POS AM

      As filed with the Securities and Exchange Commission on April 3, 2006

                                                     Registration No. 333-121673
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              --------------------
                         Post-effective Amendment No. 1
                                       to

                                    FORM SB-2

                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                              --------------------

                              NEOPROBE CORPORATION
             (Exact name of registrant as specified in its charter)

      Delaware                       2835                     31-1080091
  (State or other             (Primary standard             (IRS employer
   jurisdiction            industrial classification     identification number)
 of incorporation                  number)
 or organization)

                              --------------------
                        425 Metro Place North, Suite 300
                             Dublin, Ohio 43017-1367
                                 (614) 793-7500
          (Address and telephone number of principal executive offices)
                              --------------------
                        425 Metro Place North, Suite 300
                             Dublin, Ohio 43017-1367
                    (Address of principal place of business)
                              --------------------
                  Brent L. Larson, Vice President, Finance and
                             Chief Financial Officer
                              Neoprobe Corporation
                        425 Metro Place North, Suite 300
                             Dublin, Ohio 43017-1367
                                 (614) 793-7500
            (Name, address and telephone number of agent for service)
                              --------------------

                                   Copies to:

                             William J. Kelly, Esq.
                       Porter, Wright, Morris & Arthur LLP
                              41 South High Street
                              Columbus, Ohio 43215
                          Telephone No. (614) 227-2000
                          Telecopier No. (614) 227-2100
                            wjkelly@porterwright.com

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.

If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]





If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]

If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.





                   SUBJECT TO COMPLETION, DATED APRIL 3, 2006.

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and we are not soliciting offers to buy these
securities in any state where the offer or sale is not permitted.

                                 FIRST AMENDED
                                   PROSPECTUS

                              NEOPROBE CORPORATION

                       32,350,000 Shares of Common Stock

This prospectus relates to the sale of up to 32,350,000 shares of our common
stock by persons who have purchased shares of our common stock or who may
purchase shares of our common stock through the conversion of debt or the
exercise of warrants as more fully described herein. The aforementioned persons
are sometimes referred to in this prospectus as the selling stockholders. The
prices at which the selling stockholders may sell the shares will be determined
by the prevailing market price for the shares or in negotiated transactions. We
will not receive proceeds from the sale of our shares by the selling
stockholders.

Our common stock is quoted on the Nasdaq Over-The-Counter Bulletin Board under
the symbol NEOP. On March 31, 2006, the last reported sale price for our common
stock as reported on the Nasdaq Over-The-Counter Bulletin Board was $0.29 per
share.

                              --------------------

Each selling stockholder may be considered an "underwriter" within the meaning
of the Securities Act of 1933, as amended.

THE SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU
SHOULD CONSIDER THE RISK FACTORS BEGINNING ON PAGE 4 BEFORE PURCHASING OUR
COMMON STOCK.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

                              --------------------

                The date of this prospectus is [April __, 2006.]





                               Table of Contents

                            ------------------------

Prospectus Summary........................................................... 2
Risk Factors................................................................. 4
Cautionary Note Regarding Forward-Looking Statements.........................14
Use of Proceeds..............................................................14
Market for Common Equity and Related Stockholder Matters.....................15
Management's Discussion and Analysis of Financial Condition
     and Results of Operations...............................................15
Description of Business......................................................27
Description of Property......................................................46
Our Management...............................................................46
Security Ownership of Certain Beneficial Owners and Management...............56
Certain Relationships and Related Transactions...............................57
Description of Capital Stock.................................................58
Acquisition of Common Stock by Selling Stockholders..........................61
Selling Stockholders.........................................................62
Plan of Distribution.........................................................64
Legal Opinion................................................................65
Experts......................................................................65
Additional Information.......................................................66
Index to Financial Statements................................................F-1


Unless otherwise specified, the information in this prospectus is set forth as
of March 15, 2006, and we anticipate that changes in our affairs will occur
after such date. We have not authorized any person to give any information or to
make any representations, other than as contained in this prospectus, in
connection with the offer contained in this prospectus. If any person gives you
any information or makes representations in connection with this offer, do not
rely on it as information we have authorized. This prospectus is not an offer to
sell our common stock in any state or other jurisdiction to any person to whom
it is unlawful to make such offer.


                                       1





                               PROSPECTUS SUMMARY

The following summary highlights selected information from this prospectus and
may not contain all the information that is important to you. To understand our
business and this offering fully, you should read this entire prospectus
carefully, including the financial statements and the related notes beginning on
page F-1. When we refer in this prospectus to the "company," "we," "us," and
"our," we mean Neoprobe Corporation, a Delaware corporation, together with our
subsidiaries. This prospectus contains forward-looking statements and
information relating to Neoprobe Corporation. See Cautionary Note Regarding
Forward Looking Statements on page 14.

Our Company

Neoprobe Corporation (Neoprobe, the company or we) is a biomedical company that
develops and commercializes innovative products that enhance patient care and
improve patient outcome by meeting the critical intraoperative diagnostic
information needs of physicians and therapeutic treatment needs of patients. We
were originally incorporated in Ohio in 1983 and reincorporated in Delaware in
1988. Our executive offices are located at 425 Metro Place North, Suite 300,
Dublin, Ohio 43017. Our telephone number is (614) 793-7500.

From our inception through 1998, we devoted substantially all of our efforts and
resources to the research and clinical development of radiopharmaceutical and
medical device technologies related to the intraoperative diagnosis and
treatment of cancers, including our proprietary radioimmunoguided surgery
(RIGS(R)) technology. At that point, an evaluation of the status of the
regulatory pathway for our RIGS products coupled with our limited financial
resources caused us to suspend development activities related to our
radiopharmaceutical business and to retrench our organization to focus on our
medical device business. After achieving profitability in 2000 following this
retrenchment, we set out on a strategy to expand our medical device portfolio
outside the cancer field. In December 2001, we took a major step in executing
this strategy with the acquisition of Biosonix Ltd., a private Israeli company
limited by shares, which we subsequently renamed Cardiosonix Ltd. (Cardiosonix).

Cardiosonix is commercializing the Quantix(R) line of blood flow measurement
devices for a variety of diagnostic and surgical applications in the cardiac and
vascular management arena. The decision to expand beyond our product focus on
oncology was based on our belief that the Cardiosonix products would diversify
the markets we address. We believe the Cardiosonix product line has significant
market potential and a path of market adoption similar to our gamma detection
devices, but one that also has significant operational synergies in development,
regulation and manufacturing to that of our gamma devices.

In addition, although our strategic focus expanded to include cardiac and
vascular blood flow management, we continued to look for other avenues to
reinvigorate our radiopharmaceutical development. During 2004, our efforts
resulted in a number of positive events that caused us to take steps to
re-activate development of our radiopharmaceutical and therapeutic initiatives.
As a result, we now have two of our radiopharmaceutical products, LymphoseekTM
and RIGScan(R) CR, on the verge of entering Phase II and Phase III, and Phase
III clinical trials, respectively. In early 2005, we also formed a new
subsidiary, Cira Biosciences, Inc. (Cira Bio), to evaluate the current market
opportunities for another technology platform, activated cellular therapy (ACT).
Our unique virtual business model combines revenue generation from medical
devices with the capital infusions we received in late 2004 to allow us to fund
Lymphoseek development while we look for a development partner to assist us in
the final clinical and commercial development for RIGScan CR and to evaluate the
commercial opportunities for ACT.

The Offering

During April 2003, we completed a bridge loan agreement with our President and
CEO, David Bupp. Under the terms of the agreement, Mr. Bupp advanced us
$250,000. In consideration for the loan, we issued a note to Mr. Bupp in the
principal amount of $250,000. The note was secured by general assets of the
company, excluding accounts receivable. In addition, we issued Mr. Bupp 375,000
warrants to purchase our common stock at an exercise price of $0.13 per share,
expiring in April 2008. The note bore interest at 8.5% per annum, payable
monthly, and was originally due on June 30, 2004. On March 8, 2004, at the
request of the Board of Directors, Mr. Bupp agreed to extend the due date of the
note from June 30, 2004 to June 30, 2005. In exchange for extending the due date
of the note, we issued Mr. Bupp an additional 375,000 warrants to purchase our
common stock at an exercise price of $0.50 per share, expiring in March 2009. On
December 13, 2004, we repaid the balance of the note to Mr. Bupp. The shares
covered by this prospectus include the 375,000 shares of common stock issuable
pursuant to the warrants granted to Mr. Bupp in March 2004.


                                       2





In December 2004, we completed a private placement of Convertible Promissory
Notes in an aggregate principal amount of $8.1 million with Biomedical Value
Fund, L.P., Biomedical Offshore Value Fund, Ltd. and David C. Bupp (our
President and CEO). Biomedical Value Fund, L.P. and Biomedical Offshore Value
Fund, Ltd. are funds managed by Great Point Partners, LLC. The notes bear
interest at 8% per annum and are freely convertible into shares of our common
stock at a price of $0.40 per share. Neoprobe may force conversion of the notes
prior to their stated maturity under certain circumstances. The conversion price
represents the ten-day volume weighted average trading price of our common stock
through December 10, 2004. As part of this transaction, we issued the investors
10,125,000 warrants to purchase our common stock at an exercise price of $0.46,
expiring in December 2009. The shares covered by this prospectus include
20,250,000 shares of common stock issuable upon conversion of the notes, and the
10,125,000 shares of our common stock issuable upon the exercise of the
warrants.

During 2004 we engaged the services of two investment banking firms to assist us
in raising capital, Roth Capital Partners, LLC (Roth) and Laidlaw & Co.
(Laidlaw). In exchange for the services of Roth, we agreed to pay $320,000 in
cash, plus warrants to purchase 800,000 shares of our common stock. The warrants
have an exercise price of $0.46 per share. This prospectus covers the resale of
the shares of common stock issuable upon the exercise of warrants.

In exchange for the services of Laidlaw, we agreed to pay $320,000 in cash, plus
warrants to purchase 800,000 shares of our common stock. The warrants have an
exercise price of $0.46 per share. This prospectus covers the resale of the
shares of common stock issuable upon the exercise of warrants by the
underwriters which received warrants to purchase shares of our common stock as a
result of their participation in the offering on behalf of Laidlaw.

With the exception of the warrants granted to Mr. Bupp in March 2004, all
warrants issued in connection with this transaction expire in December 2009.
This prospectus covers the resale of shares of common stock issuable upon
conversion of the convertible promissory notes, warrants issued to Mr. Bupp in
exchange for extending the due date of the note executed in his favor in
connection with the April 2003 bridge loan agreement, and the shares of common
stock issuable pursuant to the warrants granted to the parties to the Securities
Purchase Agreement and the placement agents and their assignees.

An investment in our common stock is highly speculative and involves a high
degree of risk. See Risk Factors beginning on page 4.


                                       3






                                  RISK FACTORS

An investment in our common stock is highly speculative, involves a high degree
of risk, and should be made only by investors who can afford a complete loss.
You should carefully consider the following risk factors, together with the
other information in this prospectus, including our financial statements and the
related notes, before you decide to buy our common stock. Our most significant
risks and uncertainties are described below; however, they are not the only
risks we face. If any of the following risks actually occur, our business,
financial condition, or results of operations could be materially adversely
affected, the trading of our common stock could decline, and you may lose all or
part of your investment therein.

We have suffered significant operating losses for several years in our history
and we may not be able to again achieve profitability.

We had an accumulated deficit of approximately $131 million as of December 31,
2005. Although we were profitable in 2000 and in 2001, we incurred substantial
losses in the years prior to that, and in 2002 through 2005. The deficit
resulted because we expended more money in the course of researching, developing
and enhancing our technology and products and establishing our marketing and
administrative organizations than we generated in revenues. We expect to
continue to incur significant operating expenses in the foreseeable future,
primarily related to the completion of development and commercialization of the
Cardiosonix product line but also potentially related to RIGS and Lymphoseek. As
a result, we are sustaining substantial operating and net losses, and it is
possible that we will never be able to sustain or develop the revenue levels
necessary to again attain profitability.

Our products and product candidates may not achieve the broad market acceptance
they need in order to be a commercial success.

Widespread use of our gamma detection devices is currently limited to a surgical
procedure (ILM) used in the treatment and diagnosis of two primary types of
cancer: melanoma and breast cancer. The success of our gamma detection devices
greatly depends on the medical community's ongoing adoption of ILM, and on our
devices for use in ILM, as a reliable, safe and cost effective alternative to
current treatments and procedures. The adoption rate for ILM appears to be
leveling off and may not meet our growth expectations. Although we continue to
believe that ILM has significant advantages over other currently competing
procedures, broad-based clinical adoption of ILM will likely not occur until
after the completion of ongoing international trials related to breast cancer.
Even if the results of these trials are positive, we cannot assure you that ILM
will attain rapid and widespread acceptance. Our efforts and those of our
marketing and distribution partners may not result in significant demand for our
products, and the current demand for our products may decline.

Our future success now also greatly depends on the success of the Cardiosonix
product line. Cardiosonix' products are just beginning to be marketed
commercially. The market for these products is in an early stage of development
and may never fully develop as we expect. The long-term commercial success of
the Cardiosonix product line will require widespread acceptance of our products
as safe, efficient and cost-effective. Widespread acceptance would represent a
significant change in current medical practice patterns. Other cardiac
monitoring procedures, such as pulmonary artery catheterization, are generally
accepted in the medical community and have a long standard of use. It is
possible that the Cardiosonix product line will never achieve the broad market
acceptance necessary to become a commercial success.

Our radiopharmaceutical product candidates are still in the process of
development, and even if we are successful in commercializing them, we cannot
assure you that they will obtain significant market acceptance.


                                       4





Clinical trials for our radiopharmaceutical product candidates will be lengthy
and expensive and their outcome is uncertain.

Before obtaining regulatory approval for the commercial sale of any product
candidates, we must demonstrate through preclinical testing and clinical trials
that our product candidates are safe and effective for use in humans. Conducting
clinical trials is a time consuming, expensive and uncertain process and may
take years to complete. Our most advanced product candidates, Lymphoseek and
RIGScan CR are preparing to enter the Phase III stage of clinical trials.
Historically, the results from preclinical testing and early clinical trials
have often not been predictive of results obtained in later clinical trials.
Frequently, drugs that have shown promising results in preclinical or early
clinical trials subsequently fail to establish sufficient safety and efficacy
data necessary to obtain regulatory approval. At any time during the clinical
trials, we, our collaborative partners or FDA might delay or halt any clinical
trials for our product candidates for various reasons, including:

      o     ineffectiveness of the product candidate;
      o     discovery of unacceptable toxicities or side effects;
      o     development of disease resistance or other physiological factors;
      o     delays in patient enrollment; or
      o     other reasons that are internal to the businesses of our potential
            collaborative partners, which reasons they may not share with us.

The results of the clinical trials may fail to demonstrate the safety or
effectiveness of our product candidates to the extent necessary to obtain
regulatory approval or such that commercialization of our product candidates is
worthwhile. Any failure or substantial delay in successfully completing clinical
trials and obtaining regulatory approval for our product candidates could
severely harm our business.

If we fail to obtain collaborative partners, or those we obtain fail to perform
their obligations or discontinue clinical trials for particular product
candidates, our ability to develop and market potential products could be
severely limited.

Our strategy for the development and commercialization of our product candidates
depends, in large part, upon the formation of collaborative arrangements.
Collaborations may allow us to:

      o     generate cash flow and revenue;
      o     offset some of the costs associated with our internal research and
            development, preclinical testing, clinical trials and manufacturing;
      o     seek and obtain regulatory approvals faster than we could on our
            own; and,
      o     successfully commercialize existing and future product candidates.

We do not currently have collaborative agreements covering Lymphoseek or RIGScan
CR. We cannot assure you that we will be successful in securing collaborative
partners, or that we will be able to negotiate acceptable terms for such
arrangements. The development, regulatory approval and commercialization of our
product candidates will depend substantially on the efforts of collaborative
partners, and if we fail to secure or maintain successful collaborative
arrangements, or if our partners fail to perform their obligations, our
development, regulatory, manufacturing and marketing activities may be delayed,
scaled back or suspended.

We rely on third parties for the worldwide marketing and distribution of our
gamma detection and blood flow measurement devices, who may not be successful in
selling our products.

We currently distribute our gamma detection devices in most global markets
through two partners who are solely responsible for marketing and distributing
these products. The partners assume direct responsibility for business risks
related to credit, currency exchange, foreign tax laws or tariff and trade
regulation. Our blood flow products are marketed and sold in the U.S. and a
number of foreign markets through other distribution partners specific to those
markets. Further, our Quantix line of blood flow products has only recently been
introduced, and we have only limited experience in marketing or selling these
devices. While we believe that our distribution partners intend to continue to
aggressively market our products, we cannot assure you that the distribution
partners will succeed in marketing our products on a global basis. We may not be
able to maintain satisfactory arrangements with our marketing and distribution
partners, who may not devote adequate resources to selling our products. If this
happens, we may not be able to successfully market our products, which would
decrease our revenues.


                                       5





Our radiopharmaceutical product candidates are subject to extensive government
regulations and we may not be able to obtain necessary regulatory approvals.

We may not receive the regulatory approvals necessary to commercialize our
Lymphoseek and RIGScan product candidates, which could cause our business to be
severely harmed. Our product candidates are subject to extensive and rigorous
government regulation. FDA regulates, among other things, the development,
testing, manufacture, safety, record-keeping, labeling, storage, approval,
advertising, promotion, sale and distribution of pharmaceutical products. If our
potential products are marketed abroad, they will also be subject to extensive
regulation by foreign governments. None of our product candidates has been
approved for sale in the United States or any foreign market. The regulatory
review and approval process, which includes preclinical studies and clinical
trials of each product candidate, is lengthy, complex, expensive and uncertain.
Securing FDA approval requires the submission of extensive preclinical and
clinical data and supporting information to FDA for each indication to establish
the product candidate's safety and efficacy. Data obtained from preclinical and
clinical trials are susceptible to varying interpretation, which may delay,
limit or prevent regulatory approval. The approval process may take many years
to complete and may involve ongoing requirements for post-marketing studies. In
light of the limited regulatory history of monoclonal antibody-based
therapeutics, regulatory approvals for our products may not be obtained without
lengthy delays, if at all. Any FDA or other regulatory approvals of our product
candidates, once obtained, may be withdrawn. The effect of government regulation
may be to:

      o     delay marketing of potential products for a considerable period of
            time;
      o     limit the indicated uses for which potential products may be
            marketed;
      o     impose costly requirements on our activities; and
      o     provide competitive advantage to other pharmaceutical and
            biotechnology companies.

We may encounter delays or rejections in the regulatory approval process because
of additional government regulation from future legislation or administrative
action or changes in FDA policy during the period of product development,
clinical trials and FDA regulatory review. Failure to comply with applicable FDA
or other applicable regulatory requirements may result in criminal prosecution,
civil penalties, recall or seizure of products, total or partial suspension of
production or injunction, as well as other regulatory action against our product
candidates or us. Outside the United States, our ability to market a product is
contingent upon receiving clearances from the appropriate regulatory
authorities. This foreign regulatory approval process includes similar risks to
those associated with FDA approval process.

Our radiopharmaceutical product candidates will remain subject to ongoing
regulatory review even if they receive marketing approval. If we fail to comply
with continuing regulations, we could lose these approvals and the sale of our
products could be suspended.

Even if we receive regulatory approval to market a particular product candidate,
the approval could be conditioned on us conducting additional costly
post-approval studies or could limit the indicated uses included in our
labeling. Moreover, the product may later cause adverse effects that limit or
prevent its widespread use, force us to withdraw it from the market or impede or
delay our ability to obtain regulatory approvals in additional countries. In
addition, the manufacturer of the product and its facilities will continue to be
subject to FDA review and periodic inspections to ensure adherence to applicable
regulations. After receiving marketing approval, the manufacturing, labeling,
packaging, adverse event reporting, storage, advertising, promotion and record
keeping related to the product will remain subject to extensive regulatory
requirements. We may be slow to adapt, or we may never adapt, to changes in
existing regulatory requirements or adoption of new regulatory requirements.


                                       6





If we fail to comply with the regulatory requirements of FDA and other
applicable U.S. and foreign regulatory authorities or previously unknown
problems with our products, manufacturers or manufacturing processes are
discovered, we could be subject to administrative or judicially imposed
sanctions, including:

      o     restrictions on the products, manufacturers or manufacturing
            processes;
      o     warning letters;
      o     civil or criminal penalties;
      o     fines;
      o     injunctions;
      o     product seizures or detentions;
      o     import bans;
      o     voluntary or mandatory product recalls and publicity requirements;
      o     suspension or withdrawal of regulatory approvals;
      o     total or partial suspension of production; and
      o     refusal to approve pending applications for marketing approval of
            new drugs or supplements to approved applications.

Our existing products are highly regulated and we could face severe problems if
we do not comply with all regulatory requirements in the global markets in which
these products are sold.

FDA regulates our gamma detection and blood flow products in the United States.
Foreign countries also subject these products to varying government regulations.
In addition, these regulatory authorities may impose limitations on the use of
our products. FDA enforcement policy strictly prohibits the marketing of FDA
cleared medical devices for unapproved uses. Within the European Union, our
products are required to display the CE Mark in order to be sold. We have
obtained FDA clearance to market and European certification to display the CE
Mark on our current line of gamma detection systems and on two blood flow
products, the Quantix/ND and Quantix/OR. We may not be able to obtain clearance
to market for any new products in a timely manner, or at all. Failure to comply
with these and other current and emerging regulatory requirements in the global
markets in which our products are sold could result in, among other things,
warning letters, fines, injunctions, civil penalties, recall or seizure of
products, total or partial suspension of production, refusal of the government
to grant pre-market clearance for devices, withdrawal of clearances, and
criminal prosecution.

