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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 September 30, 2019

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.)
   
12701 Commonwealth Drive,Suite 9,Fort Myers, 
Florida 33913
(Address of principal executive offices) (Zip Code)
 
(239) 768-0600
(Registrant’s telephone number, including area code)
 
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     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     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 filerAccelerated filer
Non-accelerated filerSmaller 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  
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common stock ($0.001 par value)NEONASDAQ

As of November 8, 2019, the registrant had 104,407,597 shares of Common Stock, par value $0.001 per share outstanding.




TABLE OF CONTENTS
 
  
 
 
 
 
  
 
 
 
 
 
 
 
 




FORWARD-LOOKING STATEMENTS
The information in this Quarterly Report on Form 10-Q contains “forward-looking statements” and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the “Securities Act”, and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our 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. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. 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 “SEC” on February 26, 2019 and as amended and filed with the SEC on May 8, 2019.

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 the sufficiency of our insurance to cover such claims;
Our ability to implement our business strategy;
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, 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 (“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;
Our ability to meet our future capital requirements;
The impact of internalization of testing by customers;
Our ability to manage our indebtedness;
Our ability to protect our intellectual property from infringement;
Our ability to successfully integrate Genoptix into NeoGenomics including consolidating systems and facilities;
Our ability to integrate future acquisitions and costs related to such acquisitions;
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.
Any forward-looking statement speaks only as of the date on which such statement is made, 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.


3


PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEOGENOMICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
ASSETSSeptember 30, 2019 (unaudited)December 31, 2018
Current assets
Cash and cash equivalents$178,891  $9,811  
Accounts receivable, net91,13376,919  
Inventories12,6328,650
Prepaid assets8,7427,727
Other current assets603561
Total current assets292,001103,668
Property and equipment (net of accumulated depreciation of $64,165 and $50,127, respectively)
62,48860,888  
Operating lease right-of-use assets25,797—  
Intangible assets, net129,084140,029  
Goodwill198,571197,892  
Other assets3,2142,538  
Total assets$711,155  $505,015  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable$17,995  $17,779  
Accrued compensation26,298  19,062  
Accrued expenses and other liabilities7,900  8,986  
Short-term portion of financing obligations5,750  6,298  
Short-term portion of operating leases3,527  —  
Short-term portion of term loan6,250  7,873  
Pharma contract liability1,187  927  
Total current liabilities68,907  60,925  
Long-term liabilities
Long-term portion of financing obligations3,982  5,250  
Long-term portion of operating leases23,870  —  
Long-term portion of term loan, net93,027  87,880  
Revolving credit facility  5,000  
Other long term liabilities4,674  3,060  
Deferred income tax liability, net19,688  22,457  
Total long-term liabilities145,241  123,647  
     Total liabilities214,148  184,572  
Stockholders' equity
Common stock, $0.001 par value, (250,000,000 shares authorized; 104,145,895 and 94,465,440 shares issued and outstanding, respectively)
104  94  
Additional paid-in capital516,936  340,291  
Accumulated other comprehensive loss(2,380) (579) 
Accumulated deficit(17,653) (19,363) 
     Total stockholders’ equity497,007  320,443  
     Total liabilities and stockholders' equity$711,155  $505,015  
See the accompanying notes to the unaudited consolidated financial statements.
4


NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2019201820192018
NET REVENUE:  
Clinical Services$92,565  $59,449  $267,757  $175,960  
Pharma Services12,107  9,647  34,205  24,306  
Total revenue104,672  69,096  301,962  200,266  
COST OF REVENUE53,840  36,775  155,049  110,111  
GROSS PROFIT50,832  32,321  146,913  90,155  
Operating expenses:
General and administrative33,054  21,055  94,773  59,106  
Research and development2,611  446  6,407  2,475  
Sales and marketing11,508  6,900  35,048  21,355  
Total operating expenses47,173  28,401  136,228  82,936  
INCOME FROM OPERATIONS3,659  3,920  10,685  7,219  
Interest expense, net203  1,873  3,333  4,766  
Other (income) expense(35) (30) 5,124  31  
Loss on extinguishment of debt    1,018    
Income before taxes3,491  2,077  1,210  2,422  
Income tax expense (benefit)1,348  54  (500) 135  
NET INCOME2,143  2,023  1,710  2,287  
Deemed dividends on preferred stock and amortization of beneficial conversion feature      5,627  
Gain on redemption of preferred stock      (9,075) 
NET INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS$2,143  $2,023  $1,710  $5,735  
INCOME PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
Basic$0.02  $0.02  $0.02  $0.07  
Diluted$0.02  $0.02  $0.02  $0.06  
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic103,899  87,253  99,149  87,381  
Diluted107,880  90,899  102,766  89,925  
See the accompanying notes to the unaudited consolidated financial statements.

5


NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited, in thousands)

Three Months Ended September 30,Nine Months Ended September 30,
2019201820192018
NET INCOME$2,143  $2,023  $1,710  $2,287  
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustments  (13)   (36) 
(Loss) gain on effective cash flow hedges(217) 292  (1,801) 298  
Total other comprehensive (loss) income(217) 279  (1,801) 262  
COMPREHENSIVE INCOME (LOSS)$1,926  $2,302  $(91) $2,549  

See the accompanying notes to the unaudited consolidated financial statements.



