April 29, 2005 - 10QSB: Optional form for quarterly and transition reports of small business issuers

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549

FORM 10-QSB

(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934.

For the quarterly period ended March 31, 2005.

( ) Transition report pursuant to Section 13 or 15(d) of the Exchange Act for
the transition period from ____________ to ____________ .

Commission File Number: 333-72097

NeoGenomics, Inc.
(Exact name of registrant as specified in charter)

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

12701 Commonwealth Drive, Suite 9, Fort Myers, FL 33913

(Address of principal executive offices)

(239) 768-0600

(Registrant's Telephone Number, Including Area Code)

Check 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 ( X ) NO ( )

State the number of shares outstanding of each of the issuer's classes of common
equity, as of April 28, 2005.

22,017,657

Transitional Small Business Disclosure Format:

YES ( ) NO (X)

NeoGenomics, Inc.

INDEX TO FORM 10-QSB

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (unaudited)

Consolidated Balance Sheet as of March 31, 2005..................... 4

Consolidated Statements of Operations for the three months ended
March 31, 2005 and 2004 .......................................... 5

Consolidated Statements of Cash Flows for the three months
ended March 31, 2005 and 2004..................................... 6

Notes to Consolidated Financial Statements.......................... 7

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (including cautionary statement).............. 11

Item 3. Controls and Procedures............................................. 16

PART II. OTHER INFORMATION

Item 1. Legal Proceedings................................................... 16
Item 2. Changes in Securities............................................... 16
Item 3. Defaults Upon Senior Securities..................................... 17
Item 4. Submission of Matters to a Vote of Securities Holders............... 17
Item 5. Other Information................................................... 17
Item 6. Exhibits and Reports on Form 8-K.................................... 17

Signatures 18

PART I

FORWARD-LOOKING STATEMENTS

This Form 10-QSB contains "forward-looking statements" relating to
NeoGenomics, Inc., a Nevada corporation (referred to individually as the "Parent
Company" or collectively with all of its subsidiaries as the "Company" in this
Form 10-QSB), which represent the Company's current expectations or beliefs
including, but not limited to, statements concerning the Company's operations,
performance, financial condition and growth. For this purpose, any statements
contained in this Form 10-QSB that are not statements of historical fact are
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may", "anticipation", "intend", "could", "estimate", or
"continue" or the negative or other comparable terminology are intended to
identify forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, such as credit losses, dependence on
management and key personnel, variability of quarterly results, and the ability
of the Company to continue its growth strategy and competition, certain of which
are beyond the Company's control. Should one or more of these risks or
uncertainties materialize or should the underlying assumptions prove incorrect,
actual outcomes and results could differ materially from those indicated in the
forward-looking statements.

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.

NeoGenomics, Inc.

CONSOLIDATED BALANCE SHEET AS OF
March 31, 2005
(unaudited)
________________________________________________________________________________

ASSETS

CURRENT ASSETS:
Cash and cash equivalents $ 112,959
Accounts receivable (net of allowance for
doubtful accounts of $9,496) 141,602
Inventories 27,843
Other current assets 32,559
Total current assets 314,963

PROPERTY AND EQUIPMENT (net of accumulated
depreciation of $163,727) 378,327

OTHER ASSETS 33,898

TOTAL $ 727,188
=============

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
Accounts payable $ 138,097
Deferred revenue 110,000
Accrued and other liabilities 41,073
Total current liabilities 289,170

LONG TERM LIABILITIES (net of unamortized discount
of $129,925) 765,526

TOTAL LIABILITIES 1,054,696

STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value, 100,000,000 shares
authorized; 22,017,657 shares issued and outstanding 22,018
Additional paid-in capital 9,888,886
Deficit (10,238,412)
Total stockholders' deficit (327,508)

TOTAL $ 727,188
=============
________________________________________________________________________________

See notes to consolidated financial statements.

