UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35756

NEOGENOMICS, INC.

(Exact name of registrant as specified in its charter)


Nevada		74-2897368
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9490 NeoGenomics Way,	Fort Myers,
Florida		33912
(Address of principal executive offices)		(Zip Code)

(239) 768-0600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common stock ($0.001 par value)

NEO

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes S No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No S

As of August ~~5, 2022,~~4, 2023, the registrant had ~~125,795,904~~127,551,742 shares of Common Stock, par value $0.001 per share outstanding.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intends,” “may,” “plan,” “potential,” “project,” “will,” “would” and similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements address various matters, including the Company’s strategy, future operations, future financial position, future revenues, changing reimbursement levels from government payers and private insurers, projected costs, prospects and plans and objectives of management. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties that could cause our actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “SEC”) on February ~~25, 2022,~~24, 2023, and in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q.

Forward-looking statements include, but are not limited to, statements about:

•Our ability to respond to rapid scientific change;

•The risk of liability in conducting clinical trials and providing research services and the sufficiency of our insurance to cover such claims;

•Our ability to implement our business strategy;

•~~The potential impact to our business operations, customer demand and supply chain due to the ongoing global COVID-19 coronavirus pandemic and its related variants;~~

•The expected reimbursement levels from governmental payers and private insurers and proposed changes to those levels;

•The application, to our business and the services we provide, of existing laws, rules and regulations, including without limitation, Medicare laws, anti-kickback laws, Health Insurance Portability and Accountability Act of 1996 regulations, state medical privacy laws, international privacy laws, federal and state false claims laws and corporate practice of medicine laws;

•Regulatory developments in the United States including downward pressure on health care reimbursement;

•Our ability to maintain our license under the Clinical Laboratory Improvement Amendments of 1988 (“CLIA”);

•Food and Drug Administration, or FDA regulation of Laboratory Developed Tests (“LDTs”);

•Failure to timely or accurately bill for our services;

•Our ability to expand our operations and increase our market share;

•Our ability to expand our service offerings by adding new testing capabilities and overcome capacity constraints;

•Our ability to develop or acquire licenses for new or improved testing technologies;

•Our ability to meet our future capital requirements;

•Our ability to manage our indebtedness;

•Our ability to manage the quality of our investment portfolio;

•Our expectations regarding the conversion of our outstanding 1.25% Convertible Senior Notes due May 2025 (the “2025 Convertible Notes”) or our outstanding 0.25% Convertible Senior Notes due January 2028 (the “2028 Convertible Notes”) in the aggregate principal amount of $201.3 million and $345.0 million, respectively, and our ability to make debt service payments under the 2025 Convertible Notes or 2028 Convertible Notes if such notes are not converted;

•Our ability to have sufficient cash to pay our obligations under the 2025 Convertible Notes or the 2028 Convertible Notes;

•The dilutive impact of the conversion of the 2025 Convertible Notes or the 2028 Convertible Notes;

•Our ability to protect our intellectual property from infringement;

•Our ability to integrate acquisitions and costs related to such acquisitions;

•

Our ability to realize estimated benefits from our cost reduction and restructuring efforts;

•The effects of seasonality on our business;

•Our ability to maintain service levels and compete with other diagnostic laboratories;

•Our ability to hire and retain sufficient managerial, sales, clinical and other personnel to meet our needs;

•Our ability to successfully scale our business, including expanding our facilities, our backup systems and infrastructure;

•Our handling, storage and disposal of biological and hazardous materials;

•The accuracy of our estimates regarding reimbursement, expenses, future revenues and capital requirements; and

•Our ability to manage expenses and risks associated with international operations, including anti-corruption and trade sanction laws and other regulations, and economic, political, legal and other operational risks associated with foreign jurisdictions.

The forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date of this report, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking ~~statements~~statements.

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NEOGENOMICS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)
June 30, 2022
(unaudited) December 31, 2021
ASSETS
Current assets
Cash and cash equivalents $ 283,637 $ 316,827
Marketable securities, at fair value 182,316 198,563
Accounts receivable, net 111,276 112,130
Inventories 21,863 23,395
Prepaid assets 16,662 12,354
Assets held for sale — 10,050
Other current assets 6,506 8,189
Total current assets 622,260 681,508
Property and equipment (net of accumulated depreciation of $123,159 and $109,952, respectively) 111,105 109,465
Operating lease right-of-use assets 99,917 102,197
Intangible assets, net 425,338 442,325
Goodwill 527,115 527,115
Other assets 6,378 7,168
Total non-current assets 1,169,853 1,188,270
Total assets $ 1,792,113 $ 1,869,778
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 16,849 $ 17,921
Accrued compensation 37,280 38,304
Accrued expenses and other liabilities 16,075 17,796
Current portion of equipment financing obligations 410 1,135
Current portion of operating lease liabilities 5,708 6,884
Pharma contract liabilities 6,348 5,192
Total current liabilities 82,670 87,232
Long-term liabilities
Convertible senior notes, net 533,898 532,483
Operating lease liabilities 71,882 72,289
Deferred income tax liabilities, net 45,979 55,475
Other long-term liabilities 14,165 14,022
Total long-term liabilities 665,924 674,269
     Total liabilities $ 748,594 $ 761,501
Commitments and contingencies (Note 11) 0 0
Stockholders’ equity
Common stock, $0.001 par value, (250,000,000 shares authorized; 125,679,573 and 124,107,500 shares issued and outstanding, respectively) $ 126 $ 124
Additional paid-in capital 1,146,997 1,123,628
Accumulated other comprehensive loss (4,056) (638)
Accumulated deficit (99,548) (14,837)
     Total stockholders’ equity $ 1,043,519 $ 1,108,277
     Total liabilities and stockholders’ equity $ 1,792,113 $ 1,869,778


	(unaudited) June 30, 2023		December 31, 2022
ASSETS
Current assets
Cash and cash equivalents	$	289,074	$	263,180
Marketable securities, at fair value	120,272		174,809
Accounts receivable, net	125,425		119,711
Inventories	24,945		24,277
Prepaid assets	16,571		15,237

Other current assets	8,433		8,077
Total current assets	584,720		605,291
Property and equipment (net of accumulated depreciation of $147,452 and $131,930, respectively)	100,110		102,499
Operating lease right-of-use assets	91,412		96,109
Intangible assets, net	390,693		408,260
Goodwill	522,766		522,766




Other assets	5,407		5,109
Total non-current assets	1,110,388		1,134,743
Total assets	$	1,695,108	$	1,740,034
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	17,913	$	20,510
Accrued compensation	45,686		40,141
Accrued expenses and other liabilities	18,172		15,070
Current portion of equipment financing obligations	11		70
Current portion of operating lease liabilities	7,354		6,584


Contract liabilities	5,712		7,557
Total current liabilities	94,848		89,932
Long-term liabilities
Convertible senior notes, net	536,755		535,322

Operating lease liabilities	65,468		68,952


Deferred income tax liabilities, net	28,811		34,750
Other long-term liabilities	13,034		13,055
Total long-term liabilities	644,068		652,079
Total liabilities	$	738,916	$	742,011
Commitments and contingencies (Note 11)
Stockholders’ equity
Common stock, $0.001 par value, (250,000,000 shares authorized; 127,144,418 and 126,913,992 shares issued and outstanding, respectively)	$	127	$	127
Additional paid-in capital	1,172,850		1,160,882
Accumulated other comprehensive loss	(2,572)		(3,899)
Accumulated deficit	(214,213)		(159,087)
Total stockholders’ equity	$	956,192	$	998,023
Total liabilities and stockholders’ equity	$	1,695,108	$	1,740,034

See the accompanying notes to the unaudited Consolidated Financial Statements.

NEOGENOMICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
NET REVENUE
Clinical Services $ 105,635 $ 101,405 $ 204,426 $ 197,892
Pharma Services 19,437 20,319 37,815 39,365
Total net revenue 125,072 121,724 242,241 237,257
COST OF REVENUE 81,126 68,734 160,063 142,693
GROSS PROFIT 43,946 52,990 82,178 94,564
Operating expenses:
General and administrative 57,951 54,638 124,199 95,114
Research and development 8,626 3,495 16,339 5,951
Sales and marketing 17,071 17,224 33,370 30,973
Total operating expenses 83,648 75,357 173,908 132,038
LOSS FROM OPERATIONS (39,702) (22,367) (91,730) (37,474)
Interest expense, net 926 902 2,227 2,079
Other expense (income), net 405 (171) 237 (341)
Gain on investment in and loan receivable from non-consolidated affiliate, net — (96,534) — (91,510)
(Loss) income before taxes (41,033) 73,436 (94,194) 52,298
Income tax benefit (5,730) (2,437) (9,483) (1,461)
NET (LOSS) INCOME $ (35,303) $ 75,873 $ (84,711) $ 53,759
Adjustment to net (loss) income for convertible notes in diluted EPS (1)
NET (LOSS) INCOME $ (35,303) $ 75,873 $ (84,711) $ 53,759
Convertible note accretion, amortization, and interest, net of tax — 1,552 — 2,997
NET (LOSS) INCOME USED IN DILUTED EPS $ (35,303) $ 77,425 $ (84,711) $ 56,756
NET (LOSS) INCOME PER SHARE
Basic $ (0.28) $ 0.64 $ (0.68) $ 0.46
Diluted $ (0.28) $ 0.59 $ (0.68) $ 0.44
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 124,068 118,287 123,850 117,249
Diluted 124,068 131,237 123,850 130,247

~~(1)~~ This adjustment compensates for the effects of the if-converted impact of convertible notes in adjusted net income. Since an entity using the if-converted method assumes that a convertible debt instrument was converted into common shares at the beginning of the reporting period, net (loss) income is adjusted to reverse any recognized interest expense (including any amortization of discounts).


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
NET REVENUE
Clinical Services	$	123,156	$	105,635	$	238,025	$	204,426
Advanced Diagnostics	23,761		19,437		46,112		37,815
Total net revenue	146,917		125,072		284,137		242,241

COST OF REVENUE	87,026		81,126		169,432		160,063

GROSS PROFIT	59,891		43,946		114,705		82,178
Operating expenses:
General and administrative	60,308		57,951		121,857		124,199
Research and development	7,502		8,626		14,897		16,339
Sales and marketing	18,901		17,071		35,160		33,370
Restructuring charges	3,074		—		7,758		—
Total operating expenses	89,785		83,648		179,672		173,908
LOSS FROM OPERATIONS	(29,894)		(39,702)		(64,967)		(91,730)
Interest (income) expense, net	(2,524)		926		(3,991)		2,227
Other (income) expense, net	(730)		405		(616)		237


Loss before taxes	(26,640)		(41,033)		(60,360)		(94,194)
Income tax benefit	(2,309)		(5,730)		(5,234)		(9,483)
NET LOSS	$	(24,331)	$	(35,303)	$	(55,126)	$	(84,711)






NET LOSS PER SHARE
Basic	$	(0.19)	$	(0.28)	$	(0.44)	$	(0.68)
Diluted	$	(0.19)	$	(0.28)	$	(0.44)	$	(0.68)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	125,356		124,068		125,192		123,850
Diluted	125,356		124,068		125,192		123,850

See the accompanying notes to the unaudited Consolidated Financial Statements.

NEOGENOMICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~(LOSS) INCOME~~LOSS

(in thousands)

(unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
NET (LOSS) INCOME $ (35,303) $ 75,873 $ (84,711) $ 53,759
OTHER COMPREHENSIVE LOSS:
Net unrealized loss on marketable securities, net of tax (1,047) (183) (3,418) (343)
Total other comprehensive loss, net of tax (1,047) (183) (3,418) (343)
COMPREHENSIVE (LOSS) INCOME $ (36,350) $ 75,690 $ (88,129) $ 53,416


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
NET LOSS	$	(24,331)	$	(35,303)	$	(55,126)	$	(84,711)

OTHER COMPREHENSIVE (INCOME) LOSS:

Net unrealized gain (loss) on marketable securities, net of tax	262		(1,047)		1,327		(3,418)


Total other comprehensive income (loss), net of tax	262		(1,047)		1,327		(3,418)
COMPREHENSIVE LOSS	$	(24,069)	$	(36,350)	$	(53,799)	$	(88,129)

See the accompanying notes to the unaudited Consolidated Financial Statements.

NEOGENOMICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands, except share data)

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total
Shares Amount
Balance, December 31, 2021 124,107,500 $ 124 $ 1,123,628 $ (638) $ (14,837) $ 1,108,277
Common stock issuance ESPP Plan 47,853 — 971 — — 971
Issuance of restricted stock, net of forfeitures 100,253 — (1,049) — — (1,049)
Issuance of common stock for stock options 466,609 1 6,479 — — 6,480
ESPP expense — — 249 — — 249
Stock-based compensation expense - options and restricted stock — — 11,855 — — 11,855
Net unrealized loss on marketable securities, net of tax — — — (2,371) — (2,371)
Net loss — — — — (49,408) (49,408)
Balance, March 31, 2022 124,722,215 $ 125 $ 1,142,133 $ (3,009) $ (64,245) $ 1,075,004
Common stock issuance ESPP Plan 89,374 — 807 — — 807
Issuance of restricted stock, net of forfeitures 773,010 1 (311) — — (310)
Issuance of common stock for stock options 94,974 — 743 — — 743
ESPP expense — — 293 — — 293
Stock-based compensation expense - options and restricted stock — — 3,332 — — 3,332
Net unrealized loss on marketable securities, net of tax — — — (1,047) — (1,047)
Net loss — — — — (35,303) (35,303)
Balance, June 30, 2022 125,679,573 $ 126 $ 1,146,997 $ (4,056) $ (99,548) $ 1,043,519


	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total
		Shares			Amount
Balance, December 31, 2022		126,913,992	$	127		$	1,160,882	$	(3,899)	$	(159,087)	$	998,023
Issuance of common stock for ESPP		96,733	—			811		—		—		811
Issuance of restricted stock, net of forfeitures		114,738	—			(147)		—		—		(147)
Issuance of common stock for stock options		75,028	—			751		—		—		751
Stock issuance fees and expenses		—	—			(4)		—		—		(4)
Stock-based compensation expense - ESPP		—	—			275		—		—		275
Stock-based compensation expense - options and restricted stock		—	—			4,483		—		—		4,483
Net unrealized gain on marketable securities, net of tax		—	—			—		1,065		—		1,065

Net loss		—	—			—		—		(30,795)		(30,795)
Balance, March 31, 2023		127,200,491	$	127		$	1,167,051	$	(2,834)	$	(189,882)	$	974,462
Issuance for common stock for ESPP		78,302	—			1,029		—		—		1,029
Issuance of restricted stock, net of forfeitures		(194,448)	—			(1,527)		—		—		(1,527)
Issuance of common stock for stock options		60,073	—			610		—		—		610
Stock issuance fees and expenses		—	—			(18)		—		—		(18)
Stock-based compensation expense - ESPP		—	—			255		—		—		255
Stock-based compensation expense - options and restricted stock		—	—			5,450		—		—		5,450
Net unrealized gain on marketable securities, net of tax		—	—			—		262		—		262

Net loss		—	—			—		—		(24,331)		(24,331)
Balance, June 30, 2023		127,144,418	$	127		$	1,172,850	$	(2,572)	$	(214,213)	$	956,192

NEOGENOMICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands, except share data)
Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) (Accumulated Deficit) Retained Earnings Total
Shares Amount
Balance, December 31, 2020 112,075,474 $ 112 $ 701,357 $ 10 $ (7,185) $ 694,294
Cumulative-effect adjustment from change in accounting principle — — (23,271) — 696 (22,575)
Premiums paid for capped call confirmations — — (29,291) — — (29,291)
Common stock issuance ESPP Plan 23,917 — 1,024 — — 1,024
Issuance of restricted stock, net of forfeitures 83,220 — (614) — — (614)
Issuance of common stock for stock options 260,167 — 2,239 — — 2,239
Issuance of common stock - public offering, net of underwriting discounts 4,693,876 5 218,495 — — 218,500
Stock issuance fees and expenses — — (242) — — (242)
ESPP expense — — 241 — — 241
Stock-based compensation expense - options and restricted stock — — 2,412 — — 2,412
Net unrealized loss on marketable securities, net of tax — — — (160) — (160)
Net loss — — — — (22,114) (22,114)
Balance, March 31, 2021 117,136,654 $ 117 $ 872,350 $ (150) $ (28,603) $ 843,714
Common stock issuance ESPP Plan 31,839 — 1,245 — — 1,245
Issuance of restricted stock, net of forfeitures 146,392 — (163) — — (163)
Issuance of common stock for stock options 354,310 1 4,429 — — 4,430
Issuance of common stock - private placement, net of private placement fees 4,444,445 4 189,859 — — 189,863
Issuance of common stock for acquisition 597,712 1 29,174 — — 29,175
Stock issuance fees and expenses — — (102) — — (102)
ESPP expense — — 298 — — 298
Stock-based compensation expense - options and restricted stock — — 4,208 — — 4,208
Net unrealized loss on marketable securities, net of tax — — — (183) — (183)
Net income — — — — 75,873 75,873
Balance, June 30, 2021 122,711,352 $ 123 $ 1,101,298 $ (333) $ 47,270 $ 1,148,358


	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
		Shares			Amount
Balance, December 31, 2021		124,107,500	$	124		$	1,123,628	$	(638)	$	(14,837)	$	1,108,277
Issuance of common stock for ESPP		47,853	—			971		—		—		971
Issuance of restricted stock, net of forfeitures		100,253	—			(1,049)		—		—		(1,049)
Issuance of common stock for stock options		466,609	1			6,479		—		—		6,480

Stock-based compensation expense - ESPP		—	—			249		—		—		249
Stock-based compensation expense - options and restricted stock		—	—			11,855		—		—		11,855
Net unrealized loss on marketable securities, net of tax		—	—			—		(2,371)		—		(2,371)

Net loss		—	—			—		—		(49,408)		(49,408)
Balance, March 31, 2022		124,722,215	$	125		$	1,142,133	$	(3,009)	$	(64,245)	$	1,075,004
Issuance of common stock for ESPP		89,374	—			807		—		—		807
Issuance of restricted stock, net of forfeitures		773,010	1			(311)		—		—		(310)
Issuance of common stock for stock options		94,974	—			743		—		—		743
Stock-based compensation expense - ESPP		—	—			293		—		—		293
Stock-based compensation expense - options and restricted stock		—	—			3,332		—		—		3,332
Net unrealized loss on marketable securities, net of tax		—	—			—		(1,047)		—		(1,047)

Net loss		—	—			—		—		(35,303)		(35,303)
Balance, June 30, 2022		125,679,573	$	126		$	1,146,997	$	(4,056)	$	(99,548)	$	1,043,519

See the accompanying notes to the unaudited Consolidated Financial Statements.

NEOGENOMICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


		Six Months Ended June 30,					Six Months Ended June 30,
		2022		2021			2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES	CASH FLOWS FROM OPERATING ACTIVITIES					CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income		$	(84,711)	$	53,759
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Net loss						Net loss	$	(55,126)	$	(84,711)
Adjustments to reconcile net loss to net cash used in operating activities:						Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	Depreciation	16,921		13,629		Depreciation	18,523		16,921
Amortization of intangibles	Amortization of intangibles	16,979		6,209		Amortization of intangibles	17,566		16,979
Non-cash stock-based compensation	Non-cash stock-based compensation	15,729		7,159		Non-cash stock-based compensation	10,463		15,729
Non-cash operating lease expense	Non-cash operating lease expense	4,989		3,750		Non-cash operating lease expense	4,648		4,989
Amortization of convertible debt discount	Amortization of convertible debt discount	1,324		1,247		Amortization of convertible debt discount	1,341		1,324
Amortization of debt issue costs	Amortization of debt issue costs	91		88		Amortization of debt issue costs	92		91

Gain on investment in and loan receivable from non-consolidated affiliate, net		—		(91,510)
Interest receivable on loan receivable from non-consolidated affiliate		—		(391)

Gain on sale of assets held for sale	Gain on sale of assets held for sale	(2,048)		—		Gain on sale of assets held for sale	—		(2,048)
Write-off of COVID-19 PCR testing inventory and equipment		—		6,061
Other adjustments	Other adjustments	1,602		790		Other adjustments	1,665		1,602
Changes in assets and liabilities, net	Changes in assets and liabilities, net					Changes in assets and liabilities, net
Accounts receivable, net	Accounts receivable, net	854		1,155		Accounts receivable, net	(5,713)		854
Inventories	Inventories	1,533		3,645		Inventories	(888)		1,533
Prepaid lease asset		—		(4,730)
Prepaid and other assets	Prepaid and other assets	(2,202)		(4,681)		Prepaid and other assets	(2,614)		(2,202)
Operating lease liabilities						Operating lease liabilities	(3,294)		(4,932)
Deferred income tax liabilities, net						Deferred income tax liabilities, net	(5,939)		(9,495)
Accrued compensation						Accrued compensation	5,545		(1,024)

Accounts payable, operating lease liabilities, deferred taxes, accrued and other liabilities		(17,097)		4,640
Net cash (used in) provided by operating activities		(46,036)		820

Accounts payable and other liabilities						Accounts payable and other liabilities	(509)		(1,646)
Net cash used in operating activities						Net cash used in operating activities	(14,240)		(46,036)
CASH FLOWS FROM INVESTING ACTIVITIES	CASH FLOWS FROM INVESTING ACTIVITIES					CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of marketable securities	Purchases of marketable securities	(56,332)		(162,769)		Purchases of marketable securities	(6,756)		(56,332)
Proceeds from sales and maturities of marketable securities	Proceeds from sales and maturities of marketable securities	68,525		26,253		Proceeds from sales and maturities of marketable securities	62,868		68,525
Purchases of property and equipment	Purchases of property and equipment	(18,513)		(37,178)		Purchases of property and equipment	(17,421)		(18,513)
Proceeds from assets held for sale	Proceeds from assets held for sale	12,098		—		Proceeds from assets held for sale	—		12,098
Business acquisitions, net of cash acquired		—		(419,404)
Loan receivable from non-consolidated affiliate		—		(15,000)
Net cash provided by (used in) investing activities		5,778		(608,098)
Net cash provided by investing activities						Net cash provided by investing activities	38,691		5,778
CASH FLOWS FROM FINANCING ACTIVITIES	CASH FLOWS FROM FINANCING ACTIVITIES					CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of equipment financing obligations	Repayment of equipment financing obligations	(574)		(1,892)		Repayment of equipment financing obligations	(61)		(574)
Issuance of common stock, net	Issuance of common stock, net	7,642		8,045		Issuance of common stock, net	1,504		7,642

Proceeds from issuance of convertible debt, net of issuance costs		—		334,410
Premiums paid for capped call confirmations		—		(29,291)
Proceeds from equity offering, net of issuance costs		—		418,273
Net cash provided by financing activities	Net cash provided by financing activities	7,068		729,545		Net cash provided by financing activities	1,443		7,068

Net change in cash, cash equivalents and restricted cash		(33,190)		122,267
Cash, cash equivalents and restricted cash, beginning of period		316,827		250,632
Cash, cash equivalents and restricted cash, end of period		$	283,637	$	372,899
Net change in cash and cash equivalents						Net change in cash and cash equivalents	25,894		(33,190)
Cash and cash equivalents, beginning of period						Cash and cash equivalents, beginning of period	263,180		316,827
Cash and cash equivalents, end of period						Cash and cash equivalents, end of period	$	289,074	$	283,637

Six Months Ended June 30,
2022 2021
Reconciliation of cash, cash equivalents and restricted cash to the Consolidated Balance Sheets:
Cash and cash equivalents $ 283,637 $ 368,796
Restricted cash, non-current — 4,103
Total cash, cash equivalents and restricted cash $ 283,637 $ 372,899
Supplemental disclosure of cash flow information:
Interest paid $ 2,143 $ 1,329
Income taxes paid, net $ 129 $ 114
Supplemental disclosure of non-cash investing and financing information:
Fair value of common stock issued to fund business acquisition $ — $ 29,174
Equity offering issuance costs included in accrued expenses $ — $ 10,137
Purchases of property and equipment included in accounts payable $ 1,529 $ 3,822


Supplemental disclosure of cash flow information:
Interest paid	$	1,690	$	2,143
Income taxes paid, net	$	175	$	129
Supplemental disclosure of non-cash investing and financing information:




Purchases of property and equipment included in accounts payable	$	838	$	1,529

See the accompanying notes to the unaudited Consolidated Financial Statements.