We rely on third parties to manufacture our products and our business will
suffer if they do not perform.

We rely on independent contract manufacturers for the manufacture of our current
line of gamma detection systems and for our Quantix line of blood flow
monitoring products. Our business will suffer if our contract manufacturers have
production delays or quality problems. Furthermore, medical device manufacturers
are subject to the QSR of FDA, international quality standards, and other
regulatory requirements. If our contractors do not operate in accordance with
regulatory requirements and quality standards, our business will suffer. We use
or rely on components and services used in our devices that are provided by sole
source suppliers. The qualification of additional or replacement vendors is time
consuming and costly. If a sole source supplier has significant problems
supplying our products, our sales and revenues will be hurt until we find a new
source of supply. In addition, our distribution agreement with EES for gamma
devices contains failure to supply provisions, which, if triggered, could have a
significant negative impact on our business.

We may be unable to establish the pharmaceutical manufacturing capabilities
necessary to develop and commercialize our potential products.

We do not have our own manufacturing facility for the manufacture of the
radiopharmaceutical compounds necessary for clinical testing or commercial sale.
We intend to rely in part on third-party contract manufacturers to produce
sufficiently large quantities of drug materials that are and will be needed for
clinical trials and commercialization of our potential products. Third-party
manufacturers may not be able to meet our needs with respect to timing, quantity
or quality of materials. If we are unable to contract for a sufficient supply of
needed materials on acceptable terms, or if we should encounter delays or
difficulties in our relationships with manufacturers, our clinical trials may be
delayed, thereby delaying the submission of product candidates for regulatory
approval and the market introduction and subsequent commercialization of our
potential products. Any such delays may lower our revenues and potential
profitability.


                                       7





We may develop our manufacturing capacity in part by expanding our current
facilities or building new facilities. Either of these activities would require
substantial additional funds and we would need to hire and train significant
numbers of employees to staff these facilities. We may not be able to develop
manufacturing facilities that are sufficient to produce drug materials for
clinical trials or commercial use. We and any third-party manufacturers that we
may use must continually adhere to current Good Manufacturing Practices
regulations enforced by FDA through its facilities inspection program. If our
facilities or the facilities of third-party manufacturers cannot pass a
pre-approval plant inspection, FDA will not grant approval to our product
candidates. In complying with these regulations and foreign regulatory
requirements, we and any of our third-party manufacturers will be obligated to
expend time, money and effort on production, record-keeping and quality control
to assure that our potential products meet applicable specifications and other
requirements. If we or any third-party manufacturer with whom we may contract
fail to maintain regulatory compliance, we or the third party may be subject to
fines and/or manufacturing operations may be suspended.

Unfavorable pricing regulations, third-party reimbursement practices or
healthcare reform initiatives applicable to our products and product candidates
could limit our potential product revenue.

The regulations governing drug pricing and reimbursement vary widely from
country to country. Some countries require approval of the sale price of a drug
before it can be marketed and, in many of these countries, the pricing review
period begins only after approval is granted. In some countries, prescription
pharmaceutical pricing remains subject to continuing governmental control even
after initial approval is granted. Although we monitor these regulations, our
product candidates are currently in the development stage and we will not be
able to assess the impact of price regulations for at least several years. As a
result, we may obtain regulatory approval for a product in a particular country,
but then be subject to price regulations that may delay the commercial launch of
the product and may negatively impact the revenues we are able to derive from
sales in that country.

The healthcare industry is undergoing fundamental changes resulting from
political, economic and regulatory influences. In the United States,
comprehensive programs have been proposed that seek to increase access to
healthcare for the uninsured, control the escalation of healthcare expenditures
within the economy and use healthcare reimbursement policies to balance the
federal budget.

We expect that Congress and state legislatures will continue to review and
assess healthcare proposals, and public debate of these issues will likely
continue. We cannot predict which, if any, of such reform proposals will be
adopted and when they might be adopted. Other countries also are considering
healthcare reform. Significant changes in healthcare systems could have a
substantial impact on the manner in which we conduct our business and could
require us to revise our strategies.

We may have difficulty raising additional capital, which could deprive us of
necessary resources.

We expect to continue to devote significant capital resources to fund research
and development and to maintain existing and secure new manufacturing capacity.
In order to support the initiatives envisioned in our business plan, we may need
to raise additional funds through the sale of assets, public or private debt or
equity financing, collaborative relationships or other arrangements. Our ability
to raise additional financing depends on many factors beyond our control,
including the state of capital markets, the market price of our common stock and
the development or prospects for development of competitive technology by
others. Because our common stock is not listed on a major stock market, many
investors may not be willing or allowed to purchase it or may demand steep
discounts. Sufficient additional financing may not be available to us or may be
available only on terms that would result in further dilution to the current
owners of our common stock. If we are unable to raise additional funds when we
need them, we may have to severely curtail our operations.


                                       8



The sale of the shares of common stock acquired in private placements could
cause the price of our common stock to decline.

During 2003 and 2004, we completed several financings in which we issued common
stock, convertible notes, warrants and other securities convertible into common
stock to certain private investors and as required under the terms of those
transactions, we filed registration statements with the United States Securities
and Exchange Commission (SEC) under which the investors may resell common stock
acquired in these transactions, as well as common stock acquired on the exercise
of the warrants and convertible securities held by them, to the public.

The selling stockholders under these registration statements may sell none, some
or all of the shares of common stock acquired from us, as well as common stock
acquired on the exercise of the warrants and convertible securities held by
them. We have no way of knowing whether or when the selling stockholders will
sell the shares covered by these registration statements. Depending upon market
liquidity at the time, a sale of shares covered by these registration statements
at any given time could cause the trading price of our common stock to decline.
The sale of a substantial number of shares of our common stock under these
registration statements, or anticipation of such sales, could make it more
difficult for us to sell equity or equity-related securities in the future at a
time and at a price that we might otherwise wish to effect sales.

We may lose out to larger and better-established competitors.

The medical device and biotechnology industries are intensely competitive. Some
of our competitors have significantly greater financial, technical,
manufacturing, marketing and distribution resources as well as greater
experience in the medical device industry than we have. The particular medical
conditions our product lines address can also be addressed by other medical
devices, procedures or drugs. Many of these alternatives are widely accepted by
physicians and have a long history of use. Physicians may use our competitors'
products and/or our products may not be competitive with other technologies. If
these things happen, our sales and revenues will decline. In addition, our
current and potential competitors may establish cooperative relationships with
large medical equipment companies to gain access to greater research and
development or marketing resources. Competition may result in price reductions,
reduced gross margins and loss of market share.

Our products may be displaced by newer technology.

The medical device and biotechnology industries are undergoing rapid and
significant technological change. Third parties may succeed in developing or
marketing technologies and products that are more effective than those developed
or marketed by us, or that would make our technology and products obsolete or
non-competitive. Additionally, researchers could develop new surgical procedures
and medications that replace or reduce the importance of the procedures that use
our products. Accordingly, our success will depend, in part, on our ability to
respond quickly to medical and technological changes through the development and
introduction of new products. We may not have the resources to do this. If our
products become obsolete and our efforts to develop new products do not result
in any commercially successful products, our sales and revenues will decline.

We may not have sufficient legal protection against infringement or loss of our
intellectual property, and we may lose rights to our licensed intellectual
property if diligence requirements are not met.

Our success depends, in part, on our ability to secure and maintain patent
protection, to preserve our trade secrets, and to operate without infringing on
the patents of third parties. While we seek to protect our proprietary positions
by filing United States and foreign patent applications for our important
inventions and improvements, domestic and foreign patent offices may not issue
these patents. Third parties may challenge, invalidate, or circumvent our
patents or patent applications in the future. Competitors, many of which have
significantly more resources than we have and have made substantial investments
in competing technologies, may apply for and obtain patents that will prevent,
limit, or interfere with our ability to make, use, or sell our products either
in the United States or abroad.


                                       9





In the United States, patent applications are secret until patents issue, and in
foreign countries, patent applications are secret for a time after filing.
Publications of discoveries tend to significantly lag the actual discoveries and
the filing of related patent applications. Third parties may have already filed
applications for patents for products or processes that will make our products
obsolete or will limit our patents or invalidate our patent applications.

We typically require our employees, consultants, advisers and suppliers to
execute confidentiality and assignment of invention agreements in connection
with their employment, consulting, advisory, or supply relationships with us.
They may breach these agreements and we may not obtain an adequate remedy for
breach. Further, third parties may gain access to our trade secrets or
independently develop or acquire the same or equivalent information.

Agencies of the United States government conducted some of the research
activities that led to the development of antibody technology that some of our
proposed antibody-based surgical cancer detection products use. When the United
States government participates in research activities, it retains rights that
include the right to use the technology for governmental purposes under a
royalty-free license, as well as rights to use and disclose technical data that
could preclude us from asserting trade secret rights in that data and software.

The patents underlying our radiopharmaceutical products and ACT technology are
exclusively licensed to us by third parties, and the relevant license agreements
require us to use diligence in the development and commercialization of products
using the licensed patents. Our failure to meet the diligence requirements in
any license agreement may result in our loss of some or all of our license
rights to the patents licensed thereunder.

The government grants Cardiosonix has received for research and development
expenditures restrict our ability to manufacture blood flow monitoring products
and transfer technologies outside of Israel and require us to satisfy specified
conditions. If we fail to satisfy these conditions, we may be required to refund
grants previously received together with interest and penalties, and may be
subject to criminal charges.

Cardiosonix received grants from the government of Israel through the Office of
the Chief Scientist (OCS) of the Ministry of Industry and Trade for the
financing of a portion of its research and development expenditures associated
with our blood flow monitoring products. From 1998 to 2001, Cardiosonix received
grants totaling $775,000 from the OCS. The terms of the OCS grants may affect
our efforts to transfer manufacturing of products developed using these grants
outside of Israel without special approvals. In January 2006, the OCS consented
to the transfer of manufacturing as long as Neoprobe complies with the terms of
the OCS statutes under Israeli law. As long as we maintain at least 10% Israeli
content in our blood flow devices, we will pay a royalty rate of 4% on sales of
applicable blood flow devices and must repay the OCS a total of $1.2 million in
royalties. However, should the amount of Israeli content of our blood flow
device products decrease below 10%, the royalty rate could increase to 5% and
the total royalty payments due could increase to $2.3 million. This may impair
our ability to effectively outsource manufacturing or engage in similar
arrangements for those products or technologies. In addition, if we fail to
comply with any of the conditions imposed by the OCS, we may be required to
refund any grants previously received together with interest and penalties, and
may be subject to criminal charges. In recent years, the government of Israel
has accelerated the rate of repayment of OCS grants related to other grantees
and may further accelerate them in the future.

We could be damaged by product liability claims.

Our products are used or intended to be used in various clinical or surgical
procedures. If one of our products malfunctions or a physician misuses it and
injury results to a patient or operator, the injured party could assert a
product liability claim against our company. We currently have product liability
insurance with a $10 million per occurrence limit, which we believe is adequate
for our current activities. However, we may not be able to continue to obtain
insurance at a reasonable cost. Furthermore, insurance may not be sufficient to
cover all of the liabilities resulting from a product liability claim, and we
might not have sufficient funds available to pay any claims over the limits of
our insurance. Because personal injury claims based on product liability in a
medical setting may be very large, an underinsured or an uninsured claim could
financially damage our company.


                                       10





We may have trouble attracting and retaining qualified personnel and our
business may suffer if we do not.

Our business has experienced developments the past two years that have resulted
in several significant changes in our strategy and business plan, including the
shifting of resources to support our current product initiatives and downsizings
to what we consider to be the minimal support structure necessary to operate a
publicly traded company. Our management will need to remain flexible to support
our business model over the next few years. However, losing members of the
Neoprobe management team could have an adverse effect on our operations. Our
success depends on our ability to attract and retain technical and management
personnel with expertise and experience in the medical device business. The
competition for qualified personnel in the medical device industry is intense
and we may not be successful in hiring or retaining the requisite personnel. If
we are unable to attract and retain qualified technical and management
personnel, we will suffer diminished chances of future success.

Our secured indebtedness imposes significant restrictions on us, and a default
could cause us to cease operations.

All of our material assets, except the intellectual property associated with our
Lymphoseek, RIGS and ACT products under development, have been pledged as
collateral for the $8.1 million in principal amount of our 8% Series A
Convertible Notes due December 12, 2008 (the Notes). In addition to the security
interest in our assets, the Notes carry substantial covenants that impose
significant requirements on us, including, among others, requirements that:

      o     we pay all principal, interest and other charges on the Notes when
            due;
      o     we use the proceeds from the sale of the Notes only for permitted
            purposes, such as Lymphoseek development and general corporate
            purposes;
      o     we nominate and recommend for election as a director a person
            designated by the holders of the Notes;
      o     we keep reserved out of our authorized shares of common stock
            sufficient shares to satisfy our obligation to issue shares on
            conversion of the Notes and the exercise of the warrants issued in
            connection with the sale of the Notes;
      o     we achieve annual revenues on a consolidated basis of at least $5.4
            million in 2005, $6.5 million in 2006, and $9.0 million in each year
            thereafter;
      o     we maintain minimum cash balances of $4.5 million at the end of the
            first six months of 2005, $4.0 million at the end of the second six
            months of 2005, and $3.5 million at the end of each six-month period
            thereafter; and
      o     we indemnify the purchasers of the Notes against certain
            liabilities.

Additionally, with certain exceptions, the Notes prohibit us from:

      o     amending our organizational or governing agreements and documents,
            entering into any merger or consolidation, dissolving the company or
            liquidating its assets, or acquiring all or any substantial part of
            the business or assets of any other person;
      o     engaging in transactions with any affiliate;
      o     entering into any agreement inconsistent with our obligations under
            the Notes and related agreements;
      o     incurring any indebtedness, capital leases, or contingent
            obligations outside the ordinary course of business;
      o     granting or permitting liens against or security interests in our
            assets;


                                       11





      o     making any material dispositions of our assets outside the ordinary
            course of business;
      o     declaring or paying any dividends or making any other restricted
            payments; or
      o     making any loans to or investments in other persons outside of the
            ordinary course of business.

Our ability to comply with these provisions may be affected by changes in our
business condition or results of our operations, or other events beyond our
control. The breach of any of these covenants would result in a default under
the Notes, permitting the holders of the Notes to accelerate their maturity and
to sell the assets securing them. Such actions by the holders of the Notes could
cause us to cease operations or seek bankruptcy protection.

Our common stock is traded over the counter, which may deprive stockholders of
the full value of their shares.

Our common stock is quoted via the National Association of Securities Dealers'
Over The Counter Bulletin Board (OTCBB). As such, our common stock may have
fewer market makers, lower trading volumes and larger spreads between bid and
asked prices than securities listed on an exchange such as the New York Stock
Exchange or the NASDAQ Stock Market. These factors may result in higher price
volatility and less market liquidity for the common stock.

A low market price may severely limit the potential market for our common stock.

Our common stock is currently trading at a price substantially below $5.00 per
share, subjecting trading in the stock to certain SEC rules requiring additional
disclosures by broker-dealers. These rules generally apply to any non-NASDAQ
equity security that has a market price share of less than $5.00 per share,
subject to certain exceptions (a "penny stock"). Such rules require the
delivery, prior to any penny stock transaction, of a disclosure schedule
explaining the penny stock market and the risks associated therewith and impose
various sales practice requirements on broker-dealers who sell penny stocks to
persons other than established customers and institutional or wealthy investors.
For these types of transactions, the broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to the sale. The broker-dealer also
must disclose the commissions payable to the broker-dealer, current bid and
offer quotations for the penny stock and, if the broker-dealer is the sole
market maker, the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market. Such information must be provided to the
customer orally or in writing before or with the written confirmation of trade
sent to the customer. Monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. The additional burdens imposed upon
broker-dealers by such requirements could discourage broker-dealers from
effecting transactions in our common stock.

The price of our common stock has been highly volatile due to several factors
that will continue to affect the price of our stock.

Our common stock traded as low as $0.20 per share and as high as $0.72 per share
during the twelve-month period ended December 31, 2005. Some of the factors
leading to the volatility include:

      o     price and volume fluctuations in the stock market at large which do
            not relate to our operating performance;
      o     fluctuations in our operating results;
      o     financing arrangements we may enter that require the issuance of a
            significant number of shares in relation to the number of shares
            currently outstanding;
      o     announcements of technological innovations or new products which we
            or our competitors make;
      o     FDA and/or international regulatory actions;
      o     developments with respect to patents or proprietary rights;
      o     public concern as to the safety of products that we or others
            develop; and
      o     fluctuations in market demand for and supply of our products.


                                       12





An investor's ability to trade our common stock may be limited by trading
volume.

Until recently, the trading volume for our common stock has been relatively
limited. A consistently active trading market for our common stock may not occur
on the OTCBB. The average daily trading volume for our common stock on the OTCBB
for the twelve-month period ended December 31, 2005 was approximately 168,000
shares.

Some provisions of our organizational and governing documents may have the
effect of deterring third parties from making takeover bids for control of our
company or may be used to hinder or delay a takeover bid.

Our certificate of incorporation authorizes the creation and issuance of "blank
check" preferred stock. Our Board of Directors may divide this stock into one or
more series and set their rights. The Board of Directors may, without prior
stockholder approval, issue any of the shares of "blank check" preferred stock
with dividend, liquidation, conversion, voting or other rights, which could
adversely affect the relative voting power or other rights of the common stock.
Preferred stock could be used as a method of discouraging, delaying, or
preventing a take-over of our company. If we issue "blank check" preferred
stock, it could have a dilutive effect upon our common stock. This would
decrease the chance that our stockholders would realize a premium over market
price for their shares of common stock as a result of a takeover bid.

Because we will not pay dividends, stockholders will only benefit from owning
common stock if it appreciates.

We have never paid dividends on our common stock and we do not intend to do so
in the foreseeable future. We intend to retain any future earnings to finance
our growth. Accordingly, any potential investor who anticipates the need for
current dividends from his investment should not purchase our common stock.


                                       13






              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. We have
based these forward-looking statements largely on our current expectations and
projections about future events and financial trends affecting the financial
condition of our business. These forward-looking statements are subject to a
number of risks, uncertainties and assumptions, including, among other things:

      o     general economic and business conditions, both nationally and in our
            markets,
      o     our history of losses,
      o     our expectations and estimates concerning future financial
            performance, financing plans and the impact of competition,
      o     our ability to implement our growth strategy,
      o     anticipated trends in our business,
      o     advances in technologies, and
      o     other risk factors set forth under "Risk Factors" in this
            prospectus.

In addition, in this prospectus, we use words such as "anticipates," "believes,"
"plans," "expects," "future," "intends," and similar expressions to identify
forward-looking statements.

We undertake no obligation to update publicly or revise any forward-looking
statements, whether as a result of new information, future events or otherwise
after the date of this prospectus. In light of these risks and uncertainties,
the forward-looking events and circumstances discussed in this prospectus may
not occur and actual results could differ materially from those anticipated or
implied in the forward-looking statements.


                                 USE OF PROCEEDS

This prospectus relates to shares of our common stock that may be offered and
sold from time to time by the selling stockholders. We will receive no proceeds
from the sale of shares of common stock in this offering.


                                       14





            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock trades on the OTCBB under the trading symbol NEOP. The prices
set forth below reflect the quarterly high, low and closing sales prices for
shares of our common stock during the last two fiscal years as reported by
Reuters Limited. These quotations reflect inter-dealer prices, without retail
markup, markdown or commission, and may not represent actual transactions.



                                       High            Low           Close
      Fiscal Year 2005:
      First Quarter                   $ 0.72         $ 0.37         $ 0.46
      Second Quarter                    0.46           0.30           0.35
      Third Quarter                     0.40           0.25           0.30
      Fourth Quarter                    0.32           0.20           0.25

      Fiscal Year 2004:
      First Quarter                   $ 1.10         $ 0.28         $ 0.90
      Second Quarter                    1.11           0.41           0.60
      Third Quarter                     0.60           0.35           0.53
      Fourth Quarter                    0.61           0.37           0.59

As of March 20, 2006, we had approximately 830 holders of common stock of
record.

We have not paid any dividends on our common stock and do not anticipate paying
cash dividends in the foreseeable future. We intend to retain any earnings to
finance the growth of our business. We cannot assure you that we will ever pay
cash dividends. Whether we pay cash dividends in the future will be at the
discretion of our Board of Directors and will depend upon our financial
condition, results of operations, capital requirements and any other factors
that the Board of Directors decides are relevant. See Management's Discussion
and Analysis of Financial Condition and Results of Operations, below.


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

The following discussion should be read together with our Financial Statements
and the Notes related to those statements, as well as the other financial
information included in this Post-effective Amendment No. 1 to Registration
Statement on Form SB-2, of which this prospectus is a part. Some of our
discussion is forward-looking and involves risks and uncertainties. For
information regarding risk factors that could have a material adverse effect on
our business, refer to the Risk Factors section of this prospectus beginning on
page 4.