NeoGenomics, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
________________________________________________________________________________

For the For the
Three-Months Three-Months
Ended Ended
March 31, 2005 March 31, 2004

REVENUE $ 230,192 $ 178,863

COST OF REVENUE 176,838 145,986

GROSS PROFIT 53,354 32,877

OTHER OPERATING EXPENSES:
Selling, general and administrative 241,346 181,770
Interest expense 27,182 20,716
Total other operating expenses 268,528 202,486

NET INCOME (LOSS) $ (215,174) $ (169,609)
============== ==============

NET INCOME (LOSS) PER SHARE - Basic and
Diluted $ (0.01) $ (0.01)
============== ==============

WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING -
Basic and Diluted 21,744,273 18,449,416
============== ==============
________________________________________________________________________________

See notes to consolidated financial statements.

NeoGenomics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
_______________________________________________________________________________________

For the For the
Three-Months Three-Months
Ended Ended
March 31, 2005 March 31, 2004

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (215,174) $ (169,609)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 26,414 15,194
Equity-based compensation 31,923 -
Provision for bad debts 8,814 5,382
Amortization of debt issue costs 576 -
Changes in assets and liabilities, net:
(Increase) decrease in accounts receivables,
net of write-offs (93,926) (9,594)
(Increase) decrease in inventory (12,721) 1,306
(Increase) decrease in pre-paid expenses 2,883 1,375
(Increase) decrease in other current assets 3,474 1,023
(Increase) decrease in deposits (5,000) 5,000
Increase (decrease) in accounts payable and
other liabilities 10,515 21,007

NET CASH USED IN OPERATING ACTIVITIES (242,222) (128,916)

CASH FLOWS FROM INVESTING ACTIVITIES -
Purchases of property and equipment (11,704) (13,437)

CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliates, net 155,451 125,000
Debt issue costs (53,587) -
Issuances of common stock, net of transaction
expenses 152,473 47,434

NET CASH PROVIDED BY FINANCING ACTIVITIES 254,337 172,434

NET INCREASE IN CASH AND CASH EQUIVALENTS 411 30,081

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 112,548 25,051

CASH AND CASH EQUIVALENTS, END OF PERIOD $ 112,959 $ 55,132
=========== =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest paid $ 30,569 $ 6,987
=========== =============
Income taxes paid $ - $ -
=========== =============
_______________________________________________________________________________________

See notes to consolidated financial statements.

NeoGenomics, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
________________________________________________________________________________

NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS

NeoGenomics, Inc. ("NEO") was incorporated under the laws of the state of
Florida on June 1, 2001 and on November 14, 2001 agreed to be acquired by
American Communications Enterprises, Inc., a Nevada corporation ("ACE"). As a
result of the acquisition, NEO became the operating subsidiary of ACE. ACE was
formed in 1998 and succeeded to NEO's name on January 3, 2002 (collectively NEO
and ACE are referred to as "NeoGenomics", the "Company", "we", "us", or "our"
throughout this Form 10-QSB).

On April 4, 2003, we amended our articles of incorporation to (1) effect a
one-for-100 reverse split of our common stock, (2) reduce the authorized number
of common shares from 500,000,000 to 100,000,000, and (3) authorize 10,000,000
shares of preferred stock for future issuance, with such terms, restrictions and
limitations as may be established by the Board of Directors.

As a result of the above, all references to the number of shares and par
value in the accompanying consolidated financial statements and notes thereto
have been adjusted to reflect the April 2003 reverse stock split as though it
had been completed as of January 1, 2003.

Basis of Presentation

Our accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and the instructions
to Form 10-QSB and Rule 10-1 of Regulation S-X of the Securities and Exchange
Commission (the "SEC"). Accordingly, these consolidated financial statements do
not include all of the footnotes required by accounting principles generally
accepted in the United States of America. In our opinion, all adjustments
(consisting of normal and recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 2005 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2005. The accompanying consolidated
financial statements and the notes thereto should be read in conjunction with
our audited consolidated financial statements as of and for the year ended
December 31, 2004 contained in our Form 10-KSB.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
NEO and ACE. All significant intercompany accounts and balances have been
eliminated in consolidation.

Revenue Recognition

Net revenues are recognized in the period when tests are performed and
consist primarily of net patient revenues that are recorded based on established
billing rates less estimated discounts for contractual allowances principally
for patients covered by Medicare, Medicaid and managed care and other health
plans. These revenues also are subject to review and possible audit by the
payers. We believe that adequate provision has been made for any adjustments
that may result from final determination of amounts earned under all the above
arrangements. There are no known material claims, disputes or unsettled matters
with any payers that are not adequately provided for in the accompanying
consolidated financial statements.

