COMMENT
1:
|
We
have reviewed your response to comment 1. Your response did not
address our comment in its entirety, thus the comment has been partially
reissued. Disclose in a comparative tabular format, the payor
mix concentrations and related aging of accounts
receivable. The aging schedule may be based on management's own
reporting criteria (i.e, unbilled, less than 30 days, 30 to 60 days etc.)
or some other reasonable presentation. At a minimum, the
disclosure should indicate the past due amounts and a breakdown by payor
classification (i.e., Medicare, Medicaid, Managed care and other, and
Self-pay). We would expect Self-pay to be separately classified
from any other grouping. If your billing system does not have
the capacity to provide an aging schedule of your receivables, disclose
that fact and clarify how this affects your ability to estimate your
allowance for bad debts.
|
RESPONSE:
|
In
response to the Staff’s comments above, the Company has revised its
disclosure in the Amended Annual Report on Form 10-K/A1 with respect to
accounts receivable to add the following paragraph and tables with the
required aging schedule by payer classifications for each of 2005 and
2006. Our revised disclosure and tabular presentation provides amounts
associated with Self-pay.
|
FY
2006
|
||||||||||||||||||||||||||||||||||||||||||||||||
Payer
Group
|
0-30
|
%
|
30-60
|
%
|
60-90
|
%
|
90-120
|
%
|
>120
|
%
|
Total
|
%
|
||||||||||||||||||||||||||||||||||||
Client
|
$
|
146,005
|
9
|
%
|
$
|
150,698
|
10
|
%
|
$
|
79,481
|
5
|
%
|
$
|
8,606
|
1
|
%
|
$
|
33,827
|
2
|
%
|
$
|
418,618
|
27
|
%
|
||||||||||||||||||||||||
Commercial
Insurance
|
133,333
|
8
|
%
|
105,464
|
7
|
%
|
58,026
|
4
|
%
|
48,847
|
3
|
%
|
35,248
|
2
|
%
|
380,919
|
24
|
%
|
||||||||||||||||||||||||||||||
Medicare
|
293,298
|
19
|
%
|
282,463
|
18
|
%
|
71,283
|
5
|
%
|
68,830
|
4
|
%
|
56,598
|
4
|
%
|
772,472
|
49
|
%
|
||||||||||||||||||||||||||||||
Medicaid
|
325
|
0
|
%
|
650
|
0
|
%
|
2,588
|
0
|
%
|
400
|
0
|
%
|
-
|
0
|
%
|
3,963
|
0
|
%
|
||||||||||||||||||||||||||||||
Self-Pay
|
135
|
0
|
%
|
2,058
|
0
|
%
|
723
|
0
|
%
|
-
|
0
|
%
|
-
|
0
|
%
|
2,916
|
0
|
%
|
||||||||||||||||||||||||||||||
Total
|
$
|
573,096
|
36
|
%
|
$
|
541,334
|
34
|
%
|
$
|
212,102
|
13
|
%
|
$
|
126,684
|
8
|
%
|
$
|
125,672
|
8
|
%
|
$
|
1,578,887
|
100
|
%
|
||||||||||||||||||||||||
FY
2005
|
||||||||||||||||||||||||||||||||||||||||||||||||
Payer
Group
|
0-30
|
%
|
30-60
|
%
|
60-90
|
%
|
90-120
|
%
|
>120
|
%
|
Total
|
%
|
||||||||||||||||||||||||||||||||||||
Client
|
$
|
93,494
|
16
|
%
|
$
|
91,922
|
16
|
%
|
$
|
27,619
|
5
|
%
|
$
|
15,799
|
3
|
%
|
$
|
14,508
|
3
|
%
|
$
|
243,341
|
43
|
%
|
||||||||||||||||||||||||
Commercial
Insurance
|
34,993
|
6
|
%
|
46,234
|
8
|
%
|
14,132
|
2
|
%
|
21,810
|
4
|
%
|
14,642
|
3
|
%
|
131,811
|
23
|
%
|
||||||||||||||||||||||||||||||
Medicare
|
115,484
|
20
|
%
|
26,905
|
5
|
%
|
16,668
|
3
|
%
|
10,618
|
2
|
%
|
15,777
|
3
|
%
|
185,452
|
32
|
%
|
||||||||||||||||||||||||||||||
Medicaid
|
1,183
|
0
|
%
|
354
|
0
|
%
|
950
|
0
|
%
|
1,624
|
0
|
%
|
288
|
0
|
%
|
4,399
|
1
|
%
|
||||||||||||||||||||||||||||||
Self-Pay
|
1,304
|
0
|
%
|
1,755
|
0
|
%
|
2,382
|
0
|
%
|
1,445
|
0
|
%
|
-
|
0
|
%
|
6,885
|
1
|
%
|
||||||||||||||||||||||||||||||
Total
|
$
|
246,457
|
43
|
%
|
$
|
167,170
|
29
|
%
|
$
|
61,750
|
11
|
%
|
$
|
51,296
|
9
|
%
|
$
|
45,215
|
8
|
%
|
$
|
571,888
|
100
|
%
|
COMMENT
2:
|
We
have reviewed your response to comment 2. It appears that you
are unable to utilize an implied volatility as the information obtained
was not applicable to the stock options issued, therefore you are looking
to historical volatility over a three month period prior to the grant date
of the options. This methodology does not appear consistent
with paragraph A32(a) of SFAS No. 123(R), which states that entities
should consider historical volatility over a period generally commensurate
with the expected or contractual term, as applicable, of the share
option. Under Question 2 Item 5 of SAB Topic 14D there may be
some instances in which, due to a Company’s particular business situations
a period of historical volatility data is not relevant. In
these instances, that period should be disregarded. We believe
that if a period of historical is disregarded, you should be prepared to
support your conclusion that your historical share price during that
previous period is not relevant to estimating expected volatility due to
one or more discrete and specific historical events and that similar
events are not expected to occur during the expected term of the share
option. Please advise or
revise.