1110

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. ~~Nature of the Business~~

Nature of the Business

NeoGenomics, Inc., a Nevada corporation (the “Parent,” “Company,” or “NeoGenomics”), and its subsidiaries, operate as a certified, high complexity clinical laboratory in accordance with the federal government’s ~~CLIA,~~Clinical Laboratory Improvement Act, as amended, and is dedicated to the delivery of clinical diagnostic services to pathologists, oncologists, urologists, hospitals, and other laboratories as well as providing clinical trial services to pharmaceutical firms.

~~COVID-19 Pandemic Update~~

The impact from the COVID-19 pandemic, including recent COVID-19 variants, and the related disruptions had a significant adverse impact on the Company’s results of operations, volume growth rates and test volumes in 2020, 2021, and in the first and second quarters of 2022. The full extent to which the COVID-19 outbreak will impact the Company’s business, results of operations, financial condition, and cash flows will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national, and international markets. As the COVID-19 pandemic continues, the Company’s results of operations, financial condition, and cash flows may continue to be materially adversely affected, particularly if the pandemic continues to persist for a significant amount of time.

~~The Company anticipates that the cash on hand, marketable securities, and expected cash collections are sufficient to fund near-term capital and operating needs for at least the next 12 months.~~

At the end of the first quarter 2021, due to the broad roll-out of the COVID-19 vaccine and a sharp decline in COVID-19 polymerase chain reaction (“PCR”) testing demand, the Company made the decision to exit COVID-19 PCR testing and the Company recorded a $6.1 million expense related to the exit from COVID-19 PCR testing. This amount consisted of write-offs of $5.3 million for all remaining COVID-19 PCR testing inventory recorded to cost of revenue and $0.8 million for all remaining COVID-19 PCR testing laboratory equipment recorded to general and administrative expenses ~~on the Consolidated Statements of Operations for the six months ended June 30, 2021. There were no such amounts recorded for the three months ended June 30, 2021 and the three and six months ended June 30, 2022.~~

~~Coronavirus Aid, Relief and Economic Security Act~~

The Federal government passed legislation that the President of the United States signed into law on March 27, 2020, known as the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act permits the deferral of payment of the employer portion of social security taxes between March 27, 2020 and December 31, 2020. Fifty percent of the deferred amount was due on December 31, 2021 and the remaining 50% is due on December 31, 2022. As of June 30, 2022 and December 31, 2021, the total accrued deferred social security taxes related to the CARES Act was $3.0 million. This amount was recorded in accrued expenses and other liabilities on the Consolidated Balance Sheets.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim Consolidated Financial Statements are unaudited and have been prepared in accordance with ~~GAAP~~generally accepted accounting principles in the United States (“GAAP”) for interim financial information. All intercompany transactions and balances have been eliminated in the accompanying Consolidated Financial Statements.

The accounting policies of the Company are the same as those set forth in Note 2. Summary of Significant Accounting Policies, to the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, except for Stock-based Compensation and new accounting standards discussed under Recent Accounting ~~Pronouncements.~~Pronouncements as referenced below.

Unaudited Interim Financial Information

Certain information and footnote disclosures normally included in the Company’s annual audited Consolidated Financial Statements and accompanying notes have been condensed or omitted in these accompanying interim Consolidated Financial Statements and footnotes. Accordingly, the accompanying interim unaudited Consolidated Financial Statements included herein should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

The results of operations presented in this Quarterly Report on Form 10-Q are not necessarily indicative of the results of operations that may be expected for any future periods. In the opinion of management, these unaudited Consolidated Financial Statements include all adjustments and accruals, consisting only of normal, recurring adjustments that are necessary for a fair statement of the results of all interim periods reported herein.

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Use of Estimates

The Company prepares its Consolidated Financial Statements in conformity with GAAP. These principles require management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, together with amounts disclosed in the related notes to the Consolidated Financial Statements. Actual results and outcomes may differ from management’s estimates, judgments and assumptions. Significant estimates, judgments and assumptions used in these Consolidated Financial Statements include, but are not limited, to those related to revenues, accounts receivable and related allowances, contingencies, useful lives and recovery of long-term assets and intangible assets, income taxes and valuation allowances, stock-based compensation, ~~business combinations, and~~ impairment analysis of ~~goodwill.~~goodwill, and restructuring reserves. These estimates, judgments, and assumptions are reviewed periodically and the effects of material revisions in estimates are reflected on the Consolidated Financial Statements prospectively from the date of the change in estimate.

~~Assets Held for Sale~~

Assets to be disposed of by sale are reclassified as held for sale if their carrying amounts are expected to be recovered through a sale transaction rather than through continuing use and when the Company commits to a plan to sell the assets. Assets classified as held for sale are measured at the lower of their carrying value or fair value less selling costs. Such assets are classified within current assets if there is reasonable certainty that the sale and collection of consideration will take place within one year. Upon reclassification as held for sale, long-lived assets are no longer depreciated or amortized and a measurement for impairment is performed to determine if there is an excess of carrying value over fair value less costs to sell. Any remeasurement is reported as an adjustment to the carrying value of the assets. Subsequent changes to estimated fair value less the selling costs will impact the measurement of assets held for sale if the fair value is determined to be less than the carrying value of the assets.Segment Reporting

The Company ~~owned 43,560 square feet of~~has historically reported its ~~Carlsbad, California facility. During~~activities in two reportable segments; (1) the ~~third~~Clinical Services segment and (2) the Pharma Services segment. In the second quarter of ~~2021,~~2023, the ~~Company committed~~Pharma Services segment was rebranded as the Advanced Diagnostics segment. Functions within the Clinical Services segment include oncology diagnostics, community-based oncology and pathology sales, patient engagement, and clinical decision support. Functions within the Advanced Diagnostics segment include pharma services, informatics, R&D, minimal residual disease, liquid biopsy and therapy selection business development. For further financial information regarding reportable segments, please refer to selling this property and the associated land and concluded that these assets met the held for sale criteria. As of December 31, 2021, $10.1 million was recorded as assets held for sale within current assets on the Consolidated Balance Sheets for this property and associated land and reflected its carrying value which was lower than its fair value less costs to sell. The Company sold this property and associated land for proceeds of $12.1 million, net of closing costs, on March 31, 2022. For the six months ended June 30, 2022, a net gain on the sale of this property and associated land of $2.0 million is included in general and administrative expenses on the Consolidated Statements of Operations.

~~Goodwill~~

The Company evaluates goodwill on an annual basis in the fourth quarter or more frequently if management believes indicators of impairment exist. Such indicators could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management performs a quantitative goodwill impairment test. The quantitative analysis is performed by comparing the fair value of the reporting unit to its carrying value. If the carrying value is greater than the estimate of fair value, an impairment loss will be recognized for the amount in which the carrying amount exceeds the reporting unit’s fair value. The Company estimates the fair values of its reporting units using a combination of the income, or discounted cash flows approach and the market approach, which utilizes comparable companies’ data.

As of June 30, 2022 the Company performed a qualitative assessment to determine whether it was more likely than not that the fair values of its reporting units were less than their carrying values. Such qualitative factors included macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events. As a result of the qualitative assessment, the Company determined that there were indicators that it was more likely than not that the fair values of its reporting units were less than their carrying values. Accordingly, the Company performed a quantitative analysis and determined the reporting units’ fair values exceeded the reporting units’ carrying values and there was no impairment of the recorded goodwill as of June 30, 2022.Note 13. Segment Information.

Sales and Marketing Expenses

Sales and marketing expenses are primarily attributable to employee-related costs including sales management, sales representatives, sales and marketing consultants, and marketing and customer service personnel in the Clinical Services segment. Advertising costs are expensed at the time they are incurred and ~~are deemed~~were immaterial for the three and six months ended June 30, ~~2022~~2023 and ~~2021.~~2022.

~~Recent Accounting Pronouncements~~Stock-based Compensation

In ~~November 2021,~~ the ~~FASB issued ASU No. 2021-10,~~ ~~Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance~~second quarter of 2023, the Company began granting performance stock units (“~~ASU 2021-10”~~PSUs”)~~. This update requires business entities~~ subject to ~~disclose information annually about~~a market condition to certain ~~government assistance they receive. Such annual disclosure requirements include the nature~~ of ~~the transactions and the~~its executives as part of its executive compensation program. The number of shares awarded will be subject to

1311

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

~~related accounting policy used, the line items~~adjustment based on the ~~balance sheet and income statement that are affected and~~achievement of an absolute total shareholder return (“TSR”) performance target. If the ~~amounts applicable to each financial statement line item and significant terms and conditions~~TSR performance target is achieved, the awards will vest at the end of the ~~transactions. ASU 2021-10~~three-year requisite service period so long as the employee remains employed with the Company through the applicable vesting date.

The Company measures compensation expense for stock-based awards to employees, non-employee contracted physicians, and directors based upon the awards’ initial grant-date fair values. Stock-based compensation expense for stock options, restricted stock awards, restricted stock units and performance awards is ~~effective~~recorded over the requisite service period in general and administrative expenses on the Consolidated Statements of Operations. For awards with only a service condition, the Company expenses stock-based compensation using the straight-line method over the requisite service period for ~~annual periods beginning after December 15, 2021,~~the entire award. For awards with ~~early adoption permitted. ASU 2021-10 should be applied either (1) prospectively to all transactions within~~a market condition, the ~~scope~~Company expenses the grant date fair value at the target over the vesting period regardless of the ~~amendments~~value that the award recipients ultimately receive. The fair values of stock option grants are ~~reflected in financial statements~~estimated as of the date of grant by applying the Black-Scholes option valuation model (“Black-Scholes”). The fair value of restricted stock with a market condition is estimated at the date of ~~initial application~~grant using the Monte Carlo simulation model (“Monte Carlo”). The Black-Scholes and ~~new transactions that are entered into after~~Monte Carlo models incorporate assumptions as to stock price volatility, the expected life of options or restricted stock, a risk-free interest rate and dividend yield. The fair value of restricted stock without a market condition is estimated using the current market price of the Company’s common stock on the date of ~~initial application or (2) retrospectively to those transactions.~~grant.

Black-Scholes is affected by the stock price on the date of the grant as well as assumptions regarding a number of highly complex and subjective variables. These variables include the expected term of the option, expected risk-free interest rate, the expected volatility of common stock, and expected dividend yield; each of which is described below. The assumptions for expected term and expected volatility are the two assumptions that significantly affect the grant date fair value.

Expected Term: The expected term of an option is determined using the simplified method under SAB 107 which represents the average between the vesting term and the contractual term. The Company ~~will adopt this new accounting standard~~utilizes the simplified method to determine the expected life of the options due to insufficient exercise activity during recent years.

Risk-free Interest Rate: The risk-free interest rate used in the Black-Scholes model is based on the implied yield at the grant date of the U.S. Treasury zero-coupon issue with an equivalent term to the stock-based award being valued. Where the expected term of a stock-based award does not correspond with the term for which a zero coupon interest rate is quoted, the Company uses the nearest interest rate from available maturities.

Expected Stock Price Volatility: The Company uses its ~~Annual Report on Form 10-K for~~own historical weekly volatility because that is more reflective of market conditions.

Dividend Yield: Because the ~~year ended December 31, 2022~~Company has never paid a dividend and does not expect to begin doing so in the ~~adoption~~foreseeable future, the Company assumed no dividend yield in valuing the stock-based awards.

The fair value of ~~this standard~~the PSUs granted during the three and six months ended June 30, 2023 was estimated as of the grant date using a Monte Carlo, which requires management to ~~have a material impact on its Consolidated Financial Statements.~~make assumptions regarding risk-free interest rates and volatility of the Company’s stock price. The Monte Carlo incorporates the same assumptions as Black-Scholes as to stock price volatility, the risk-free interest rate and dividend yield. The Company utilized the expected life of the PSUs for the expected term of the award, as the vesting term and contractual term of the awards are identical.

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“(“ASU ~~2021-08~~”2021-08”). This update amends guidance to require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Revenue from Contracts with Customers (Topic 606). At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted including adoption in an interim period. If the Company early adopts in an interim period, the Company is required to apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application. The amendments in ASU 2021-08 should be applied prospectively to business combinations occurring on or after the effective date of the amendments. The Company ~~is currently evaluating its adoption date of~~adopted this standard as of January 1, 2023 and ~~the~~there was no impact ~~of the standard~~ on its Consolidated Financial Statements.

~~In March 2020, the FASB issued ASU No. 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ (“~~ASU 2020-04~~”) which provides for temporary optional expedients and exceptions to the current guidance on certain contract modifications and hedging relationships to ease the burdens related to the expected market transition from the London Inter-bank Offered Rate (“~~LIBOR~~”~~) or other reference rates to alternative reference rates. In January 2021, the FASB issued ASU No. 2021-01~~, ~~Reference Rate Reform (Topic 848)~~ (“~~ASU 2021-01~~”) to clarify that certain optional expedients and exceptions apply to modifications of derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements, and for calculating price alignment interest. ASU 2020-04 was effective beginning on March 12, 2020 and may be applied prospectively to such transactions through December 31, 2022 and ASU 2021-01 was effective beginning on January 7, 2021 and may be applied retrospectively or prospectively to such transactions through December 31, 2022. The Company will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis. As of June 30, 2022, there was no impact to the Company’s Consolidated Financial Statements related to ASU 2020-04 or ASU 2021-01.

~~Note 3. Acquisitions~~

~~Trapelo Health~~

On April 7, 2021 (the “Trapelo Acquisition Date”), the Company completed the acquisition of a 100% ownership interest in Intervention Insights, Inc. d/b/a Trapelo Health (“Trapelo”), an information technology company focused on precision oncology. The purchase price consisted of (i) cash consideration of $35.6 million, which included a net adjustment of $0.6 million for estimated cash on hand of Trapelo and estimated working capital adjustments on the Trapelo Acquisition Date, and (ii) equity consideration of $29.2 million, consisting of 597,712 shares of the Company’s common stock, par value $0.001 per share, valued at $48.81 per share. The Company acquired control of Trapelo on the Trapelo Acquisition Date; therefore, the fair value of the common stock issued as part of consideration was determined on the basis of the closing market price of the Company’s common stock immediately prior to the Trapelo Acquisition Date. The Trapelo acquisition enhances the Company’s ability to provide customers clinical decision support to help answer complex questions related to precision oncology biomarker testing and treatment options as part of the Company’s comprehensive oncology offerings.

The acquisition of Trapelo was determined to be a business combination and has been accounted for using the acquisition method. The purchase price and purchase price allocation were based upon management’s best estimates and assumptions and were considered final as of March 31, 2022. The following table summarizes the purchase consideration recorded for the acquisition of Trapelo, the fair value of the net assets acquired and liabilities assumed, and the calculation of goodwill based on the excess of the consideration transferred over the fair value of the net assets acquired and liabilities assumed at the Trapelo Acquisition Date (in thousands, except per share data):

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~


	~~Amount~~
~~Purchase consideration:~~
~~Shares of common stock issued as consideration~~	~~597,712~~
~~Per share value of common stock issued as consideration~~	$	~~48.81~~
~~Fair value of common stock at Trapelo Acquisition Date~~	$	~~29,174~~
~~Plus: Cash paid at closing~~	~~35,591~~
~~Total purchase consideration~~	$	~~64,765~~

~~Allocation of the purchase consideration:~~
~~Cash~~	$	~~713~~
~~Other current assets~~	~~282~~
~~Identifiable intangible asset - marketing assets~~	~~549~~
~~Identifiable intangible asset - developed technology~~	~~19,040~~
~~Other long-term assets~~	~~268~~
~~Total identifiable assets acquired~~	~~20,852~~
~~Current liabilities~~	~~(751)~~
~~Net identifiable assets acquired~~	~~20,101~~
~~Goodwill~~	~~44,664~~
~~Total purchase consideration~~	$	~~64,765~~

The identified developed technology and marketing intangible assets are being amortized over ten years and four years, respectively, based on their estimated useful lives. The weighted-average amortization period in total for all classes of intangible assets from the Trapelo acquisition is 9.8 years. The developed technology was valued using the income approach, specifically, the multi-period excess earnings method, which measures the after-tax cash flows attributable to the developed technology. The marketing intangible assets were valued using the income approach, specifically, the relief from royalty method, which measures the cash flow streams attributable to the marketing intangible assets in the form of the avoided royalty payment that would be paid to the owner in return for the rights to use the marketing intangible assets had the intangible assets not been acquired. The values of the identifiable intangible assets represent Level 3 measurements as they were based on unobservable inputs reflecting the Company’s assumptions used in pricing the assets at fair value. These inputs required significant judgments and estimates at the time of the valuation.

The goodwill recognized, all of which was assigned to the Clinical Services segment, was primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of the healthcare and information technology industries. None of the goodwill resulting from the acquisition of Trapelo is expected to be deductible for income tax purposes.

The results of operations of Trapelo are included in the Company’s unaudited Consolidated Financial Statements beginning on the Trapelo Acquisition Date. No pro forma information has been included relating to the Trapelo acquisition, as this acquisition was not deemed to be material to the Company’s revenue or net loss on a pro forma basis.

~~Inivata Limited~~

On June 18, 2021 (the “Inivata Acquisition Date”), the Company completed the acquisition of the remaining equity interests in Inivata Limited, a private limited company incorporated in England and Wales (“Inivata”). Inivata is a global, commercial stage, liquid biopsy platform company. The acquisition follows a $25.0 million minority equity investment by the Company in Series C1 Preference Shares (the “Preference Shares” or “previously-held equity interest”) in Inivata in May 2020, at which time the Company also acquired a fixed price option to purchase the remainder of equity interests in Inivata for $390.0 million (the “Purchase Option”). The Company and Inivata also entered into a line of credit agreement in the amount of $15.0 million (the “Line of Credit”) in May 2020. In the first quarter of 2021, prior to the Inivata Acquisition Date, an observable transaction of an identical investment in Inivata Preference Shares occurred which resulted in a remeasurement of the Preference Shares to the value of this observable transaction. The Company recorded a net unrealized loss of $5.0 million on investment in non-consolidated affiliate for this remeasurement for the three months ended March 31, 2021 in other expense (income), net on the Consolidated Statements of Operations.

The Inivata acquisition adds liquid biopsy platform technology, including minimal residual disease testing capabilities, to the Company’s comprehensive portfolio of oncology testing solutions. The purchase price consisted of cash consideration of

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

$398.6 million, which included a net adjustment of $8.6 million for estimated cash on hand of Inivata and other adjustments on the Inivata Acquisition Date, and was funded through cash on hand and a private placement of equity.