Accounts Receivable and Allowance for Doubtful Accounts

We record accounts receivable net of estimated and contractual discounts.
We provide for accounts receivable that could become uncollectible in the future
by establishing an allowance to reduce the carrying value of such receivables to
their estimated net realizable value. We estimate this allowance based on the
aging of our accounts receivable and our historical collection experience for
each type of payer. Bad debts are charged off to the allowance account at the
time they are deemed uncollectible.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires us to
make certain 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. The reported amounts of revenues and
expenses during the reporting period may be affected by the estimates and
assumptions we are required to make. Estimates that are critical to the
accompanying consolidated financial statements include estimates related to
contractual adjustments, and the allowance for doubtful accounts. It is at least
reasonably possible that our estimates could change in the near term with
respect to these matters.

NOTE B - LIQUIDITY

Our consolidated financial statements were prepared using accounting
principles generally accepted in the United States of America applicable to a
going concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. At December 31, 2004, we had
working capital and stockholders' deficits of approximately $822,000 and
$426,000 respectively. However, subsequent to December 31, 2004, we enhanced our
working capital as we refinanced our short-term indebtedness of $740,000
included in current liabilities with indebtedness that does not mature until
March 31, 2007 (see Note C). We believe this debt facility, which allows for
unsecured borrowings of $1,000,000 after April 30, 2005, and improving
operations, will provide adequate capital to fund our operations and growth for
2005 and beyond. At March 31, 2005, we had a working capital surplus of $25,800.
As such, our consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts or
the amounts and classification of liabilities that might be necessary should we
be unable to continue as a going concern.

NOTE C - RELATED PARTY TRANSACTIONS

During the first eight months of 2003, the executive offices of the Company
shared space, on a rent-free basis, with Naples Women's Center ("NWC"), a
company owned by Dr. Michael Dent, our Chairman of the Board. In addition, NWC
provided bookkeeping services to the Company free of charge. An estimate of the
fair market value of these services has been expensed and added to paid-in
capital as a capital contribution.

During 2001 and 2002, we borrowed approximately $117,332 from the Naples
Women's Center to meet our short-term cash needs. In 2003, we repaid
approximately $58,666 of this amount, and in 2004, we repaid the remaining
$58,666, plus accrued interest at a rate of 8.0% per annum.

During the period from December 2002 to April 2003, Steven C. Jones, one of
our directors, advanced $32,000 under a short term bridge loan agreement. Mr.
Jones is a principal of Aspen Select Healthcare, LP (formerly known as MVP 3,
LP), which consummated debt and equity financing transactions with the Company
on April 15, 2003 and refinanced the debt portion of the transaction on March
23, 2005. These advances, plus accrued interest at a rate of 8.0% per annum,
were repaid to Mr. Jones on April 17, 2003.

During the three months ending March 31, 2005, and 2004 and 2003, the
Company incurred consulting expenses from a director of $22,500 and $52,000,
respectively, for various consulting work performed in connection with managing the
financial affairs of the Company and acting as the Principle Financial Officer.

On April 15, 2003, we entered into a revolving credit facility with MVP 3,
LP ("MVP 3"), a partnership controlled by certain of our shareholders. Under the
terms of the agreement MVP 3, LP agreed to make available up to $1.5 million of
debt financing with a stated interest rate of prime + 8% and such credit
facility had an initial maturity of March 31, 2005. At December 31, 2004, we
owed MVP 3, approximately $740,000 under this loan agreement, which is
classified as "Due to affiliates" under the current liabilities section of our
balance sheet. This obligation was repaid in full through a refinancing on March
23, 2005.

On March 11, 2005 we entered into an agreement with HCSS, LLC and
eTelenext, Inc. to provide eTelenext, Inc's Accessioning Application, AP
Anywhere Application and CMQ Application. HCSS, LLC is a holding company created
to build a small laboratory network for the 50 small commercial genetics
laboratories in the United States. HCSS, LLC is owned 66.7% by Dr. Michael T.
Dent, our Chairman. By becoming the first customer of HCSS in the small
laboratory network, the Company is saving approximately $152,000 in up front
licensing fees. Under the terms of the agreement, the Company is required to pay
$22,500 over three months to customize this software and will pay an annual
membership fee of $6,000 per year and monthly transaction fees of between $10.00
- - $2.50 per completed test, depending on the volume of tests performed. The
eTelenext system is an elaborate laboratory information system (LIS) that is in
use at many larger labs. By assisting in the formation of the small laboratory
network, the Company will be able to increase the productivity of its
technologists and have on-line links to other small labs in the network in order
to better manage its workflow.