|
RESPONSE:
|
Since
we experienced a change of control on April 15, 2003 and subsequently
changed our business focus, there is not sufficient historical trading
data available in our stock in order to have relevant historical
volatility over a period generally commensurate with the expected terms of
our options. As a result, in accordance with the guidance
outlined in the interpretive response to question 6 of Topic 14D of Staff
Accounting Bulletin 107, we identified a peer group of three
companies with similar characteristics as the Company, and used a blended
average of the historical volatilities of these peers over historical
periods which were commensurate with the expected term of each
option. We also incorporated NeoGenomics historical
volatility into this blended average for those options grants where we had
relevant historical data for
NeoGenomics.
|
In
addition, we engaged Lougheed & Company LLC, (a Tampa, Florida based
company that specializes, among other areas, in valuing stock-based
compensation awards and arrangements for publicly-traded companies) to
revalue our stock option grants using a trinomial lattice model instead of
the Black-Scholes model we had previously used. As a result,
our disclosure around stock-based compensation in our 2006 10-K/A1 has
been amended to reflect this change in methodology for calculating stock
based compensation. Exhibit A to this letter includes the new
language included in our 2006 Amended 10-K/A1 in the following two
sections: a) Critical Accounting Policies in MD&A and b)
NOTE E of the Financial Statement dealing with Stock-Based
Compensation.
|
COMMENT
3:
|
We
reviewed your response to comment 3, noting the Company utilized a market
price of $0.35 in determining the fair value of the
warrants. It appears the market price of your common stock on
March 23, 2005 was $0.58. Please advise or
revise.
|
RESPONSE:
|
The
measurement date for the subject warrants was, in fact, February 18, 2005
on which date the closing share-price was $0.35. Our policy is to record
our share-based payment arrangements on measurement dates established in
accounting standards. On February 18, 2005 the Company and the warrant
holder had agreed to all of the pertinent terms and conditions and
executed a binding agreement regarding such warrants. We have
revised the note to clarify the measurement date for these
warrants.
|
ITEM
6.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
|
2006
|
2005
|
|||||||
Expected
term (in years)
|
5.5
|
5.8
|
||||||
Risk-free
interest rate (%)
|
4.8
|
%
|
3.7
|
%
|
||||
Expected
volatility (%)
|
36
|
%
|
37
|
%
|
||||
Dividend
yield (%)
|
0.0
|
%
|
0.0
|
%
|
||||
Weighted
average fair value/share at grant date
|
$
|
0.23
|
$
|
0.08
|
2006
|
||||
Stock-based
compensation for employee stock options
|
$
|
63,730
|
||
Tax
effect on stock-based compensation
|
-
|
|||
Net
effect of stock-based compensation
|
$
|
63,730
|
||
Effect
on net loss per weighted average share
|
||||
Basic
|
$
|
0.00
|
||
Diluted
|
$
|
0.00
|
2005
|
||||
Net
loss, as reported
|
$
|
(997,160
|
)
|
|
Add:
Stock-based compensation expense included in reported net earnings, net of
tax
|
2,953
|
|||
Deduct:
Stock-based compensation expense determined under the fair value method,
net of tax
|
(57,162)
|
|||
Pro
forma, net loss
|
$
|
(1,051,369
|
)
|
|
Basic
and Diluted net loss per weighted average share
|
||||
As
reported
|
$
|
(0.04
|
)
|
|
Pro
forma
|
$
|
(0.05
|
)
|
Number
of Shares
|
Weighted
Average
Exercise
Price
|
|||||||
Outstanding
at December 31, 2004
|
882,329
|
$
|
0.16
|
|||||
Granted
|
1,442,235
|
0.27
|
||||||
Exercised
|
(42,235
|
)
|
0.00
|
|||||
Canceled
|
(547,329
|
)
|
0.11
|
|||||
Outstanding
at December 31, 2005
|
1,735,000
|
0.27
|
||||||
Granted
|
1,011,897
|
0.68
|
||||||
Exercised
|
(211,814
|
)
|
0.30
|
|||||
Canceled
|
(428,083
|
)
|
0.42
|
|||||
Outstanding
at December 31, 2006
|
2,107,000
|
0.43
|
||||||
Exercisable
at December 31, 2006
|
1,161,416
|
$
|
0.28
|
Options
Outstanding, Expected to Vest
|
Options
Exercisable
|
Ranges of Exercise
Prices
|
Number
Outstanding
|
Weighted
Average Remaining Contractual Life
|
Weighted
Average Exercise price
|
Number
Exercisable
|
Weighted
Average Remaining Life
|
Weighted
Average Exercise price
|
||||||||||||||||||||
0.00 – 0.30 | 1,287,000 | 7.6 | $ | 0.25 | 1,030,500 | 7,5 | $ | 0.25 | ||||||||||||||||||
0.31 – 0.46 | 179,250 | 8.6 | 0.35 | 82,166 | 8.5 | 0.35 | ||||||||||||||||||||
0.47 – 0.71 | 407,750 | 9.4 | 0.62 | 28,750 | 7.7 | 0.61 | ||||||||||||||||||||
0.72 – 1.08 | 85,000 | 9.7 | 0.99 | - | 0.0 | 0.00 | ||||||||||||||||||||
1.09 – 1.47 | 148,000 | 9.9 | 1.29 | 20,000 | 9.9 | 1.29 | ||||||||||||||||||||
2,107,000 | 8.3 | $ | 0.43 | 1,161,416 | 7.6 | $ | 0.28 |