Prior to the acquisition of the remaining equity interests in Inivata, the Company accounted for its previously-held equity interest and the Purchase Option in Inivata as equity securities without a readily determinable fair value. The equity interests were recorded at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Therefore, the Company’s acquisition of control of Inivata on the Inivata Acquisition Date was accounted for as a business combination achieved in stages under the acquisition method. Accordingly, the Company used a discounted cash flow to derive a business enterprise value of Inivata in order to determine the acquisition-date fair value of the Company’s previously-held equity interest and Purchase Option in Inivata. To determine the fair value of the previously-held equity interest, the fair value of Inivata’s total equity was allocated to its various classes of equity based on the respective rights and privileges of each class of stock in liquidation. The business enterprise value and a Black-Scholes model were then used to determine the fair value of the remaining equity acquired through the exercise of the Purchase Option. The Purchase Option was recorded at the fair value at the Inivata Acquisition Date based on its settlement value. This resulted in fair values of $64.9 million in Preference Shares and a $74.3 million Purchase Option, immediately prior to the acquisition. On the Inivata Acquisition Date, the $10.3 million outstanding under the Line of Credit extended by the Company to Inivata was effectively settled as part of the acquisition of Inivata at the $15.0 million principal amount and was recorded as part of the consideration transferred in the acquisition. The Company recorded a gain on investment in and loan receivable from non-consolidated affiliate, net, within the Company’s Consolidated Statements of Operations of $109.3 million for the year ended December 31, 2021 for the excess of the acquisition-date fair value of the Company’s previously-held equity interest, Purchase Option, and Line of Credit over their carrying values.

The purchase price and purchase price allocation were based upon management’s best estimates and assumptions and were considered final as of June 30, 2022. The following table summarizes the calculation of goodwill based on the excess of the estimated fair value of the consideration transferred including the fair value of the Line of Credit, and the estimated fair value of the previously-held equity interest and Purchase Option, over the estimated fair value of the net assets acquired and liabilities assumed at the Inivata Acquisition Date and includes measurement period adjustments recorded during 2021 (in thousands):

June 18, 2021
(as initially reported) Measurement Period Adjustments June 18, 2021
(as adjusted)
Fair value of business combination:
Cash paid at closing $ 398,594 $ — $ 398,594
Fair value of Line of Credit 15,000 — 15,000
Fair value of consideration transferred $ 413,594 $ — $ 413,594
Fair value of previously-held equity interest(1)
62,919 1,987 64,906
Fair value of Purchase Option(1)
58,537 15,763 74,300
Total fair value of business combination $ 535,050 $ 17,750 $ 552,800
Allocation of the fair value business combination:
Cash $ 14,068 $ — $ 14,068
Other current assets(2)
5,366 345 5,711
Property and equipment 1,753 — 1,753
Identifiable intangible assets - developed technology(1)
302,982 (11,796) 291,186
Identifiable intangible assets - trademarks(1)
31,700 (226) 31,474
Identifiable intangible asset - trade name(1)
2,322 253 2,575
Other long-term assets 6,240 — 6,240
Total identifiable assets acquired 364,431 (11,424) 353,007
Current liabilities (4,241) (1,650) (5,891)
Deferred income tax liabilities(3)
(64,680) 3,686 (60,994)
Other long-term liabilities (4,690) — (4,690)
Net identifiable assets acquired 290,820 (9,388) 281,432
Goodwill 244,230 27,138 271,368
Total fair value of business combination $ 535,050 $ 17,750 $ 552,800

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

~~(1)~~ ~~Measurement period adjustment primarily relates to a change in estimated taxes based on jurisdictions in which forecasted profits are expected to be generated.~~

~~(2)~~ ~~Measurement period adjustment relates to the recognition of a credit which Inivata is entitled to claim for certain research and development expenditures~~

~~(3)~~ ~~Measurement period adjustment relates to a change in estimated deferred income tax liabilities as a result of the reduction in the amounts for intangibles assets and related future amortization.~~

The identified developed technology intangible assets and the trademark intangible assets are both being amortized over fifteen years, and the trade name intangible asset is being amortized over five years, based on their estimated useful lives. The weighted-average amortization period in total for all classes of intangible assets from the Inivata acquisition is 14.9 years. The developed technology was valued using the income approach, specifically, the multi-period excess earnings method, which measures the after-tax cash flows attributable to the developed technology. The trademarks and trade name assets were valued using the income approach, specifically, the relief from royalty method, which measures the cash flow streams attributable to the trademarks and trade name assets in the form of the avoided royalty payment that would be paid to the owner in return for the rights to use the trademarks and trade name assets had the assets not been acquired. The values of the identifiable intangible assets represent Level 3 measurements as they were based on unobservable inputs reflecting the Company’s assumptions used in pricing the assets at fair value. These inputs required significant judgments and estimates at the time of the valuation.

The goodwill recognized, of which $238.4 million and $33.0 million was assigned to the Clinical Services and Pharma Services segments, respectively, was primarily attributable to expected synergies of the combined businesses and the acquisition of an assembled workforce knowledgeable of liquid biopsy technology for oncology testing. The recording of amortizable intangibles has given rise to a deferred tax liability upon the acquisition of Inivata which increased goodwill by $61.0 million. None of the goodwill resulting from the acquisition of Inivata is expected to be deductible for income tax purposes.

The following unaudited pro forma information and has been provided for illustrative purposes only and is not necessarily indicative of results that would have occurred had the acquisition of Inivata occurred on January 1, 2020, nor are they necessarily indicative of future results (in thousands):

Three Months Ended
June 30, 2021 Six Months Ended
June 30, 2021
(unaudited) (unaudited)
Net revenue $ 121,707 $ 237,159
Net loss $ (23,222) $ (51,313)

These unaudited pro forma results represent the combined results of operations of the Company and Inivata, on an unaudited pro forma basis, for the period in which the acquisition of Inivata occurred and the prior reporting period as though the companies had been combined as of the beginning of the earliest period presented. Therefore, the unaudited pro forma consolidated results have been prepared by adjusting the Company’s historical results to include the acquisition of Inivata as if it occurred on January 1, 2020. These unaudited pro forma consolidated historical results exclude, for the periods presented, the gain on investment in and loan receivable from non-consolidated affiliate, net, of $96.5 million and $91.5 million recorded in the three and six months ended June 30, 2021, respectively.

Note 4.3. Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

the use of unobservable inputs. A fair value hierarchy has been established based on three levels of inputs, of which the first two are considered observable and the last unobservable.

Level 1: Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

Level 2: Inputs, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments.

Level 3: Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own assumptions of the data that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis

The Company measures certain financial assets at fair value on a recurring basis, including its marketable securities and certain cash equivalents. The Company considers all securities available-for-sale, including those with maturity dates beyond 12 months, and therefore these securities are classified within current assets on the Consolidated Balance Sheets as they are available to support current operational liquidity needs. The money market accounts are valued based on quoted market prices in active ~~markets.~~markets and are included in cash and cash equivalents on the Consolidated Balance Sheets. The marketable securities are generally valued based on other observable inputs for those securities (including market corroborated pricing or other models that utilize observable inputs such as interest rates and yield curves) based on information provided by independent third-party pricing entities, except for U.S. Treasury securities which are valued based on quoted market prices in active markets.

The following tables set forth the amortized cost, gross unrealized gains, gross unrealized losses and fair values of the Company’s marketable securities accounted for as available-for-sale securities as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.


		June 30, 2022									June 30, 2023
(in thousands)	(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Financial Assets:	Financial Assets:									Financial Assets:
Short-term marketable securities:	Short-term marketable securities:									Short-term marketable securities:
U.S. Treasury securities	U.S. Treasury securities	$	51,074	$	2	$	(772)	$	50,304	U.S. Treasury securities	$	32,218	$	—	$	(338)	$	31,880

Yankee bonds	Yankee bonds	8,761		—		(117)		8,644		Yankee bonds	2,608		—		(58)		2,550
Agency bonds	Agency bonds	12,377		—		(101)		12,276		Agency bonds	6,025		—		(119)		5,906
Municipal bonds	Municipal bonds	12,914		—		(867)		12,047		Municipal bonds	12,768		—		(937)		11,831
Commercial paper	Commercial paper	8,453		—		(41)		8,412		Commercial paper	2,929		—		—		2,929
Asset-backed securities	Asset-backed securities	30,463		—		(479)		29,984		Asset-backed securities	15,537		—		(180)		15,357
Corporate bonds	Corporate bonds	62,595		—		(1,946)		60,649		Corporate bonds	51,299		1		(1,481)		49,819
Total	Total	$	186,637	$	2	$	(4,323)	$	182,316	Total	$	123,384	$	1	$	(3,113)	$	120,272


		December 31, 2021									December 31, 2022
(in thousands)	(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Financial Assets:	Financial Assets:									Financial Assets:
Short-term marketable securities:	Short-term marketable securities:									Short-term marketable securities:
U.S. Treasury securities	U.S. Treasury securities	$	52,791	$	11	$	(138)	$	52,664	U.S. Treasury securities	$	56,426	$	—	$	(651)	$	55,775
Yankee bonds	Yankee bonds	6,175		1		(16)		6,160		Yankee bonds	5,358		—		(92)		5,266
Agency bonds	Agency bonds	17,546		—		(16)		17,530		Agency bonds	12,485		—		(116)		12,369
Municipal bonds	Municipal bonds	12,440		—		(211)		12,229		Municipal bonds	12,841		—		(1,030)		11,811
Commercial paper	Commercial paper	17,694		—		(4)		17,690		Commercial paper	2,846		8		—		2,854
Asset-backed securities	Asset-backed securities	27,620		1		(86)		27,535		Asset-backed securities	25,544		2		(427)		25,119
Corporate bonds	Corporate bonds	65,198		9		(452)		64,755		Corporate bonds	63,748		3		(2,136)		61,615
Total	Total	$	199,464	$	22	$	(923)	$	198,563	Total	$	179,248	$	13	$	(4,452)	$	174,809

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

The Company had ~~$0.7~~$1.5 million and ~~$0.6~~$0.9 million of accrued interest receivable at June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, included in other current assets on its Consolidated Balance Sheets related to its marketable securities. There were no realized gains or losses on marketable securities for the three and six months ended June 30, ~~2022. Realized gains or losses on marketable securities for the three~~2023 and ~~six months ended~~ June 30, ~~2021 were immaterial.~~

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

2022.

The following tables set forth the fair value of available-for-sale marketable securities by contractual maturity at June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.


		June 30, 2022									June 30, 2023
(in thousands)	(in thousands)	One Year or Less		Over One Year Through Five Years		Over Five Years		Total		(in thousands)	One Year or Less		Over One Year Through Five Years		Over Five Years		Total
Financial Assets:	Financial Assets:									Financial Assets:
Marketable Securities:	Marketable Securities:									Marketable Securities:
U.S. Treasury securities	U.S. Treasury securities	$	37,193	$	13,111	$	—	$	50,304	U.S. Treasury securities	$	31,880	$	—	$	—	$	31,880

Yankee bonds	Yankee bonds	6,073		2,571		—		8,644		Yankee bonds	2,550		—		—		2,550
Agency bonds	Agency bonds	9,899		2,377		—		12,276		Agency bonds	3,557		2,349		—		5,906
Municipal bonds	Municipal bonds	—		12,047		—		12,047		Municipal bonds	—		11,831		—		11,831
Commercial paper	Commercial paper	8,412		—		—		8,412		Commercial paper	2,929		—		—		2,929
Asset-backed securities	Asset-backed securities	22,095		7,889		—		29,984		Asset-backed securities	15,357		—		—		15,357
Corporate bonds	Corporate bonds	20,931		39,718		—		60,649		Corporate bonds	32,429		17,390		—		49,819
Total	Total	$	104,603	$	77,713	$	—	$	182,316	Total	$	88,702	$	31,570	$	—	$	120,272


		December 31, 2021									December 31, 2022
(in thousands)	(in thousands)	One Year or Less		Over One Year Through Five Years		Over Five Years		Total		(in thousands)	One Year or Less		Over One Year Through Five Years		Over Five Years		Total
Financial Assets:	Financial Assets:									Financial Assets:
Marketable Securities:	Marketable Securities:									Marketable Securities:
U.S. Treasury securities	U.S. Treasury securities	$	22,550	$	30,114	$	—	$	52,664	U.S. Treasury securities	$	40,795	$	14,980	$	—	$	55,775
Yankee bonds	Yankee bonds	4,150		2,010		—		6,160		Yankee bonds	2,734		2,532		—		5,266
Agency bonds	Agency bonds	14,041		3,489		—		17,530		Agency bonds	6,470		5,899		—		12,369
Municipal bonds	Municipal bonds	—		12,229		—		12,229		Municipal bonds	—		11,811		—		11,811
Commercial paper	Commercial paper	17,690		—		—		17,690		Commercial paper	2,854		—		—		2,854
Asset-backed securities	Asset-backed securities	20,868		6,667		—		27,535		Asset-backed securities	23,179		1,940		—		25,119
Corporate bonds	Corporate bonds	25,412		39,343		—		64,755		Corporate bonds	35,377		26,238		—		61,615
Total	Total	$	104,711	$	93,852	$	—	$	198,563	Total	$	111,409	$	63,400	$	—	$	174,809

The following tables set forth the Company’s cash equivalents and marketable securities accounted for as available-for-sale securities that were measured at fair value on a recurring basis based on the fair value hierarchy as of June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

1914

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


		June 30, 2022									June 30, 2023
(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:	Financial Assets:									Financial Assets:
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	216,373	$	—	$	—	$	216,373	Money market funds	$	283,214	$	—	$	—	$	283,214

Commercial paper		—		34,406		—		34,406

Marketable securities:	Marketable securities:									Marketable securities:
U.S. Treasury securities	U.S. Treasury securities	50,304		—		—		50,304		U.S. Treasury securities	31,880		—		—		31,880

Yankee bonds	Yankee bonds	8,644		—		—		8,644		Yankee bonds	2,550		—		—		2,550
Agency bonds	Agency bonds	12,276		—		—		12,276		Agency bonds	5,906		—		—		5,906
Municipal bonds	Municipal bonds	12,047		—		—		12,047		Municipal bonds	11,831		—		—		11,831
Commercial paper	Commercial paper	—		8,412		—		8,412		Commercial paper	—		2,929		—		2,929
Asset-backed securities	Asset-backed securities	—		29,984		—		29,984		Asset-backed securities	—		15,357		—		15,357
Corporate bonds	Corporate bonds	—		60,649		—		60,649		Corporate bonds	—		49,819		—		49,819
Total	Total	$	299,644	$	133,451	$	—	$	433,095	Total	$	335,381	$	68,105	$	—	$	403,486


		December 31, 2021									December 31, 2022
(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Level 3		Total
Financial Assets:	Financial Assets:									Financial Assets:
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	254,157	$	—	$	—	$	254,157	Money market funds	$	196,749	$	—	$	—	$	196,749

Commercial paper	Commercial paper	—		22,491		—		22,491		Commercial paper	—		36,965		—		36,965
Marketable securities:	Marketable securities:									Marketable securities:
U.S. Treasury securities	U.S. Treasury securities	52,664		—		—		52,664		U.S. Treasury securities	55,775		—		—		55,775
Yankee bonds	Yankee bonds	6,160		—		—		6,160		Yankee bonds	5,266		—		—		5,266
Agency bonds	Agency bonds	17,530		—		—		17,530		Agency bonds	12,369		—		—		12,369
Municipal bonds	Municipal bonds	12,229		—		—		12,229		Municipal bonds	11,811		—		—		11,811
Commercial paper	Commercial paper	—		17,690		—		17,690		Commercial paper	—		2,854		—		2,854
Asset-backed securities	Asset-backed securities	—		27,535		—		27,535		Asset-backed securities	—		25,119		—		25,119
Corporate bonds	Corporate bonds	—		64,755		—		64,755		Corporate bonds	—		61,615		—		61,615
Total	Total	$	342,740	$	132,471	$	—	$	475,211	Total	$	281,970	$	126,553	$	—	$	408,523

There were no transfers of financial assets or liabilities into or out of Level 1, Level 2, or Level 3 for the three and six months ended June 30, ~~2022~~2023 and June 30, ~~2021.~~

~~Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis~~2022.

The carrying value of cash and cash equivalents, accounts receivable, net, accounts payable, accrued expenses and other liabilities, and other current assets and liabilities, are considered reasonable estimates of their respective fair values at June 30, ~~2022~~2023 and December 31, ~~2021~~2022 due to their short-term nature.

The Company also measures certain non-financial assets at fair value on a nonrecurring basis, primarily intangible assets, goodwill, and long-lived assets in connection with periodic evaluations for potential impairment. The Company estimates the fair value of these assets using primarily unobservable inputs and, as such, these are considered Level 3 fair value measurements.

Note 5.4. Goodwill and Intangible Assets

The following table summarizes the carrying amounts of goodwill by segment at June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


	June 30, 2023		December 31, 2022
Clinical Services	$	458,782	$	458,782
Advanced Diagnostics	63,984		63,984
Total	$	522,766	$	522,766

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

June 30, 2022 December 31, 2021
Clinical Services $ 462,603 $ 462,603
Pharma Services 64,512 64,512
Total $ 527,115 $ 527,115

Intangible assets consisted of the following (in thousands):


			June 30, 2022								June 30, 2023
		Amortization Period (years)	Cost		Accumulated Amortization		Net			Amortization Period (years)	Cost		Accumulated Amortization		Net

Customer Relationships	Customer Relationships	7 - 15	$	143,101	$	50,700	$	92,401	Customer Relationships	7 - 15	$	143,101	$	60,590	$	82,511
Developed Technology	Developed Technology	10 - 15	310,226		22,457		287,769		Developed Technology	10 - 15	310,226		43,778		266,448
Marketing Assets	Marketing Assets	4	549		169		380		Marketing Assets	4	549		307		242
Trademarks	Trademarks	15	31,473		2,174		29,299		Trademarks	15	31,473		4,272		27,201
Trade Name	Trade Name	5	2,584		542		2,042		Trade Name	2.5	2,584		1,740		844
Trademark - Indefinite lived	Trademark - Indefinite lived	—	13,447		—		13,447		Trademark - Indefinite lived	—	13,447		—		13,447
Total	Total		$	501,380	$	76,042	$	425,338	Total		$	501,380	$	110,687	$	390,693


			December 31, 2021								December 31, 2022
		Amortization Period (years)	Cost		Accumulated Amortization		Net			Amortization Period (years)	Cost		Accumulated Amortization		Net
Customer Relationships	Customer Relationships	7 - 15	$	143,101	$	45,756	$	97,345	Customer Relationships	7 - 15	$	143,101	$	55,645	$	87,456
Developed Technology	Developed Technology	10 - 15	310,226		11,798		298,428		Developed Technology	10 - 15	310,226		33,117		277,109
Marketing Assets	Marketing Assets	4	549		100		449		Marketing Assets	4	549		238		311
Trademarks	Trademarks	15	31,473		1,125		30,348		Trademarks	15	31,473		3,223		28,250
Trade Name	Trade Name	5	2,584		276		2,308		Trade Name	2.5	2,584		897		1,687
Trademark - Indefinite lived	Trademark - Indefinite lived	—	13,447		—		13,447		Trademark - Indefinite lived	—	13,447		—		13,447
Total	Total		$	501,380	$	59,055	$	442,325	Total		$	501,380	$	93,120	$	408,260

The Company records amortization expense within cost of revenue and general and administrative expense on the Consolidated Statement of Operations. The following table summarizes the amortization expense for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Amortization of intangibles included in cost of revenue	Amortization of intangibles included in cost of revenue	$	4,853	$	729	$	9,706	$	729	Amortization of intangibles included in cost of revenue	$	4,853	$	4,853	$	9,706	$	9,706
Amortization of intangibles included in general and administrative expenses	Amortization of intangibles included in general and administrative expenses	3,637		3,022		7,273		5,480		Amortization of intangibles included in general and administrative expenses	3,930		3,637		7,860		7,273
Total amortization of intangibles	Total amortization of intangibles	$	8,490	$	3,751	$	16,979	$	6,209	Total amortization of intangibles	$	8,783	$	8,490	$	17,566	$	16,979

The estimated amortization expense related to amortizable intangible assets for each of the following periods as of June 30, ~~2022~~2023 is as follows (in thousands):


Remainder of 2022		$	16,980
2023		33,962
Remainder of 2023				Remainder of 2023	$	17,566
2024	2024	33,961		2024	33,447
2025	2025	33,858		2025	33,343
2026	2026	33,547		2026	33,308
2027				2027	32,758

Thereafter	Thereafter	259,583		Thereafter	226,824
Total	Total	$	411,891	Total	$	377,246

Note 6.5. Debt

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

2028 Convertible Senior Notes

On January 11, 2021, the Company completed the sale of $345.0 million of Convertible Senior Notes with a stated interest rate of 0.25% and a maturity date of January 15, 2028 (the “2028 Convertible Notes”), unless earlier converted, redeemed, or repurchased.

The last reported sales price of the Company’s common stock was not greater than or equal to 130.0% of the conversion price of the 2028 Convertible Notes on at least 20 of the last 30 consecutive trading days of the quarter ended March 31, ~~2022.~~2023. Based

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

on the terms of the 2028 Convertible Notes, the holders could not have converted all or a portion of their 2028 Convertible Notes in the second quarter of ~~2022.~~2023. The last reported sales price of the Company’s common stock was not greater than or equal to 130.0% of the conversion price of the 2028 Convertible Notes on at least 20 of the last 30 consecutive trading days of the quarter ended June 30, ~~2022.~~2023. Based on the terms of the 2028 Convertible Notes, the holders cannot convert all or a portion of their 2028 Convertible Notes in the third quarter of ~~2022.~~2023. The value of the 2028 Convertible Notes, if-converted, does not exceed the principal amount based on a closing stock price of ~~$8.15~~$16.07 on June 30, ~~2022.~~2023.

The interest expense recognized on the 2028 Convertible Notes includes $0.2 million, $0.4 million and $8,500 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended June 30, 2023. The interest expense recognized on the 2028 Convertible Notes includes $0.4 million, $0.7 million and $17,000 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the six months ended June 30, 2023. The interest expense recognized on the 2028 Convertible Notes includes $0.2 million, $0.4 million and $8,400 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended June 30, 2022. The interest expense recognized on the 2028 Convertible Notes includes $0.4 million, $0.7 million and $16,800 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the six months ended June 30, 2022. The interest expense recognized on the 2028 Convertible Notes includes $0.2 million, $0.3 million and $8,400 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended June 30, 2021. The interest expense recognized on the 2028 Convertible Notes includes $0.4 million, $0.7 million and $15,100 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the six months ended June 30, 2021. The effective interest rate on the 2028 Convertible Notes is 0.70%, which includes the interest on the 2028 Convertible Notes and amortization of the debt discount and debt issuance costs. The 2028 Convertible Notes bear interest at a rate of 0.25% per annum, payable semi-annually in arrears on January 15 and July 15 of each year, beginning on July 15, 2021.