On March 23, 2005, we entered into an agreement with Aspen Select
Healthcare, LP (formerly known as MVP 3, LP) to refinance our existing
indebtedness of $740,000 and provide for additional liquidity of up to $760,000
to the Company. Under the terms of the agreement, Aspen Select Healthcare, LP
("Aspen"), a Naples, Florida-based private investment fund will make available
up to $1.5 million of debt financing in the form of a revolving credit facility
(the "Credit Facility") with an initial maturity of March 31, 2007. Aspen is
managed by its General Partner, Medical Venture Partners, LLC, which is
controlled by a director of NeoGenomics. We incurred $53,587 of transaction
expenses in connection with establishing the Credit Facility, which have been
capitalized and are being amortized to interest expense over the term of the
agreement.

Under the terms of the Credit Facility, we are able to borrow up to 80% of
"eligible" accounts receivable, 50% of our net furniture and equipment balance,
secured by substantially all of our assets, and up to $500,000 on an unsecured
basis until April 30, 2005 and up to $1,000,000 on an unsecured basis after
April 30, 2005. The interest rate on the Credit Facility is prime + 6.0%,
payable monthly in arrears. With respect to this agreement, we are subject to
the following restrictive covenants: (i) we are not to incur indebtedness
outside of this agreement in excess of $50,000 without written authorization of
Aspen, (ii) we cannot declare or pay any dividend on our common stock, and (iii)
we are also subject to other general covenants typical of an instrument of this
kind. In addition, as a condition to these transactions, the Company, Aspen and
certain individual shareholders agreed to amend and restate their shareholders'
agreement to provide that Aspen will have the right to appoint up to three of
seven of our directors and one mutually acceptable independent director. We also
amended and restated the Registration Rights Agreement with Aspen and certain
individual shareholders, which grants to Aspen certain demand registration
rights and which grants to all parties to the agreement, piggyback registration
rights. As part of the Credit Facility transaction, the Company also issued to
Aspen a five year Warrant to purchase up to 2,500,000 shares of its common stock
at an exercise price of $0.50/share (which we anticipate will result in us
recording stock based interest expense in 2005 and beyond). We have accrued
$131,337 for the value of such Warrant as of the original commitment date as a
discount to the face amount of the Credit Facility. The Company is amortizing
such discount to interest expense over the 24 month of the Credit Facility.

NOTE D - EQUITY FINANCING TRANSACTIONS

During 2004, we sold 3,040,000 shares of our common stock in a series of
private placements at $0.25/share to unaffiliated third party investors. These

transactions generated net proceeds to the Company of approximately $740,000
after deducting certain transaction expenses. Under the terms of the stock
purchase agreements used in these transactions, the Company agreed to use its
reasonable best efforts to file with the SEC within 180 days of any transaction,
and to cause to be declared effective thereafter, a resale registration
statement which includes the shares purchased by such third party investors. As
of March 31, 2005, the Company had not filed such resale registration statement
with the SEC and is in breach of such provision under certain of the stock
purchase agreements executed with third party investors. There were no penalties
stipulated for failing to meet this registration deadline. The Company currently
anticipates filing such resale registration statement shortly.

On January 3, 2005, we issued 27,288 shares of common stock under the
Company's 2003 Equity Incentive Plan to two employees of the Company in
satisfaction of $6,822 of accrued, but unpaid vacation.

During the period January 3, 2005 to March 31, 2005, we sold 450,953 shares
of our common stock in a series of private placements at $0.30/share and
$0.35/share to unaffiliated third party investors. These transactions generated
net proceeds to the Company of approximately $146,000. Under the terms of the
stock purchase agreements used in these transactions, the Company agreed to use
its reasonable best efforts to file with the SEC within 180 days of any
transaction, and to cause to be declared effective thereafter, a resale
registration statement which includes the shares purchased by such third party
investors.