The Company

Neoprobe Corporation is a biomedical technology company that provides innovative
surgical and diagnostic products that enhance patient care. We currently market
two lines of medical devices; our neo2000(R) gamma detection systems and the
Quantix(R) line of blood flow measurement devices of our subsidiary,
Cardiosonix. In addition to our medical device products, we have two
radiopharmaceutical products, RIGScan(R) CR and LymphoseekTM, in the advanced
phases of clinical development. We are also exploring the development of our
activated cellular therapy (ACT) technology for patient-specific disease
treatment through our majority-owned subsidiary, Cira Biosciences, Inc. (Cira
Bio).


                                       15





Executive Summary

This Executive Summary section contains a number of forward-looking statements,
all of which are based on current expectations. Actual results may differ
materially. Our financial performance is highly dependent on our ability to
continue to generate income and cash flow from our gamma device product line and
on our ability to successfully commercialize the blood flow products of our
subsidiary, Cardiosonix. We cannot assure you, however, that we will achieve the
volume of sales anticipated, or if achieved, that the margin on such sales will
be adequate to produce positive operating cash flow. We continue to be
optimistic about the longer-term potential for our other proprietary,
procedural-based technologies such as Lymphoseek and RIGS(R)
(radio-immuno-guided surgery); however, these technologies are not anticipated
to generate any significant revenue for us during 2006. In addition, we cannot
assure you that these products will ever obtain marketing clearance from the
appropriate regulatory bodies.

We believe that the future prospects for Neoprobe are steadily improving as we
continue to make progress in all of our lines of business. We expect revenue
from our gamma device line to continue to provide a strong revenue base in 2006,
and we expect revenue from our Quantix blood flow measurement products to
increase substantially in the coming year as the product refinements introduced
during 2005 related to our Quantix/ORTM system are evaluated by increasing
numbers of surgeons around the world.

We expect 2006 to be a year of positive developments for Neoprobe primarily due
to our anticipation that Lymphoseek will enter into and complete pivotal
clinical trial activities. We expect to spend approximately $3.5 million in
out-of-pocket expenses on the development of Lymphoseek over the next twelve to
eighteen months in order to complete manufacturing validation and scale-up, to
complete Phase II and pivotal clinical trials and to prepare for the submission
of a new drug application to the U.S. Food and Drug Administration (FDA) which
we expect to submit during the first quarter of 2007. We also expect to incur
development expenses in 2006 related to innovations we are working on related to
our device product lines as well, although we do not currently expect our
out-of-pocket expenses to exceed $1 million related to these projects. We may
also incur some development expenses in 2006 related to our RIGS
radiopharmaceutical product development although we intend to defer any major
expenses until we identify a partner to assist us in the development and
commercialization of RIGScan CR. As a result, although we expect to see positive
movement in all our lines of business in 2006, we will likely show a loss for
the year primarily due to our drug product development efforts.

As of December 31, 2005, our cash and investments on hand totaled $6.5 million.
During 2005, we used $3.0 million in cash to fund our operations. We believe our
currently available capital resources will be adequate to sustain our device
operations at planned levels through 2006. If we decide to seek additional
funding to support the development of our products and additional financing is
not available when required or is not available on acceptable terms, or we are
unable to arrange a suitable strategic opportunity, we may need to modify our
business plan. We cannot assure you that the additional capital we require will
be available on acceptable terms, if at all. We cannot assure you that we will
be able to successfully commercialize products or that we will achieve
significant product revenues from our current or potential new products. In
addition, we cannot assure you that we will achieve or sustain profitability in
the future.

Our Outlook for our Gamma Detection Device Products

We believe our core gamma detection device business line will continue to
achieve positive results. Our belief is based on continued interest in the
research community in lymphatic mapping. The National Cancer Institute (NCI)
recently sponsored two large randomized clinical trials (research studies) for
breast cancer comparing sentinel lymph node biopsy (SLNB) with conventional
axillary lymph node dissection. The trials were conducted by the National
Surgical Adjuvant Breast and Bowel Project (NSABP) and the American College of
Surgeons Oncology Group (ACOSOG). NSABP and ACOSOG are both NCI-sponsored
Clinical Trials Cooperative Groups, which are networks of institutions and
physicians across the country who jointly conduct trials. Although several
studies have examined the correlation between the sentinel node and the
remaining axillary nodes, these are the first two large randomized multi-center
trials that will compare the long-term results of sentinel lymph node removal
with full axillary node dissection. Both of these trials are now closed.
However, final data from these studies likely will not be presented for another
two years. We expect the results from these clinical trials, when announced,
will have a positive impact on helping us to penetrate the remaining market for
breast cancer and melanoma. We also believe that the surgical community will
continue to adopt the SLNB application while a standard of care determination is
still pending. We also believe that Lymphoseek, our lymphatic targeting agent,
should it become commercially available, could significantly improve the
adoption of SLNB in future years in areas beyond melanoma and breast cancer.


                                       16





We believe that most of the leading cancer treatment institutions in the U.S.
and other major global markets have adopted SLNB and purchased gamma detection
systems such as the neo2000. As a result, we may be reaching saturation within
this segment of the market, except for potential replacement sales. As such, our
marketing focus in all major global markets for gamma detection devices will
continue to be among local/regional hospitals, which typically lag behind
leading research centers and major hospitals in adapting to new technologies. A
decline in the adoption of SLNB or the development of alternative technologies
by competitors may negatively impact our sales volumes, and therefore, revenues
and net income in 2006.

During March 2006, our primary gamma device marketing partner, Ethicon
Endo-Surgery, Inc. (EES), a Johnson & Johnson company, exercised the second of
its two options to extend the termination date of our distribution agreement
with them through the end of 2008. As of December 31, 2005, we had approximately
$1.7 million in committed orders from EES that extend through late April 2006.
We believe that total quantities of base neo2000 systems expected to be
purchased by EES during 2006 should be consistent with 2005 purchase levels. We
cannot assure you, however, that EES' product purchases beyond those firmly
committed through mid-2006 will indeed occur or that the prices we realize will
not be affected by increased competition.

Under the terms of our distribution agreement with EES, the transfer prices we
receive on product sales to EES are based on a fixed percentage of their
end-customer sales price, subject to a floor transfer price. Throughout their
sales history, our products have generally commanded a price premium in most of
the markets in which they are sold, which we believe is due to their superior
performance and ease of use. The average end-customer sales prices received by
EES for our gamma detection devices remained relatively steady and strong for
2005 as compared to 2004 and as a result, the transfer price that we received
from selling to EES during 2005 was 22% above the floor pricing for the base
system configuration. While we continue to believe in the technical and
user-friendly superiority of our products, the competitive landscape continues
to evolve and we may lose market share or experience price erosion as a result.
A loss of market share or significant price erosion would have a direct negative
impact on net income. Although the average price for 2005 was consistent with
2004, sales prices during the second half of 2005 were lower than the first half
of the year. If such price erosion should continue into 2006, there is some
level of downside pricing risk associated with future sales of our gamma
detection devices to EES that may erode some or all of the 22% premium we
received in excess of the floor price. However, we believe the anticipated
steady volumes coupled will result in continued profitability for our gamma
device business line for 2006, even at floor prices.

Our Outlook for our Drugs and Therapeutics

The primary focus of our drug and therapeutic development efforts during 2005
centered around preparing for the start of a pivotal clinical trial for
Lymphoseek and this is expected to continue in 2006. Lymphoseek is intended to
be used in biopsy procedures for the detection of cancer cells in lymph nodes in
a variety of tumor types including breast, melanoma, prostate, gastric and colon
cancers. Our Lymphoseek development was focused on three primary areas: drug
manufacturing and scale-up, completion of non-clinical safety testing and
refinement of a clinical development plan. If approved, Lymphoseek would be the
first radiopharmaceutical specifically designed to target lymphatic tissue.


                                       17





We have recently submitted the Phase II protocol amendment and non-clinical
testing data to FDA and are preparing to submit responses to the Chemistry,
Manufacturing and Control (CMC) questions asked by FDA. Following review of
these items by FDA, we hope to receive approval begin patient enrollment in the
Phase II trial in the second quarter and to be in a position to report
preliminary results approximately ninety days after the commencement of patient
enrollment. While preparing for the Phase II study, we began working with
regulatory agencies in Europe to determine the pathway to seek marketing
clearance for Lymphoseek in Europe. As a result of those discussions, it is our
intention to pursue marketing clearance for Lymphoseek through the centralized
authority, the European Agency for the Evaluation of Medicinal Products (EMEA)
in London. We intend to review with the EMEA the Phase III protocol design that
will be discussed with FDA with the intention of including European sites in the
Phase III study. An investigator's meeting was held with the Phase II clinical
investigators at the recently completed Society of Surgical Oncology (SSO)
meeting in March 2006 in preparation for the initiation of patient enrollment in
the Phase II study. In addition, the SSO meeting also gave us the opportunity to
meet with and recruit potential investigators for the planned Phase III study of
Lymphoseek to be initiated later in 2006. We cannot assure you, however, that
this product will achieve regulatory approval, or if approved, that it will
achieve market acceptance.

Over the past few years, we have made progress in advancing our RIGScan CR
development program while incurring little in the way of research expenses. Our
RIGS technology, which had been essentially inactive since the failure to gain
approval following our original license application in 1997, has been the
subject of renewed interest due primarily to the analysis of survival data
related to patients who participated in the original Phase III clinical studies
that were completed in 1996. We believe there are development milestones that
can be achieved prior to the need for significant capital investment in RIGScan
CR such as preparing the request for a special protocol assessment (SPA) and
completing a final protocol review. However, we continue to believe it will be
necessary for Neoprobe to identify a development partner or an alternative
funding source in order to prepare for and to fund the pivotal clinical testing
that will be necessary to gain marketing clearance for RIGScan CR. We have
engaged in discussions with various parties regarding such a partnership. At the
present time, while we have parties who have indicated an interest in entering
into a development relationship, we do not believe these efforts will result in
a partnership until further clarity can be added to the RIGScan regulatory
approval pathway, such as perhaps obtaining a positive SPA determination from
FDA. However, even if we are able to make such arrangements on satisfactory
terms, we believe that the time required for continued development, regulatory
approval and commercialization of a RIGS product would likely be a minimum of
five years before we receive any significant product-related royalties or
revenues. We cannot assure you that we will be able to complete definitive
agreements with a development partner for the RIGS technology and do not know if
a partner will be obtained on a timely basis on terms acceptable to us, or at
all. We also cannot assure you that FDA or the EMEA will clear our RIGS products
for marketing or that any such products will be successfully introduced or
achieve market acceptance.

In early 2005, we formed a new subsidiary, Cira Bio, to explore the development
of ACT. Neoprobe owns approximately 90% of the outstanding shares of Cira Bio
with the remaining shares being held by the principals of a private holding
company, Cira LLC. In conjunction with the formation of Cira Bio, an amended
technology license agreement also was executed with The Ohio State University,
from whom both Neoprobe and Cira LLC had originally licensed or optioned the
various cellular therapy technologies. As a result of the cross-license
agreements, Cira Bio has the development and commercialization rights to three
issued U.S. patents that cover the oncology and autoimmune applications of its
technology. In addition, Cira Bio has licenses to several pending patent
applications.

During 2005, Cira Bio engaged the Battelle Memorial Institute to complete a
technology and manufacturing process assessment of the cellular therapy
approach. Cira Bio intends to raise the necessary capital to move this
technology platform forward; however, Cira Bio has not yet identified a
potential source of capital. The means by which this funding is obtained will
likely dilute Neoprobe's ownership interest in Cira Bio; however, we believe
that moving forward such a promising technology will only yield positive results
for the Neoprobe shareholders and the patients who could benefit from these
treatments. However, we do not know if we will be successful in obtaining
additional funding, on terms acceptable to us, or at all. In addition, should
Cira Bio not be successful in obtaining sufficient capital by December 31, 2006,
the technology rights for the oncology applications of ACT would revert back to
Neoprobe and the technology rights for the viral and autoimmune applications
would revert back to Cira LLC.


                                       18





Our Outlook for our Blood Flow Measurement Products

We have two blood flow measurement devices, the Quantix/OR and the Quantix/NDTM,
that have regulatory clearance to market in the U.S. and European Union (EU) as
well as certain other foreign markets. The Quantix/OR is primarily intended to
measure blood flow in cardiac bypass graft and other similar procedures while
the Quantix/ND is designed to measure blood flow in neurovascular settings. Our
efforts concerning the Quantix products in 2006 will be primarily focused on
marketing our Quantix/OR system while we work with thought leaders to determine
the ultimate market viability of the Quantix/ND. Currently, we have in place or
have executed or reached agreement in principle with distributors and/or master
distributors for the Quantix/OR covering the United States, all major market
countries in the EU as well substantially all countries that comprise the
Pacific Rim of Asia. In addition, we have distribution arrangements in place
covering major portions of Central and South America. Our primary focus is to
secure marketing and distribution partners who possess appropriate expertise in
marketing medical devices, preferably ultrasound or cardiac care devices, into
our primary target markets, the cardiovascular, vascular surgery and
neurosurgical markets.

We anticipate spending a significant amount of time and effort in 2006 to market
the Cardiosonix blood flow products to a wider market. We will need to continue
the management of relationships with thought leaders in the cardiac surgery and
neurosurgical fields to gain broader exposure to the advantages of our
technology. We anticipate continuing to place blood flow systems with industry
thought leaders to obtain critical commercial feedback during the widespread
market launch. The market education process we envision will likely take some
time to develop in the manner we desire. In addition, the sales cycle for
medical devices such as our blood flow products is typically a four to six month
cycle. As such, significant end customer sales, if they occur, will likely lag
the signing of distribution arrangements.

We expect sales of blood flow products for 2006 to be higher than 2005 although
such sales are difficult to gauge in situations where the use of the product is
dependent on changes in surgical practice as well as subject to the sales
cycles, etc. outlined above. We are also investigating alternative pricing
strategies such as per use fees or leasing that may affect the adoption rates
for our blood flow measurement devices. As a result, we anticipate that the
product development and market support costs we will incur in 2006 will be
greater than the revenue we generate from the sales of blood flow devices.

Summary

The strengthening of our gamma product (device and drug) portfolio coupled with
the introduction of the Cardiosonix blood flow products should position us to
eventually achieve profitable operating performance for our device product
lines. However, overall profitable operational results will be significantly
affected by our decision to fund drug and therapeutic development activities
internally.

We anticipate generating a net profit from the sale of our gamma detection
devices in 2005, excluding the allocation of any corporate general and
administrative costs; however, we expect to show a loss for our blood flow
device product line for 2006 due to continued research and development and
increased marketing and administrative support costs that are still required to
commercialize the product line. Currently, we expect our blood flow operations,
excluding any allocation of corporate general and administrative costs, to
approach breakeven during the third or fourth quarters of 2006. However, this
expectation is based to a large degree on our anticipation that we will achieve
the necessary developmental milestones required to achieve significant
commercial sales of our Quantix/OR product in a timely manner. The overall
operating results for 2006 will be affected by the amount of development for
radiopharmaceutical products. If we are unsuccessful in achieving significant
commercial sales of the Quantix/OR product in 2006, or if we modify our business
plan and decide to carry out RIGS development internally, our profitability
estimates will be adversely affected and our business plan will likely need to
be modified.

As a result of our decision to fund Lymphoseek development internally, we do not
expect to achieve operating profit during 2006. In addition, our net loss and
earnings per share will likely be significantly impacted by the non-cash
interest expense we expect to record related to the accounting treatment for the
beneficial conversion feature of the convertible debt and for the warrants
issued in connection with the private placement we completed in December 2004.
Also, we cannot assure you that our current or potential new products will be
successfully commercialized or that we will achieve significant product revenues
or that we will achieve or be able to sustain profitability in the future.


                                       19





Results of Operations

We reported revenues for 2005 of $5.9 million compared to $6.0 million in the
prior year. However, license and other revenues for 2004 included a $600,000
non-cash item, representing the final installment of deferred revenue related to
a distribution agreement we entered into with EES in 1999, and no such revenue
was recognized in 2005. The decrease in license and other revenue was offset by
increases of $251,000 related to blood flow device sales, $203,000 of gamma
detection device extended service contract sales, $73,000 of gamma detection
device sales, and $40,000 of gamma detection device service revenue.

Gross profit for 2005 decreased $64,000 or 2% as compared to 2004. Excluding
license and other revenue, gross profit on net sales of our medical devices
increased $536,000 or 18% compared to the prior year. The percentage improvement
in gross profit on net sales of our medical devices in 2005 relative to the
percentage increase in sales reflects the impact of manufacturing cost control
initiatives implemented in 2004 coupled with the positive contribution from the
increased service activities.

Results for 2005 also reflect the efforts made in the development of our gamma
detection radiopharmaceutical products, RIGScan CR and Lymphoseek. Accordingly,
our research and development costs for 2005 increased to $4.0 million compared
to $2.5 million in 2004. Consolidated general and administrative expenses
remained constant at $3.2 million in 2005 and 2004.

Major expense categories as a percentage of net sales fluctuated from 2004 to
2005 due to increased net sales as well as increased expenses related to our
gamma detection radiopharmaceutical and therapeutic products. Research and
development expenses, as a percentage of net sales, increased to 68% in 2005
from 46% in 2004 due to increased expenses related to the development of our
gamma detection drug and therapeutic products. Selling, general and
administrative expenses, as a percentage of net sales, decreased to 53% in 2005
from 59% in 2004 primarily due to the increase in net sales revenue. Due to the
ongoing development activities of the company, research and development expenses
are expected to be higher as a percentage of sales for 2006 than they were in
2005. In addition, as we move forward with commercialization activities related
to the Quantix product line, selling, general and administrative expenses as a
percentage of sales are expected to increase in 2006 over 2005.

Years Ended December 31, 2005 and 2004

Net Sales and Margins. Net sales, primarily of our gamma detection systems,
increased $567,000, or 11%, to $5.9 million in 2005 from $5.4 million in 2004.
Gross margins on net sales increased to 60% of net sales for 2005 compared to
56% of net sales for 2004.

The increase in net sales was the combined result of increases of $251,000 in
blood flow device sales, $203,000 in gamma detection device extended service
contract sales, $73,000 in gamma detection device sales, and $40,000 in gamma
detection device service revenue. The price at which we sell our gamma detection
products to EES is based on a percentage of the global average selling price
received by EES on sales of Neoprobe products to end customers, subject to a
minimum floor price. The base system price at which we sold neo2000 systems to
EES increased approximately 1% from 2004 to 2005.

The increase in gross margins on net product sales was the combined result of
increased extended service contract sales which typically generate higher
margins than sales of our devices coupled with slightly decreased unit costs to
manufacture our neo2000 control unit. Gross margins in 2005 were adversely
affected by inventory impairments of $42,000 related to our laparoscopic probe
product as well as impairments of $13,000 related to our Quantix products. Gross
margins in 2004 were adversely affected by a $107,000 impairment charge related
to obsolete Quantix inventory.


                                       20





License and Other Revenue. License and other revenue for 2004 included $600,000
from the pro-rata recognition of license fees related to the distribution
agreement with EES. These license fees were fully amortized into income as of
the end of the third quarter of 2004. No license revenue was recorded in 2005.

Research and Development Expenses. Research and development expenses increased
$1.6 million, or 64%, to $4.0 million during 2005 from $2.5 million in 2004.
Research and development expenses in 2005 included approximately $2.3 million in
drug and therapy product development costs, $1.4 million in product design
activities for the Quantix products and $276,000 gamma detection device
development costs. This compares to expenses of $489,000, $1.6 million and
$404,000 in these respective product categories in 2004. The changes in each
category were primarily due to (i) efforts to move our development of Lymphoseek
forward, (ii) the costs of product refinement activities related to the
Quantix/OR offsetting cost savings from headcount reductions at our facility in
Israel, and (iii) development activities related to updated versions of our
neo2000 control unit and detector probes, respectively.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses remained steady at $3.2 million during 2005 and 2004.
Increases in U.S. headcount and compensation coupled with increases in certain
overhead costs such as professional services and facilities expenses were offset
by decreased marketing expenses and decreases in certain other overhead costs
such as travel, insurance and taxes.

Other Income (Expenses). Other expenses decreased $257,000 to $1.3 million
during 2005 from $1.5 million during 2004. The primary reason for the decrease
was a $1.1 million decrease in warrant liability resulting from the accounting
treatment for the warrants we issued in connection with the private placement of
convertible debt we completed in December 2004. In addition, we recorded an
increase of $198,000 in interest income resulting from maintaining a higher
balance of cash and investments during 2005 compared to 2004. We also recorded
interest expense of $1.4 million and $334,000 during 2005 and 2004,
respectively, related to debt financings entered into during 2004 and 2003. Of
this interest expense, $687,000 and $268,000 in 2005 and 2004, respectively, was
non-cash in nature related to the amortization of debt issuance costs and
discounts resulting from the warrants and beneficial conversion features of the
convertible debt.

Liquidity and Capital Resources

Operating Activities. Cash used in operations increased $2.2 million to $3.0
million during 2005 from $825,000 during 2004. Working capital decreased $3.5
million to $6.9 million at December 31, 2005 as compared to $10.4 million at
December 31, 2004. The current ratio decreased to 5.6:1 at December 31, 2005
from 11.3:1 at December 31, 2004. The decrease in working capital was primarily
related to cash used in operations coupled with cash used in investing
activities.

Cash and investment balances decreased to $6.5 million at December 31, 2005 from
$9.8 million at December 31, 2004, primarily as a result of cash used to fund
operating activities and service our debt during 2005.