At June 30, ~~2022,~~2023, the estimated fair values (Level 2) of the 0.25% Convertible Senior Notes due 2028 was ~~$213.9~~$251.9 million. At December 31, ~~2021,~~2022, the estimated fair value (Level 2) of the 0.25% Convertible Senior Notes due 2028 was ~~$297.6~~$218.2 million.

2025 Convertible Senior Notes

On May 4, 2020, the Company completed the sale of $201.3 million of Convertible Senior Notes with a stated interest rate of 1.25% and a maturity date of May 1, 2025 (the “2025 Convertible Notes”), unless earlier converted, redeemed, or repurchased.

The last reported sales price of the Company’s common stock was not greater than or equal to 130.0% of the conversion price of the 2025 Convertible Notes on at least 20 of the last 30 consecutive trading days of the quarter ended March 31, ~~2022.~~2023. Based on the terms of the 2025 Convertible Notes, the holders could not have converted all or a portion of their 2025 Convertible Notes in the ~~first~~second quarter of ~~2022.~~2023. The last reported sales price of the Company’s common stock was not greater than or equal to 130.0% of the conversion price of the 2025 Convertible Notes on at least 20 of the last 30 consecutive trading days of the quarter ended June 30, ~~2022.~~2023. Based on the terms of the 2025 Convertible Notes, the holders cannot convert all or a portion of their 2025 Convertible Notes in the third quarter of ~~2022.~~2023. The value of the 2025 Convertible Notes, if-converted, does not exceed the principal amount based on a closing stock price of ~~$8.15~~$16.07 on June 30, ~~2022.~~2023.

The interest expense recognized on the 2025 Convertible Notes includes $0.6 million, $0.3 million and $37,700 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended June 30, 2023. The interest expense recognized on the 2025 Convertible Notes includes $1.3 million, $0.6 million and $0.1 million for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the six months ended June 30, 2023. The interest expense recognized on the 2025 Convertible Notes includes $0.6 million, $0.3 million and $37,000 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended June 30, 2022. The interest expense recognized on the 2025 Convertible Notes includes $1.2 million, $0.6 million and ~~$74,000~~$0.1 million for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the six months ended June 30, 2022. The interest expense recognized on the 2025 Convertible Notes includes $0.7 million, $0.3 million and $30,000 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the three months ended June 30, 2021. The interest expense recognized on the 2025 Convertible Notes includes $1.3 million, $0.6 million and $70,000 for the contractual coupon interest, the amortization of the debt discount and the amortization of the debt issuance costs, respectively, for the six months ended June 30, 2021. The effective interest rate on the 2025 Convertible Notes is 1.96%, which includes the interest on the 2025 Convertible Notes and amortization of the debt discount and debt issuance costs. The 2025 Convertible Notes bear interest at a rate of 1.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, which began on November 1, 2020.

At June 30, ~~2022,~~2023, the estimated fair values (Level 2) of the 1.25% Convertible Senior Notes due 2025 was ~~$168.6~~$192.1 million. At December 31, ~~2021,~~2022, the estimated fair value (Level 2) of the 1.25% Convertible Senior Notes due 2025 was ~~$238.9~~$169.6 million.

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Note 7.6. Stock-Based Compensation

Equity Incentive Plan

Effective May 25, 2023, the Company adopted the NeoGenomics, Inc. 2023 Equity Incentive Plan (the “2023 Plan”) as approved by the Board of Directors on March 28, 2023 and the Company’s stockholders on May 25, 2023. The 2023 Plan replaced the NeoGenomics, Inc. Amended and Restated Equity Incentive Plan, as most recently amended and subsequently

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

approved by the stockholders on May 25, 2017 (the “Prior Plan”). The 2023 Plan allows for the award of equity incentives including stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares, performance units, and other stock-based awards to certain employees, directors, or officers of, or key non-employee advisers or consultants, including contracted physicians to the Company or its subsidiaries. The 2023 Plan provides that the maximum aggregate number of shares of the Company’s common stock reserved and available for issuance under the 2023 Plan is 3,975,000. Additionally, effective May 25, 2023, any remaining unissued shares from the Prior Plan shall be available for the grant of new awards under the 2023 Plan.

The Company recorded approximately ~~$3.6~~$5.7 million and ~~$4.5~~$3.6 million for stock-based compensation in general and administrative expenses on the Consolidated Statements of Operations for the three months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and approximately ~~$15.7~~$10.5 million and ~~$7.2~~$15.7 million for the six months ended June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Stock Options

The Company recorded approximately $2.3 million and $0.3 million for stock-based compensation related to stock options in general and administrative expenses on the Consolidated Statements of Operations for the three months ended June 30, 2023 and 2022, respectively, and approximately $4.1 million and $4.8 million for the six months ended June 30, 2023 and 2022, respectively.

A summary of the stock option activity under the Company’s plans for the six months ended June 30, ~~2022~~2023 is as follows:

Number of
Shares Weighted Average Exercise Price
Options outstanding at December 31, 2021 2,961,195 $ 25.46
Options granted 2,953,059 $ 15.80
Less:
Options exercised 566,583 $ 12.65
Options forfeited 1,316,107 $ 30.31
Options outstanding at June 30, 2022 4,031,564 $ 18.59
Exercisable at June 30, 2022 1,427,681 $ 22.60


	Number of Shares	Weighted Average Exercise Price
Outstanding at December 31, 2022	4,214,617	$	16.48
Granted	1,502,768	$	17.34

Exercised	(135,101)	$	10.07
Forfeited	(818,558)	$	19.77
Outstanding at June 30, 2023	4,763,726	$	16.37
Exercisable at June 30, 2023	1,231,330	$	23.06

The fair value of each stock option award granted during the six months ended June 30, ~~2022~~2023 was estimated as of the grant date using a Black-Scholes model with the following ~~weighted average~~ assumptions:


			Six Months Ended June 30, ~~2022~~2023
Expected term (in years)			34.0 - ~~5.5~~6.5
Risk-free interest rate (%)			~~2.5%~~3.3% - 4.4%
Expected volatility (%)			~~42%~~53.3% - ~~59%~~67.9%
Dividend yield (%)			—
Weighted average grant date fair value per share			$~~6.70~~9.05

As of June 30, ~~2022,~~2023, there was approximately ~~$13.3~~$18.4 million of unrecognized stock-based compensation expense related to stock options that will be recognized over a weighted-average period of approximately ~~2.2~~2.0 years.

Restricted Stock ~~Awards~~

The Company recorded approximately $2.8 million and $3.0 million for stock-based compensation related to restricted stock in general and administrative expenses on the Consolidated Statements of Operations for the three months ended June 30, 2023 and 2022, respectively, and approximately $5.6 million and $10.4 million for the six months ended June 30, 2023 and 2022, respectively.

A summary of the restricted stock activity under the Company’s plans for the six months ended June 30, ~~2022~~2023 is as follows:
Number of Restricted
Shares Weighted Average Grant Date Fair Value
Nonvested at December 31, 2021 851,403 $ 36.00
Granted 1,778,000 $ 15.47
Vested (309,100) $ 36.74
Forfeited (817,912) $ 29.68
Nonvested at June 30, 2022 1,502,391 $ 14.99


	Number of Restricted Shares	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2022	1,994,861	$	12.71
Granted	845,735	$	17.19
Vested	(451,523)	$	14.32
Forfeited	(333,682)	$	15.75
Nonvested at June 30, 2023	2,055,391	$	13.68

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

As of June 30, ~~2022,~~2023, there was approximately ~~$17.1~~$20.9 million of unrecognized stock-based compensation expense related to restricted stock that will be recognized over a weighted-average period of approximately ~~1.9~~2.1 years.

Performance-Based Restricted Stock Units

In the second quarter of 2023, the Company granted 305,105 PSUs subject to a market condition to certain of its executives with an aggregated grant date fair value of approximately $6.7 million. The number of shares awarded will be subject to adjustment based on the achievement of a TSR performance target. If the TSR performance target is achieved, the awards will vest at the end of the three-year requisite service period so long as the employee remains employed with the Company through the applicable vesting date. Compensation cost for the PSUs is recognized straight-line over the requisite service period, regardless of when, if ever, the market condition is satisfied.

The Company recognized approximately $0.3 million of stock-based compensation related to the PSUs in general and administrative expenses on the Consolidated Statements of Operations for the three and six months ended June 30, 2023, respectively. There were no such amounts for the three and six months ended June 30, 2022.

A summary of the PSU activity under the Company’s plans for the six months ended June 30, 2023 is as follows:


	Number of Stock Units	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2022	—	$	—
Granted	305,105	$	21.83
Vested	—	$	—
Forfeited	—	$	—
Nonvested at June 30, 2023	305,105	$	21.83

The fair value of each PSU granted during the six months ended June 30, 2023 was estimated as of the grant date using a Monte Carlo with the following assumptions:


			Six Months Ended June 30, 2023
Expected term (in years)			3.0
Risk-free interest rate (%)			3.6% - 4.0%
Expected volatility (%)			68.4% - 69.9%
Dividend yield (%)			—
Weighted average grant date fair value per share			$21.83

As of June 30, 2023, there was approximately $6.4 million of unrecognized stock-based compensation expense related to PSUs that will be recognized over a weighted-average period of approximately 2.9 years.

Modification of Stock Option and Restricted Stock Awards

In the three months ended June 30, 2023, upon the departure of certain executives from the Company and in accordance with the terms of each of their respective employment agreements, 101,937 previously granted time-based vesting stock option awards and 61,746 previously granted time-based vesting restricted stock awards accelerated vesting. The Company accounted for the effects of the accelerated vesting of these stock awards as modifications, and recognized $0.9 million of incremental stock-based compensation which consisted of $0.3 million and $0.6 million for the acceleration of stock option awards and restricted stock awards, respectively, within general and administrative expenses on the Consolidated Statements of Operations for the three and six months ended June 30, 2023.

In the second quarter of 2022, upon the prior Chief Legal Officer’s departure from the Company and in accordance with the terms of the prior Chief Legal Officer’s employment agreement, 41,487 previously granted time-based vesting stock option awards and 76,138 previously granted ~~time-vesting~~time-based vesting restricted stock awards accelerated vesting. The Company accounted for the effects of the accelerated vesting of these stock awards as a modification, and recognized $2.2 million of incremental stock-based compensation which consisted of $0.3 million and $1.9 million for the acceleration of stock option awards and restricted stock awards, respectively, within general and administrative expenses on the Consolidated Statements of Operations for the three and six months ended June 30, 2022.

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

In the first quarter of 2022, upon the prior Chief Executive Officer’s departure from the Company and in accordance with the terms of the prior Chief Executive Officer’s separation agreement, 237,960 previously granted time-based vesting stock option

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

awards and 142,302 previously granted ~~time-vesting~~time-based vesting restricted stock awards accelerated vesting. The Company accounted for the effects of the accelerated vesting of these stock awards as a modification, and recognized $5.9 million of incremental stock-based compensation which consisted of $2.3 million and $3.6 million for the acceleration of stock option awards and restricted stock awards, respectively, within general and administrative expenses on the Consolidated Statements of Operations for the six months ended June 30, 2022. There were no such amounts for the three months ended June 30, 2022.

Note 8.7. Revenue Recognition

The Company’s 2two reportable segments for which it recognizes revenue are (1) Clinical Services and (2) ~~Pharma Services.~~Advanced Diagnostics. The Clinical Services segment provides various clinical-testing services related to oncology diagnostics, community-based oncology and pathology sales, patient engagement, and clinical ~~testing~~decision support. Functions within the Advanced Diagnostics segment include pharma services, ~~to community-based pathology practices, oncology practices, hospital pathology labs, reference labs,~~informatics, R&D, and ~~academic centers with reimbursement from various payers including client direct billing, commercial insurance, Medicare~~minimal residual disease, liquid biopsy and other government payers, and patients. The Pharma Services segment supports pharmaceutical firms in their drug development programs by providing testing services and data analytics for clinical trials and research.therapy selection business development.

Clinical Services Revenue

The Company’s specialized diagnostic services are performed based on a written test requisition form or an electronic equivalent. The performance obligation is satisfied and revenues are recognized once the diagnostic services have been performed and the results have been delivered to the ordering physician. These diagnostic services are billed to various payers, including client direct billing, commercial insurance, Medicare and other government payers, and patients. Revenue is recorded for all payers based on the amount expected to be collected, which considers implicit price concessions. Implicit price concessions represent differences between amounts billed and the estimated consideration the Company expects to receive based on negotiated discounts, historical collection experience, and other anticipated adjustments, including anticipated payer denials. Collection of consideration the Company expects to receive typically occurs within 30 to 60 days of billing for commercial insurance, Medicare and other governmental and self-pay payers and within 60 to 90 days of billing for client payers.

~~Pharma Services~~Advanced Diagnostics Revenue

The Company’s ~~Pharma Services~~Advanced Diagnostics segment generally enters into contracts with pharmaceutical and biotech customers as well as other ~~CROs~~contract research organizations (“CROs”) to provide research and clinical trial services. Such services ~~ranging in duration from one month to several years.~~also include validation studies and assay development. The Company records revenue on a unit-of-service basis based on number of units completed and the total expected contract value. The total expected contract value is estimated based on historical experience of total contracted units compared to realized units as well as known factors on a specific contract-by-contract basis. Certain contracts include upfront fees, final settlement amounts, and/or billing milestones that may not align with the completion of performance obligations. The value of these upfront fees or final settlement amounts is usually recognized over time based on the number of units completed ~~which aligns with~~towards the ~~progress~~satisfaction of a performance obligation. In addition, certain contracts include upfront fees and the ~~Company towards fulfilling its obligations under the contract.~~

~~The Company also enters into other~~revenue for those contracts such as validation studies and informatics. Revenue for validation studies for which the sole deliverable may be a final report that is sent to the sponsor(s) at the completion of contracted activities, is recognized ~~at a point in~~over time ~~upon delivery of~~as services are performed.

Additional offerings within the ~~final report to~~Advanced Diagnostics portfolio includes Informatics, which involves the ~~sponsor. Informatics is the sale~~licensing of de-identified data ~~for which deliverables typically consist~~to pharmaceutical and biotech customers in the form of either retrospective records or prospective deliveries of data. Informatics revenue is recognized at a point in time upon delivery of retrospective data or over time for prospective data feeds. Any contracts that contain multiple performance obligations and include both units-of-service and point in time deliverables are accounted for as separate performance obligations and revenue is recognized as previously disclosed. The Company negotiates billing schedules and payment terms on a contract-by-contract ~~basis. While the~~basis, and contract terms generally provide for payments based on a unit-of-service ~~arrangement, the billing schedules, payment terms, and related cash payments may not align with the performance of services and, as such, may not correspond to revenue recognized in any given period.~~arrangement.

Amounts collected in advance of services being provided are deferred as contract liabilities on the Consolidated Balance Sheets. The associated revenue is recognized and the contract liability is reduced as the contracted services are subsequently performed. Contract assets are established for revenue recognized but not yet billed. These contract assets are reduced once the customer is invoiced and a corresponding receivable is recorded. Additionally, ~~certain costs to obtain contracts, primarily for~~Advanced Diagnostics incurs sales commissions in the process of obtaining contracts with customers. Sales commissions that are ~~capitalized when incurred~~payable upon contract award are recognized as assets and amortized over the ~~term~~expected contract term. The amortization of commission expense is based on the weighted average contract duration for all commissionable awards in the respective business in which the commission expense is paid, which approximates the period over which goods and services are transferred to the customer. For offerings with primarily short-term contracts, such as Informatics, the Company applies the practical expedient which allows costs to obtain a contract to be expensed when incurred, if the amortization period of the ~~contract. Amounts~~assets that would otherwise have been recognized is one year or less. Contract assets and capitalized ~~for contracts with an initial contract term of twelve months or less~~commissions are ~~classified as~~included in other current ~~assets. All others are classified as non-current assets.~~assets and other assets on the Consolidated Balance Sheets.

Most contracts are terminable by the customers, either immediately or according to advance notice terms specified within the contracts. All contracts require payment of fees to the Company for services rendered through the date of termination and may require payment for subsequent services necessary to conclude the study or close out the contract.

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

The following table summarizes the values of contract assets, capitalized commissions and contract liabilities (in thousands):

June 30, 2022 December 31, 2021
Current pharma contract assets (1)
$ 1,951 $ 1,738
Long-term pharma contract assets (2)
283 236
Total pharma contract assets $ 2,234 $ 1,974
Current pharma capitalized commissions (1)
$ 128 $ 109
Long-term pharma capitalized commissions (2)
1,139 882
Total pharma capitalized commissions $ 1,267 $ 991
Current pharma contract liabilities $ 6,348 $ 5,192
Long-term pharma contract liabilities (3)
1,121 917
Total pharma contract liabilities $ 7,469 $ 6,109

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


	June 30, 2023		December 31, 2022
Current contract assets (1)	$	810	$	1,898
Long-term contract assets (2)	—		31
Total assets	$	810	$	1,929


Current capitalized commissions (1)	$	923	$	800
Long-term capitalized commissions (2)	437		715
Total capitalized commissions	$	1,360	$	1,515


Current contract liabilities	$	5,712	$	7,557
Long-term contract liabilities (3)	—		19
Total contract liabilities	$	5,712	$	7,576

(1) ~~Current pharma contract assets and Current pharma capitalized commissions are classified as~~Recorded within other current assets on the Consolidated Balance Sheets.

(2) ~~Long-term pharma contract assets and Long-term pharma capitalized commissions are classified as~~Recorded within other assets on the Consolidated Balance Sheets.

(3) ~~Long-term pharma contract liabilities are classified as~~Recorded within other long-term liabilities on the Consolidated Balance Sheets.

Revenue recognized for the three and six months ended June 30, 2023 related to contract liability balances outstanding at the beginning of the period was $1.7 million and $3.5 million, respectively. Revenue recognized for the three and six months ended June 30, 2022 related to ~~Pharma~~ contract liability balances outstanding at the beginning of the period was $1.0 million and $4.1 million, respectively. ~~Revenue recognized~~Amortization of capitalized commissions for the three and six months ended June 30, ~~2021 related to Pharma contract liability balances outstanding at the beginning of the period~~2023 was ~~$1.1~~$0.3 million and ~~$3.8~~$0.5 million, respectively. Amortization of capitalized commissions for the three and six months ended June 30, 2022 was $0.2 million and $0.3 million, respectively. ~~Amortization of capitalized commissions for the three and six months ended June 30, 2021 was $0.5 million and $0.7 million, respectively.~~

Disaggregation of Revenue

The Company considered various factors for both its Clinical Services and ~~Pharma Services~~Advanced Diagnostics segments in determining appropriate levels of homogeneous data for its disaggregation of revenue; including the nature, amount, timing, and uncertainty of revenue and cash flows. Clinical Services categories align with the types of customers due to similarities of billing method, level of reimbursement, and timing of cash receipts. Unbilled amounts are accrued and allocated to payer categories based on historical experience. In future periods actual billings by payer category may differ from accrued amounts. ~~Pharma Services~~Advanced Diagnostics relate to contracts with large pharmaceutical and biotech customers as well as other CROs. Because the nature, timing, and uncertainty of revenue and cash flows are similar and primarily driven by individual contract terms ~~Pharma Services~~Advanced Diagnostics revenue is not further disaggregated.

The following table details the disaggregation of revenue for both the Clinical Services and ~~Pharma Services~~Advanced Diagnostics Segments (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Clinical Services:
Clinical Services										Clinical Services
Client direct billing	Client direct billing	$	69,874	$	63,137	$	134,888	$	123,846	Client direct billing	$	83,176	$	69,874	$	159,999	$	134,888
Commercial Insurance	Commercial Insurance	18,512		20,528		36,800		39,102		Commercial Insurance	21,695		18,512		43,050		36,800
Medicare and Medicaid	Medicare and Medicaid	17,167		17,484		32,632		34,634		Medicare and Medicaid	18,196		17,167		34,783		32,632
Self-Pay	Self-Pay	82		256		106		310		Self-Pay	89		82		193		106
Total Clinical Services	Total Clinical Services	$	105,635	$	101,405	$	204,426	$	197,892	Total Clinical Services	$	123,156	$	105,635	$	238,025	$	204,426
Pharma Services:		19,437		20,319		37,815		39,365
Advanced Diagnostics										Advanced Diagnostics	23,761		19,437		46,112		37,815
Total Revenue	Total Revenue	$	125,072	$	121,724	$	242,241	$	237,257	Total Revenue	$	146,917	$	125,072	$	284,137	$	242,241

Note 8. Restructuring

In 2022, the Company embarked on a restructuring program to improve execution and drive efficiency across the organization. This program is a framework for identifying, prioritizing and executing operational improvements. Restructuring charges incurred consist of severance and other employee costs, costs for optimizing the Company’s geographic presence (“Facility

2521

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Footprint Optimization”), and consulting and other costs. There were no such charges for the three and six months ended June 30, 2022.

The following table summarizes the changes in the Company’s accrued restructuring balance (in thousands):


	Severance and Other Employee Costs		Facility Footprint Optimization		Consulting and Implementation Costs		Total
Balance as of December 31, 2022	$	559	$	—	$	960	$	1,519
Restructuring charges incurred	3,105		913		106		4,124
Impairment of facility related assets	—		560		—		560

Cash payments and other adjustments(1)	(1,285)		(564)		(346)		(2,195)
Balance as of March 31, 2023	$	2,379	$	909	$	720	$	4,008
Restructuring charges incurred	1,893		271		581		2,745
Impairment of facility related assets	—		329		—		329

Cash payments and other adjustments(1)	(1,634)		(306)		(1,007)		(2,947)
Balance as of June 30, 2023	$	2,638	$	1,203	$	294	$	4,135
Current liabilities							$	4,135
Long-term liabilities							—
							$	4,135

(1)Other adjustments include non-cash asset charges related to Facility Footprint Optimization costs.