________________________________________________________________________________

End of Financial Statements

Item 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

NeoGenomics, Inc. operates a medical testing laboratory and research
facility based in Fort Myers, Florida that is targeting the rapidly growing
genetic and molecular testing segment of the medical laboratory market. Our
common stock is listed on the NASDAQ Over-the-Counter Bulletin Board (the
"OTCBB") under the symbol "NGNM." Our business plan features two concurrent
objectives:

1. Development of a clinical laboratory to offer routine cytogenetics,
FISH, Flow Cytometry and molecular biology testing services; and

2. Development of a research laboratory to offer sponsored research
services to other companies that are seeking to develop genomic
products that will determine the genetic basis for female and neonatal
diseases, cancers and other forms of disease.

The vision of NeoGenomics is to merge a high-end genetic and molecular
testing laboratory with ongoing research activities to help bridge the gap
between clinical medicine and genomic research. We believe that this combination
could allow the Company to speed the process of discovery and innovation and
develop new advanced testing methods to identify the genetic and molecular
causes of disease. Over the last five years, advances in technology and genetic
research, including the complete sequencing of the human genome, have made
possible a whole new set of tools to diagnose and treat diseases. This has
opened up a vast opportunity for laboratory companies that are positioned to
address this growing market segment.

The medical testing laboratory market can be broken down into three primary
segments:

o clinical lab testing,
o anatomic pathology testing, and
o genetic/molecular testing.

Clinical labs typically are engaged in high volume, high automation tests
on blood and urine. Clinical lab tests often involve testing of a less urgent
nature, for example, cholesterol testing and testing associated with routine
physical exams. This type of testing yields relatively low average revenue per
test. Anatomic pathology ("AP") testing involves evaluation of tissue, as in
surgical pathology, or cells as in cytopathology. AP testing typically seeks to
answer the question: is it cancer? The most widely known AP tests are Pap
smears, skin biopsies, and tissue biopsies. AP tests are typically more labor
and technology intensive than clinical lab tests and thus typically have higher
average revenue per test than clinical lab tests.

We believe genetic/molecular testing is the newest and fastest growing
subset of the laboratory market. Genetic testing or "cytogenetics" involves
analyzing chromosomes taken from the nucleus of cells for abnormalities in a
process called karyotyping. A karyotype evaluates the entire 46 human
chromosomes by number, and banding patterns to identify abnormalities associated
with diseases. Examples of cytogenetics testing include bone marrow testing to
diagnose various types of leukemia and lymphoma, and amniocentesis testing of
pregnant women to diagnose genetic anomalies such as Down syndrome in a fetus.
Molecular biology involves testing for even more specific causes of diseases
based on very small alterations in cellular biology and DNA. Examples of common
molecular biology testing include screening for paternity, cystic fibrosis or
Tay-Sachs disease.

Both cytogenetics and molecular biology have become important and
highly-accurate diagnostic tools over the last five years. New tests are being
developed rapidly, thus this market segment is expanding rapidly.
Genetic/molecular testing requires very specialized equipment and credentialed
individuals (typically PhD level) to certify the results. The following chart
shows the differences between the genetic/molecular segment and other segments
of the medical laboratory testing market. Up until about five years ago, the

genetic/molecular segment was considered to be part of the Anatomic Pathology
segment, but given its rapid growth, many industry veterans now break
genetic/molecular testing out into its own segment.

Comparison of the Medical Testing Laboratory Market Segments:

Attributes Clinical Anatomic Pathology Genetic/Molecular
Testing Performed On Blood, Urine Tissue/cells Chromosomes/
molecules
High Low Low
Volume Low High - Pathologist Low
Physician Involvement Low High Low
Malpractice Insur. Required None None Cyto Geneticist/
Other Professionals Req. Molecular Geneticist
High Low-Moderate Moderate
Level of Automation Usually Not Yes Yes
Diagnostic in Nature Many Possible Primarily Cancer Rapidly Growing
Types of Diseases Tested $5 - $35/Test $25 - $500/Test $200 - $1,000/Test
Estimated Revenue/Test (1) $25 - $30 Billion $8.0 - $10.0 Billion $3.0 - $4.0 Billion
Estimated Size of Market
Estimated Annual Growth Rate of 4.0 -5.0% 6.0 - 7.0% 25.0 +%
Market

Source: Research Analysts and Company Estimates
(1) Estimated Revenue/Test is for the technical component of such tests and does
not include revenue for the professional component or interpretation of such
tests.