Accounts receivable increased to $673,000 at December 31, 2005 from $412,000 at
December 31, 2004. The increase was primarily a result of timing of purchases
and payments by EES. We expect overall receivable levels will continue to
fluctuate in 2006 depending on the timing of purchases and payments by EES.
However, on average, we expect accounts receivable balances will start to
increase commensurate with anticipated increases in sales of blood flow products
to our distributors, many of whom are foreign-domiciled entities who typically
pay at a slower rate than domestic companies. Such increases, if any, will
require the increased use of our cash resources over time.

Inventory levels decreased to $804,000 at December 31, 2005 from $855,000 at
December 31, 2004. During 2005, we wrote off inventory totaling $42,000 related
to our laparoscopic probe product and $13,000 related to our Quantix products.
We expect inventory levels to increase during 2006 as we ramp up our blood flow
device business, reassess our gamma detection and blood flow measurement device
safety stock levels, and prepare for radiopharmaceutical product distribution.


                                       21





Investing Activities. Cash used in investing activities increased $1.5 million
to $1.6 million during 2005 from $111,000 during 2004. We purchased $5.5 million
and received $4.0 million from maturities of available-for-sale securities
during 2005. Capital expenditures during 2005 were primarily related to
purchases of production tools and equipment in preparation for blood flow
measurement device production at our contract manufacturers. Capital
expenditures during 2004 were primarily purchases of technology infrastructure.
Capital needs for 2006 are expected to increase over 2005 as we start up blood
flow product production at our contract manufacturers and establish alternative
sales financing arrangements for our blood flow devices such as leasing and per
use sales pricing.

Financing Activities. Financing activities used $273,000 in cash during 2005
versus providing $9.2 million during 2004. Proceeds from the issuance of common
stock were $58,000 and $2.3 million in 2005 and 2004, respectively. Proceeds
from notes payable were $8.1 million 2004. Payments of common stock and debt
issuance costs were $30,000 and $767,000 in 2005 and 2004, respectively.
Payments of notes payable were $190,000 lower during 2005 as compared to 2004,
primarily due to the repayment of a note to our CEO in 2004.

During 2004, we sold a total of 2,350,000 shares of common stock and realized
net proceeds of $1,468,874 under the terms of a 2001 common stock purchase
agreement with the Fusion Capital Fund II, LLC. We also issued Fusion 66,129
shares of common stock for commitment fees related to the sales of our common
stock to them during 2004. No common stock was issued to Fusion during 2005. The
Fusion common stock purchase agreement expired under its own terms in February
2006.

During April 2003, we completed a bridge loan agreement with our President and
CEO, David Bupp. Under the terms of the agreement, Mr. Bupp advanced us
$250,000. In consideration for the loan, we issued a note to Mr. Bupp in the
principal amount of $250,000. The note was secured by general assets of the
company, excluding accounts receivable. In addition, we issued Mr. Bupp 375,000
warrants to purchase our common stock at an exercise price of $0.13 per share,
expiring in April 2008. The note bore interest at 8.5% per annum, payable
monthly, and was originally due on June 30, 2004. On March 8, 2004, at the
request of the Board of Directors, Mr. Bupp agreed to extend the due date of the
note from June 30, 2004 to June 30, 2005. In exchange for extending the due date
of the note, we issued Mr. Bupp an additional 375,000 warrants to purchase our
common stock at an exercise price of $0.50 per share, expiring in March 2009. On
December 13, 2004, we repaid the balance of the note to Mr. Bupp.

During April 2003, we also completed a convertible bridge loan agreement with an
outside investor for an additional $250,000. In consideration for the loan, we
issued a note to the investor in the principal amount of $250,000. The note was
secured by general assets of the company, excluding accounts receivable. In
addition, we issued the investor 500,000 warrants to purchase our common stock
at an exercise price of $0.13 per share, expiring in April 2008. Under the terms
of the agreement, the note bore interest at 9.5% per annum, payable monthly, and
was due on June 30, 2004. During January 2004, the investor converted the entire
balance of the note into 1.1 million shares of common stock according to the
conversion terms of the agreement.

During 2004, the certain investors who received warrants to purchase our common
stock in connection with a November 2003 financing exercised a total of
3,230,066 warrants in exchange for 3,197,854 shares of our common stock. Of the
warrants exercised by these investors in 2004, 3,134,783 were exercised in
exchange for 3,134,783 shares of our common stock resulting in net proceeds of
$871,398. The remaining 95,283 warrants exercised in 2004 were exercised on a
cashless basis in exchange for 63,071 shares of our common stock. During 2005,
certain investors and placement agents related to this financing also exercised
a total of 206,865 warrants in exchange for 206,865 shares of our common stock,
resulting in net proceeds of $57,922.

In December 2004, we completed a private placement of Convertible Promissory
Notes in an aggregate principal amount of $8.1 million with Biomedical Value
Fund, L.P., Biomedical Offshore Value Fund, Ltd. and David C. Bupp (our
President and CEO). Biomedical Value Fund, L.P. and Biomedical Offshore Value
Fund, Ltd. are funds managed by Great Point Partners, LLC. The notes bear
interest at 8% per annum and are freely convertible into shares of our common
stock at a price of $0.40 per share. Neoprobe may force conversion of the notes
prior to their stated maturity under certain circumstances. The conversion price
represents the ten-day volume weighted average trading price of our common stock
through December 10, 2004. As part of this transaction, we issued the investors
10,125,000 warrants to purchase our common stock at an exercise price of $0.46,
expiring in December 2009. In connection with this financing, we also issued
1,600,000 warrants to purchase our common stock to the placement agents,
containing substantially identical terms to the warrants issued to the
investors.


                                       22





Our future liquidity and capital requirements will depend on a number of
factors, including our ability to raise additional capital in a timely manner
through additional investment, expanded market acceptance of our current
products, our ability to complete the commercialization of new products, our
ability to monetize our investment in non-core technologies, our ability to
obtain milestone or development funds from potential development and
distribution partners, regulatory actions by FDA and other international
regulatory bodies, and intellectual property protection. We believe we now have
adequate capital to assure that we can properly support our current business
goals and objectives for 2006. Our near-term priorities are to commence
multi-center trials for our Lymphoseek product, support the launch of the
reengineered version of the Quantix/OR products, identify a development and
commercialization partner for our RIGS technology, complete a technology
assessment of our ACT technology and continue to innovate our gamma detection
product line. We cannot assure you that we will be able to achieve significant
product revenues from our current or potential new products. We also cannot
assure you that we will achieve profitability again.

Contractual Obligations and Commercial Commitments

The following table presents our contractual obligations and commercial
commitments as of December 31, 2005.



                                                               Payments Due By Period
                                       ----------------------------------------------------------------
      Contractual Cash                                  Less than      1 - 3         4 - 5       After
        Obligations                        Total         1 Year        Years         Years      5 Years
- -------------------------------------   -----------   -----------   -----------   -----------   -------
                                                                                 
Capital Leases(1)                       $    61,151   $    24,769   $    33,897   $     2,485   $    --

Operating Leases                            208,819       100,129       108,690          --          --

Unconditional Purchase Obligations(2)     1,869,255     1,869,255          --            --          --

Long-Term Debt(3)                        10,012,043       648,000     9,364,043          --          --
                                        -----------   -----------   -----------   -----------   -------

Total Contractual Cash Obligations      $12,151,268   $ 2,642,153   $ 9,506,630   $     2,485   $    --
                                        ===========   ===========   ===========   ===========   =======

(1)   These amounts include interest at rates between 8% and 13%.
(2)   These amounts represent purchases under binding purchase orders for which
      we are required to take delivery of the product under the terms of the
      underlying supply agreements going out approximately one year.
(3)   These amounts include interest at 8% on $8.1 million in outstanding
      principal due in December 2008, payable in either cash or common stock.


                                       23





Recent Accounting Developments

In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS
No. 151, Inventory Costs - An Amendment of ARB No. 43, Chapter 4. This statement
amends the guidance in ARB No. 43 Chapter 4, Inventory Pricing, to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). Paragraph 5 of ARB No. 43, Chapter 4,
previously stated that " . . . under some circumstances, items such as idle
facility expense, excessive spoilage, double freight, and rehandling costs may
be so abnormal to require treatment as a current period charge...." This
statement requires that those items be recognized as current-period charges
regardless of whether they meet the criterion of "so abnormal." In addition,
this statement requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the production
facilities. The provisions of this statement will be effective for inventory
costs during fiscal years beginning after June 15, 2005. Neoprobe does not
believe that the adoption of this statement will have a material impact on its
financial condition or results of operations.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based
Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123R). SFAS No. 123R supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of
Cash Flows. Generally, the approach in SFAS No. 123R is similar to the approach
described in SFAS No. 123. However, SFAS No. 123R requires all share-based
payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. Pro forma
disclosure is no longer an alternative. We must adopt SFAS No. 123R for interim
or annual reporting periods beginning after December 15, 2005. Early adoption
will be permitted in periods in which financial statements have not yet been
issued. We adopted SFAS No. 123R effective January 1, 2006.

As permitted by SFAS No. 123, during 2005 Neoprobe accounted for share-based
payments to employees using APB Opinion No. 25's intrinsic value method and, as
such, generally recognized no compensation cost for employee stock options.
However, had we adopted SFAS No. 123R in prior periods, the impact of that
standard would have approximated the impact of SFAS No. 123 as described in the
disclosure of pro forma net loss and loss per share in Note 1(l) to our
consolidated financial statements. The adoption of SFAS No. 123R's fair value
method will have a significant impact on our results of operations, although it
will have no impact on our overall cash position. Based on options outstanding
at December 31, 2005, we estimate that the adoption of SFAS No. 123R will result
in additional compensation expense of approximately $260,000 in 2006 and
$115,000 in 2007. However, these amounts may change significantly depending on
levels of share-based payments granted in the future and the assumptions for the
variables which impact the computation. SFAS No. 123R also requires the benefits
of tax deductions in excess of recognized compensation cost to be reported as a
financing cash flow, rather than as an operating cash flow as required under
current literature.

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets
- - An Amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions
(SFAS No. 153). SFAS No. 153 eliminates the exception from fair value
measurement for nonmonetary exchanges of similar productive assets in paragraph
21(b) of APB Opinion No. 29, Accounting for Nonmonetary Transactions, and
replaces it with an exception for exchanges that do not have commercial
substance. SFAS No. 153 specifies that a nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. SFAS No. 153 is effective for fiscal
periods beginning after June 15, 2005 and is required to be adopted by Neoprobe
beginning January 1, 2006. Neoprobe is currently evaluating the effect that the
adoption of SFAS No. 153 will have on its consolidated results of operations and
financial condition but does not expect it to have a material impact.

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS
No. 154). SFAS No. 154 supersedes APB Opinion No. 20, Accounting Changes, and
SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS
No. 154 requires retrospective application to prior periods' financial
statements of a voluntary change in accounting principle unless it is
impracticable. APB Opinion No. 20 previously required that most voluntary
changes in accounting principle be recognized by including in net income of the
period of the change the cumulative effect of changing to the new accounting
principle. SFAS No. 154 requires that a change in method of depreciation,
amortization, or depletion for long-lived, nonfinancial assets be accounted for
as a change in accounting estimate that is effected by a change in accounting
principle. ABP Opinion No. 20 previously required that such a change be reported
as a change in accounting principle. SFAS No. 154 carries forward many
provisions of APB Opinion No. 20 without change, including the provisions
related to the reporting of a change in accounting estimate, a change in the
reporting entity, and the correction of an error. SFAS No. 154 also carries
forward the provisions of SFAS No. 3 that govern reporting accounting changes in
interim financial statements. SFAS No. 154 is effective for fiscal years
beginning after December 15, 2005 and is required to be adopted by Neoprobe
beginning January 1, 2006. We do not expect the adoption of SFAS No. 154 to have
a material impact on our consolidated results of operations and financial
condition.


                                       24





In September 2005, the Emerging Issues Task Force (EITF) ratified EITF No. 05-8,
Income Tax Consequences of Issuing Convertible Debt with a Beneficial Conversion
Feature (EITF No. 05-8). EITF No. 05-8 determined that (a) the issuance of
convertible debt with a beneficial conversion feature results in a difference
between book basis and tax basis of the debt instrument, (b) such difference
between book basis and tax basis of the debt instrument is temporary in nature,
and (c) the recognition of deferred taxes for the temporary difference of
convertible debt with a beneficial conversion feature should be recorded as an
adjustment to additional paid-in capital. EITF No. 05-8 is required to be
applied retrospectively, and is effective beginning in the first interim or
annual reporting period beginning after December 15, 2005. Neoprobe is required
to adopt EITF No. 05-8 beginning January 1, 2006. We do not expect the adoption
of EITF No. 05-8 to have a material impact on our consolidated results of
operations or financial condition, however we do expect the adoption of EITF No.
05-8 to result in a material change in our income tax disclosures.

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid
Financial Instruments - An Amendment of FASB Statements No. 133 and 140 (SFAS
No. 155). SFAS No. 155 amends SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, and SFAS No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No.
155 (a) permits fair value remeasurement for any hybrid financial instrument
that contains an embedded derivative that otherwise would require bifurcation,
(b) clarifies which interest-only strips and principal-only strips are not
subject to the requirements of SFAS No. 133, (c) establishes a requirement to
evaluate interests in securitized financial assets to identify interests that
are freestanding derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation, (d) clarifies that
concentrations of credit risk in the form of subordination are not embedded
derivatives, and (e) amends SFAS No. 140 to eliminate the prohibition on a
qualifying special-purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative financial
instrument. SFAS No. 155 is effective for all financial instruments acquired or
issued after the beginning of an entity's first fiscal year that begins after
September 15, 2006 and is required to be adopted by Neoprobe beginning January
1, 2007. We do not expect the adoption of SFAS No. 155 to have a material impact
on our consolidated results of operations and financial condition.

Critical Accounting Policies

The following accounting policies are considered by us to be critical to our
results of operations and financial condition.

Revenue Recognition Related to Net Sales. We currently generate revenue
primarily from sales of our gamma detection products; however, sales of blood
flow products constituted approximately 6% of total revenues for 2005 and are
expected to increase in the future. Our standard shipping terms are FOB shipping
point, and title and risk of loss passes to the customer upon shipment. We
generally recognize sales revenue related to sales of our products when the
products are shipped and the earnings process has been completed. However, in
cases where product is shipped but the earnings process is not yet completed,
revenue is deferred until it has been determined that the earnings process has
been completed. Our customers have no right to return products purchased in the
ordinary course of business.


                                       25





The prices we charge our primary customer, EES, related to sales of products are
subject to retroactive annual adjustment based on a fixed percentage of the
actual sales prices achieved by EES on sales to end customers made during each
fiscal year. To the extent that we can reasonably estimate the end-customer
prices received by EES, we record sales to EES based upon these estimates. If we
are unable to reasonably estimate end customer sales prices related to certain
products sold to EES, we record revenue related to these product sales at the
minimum (i.e., floor) price provided for under our distribution agreement with
EES.

We also generate revenue from the service and repair of out-of-warranty
products. Fees charged for service and repair on products not covered by an
extended service agreement are recognized on completion of the service process
when the serviced or repaired product has been returned to the customer. Fees
charged for service or repair of products covered by an extended warranty
agreement are deferred and recognized as revenue ratably over the life of the
extended service agreement.

Use of Estimates. The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. We base these estimates and assumptions upon
historical experience and existing, known circumstances. Actual results could
differ from those estimates. Specifically, management may make significant
estimates in the following areas:

      o     Allowance for Doubtful Accounts. We maintain an allowance for
            doubtful accounts receivable to cover estimated losses resulting
            from the inability of our customers to make required payments. We
            determine the adequacy of this allowance by regularly reviewing our
            accounts receivable aging and evaluating individual customer
            receivables, considering customers' credit and financial condition,
            payment history and relevant economic conditions. If the financial
            condition of our customers were to deteriorate, resulting in an
            impairment of their ability to make payments, additional allowances
            for doubtful accounts may be required.

      o     Inventory Valuation. We value our inventory at the lower of cost
            (first-in, first-out method) or market. Our valuation reflects our
            estimates of excess, slow moving and obsolete inventory as well as
            inventory with a carrying value in excess of its net realizable
            value. Write-offs are recorded when product is removed from saleable
            inventory. We review inventory on hand at least quarterly and record
            provisions for excess and obsolete inventory based on several
            factors, including current assessment of future product demand,
            anticipated release of new products into the market, historical
            experience and product expiration. Our industry is characterized by
            rapid product development and frequent new product introductions.
            Uncertain timing of product approvals, variability in product launch
            strategies, product recalls and variation in product utilization all
            impact the estimates related to excess and obsolete inventory.

      o     Impairment or Disposal of Long-Lived Assets. We account for
            long-lived assets in accordance with the provisions of SFAS No. 144.
            This Statement requires that long-lived assets and certain
            identifiable intangibles be reviewed for impairment whenever events
            or changes in circumstances indicate that the carrying amount of an
            asset may not be recoverable. The recoverability of assets to be
            held and used is measured by a comparison of the carrying amount of
            an asset to future net undiscounted cash flows expected to be
            generated by the asset. If such assets are considered to be
            impaired, the impairment to be recognized is measured by the amount
            by which the carrying amount of the assets exceeds the fair value of
            the assets. Assets to be disposed of are reported at the lower of
            the carrying amount or fair value less costs to sell. As of December
            31, 2005, the most significant long-lived assets on our balance
            sheet relate to assets recorded in connection with the acquisition
            of Cardiosonix and gamma detection device patents related to SLNB.
            The recoverability of these assets is based on the financial
            projections and models related to the future sales success of
            Cardiosonix' products and the continuing success of our gamma
            detection product line. As such, these assets could be subject to
            significant adjustment should the Cardiosonix technology not be
            successfully commercialized or the sales amounts in our current
            projections not be realized.


                                       26





      o     Product Warranty. We warrant our products against defects in design,
            materials, and workmanship generally for a period of one year from
            the date of sale to the end customer. Our accrual for warranty
            expenses is adjusted periodically to reflect actual experience. EES
            also reimburses us for a portion of warranty expense incurred based
            on end customer sales they make during a given fiscal year.

      o     Fair Value of Warrant Liability. U.S. generally accepted accounting
            principles required us to classify the warrants issued in connection
            with our December 2004 placement of convertible promissory notes as
            a liability due to penalty provisions contained in the underlying
            securities purchase agreement. The penalty provisions could have
            required us to pay a penalty of 0.0667% per day of the total debt
            amount if we failed to meet certain registration deadlines, or if
            our stock was suspended from trading for more than 30 days. As a
            liability, the warrants were considered derivative instruments that
            were required to be periodically "marked to market" on our balance
            sheet. We estimated the fair value of the warrants at December 31,
            2004 using the Black-Scholes option pricing model. On February 16,
            2005, Neoprobe and the investors confirmed in writing their
            intention that the penalty provisions which led to this accounting
            treatment were intended to apply only to the $8.1 million principal
            balance of the promissory notes and underlying conversion shares and
            not to the warrant shares. Because the value of our stock increased
            $0.19 per share from $0.40 per share at the closing date of the
            financing on December 14, 2004 to $0.59 per share at December 31,
            2004, our year end, the effect of marking the warrant liability to
            "market" at December 31, 2004 resulted in an increase in the
            estimated fair value of the warrant liability of $1.2 million which
            was recorded as non-cash expense during the fourth quarter of 2004.
            Subsequently, the value of our stock increased $0.02 per share from
            $0.59 at December 31, 2004 to $0.61 per share at February 16, 2005,
            such that marking the warrant liability to "market" at February 16,
            2005 resulted in an increase in the estimated fair value of the
            warrant liability of $142,427 which was recorded as non-cash expense
            during the first quarter of 2005. The estimated fair value of the
            warrant liability was then reclassified to additional paid-in
            capital during the first quarter of 2005.

Other Items Affecting Financial Condition

At December 31, 2005, we had U.S. net operating tax loss carryforwards and tax
credit carryforwards of approximately $131.3 million and $4.3 million,
respectively, available to offset or reduce future income tax liability, if any,
through 2025. However, under Sections 382 and 383 of the Internal Revenue Code
of 1986, as amended, use of prior tax loss and credit carryforwards may be
limited after an ownership change. As a result of ownership changes as defined
by Sections 382 and 383, which have occurred at various points in our history,
we believe utilization of our tax loss carryforwards and tax credit
carryforwards may be significantly limited.

                             DESCRIPTION OF BUSINESS

Development of the Business

We are a biomedical company that develops and commercializes innovative products
that enhance patient care and improve patient outcome by meeting the critical
intraoperative diagnostic information needs of physicians and therapeutic
treatment needs of patients. We were originally incorporated in Ohio in 1983 and
reincorporated in Delaware in 1988. Our executive offices are located at 425
Metro Place North, Suite 300, Dublin, Ohio 43017. Our telephone number is (614)
793-7500.

From our inception through 1998, we devoted substantially all of our efforts and
resources to the research and clinical development of radiopharmaceutical and
medical device technologies related to the intraoperative diagnosis and
treatment of cancers, including our proprietary radioimmunoguided surgery
(RIGS(R)) technology. At that point, an evaluation of the status of the
regulatory pathway for our RIGS products coupled with our limited financial
resources caused us to suspend development activities related to our
radiopharmaceutical business and to retrench our organization to focus on our
medical device business. After achieving profitability in 2000 following this
retrenchment, we set out on a strategy to expand our medical device portfolio
outside the cancer field. In December 2001, we took a major step in executing
this strategy with the acquisition of Biosonix Ltd., a private Israeli company
limited by shares, which we subsequently renamed Cardiosonix Ltd. (Cardiosonix).