The Company will continue this restructuring program in 2023 and expects to incur additional restructuring charges of approximately $1.2 million. The Company estimates these additional restructuring charges to be comprised of approximately $0.3 million in severance and other employee costs, $0.2 million of Facility Footprint Optimization costs, and $0.7 million of consulting and other costs. The Company’s restructuring activities are expected to be complete by December 31, 2023.

Note 9. Income Taxes

At the end of each interim period, management estimates the annual effective tax rate based on forecasted pre-tax results of the Company’s global operations and applies such rate to its ordinary quarterly earnings to calculate income tax expense related to ordinary income. The tax effects of items significant, unusual and infrequent in nature are discretely calculated and recognized in the period during which they occur. These discrete items often relate to changes in tax laws, excess tax benefits/deficiencies related to share-based compensation or adjustments to previously reported tax expense/benefits.

Management assesses the recoverability of its deferred tax assets as of the end of each quarter, weighing available positive and negative evidence, and is required to establish and maintain a valuation allowance for these assets if it is more likely than not that some or all of the deferred income tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary to support a conclusion that a valuation allowance is not needed.

A cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome. Cumulative loss in recent years is commonly defined as a three-year cumulative loss position. As of June 30, ~~2022,~~2023, all of the Company’s ~~U.S.~~ ongoing operations were in a three-year cumulative loss position. Management determined that sufficient objectively verifiable positive evidence did not exist to overcome the negative evidence of the Company’s ~~U.S.~~ cumulative loss position. Accordingly, the Company’s estimated annual effective tax rate applied to the Company’s pre-tax loss for the three and six months ended June 30, ~~2022,~~2023, includes the unfavorable impact of a valuation allowance against the Company’s deferred income tax assets expected to be created in ~~2022~~2023 for additional U.S. net operating loss and tax credit ~~carryforwards.~~carryforwards as well as Switzerland, China and Singapore deferred tax assets. The reversal of U.K. deferred tax liabilities will provide a source of realization to support a portion of the U.K. deferred tax assets, and therefore a partial valuation has been established for those deferred tax assets. Accordingly, the Company’s estimated annual effective tax rate applied to the Company’s pre-tax loss for the six months ended June 30, 2023, includes the favorable impact of recognizing the realizable portion of the U.K. benefit.

In August 2023, the Company received notification from the Internal Revenue Service that their review of the examination of the Company’s U.S federal tax return for the tax year ended December 31, 2017 was complete. There were no changes to the reported tax and the notice had no impact to the Consolidated Financial Statements.

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 10. Net ~~(Loss) Income~~Loss Per Share

The Company presents both basic earnings per share (“EPS”) and diluted EPS. Basic EPS excludes potential dilution and is computed by dividing net loss by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock ~~awards~~options were exercised, stock awards vested and if the 2028 Convertible Notes and 2025 Convertible Notes were converted. The potential dilution from stock awards is accounted for using the treasury stock method based on the average market value of the Company’s common stock. The potential dilution from conversion of the 2028 Convertible Notes and 2025 Convertible Notes is accounted for using the if-converted method, which requires that all of the shares of the Company’s common stock issuable upon conversion of the 2028 Convertible Notes and the 2025 Convertible Notes will be included in the calculation of diluted EPS assuming conversion of the 2028 Convertible Notes and the 2025 Convertible Notes at the beginning of the reporting period (or at time of issuance, if later).

The following table shows the calculations (in thousands, except net loss per share amounts):

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Adjustment to net (loss) income for convertible notes in diluted EPS (1)
NET (LOSS) INCOME $ (35,303) $ 75,873 $ (84,711) $ 53,759
Convertible note accretion, amortization, and interest, net of tax — 1,552 — 2,997
NET (LOSS) INCOME USED IN DILUTED EPS $ (35,303) $ 77,425 $ (84,711) $ 56,756
Basic weighted average shares outstanding 124,068 118,287 123,850 117,249
Dilutive effect of stock options — 2,027 — 2,221
Dilutive effect of restricted stock awards — 170 — 196
Dilutive effect of Convertible Notes due 2025 — 5,538 — 5,538
Dilutive effect of Convertible Notes due 2028 — 5,215 — 5,043
Diluted weighted average shares outstanding 124,068 131,237 123,850 130,247
Basic net (loss) income per share $ (0.28) $ 0.64 $ (0.68) $ 0.46
Diluted net (loss) income per share $ (0.28) $ 0.59 $ (0.68) $ 0.44

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

NET LOSS	$	(24,331)	$	(35,303)	$	(55,126)	$	(84,711)




Basic weighted average shares outstanding	125,356		124,068		125,192		123,850




Diluted weighted average shares outstanding	125,356		124,068		125,192		123,850

Basic net loss per share	$	(0.19)	$	(0.28)	$	(0.44)	$	(0.68)
Diluted net loss per share	$	(0.19)	$	(0.28)	$	(0.44)	$	(0.68)

The following potential dilutive shares were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive (in thousands):


		Three Months Ended June 30,		Six Months Ended June 30,			Three Months Ended June 30,		Six Months Ended June 30,
		2022	2021	2022	2021		2023	2022	2023	2022
Stock options	Stock options	68	—	332	—	Stock options	574	68	474	332
Restricted stock awards	Restricted stock awards	52	—	152	—	Restricted stock awards	1,016	52	987	152
2025 Convertible Notes	2025 Convertible Notes	5,538	—	5,538	—	2025 Convertible Notes	5,538	5,538	5,538	5,538
2028 Convertible Notes	2028 Convertible Notes	5,215	—	5,215	—	2028 Convertible Notes	5,215	5,215	5,215	5,215

In connection with the 2028 Convertible Notes offering, on January 11, 2021, the Company entered into separate, privately negotiated convertible note hedge transactions (collectively, the “Capped Call Transactions”) with option counterparties pursuant to capped call confirmations at a cost of approximately $29.3 million. The potential effect of the Capped Call Transactions were excluded from the calculation of diluted net loss per share in the three and six months ended June 30, ~~2022~~2023 as the Company’s closing price of $16.07 on June 30, ~~2022~~2023 did not exceed the conversion price of $85.75 per share. The Capped Call Transactions are not reflected in diluted net loss per share as they are anti-dilutive.

Note 11. Commitments and Contingencies

Legal ~~Proceeding~~Proceedings

On January 20, 2021, Natera, Inc. filed a patent infringement complaint against the Company’s newly-acquired subsidiary Inivata Limited and its subsidiary Inivata, Inc. in ~~United States~~U.S. District Court for the district of Delaware, alleging Inivata’s ~~InVisionFirst-Lung™~~InVisionFirst®-Lung cancer diagnostic test of infringing 2two patents. Natera then filed a second patent infringement complaint on December 20, 2022 against Inivata Limited and Inivata Inc. alleging that the RaDaR® minimal residual disease test infringes one patent. The litigation is ~~presently~~ in the ~~pleadings~~discovery stage. On July 31, 2023, Natera, Inc. filed a patent infringement complaint against the Company in the U.S. District Court for the Middle District of North Carolina, alleging that the RaDaR® minimal residual test infringes on two patents. The Company believes that it has good and substantial defenses to the claims alleged in ~~the suit,~~these suits, but there is no guarantee that the Company will prevail. At the time of filing the outcome of ~~this matter is~~these matters are not estimable or probable.

On December 16, 2022, a purported shareholder class action captioned Daniel Goldenberg v. NeoGenomics, Inc., Douglas VanOort, Mark Mallon, Kathryn McKenzie, and William Bonello was filed in the United States District Court for the Southern

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

District of New York, naming the Company and certain of the Company’s current and former officers as defendants. This lawsuit was filed by a stockholder who claims to be suing on behalf of anyone who purchased or otherwise acquired the Company’s securities between February 27, 2020 and April 26, 2022. The lawsuit alleges that material misrepresentations and/or omissions of material fact were made in the Company’s public disclosures in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. The alleged improper disclosures relate to statements regarding the Company’s menu of tests, business operations and compliance with health care laws and regulations. The plaintiff seeks unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including attorney’s fees and expert fees. On April 27, 2023, a shareholder of the Company filed a shareholder derivative action on behalf of the Company captioned Puskarich v. VanOort, et al. in Clark County Nevada, naming certain of the Company’s current and former officers and directors as defendants. The allegations are substantially similar to the allegations asserted in the Goldenberg action. Substantially similar shareholder derivative actions were subsequently filed in Lee County, Florida and in the United States District Court for the Southern District of New York, captioned Wong v. VanOort, et al. and Mellema v. VanOort, et al., respectively. The Company believes that it has valid defenses to the claims alleged in the lawsuits, but there is no guarantee that the Company will prevail. At the time of filing the outcome of these matters are not estimable or probable.

In April 2023, the Company made an offer to settle a dispute. In July 2023, the matter was settled for an amount which was not material.

Regulatory Matter

With the assistance of outside counsel, the Company is voluntarily ~~conducting~~conducted an internal investigation that ~~focuses~~focused on the compliance of certain consulting and service agreements with federal healthcare laws and regulations, including those relating to fraud, waste and abuse. Based on this internal investigation, the Company voluntarily notified the Office of Inspector General of the U.S. Department of Health and Human Services (“OIG”) of the Company’s internal investigation in November 2021. The Company’s interactions with regulatory authorities and the Company’s related review of this matter isare ongoing. The Company has a reserve of $11.2 million in other long-term liabilities as of June 30, ~~2022~~2023 and December 31, ~~2021~~2022 on the Consolidated Balance Sheets for potential damages and liabilities primarily associated with the federal healthcare program revenue received by the Company in connection with the agreements at issue that were identified during the course of this internal investigation. This reserve reflects management’s best estimate of the minimum probable loss associated with this matter. As a result of the ~~ongoing~~internal investigation and ongoing interactions with regulatory authorities, the Company may accrue additional reserves for any related potential damages and liabilities arising out of this matter. The Company was notified on June 30, 2022 that the Department of Justice (“DOJ”) will be ~~participating in~~leading the investigation of this matter. At this time, the Company is unable to predict the duration, scope, result or related costs associated with any further investigation, including by the OIG, DOJ, or any other governmental authority, or what penalties or remedial actions they may seek. Accordingly, at this time, the Company is unable to estimate a range of possible loss in excess of the amount reserved. Any determination that the Company’s operations or activities are not in compliance with existing laws or regulations, however, could result in the imposition of civil or criminal fines, penalties, disgorgement, restitution, equitable relief, or other losses or conduct restrictions, which could be material to the Company’s financial results or business operations.

Note 12. Related Party Transactions

On May 22, 2020, the Company formed a strategic alliance with Inivata and entered into a Strategic Alliance Agreement and Laboratory Services Agreement whereas Inivata, prior to the Inivata Acquisition Date, would render and perform certain laboratory testing which the Company made available to customers. In connection with this agreement, Inivata provided $0.4 million and $0.8 million of testing services to the Company recorded in cost of revenue in the Consolidated Statements of Operations for the three and six months ended June 30, 2021, respectively, through the Inivata Acquisition Date.

On June 18, 2021, the Company completed its acquisition of all remaining equity interest in Inivata by exercising its Purchase Option. Beginning June 18, 2021, Inivata is a wholly-owned consolidated subsidiary of the Company. As of the Inivata

~~NEOGENOMICS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(unaudited)~~

Acquisition Date, Inivata’s financial statement activity is being consolidated within the Company’s unaudited Consolidated Financial Statements. For further details on the acquisition of Inivata, please refer to Note 3. Acquisitions.

The Company has ~~Pharma Services~~Advanced Diagnostics contracts with ~~CytomX Therapeutics,~~HOOKIPA Pharma, Inc., an entity with whom a director of the Company, ~~Dr. Alison L. Hannah, is an officer and the Company’s former Chief Legal Officer, Halley Gilbert, is~~Michael A. Kelly, was a ~~director.~~director of until April 7, 2023. In connection with these contracts, the Company recognized ~~$0.4 million and $0.5~~$0.2 million of revenue in the Consolidated Statements of Operations for the six months ended June 30, 2023. Revenue recognized in connection with these contracts for the three months ended June 30, 2023 and both the three and six months ended June 30, 2022 ~~respectively, and $0.1 million and $0.3 million for the three and six months ended June 30, 2021, respectively.~~was immaterial.

Note 13. Segment Information

The Company ~~recognizes revenue under 2~~has historically reported its activities in two reportable ~~segments,~~segments; (1) ~~Clinical Services and (2) Pharma Services. The~~the Clinical Services segment ~~provides various clinical testing services to community-based pathology~~ and oncology practices, hospital pathology labs, and academic centers with reimbursement from various payers including client direct billing, commercial insurance, Medicare and other government payers, and self-pay patients. The(2) the Pharma Services segment. In the second quarter of 2023, the Pharma Services segment ~~supports pharmaceutical firms’ drug development programs by assisting with various clinical trials and research~~was rebranded as ~~well as providing informatics related services often supporting pharmaceutical commercialization efforts.~~the Advanced Diagnostics segment.

The financial information reviewed by the ~~Chief Operating Decision Maker (“CODM”)~~CODM includes revenues, cost of revenue, and gross profit for both reportable segments. Assets, operating expenses, loss from operations, and net loss are not presented at the segment level as that information is not used by the CODM. For further details regarding segment reporting, please refer to Note 2. Summary of Significant Accounting Policies.

The following table summarizes the segment information (in thousands):

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net revenues:
Clinical Services $ 105,635 $ 101,405 $ 204,426 $ 197,892
Pharma Services 19,437 20,319 37,815 39,365
Total revenue 125,072 121,724 242,241 237,257
Cost of revenue:
Clinical Services(1)
67,035 57,233 132,302 118,798
Pharma Services(2)
14,091 11,501 27,761 23,895
Total cost of revenue 81,126 68,734 160,063 142,693
Gross Profit:
Clinical Services 38,600 44,172 72,124 79,094
Pharma Services 5,346 8,818 10,054 15,470
Total gross profit 43,946 52,990 82,178 94,564
Operating expenses:
General and administrative 57,951 54,638 124,199 95,114
Research and development 8,626 3,495 16,339 5,951
Sales and marketing 17,071 17,224 33,370 30,973
Total operating expenses 83,648 75,357 173,908 132,038
Loss from operations (39,702) (22,367) (91,730) (37,474)
Interest expense, net 926 902 2,227 2,079
Other expense (income), net 405 (171) 237 (341)
Gain on investment in and loan receivable from non-consolidated affiliate, net — (96,534) — (91,510)
(Loss) income before taxes (41,033) 73,436 (94,194) 52,298
Income tax benefit (5,730) (2,437) (9,483) (1,461)
Net (loss) income $ (35,303) $ 75,873 $ (84,711) $ 53,759

2824

NEOGENOMICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net revenues:
Clinical Services	$	123,156	$	105,635	$	238,025	$	204,426
Advanced Diagnostics	23,761		19,437		46,112		37,815
Total revenue	146,917		125,072		284,137		242,241

Cost of revenue:
Clinical Services(1)	71,746		67,035		139,038		132,302
Advanced Diagnostics(2)	15,280		14,091		30,394		27,761
Total cost of revenue	87,026		81,126		169,432		160,063

Gross Profit:
Clinical Services	51,410		38,600		98,987		72,124
Advanced Diagnostics	8,481		5,346		15,718		10,054
Total gross profit	$	59,891	$	43,946	$	114,705	$	82,178

(1) Clinical Services cost of revenue for both the three months ended June 30, ~~2022~~2023 and June 30, ~~2021~~2022 includes $4.3 million and $0.7 million, respectively, of amortization of acquired Inivata developed technology intangible assets. Clinical Services cost of revenue adjustments for the six months ended June 30, 2022 include $8.5 million of amortization of acquired Inivata developed technology intangible assets. Clinical Services cost of revenue for both the six months ended June 30, ~~2021 include write-offs of $5.3 million for COVID-19 PCR testing inventory~~2023 and ~~$0.7~~June 30, 2022 includes $8.5 million of amortization of acquired Inivata developed technology intangible assets.

(2) ~~Pharma Services~~Advanced Diagnostics cost of revenue for both the three months ended June 30, 2023 and June 30, 2022 includes $0.6 million of amortization of acquired Inivata developed technology intangible assets. ~~Pharma Services~~Advanced Diagnostics cost of revenue for both the six months ended June 30, 2023 and June 30, 2022 includes $1.2 million of amortization of acquired Inivata developed technology intangible assets. ~~There were no such amounts for the three and six months ended June 30, 2021.~~

2925

NEOGENOMICS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NeoGenomics, Inc., a Nevada corporation (referred to individually as the “Parent Company” or collectively with its subsidiaries as “NeoGenomics,” “we,” “us,” “our,” or the “Company” in this Quarterly Report) is the registrant for SEC reporting purposes. Our common stock is listed on The Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “NEO”.

Introduction

The following discussion and analysis should be read in conjunction with the unaudited Consolidated Financial Statements and the notes thereto included herein. The information contained below includes statements of the Company’s or management’s beliefs, expectations, hopes, goals and plans that, if not historical, are forward-looking statements subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. For a discussion on forward-looking statements, see the information set forth in the introductory note to this Quarterly Report on Form 10-Q under the caption “Forward-Looking Statements,” which information is incorporated herein by reference.

~~COVID-19 Pandemic~~

The outbreak of the COVID-19 pandemic is materially adversely affecting the Company’s employees, patients, communities and business operations, as well as the U.S. economy and financial markets. The full extent to which the COVID-19 pandemic will impact the Company’s business, results of operations, financial condition, and cash flows will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national, and international markets. As the COVID-19 pandemic continues, the Company’s results of operations, financial condition and cash flows are likely to continue to be materially adversely affected, particularly if the pandemic persists for a significant amount of time.

The impact from the COVID-19 pandemic and the related disruptions have had a significant adverse impact on our results of operations, volume growth rates and test volumes in 2021 and the first and second quarters of 2022. For example, our Pharma Services customers are facing challenges in recruiting patients and in conducting clinical trials for which our tests could be utilized. Demand may fluctuate depending on the duration and severity of the COVID-19 pandemic, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties. Such events may result in business disruption, reduced revenues and a decreased number of tests, any of which could materially affect our business, financial condition, and results of operations.

For additional information on risk factors related to the pandemic or other risks that could impact our results, please refer to the Company’s Form 10-K under Item 1A, “Risk Factors” for the year ended December 31, 2021, as filed with the SEC on February 25, 2022, and in Part II, Item 1A. “Risk Factors” in the Quarterly Report on Form 10-Q.

Overview

We operate a network of cancer-focused testing laboratories in the United States, Europe and Asia. Our mission is to improve patient care through exceptional cancer-focused testing services. Our vision is to be the world’s leading cancer testing and information company by delivering uncompromising quality, exceptional service and innovative solutions.

As of June 30, ~~2022, the Company operates CAP~~2023, we operated College of American Pathologists (“CAP”) accredited and ~~CLIA~~Clinical Laboratory Improvement Amendments of 1988 (“CLIA”) certified laboratories in Fort Myers, ~~and Tampa,~~ Florida; Aliso Viejo and ~~Carlsbad,~~San Diego, California; Research Triangle Park, North Carolina; and Houston, Texas; ~~Atlanta, Georgia; Nashville, Tennessee; and Phoenix, Arizona;~~ and CAP accredited full-service, sample-processing laboratories in Rolle, Switzerland and China. CAP accreditation is pending in Cambridge, United ~~Kingdom; Rolle, Switzerland; Singapore and China.~~Kingdom. We also have several, small, non-processing laboratory locations across the United States for providing analysis services. We currently offer the following types of testing services:

•Cytogenetics (“karyotype analysis”) – the study of normal and abnormal chromosomes and their relationship to disease. Cytogenetics involves analyzing the chromosome structure to identify changes from patterns seen in normal chromosomes. Cytogenetic studies are often performed to provide diagnostic, prognostic and occasionally predictive information for patients with hematological malignancies.

•Fluorescence In-Situ Hybridization (“FISH”) – a molecular cytogenetic technique that focuses on detecting and localizing the presence or absence of specific DNA sequences and genes on chromosomes. The technique uses fluorescent probes that bind to only those parts of the chromosome with which they show a high degree of sequence similarity. Fluorescence microscopy is used to visualize the fluorescent probes bound to the chromosomes. FISH can be used to help identify numerous types of gene alterations, including amplifications, deletions, and translocations.

•Flow cytometry – a technique utilized to measure the characteristics of cell populations. Typically performed on liquid samples such as peripheral blood and bone marrow aspirate, it may also be performed on solid tissue samples

~~NEOGENOMICS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

such as lymph nodes following additional processing steps. Cells are labeled with selective fluorescent antibodies and analyzed as they flow in a fluid stream through a beam of light. The properties measured in these antibodies include the relative size, relative granularity or internal complexity, and relative fluorescence intensity. These fluorescent antibodies bind to specific cellular antigens and are used to identify abnormal and/or malignant cell populations. Flow cytometry is typically utilized in diagnosing a wide variety of hematopoietic and lymphoid neoplasms. Flow cytometry is also used to monitor patients during the course of therapy to identify extremely low levels of residual malignant cells, known as minimal residual disease (“MRD”) monitoring.

•Immunohistochemistry (“IHC”) and Digital Imaging – the process of localizing cellular proteins in tissue sections and relies on the principle of antigen-antibody binding. IHC is widely used in the diagnosis of abnormal cells such as those found in cancer. Specific surface membrane, cytoplasmic, or nuclear markers may be identified. IHC is also widely used to understand the distribution and localization of differentially expressed proteins. Digital imaging allows clients to visualize scanned slides and also perform quantitative analysis for certain stains. Scanned slides are received online in real time and can be previewed often a full day before the glass slides can be shipped back to clients.

