NOTE C — ACQUISITIONS

On July 8, 2014, NeoGenomics, Laboratories entered into a membership interest purchase agreement with Path Logic, and Path Labs Holdings, LLC, a Delaware limited liability company (“PL Holdings”), whereby the Company acquired all of the outstanding membership interests in Path Logic from PL Holdings for a purchase price (in thousands) of $5,908 (the “Acquisition”). NeoGenomics Laboratories paid the purchase price using cash on hand and borrowings on its revolving credit facility.

The following table summarizes the final amounts for the fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

	Fair Value July 8, 2014
Current assets, including cash and cash equivalents	$	1,722
Property, plant and equipment		577
Identifiable intangible assets – customer relationships		1,930
Long term deposits		28
Goodwill		2,929
Total assets acquired		7,186
Current liabilities		(1,180	)
Long-term liabilities		(98	)
Net assets acquired	$	5,908

The above estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. The measurement period adjustments were complete as of December 31, 2014.

Acquired intangible assets of $1.93 million consist of customer relationships which are being amortized over thirteen years. We recorded approximately $37,000 and $111,000 of amortization expense for the three and nine months ended September 30, 2015, respectively.

The estimated amortization expense related to the acquired intangible assets for each of the five succeeding fiscal years and thereafter as of September 30, 2015 is as follows (in thousands):

Year Ending December 31,
Remainder of 2015	$	37
2016		148
2017		148
2018		148
2019		148
2020		148
Thereafter		970
Total	$	1,747

The goodwill arising from the Acquisition includes revenue synergies as a result of our existing customers and Path Logic’s customers having access to each other’s testing menus and capabilities. It also arises from the new product lines which Path Logic has added to the Company’s product portfolio. The total amount of goodwill which is expected to be deductible for tax purposes is approximately $3.7 million, which will be amortized on the Company’s tax returns over fifteen years.

The following unaudited pro forma information (in thousands) have been provided for illustrative purposes only and are not necessarily indicative of results that would have occurred had the Acquisition been in effect since January 1, 2013, nor are they necessarily indicative of future results.

	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
Revenue	$	23,405		$	67,289
Net income (loss)		(35	)		(450	)
Income (loss) per share
Basic	$	(0.00	)	$	(0.01	)
Diluted	$	(0.00	)	$	(0.01	)

The unaudited pro forma consolidated results above have been prepared by adjusting our historical results to include the Acquisition as if it occurred on January 1, 2013. These unaudited pro forma consolidated historical results were then adjusted for the following:

•

Adjustments to reflect the impact of $361,000 of transaction costs related to the 2014 acquisition as of January 1, 2013,

•

A net reduction in amortization expense due to decreased intangible assets recorded related to the acquisition,

•

a net reduction in interest expense as we did not acquire the existing debt from the acquisition, offset by our interest expense on net borrowings under capital leases and notes payable,

•

a net reduction in depreciation expense due to decreased fixed asset values recorded related to the acquisition,

•

a net reduction in general and administrative to remove the management fees from the private equity company and the Chief Executive Officer’s salary from the results,

•

a net reduction to adjust for the tax effect of the losses that were acquired which is based on an estimate of the state income taxes and federal alternate minimum tax which would not be required based on the losses for all periods.

As noted above, the unaudited pro forma results of operations do not purport to be indicative of the actual results that would have been achieved by the combined company for the periods presented or that may be achieved by the combined company in the future.