                                       27





Cardiosonix is commercializing the Quantix(R) line of blood flow measurement
devices for a variety of diagnostic and surgical applications in the cardiac and
vascular management arena. The decision to expand beyond our product focus on
oncology was based on our belief that the Cardiosonix products would diversify
the markets we address. We believe the Cardiosonix product line has significant
market potential and a path of market adoption similar to our gamma detection
devices, but one that also has significant operational synergies in development,
regulation and manufacturing to that of our gamma devices.

In addition, although our strategic focus expanded to include cardiac and
vascular blood flow management, we continued to look for other avenues to
reinvigorate our radiopharmaceutical development. During 2004, our efforts
resulted in a number of positive events that caused us to take steps to
re-activate development of our radiopharmaceutical and therapeutic initiatives.
As a result, we now have two of our radiopharmaceutical products, LymphoseekTM
and RIGScan(R) CR, on the verge of entering Phase II and Phase III, and Phase
III clinical trials, respectively. In early 2005, we also formed a new
subsidiary, Cira Biosciences, Inc. (Cira Bio), to evaluate the current market
opportunities for another technology platform, activated cellular therapy (ACT).
Our unique virtual business model combines revenue generation from medical
devices with the capital infusions we received in late 2004 to allow us to fund
Lymphoseek development while we look for a development partner to assist us in
the final clinical and commercial development for RIGScan CR and to evaluate the
commercial opportunities for ACT.

Our Technology

Gamma Detection Devices

Through 2005, substantially all of our revenue has been generated from the sale
of a line of gamma radiation detection devices and related products used by
surgeons in the diagnosis and treatment of cancer and related diseases. Our
currently-marketed line of gamma detection devices has been cleared by the U.S.
Food and Drug Administration (FDA) and other international regulatory agencies
for marketing and commercial distribution throughout most major global markets.

Our patented gamma detection device systems consist of hand-held detector probes
and a control unit. The critical detection component is a highly radiosensitive
crystal contained in the tip of the probe that relays a signal through a
preamplifier to the control unit to produce both a digital readout and an
audible signal. The detector element fits into a housing approximately the size
of a pocket flashlight. The neo2000(R) Gamma Detection System, originally
released in 1998, is the third generation of our gamma detection systems. The
neo2000 is designed as a platform for future growth of our instrument business.
The neo2000 is software upgradeable and is designed to support future surgical
targeting probes without the necessity of costly remanufacture. Since 1998, we
have developed and released three major software upgrades for customer units
designed to improve the utility of the system and/or offer the users additional
features.

Surgeons are using our gamma detection devices in a surgical application
referred to as sentinel lymph node biopsy (SLNB) or intraoperative lymphatic
mapping (lymphatic mapping or ILM). ILM helps trace the lymphatic patterns in a
cancer patient to evaluate potential tumor drainage and cancer spread in
lymphatic tissue. The technique does not detect cancer; rather it helps surgeons
identify the lymph node(s) to which a tumor is likely to drain and spread. The
lymph node(s), sometimes referred to as the "sentinel" node(s), may provide
critical information about the stage of a patient's disease. ILM begins when a
patient is injected at the site of the main tumor with a commercially available
radioactive tracing agent. The agent is intended to follow the same lymphatic
flow as the cancer would if it had metastasized. The surgeon may then track the
agent's path with a hand-held gamma-radiation-detection probe, thus following
the potential avenues of metastases and identifying lymph nodes to be biopsied
for evaluation and determination of cancer spread.


                                       28





Numerous clinical studies, involving a total of nearly two thousand patients and
published in peer-reviewed medical journals such as Oncology (January 1999) and
The Journal of The American College of Surgeons (December 2000), have indicated
ILM is approximately 97% accurate in predicting the presence or absence of
disease spread in melanoma and breast cancers. Consequently, it is estimated
that more than 80% of breast cancer patients who would otherwise have undergone
full axillary lymph node dissections (ALND), involving the removal of as many as
20 - 30 lymph nodes, might be spared this radical surgical procedure if the
sentinel node was found to be free of cancer. Surgeons practicing ILM have found
that our gamma-detection probes are well suited to the procedure.

Hundreds of articles have been published in recent years in peer-reviewed
journals on the topics of sentinel lymph node biopsy and ILM. Furthermore, a
number of thought leaders and cancer treatment institutions have recognized and
embraced the technology as standard of care for melanoma and, in some cases, for
breast cancer. Our marketing partner continues to see strong sales, especially
for use in breast cancer treatment. Lymphatic mapping in breast cancer is the
subject of national and international clinical trials, including studies
sponsored by the U.S. Department of Defense, the National Cancer Institute (NCI)
and the American College of Surgeons. Although we have been selling gamma
detection devices for use in surgical oncology for over seven years, we believe
many surgeons in the U.S. and the rest of the world have delayed adoption of
lymphatic mapping pending the outcome of these important trials. We believe that
once data from these trials are published; there will be an additional demand
for our devices. We continue to monitor these trials and to work with our
marketing partners and thought leaders in the surgical community to set up and
support training courses internationally for lymphatic mapping. We also believe,
based on an estimate of the total number of operating rooms in medical centers
that are capable of performing the types of procedures in which our gamma
devices are used, that roughly half of the potential global market for devices
such as ours remains untapped. Courses showcasing our instruments continue to be
held at many nationally and internationally renowned cancer-specializing and
teaching institutions. These courses appear to be positively impacting the
adoption of lymphatic mapping, albeit not as rapidly as we would like to see.

In addition to lymphatic mapping, surgeons are investigating the use of our
device for other gamma guided surgery applications, such as evaluating the
thyroid function, in determining the state of disease in patients with vulvar
and penile cancers, and in SLNB in prostate, gastric, colon, head and neck and
non-small cell lung cancers. Expanding the application of ILM beyond the current
primary uses in the treatment of breast cancer and melanoma is the primary focus
of our strategy regarding our gamma guided surgery products. To support that
expansion, we continue to work with our marketing and distribution partners to
develop additional software-based enhancements to the neo2000 platform as well
as new probes such as the laparoscopic probe introduced in 2002 that supports
the minimally invasive emphasis in today's practice of surgery. To that end, our
goals for our gamma device business for 2006 center around introducing
additional improvements to our neo2000 system and working with our marketing
partners to further penetrate the breast care market and identify ways to expand
the application of ILM to other indications beyond breast cancer and melanoma.
We also believe that our development of Lymphoseek could be an integral step in
helping expand the application of ILM.

Blood Flow Measurement Devices

Accurate blood flow measurement is essential for a variety of clinical needs,
including:

      o     real-time monitoring;
      o     intra-operative quantification;
      o     non-invasive diagnostics; and
      o     evaluation of cardiac function.

Blood flow velocity measurements are often confused with volume blood flow.
These two variables, however, are normally different parameters that respond
differently to pathological conditions and provide different data. Blood flow
velocity is used primarily for determining the existence of a stenosis
(narrowing or obstruction) in the vascular surgery setting, while the
applications of blood flow volume have potential impact across a much broader
range of medical disciplines.


                                       29





Cardiosonix has developed and is commercializing the Quantix line of products
that employ a unique and proprietary technology that allows for measurement of
blood flow volume, velocity and several other hemodynamic parameters that permit
the real-time assessment of conduit hemodynamic status.

The Quantix technology utilizes a special application of the Doppler method
through simultaneous projection of a combination of narrow beams with a known
angle between them. Thus, based on trigonometric and Doppler considerations, the
angle of insonation can be obtained, resulting in accurate, angle-independent
blood flow velocity measurements that do not require the use of complicated,
expensive imaging systems. In order to obtain high-resolution velocity profiles,
the Quantix devices use a multi-gated pulse wave Doppler beam. With this method,
specific sample volumes along the ultrasound beam can be separately evaluated,
and the application of a flow/no flow criterion can be made. The Cardiosonix
technology applies a special use of digital Doppler technology, which with the
digital signal processing power of the system allows hundreds of sample volumes
to be sampled and processed simultaneously, thus providing high resolution
velocity profiles for both angle and vascular diameter calculations, and
subsequently volume blood flow measurements. At present, Cardiosonix has two
products in the early stages of commercialization designed to provide blood flow
measurement and cardiac output information to physicians in cardiac/vascular
surgery and neurosurgery. The technology also has the potential to be applied in
other healthcare settings where measurement of blood flow may be beneficial.

Quantix/ORTM is designed to permit cardiovascular surgeons to obtain
intraoperative volume blood flow readings in various targeted blood vessels
within seconds. The system consists of an insonation angle-independent
ultrasound probe and digital numerical displays of blood flow rate. Thus, the
surgeon obtains immediate, real-time and quantitative readings while focused on
the target vessel. Quantifying blood flow can be very beneficial during
anastomostic or other bypass graft procedures to determine adequate blood flow.
While measurement is advisable whenever a blood vessel is exposed and
manipulated intra-operatively, generally this is not the current practice.

Ultimately, in practice, the surgeon generally resorts to using his eyes and
fingers in a process called finger palpation to qualitatively assess vessel
flow. The Quantix/OR offers the surgeon immediate and simple quantitative
assessment of blood flow in multiple blood vessels and grafts. The primary
advantage of finger palpation is that it is fast, simple and low cost; the
disadvantages are that it requires a good deal of experience, it is difficult to
perform in vessels embedded in tissue, it can become difficult to interpret in
large vessels, and it permits only a very qualitative and subjective assessment.
A significant partial occlusion (or even a total occlusion) will result in
significant vessel "distention" and strong pulse that may mislead the surgeon.
Rather than rely on such a subjective clinical practice, which is highly
experience-dependent, the Quantix/OR is designed to allow the surgeon to rely on
more quantifiable and objective information. We believe that Quantix/OR
represents a measurable improvement over existing technologies to directly
measure blood flow intraoperatively. Other technologies that attempt to measure
intraoperative blood flow directly are generally more invasive and are
impractical when non-skeletonized vessel measurements are required. As a result,
a majority of surgeons generally resort to finger palpation to qualitatively,
rather than quantitatively, measure vessel perfusion.

The initial physician and distributor evaluation of the flagship product, the
Quantix/OR, during 2004 indicated a number of design deficiencies that needed to
be corrected before further commercial distribution of the product was
advisable. The development activities for the Quantix/OR over the last year have
therefore involved modification of the user interface software functions and a
redesign of the Quantix/OR probe ergonomics to enhance system performance,
improve ease of measurement and expand physician acceptance of the system. The
Quantix/OR device has received CE mark regulatory clearance for marketing in the
European Union (EU) as well as FDA 510(k) clearance for marketing in the United
States.


                                       30





Quantix/NDTM is intended to allow neurosurgeons and neurologists, as well as
intensive care unit or emergency room physicians, to non-invasively measure the
internal carotid artery blood flow in a simple, real-time manner. Quantix/ND
consists of a control unit and an ultrasound probe that obtains signals directly
from the carotid artery in a non-invasive manner. Quantix/ND is designed
primarily for use in monitoring head trauma patients in neuro-intensive care
units and emergency rooms. Periodic blood flow measurements may minimize the
risk of brain impairment. To-date, we have placed the Quantix/ND device with a
limited number of thought leaders. While we are unaware of any competitive
measurement system on the market today that provides real-time, bedside,
non-invasive, continuous, direct and accurate measurements of a complete suite
of hemodynamic parameters including blood flow, we also believe that the current
market for the Quantix/ND may be primarily as a research tool until additional
feedback is received from those who are evaluating the device. The Quantix/ND
device has received CE mark regulatory clearance for marketing in the EU as well
as FDA 510(k) clearance for marketing in the United States.

Our strategy related to Cardiosonix products for 2006 continues to emphasize the
three primary objectives we have established for the Quantix product line:

o     to secure and train additional marketing and distribution partners for key
      global markets for the Quantix/OR device;
o     to achieve commercial sales of Cardiosonix' Quantix products beyond
      demonstration unit sales that would demonstrate broader market acceptance
      of the products; and
o     to promote and expand the clinical evaluation of the Quantix/ND and
      Quantix/OR with thought leaders in the neurosurgical, cardiovascular and
      vascular surgery arenas.

We cannot assure you, however, that any of Cardiosonix' products will achieve
market acceptance. See Risk Factors.

Lymphoseek

Our gamma detection devices are primarily capital in nature; as such, they
generate revenue only on the initial sale. To complement the one-time revenue
stream related to capital products, we are working on developing recurring
revenue or "procedural" products that would generate revenue based on each
procedure in which they were used. The product we are working on with the
greatest near-term potential in this area involves a proprietary drug compound
under exclusive worldwide license from the University of California, San Diego
(UCSD) that we refer to as Lymphoseek. If proven effective and cleared for
commercial sale, Lymphoseek would be the first radiopharmaceutical specifically
designed and labeled for the targeting of lymphatic tissue.

Neoprobe and UCSD completed the initial pre-clinical evaluations of Lymphoseek
in 2001. Since that time, UCSD has initiated four Phase I clinical trials
involving Lymphoseek. The status of these trials is listed below:

                                             Number of
       Indication                            Patients             Status
       ----------                            ---------            ------
       Breast (peritumoral injection)           24               Completed
       Melanoma                                 24               Completed
       Breast (intradermal injection,
          next day surgery)                     60               Ongoing
       Prostate                                 60               Ongoing

These Phase I studies have been supported, including being substantially funded
through research grants, by a number of organizations such as the Susan G. Komen
Breast Cancer Research Foundation, the American Cancer Society (ACS) and the
NCI. Research data from these clinical evaluations of Lymphoseek have been
presented at recent meetings of the Society of Nuclear Medicine, the Society of
Surgical Oncology and the World Sentinel Node Congress.

In November 2003 we met with the Interagency Council on Biomedical Imaging in
Oncology (Interagency Council), an organization representing FDA, the NCI and
the Centers for Medicare and Medicaid Services, to discuss the regulatory
approval process and to determine the objectives for the next clinical trial
involving Lymphoseek. During 2004, we prepared and submitted an investigational
new drug (IND) application to FDA to support the marketing clearance of
Lymphoseek.


                                       31





In the first quarter of 2005, we announced that FDA had accepted our application
to establish a corporate IND for Lymphoseek. With the transfer of the UCSD
physician IND to Neoprobe, we assumed full clinical and commercial
responsibility for the development of Lymphoseek. Following the establishment of
the corporate IND, Neoprobe's clinical and regulatory personnel began
discussions with FDA regarding the clinical development program for Lymphoseek.

As a "first in class" drug, Neoprobe was advised that additional non-clinical
studies needed to be completed before additional clinical testing of the drug
could occur in humans. The non-clinical testing was successfully completed in
the fourth quarter of 2005 and the reports were filed with FDA in December. The
seven studies included repeat administrations of Lymphoseek at dosages
significantly in excess of the anticipated clinical dosage. None of the
non-clinical studies revealed any toxicity issues associated with the drug.

In preparation for the commencement of the multi-center clinical study, Neoprobe
engaged the services of a global clinical research organization (CRO) to oversee
and monitor the conduct of the Phase II and Phase III clinical studies. Neoprobe
and the CRO began working with some of the leading cancer treatment hospitals in
the United States that Neoprobe had identified to participate in the clinical
studies. We developed and are reviewing with the clinical sites and regulatory
agencies the Phase II protocol, investigator's brochure and case report forms to
obtain regulatory clearance and institutional clearance from the clinical sites
to commence patient enrollment in the Phase II study. An investigator's meeting
was held with the Phase II clinical investigators at the recently completed
Society of Surgical Oncology (SSO) meeting in March 2006 in preparation for the
initiation of patient enrollment in the Phase II study. In addition, we used the
SSO meeting as a venue to meet with and recruit potential investigators for the
planned Phase III study of Lymphoseek to be initiated later in 2006.

Upon the submission of the IND and draft Phase II protocol, FDA advised Neoprobe
that commercially produced Lymphoseek would need to be used in the Phase II
clinical study, as opposed to using drug previously manufactured in laboratories
at UCSD for the Phase II clinical study. Also, the regulatory agencies raised a
number of Chemistry, Manufacturing and Control (CMC) questions regarding the
drug compound and its complete characterization. Neoprobe began the transfer of
bulk drug manufacturing to Reliable Biopharmaceutical early in 2005 and engaged
Cardinal Health to develop and validate procedures and assays to establish
commercial standards for the formulation, filling and lyophilization of the drug
compound. Developing responses to FDA to their CMC questions proved to be more
challenging than originally anticipated, but both Reliable and Cardinal are
concluding their work and we believe we will be in a position to submit a CMC
response to FDA in April 2006.

With the completion and acceptance by FDA of the Phase II protocol amendment,
the submission of non-clinical testing data and the pending submission of
responses to CMC questions asked by FDA, we hope to begin patient enrollment in
the Phase II trial in the second quarter and to be in a position to report
preliminary results approximately ninety days after the commencement of patient
enrollment. While preparing for the Phase II study, we began working with
regulatory agencies in Europe to determine the pathway to seek marketing
clearance for Lymphoseek in Europe. As a result of those discussions, it is our
intention to pursue marketing clearance for Lymphoseek through the centralized
authority, the European Agency for the Evaluation of Medicinal Products (EMEA)
in London. We intend to review with the EMEA the Phase III protocol design that
will be discussed with FDA with the intention of including European sites in the
Phase III study. In addition, we have been discussing the evaluation of
Lymphoseek in gastric cancers with researchers in Japan and we intend to provide
commercial Lymphoseek kits to the investigators to assist in their evaluation.
We cannot assure you, however, that this product will achieve regulatory
approval, or if approved, that it will achieve market acceptance. See Risk
Factors.


                                       32





RIGS

From inception until 1998, Neoprobe devoted significant efforts and resources to
the development of its proprietary RIGS technology. The RIGS system combines a
patented hand-held gamma radiation detection probe, proprietary radiolabeled
cancer-specific targeting agents, and patented surgical methods to provide
surgeons with real-time information to locate tumor deposits not detectable by
conventional methods, and to assist in more thorough removal of the cancer. The
RIGS system is designed to assist the surgeon in the more thorough removal of
the cancer, thereby leading to improved surgical treatment of the patient. The
targeting agents used in the RIGS process are monoclonal antibodies, labeled
with a radioactive isotope that emits low energy gamma rays. The device used is
a very sensitive radiation detection instrument that is capable of detecting
small amounts of radiation bound to the targeting agent. Before surgery, a
cancer patient is injected with one of the targeting agents which circulates
throughout the patient's body and binds specifically to cancer cell antigens or
receptors. Concentrations of the targeting agent are then located during surgery
by Neoprobe's gamma-detection device, which emits an audible tone to direct the
surgeon to targeted tissue.

RIGScan CR is an intraoperative agent consisting of a radiolabeled murine
monoclonal antibody (MAb CC49). The radiolabel used is (125)I, a 27 - 35 KeV
emitting isotope. The MAb used in RIGScan CR is the CC49 MAb developed by the
NCI and licensed to Neoprobe by the National Institutes of Health (NIH). The
CC49 MAb is produced from a murine cell line generated by the fusion of splenic
lymphocytes from mice immunized with tumor-associated glycoprotein-72 (TAG-72)
with non-immunoglobulin secreting P3-NS-1-Ag4 myeloma cells. The CC49 MAb
localizes or binds to TAG-72 and shows a strong reactivity with both LS-174T
colon cancer extract and to a breast cancer extract.

RIGScan CR is the biologic component for the RIGS system to be used in patients
with colon or rectal cancer. The RIGS system was conceived to be a diagnostic
aid in the intraoperative detection of clinically occult disease. RIGScan CR is
intended to be used in conjunction with other diagnostic methods, for the
detection of the extent and location of tumor in patients with colorectal
cancer. The detection of clinically occult tumor provides the surgeon with a
more accurate assessment of the extent of disease, and therefore may impact the
surgical and therapeutic management of the patient. Clinical trials suggest that
RIGScan CR provides additional information outside that provided by standard
diagnostic modalities (including surgical exploration) that may aid in patient
management. Specifically, RIGScan CR used as a component of the RIGS system
confirms the location of surgically suspicious metastases, evaluates the margins
of surgical resection, and detects occult tumor in perihepatic (portal and
celiac axis) lymph nodes.

Neoprobe conducted two Phase III studies, NEO2-13 and NEO2-14, of RIGScan CR in
the mid-1990s in patients with primary and metastatic colorectal cancer,
respectively. Both studies were multi-institutional involving cancer treatment
institutions in the United States, Israel, and Europe. The primary endpoint of
both studies was to demonstrate that RIGScan CR detected pathology-confirmed
disease that had been undetected by traditional preoperative (i.e., CT Scans) or
intraoperative (i.e., surgeon's visual observations and palpation) means. That
is, the trials were intended to show that the use of RIGScan CR assisted the
surgeon in the detection of occult tumor. In 1996, Neoprobe submitted
applications to the EMEA and FDA for marketing approval of RIGScan CR for the
detection of metastatic colorectal cancer.

Clinical study NEO2-14, which was submitted to FDA in the RIGScan CR Biologic
License Application (BLA), enrolled 151 colorectal cancer patients with either
suspected metastatic primary colorectal disease or recurrent colorectal disease.
During FDA's review of the BLA, 109 of the enrolled patients were determined to
be evaluable patients. Clinical study NEO2-13 was conducted in 287 enrolled
patients with primary colorectal disease. The primary end-point for clinical
study NEO2-13 was the identification of occult tumor.