•Molecular testing – a rapidly growing field which includes a broad range of laboratory techniques utilized in cancer testing. Most molecular techniques rely on the analysis of DNA and/or RNA, as well as the structure and function of genes at the molecular level. Molecular testing technologies include: liquid biopsy tests for advanced non-small cell lung cancer, all solid tumor types (pan-cancer), and certain breast cancer cases; DNA fragment length analysis; polymerase chain reaction (“PCR”) analysis; reverse transcriptase polymerase chain reaction (“RT-PCR”) analysis,

NEOGENOMICS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

real-time (or quantitative) polymerase chain reaction (“qPCR”) analysis; bi-directional Sanger sequencing analysis; and next-generation sequencing (“NGS”) analysis.

•Morphologic analysis – the process of analyzing cells under the microscope by a pathologist, usually for the purpose of diagnosis. Morphologic analysis may be performed on a wide variety of samples, such as peripheral blood, bone marrow, lymph node, and from other sites such as lung, breast, etc. The services provided at NeoGenomics may include primary diagnosis, in which a sample is received for processing and our pathologists provide the initial diagnosis; or may include secondary consultations, in which slides and/or tissue blocks are received from an outside institution for a second opinion. In the latter setting, the expert pathologists at NeoGenomics assist our client pathologists on ~~some of~~ their most difficult and complex cases.

Clinical Services Segment

The clinical cancer testing services we offer to community-based pathologists and oncologists are designed to be a natural extension of, and complementary to, the services that they perform within their own practices. We believe our relationship as a non-competitive partner to community-based pathology practices, hospital pathology labs, reference labs, and academic centers can empower them to expand their breadth of testing to provide a menu of services that could match or exceed the level of service found in any center of excellence around the world. Community-based pathology practices and hospital pathology labs may order certain testing services on a technical component only (“TC” or “tech-only”) basis, which allows them to participate in the diagnostic process by performing the professional component (“PC”) interpretation services without having to hire laboratory technologists or purchase the sophisticated equipment needed to perform the technical component of the tests. We also support our pathology clients with interpretation and consultative services using our own specialized team of pathologists for difficult or complex cases and we provide overflow interpretation services when requested by clients.

We are a leading provider of Heme Molecular and NGS ~~testing.~~testing and one of the key providers of solid tumor NGS testing solutions. These tests are interpreted by NeoGenomics’ team of Molecular experts and are often ordered in conjunction with other testing modalities. NGS panels are one of our fastest growing testing areas and clients can often receive a significant amount of biomarker information from very limited samples. These comprehensive panels can allow for faster treatment decisions for patients as compared to a series of single-gene molecular tests being ordered sequentially. We have ~~one of the broadest~~a broad Molecular ~~menus in the industry~~testing menu and our targeted NeoTYPE panels include genes relevant to a particular cancer type, as well as other complementary tests such as IHC and FISH. In addition, we offer molecular-only NGS targeted and comprehensive panels which combine DNA and RNA into a single work stream in order to report a full spectrum of genomic alterations, including ~~mutation,~~mutations, fusions, copy number variations, and gene expression. This comprehensive menu means that ~~NeoGenomics can be a “one-stop shop” for~~ our clients ~~who~~ can get ~~all~~most of their oncology testing needs satisfied by our laboratory. This is attractive to our clients as patient samples do not need to be split and then managed across several laboratories. The acquisition of Inivata provided us with oncology Liquid Biopsy technology capabilities. InVisionFirst®-Lung is a highly sensitive, targeted plasma-based assay for patients with non-small cell lung cancer, and ~~RaDaR™~~RaDaR® is an industry-leading liquid biopsy assay designed to detect residual disease and recurrence in plasma samples from patients with solid tumor malignancies. We expect our Molecular laboratory and NGS capabilities to be a key growth driver in the coming years.

~~NEOGENOMICS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

In addition, we directly serve oncology, dermatology and other clinician practices that prefer to have a direct relationship with a laboratory for cancer-related genetic testing services. We typically serve these types of clients with a comprehensive service offering where we perform both the technical and professional components of the tests ordered. In certain instances, larger clinician practices have begun to internalize pathology interpretation services and our tech-only service offering allows these larger clinician practices to also participate in the diagnostic process by performing the PC interpretation services on TC testing performed by us. In these instances we will typically provide all of the more complex, molecular testing services. The Clinical Services segment also offers Trapelo™, a decision making Informatics tool, to help health care professionals navigate the rapidly evolving field of precision medicine. Trapelo™ is an end-to-end, clinical decision-support platform designed to resolve the complexities of precision oncology – from test ordering to therapy selection to navigating prior authorization.

~~Pharma Services~~Advanced Diagnostics Segment

Our ~~Pharma Services~~Advanced Diagnostics revenue consists of three revenue streams:

•Clinical trials and research;

•Validation laboratory services; and

•Informatics.

Our ~~Pharma Services~~Advanced Diagnostics segment supports pharmaceutical firms in their drug development programs by supporting various clinical trials and research. This portion of our business often involves working with the pharmaceutical firms (“sponsors”) on study design as well as performing the required testing. Our medical team often advises the sponsor and works closely with them as specimens are received from the enrolled sites. We also work on developing tests that ~~will~~can potentially be used as part of

NEOGENOMICS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

a companion diagnostic to determine patients’ response to a particular drug. As studies unfold, our clinical trials team reports the data and often provides key analysis and insights back to the sponsors.

Our ~~Pharma Services~~Advanced Diagnostics segment provides comprehensive testing services in support of our pharmaceutical clients’ oncology programs from discovery to commercialization. In biomarker discovery, our aim is to help our customers discover the right content. We help our customers develop a biomarker hypothesis by recommending an optimal platform for molecular screening and backing our discovery tools with the informatics to capture meaningful data. In other pre-clinical and non-clinical work, we can use our platforms to characterize markers of interest. Moving from discovery to development, we seek to help our customers refine their biomarker strategy and, if applicable, develop a companion diagnostic pathway using the optimal technology for large-scale clinical trial testing.

Whether serving as the single contract research organization or partnering with one, our ~~Pharma Services~~Advanced Diagnostics team provides significant technical expertise, working closely with our customers to support each stage of clinical trial development. Each trial we support comes with rapid turnaround time, dedicated project management and quality assurance oversight. We have experience in supporting submissions to the Federal Drug Administration (“FDA”) for companion diagnostics. Our ~~Pharma Services~~Advanced Diagnostics strategy is focused on helping to bring more effective oncology treatments to market through providing world-class laboratory services in oncology to key pharmaceutical companies in the industry.

We believe that we are well positioned to service ~~Pharma~~pharmaceutical sponsors across the full continuum of the drug development process. Our ~~Pharma Services~~Advanced Diagnostics team can work with ~~them~~these sponsors during the basic research and development phase as compounds come out of translational research departments, as well as work with clients from Phase 1I, Phase II and Phase III clinical trials ~~through Phases II and III~~ as the sponsors work to ~~prove~~demonstrate the efficacy of their drugs. The laboratory biomarker tests that are developed during this process may become companion diagnostic (“CDx”) tests, that will be used on patients to determine if they could respond to a certain therapy. We are able to offer these CDx tests to the market immediately after FDA approval as part of our Day 1 readiness program. This ability helps to speed the commercialization of a drug and can enable ~~Pharma~~pharmaceutical sponsors to reach patients through our broad distribution channel in the Clinical Services segment.

We are committed to connecting patients with life-altering therapies and trials. In carrying out these commitments, we aim to provide transparency and choice to patients regarding the handling and use of their data through our Notice of Privacy Practices, and have invested in leading technologies to ~~seek to ensure~~secure the data we ~~maintain is secured at all times.~~maintain. We are continuing to develop and broaden our informatics and data-related tools to leverage our unique market position and oncology expertise to help our stakeholders solve real-world problems such as identifying patients for clinical trials or providing clinical decision support tools for physicians and providers. We also offer testing and informatics tools to help health care professionals in the rapidly evolving field of precision medicine, such as Trapelo™. Trapelo™ is an end-to-end, clinical decision-support platform designed to resolve the complexities of precision oncology – from test ordering to therapy selection to navigating prior authorization. Trapelo™ helps oncologists determine which biomarkers to test and in selecting the appropriate tests from laboratory offerings, and then assists with interpreting test results to identify appropriate, evidence-based treatment options. Trapelo™ also collaborates with health plans to embed plan policy at the “point of decision” and streamline prior authorization to optimize the efficient delivery of precision care for better patient outcomes.

~~2022~~2023 Focus Areas:

~~NEOGENOMICS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

We are committed to sustainable growth while transforming ~~patient~~cancer care ~~by being an innovative leader in our industry.~~for patients and providers. Our focus for ~~2022~~2023 is to sustain a purpose driven culture that maintains excellence in service and performance while growing through innovation. We expect the following initiatives to allow ~~the Company~~us to continue on ~~its~~our path to become one of the world’s leading cancer testing and information companies:

~~Growth through Innovation~~Profitably Grow Core Business

•~~Successfully launch new test offerings~~Grow volume and ~~secure reimbursement;~~NGS mix;

•Improve turnaround time;

•Win on service;

•Expand ~~development of new cancer treatments;~~and optimize commercial optimization; and

•~~Accelerate precision medicine in the community.~~Improve product offering.

~~Excellence in Service and Performance~~Accelerate Advanced Diagnostics

•~~Achieve turnaround time targets;~~Execute clinical RaDaR® (MRD) launch;

•~~Grow consolidated revenue~~Launch Neo Comprehensive, new NGS offering;

•Continue to improve Advanced Diagnostics growth and profitability; and

•~~Design next-generation Laboratory Information Management System (“LIMS”) platform.~~Focus on enterprise data strategy.

~~Purpose Driven Culture~~Improve Profitability

•~~Drive an engaged~~Increase productivity and ~~committed workforce;~~efficiency;

•Manage general and administrative spend;

•Focused investments; and

•~~Foster inclusive and effective leadership by expanding our culture of inclusion and developing our future leaders.~~Prioritize revenue cycle management.

NEOGENOMICS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Competitive Strengths

~~In addition to~~We believe the following areas are competitive strengths discussed below, we believe that our superior testing technologies and instrumentation, laboratory information system, client education programs, and broad domestic and growing international presence also differentiate NeoGenomics from its competitors.differentiators:

Turnaround Times

We ~~strive to provide industry leading~~consistently focus on improving turnaround times for test results to our clients nationwide ~~both~~ in the Clinical Services ~~and Pharma Services segments.~~segment. By providing information to our clients in a ~~rapid~~timely manner, physicians can begin treating their patients as soon as possible. ~~Our consistent timeliness~~Timeliness of results by our Clinical Services segment is a ~~competitive strength and a~~ driver of additional testing requests by referring physicians. ~~Rapid turnaround~~Turnaround times allow for the performance of other adjunctive tests within an acceptable diagnosis window in order to augment or confirm results and more fully inform treatment options. Additionally, we believe that our rapid turnaround time on testing and our project milestones are a key ~~differentiator~~factor in our ~~Pharma Services~~Advanced Diagnostics segment.

~~World-class Medical and Scientific Team~~

Our team of medical professionals and PhDs are specialists in the field of genetics, oncology and pathology. As of June 30, 2022, we employed or contracted with approximately 170 MDs and PhDs. We have many nationally and world-renowned pathologists on staff, which is a key differentiator from many smaller laboratories. Our clinical customers look to our staff and their expertise and they often call our medical team on challenging cases. For our Pharma Services segment, many sponsors work with our medical team on their study design and on the interpretation of results from the studies. Our medical team is a key differentiator as we have a depth of medical expertise that many other laboratories cannot offer to pharmaceutical companies.

Innovative Service Offerings

We believe we currently have one of the most extensive menu of tech-only FISH services in the country as well as extensive and advanced tech-only flow cytometry and IHC testing services. These types of testing services allow the professional interpretation component of a test to be performed and billed separately by our physician clients. Our tech-only services are designed to give pathologists the option to choose, on a case by case basis, whether they want to order ~~just~~only the technical ~~information and images relating to a specific test~~component of testing so they can perform the professional interpretation, or order “global” services and receive a comprehensive test report which includes a NeoGenomics pathologist’s interpretation of the test results. Our clients appreciate the flexibility to access NeoGenomics’ medical staff for difficult or complex cases or when they are otherwise unavailable to perform professional interpretations.

We offer a comprehensive suite of technical and professional interpretation services to meet the needs of ~~those~~ clients who are not credentialed ~~and~~and/or trained in interpreting ~~genetic tests~~various testing modalities and who require our pathology specialists to interpret their testing results. In our global service offerings, our lab performs the technical component of ~~the tests~~testing and our MDs and PhDs provide the ~~service~~professional component of testing by interpreting the results of those tests. Our professional staff is also available for post-test consultative services. Clients using our global service offering rely on the expertise of our medical team to give them the answers they need in a timely manner to help inform their diagnoses and treatment decisions.

~~NEOGENOMICS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~We believe we have one of the broadest~~Our Molecular and NGS test menus ~~in the world. Clients have~~provide clients with the ability to order single gene molecular tests, targeted NeoTYPE panels that include the relevant actionable genes for a particular cancer type as well as large NGS panels. Our ~~Pharma Services~~Advanced Diagnostics segment offers a full range of sequencing testing including whole exome and whole genome sequencing. ~~Our menu enables us to be a true “one-stop shop” for our clients as we can meet all of their oncology testing needs.~~

National Direct Sales Force

Our direct sales force has been trained extensively in cancer genetic testing and consultative selling skills to service the needs of clients. Our sales team for the clinical cancer testing services is organized into ~~five~~nine regions – Northeast, Northwest, Mid-Atlantic, South, Southeast, ~~North Central,~~Southwest, West, Great Lakes, and South ~~Central, and West.~~Central. Our ~~Pharma Services~~sales team will be focused on end-to-end client experience as a growth driver. Our Advanced Diagnostics segment has a dedicated team of business development specialists who are experienced in working with ~~pharma~~pharmaceutical sponsors and helping them with the testing needs of their research and development projects as well as Phase I, II and III studies. These sales representatives utilize our custom Customer Relationship Management System (“CRM”) to manage their territories, and we have integrated the key customer care functionality within our Laboratory Information Services (“LIS”) into the CRM so that our sales representatives can stay informed of emerging issues and opportunities within their regions. Our in-house customer care team is aligned with our field sales team to serve the needs of our clients by utilizing the same LIS and CRM. Our field teams can see in real-time when a client calls the laboratory, the reason for the call, the resolution, and if face-to-face interaction is needed for follow-up. Our sales force educates clients on new test offerings and their proper utilization and our representatives are often seen as trusted advisors by our clients.

Seasonality

The majority of our clinical testing volume is dependent on patients being treated by hematology/oncology professionals and other healthcare providers. The volume of our testing services generally declines modestly during the summer vacation season, year-end holiday periods and other major holidays, particularly when those holidays fall during the middle of the week. In addition, the volume of our testing tends to decline due to extreme adverse weather conditions, such as excessively hot or cold spells, heavy snow, hurricanes or tornadoes in certain regions, consequently reducing revenues and cash flows in any affected period.

In our ~~Pharma Services~~Advanced Diagnostics segment, we enter into both short-term and long-term contracts, ranging from one month to several years. While the volume of this testing is not as directly affected by seasonality as described above, the testing volume does vary based on the terms of the contract. Our volumes are often based on how quickly sponsors can get patient enrollees for their trials and seasonality can impact how quickly ~~they can get~~ patients are enrolled. Many of our long-term contracts contain specific performance obligations where the testing is performed on a specific schedule. This results in revenue that is not consistent among periods. In addition, this results in backlog that can be significant.

~~NEOGENOMICS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~Results of Operations for the Three and Six Months Ended June 30, 2022 as Compared to the Three and Six Months Ended June 30, 2021~~

~~The following table presents the Consolidated Statements of Operations as a percentage of net revenue:~~
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Net revenue 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenue(1)
64.9 % 56.5 % 66.1 % 60.1 %
Gross profit 35.1 % 43.5 % 33.9 % 39.9 %
Operating expenses:
General and administrative 46.4 % 44.9 % 51.3 % 40.1 %
Research and development 6.9 % 2.9 % 6.7 % 2.5 %
Sales and marketing 13.6 % 14.2 % 13.8 % 13.1 %
Total operating expenses 66.9 % 62.0 % 71.8 % 55.7 %
Loss from operations (31.8) % (18.5) % (37.9) % (15.8) %
Interest expense, net 0.7 % 0.7 % 0.9 % 0.9 %
Other expense (income), net 0.3 % (0.1) % 0.1 % (0.1) %
Gain on investment in and loan receivable from non-consolidated affiliate, net — % (79.3) % — % (38.6) %
(Loss) income before taxes (32.8) % 60.2 % (38.9) % 22.0 %
Income tax benefit (4.6) % (2.0) % (3.9) % (0.6) %
Net (loss) income (28.2) % 62.2 % (35.0) % 22.6 %

~~(1)~~ Cost of revenue for the three months ended June 30, 2022 and June 30, 2021 includes $4.9 million and $0.7 million of amortization of acquired Inivata developed technology intangible assets. Cost of revenue for the six months ended June 30, 2022 includes $9.7 million of amortization of acquired Inivata developed technology intangible assets. Cost of revenue for the six months ended June 30, 2021 includes write-offs of $5.3 million for COVID-19 PCR testing inventory and $0.7 million of amortization of acquired Inivata developed technology intangible assets.

~~Clinical and Pharma Services net revenues for the periods presented are as follows ($ in thousands):~~
Three Months Ended June 30, Six Months Ended June 30,
2022 2021 $ Change % Change 2022 2021 $ Change % Change
Net revenue:
Clinical Services $ 105,635 $ 101,405 $ 4,230 4.2 % $ 204,426 $ 197,892 $ 6,534 3.3 %
Pharma Services 19,437 20,319 (882) (4.3) % 37,815 39,365 (1,550) (3.9) %
Total revenue $ 125,072 $ 121,724 $ 3,348 2.8 % $ 242,241 $ 237,257 $ 4,984 2.1 %

~~Revenue~~

Consolidated revenues increased $3.3 million, or 2.8%, year-over-year. Clinical Services revenue for the three and six months ended June 30, 2022 increased $4.2 million and $6.5 million, respectively, when compared to the same periods in 2021. Increases in Clinical Services revenue reflects an increase in average unit price due to strategic reimbursements and a more favorable test mix.

Pharma Services revenue for the three and six months ended June 30, 2022 decreased $0.9 million and $1.5 million, respectively, compared to the same periods in 2021 due to the timing of project billings. Our backlog of signed contracts has continued to grow from $267 million as of December 31, 2021 to $299 million as of June 30, 2022. We define backlog as the stated amount of signed contracts less dormant contracts with no activity for twelve months, contingencies and cancellations.

~~Cost of Revenue and Gross Profit~~

Cost of revenue includes payroll and payroll related costs for performing tests, maintenance and depreciation of laboratory equipment, rent for laboratory facilities, laboratory reagents, probes and supplies, and delivery and courier costs relating to the transportation of specimens to be tested.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

performance obligations where the testing is performed on a specific schedule. In addition, this results in backlog that can be significant and highly dependent on clinical trial enrollment, which continues to recover from the slowdown experienced due to the COVID-19 pandemic.

Results of Operations for the Three and Six Months Ended June 30, 2023 as Compared to the Three and Six Months Ended June 30, 2022

Clinical and Advanced Diagnostics net revenues for the periods presented are as follows ($ in thousands):


	Three Months Ended June 30,								Six Months Ended June 30,
	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Net revenue:
Clinical Services	$	123,156	$	105,635	$	17,521	16.6	%	$	238,025	$	204,426	$	33,599	16.4	%
Advanced Diagnostics	23,761		19,437		4,324		22.2	%	46,112		37,815		8,297		21.9	%
Total revenue	$	146,917	$	125,072	$	21,845	17.5	%	$	284,137	$	242,241	$	41,896	17.3	%

Revenue

Consolidated revenues increased $21.8 million, or 17.5%, year-over-year.

Clinical Services revenue for the three and six months ended June 30, 2023 increased $17.5 million and $33.6 million, respectively, when compared to the same periods in 2022. The increase in Clinical Services revenue reflects an increase in clinical testing volume, a more favorable test mix and an increase in average unit price due to strategic reimbursement and pricing initiatives.

Advanced Diagnostics revenue for the three and six months ended June 30, 2023 increased $4.3 million and $8.3 million, respectively, compared to the same periods in 2022 due to the timing of project activity.

Cost of Revenue and Gross Profit

Cost of revenue includes payroll and payroll-related costs for performing tests, maintenance and/or depreciation of laboratory equipment, rent for laboratory facilities, laboratory reagents, probes and supplies, delivery and courier costs relating to the transportation of specimens to be tested, and amortization for acquired Inivata developed technology intangible assets.