Our initial focus is on the oncology and advanced natology testing markets.
We target oncologists that perform bone marrow sampling and obstetricians and
perinatologists that perform amniocentesis testing and other natology screening
tests. Historically, our clients have been predominantly located in Florida.
Beginning in January 2005, based on the experience of our new President, we
began targeting large institutional clients in the Eastern United States. As we
grow, we anticipate offering additional tests that will allow us to more broadly
penetrate the oncology and advanced natology testing markets as well as broaden
our focus from genetic and molecular biology testing to more traditional types
of anatomic pathology testing that are complementary to our current test
offerings.

We compete in the marketplace based on the quality and accuracy of our test
results, our turn-around times and our ability to provide after-test support to
those physicians requesting consultation. We believe our average 3-5 day
turn-around times on oncology-related cytogenetics tests is among the best in
the industry and is helping to increase the usage patterns of cytogenetics tests
by our referring oncologists and hematopathologists. Based on anecdotal
information, we believe that most competing cytogenetics labs typically have
7-21 day turn-around times on average. Traditionally, longer turn-around times
for cytogenetics tests have resulted in fewer tests being ordered since there is
an increased chance that the test results will not be returned within an
acceptable diagnostic window when other adjunctive diagnostic test results are
available. We believe our turn-around times are resulting in our referring
physicians requesting more of our testing services in order to augment or
confirm other diagnostic tests, thereby giving us a significant competitive
advantage in marketing our services against those of other competing
laboratories.

We have an opportunity to add additional types of tests to our product
offering. We believe that by doing so we may be able to capture increases in our
testing volumes through our existing customer base as well as more easily
attract new customers via the ability to bundle our testing services more
appropriately to the needs of the market. For instance, initial testing for most
hematological cancers yields total revenue ranging from approximately $1,500 -
$2,500/case and is generally comprised of cytogenetic, fluorescence in-situ
hybridization (FISH), flow cytometry, and morphology testing. Until recently, we
only performed cytogenetic testing in-house, which averaged approximately $500
of revenue per case. In December 2004, we added FISH testing to our product

offering, and in February 2005, we began offering flow cytometry testing
services. We believe that with the addition of these two new testing platforms,
we will nearly double our average revenue per oncology case.

We believe this bundled offering approach could drive large increases in
our revenue and afford the Company significant synergies and efficiencies in our
operations, sales and marketing activities.

Avg. Rev/Test

Cytogenetics $400-$600
Fluorescence In Situ Hybridization (FISH) $200-$400
Flow cytometry
- Technical component $400-$600
- Professional component $100-$200
Morphology $400-$700
Total $1,500-$2,500

The cytogenetics and molecular biology testing markets in general can be
seasonal and the volumes of such tests tend to decline somewhat in the summer
months as referring physicians and their patients are vacationing. In southern
Florida, currently our primary referral market for lab tests, this seasonality
is further exacerbated because a meaningful percentage of the population returns
to homes in the Northern U.S. to avoid the hot summer months. We estimate that
our growth rates during the second and third quarter of each year will be
somewhat impacted by these seasonality factors.

The following discussion and analysis should be read in conjunction with
the financial statements for the three months ended March 31, 2005, included
with this Form 10-QSB. Readers are also referred to the cautionary statement,
which addresses forward-looking statements made by us.

Critical Accounting Policies

The preparation of financial statements in conformity with United States
generally accepted accounting principles requires our management to make
estimates and assumptions that affect the reported amount 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.