NEO2-14 was the pivotal study submitted with Neoprobe's referenced BLA. Two
additional studies evaluating patients with either primary or metastatic
colorectal disease, NEO2-11 (a multi-center study) and NEO2-18 (a single
institution study), were included in the BLA and provided supportive proof of
concept (i.e., localization and occult tumor detection) and safety data. A study
summary report for NEO2-13 was submitted under the BLA; however, FDA undertook
no formal review of the study.


                                       33





Following review of our applications, we received requests for further
information from FDA and from the European Committee for Proprietary Medicinal
Products on behalf of the EMEA. Both FDA and EMEA acknowledged that our studies
met the diagnostic endpoint of the Phase III clinical study, which was to
provide incremental information to the surgeon regarding the location of hidden
tumor. However, both agencies wanted to know how the finding of additional tumor
provided clinical benefit that altered patient management or outcome for
patients with metastatic colorectal cancer. In a series of conversations with
FDA the product claims were narrowed to the intraoperative detection of hepatic
and perihepatic disease in patients with advanced colorectal cancer and patients
with recurrent colorectal cancer.

FDA determined during its review of the BLA that the clinical studies of RIGScan
CR needed to demonstrate clinical utility in addition to identifying additional
pathology confirmed disease. In discussions between Neoprobe and the agency, an
FDA driven post hoc analysis plan was developed to limit the evaluation of
RIGScan CR to patients with hepatic and perihepatic disease with known
metastasis to the liver. Findings of "occult" disease and subsequent changes in
patient management (i.e., abandoning otherwise risky hepatic resections) in this
limited population would serve as a measure of patient benefit. FDA's analysis
of the patients enrolled in NEO2-14 matching the limited criteria was evaluated
with a determination to confirm the surgical resection abandonment outcome. The
number of evaluable patients in this redefined patient population was deemed too
small by the agency and the lack of pre-stated protocol guidance precluded
consistent sets of management changes given similar occult findings. The number
of evaluable patients for any measure of clinical utility, therefore, was too
small to meet relevant licensing requirements and FDA ultimately issued a not
approvable letter for the BLA on December 22, 1997, describing certain clinical
and manufacturing deficiencies. Neoprobe withdrew its application to the EMEA in
November 1997.

We developed a clinical response plan for both agencies during the first half of
1998. However, following our analysis of the regulatory pathways for approval
that existed at that time, we determined that we did not have sufficient
financial resources to conduct the additional studies requested and sought to
identify others with an interest in continuing the development process.

In recent years, we have obtained access to survival analyses of patients
treated with RIGScan CR which have been prepared by third parties, indicating
that RIGScan CR may be predictive of, or actually contribute to, a positive
outcome when measuring survival of the patients that participated in our
original BLA studies. The data or its possible significance was unknown at the
time of the BLA review given the limited maturity of the follow-up experience.
The data includes publication by some of the primary investigators involved in
the Phase III RIGS trials who have independently conducted survival follow-up
analyses to their own institution's RIGS trial patients with apparently
favorable results relating to the long-term survival prognosis of patients who
were treated with RIGS. In addition, we have recently learned that FDA has held
the BLA originally filed with FDA in 1996 open. Based primarily on these pieces
of information, we requested a meeting with FDA to discuss the possible next
steps for evaluating the survival related to our previous Phase III clinical
trials as well as the possible submission of this data, if acceptable, as a
prospective analysis in response to questions originally asked by FDA in
response to our original BLA.

The April 2004 meeting with FDA was an important event in the re-activation of
the RIGS program. The meeting was very helpful from a number of aspects: we
confirmed that the RIGS BLA remains active and open. We believe this will
improve both the cost effectiveness and timeliness of future regulatory
submissions for RIGScan CR. Additionally, FDA preliminarily confirmed that the
BLA may be applicable to the general colorectal population; and not just the
recurrent colorectal market as applied for in 1996. Applicability to a general
colorectal population could result in a greater market potential for the product
than if applicable to just the recurrent population. During the meeting, FDA
indicated that it would consider possible prognostic indications for RIGScan CR
and that survival data from one of our earlier Phase III studies could be
supportive of a prognostic indication. We provided FDA with a draft protocol for
a Phase III prognostic/therapeutic trial.


                                       34





Neoprobe received a response from FDA that the prognostic/therapeutic trial
design appeared to meet their guidelines. FDA's response to our clinical
submission included an invitation for Neoprobe to seek a special protocol
assessment (SPA) of its proposed Phase III study. Neoprobe intends to seek a SPA
review of the complete Phase III package including the clinical protocol,
training materials and data collection forms later this year. In concert with
our meetings with FDA, we met with representatives of the European regulatory
body, the EMEA, to seek guidance for the RIGScan CR program in Europe. The
guidance from the EMEA was consistent with the input from FDA with the
additional recommendation that any future clinical studies be conducted with the
humanized version of the RIGScan CR antibody. It is possible that the regulatory
pathway may continue to evolve as we seek to reach a consensus with the
regulatory agencies on the reactivation of the BLA for RIGScan CR.

In addition, the RIGScan CR biologic drug has not been produced for several
years and we believe it is likely we would have to perform some additional work
related to ensuring the drug cell line is still viable and submit this data to
FDA for their evaluation before approval could be considered. We have initiated
discussions with established biologic manufacturing organizations to determine
the costs and timelines associated with the production of commercial quantities
of the CC49 antibody. In addition, we will need to establish radiolabeling
capabilities for the CC49 antibody in order to meet the regulatory needs for the
RIGScan CR product.

In parallel with our discussions with the regulatory authorities, we have
discussed the clinical and regulatory strategy for RIGScan CR with reimbursement
consultants who provided us with valuable input regarding the potential target
pricing for a RIGScan product.

In November 2005, Neoprobe submitted a corporate IND application for the
modified humanized version of RIGScan CR. With the establishment of the
corporate IND, responsibility for the clinical and commercial development of the
humanized version of RIGScan CR was officially transferred from a physician
sponsored IND to Neoprobe. Prior to the evaluation of modified antibody in a
Phase I clinical trial, all clinical development of RIGScan CR had been
conducted with a murine (i.e., mouse DNA-based) version of a monoclonal
antibody. The Phase I trial was the first test in human patients using a
modified version of the antibody from which the prominent parts of the mouse DNA
chain had been removed. In early 2006, we filed an IND amendment that included a
final report to FDA of the Phase I study.

During 2005, we devoted significant effort, working in connection with business
development consultants, toward the identification of potential development
partners for RIGScan CR. Our efforts to date have resulted in discussions with a
number of parties, some of which have led to due diligence and partnership
discussions. We continue to believe it will be necessary for Neoprobe to
identify a development partner or an alternative funding source in order to
prepare for and to fund the pivotal clinical testing that will be necessary to
gain marketing clearance for RIGScan CR. However, while we have parties who have
indicated an interest in the technology, none of the discussions to-date have
resulted in definitive agreements with any party or parties. In addition, we do
not believe these efforts will result in a partnership until further clarity can
be added to the RIGScan regulatory approval pathway, such as perhaps obtaining a
positive SPA determination from FDA. However, even if we are able to make such
arrangements on satisfactory terms, we believe that the time required for
continued development, regulatory approval and commercialization of a RIGS
product would likely be a minimum of five years before we receive any
significant product-related royalties or revenues. We cannot assure you that we
will be able to complete definitive agreements with a development partner for
the RIGS technology and do not know if a partner will be obtained on a timely
basis on terms acceptable to us, or at all. We also cannot assure you that FDA
or the EMEA will clear our RIGS products for marketing or that any such products
will be successfully introduced or achieve market acceptance. See Risk Factors.

Activated Cellular Therapy

Through various research collaborations, we performed early stage research on
another technology platform, ACT, based on work originally done in conjunction
with the RIGS technology. ACT is intended to boost the patient's own immune
system by removing lymph nodes identified during surgery and then, in a cell
processing technique, activating and expanding "helper" T-cells found in the
nodes. Within 10 to 14 days, the patient's own immune cells, activated and
numbering more than 20 billion, are infused into the patient in an attempt to
trigger a more effective immune response to the cancer.


                                       35





In the course of our research into ACT performed with RIGS, we learned that
these lymph node lymphocytes containing helper T-cells could be activated and
expanded to treat viral and autoimmune disease afflicted patients as well as
oncology patients. We have seen promising efficacy of this technology
demonstrated from six Phase I clinical trials covering the oncology, viral and
autoimmune applications.

In 2005, we formed a new subsidiary, Cira Bio, to explore the development of
ACT. Neoprobe owns approximately 90% of the outstanding shares of Cira Bio with
the remaining shares being held by the principals of a private holding company,
Cira LLC. In conjunction with the formation of Cira Bio, an amended technology
license agreement also was executed with The Ohio State University, from whom
both Neoprobe and Cira LLC had originally licensed or optioned the various
cellular therapy technologies. As a result of the cross-license agreements, Cira
Bio has the exclusive development and commercialization rights to three issued
U.S. patents that cover the oncology and autoimmune applications of its
technology. In addition, Cira Bio has exclusive licenses to several pending
patent applications.

Cira Bio engaged the Battelle Memorial Institute to complete a technology and
manufacturing process assessment of the cellular therapy approach. In addition,
a scientific advisory group is being formed to develop a clinical and regulatory
approach for the Cira Bio technology. Following the completion of these
assessments and the formation of a commercialization strategy, Cira Bio intends
to raise the necessary capital to move this technology platform forward. The
means by which this funding is obtained will likely dilute Neoprobe's ownership
interest in Cira Bio; however, we believe that moving forward such a promising
technology will only yield positive results for the Neoprobe shareholders and
the patients who could benefit from these treatments. However, we do not know if
we will be successful in obtaining additional funding, on terms acceptable to
us, or at all.

In addition, although the prospects for ACT may be improved depending on the
outcome of a decision to renew development efforts for RIGS, we currently do not
intend to fund any significant ACT-related research and development beyond the
evaluation work performed in 2005 until a source of further funding is
identified. We cannot assure you that we will be successful in obtaining
additional funding, or if obtained, that any ACT products will be successfully
developed, tested or licensed, or that any such products will gain market
acceptance. See Risk Factors.

Market Overviews

The medical device marketplace is a fast growing market. Medical Device &
Diagnostic Industry magazine reports an annual medical device and diagnostic
market of $75 billion in the U.S. and $169 billion internationally.

Cancer Market Overview

Cancer is the second leading cause of death in the U.S. and Western Europe and
is responsible for over half a million deaths annually in the U.S. alone. The
NIH estimates the overall annual costs for cancer (the primary focus of our
gamma detection and pharmaceutical products) for the U.S. in the year 2005 at
$209.9 billion: $74.0 billion for direct medical costs, $17.5 billion for
indirect morbidity, and $118.4 billion for indirect mortality. Our line of gamma
detection systems is currently used primarily in the application of ILM in
breast cancer and melanoma which, according the ACS, are expected to account for
15% and 4%, respectively, of new cancer cases in the U.S. in 2006.

The NIH has estimated that breast cancer will annually affect approximately
500,000 women in North America, Western Europe, and other major economic
markets. Breast cancer is the second leading cause of death from cancer among
all women in the U.S. According to the ACS, nearly 213,000 new cases of invasive
breast cancer are expected to be diagnosed and approximately 41,000 women are
expected to die from the disease during 2006 in the U.S. alone. The incidence of
breast cancer increases with age, rising from about 100 cases per 100,000 women
at age 40 to about 400 cases per 100,000 women at age 65. Thus, we believe that
the significant aging of the population, combined with improved education and
awareness of breast cancer and diagnostic methods, will lead to an increased
number of breast cancer surgical diagnostic procedures.


                                       36





Approximately 80% of the patients diagnosed with breast cancer undergo a lymph
node dissection (either ALND or SLNB) to determine if the disease has spread.
While many breast cancer patients are treated in large cancer centers or
university hospitals, regional and/or community hospitals currently treat the
majority of breast cancer patients. Over 10,000 hospitals are located in the
markets targeted for our gamma detection ILM products. While we are aware of no
published statistics on the number of institutions that are currently using
gamma detection devices in ILM, we believe that approximately fifty percent of
the total potential global market for gamma detecting devices remains to be
penetrated at this time. However, if the potential of Lymphoseek as a
radioactive tracing agent is ultimately realized, it has the potential to
address not only the current breast and melanoma markets on a procedural basis,
but also to assist in the clinical evaluation and staging of solid tumor cancers
and expanding ILM to additional indications, such as gastric, non-small cell
lung and other solid tumor cancers.

We estimate the total market potential for Lymphoseek, if ultimately approved
for all of these indications, could exceed $200 million. However, we cannot
assure you that Lymphoseek will be cleared to market, or if cleared to market,
that it will achieve the prices or sales we have estimated.

The ACS estimates that over 147,000 new incidences of colon and rectal cancers
will occur in the U.S. in 2006. Based on an assumed recurrence rate of 40%, this
would translate into total potential surgical procedures of over 200,000
annually in the U.S. alone. We believe the number of procedures in other markets
of the world to be approximately two times the estimated U.S. market. As a
result, we believe the total potential global market for RIGScan CR could be in
excess of $3 billion annually, depending on the level of reimbursement allowed.
However, we cannot assure you that RIGScan CR will be cleared to market, or if
cleared to market, that it will receive the reimbursement or achieve the level
of sales we have currently estimated.

Blood Flow Measurement Market Overview

Cardiovascular disease is the number one killer of men and women in the U.S. and
in a majority of countries in the rest of the world that track such statistics.
The Centers for Disease Control registered over 6.8 million inpatient
cardiovascular procedures in the U.S. during 2003 that directly involve
cardiovascular circulation. In the United States in 2003, the National Center
for Healthcare Services estimates that there were 467,000 coronary artery bypass
surgeries performed on 268,000 patients. We, as well as our competitors and
other industry analysts, generally estimate the rest of the world's incidence of
such modalities at roughly twice U.S. estimates.

The American Heart Association (AHA) estimates the total cost of cardiovascular
diseases and stroke in the United States will exceed $403.1 billion in 2006. A
substantial portion of these expenditures is expected to be for non-invasive
image and intravascular examination. We are focused on two distinct markets
within the hospital setting for Cardiosonix' products:

      o     intraoperative assessment (Quantix/OR); and,
      o     non-invasive diagnostics (Quantix/ND).

Based on data obtained from the AHA, the Society of Thoracic Surgeons and the
American Hospital Association, it is estimated that there are approximately 1
million vascular and cardiovascular procedures performed in the U.S. that could
benefit from qualitative blood flow measurement. Based on these estimates,
information obtained from industry sources and data published by our competitors
and other medical device companies, we estimate the worldwide total of target
procedures to be approximately two times the U.S. totals.

Based on the above number of procedures, assuming we are able to achieve market
prices that are comparable to what our competitors are achieving (estimated at
averaging $20,000 per system or $130 per procedural use), we believe the
worldwide market potential for blood flow measurement products in the niches
which our products address to be more than $1.5 billion. We believe that gaining
even a modest share of this market would result in significant annual revenues
for our company. We cannot assure you, however, that Cardiosonix products will
achieve market acceptance and generate the level of sales or prices anticipated.


                                       37





Marketing and Distribution

Gamma Detection Devices

We began marketing the current generation of our gamma detection systems, the
neo2000, in October 1998. Since October of 1999, our gamma detection systems
have been marketed and distributed throughout most of the world through Ethicon
Endo-Surgery, Inc. (EES), a Johnson & Johnson company. In Japan, however, we
market our products through a pre-existing relationship with Century Medical,
Inc.

The heart of the neo2000 system is a control unit that is software-upgradeable,
permitting product enhancements without costly remanufacturing. Since the
original launch of the neo2000 system, we have introduced an enhanced version of
our 14mm reusable probe optimized for lymphatic mapping procedures and a
laparoscopic probe intended for certain minimally invasive procedures. We have
also developed three major software version upgrades for the system that have
been made available for sale to customers. We intend to continue developing
additional ILM-related probes and instrument products in cooperation with EES to
maintain our leadership position in the ILM field.

Physician training is critical to the use and adoption of ILM products by
surgeons and other medical professionals. Our company and our marketing partners
have established relationships with leaders in the ILM surgical community and
have established and supported training courses internationally for lymphatic
mapping. We intend to continue to work with our partners to expand the number of
ILM training courses available to surgeons.

We entered into our current distribution agreement with EES effective October 1,
1999 for an initial five year term with options to extend for two successive
two-year terms. In March 2004, EES exercised its first two year extension
option, and in March 2006 EES exercised its option for the second two-year term
extension, thus extending the term of our current agreement through December 31,
2008. Under this agreement, we manufacture and sell our ILM products almost
exclusively to EES, who distributes the products globally (except for Japan).
EES has no ongoing purchase or reimbursement commitments to us other than the
rolling four-month binding purchase commitment for gamma detection devices as
outlined in the distribution agreement. Our agreement with EES also contains
certain termination provisions and licenses to our intellectual property that
take effect only in the event we fail to supply product, or for other reasons
such as a change of control. See Risk Factors.

Gamma Detection Radiopharmaceuticals

We have not established a marketing or distribution channel for either RIGScan
CR or Lymphoseek. We anticipate initiating such discussions as we continue to
move forward with clinical development. We have had initial discussions with
parties who may be interested in marketing and distribution of these products;
however, such discussions to date have been preliminary in nature and have not
resulted in any definitive arrangements. With respect to RIGScan CR, we believe
there are development milestones that can be achieved prior to the need for
significant capital investment in RIGScan CR such as preparing the request for a
SPA and completing a final protocol review. However, we continue to believe it
will be necessary for Neoprobe to identify a development partner or an
alternative funding source in order to prepare for and to fund the pivotal
clinical testing that will be necessary to gain marketing clearance for RIGScan
CR. At the present time, while we have parties who have indicated an interest in
entering into a development relationship, we do not believe these efforts will
result in a definitive partnership until at least a positive SPA is obtained. We
cannot assure you that we will be able to secure marketing and distribution
partners for RIGS or Lymphoseek, or if secured, that such arrangements will
result in significant sales of either product.


                                       38





Blood Flow Measurement Devices

Both of our blood flow measurement devices, the Quantix/ND and Quantix/OR have
received marketing clearance in the U.S. and the EU and certain other foreign
markets. Our goal is to ensure sales and distribution coverage through third
parties of substantially all of the U.S., the EU, the Pacific Rim of Asia and
selective markets in the rest of the world. Currently, we have in place or have
executed or reached agreement in principle with distributors and/or master
distributors for the Quantix/OR covering the United States, all major market
countries in the European Union as well substantially all countries that
comprise the Pacific Rim of Asia. In addition, we have distribution arrangements
in place covering major portions of Central and South America.

The initial negative response to the original Quantix/OR system strained many of
our distributor relationships; however, we are heartened by the distributor
response to the changes and improvements we have made to the Quantix/OR system.
Despite the difficulties we have encountered, our underlying belief in the
market need for a reliable system to measure blood flow has not been dampened.
We continue to believe strongly in the blood flow market and believe the
redesigned Quantix/OR system will generate increasing sales in 2006 and beyond.

In addition to the development activities on the Quantix/OR, the first
multi-center data from the correlation of Cardiac Blood Flow (CBF) measurement
with accepted clinical events was presented at the International Conference on
Xenon CT-CBF and Related CBF Techniques in Bordeaux, France in June 2004. The
presentation of the clinical evaluations of the Quantix/ND has set the stage for
the broader adoption of the technology in the monitoring of patients with
neuro-trauma and other neurology situations.

We anticipate spending a significant amount of time and effort during 2006 to
penetrate the end-user market. We will need to complete the training of our
distributors and independent sales agents and work through them with thought
leaders in the cardiac and neurosurgical fields to gain penetration at the
end-user level. We anticipate placing some additional blood flow systems with
industry thought leaders to obtain critical feedback; however, we plan to
continue working with the thought leaders already identified to promote
publication in support of more widespread market launch. To date, we have placed
a small number of devices with thought leaders in the U.S. and EU to support
clinical investigations by their institutions. We are also investigating
different sales models that include both capital sales and per-use or lease-type
transactions. We expect the sales model will evolve over the initial months of
sales. The market education process we envision will likely take some time to
develop in the manner we desire. In addition, the sales cycle for capital
medical devices such as our blood flow products is typically a four to six month
cycle.

Manufacturing

Gamma Detection Devices

We rely on independent contract manufacturers, some of which are single-source
suppliers, for the manufacture of the principal components of our current line
of gamma detection system products. See Risk Factors. We have devoted
significant resources to develop production capability for our gamma detection
systems at qualified contract manufacturers. Production of the neo2000 control
unit, the 14mm probe and the 11mm laparoscopic probe involve the manufacture of
components by a combination of subcontractors, including but not limited to eV
Products, a division of II-VI Corporation (eV), and TriVirix International, Inc.
(TriVirix). Currently, we have a manufacturing and supply agreement with
TriVirix for the manufacture of the 14mm probe, 11mm laparoscopic probe and the
neo2000 control unit. We also purchase certain accessories for our line of gamma
detection systems from other qualified manufacturers.

In December 1997, we entered into a supply agreement with eV for the supply of
certain crystals and associated electronics to be used in the manufacture of our
proprietary line of hand-held gamma detection probes. The original term of the
agreement with eV expired on December 31, 2002 and was automatically extended
through December 31, 2005. eV supplies 100% of the crystals used in our
products. While eV is not the only potential supplier of such crystals, any
prolonged interruption of this source could restrict the availability of our
probe products, which would adversely affect our operating results.