The consolidated cost of revenue and gross profit metrics are as follows:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,						Six Months Ended June 30,
($ in thousands)	($ in thousands)	2022		2021		% Change		2022		2021		% Change		($ in thousands)	2023		2022		% Change		2023		2022		% Change
Cost of revenue:	Cost of revenue:													Cost of revenue:
Clinical Services~~(2)~~(1)	Clinical Services~~(2)~~(1)	$	67,035	$	57,233	17.1	%	$	132,302	$	118,798	11.4	%	Clinical Services~~(2)~~(1)	$	71,746	$	67,035	7.0	%	$	139,038	$	132,302	5.1	%
Pharma Services(3)		14,091		11,501		22.5	%	27,761		23,895		16.2	%
Advanced Diagnostics(2)														Advanced Diagnostics(2)	15,280		14,091		8.4	%	30,394		27,761		9.5	%
Total cost of revenue	Total cost of revenue	$	81,126	$	68,734	18.0	%	$	160,063	$	142,693	12.2	%	Total cost of revenue	$	87,026	$	81,126	7.3	%	$	169,432	$	160,063	5.9	%
Cost of revenue as a % of revenue	Cost of revenue as a % of revenue	64.9%		56.5%				66.1%		60.1%				Cost of revenue as a % of revenue	59.2%		64.9%				59.6%		66.1%

Gross profit:	Gross profit:													Gross profit:
Clinical Services	Clinical Services	$	38,600	$	44,172	(12.6)	%	$	72,124	$	79,094	(8.8)	%	Clinical Services	$	51,410	$	38,600	33.2	%	$	98,987	$	72,124	37.2	%
Pharma Services		5,346		8,818		(39.4)	%	10,054		15,470		(35.0)	%
Advanced Diagnostics														Advanced Diagnostics	8,481		5,346		58.6	%	15,718		10,054		56.3	%
Total gross profit	Total gross profit	$	43,946	$	52,990	(17.1)	%	$	82,178	$	94,564	(13.1)	%	Total gross profit	$	59,891	$	43,946	36.3	%	$	114,705	$	82,178	39.6	%
Gross profit margin	Gross profit margin	35.1%		43.5%				33.9%		39.9%				Gross profit margin	40.8%		35.1%				40.4%		33.9%

~~(2)~~(1) Clinical Services cost of revenue for both the three months ended June 30, ~~2022~~2023 and June 30, 2021 includes $4.3 million and $0.7 million, respectively, of amortization of acquired Inivata developed technology intangible assets. Clinical Services cost of revenue for the six months ended June 30, 2022 includes ~~$8.5~~$4.3 million of amortization of acquired Inivata developed technology intangible assets. Clinical Services cost of revenue for the six months ended June 30, ~~2021~~2023 and June 30, 2022 includes ~~write-offs of $5.3 million for COVID-19 PCR testing inventory and $0.7~~$8.5 million of amortization of acquired Inivata developed technology intangible assets.

~~(3)~~ (2)~~Pharma Services~~Advanced Diagnostics cost of revenue for both the three months ended June 30, 2023 and June 30, 2022 includes $0.6 million of amortization of acquired Inivata developed technology intangible assets. ~~Pharma Services~~Advanced Diagnostics cost of revenue for the six months ended June 30, 2023 and June 30, 2022 includes $1.2 million of amortization of acquired Inivata developed technology intangible assets. ~~There were no such amounts~~

Consolidated cost of revenue increased 7.3% and 5.9% for the three and six months ended June 30, ~~2021.~~

~~Consolidated cost of revenue increased for the three and six months ended June 30, 2022~~2023, respectively, when compared to the same periods in ~~2021~~2022. For the three months ended June 30, 2023 this increase was primarily due to ~~the amortization of acquired Inivata developed technology intangible assets~~an increase

NEOGENOMICS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

in supplies expense and higher payroll and payroll-related ~~costs. The cost of revenue~~costs partially offset by a decrease in ~~the first quarter of 2021 included write-offs of $5.3 million for inventory due to the exit from COVID-19 PCR testing. There were no such inventory write-offs for the three months ended June 30, 2021~~shipping costs and facilities expense. For the ~~three and~~ six months ended June 30, ~~2022.~~2023 this increase was due to an increase in supplies expense and higher payroll and payroll-related costs partially offset by a decrease in professional fees and facilities expenses.

Gross profit margin for the three and six months ended June 30, ~~2022~~2023 was ~~35.1%~~40.8% and ~~33.9%~~40.4%, respectively, compared to ~~43.5%~~35.1% and ~~39.9%~~33.9%, respectively, in the same periods of ~~2021.~~2022. The ~~decreases~~increases of ~~8.4%~~5.7% and ~~6.0%~~6.5% for the three and six months ended June 30, ~~2022,~~2023, respectively, ~~are~~were primarily ~~due~~related to ~~amortization of acquired Inivata developed technology intangible assets~~increases in revenue offset by an increase in supplies expense and higher payroll and payroll-related costs.

General and Administrative Expenses

General and administrative expenses consist of payroll and ~~payroll related~~payroll-related costs for our executive, billing, finance, human resources, information technology, and other administrative personnel, as well as stock-based compensation. We also allocate professional services, facilities expense, IT infrastructure costs, depreciation, amortization and other administrative-related costs to general and administrative expenses.

Consolidated general and administrative expenses are as follows:
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2022 2021 $ Change % Change 2022 2021 $ Change % Change
General and administrative $ 57,951 $ 54,638 $ 3,313 6.1 % $ 124,199 $ 95,114 $ 29,085 30.6 %
As a % of revenue 46.4 % 44.9 % 51.3 % 40.1 %


	Three Months Ended June 30,										Six Months Ended June 30,
($ in thousands)	2023			2022			$ Change		% Change		2023			2022			$ Change		% Change
General and administrative	$	60,308		$	57,951		$	2,357	4.1	%	$	121,857		$	124,199		$	(2,342)	(1.9)	%
As a % of revenue	41.0		%	46.4		%					42.9		%	51.3		%

General and administrative expenses increased ~~$3.3~~$2.4 million for the three months ended June 30, ~~2022,~~2023, when compared to the same period in ~~2021. These increases were primarily~~2022. This increase was partially due to a $2.1 million increase in incremental non-cash stock-based compensation expense. In addition, there was a net increase in cash-based payroll and payroll-related expenses of $1.2 million, an increase in ~~general~~insurance expense of $0.6 million, and ~~administrative expenses for the Inivata subsidiary which was acquired in June of 2021, higher payroll and payroll-related costs and facilities costs to support our strategic growth initiatives, an~~ increase in ~~professional fees,~~depreciation expense of $0.6 million, and an increase in ~~investments in technology.~~travel expenses of $0.5 million. These increases were partially offset by a decrease in ~~non-recurring transaction costs related to the acquisitions~~professional fees of ~~the Inivata~~$2.0 million, a decrease in recruiting expense of $0.8 million and ~~Trapelo Health subsidiaries that occurred~~a decrease in ~~the second quarter~~facilities expense of ~~2021.~~

~~NEOGENOMICS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

$0.5 million.

General and administrative expenses ~~increased $29.1~~decreased $2.3 million for the six months ended June 30, ~~2022,~~2023, when compared to the same period in ~~2021.~~2022. This ~~increase~~decrease was partially due to ~~an increase~~a net decrease of $5.3 million in incremental non-cash stock-based compensation expenses of $8.6 million, which included incremental stock-based compensation of $8.1 million for the acceleration of stock option and restricted stock awards upon the Chief Executive Officer and Chief Legal Officer’s departures in the first and second quarters of 2022, respectively, and also due to severance costs related to the Chief Executive Officer and Chief Legal Officer’s departures.expense. In addition, the increase reflects the addition of general and administrative expenses for the Inivata and Trapelo Health subsidiaries which were acquired in the second quarter of 2021, higher payroll and payroll-related costs and facilities costs to support our strategic growth initiatives, an increasethere was a decrease in professional fees of $3.4 million, a decrease in recruiting expenses of $1.8 million, and ~~an increase~~a decrease in ~~investments in technology.~~facilities expenses of $0.6 million. These ~~increases~~decreases were partially offset by a ~~decrease~~net increase in ~~non-recurring transaction costs related to~~cash-based payroll and payroll-related expenses of $2.6 million, an increase in depreciation expense of $1.1 million, an increase in insurance expense of $0.8 million, an increase in travel expenses of $0.8 million, an increase in technology expense of $0.7 million and an increase in amortization expense of $0.6 million. In addition, the ~~acquisitions of the Inivata and Trapelo Health subsidiaries that occurred in the second~~first quarter of ~~2021.~~2022 included a gain on sale of assets held for sale of $2.0 million.

Research and Development Expenses

Research and development expenses relate to costs of developing new proprietary and non-proprietary genetic tests, including payroll and ~~payroll related~~payroll-related costs, maintenance of laboratory equipment, laboratory supplies (reagents), and outside consultants and experts assisting our research and development team.

Consolidated research and development expenses for the periods presented are as follows:


		Three Months Ended June 30,										Six Months Ended June 30,											Three Months Ended June 30,										Six Months Ended June 30,
($ in thousands)	($ in thousands)	2022			2021			$ Change		% Change		2022			2021			$ Change		% Change		($ in thousands)	2023			2022			$ Change		% Change		2023			2022			$ Change		% Change
Research and development	Research and development	$	8,626		$	3,495		$	5,131	146.8	%	$	16,339		$	5,951		$	10,388	174.6	%	Research and development	$	7,502		$	8,626		$	(1,124)	(13.0)	%	$	14,897		$	16,339		$	(1,442)	(8.8)	%
As a % of revenue	As a % of revenue	6.9		%	2.9		%					6.7		%	2.5		%					As a % of revenue	5.1		%	6.9		%					5.2		%	6.7		%

Research and development expenses ~~increased $5.1~~decreased $1.1 million and ~~$10.4~~$1.4 million for the three and six months ended June 30, ~~2022, respectively,~~2023 when compared to the same periods in ~~2021. This increase reflects the addition of research~~2022 primarily due to a decrease in payroll and ~~development expenses for the Inivata subsidiary which was acquired in June of 2021.~~payroll-related costs and professional fees.

We anticipate research and development expenditures will increase in future quarters as we continue to invest in development costs for innovation projects and bringing new tests to market.

Sales and Marketing Expenses

NEOGENOMICS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Consolidated sales and marketing expenses for the periods presented are as follows:


		Three Months Ended June 30,										Six Months Ended June 30,											Three Months Ended June 30,										Six Months Ended June 30,
($ in thousands)	($ in thousands)	2022			2021			$ Change		% Change		2022			2021			$ Change		% Change		($ in thousands)	2023			2022			$ Change		% Change		2023			2022			$ Change		% Change
Sales and marketing	Sales and marketing	$	17,071		$	17,224		$	(153)	(0.9)	%	$	33,370		$	30,973		$	2,397	7.7	%	Sales and marketing	$	18,901		$	17,071		$	1,830	10.7	%	$	35,160		$	33,370		$	1,790	5.4	%
As a % of revenue	As a % of revenue	13.6		%	14.2		%					13.8		%	13.1		%					As a % of revenue	12.9		%	13.6		%					12.4		%	13.8		%

Sales and marketing expenses ~~were flat~~increased $1.8 million for both the three ~~months ended June 30, 2022~~ and ~~increased $2.4 million for the~~ six months ended June 30, ~~2022~~2023 when compared to the same periods in ~~2021. This increase~~2022. These increases primarily ~~reflects~~reflect an increase in ~~payroll and~~sales commissions, other payroll-related costs ~~due to the expansion of our precision medicine sales team.~~and travel expenses partially offset by a decrease in professional fees.

We expect higher commissions expense in the coming quarters as our sales representatives ~~continue generating~~generate new business in ~~both of~~ our business segments. We expect our sales and marketing expenses over the long term to align with changes in ~~revenue.~~revenue and we continue to evaluate the effectiveness of our incentive compensation plans.

Restructuring charges

Consolidated restructuring charges for the periods presented are as follows:


	Three Months Ended June 30,										Six Months Ended June 30,
($ in thousands)	2023			2022			$ Change		% Change		2023			2022			$ Change		% Change
Restructuring charges	$	3,074		$	—		$	3,074	100.0	%	$	7,758		$	—		$	7,758	100.0	%
As a % of revenue	2.1		%	—		%					2.7		%	—		%

Restructuring charges relate to a restructuring program to improve execution and drive efficiency across the organization. Restructuring charges consist of severance and other employee costs, costs for optimizing our geographic presence, and consulting and other costs.

For the three and six months ended June 30, 2023, we recorded $3.1 million and $7.8 million of restructuring charges, respectively. For the three months ended June 30, 2023, these charges were comprised of $1.9 million in severance and other employee costs, $0.6 million in Facility Footprint Optimization costs, and $0.6 million of consulting and other costs. For the six months ended June 30, 2023, these charges were comprised of $5.0 million in severance and other employee costs, $2.1 million in Facility Footprint Optimization costs, and $0.7 million of consulting and other costs. There were no such amounts recorded for the three or six months ended June 30, 2022. We will continue this restructuring program in 2023 and expect to incur additional restructuring charges of approximately $1.2 million. Our restructuring activities are expected to be complete by December 31, 2023.

Interest (Income) Expense, ~~net~~Net

~~Net interest~~Interest (income) expense, net, for the periods presented is as follows:


	Three Months Ended June 30,										Six Months Ended June 30,
($ in thousands)	2023			2022			$ Change		% Change		2023			2022			$ Change		% Change
Interest (income) expense, net	$	(2,524)		$	926		$	(3,450)	(372.6)	%	$	(3,991)		$	2,227		$	(6,218)	(279.2)	%
As a % of revenue	(1.7)		%	0.7		%					(1.4)		%	0.9		%

Interest (income) expense, net, was ~~flat~~income of $2.5 million and $4.0 million for the three and six months ended June 30, ~~2022,~~2023, respectively, compared to expense of $0.9 million and $2.2 million for the same periods in ~~2021.~~2022. Interest income includes interest earned on funds held in our cash equivalent and marketable securities accounts. Interest expense reflects the effective interest rate on the 2028 Convertible Notes and the 2025 Convertible Notes which is 0.70% and 1.96%, respectively. Interest expense on the 2028 Convertible Notes and 2025 Convertible Notes began accruing upon issuance and is payable semi-annually. Interest expense also includes amortization related to our fixed income investments. The increase in interest (income) expense, net, for the three and six months ended June 30, 2023 was due to the higher interest rate environment experienced when compared to the same periods in 2022.

For further details regarding our investments in marketable securities and the convertible notes, please refer to Note 6.3. Fair Value Measurements and Note 5. Debt, respectively, in the accompanying notes to the unaudited Consolidated Financial Statements.

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~~Gain on Investment In and Loan Receivable from Non-Consolidated Affiliate, Net~~

The Company recorded a gain on investment in and loan receivable from non-consolidated affiliate, net, within the Company’s Consolidated Statements of Operations of $96.5 million and $91.5 million in the three and six months ended June 30, 2021, respectively, for the excess of the acquisition-date fair value of the Company’s previously-held equity interest, Purchase Option, and Line of Credit over their carrying values. There were no such amounts for the three and six months ended June 30, 2022. For further details regarding the previously-held equity investment, purchase option in Inivata and the related gain, please refer to Note 3. Acquisitions, in the accompanying notes to the unaudited Consolidated Financial Statements.

Net ~~(Loss) Income~~Loss Per Share

The following table provides consolidated net ~~(loss) income~~loss for each period along with the computation of basic and diluted net ~~(loss) income~~loss per share for the three and six months ended June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands, except net ~~(loss) income~~loss per share data):

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
NET (LOSS) INCOME $ (35,303) $ 75,873 $ (84,711) $ 53,759
Adjustment to net (loss) income for convertible notes in diluted EPS(4)
Net (loss) income $ (35,303) $ 75,873 $ (84,711) $ 53,759
Convertible note accretion, amortization, and interest, net of tax — 1,552 — 2,997
Net (loss) income used in diluted EPS $ (35,303) $ 77,425 $ (84,711) $ 56,756
Basic weighted average shares outstanding 124,068 118,287 123,850 117,249
Diluted weighted average shares outstanding 124,068 131,237 123,850 130,247
Basic net (loss) income per share $ (0.28) $ 0.64 $ (0.68) $ 0.46
Diluted net (loss) income per share $ (0.28) $ 0.59 $ (0.68) $ 0.44


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
NET LOSS	$	(24,331)	$	(35,303)	$	(55,126)	$	(84,711)






Basic weighted average shares outstanding	125,356		124,068		125,192		123,850
Diluted weighted average shares outstanding	125,356		124,068		125,192		123,850

Basic net loss per share	$	(0.19)	$	(0.28)	$	(0.44)	$	(0.68)
Diluted net loss per share	$	(0.19)	$	(0.28)	$	(0.44)	$	(0.68)

~~(4)~~ This adjustment compensates for the effects of the if-converted impact of convertible notes in adjusted net income. Since an entity using the if-converted method assumes that a convertible debt instrument was converted into common shares at the beginning of the reporting period, net (loss) income is adjusted to reverse any recognized interest expense (including any amortization of discounts).

Non-GAAP Measures

Use of Non-GAAP Financial Measures

In order to provide greater transparency regarding our operating performance, the financial results and financial guidance include the use of certain non-GAAP financial measures that involve adjustments to GAAP results. Non-GAAP financial measures exclude certain income and/or expense items that management believes are not directly attributable to ~~the Company’s~~our core operating results and/or certain items that are inconsistent in amounts and frequency, making it difficult to perform a meaningful evaluation of our current or past operating performance. Management believes that the presentation of operating results using non-GAAP financial measures provides useful supplemental information to investors by facilitating the analysis of ~~the Company’s~~our core test-level operating results across reporting periods and when comparing those same results to those published by our peers. These non-GAAP financial measures may also assist investors in evaluating future prospects. Management also uses non-GAAP financial measures for financial and operational decision making, planning and forecasting purposes and to manage the business. These non-GAAP financial measures do not replace the presentation of financial information in accordance with U.S. GAAP financial results, should not be considered measures of liquidity, and are unlikely to be comparable to non-GAAP financial measures used by other companies.

Definitions of Non-GAAP Measures

Non-GAAP Adjusted EBITDA

~~“Adjusted~~We define “Adjusted EBITDA” ~~is defined by NeoGenomics~~ as net (loss) income from continuing operations before: (i) interest (income) expense, net, (ii) tax (benefit) or expense, (iii) depreciation and amortization expense, (iv) non-cash stock-based compensation expense, and, if applicable in a reporting period, (v) acquisition and integration related expenses, (vi) ~~write-off of COVID-19 PCR testing~~restructuring costs, and (vii) other significant or non-operating (income) or expenses, net.

3833

NEOGENOMICS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~inventory and equipment, (vii) gain on investment in and loan receivable from non-consolidated affiliate, net, and (viii) other significant or non-operating (income) or expenses, net.~~

The following is a reconciliation of GAAP net ~~(loss) income~~loss to Non-GAAP EBITDA and Adjusted EBITDA for the three and six months ended June 30, ~~2022:~~2023:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022		2023		2022
Net (loss) income (GAAP)		$	(35,303)	$	75,873	$	(84,711)	$	53,759
Adjustments to net (loss) income:
Interest expense, net		926		902		2,227		2,079
Net loss (GAAP)										Net loss (GAAP)	$	(24,331)	$	(35,303)	$	(55,126)	$	(84,711)
Adjustments to net loss:										Adjustments to net loss:
Interest (income) expense, net										Interest (income) expense, net	(2,524)		926		(3,991)		2,227
Income tax benefit	Income tax benefit	(5,730)		(2,437)		(9,483)		(1,461)		Income tax benefit	(2,309)		(5,730)		(5,234)		(9,483)
Depreciation	Depreciation	8,526		6,949		16,921		13,629		Depreciation	9,475		8,526		18,523		16,921
Amortization of intangibles	Amortization of intangibles	8,490		3,751		16,980		6,209		Amortization of intangibles	8,783		8,490		17,566		16,980
EBITDA (non-GAAP)	EBITDA (non-GAAP)	$	(23,091)	$	85,038	$	(58,066)	$	74,215	EBITDA (non-GAAP)	$	(10,906)	$	(23,091)	$	(28,262)	$	(58,066)
Further adjustments to EBITDA:	Further adjustments to EBITDA:									Further adjustments to EBITDA:
Acquisition and integration related expenses	Acquisition and integration related expenses	1,252		10,998		2,282		11,812		Acquisition and integration related expenses	—		1,252		—		2,282
Write-off of COVID-19 PCR testing inventory and equipment		—		—		—		6,061

Non-cash stock-based compensation expense	Non-cash stock-based compensation expense	3,626		4,506		15,729		7,159		Non-cash stock-based compensation expense	5,705		3,626		10,463		15,729
Gain on investment in and loan receivable from non-consolidated affiliate, net		—		(96,534)		—		(91,510)

Restructuring charges										Restructuring charges	3,074		—		7,758		—
Other significant (income) expenses, net(1)	Other significant (income) expenses, net(1)	1,940		542		4,771		999		Other significant (income) expenses, net(1)	76		1,940		874		4,771
Adjusted EBITDA (non-GAAP)	Adjusted EBITDA (non-GAAP)	$	(16,273)	$	4,550	$	(35,284)	$	8,736	Adjusted EBITDA (non-GAAP)	$	(2,051)	$	(16,273)	$	(9,167)	$	(35,284)

(1) For the three months ended June 30, 2023, other significant (income) expenses, net, includes fees related to a regulatory matter and other non-recurring items. For the three months ended June 30, 2022, other significant (income) expenses, net, includes fees related to ~~the~~a regulatory matter, moving costs, and other non-recurring items. For the ~~three~~six months ended June 30, ~~2021,~~2023, other significant (income) expenses, net, includes ~~moving~~CEO transition costs, fees related to a regulatory matter and other non-recurring items. For the six months ended June 30, 2022, other significant (income) expenses, net, includes a gain on the sale of a building, fees related to ~~the~~a regulatory matter, CEO transition costs, moving costs, and other non-recurring items. ~~For the six months ended June 30, 2021, other significant (income) expenses, net, includes CEO transition costs, moving costs and other non-recurring items.~~

Liquidity and Capital Resources

To date, we have financed our operations primarily through cash generated from operations, public and private sales of debt and equity securities, and bank debt borrowings.