Our critical accounting policies are those where we have made difficult,
subjective or complex judgments in making estimates, and/or where these
estimates can significantly impact our financial results under different
assumptions and conditions. Our critical accounting policies are:

o Revenue Recognition
o Accounts Receivable

Revenue Recognition

Accounts Receivable

Results of Operations for the Three Months ended March 31, 2005 as Compared to
the Three Months ended March 31, 2004

During the three months ended March 31, 2005, our revenues increased
approximately 29% to $230,000 from $179,000 during the three months ending March
31, 2004, primarily as a result of attracting new customers to our services and
increasing the volume of services sold to existing customers. During the three
months ending March 31, 2005, our cost of revenue increased approximately 21% to
$177,000 from $146,000 during the three months ending March 31, 2004, primarily
as a result of additional costs associated with hiring more laboratory personnel
to support our increased testing volumes as well as increased costs as a result
of opening new lines of business. This resulted in a 62% increase in our gross
profit to approximately $53,000 for the three months ended March 31, 2005 from
approximately $33,000 during the three months ended March 31, 2004. This change
is primarily attributable to our increased revenues and testing volumes for the
period ended March 31, 2005 as compared to the three month period ended March
31, 2004. We believe our gross margin will continue to improve as we perform
more tests.

During the three months ended March 31, 2005, our selling, general and
administrative expenses increased by approximately 33% to approximately $241,000
from approximately $182,000 in the three months ended March 31, 2004. This
increase was primarily as a result of higher personnel and personnel-related
expenses associated with increased levels of staffing. Selling, general and
administrative expenses include all of our overhead and technology expenses as
well as the cost of our management and sales personnel. Interest expense for the
most recent quarter increased approximately 31% to approximately $27,000 from
approximately $21,000 for the three months ended March 31, 2004. Interest
expense is mainly comprised of interest payable on advances under our Credit
Facility from Aspen, which have increased as a result of our increased
borrowing. In connection with our new credit facility, discussed below in
"Liquidity and Capital Resources," we recorded $131,337 of a debt discount for
the issuance of warrants and we incurred $53,587 of financing costs. These
amounts will be amortized to interest expense over the 24 month period of the
new credit facility.

As a result of the foregoing, our net loss for the three months-ended March
31, 2005 increased approximately 27% to approximately $215,000 from
approximately $170,000 during the three months-ended March 31, 2004.

Liquidity and Capital Resources

During the three months ended March 31, 2005, our operating activities used
approximately $243,000 in cash. This amount primarily represented cash used to
pay general and administrative expenses associated with our operations and to fund
our working capital needs. We also spent approximately $12,000 on new equipment.
We were able to finance operations and equipment purchases primarily through the
sale of equity securities and net advances under our Credit Facility, which
together provided approximately $254,000 during the three months ended March 31,
2005. At March 31, 2005, we had cash and cash equivalents of approximately
$113,000.

During 2004, we sold 3,040,000 shares of our common stock in a series of
private placements at $0.25/share to unaffiliated third party investors. These
transactions generated net proceeds to the Company of approximately $740,000
after deducting certain transaction expenses. Under the terms of the stock

purchase agreements used in these transactions, the Company agreed to use its
reasonable best efforts to file with the SEC within 180 days of any transaction,
and to cause to be declared effective thereafter, a resale registration
statement which includes the shares purchased by such third party investors. As
of March 31, 2005, the Company had not filed such resale registration statement
with the SEC and is in breach of such provision under certain of the stock
purchase agreements executed with third party investors. There were no penalties
stipulated for failing to meet this registration deadline. The Company currently
anticipates filing such resale registration statement shortly.

On January 3, 2005, we issued 27,288 shares of common stock under the
Company's 2003 Equity Incentive Plan to two employees of the Company in
satisfaction of $6,822 of accrued, but unpaid vacation.

At the present time, we have limited cash resources. We do not anticipate
that we will generate significant cash flow from operating activities until late
2005. As a result, we anticipate that we will require approximately $200,000 to
$300,000 of additional working capital financing during the next twelve months
in order to meet our working capital requirements during this period. We
currently plan to finance our operations through borrowings under our Credit
Facility with Aspen. Advances under this Credit Facility are limited, at any
given time, based on a formula contained in the loan agreement. The Company may
not be eligible to obtain all of its working capital funding needs from Aspen or
another source. If the Company is unable to obtain such funding, the Company
will be required to curtail or discontinue operations.