                                       39





In February 2004, we executed a Product Supply Agreement with TriVirix for the
manufacture of the neo2000, 14mm probe and 11mm laparoscopic probe. The initial
term of this agreement expires in February 2007 but will automatically be
extended for successive one-year periods unless six months notice is provided by
either party.

We cannot assure you that we will be able to maintain agreements with our
subcontractors on terms acceptable to us, or that our subcontractors will be
able to meet our production requirements on a timely basis, at the required
levels of performance and quality. In the event that any of our subcontractors
is unable or unwilling to meet our production requirements, we cannot assure you
that an alternate source of supply could be established without significant
interruption in product supply or without significant adverse impact to product
availability or cost. Any significant supply interruption or yield problems that
we or our subcontractors experience would have a material adverse effect on our
ability to manufacture our products and, therefore, a material adverse effect on
our business, financial condition, and results of operations until a new source
of supply is qualified. See Risk Factors.

Gamma Detection Radiopharmaceuticals

In preparation for the commencement of multi-center clinical evaluation of
Lymphoseek, Neoprobe has engaged drug manufacturing organizations to produce the
drug for use in the Phase II and pivotal (i.e., Phase III) clinical trials.
Neoprobe selected Reliable Biopharmaceuticals (Reliable) to produce the basic
chemical compound and Cardinal Health (Cardinal) to perform product
lyophilization (i.e., freeze-drying) and packaging processes. Once packaged, the
vialed drug can then be shipped to a hospital or regional commercial
radiopharmacy where it can be made radioactive (i.e., radiolabeled) with Tc99m
to become Lymphoseek. The commercial manufacturing processes at Reliable and
Cardinal have been validated and both organizations have assisted Neoprobe in
the preparation of chemistry, manufacturing and control section of our
submissions to FDA. At this point, our agreements with Reliable and Cardinal
cover only product to be used in the clinical trials for Lymphoseek. Further
commercial supply and distribution agreements have yet to be negotiated with
both Reliable and Cardinal. We cannot assure you that we will be successful in
reaching such agreements with Reliable or Cardinal on terms satisfactory to us
or at all.

In preparation for the initiation of the next phase of clinical evaluation of
RIGScan CR, we have also initiated discussions with potential biologic
manufacturers and radiolabeling organizations. We have held discussions with
parties who may assist in the manufacturing validation and radiolabeling of the
RIGScan product; however, we have not yet finalized agreements with these
entities. We anticipate finalizing these discussions following securing a
development partner in order to accommodate the commencement of future RIGScan
CR clinical trials. We cannot assure you that we will be successful in securing
and/or maintaining the necessary biologic, product and/or radiolabeling
capabilities. See Risk Factors.

Blood Flow Measurement Devices

The Quantix blood flow measurement devices distributed to date have been
manufactured by our subsidiary, Cardiosonix Ltd. In early 2006, we received the
approval from the Office of the Chief Scientist in Israel to transfer
manufacturing rights for the Quantix devices to Neoprobe. See Risk Factors.
Future assembly of Quantix blood flow control units will therefore be done under
the terms of the Product Supply Agreement we have in place with TriVirix for the
assembly of our gamma devices. Assembly of the Quantix/OR control units started
at TriVirix in March 2006. We currently purchase ultrasound transducer modules
and probe subassemblies from Vermon S.A. (Vermon) of France under purchase
orders. The ultrasound probe assemblies are then completed by Technical Services
for Electronics, Inc. (TSE), also under purchase orders.

We cannot assure you that we will be able to finalize supply and service
agreements with Vermon, TSE or other subcontractors for the Quantix products,
that we will be able to maintain our agreement with TriVirix, or that our
subcontractors will be able to meet our production requirements on a timely
basis, at the required levels of performance and quality. In the event that any
of our subcontractors is unable or unwilling to meet our production
requirements, we cannot assure you that an alternate source of supply could be
established without significant interruption in product supply or without
significant adverse impact to product availability or cost. Any significant
supply interruption or yield problems that we or our subcontractors experience
would have a material adverse effect on our ability to manufacture our products
and, therefore, a material adverse effect on our business, financial condition,
and results of operations until a new source of supply is qualified. See Risk
Factors.


                                       40





Competition

We face competition from medical product and biotechnology companies, as well as
from universities and other non-profit research organizations in the field of
cancer diagnostics and treatment. Many emerging medical product companies have
corporate partnership arrangements with large, established companies to support
the research, development, and commercialization of products that may be
competitive with our products. In addition, a number of large established
companies are developing proprietary technologies or have enhanced their
capabilities by entering into arrangements with or acquiring companies with
technologies applicable to the detection or treatment of cancer and the
measurement of blood flow. Many of our existing or potential competitors have
substantially greater financial, research and development, regulatory,
marketing, and production resources than we have. Other companies may develop
and introduce products and processes competitive with or superior to those of
ours. See Risk Factors.

For our products, an important factor in competition is the timing of market
introduction of our products or those of our competitors' products. Accordingly,
the relative speed with which we can develop products, complete the regulatory
clearance processes and supply commercial quantities of the products to the
market is an important competitive factor. We expect that competition among
products cleared for marketing will be based on, among other things, product
efficacy, safety, reliability, availability, price, and patent position.

Gamma Detection Devices

With the emergence of ILM, a number of companies have begun to market gamma
radiation detection instruments. Most of the competitive products have been
designed from an industrial or nuclear medicine perspective rather than being
developed initially for surgical use. We compete with products produced and/or
marketed by Care Wise Medical Products Corporation, SenoRx, Pol.Hi.Tech. Srl,
and other companies. GE Healthcare (GE) has recently entered the gamma detection
market through an arrangement with Intra-Medical Imaging LLC. We are still
assessing the impact of GE's entry into the market.

It is often difficult to glean accurate competitive information within the
lymphatic mapping field, primarily because most of our competitors are either
subsidiaries or divisions of a large corporation or privately held corporations,
whose sales revenue or volume data is, therefore, not readily available or
determinable. In addition, lymphatic mapping does not currently have a separate
reimbursement code in most healthcare systems. As such, determining trends in
the actual number of procedures being performed using lymphatic mapping is
difficult. We believe, based on our understanding of EES' success rate in
competitive bid situations, that our market share has remained relatively
constant or increased slightly in light of changes in the competitive landscape
over the past few years. As we have discussed, we believe that current sales
levels indicate that some prospective customers may be waiting on the results of
important international clinical trials prior to adoption the ILM procedure and
purchasing a gamma detection device. We expect the results from these trials,
when announced, will likely have a positive impact on sales volumes. We believe
our intellectual property portfolio will be a barrier to competitive products;
however, we cannot assure you that competitive products will not be developed,
be successful in eroding our market share or affect the prices we receive for
our gamma detection devices. See Risk Factors.


                                       41





Gamma Detection Radiopharmaceuticals

We do not believe there are any directly competitive intraoperative diagnostic
radiopharmaceuticals with RIGScan CR that would be used intraoperatively in the
colorectal cancer application that RIGScan CR is initially targeted for. There
are other radiopharmaceuticals that are used as preoperative imaging agents;
however, we are unaware of any that could be used as a real-time diagnostic aid
during surgery such as RIGScan CR.

Surgeons who practice the lymphatic mapping procedure that Lymphoseek is
intended for currently use other radiopharmaceuticals such as a sulphur-colloid
compound in the U.S. and other colloidal compounds in other markets. However,
these drugs are being used "off-label" (i.e., they are not specifically
indicated for use as a lymphatic targeting agent). As such, we believe that
Lymphoseek, if ultimately approved, would be the first drug specifically labeled
for use as a lymphatic tissue targeting agent.

Blood Flow Measurement Devices

There are several technologies on the market that measure or claim to measure
indices of blood flow. These products can be categorized as devices that measure
blood flow directly and devices that only obtain an estimation of flow
conditions. We believe our device is most directly competitive with Transit Time
Ultrasound (TT) Flowmetry. TT is the leading modality for blood flow measurement
in the operating room today. TT systems monitor blood flow invasively and are
restricted to isolated vessels. They require probe adaptation to the vessel
size, and do not provide additional vascular parameters. The technology requires
the operator to encircle the blood vessel with a probe that includes two
ultrasound transmitters/receivers on one side, and a mirror reflector on the
opposite side of the vessel. By measuring the transit time of the ultrasound
beam in the upstream and downstream directions, volume blood flow estimates can
be evaluated. In addition, there are other competitive technologies which
utilize Doppler ultrasound. Doppler technology has been around for several
decades, and is being widely used in non-invasive vascular diagnostics. Duplex
ultrasound systems have the potential to measure blood flow non-invasively.
Duplex systems are designed for imaging the anatomical severity of pathology.
This method is technician-dependent, often cumbersome and does not offer
monitoring capabilities. Plain Doppler systems provide only blood flow velocity
rather than volume flow.

Cardiosonix products are designed to address blood flow measurement across a
variety of clinical and surgical settings, and there are a number of companies
already in the marketplace that offer products related to blood flow
measurement. However, most of these products do not directly compete with
Cardiosonix products. The companies that do offer potentially competitive
products are, for the most part, smaller, privately held companies, with which
we believe we can effectively compete. Indeed, due to our belief in the
technical superiority of our products, we believe the existence of competitors
will help to educate the marketplace regarding the importance of blood flow
measurement. As we have discussed, adoption of blood flow monitoring devices for
the measurement of hemodynamic status will likely take an involved education
process as it often involves a change in clinical or surgical management. While
there is not a clear leader in these markets, the following companies compete
most directly with Cardiosonix: Transonic Systems, Inc., Medi-Stim AS, and
Carolina Medical, Inc.

Patents and Proprietary Rights

We regard the establishment of a strong intellectual property position in our
technology as an integral part of the development process. We attempt to protect
our proprietary technologies through patents and intellectual property
positions, in the United States as well as major foreign markets. Specifically,
twenty instrument patents have been issued in the United Sates as well as major
foreign markets protect our ILM technology.

Cardiosonix has also applied for patent coverage for the key elements of its
Doppler blood flow technology in the EU and the U.S. The first of the two
patents covering Cardiosonix technology was issued in the U.S. in January 2003
and claims for the second patent have been allowed. Two patents have been filed
in the EU and the claims of one patent have been allowed and the claims of the
second patent are in the late stage of review by the relevant governing bodies.


                                       42





Lymphoseek is also the subject of patent applications in the United States and
certain major foreign markets. The patent applications are held by UCSD and
licensed exclusively to Neoprobe for lymphatic tissue imaging and detection. The
first composition of matter patent covering Lymphoseek was issued in the U.S. in
June 2002. The claims of the composition of matter patent covering Lymphoseek
have been allowed in the EU and issued in the majority of EU countries in 2005.
The composition of matter patent is being prosecuted in Japan.

We continue to maintain proprietary protection for the products related to RIGS
and ACT in major global markets such as the U.S. and the EU, which although not
currently integral to our near-term business plans, may be important to a
potential RIGS or ACT development partner. The original methodology aspects of
our RIGS technology are claimed in the United States in U.S. Patent No.
4,782,840, which expired in August 2005. However, Neoprobe has recently gained
access to additional methodology applications related to our RIGS technology
that are covered by patents that provide additional patent coverage through
2018, unless extended. In addition to the RIGS methodology patents, composition
of matter patents have been issued in the U.S. and EU that cover the antibodies
used in clinical studies. The most recent of these patents issued in 2004 and
additional patent applications are pending.

The activated cellular therapy technology of Cira Bio is the subject of issued
patents in the United States to which Neoprobe has exclusive license rights.
European patent statutes do not permit patent coverage for treatment
technologies such as Cira Bio's. The oncology applications of Cira Bio's
treatment approach are covered by patents with expiration dates of 2018 and
2020, unless extended. The autoimmune applications are covered by an issued
patent with an expiration date of 2018, unless extended. The viral applications
are the subject of patent applications and other aspects of the Cira Bio
technology that are in the process of being reviewed by the United States Patent
and Trademark Office. Cira Bio has received favorable office action
correspondence on both applications.

The patent position of biotechnology and medical device firms, including our
company, generally is highly uncertain and may involve complex legal and factual
questions. Potential competitors may have filed applications for, or may have
been issued patents, or may obtain additional patents and proprietary rights
relating to products or processes in the same area of technology as that used by
our company. The scope and validity of these patents and applications, the
extent to which we may be required to obtain licenses thereunder or under other
proprietary rights, and the cost and availability of licenses are uncertain. We
cannot assure you that our patent applications will result in additional patents
being issued or that any of our patents will afford protection against
competitors with similar technology; nor can we assure you that any of our
patents will not be designed around by others or that others will not obtain
patents that we would need to license or design around. See Risk Factors.

We also rely upon unpatented trade secrets. We cannot assure you that others
will not independently develop substantially equivalent proprietary information
and techniques, or otherwise gain access to our trade secrets, or disclose such
technology, or that we can meaningfully protect our rights to our unpatented
trade secrets.

We require our employees, consultants, advisers, and suppliers to execute a
confidentiality agreement upon the commencement of an employment, consulting or
manufacturing relationship with us. The agreement provides that all confidential
information developed by or made known to the individual during the course of
the relationship will be kept confidential and not disclosed to third parties
except in specified circumstances. In the case of employees, the agreements
provide that all inventions conceived by the individual will be the exclusive
property of our company. We cannot assure you, however, that these agreements
will provide meaningful protection for our trade secrets in the event of an
unauthorized use or disclosure of such information.


                                       43





Government Regulation

Most aspects of our business are subject to some degree of government regulation
in the countries in which we conduct our operations. As a developer,
manufacturer and marketer of medical products, we are subject to extensive
regulation by, among other governmental entities, FDA and the corresponding
state, local and foreign regulatory bodies in jurisdictions in which our
products are sold. These regulations govern the introduction of new products,
the observance of certain standards with respect to the manufacture, safety,
efficacy and labeling of such products, the maintenance of certain records, the
tracking of such products and other matters.

Failure to comply with applicable federal, state, local or foreign laws or
regulations could subject us to enforcement action, including product seizures,
recalls, withdrawal of marketing clearances, and civil and criminal penalties,
any one or more of which could have a material adverse effect on our business.
We believe that we are in substantial compliance with such governmental
regulations. However, federal, state, local and foreign laws and regulations
regarding the manufacture and sale of medical devices are subject to future
changes. We cannot assure you that such changes will not have a material adverse
effect on our company.

For some products, and in some countries, government regulation is significant
and, in general, there is a trend toward more stringent regulation. In recent
years, FDA and certain foreign regulatory bodies have pursued a more rigorous
enforcement program to ensure that regulated businesses, like ours, comply with
applicable laws and regulations. We devote significant time, effort and expense
addressing the extensive governmental regulatory requirements applicable to our
business. To date, we have not received any notifications or warning letters
from FDA or any other regulatory bodies of alleged deficiencies in our
compliance with the relevant requirements, nor have we recalled or issued safety
alerts on any of our products. However, we cannot assure you that a warning
letter, recall or safety alert, if it occurred, would not have a material
adverse effect on our company.

In the early to mid 1990s, the review time by FDA to clear medical products for
commercial release lengthened and the number of marketing clearances decreased.
In response to public and congressional concern, FDA Modernization Act of 1997
(the 1997 Act) was adopted with the intent of bringing better definition to the
clearance process for new medical products. While FDA review times have improved
since passage of the 1997 Act, we cannot assure you that FDA review process will
not continue to delay our company's introduction of new products in the U.S. in
the future. In addition, many foreign countries have adopted more stringent
regulatory requirements that also have added to the delays and uncertainties
associated with the release of new products, as well as the clinical and
regulatory costs of supporting such releases. It is possible that delays in
receipt of, or failure to receive, any necessary clearance for our new product
offerings could have a material adverse effect on our business, financial
condition or results of operations.

While we are unable to predict the extent to which our business may be affected
by future regulatory developments, we believe that our substantial experience
dealing with governmental regulatory requirements and restrictions on our
operations throughout the world, and our development of new and improved
products, should enable us to compete effectively within this environment.

Gamma Detection and Blood Flow Measurement Devices

As a manufacturer of medical devices sold in various global markets, we are
required to manufacture the devices under quality system regulations (QSR) and
maintain appropriate technical files and quality records. Our medical devices
are regulated in the United States by FDA. Our medical devices are regulated in
the EU according to the Medical Device Directive (93/42/EEC). Under this
regulation, we must obtain CE Mark status for all products exported to the EU.

Our initial generation gamma detection instruments received 510(k) marketing
clearance from FDA in December 1986 with modified versions receiving similar
clearances in 1992 through 1997. In 1998, FDA reclassified "nuclear uptake
detectors" as being exempt from the 510(k) process. We believe the neo2000
device is exempt from the 510(k) process because it is substantially equivalent
to previously cleared predecessor devices. We obtained the CE Mark for the
neo2000 device in January 1999, and therefore, must continue to manufacture the
devices under a quality system compliant to the requirements of ISO 9001/EN
46001 and maintain appropriate technical files. We maintain a license to import
our gamma devices into Canada, and therefore must continue to manufacture the
devices under a quality system compliant to the requirements of ISO 13485 and
relevant Canadian regulations.


                                       44





Cardiosonix has received 510(k) and CE mark clearance to market the Quantix/ND
device in the U.S. and EU for non-invasive applications. The Quantix/OR has also
received CE Mark clearance to market in the EU and 510(k) clearance to market in
the U.S. Our distribution partners in certain foreign markets other than the EU
are seeking marketing clearances, as required, for both the Quantix/ND and
Quantix/OR.

Gamma Detection Radiopharmaceuticals (Lymphoseek and RIGScan)

Our radiolabeled targeting agents and biologic products, if developed, would
require a regulatory license to market by FDA and by comparable agencies in
foreign countries. The process of obtaining regulatory licenses and approvals is
costly and time consuming, and we have encountered significant impediments and
delays related to our previously proposed biologic products.

The process of completing pre-clinical and clinical testing, manufacturing
validation and submission of a marketing application to the appropriate
regulatory bodies usually takes a number of years and requires the expenditure
of substantial resources, and we cannot assure you that any approval will be
granted on a timely basis, if at all. Additionally, the length of time it takes
for the various regulatory bodies to evaluate an application for marketing
approval varies considerably, as does the amount of preclinical and clinical
data required to demonstrate the safety and efficacy of a specific product. The
regulatory bodies may require additional clinical studies that may take several
years to perform. The length of the review period may vary widely depending upon
the nature and indications of the proposed product and whether the regulatory
body has any further questions or requests any additional data. Also, the
regulatory bodies will likely require post-marketing reporting and surveillance
programs to monitor the side effects of the products. We cannot assure you that
any of our potential drug or biologic products will be approved by the
regulatory bodies or approved on a timely or accelerated basis, or that any
approvals received will not subsequently be revoked or modified.

In addition to regulations enforced by FDA, the manufacture, distribution, and
use of radioactive targeting agents, if developed, are also subject to
regulation by the Nuclear Regulatory Commission (NRC), the Department of
Transportation and other federal, state, and local government authorities. We,
or our manufacturer of the radiolabeled antibodies, must obtain a specific
license from the NRC to manufacture and distribute radiolabeled antibodies, as
well as comply with all applicable regulations. We must also comply with
Department of Transportation regulations on the labeling and packaging
requirements for shipment of radiolabeled antibodies to licensed clinics, and
must comply with federal, state, and local governmental laws regarding the
disposal of radioactive waste. We cannot assure you that we will be able to
obtain all necessary licenses and permits and be able to comply with all
applicable laws. The failure to obtain such licenses and permits or to comply
with applicable laws would have a materially adverse effect on our business,
financial condition, and results of operations.

Employees

As of March 20, 2006, we had 21 full-time employees. We consider our relations
with our employees to be good.


                                       45





                             DESCRIPTION OF PROPERTY

We currently lease approximately 11,300 square feet of office space at 425 Metro
Place North, Dublin, Ohio, as our principal offices. The current lease term is
from February 1, 2005 and ending on January 31, 2008, at a monthly base rent of
approximately $8,300 during 2006. We must also pay a pro-rata portion of the
operating expenses and real estate taxes of the building. We believe these
facilities are in good condition, but that we may need to expand our leased
space related to our radiopharmaceutical activities depending on the level of
activities performed internally versus by third parties.

                                 OUR MANAGEMENT

Directors, Executive Officers, Promoters and Control Persons

Directors

The following directors' terms continue until the 2006 Annual Meeting:

Kirby I. Bland, M.D., age 64, has served as a director of our Company since May
2004. Dr. Bland currently serves as Professor and Chairman and Fay Fletcher
Kerner Professor and Chairman, Department of Surgery of the University of
Alabama at Birmingham (UAB) School of Medicine since 1999 and 2002,
respectively, Deputy Director of the UAB Comprehensive Cancer Center since 2000
and Senior Scientist, Division of Human Gene Therapy, UAB School of Medicine
since 2001. Prior to his appointments at UAB, Dr. Bland was J. Murry Breadsley
Professor and Chairman, Professor of Medical Science, Department of Surgery and
Director, Brown University Integrated Program in Surgery at Brown University
School of Medicine from 1993 to 1999. Prior to his appointments at Brown
University, Dr. Bland was Professor and Associate Chairman, Department of
Surgery, University of Florida College of Medicine from 1983 to 1993 and
Associate Director of Clinical Research at the University of Florida Cancer
Center from 1991 to 1993. Dr. Bland held a number of medical staff positions at
the University of Louisville, School of Medicine from 1977 to 1983 and at M. D.
Anderson Hospital and Tumor Institute from 1976 to 1977. Dr. Bland is a member
of the Board of Governors of the American College of Surgeons (ACS), a member of
the ACS' Advisory Committee, Oncology Group (ACOSOG), a member of the ACS'
American Joint Committee on Cancer Task Force and serves as Chairman of the ACS'
Breast Disease Site Committee, COC. Dr. Bland is a past President of the Society
of Surgical Oncology. Dr. Bland received his B.S. in Chemistry/Biology from
Auburn University and a M.D. degree from the University of Alabama, Medical
College of Alabama.