The following table presents a summary of our consolidated cash flows for operating, investing and financing activities for the six months ended June 30, ~~2022~~2023 and ~~2021~~2022 as well balances of cash and cash equivalents and working capital:


		Six Months Ended June 30,					Six Months Ended June 30,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Net cash (used in) provided by:	Net cash (used in) provided by:					Net cash (used in) provided by:
Operating activities	Operating activities	$	(46,036)	$	820	Operating activities	$	(14,240)	$	(46,036)
Investing activities	Investing activities	5,778		(608,098)		Investing activities	38,691		$	5,778
Financing activities	Financing activities	7,068		729,545		Financing activities	1,443		$	7,068

Net change in cash, cash equivalents and restricted cash		(33,190)		122,267
Cash, cash equivalents and restricted cash, beginning of period		$	316,827	$	250,632
Cash, cash equivalents and restricted cash, end of period		$	283,637	$	372,899
Net change in cash and cash equivalents						Net change in cash and cash equivalents	25,894		(33,190)
Cash and cash equivalents, beginning of period						Cash and cash equivalents, beginning of period	$	263,180	$	316,827
Cash and cash equivalents, end of period						Cash and cash equivalents, end of period	$	289,074	$	283,637
Working Capital (1), end of period	Working Capital (1), end of period	$	539,590	$	622,664	Working Capital (1), end of period	$	489,872	$	539,590

(1) Defined as current assets less current liabilities.

Cash Flows from Operating Activities

~~During~~Cash used in operating activities during the six months ended June 30, ~~2022, cash used in operating activities~~2023 was ~~$46.0~~$14.2 million compared to ~~$0.8~~$46.0 million ~~of cash provided by operating activities~~ in the same period in ~~2021.~~2022. This ~~$46.8~~$31.8 million decrease was primarily driven by our operating results (net loss adjusted for depreciation, amortization of intangibles, and other non-cash charges) which resulted in ~~$29.9~~$28.3 million of ~~higher~~lower cash used by operating activities year-over-year, as well as a ~~$16.9~~$3.5 million ~~year-over-year increase~~decrease in cash used resulting from net changes in operating assets and liabilities. The decrease in cash used related to our operating activities was primarily driven by an improvement in gross profit of $32.5 million. In addition, timing of cash receipts and cash payments in the ordinary course of business caused operating cash flow to fluctuate from period to period.

3934

NEOGENOMICS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

cash used to fund net operating assets. The increase in cash used by operating activities in the six months ended June 30, 2022 compared to the same period in 2021 reflects cash used to fund the operating activities of our Inivata subsidiary which was acquired in June of 2021, higher payroll and payroll-related costs to support our strategic growth initiatives, and an increase in professional fees.

Cash Flows from Investing Activities

During the six months ended June 30, ~~2022,~~2023, cash provided by investing activities was ~~$5.8~~$38.7 million compared to ~~$608.1~~$5.8 million ~~of cash used in investing activities~~ in the same period in ~~2021.~~2022. This change was primarily due to a ~~$419.4 million decrease in net cash used in business acquisitions, a $106.4~~$49.6 million decrease in purchases of marketable securities, ~~and~~partially offset by a ~~$42.3 million increase~~decrease in proceeds from sales and maturities of marketable securities ~~year-over-year.~~of $5.7 million. In addition the six months ended June 30, 2022 included $12.1 million of net proceeds from the sale of a building and associated land.

Cash Flows from Financing Activities

During the six months ended June 30, ~~2022,~~2023, cash provided by financing activities was ~~$7.1~~$1.4 million compared to ~~$729.5~~$7.1 million in the same period in ~~2021.~~2022. The cash provided by financing activities during the six months ended June 30, ~~2022~~2023 consisted of ~~$7.6~~$1.5 million for the net issuance of common stock ~~partially~~ offset by ~~$0.6~~$0.1 million used for the repayment of equipment financing obligations. The primary reason for the decrease in cash provided by financing activities year-over-year was ~~that there were no convertible debt or equity offerings in~~ the ~~six months ended June 30, 2022. Comparatively, the six months ended June 30, 2021 had convertible debt net proceeds~~timing of ~~$334.4 million and equity offering net proceeds of $418.3 million, partially offset by $29.3 million of premiums paid~~cash payments for ~~capped call confirmations.~~stock option exercises which can fluctuate from period to period.

Liquidity Outlook

We had ~~$283.6~~$289.1 million in unrestricted cash and cash equivalents as of June 30, ~~2022~~2023 in addition to ~~$182.3~~$120.3 million of marketable securities available to support current operational liquidity needs. We anticipate that the cash on hand, marketable securities and cash collections are sufficient to fund our near-term capital and operating needs for at least the next 12 months. Operating needs include, but are not limited to, the planned costs to operate our business, including amounts required to fund working capital and capital expenditures, continued research and development efforts, and potential strategic acquisitions and investments.

We anticipate that the cash on hand, marketable securities and cash collections are sufficient to fund our near-term capital and operating needs for at least the next 12 months. Operating needs include, but are not limited to, the planned costs to operate our business, including amounts required to fund working capital and capital expenditures, continued research and development efforts, and potential strategic acquisitions and investments.

Capital Expenditures

We forecast capital expenditures in order to execute on our business plan and maintain growth; however, the actual amount and timing of such capital expenditures will ultimately be determined by the volume of business. We currently anticipate that our capital expenditures for the year ending December 31, ~~2022~~2023 will be in the range of ~~$25.0~~$30.0 million to ~~$35.0~~$40.0 million. During the six months ended June 30, ~~2022,~~2023, we purchased, with cash, approximately ~~$19.1~~$17.5 million of capital equipment, software and leasehold improvements. We have funded and plan to continue funding these capital expenditures with cash and financing.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Please refer to our critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 and Note 2. Summary of Significant Accounting Policies, in the accompanying notes to the unaudited Consolidated Financial Statements for a complete description of our significant accounting policies.

~~Goodwill~~

We evaluate goodwill on an annual basis in the fourth quarter or more frequently if management believes indicators of impairment exist. Such indicators could include, but are not limited to, (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. We first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If management concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management performs a quantitative goodwill impairment test. The quantitative analysis is performed by comparing the fair value of the reporting unit to its carrying value. If the carrying value is greater than the estimate of fair value, an impairment loss will be recognized for the amount in which the carrying amount exceeds the reporting unit’s fair

~~NEOGENOMICS, INC.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~value. We estimate the fair values of our reporting units using a combination of the income, or discounted cash flows approach and the market approach, which utilizes comparable companies’ data.~~

As of June 30, 2022 we performed a qualitative assessment to determine whether it was more likely than not that the fair values of our reporting units were less than their carrying values. Such qualitative factors included macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant events. As a result of the qualitative assessment, we determined that due to changes in executive leadership and the sustained decline in our stock price of $12.15 per share as of March 31, 2022 to $8.15 per share as of June 30, 2022, there were indicators that it was more likely than not that the fair values of the reporting units were less than their carrying values. Accordingly, we performed a quantitative analysis and compared our reporting units’ fair values to their carrying values to determine whether goodwill was impaired. We determined the fair values of our reporting units using a combination of the income approach using discounted cash flows and the market approach utilizing comparable companies’ data. The assumptions and estimates, including management's estimated future revenue growth rates, estimated future margins and discount rates, used in the quantitative analysis were based on management’s best estimate about current and future conditions including projected net revenue from emerging market technologies acquired through the June 2021 acquisition of Inivata. The results of the quantitative analysis showed that the reporting units’ fair values exceeded their carrying values and there was no impairment of the recorded goodwill as of June 30, 2022. However, to the extent we continue to experience declines in our stock price or experience other indicators, such as industry and market considerations or declines in financial performance, that the fair values of our reporting units are less than their carrying values, there could be a risk of goodwill impairment of our reporting units in future periods.

4135

NEOGENOMICS, INC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks, including changes in interest rates and foreign currency exchange rates.

Interest Rate Risk

In May 2020, we issued $201.3 million aggregate principal amount of the 2025 Convertible Notes. The 2025 Convertible Notes have a fixed annual interest rate of 1.25%; therefore, we do not have economic interest rate exposure with respect to the 2025 Convertible Notes. In January 2021, we issued $345.0 million aggregate principal amount of the 2028 Convertible Notes. The 2028 Convertible Notes have a fixed annual interest rate of 0.25%; therefore, we do not have economic interest rate exposure with respect to the 2028 Convertible Notes. However, the fair value of the 2025 Convertible Notes and 2028 Convertible Notes is exposed to interest rate risk. Generally, the fair market value will increase as interest rates fall and decrease as interest rates rise. In addition, the fair value is affected by our common stock price. The fair value will generally increase as our common stock price increases and will generally decrease as our common stock price declines. We carry the 2025 Convertible Notes and 2028 Convertible Notes at face value less unamortized debt discount and debt issuance costs on our balance sheet, and we present the fair value for required disclosure purposes only.

The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest in highly liquid and high-quality U.S. government and other highly credit rated debt securities. Our investments are exposed to market risk due to fluctuations in interest rates, which may affect our interest income and the fair market value of our investments. To minimize our exposure due to adverse shifts in interest rates, we invest in short-term securities with short maturities. If a 1% change in interest rates were to have occurred on June 30, ~~2022,~~2023, this change would not have had a material effect on the fair value of our investment portfolio as of that date. Due to the short holding period of our investments, we do not believe that we have a material financial market risk exposure and do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates. While we believe our marketable securities do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value.

Foreign Currency Exchange Risk

~~We have operations in Cambridge, United Kingdom; Rolle, Switzerland; Suzhou, China; and Singapore.~~ Our international revenues and expenses denominated in foreign currencies (primarily British Pounds, Swiss Francs, Chinese Renminbi and Singapore Dollars) expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. We do not hedge foreign currency exchange risks and do not currently believe that these risks are significant.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As required by SEC Rule 15d-15, our management carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4236

NEOGENOMICS, INC.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time the Company is engaged in legal proceedings in the ordinary course of business. For further information on legal proceedings, please refer to Note 11. Commitments and Contingencies, in the notes to the unaudited Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

You should carefully consider each of the risk factors described in Part I, Item 1A, “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, as filed with the SEC on February ~~25, 2022,~~24, 2023, as well as the other information set forth in this Quarterly Report on Form 10-Q. ~~In addition, we are supplementing such risk factors with the following disclosure:~~

~~If goodwill and intangible assets that we recorded in connection with our acquisitions become impaired, we may have to take significant charges against earnings.~~

In connection with the accounting for our completed acquisitions, we recorded a significant amount of goodwill and intangible assets. Goodwill and indefinite-lived intangible assets are evaluated for impairment annually, or more frequently if conditions warrant, by comparing the carrying value of a reporting unit to its estimated fair value. Intangible assets with definite lives are reviewed for impairment when events or circumstances indicate that their carrying value may not be recoverable. Declines in operating results, sustained market declines and other factors that impact the fair values of our reporting units could result in an impairment of goodwill or intangible assets and a charge against earnings, which could materially adversely affect our results of operations or financial condition in future periods.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

None for the quarterly period ended June 30, ~~2022~~2023 that have not previously been included in a Current Report on Form 8-K.

Issuer Purchases of Equity Securities

The following table sets forth information concerning our purchases of common stock for the periods indicated:

Period of Repurchase
Total Number of Shares Purchased(1)
Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2022 - April 30, 2022 22,672 $ 11.40 — —
May 1, 2022 - May 31, 2022 5,176 $ 9.45 — —
June 1, 2022 - June 30, 2022 509 $ 7.92 — —
Total 28,357 — —


Period of Repurchase	Total Number of Shares Purchased(1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
April 1, 2023 - April 30, 2023	37,697	$	16.59	—	—
May 1, 2023 - May 31, 2023	5,349	$	14.63	—	—
June 1, 2023 - June 30, 2023	49,233	$	16.75	—	—
Total	92,279			—	—

(1) Effective May 25, 2023, the Company adopted the NeoGenomics, Inc. 2023 Equity Incentive Plan (the “2023 Plan”) as approved by the Board of Directors on March 28, 2023 and a majority of the Company’s stockholders on May 25, 2023. The ~~Company’s~~2023 Plan replaced the NeoGenomics, Inc. Amended and Restated Equity Incentive Plan, as most recently amended and subsequently approved by a majority of stockholders on May ~~27, 2021, allows~~25, 2017 (the “Prior Plan”). Both the 2023 Plan and the Prior Plan allow participants to surrender already-owned shares having a fair market value equal to the required withholding tax related to the vesting of restricted stock. Pursuant to a share withholding election made by participants in connection with the vesting of such awards, all of which were outside of a publicly-announced repurchase plan, we acquired from such participants the shares noted in the table above to satisfy tax withholding obligations related to the vesting of their restricted stock. The average prices listed in the above table are averages of the fair market prices at which we valued shares withheld for purposes of calculating the number of shares to be withheld.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

4437

NEOGENOMICS, INC.

ITEM 6. EXHIBITS

EXHIBIT
NO.Exhibit Number

~~DESCRIPTION~~Description of Exhibit

Location

10.1*

~~Executive Chair and Principal Executive Officer agreement between~~ NeoGenomics, Inc. 2023 Equity Incentive Plan .

Incorporated by reference as Annex A to the Company’s Definitive Proxy Statement on Schedule 14A as filed on April 7, 2023.

10.2*

Form of PSU Agreement under the NeoGenomics, Inc. Amended and ~~Lynn A. Tetrault dated April 25, 2022~~Restated Equity Incentive Plan. (

Incorporated by reference to the Company’s ~~Quarterly~~Current Report on Form ~~10-Q for the quarterly period ended~~ ~~March 31, 2022~~,8-K as filed with the SEC on May ~~9, 2022).~~17, 2023.

10.3*

Amendment to Employment Agreement, effective May 12, 2023, by and between NeoGenomics, Inc. and Melody Harris.

Incorporated by reference to the Company’s Current Report on Form 8-K as filed with the SEC on May 17, 2023.

31.1

Certification by Principal Executive Officer pursuant to Rule 13a-14(a)/ 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Provided herewith.

31.2

Certification by Principal Financial Officer pursuant to Rule 13a-14(a)/ 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Provided herewith.

32.1

Certification by Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Provided herewith.

101.INS

XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

Provided herewith.

101.SCH

XBRL Taxonomy Extension Schema Document

Provided herewith.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

Provided herewith.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

Provided herewith.

101.LAB

XBRL Taxonomy Extension Labels Linkbase Document

Provided herewith.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

Provided herewith.

104

Cover Page Interactive File (formatted as inline XBRL and contained within Exhibit 101)

Provided herewith.

Denotes a management contract or compensatory plan or arrangement.

4538

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: August ~~9, 2022~~8, 2023

NEOGENOMICS, INC.

By:

/s/ ~~Lynn A. Tetrault~~Christopher M. Smith

Name:

~~Lynn A. Tetrault~~Christopher M. Smith

Title:

~~Chair of the Board of Directors~~Director and

~~Interim~~ Chief Executive Officer

By:

/s/ ~~William B. Bonello~~Jeffrey S. Sherman

Name:

~~William B. Bonello~~Jeffrey S. Sherman

Title:

Chief Financial Officer

4639


PART I FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)						5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						3026
Item 3. Quantitative and Qualitative Disclosures About Market Risk						4236
Item 4. Controls and Procedures						4236

PART II OTHER INFORMATION
Item 1. Legal Proceedings						4337
Item 1A. Risk Factors						4337
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						4337
Item 3. Defaults Upon Senior Securities						4337
Item 4. Mine Safety Disclosures						4337
Item 5. Other Information						4437
Item 6. Exhibits						4538
SIGNATURES						4639


	June 30, 2022 (unaudited)		December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	283,637	$	316,827

Marketable securities, at fair value	182,316		198,563
Accounts receivable, net	111,276		112,130
Inventories	21,863		23,395
Prepaid assets	16,662		12,354
Assets held for sale	—		10,050
Other current assets	6,506		8,189
Total current assets	622,260		681,508
Property and equipment (net of accumulated depreciation of $123,159 and $109,952, respectively)	111,105		109,465
Operating lease right-of-use assets	99,917		102,197

Intangible assets, net	425,338		442,325
Goodwill	527,115		527,115




Other assets	6,378		7,168
Total non-current assets	1,169,853		1,188,270
Total assets	$	1,792,113	$	1,869,778
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	16,849	$	17,921
Accrued compensation	37,280		38,304
Accrued expenses and other liabilities	16,075		17,796
Current portion of equipment financing obligations	410		1,135
Current portion of operating lease liabilities	5,708		6,884


Pharma contract liabilities	6,348		5,192
Total current liabilities	82,670		87,232
Long-term liabilities
Convertible senior notes, net	533,898		532,483

Operating lease liabilities	71,882		72,289


Deferred income tax liabilities, net	45,979		55,475
Other long-term liabilities	14,165		14,022
Total long-term liabilities	665,924		674,269
Total liabilities	$	748,594	$	761,501
Commitments and contingencies (Note 11)	0		0
Stockholders’ equity
Common stock, $0.001 par value, (250,000,000 shares authorized; 125,679,573 and 124,107,500 shares issued and outstanding, respectively)	$	126	$	124
Additional paid-in capital	1,146,997		1,123,628
Accumulated other comprehensive loss	(4,056)		(638)
Accumulated deficit	(99,548)		(14,837)
Total stockholders’ equity	$	1,043,519	$	1,108,277
Total liabilities and stockholders’ equity	$	1,792,113	$	1,869,778


	Common Stock		Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)		(Accumulated Deficit) Retained Earnings		Total
		Shares			Amount
Balance, December 31, 2020		112,075,474	$	112		$	701,357	$	10	$	(7,185)	$	694,294
Cumulative-effect adjustment from change in accounting principle		—	—			(23,271)		—		696		(22,575)
Premiums paid for capped call confirmations		—	—			(29,291)		—		—		(29,291)
Common stock issuance ESPP Plan		23,917	—			1,024		—		—		1,024
Issuance of restricted stock, net of forfeitures		83,220	—			(614)		—		—		(614)
Issuance of common stock for stock options		260,167	—			2,239		—		—		2,239
Issuance of common stock - public offering, net of underwriting discounts		4,693,876	5			218,495		—		—		218,500
Stock issuance fees and expenses		—	—			(242)		—		—		(242)
ESPP expense		—	—			241		—		—		241
Stock-based compensation expense - options and restricted stock		—	—			2,412		—		—		2,412
Net unrealized loss on marketable securities, net of tax		—	—			—		(160)		—		(160)
Net loss		—	—			—		—		(22,114)		(22,114)
Balance, March 31, 2021		117,136,654	$	117		$	872,350	$	(150)	$	(28,603)	$	843,714
Common stock issuance ESPP Plan		31,839	—			1,245		—		—		1,245
Issuance of restricted stock, net of forfeitures		146,392	—			(163)		—		—		(163)
Issuance of common stock for stock options		354,310	1			4,429		—		—		4,430
Issuance of common stock - private placement, net of private placement fees		4,444,445	4			189,859		—		—		189,863
Issuance of common stock for acquisition		597,712	1			29,174		—		—		29,175
Stock issuance fees and expenses		—	—			(102)		—		—		(102)
ESPP expense		—	—			298		—		—		298
Stock-based compensation expense - options and restricted stock		—	—			4,208		—		—		4,208
Net unrealized loss on marketable securities, net of tax		—	—			—		(183)		—		(183)

Net income		—	—			—		—		75,873		75,873




Balance, June 30, 2021		122,711,352	$	123		$	1,101,298	$	(333)	$	47,270	$	1,148,358


	June 18, 2021 (as initially reported)		Measurement Period Adjustments		June 18, 2021 (as adjusted)
Fair value of business combination:
Cash paid at closing	$	398,594	$	—	$	398,594
Fair value of Line of Credit	15,000		—		15,000
Fair value of consideration transferred	$	413,594	$	—	$	413,594
Fair value of previously-held equity interest(1)	62,919		1,987		64,906
Fair value of Purchase Option(1)	58,537		15,763		74,300
Total fair value of business combination	$	535,050	$	17,750	$	552,800

Allocation of the fair value business combination:
Cash	$	14,068	$	—	$	14,068
Other current assets(2)	5,366		345		5,711
Property and equipment	1,753		—		1,753
Identifiable intangible assets - developed technology(1)	302,982		(11,796)		291,186
Identifiable intangible assets - trademarks(1)	31,700		(226)		31,474
Identifiable intangible asset - trade name(1)	2,322		253		2,575
Other long-term assets	6,240		—		6,240
Total identifiable assets acquired	364,431		(11,424)		353,007
Current liabilities	(4,241)		(1,650)		(5,891)
Deferred income tax liabilities(3)	(64,680)		3,686		(60,994)
Other long-term liabilities	(4,690)		—		(4,690)
Net identifiable assets acquired	290,820		(9,388)		281,432
Goodwill	244,230		27,138		271,368
Total fair value of business combination	$	535,050	$	17,750	$	552,800


	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
	(unaudited)		(unaudited)
Net revenue	$	121,707	$	237,159
Net loss	$	(23,222)	$	(51,313)


	Number of Shares	Weighted Average Exercise Price
Options outstanding at December 31, 2021	2,961,195	$	25.46
Options granted	2,953,059	$	15.80
Less:
Options exercised	566,583	$	12.65
Options forfeited	1,316,107	$	30.31
Options outstanding at June 30, 2022	4,031,564	$	18.59
Exercisable at June 30, 2022	1,427,681	$	22.60


	Number of Restricted Shares	Weighted Average Grant Date Fair Value
Nonvested at December 31, 2021	851,403	$	36.00
Granted	1,778,000	$	15.47
Vested	(309,100)	$	36.74
Forfeited	(817,912)	$	29.68
Nonvested at June 30, 2022	1,502,391	$	14.99


	June 30, 2022		December 31, 2021
Current pharma contract assets (1)	$	1,951	$	1,738
Long-term pharma contract assets (2)	283		236
Total pharma contract assets	$	2,234	$	1,974


Current pharma capitalized commissions (1)	$	128	$	109
Long-term pharma capitalized commissions (2)	1,139		882
Total pharma capitalized commissions	$	1,267	$	991


Current pharma contract liabilities	$	6,348	$	5,192
Long-term pharma contract liabilities (3)	1,121		917
Total pharma contract liabilities	$	7,469	$	6,109