Capital Expenditures

We currently forecast capital expenditures for the coming year in order to
execute on our business plan. The amount and timing of such capital expenditures
will be determined by the volume of business, but we currently anticipate that
we will need to purchase approximately $200,000 to $300,000 of additional
capital equipment during the next twelve months. We plan to fund these
expenditures through borrowings under our Credit Facility with Aspen and through
traditional lease financing from equipment lessors. We may not be eligible to
obtain all of our capital equipment funding needs from Aspen or another source.

If we are unable to obtain such funding, we will be required to curtail our
equipment purchases, which may have an impact on our ability to generate
revenues.

Staffing

Currently, we have nine full-time employees, one part-time employee and
four part-time consultants. During 2005, we plan to add additional laboratory
technologists and laboratory assistants to assist us in handling a greater
volume of tests and to perform sponsored research projects. In addition, we
intend to continue building our sales force in an effort to sustain our sales
growth, as well as add personnel in management, accounting, and administrative
functions. The number of such additional personnel and their salaries will be
determined by the volume of business we are generating and the availability of
adequate financial resources to pay the salaries of such personnel.

Item 3 - CONTROLS AND PROCEDURES

A) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out
an evaluation, under the supervision and with the participation of the Company's
Principal Executive Officer and Acting Principal Financial Officer of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. The Company's disclosure controls and procedures are designed to
provide a reasonable level of assurance of achieving the Company's disclosure
control objectives. The Company's Principal Executive Officer and Acting
Principal Financial Officer have concluded that the Company's disclosure
controls and procedures are, in fact, effective at this reasonable assurance
level as of the period covered. In addition, the Company reviewed its internal
controls, and there have been no significant changes in its internal controls or
in other factors that could significantly affect those controls subsequent to
the date of their last evaluation or from the end of the reporting period to the
date of this Form 10-QSB.

(B) Changes in Internal Controls Over Financial Reporting

In connection with the evaluation of the Company's internal controls during
the Company's first fiscal quarter ended March 31, 2005, the Company's Principal
Executive Officer and Acting Principal Financial Officer have determined that
there are no changes to the Company's internal controls over financial reporting
that has materially affected, or is reasonably likely to materially effect, the
Company's internal controls over financial reporting.

PART II. - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is currently a defendant in one lawsuit from a former employee
relating to compensation related claims. The Company does not believe this
lawsuit is material to its operations or financial results and intends to
vigorously pursue its defense of the matter.

Item 2. Changes in Securities

On January 3, 2005, we issued 27,288 shares of common stock under the
Company's 2003 Equity Incentive Plan to two employees of the Company in
satisfaction of $6,822 of accrued, but unpaid vacation.

On March 23, 2005, the Company entered into a Loan Agreement with Aspen
Select Healthcare, LP ("Aspen") to provide up to $1.5 million of indebtedness

pursuant to a credit facility (the "Credit Facility"). As part of the Credit
Facility transaction, the Company also issued to Aspen a five year Warrant to
purchase up to 2,500,000 shares of its common stock at an exercise price of
$0.50/share.

During the period January 1, 2005 to March 31, 2005, we sold 450,950 shares
of our common stock in a series of private placements at $0.30/share and
$0.35/share to unaffiliated third party investors. These transactions generated
net proceeds to the Company of approximately $146,000. These transactions
involved the issuance of unregistered stock to accredited investors in
transactions that we believed were exempt from registration under Rule 506
promulgated under the Securities Act of 1933.

Item 3. Defaults Upon Senior Securities

NONE

Item 4. Submission of Matters to a Vote of Securities Holders

NONE

Item 5. Other Information

NONE

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

The following exhibits are filed as part of this Form 10-QSB.

Exhibit
Number Description

Certification by Principal Executive Officer
31.1 pursuant to 15 U.S.C. Section 7241, as adopted Provided herewith
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002

31.2 Certification by Principal Financial Officer
pursuant to 15 U.S.C. Section 7241, as adopted Provided herewith
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002

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

(b) Reports on Form 8-K.

On March 30, 2005, we filed a report on Form 8-K announcing that the
Company had obtained a $1.5 million revolving credit facility with Aspen Select
Healthcare, LP. All of the related transaction documents were filed as
attachments to this Form 8-K.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

NEOGENOMICS, INC.

Date: April 29, 2005 /s/ Robert P. Gasparini
Robert P. Gasparini
President and
Principal Executive Officer

Form: 10QSB

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