6


NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(unaudited, in thousands, except share amounts)


Series A Redeemable Convertible Preferred StockCommon StockAdditional Paid-In CapitalAccumulated Other Comprehensive LossAccumulated DeficitTotal
SharesAmountShares Amount
Balance, December 31, 2018  $  94,465,440  $94  $340,291  $(579) $(19,363) $320,443  
Common stock issuance ESPP Plan—  —  36,032  —  419  —  —  419  
Stock issuance fees and expenses—  —  —  —  (66) —  —  (66) 
Loss on effective cash flow hedge—  —  —  —  —  (557) —  (557) 
Issuance of restricted stock, net of forfeitures—  —  182,502  —  —  —  —  —  
Issuance of common stock for stock options—  —  619,536  1  3,893  —  —  3,894  
ESPP expense—  —  —  —  119  —  —  119  
Stock based compensation expense - options and restricted stock—  —  —  —  2,020  —  —  2,020  
Net loss—  —  —  —  —  —  (2,424) (2,424) 
Balance, March 31, 2019  $  95,303,510  $95  $346,676  $(1,136) $(21,787) $323,848  
Common stock issuance ESPP Plan—  —  37,255  —  653  —  —  653  
Stock issuance fees and expenses—  —  —  —  (211) —  —  (211) 
Loss on effective cash flow hedge—  —  —  —  —  (1,027) —  (1,027) 
Issuance of restricted stock, net of forfeitures—  —  (633) —  —  —  —  —  
Working capital adjustment related to acquisition—  —  (99,524) —  (1,977) —  —  (1,977) 
Issuance of common stock - Public Offering—  —  8,050,000  8  160,766  —  —  160,774  
Issuance of common stock for stock options—  —  543,604  1  3,369  —  —  3,370  
ESPP expense—  —  —  —  162  —  —  162  
Stock based compensation expense - options and restricted stock—  —  —  —  2,151  —  —  2,151  
Net income—  —  —  —  —  —  1,991  1,991  
Balance, June 30, 2019  $  103,834,212  $104  $511,589  $(2,163) $(19,796) $489,734  
Common stock issuance ESPP Plan—  —  28,672  —  564  —  —  564  
Stock issuance fees and expenses—  —  —  —  23  —  —  23  
Loss on effective cash flow hedge—  —  —  —  —  (217) —  (217) 
Issuance of restricted stock, net of forfeitures—  —  (6,070) —  (688) —  —  (688) 
Issuance of common stock for stock options—  —  289,081  —  2,173  —  —  2,173  
ESPP expense—  —  —  —  144  —  —  144  
Stock based compensation expense - options and restricted stock—  —  —  —  3,131  —  —  3,131  
Net income—  —  —  —  —  —  2,143  2,143  
Balance, September 30, 2019  $  104,145,895  $104  $516,936  $(2,380) $(17,653) $497,007  

See the accompanying notes to the unaudited consolidated financial statements.















7


NEOGENOMICS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(unaudited, in thousands, except share amounts)


Series A Redeemable Convertible Preferred StockCommon StockAdditional Paid-In CapitalAccumulated Other Comprehensive IncomeAccumulated DeficitTotal
SharesAmountSharesAmount
Balance, December 31, 20176,864,000  $32,615  80,462,574  $80  $194,687  $274  $(23,079) $171,962  
Common stock issuance ESPP Plan—  —  38,620  —  267  —  —  267  
Stock issuance fees and expenses—  —  —  —  (97) —  —  (97) 
Foreign currency translation adjustments—  —  —  —  —  (45) —  (45) 
Gain on effective cash flow hedge—  —  —  —  —  270  —  270  
Issuance of common stock for stock options—  —  67,259  1  215  —  —  216  
Deemed dividends on preferred stock and amortization of beneficial conversion feature—  2,856  —  —  (2,856) —  —  (2,856) 
ESPP expense—  —  —  —  54  —  —  54  
Stock based compensation expense - options and restricted stock—  —  —  —  1,570  —  —  1,570  
Net income—  —  —  —  —  —  644  644  
Balance, March 31, 20186,864,000  $35,471  80,568,453  $81  $193,840  $499  $(22,435) $171,985  
Common stock issuance ESPP Plan—  —  31,686  —  231  —  —  231  
Redemption of Series A Preferred Stock(6,864,000) (37,823) —  —  (21,348) —  —  (21,348) 
Stock issuance fees and expenses—  —  —  —  (46) —  —  (46) 
Foreign currency translation adjustments—  —  —  —  —  24  —  24  
Loss on effective cash flow hedge—  —  —  —  —  (266) —  (266) 
Issuance of common stock for stock options—  —  897,942  —  4,918  —  —  4,918  
Deemed dividends on preferred stock and amortization of beneficial conversion feature—  2,352  —  —  (2,352) —  —  (2,352) 
Gain on redemption of preferred stock  —  —  9,075  —  —  9,075  
ESPP expense—  —  —  —  56  —  —  56  
Stock based compensation expense - options and restricted stock—  —  —  —  2,277  —  —  2,277  
Adjustment for adoption of accounting standards—  —  —  —  (1,095) —  1,130  35  
Net loss—  —  —  —  —  —  (380) (380) 
Balance, June 30, 2018  $  81,498,081  $81  $185,556  $257  $(21,685) $164,209  
Common stock issuance ESPP Plan—  —  16,689  —  267  —  —  267  
Stock issuance fees and expenses—  —  —  —  (163) —  —  (163) 
Foreign currency translation adjustments—  —  —  —  —  (13) —  (13) 
Loss on effective cash flow hedge—  —  —  —  —  292  —  292  
Issuance of restricted stock, net of forfeitures—  —  62,182  —  (297) —  —  (297) 
Issuance of common stock - Public Offering—  —  11,270,000  11  135,060  —  —  135,071  
Issuance of common stock for stock options—  —  133,831  1  978