J. Frank Whitley, Jr., age 63, has served as a director of our Company since May
1994. Mr. Whitley was Director of Mergers, Acquisitions and Licensing at The Dow
Chemical Company (Dow), a multinational chemical company, from June 1993 until
his retirement in June 1997. After joining Dow in 1965, Mr. Whitley served in a
variety of marketing, financial, and business management functions. Mr. Whitley
has a B.S. degree in Mathematics from Lamar State College of Technology.

The following directors' terms continue until the 2007 Annual Meeting:

Reuven Avital, age 54, has served as a director of our Company since January
2002. Mr. Avital is a partner and general manager of Ma'Aragim Enterprises Ltd.,
an investment company in Israel, and he is a member of the board of Neoprobe as
well as a number of privately-held Israeli companies, three of them in the
medical device field. Mr. Avital was a board member of Cardiosonix, Ltd. from
April 2001 through December 31, 2001, when we acquired the company. Previously,
Mr. Avital served in the Israeli government in a variety of middle and senior
management positions. He is also chairman or board member in several
not-for-profit organizations, mainly involved in education for the
under-privileged and international peace-building. Mr. Avital has B.A. degrees
in The History of the Middle East and International Relations from the Hebrew
University of Jerusalem, and a M.P.A. from the Kennedy School of Government at
Harvard University.


                                       46





David C. Bupp, age 56, has served as President and a director of our Company
since August 1992 and as Chief Executive Officer since February 1998. From
August 1992 to May 1993, Mr. Bupp served as our Treasurer. In addition to the
foregoing positions, from December 1991 to August 1992, he was Acting President,
Executive Vice President, Chief Operating Officer and Treasurer, and from
December 1989 to December 1991, he was Vice President, Finance and Chief
Financial Officer. From 1982 to December 1989, Mr. Bupp was Senior Vice
President, Regional Manager for AmeriTrust Company National Association, a
nationally chartered bank holding company, where he was in charge of commercial
banking operations throughout Central Ohio. Mr. Bupp has a B.A. degree in
Economics from Ohio Wesleyan University. Mr. Bupp also completed a course of
study at Stonier Graduate School of Banking at Rutgers University.

Julius R. Krevans, M.D., age 81, has served as a director of our Company since
May 1994 and as Chairman of the Board of Directors of our Company since February
1999. Dr. Krevans served as Chancellor of the University of California, San
Francisco from July 1982 until May 1993. Prior to his appointment as Chancellor,
Dr. Krevans served as a Professor of Medicine and Dean of the School of Medicine
at the University of California, San Francisco from 1971 to 1982. Dr. Krevans is
a member of the Institute of Medicine, National Academy of Sciences, and led its
committee for the National Research Agenda on Aging until 1991. Dr. Krevans also
serves on the Board of Directors and the compensation committee of the Board of
Directors of Calypte Biomedical Corporation (Calypte), a publicly held
corporation. Dr. Krevans has a B.S. degree and a M.D. degree, both from New York
University.

The following directors' terms continue until the 2008 Annual Meeting:

Carl J. Aschinger, Jr., age 67, has served as a director of our Company since
June 2004. Mr. Aschinger is the Chairman and Chief Executive Officer of Columbus
Show Case Co., a privately-held company that manufactures showcases for the
retail industry. Mr. Aschinger also serves on the Board of Directors and as
Chairman of the Audit Committee of Pinnacle Data Systems, a publicly-traded
company that provides software and hardware solutions to original equipment
manufacturers. Mr. Aschinger also serves on the Board of Directors and as
Chairman of the Audit Committee of Wilson-Bohannon, a privately-held company
that manufactures padlocks. Mr. Aschinger is a former director of Liqui-Box
Corporation and Huntington National Bank as well as other privately-held
ventures and has served on boards or advisory committees of several
not-for-profit organizations.

Fred B. Miller, age 66, has served as a director of our Company since January
2002. Mr. Miller serves as Chairman of the Audit Committee. Mr. Miller is the
President and Chief Operating Officer of Seicon, Limited, a privately held
company that specializes in developing, applying and licensing technology to
reduce seismic and mechanically induced vibration. Mr. Miller also serves on the
board of one other privately-held company. Until his retirement in 1995, Mr.
Miller had been with Price Waterhouse LLP since 1962. Mr. Miller is a Certified
Public Accountant, a member of the American Institute of Certified Public
Accountants (AICPA), a past member of the Council of the AICPA and a member and
past president of the Ohio Society of Certified Public Accountants. He also has
served on the boards or advisory committees of several universities and
not-for-profit organizations. Mr. Miller has a B.S. degree in Accounting from
the Ohio State University.


                                       47





Executive Officers

In addition to Mr. Bupp, the following individuals are executive officers of our
Company and serve in the position(s) indicated below:

           Name             Age                  Position
           ----             ---                  --------

     Anthony K. Blair       45        Vice President, Manufacturing Operations
     Carl M. Bosch          49        Vice President, Research and Development
     Rodger A. Brown        55        Vice President, Regulatory Affairs and
                                        Quality Assurance
     Brent L. Larson        42        Vice President, Finance; Chief Financial
                                        Officer; Treasurer and Secretary
     Douglas L. Rash        62        Vice President, Marketing

Anthony K. Blair has served as Vice President, Manufacturing Operations of our
Company since July 2004. Prior to joining our Company, he served as Vice
President, Manufacturing Operations of Enpath Medical, Lead Technologies
Division, formerly known as Biomec Cardiovascular, Inc. from 2002 to June 2004.
From 1998 through 2001, Mr. Blair led the manufacturing efforts at Astro
Instrumentation, a medical device contract manufacturer. From 1989 to 1998 at
Ciba Corning Diagnostics (now Bayer), Mr. Blair held managerial positions
including Operations Manager, Materials Manager, Purchasing Manager and
Production Supervisor. From 1985 to 1989, Mr. Blair was employed by Bailey
Controls and held various positions in purchasing and industrial engineering.
Mr. Blair started his career at Fisher Body, a division of General Motors, in
production supervision. Mr. Blair has a B.B.A. degree in management and labor
relations from Cleveland State University.

Carl M. Bosch has served as Vice President, Research and Development of our
Company since March 2000. Prior to that, Mr. Bosch served as our Director,
Instrument Development from May 1998 to March 2000. Before joining our Company,
Mr. Bosch was employed by GE Medical Systems from 1994 to 1998 where he served
as Manager, Nuclear Programs. From 1977 to 1994, Mr. Bosch was employed by GE
Aerospace in several engineering and management functions. Mr. Bosch has a B.S.
degree in Electrical Engineering from Lehigh University and a M.S. degree in
Systems Engineering from the University of Pennsylvania.

Rodger A. Brown has served as Vice President, Regulatory Affairs and Quality
Assurance of our Company since November 2000. From July 1998 through November
2000, Mr. Brown served as our Director, Regulatory Affairs and Quality
Assurance. Prior to joining our Company, Mr. Brown served as Director of
Operations for Biocore Medical Technologies, Inc. from April 1997 to April 1998.
From 1981 through 1996, Mr. Brown served as Director, Regulatory Affairs/Quality
Assurance for E for M Corporation, a subsidiary of Marquette Electronics, Inc.

Brent L. Larson has served as Vice President, Finance and Chief Financial
Officer of our Company since February 1999. Prior to that, he served as our Vice
President, Finance from July 1998 to January 1999 and as Controller from July
1996 to June 1998. Before joining our Company, Mr. Larson was employed by Price
Waterhouse LLP. Mr. Larson has a B.B.A. degree in accounting from Iowa State
University of Science and Technology and is a Certified Public Accountant.

Douglas L. Rash has served as Vice President, Marketing of our Company since
January 2005. Prior to that, Mr. Rash was Neoprobe's Director, Marketing and
Product Management from March to December 2004. Before joining our Company, Mr.
Rash served as Vice President and General Manager of MTRE North America, Inc.
from 2000 to 2003. From 1994 to 2000, Mr. Rash served as Vice President and
General Manager (Medical Division) of Cincinnati Sub-Zero, Inc. From 1993 to
1994, Mr. Rash was Executive Vice President of Everest & Jennings International,
Ltd. During his nine-year career at Gaymar Industries, Inc. from 1984 to 1993,
Mr. Rash held positions as Vice President and General Manager (Clinicare
Division) and Vice President, Marketing and Sales (Acute Care Division). From
1976 to 1984, Mr. Rash held management positions at various divisions of British
Oxygen Corp. Mr. Rash has a B.S. degree in Business Administration with a minor
in Chemistry from Wisconsin State University.


                                       48





Family Relationships

There are no family relationships among the directors and executive officers of
the Company.

Code of Conduct and Ethics

We have adopted a code of conduct and ethics that applies to our directors,
officers and all employees. The code of conduct and ethics is posted on our
website at www.neoprobe.com. The code of business conduct and ethics may be also
obtained free of charge by writing to Neoprobe Corporation, Attn: Chief
Financial Officer, 425 Metro Place North, Suite 300, Dublin, Ohio 43017.

Audit Committee Financial Expert

The Board of Directors of Neoprobe has determined that Fred B. Miller, a member
of the Audit Committee, qualifies as Neoprobe's audit committee financial expert
under Item 401 of Regulation S-B under the Securities Act of 1933, and that he
is independent, as that term is defined in Item 7(d)(3) of Schedule 14A under
the Securities Exchange Act of 1934.


                                       49





Executive Compensation

Summary Compensation Table

The following table sets forth certain information concerning the annual and
long-term compensation of our Chief Executive Officer and our other four highest
paid executive officers having annual compensation in excess of $100,000 during
the last fiscal year (the Named Executives) for the last three fiscal years.



                                                                                                       Long Term
                                                                                                  Compensation Awards
                                                                                            ----------------------------
                                                                                             Restricted       Securities
                                                       Annual Compensation                      Stock         Underlying
                                           ---------------------------------------------        Awards         Options
Name and Principal Position                   Year      Salary     Bonus(e)     Other           ($)              (#)
- ---------------------------                   ----     ---------   ---------    ------       ----------       ----------
                                                                                            
Anthony K. Blair                              2005     $ 115,000   $  1,875   $  2,204(a)           --           30,000
   Vice President,                            2004        55,000         --         --              --           90,000
   Manufacturing Operations                   2003            --         --         --              --               --

Carl M. Bosch                                 2005     $ 149,000   $  7,500   $  2,980(b)           --           40,000
   Vice President,                            2004       138,375      6,000      2,887(b)           --          170,000
   Research and Development                   2003       135,125         --      6,573(b)           --           70,000

Rodger A. Brown                               2005     $ 124,000  $   1,875   $     --              --           20,000
   Vice President, Regulatory Affairs/        2004       117,300      2,500         --              --          160,000
   Quality Assurance                          2003       125,316         --         --              --           70,000

David C. Bupp                                 2005     $ 290,000   $ 45,000   $  5,744(c)           --          200,000
   President and                              2004       271,250     15,000      5,770(c)           --          500,000
   Chief Executive Officer                    2003       222,167     32,500     32,566(c)           --          170,000

Brent L. Larson                               2005     $ 149,000   $  7,500   $  2,986(d)           --           40,000
   Vice President, Finance and                2004       137,700      6,000      2,874(d)           --          170,000
   Chief Financial Officer                    2003       135,125         --     11,733(d)           --           70,000


- ----------
(a)   Amount represents solely matching contribution under the Neoprobe
      Corporation 401(k) Plan (the Plan). Eligible employees may make voluntary
      contributions and we may, but are not obligated to, make matching
      contributions based on 40 percent of the employee's contribution, up to
      five percent of the employee's salary. Employee contributions are invested
      in mutual funds administered by an independent plan administrator. Company
      contributions, if any, are made in the form of shares of common stock. The
      Plan is intended to qualify under section 401 of the Internal Revenue
      Code, which provides that employee and company contributions and income
      earned on contributions are not taxable to the employee until withdrawn
      from the Plan, and that we may deduct our contributions when made.
(b)   Amounts represent solely matching contribution under the Plan, except for
      2003, which includes $3,870 related to the vesting of restricted stock.
(c)   Amounts represent matching contribution under the Plan and social luncheon
      club dues, except for 2003, which includes $27,090 related to the vesting
      of restricted stock.
(d)   Amounts represent solely matching contribution under the Plan, except for
      2003, which includes $9,030 related to the vesting of restricted stock.
(e)   Bonuses, if any, have been disclosed for the year in which they were
      earned (i.e., to year to which the service relates).


                                       50





Option Grants in Last Fiscal Year

The following table presents certain information concerning stock options
granted to the Named Executives under the 2002 Stock Incentive Plan during the
2005 fiscal year.



                                                      Individual Grants
- ------------------------------------------------------------------------------------------------

                                 Number of         Percent of Total
                                Securities         Options Granted     Exercise
                            Underlying Options     to Employees in       Price        Expiration
Name                         Granted (shares)        Fiscal Year       Per Share       Date(c)
- ----                        ------------------     ----------------    ---------      ----------
                                                                          

Anthony K. Blair                30,000(a)                 6%           $ 0.26(b)      12/27/2015

Carl M. Bosch                   40,000(a)                 8%           $ 0.26(b)      12/27/2015

Rodger A. Brown                 20,000(a)                 4%           $ 0.26(b)      12/27/2015

David C. Bupp                  200,000(a)                41%           $ 0.26(b)      12/27/2015

Brent L. Larson                 40,000(a)                 8%           $ 0.26(b)      12/27/2015


(a)   Vests as to one-third of these shares immediately and on each of the first
      two anniversaries of the date of grant.
(b)   The per share weighted average fair value of these stock options during
      2005 was $0.22 on the date of grant using the Black-Scholes option pricing
      model with the following assumptions: an expected life of 10 years, an
      average risk-free interest rate of 4.3%, volatility of 79% and no expected
      dividend rate.
(c)   The options terminate on the earlier of the expiration date, nine months
      after death or disability, 90 days after termination of employment without
      cause or by resignation, or immediately upon termination of employment for
      cause.

Fiscal Year-End Option Numbers and Values

The following table sets forth certain information concerning the number and
value of unexercised options held by the Named Executives at the end of the last
fiscal year (December 31, 2005). There were no stock options exercised by the
Named Executives during the fiscal year ended December 31, 2005.



                                    Number of Securities               Value of Unexercised
                                   Underlying Unexercised            In-the-Money Options at
                                Options at Fiscal Year-End:              Fiscal Year-End:
Name                            Exercisable/Unexercisable          Exercisable/Unexercisable(1)
- ----                            ---------------------------        ----------------------------
                                                                  
Anthony K. Blair                     40,021 / 79,979                        $0 / $0

Carl M. Bosch                       286,695 / 163,305                   $5,333 / $2,667

Rodger A. Brown                     271,182 / 143,318                   $5,333 / $2,667

David C. Bupp                       886,801 / 523,199                   $12,933 / $6,467

Brent L. Larson                     343,895 / 163,305                   $5,333 / $2,667


(1)   Represents the total gain which would be realized if all in-the-money
      options held at year end were exercised, determined by multiplying the
      number of shares underlying the options by the difference between the per
      share option exercise price and the per share fair market value at year
      end of $0.25. An option is in-the-money if the fair market value of the
      underlying shares exceeds the exercise price of the option.


                                       51





Compensation of Non-Employee Directors

We paid non-employee directors a quarterly retainer of $2,500 for participation
in board or committee meetings during 2005. We also reimbursed non-employee
directors for travel expenses for meetings attended during 2005. In addition,
each non-employee director received 70,000 options to purchase common stock as a
part of our annual stock incentive grants, and the Chairman of the Board and the
Chairman of the Audit Committee each received an additional 20,000 options for
their services in those capacities. Options granted to purchase common stock
vest on the first anniversary of the date of grant and have an exercise price
equal to not less than the closing market price of common stock at the date of
grant.

Directors who are also officers or employees of Neoprobe do not receive any
compensation for their services as directors.

Compensation of Mr. Bupp

Employment Agreement. David C. Bupp is employed under a thirty-six month
employment agreement effective January 1, 2004. The employment agreement
provides for an annual base salary of $271,250. Effective January 1, 2005, Mr.
Bupp's annual base salary was increased to $290,000. Effective January 1, 2006,
Mr. Bupp's annual base salary was increased to $305,000. The Board of Directors
will, on an annual basis, review the performance of our company and of Mr. Bupp
and may pay a bonus to Mr. Bupp as it deems appropriate, in its discretion. Such
review and bonus will be consistent with any bonus plan adopted by the
Compensation Committee that covers the executive officers of our company
generally.

If a change in control occurs with respect to our company and the employment of
Mr. Bupp is concurrently or subsequently terminated:

      o     by our company without cause (cause is defined as any willful breach
            of a material duty by Mr. Bupp in the course of his employment or
            willful and continued neglect of his duty as an employee);

      o     the term of Mr. Bupp's employment agreement expires; or

      o     Mr. Bupp resigns because his authority, responsibilities or
            compensation have materially diminished, a material change occurs in
            his working conditions or we breach the agreement;

then, Mr. Bupp will be paid a severance payment of $650,000 (less amounts paid
as Mr. Bupp's salary and benefits that continue for the remaining term of the
agreement if his employment is terminated without cause). If any such
termination occurs after the substantial completion of the liquidation of our
assets, the severance payment shall be increased by $81,250.

For purposes of Mr. Bupp's employment agreement, a change in control includes:

      o     the acquisition, directly or indirectly, by a person (other than our
            company or an employee benefit plan established by the Board of
            Directors) of beneficial ownership of 15 percent or more of our
            securities with voting power in the next meeting of holders of
            voting securities to elect the directors;

      o     a majority of the directors elected at any meeting of the holders of
            our voting securities are persons who were not nominated by our then
            current Board of Directors or an authorized committee thereof;

      o     our stockholders approve a merger or consolidation of our company
            with another person, other than a merger or consolidation in which
            the holders of our voting securities outstanding immediately before
            such merger or consolidation continue to hold voting securities in
            the surviving or resulting corporation (in the same relative
            proportions to each other as existed before such event) comprising
            eighty percent (80%) or more of the voting power for all purposes of
            the surviving or resulting corporation; or


                                       52





o     our stockholders approve a transfer of substantially all of our assets to
      another person other than a transfer to a transferee, eighty percent (80%)
      or more of the voting power of which is owned or controlled by us or by
      the holders of our voting securities outstanding immediately before such
      transfer in the same relative proportions to each other as existed before
      such event.

Mr. Bupp will be paid a severance amount of $406,250 if his employment is
terminated at the end of his employment agreement or without cause and his
benefits will continue for the longer of twenty-four months or the full term of
the agreement.

Compensation Agreements With Other Named Executives

Our Executive Officers are employed under employment agreements of varying terms
as outlined below. In addition, the Compensation Committee of the Board of
Directors will, on an annual basis, review the performance of our company and
may pay bonuses to our executives as the Compensation Committee deems
appropriate, in its discretion. Such review and bonus will be consistent with
any bonus plan adopted by the Compensation Committee that covers Mr. Bupp as
well as the executive officers of our company generally.

Anthony K. Blair

Employment Agreement. Anthony Blair is employed under a twelve month employment
agreement effective January 1, 2006. The employment agreement provides for an
annual base salary of $122,000.

The Compensation Committee will, on an annual basis, review the performance of
our company and of Mr. Blair and we may pay a bonus to Mr. Blair as we deem
appropriate, in our discretion. Such review and bonus will be consistent with
any bonus plan adopted by the Compensation Committee that covers the executive
officers of our company generally.

If a change in control occurs with respect to our company and the employment of
Mr. Blair is concurrently or subsequently terminated:

      o     without cause (cause is defined as any willful breach of a material
            duty by Mr. Blair in the course of his employment or willful and
            continued neglect of his duty as an employee);

      o     the term of Mr. Blair's employment agreement expires; or

      o     Mr. Blair resigns because his authority, responsibilities or
            compensation have materially diminished, a material change occurs in
            his working conditions or we breach the agreement;

then, Mr. Blair will be paid a severance payment of $122,000 and will continue
his benefits for the longer of twelve months or the remaining term of his
employment agreement.

For purposes of Mr. Blair's employment agreement, a change in control includes:

      o     the acquisition, directly or indirectly, by a person (other than our
            company or an employee benefit plan established by the Board of
            Directors) of beneficial ownership of 30 percent or more of our
            securities with voting power in the next meeting of holders of
            voting securities to elect the directors;

      o     a majority of the directors elected at any meeting of the holders of
            our voting securities are persons who were not nominated by our then
            current Board of Directors or an authorized committee thereof;


                                       53





      o     our stockholders approve a merger or consolidation of our company
            with another person, other than a merger or consolidation in which
            the holders of our voting securities outstanding immediately before
            such merger or consolidation continue to hold voting securities in
            the surviving or resulting corporation (in the same relative
            proportions to each other as existed before such event) comprising
            eighty percent (80%) or more of the voting power for all purposes of
            the surviving or resulting corporation; or

      o     our stockholders approve a transfer of substantially all of the
            assets of our company to another person other than a transfer to a
            transferee, eighty percent (80%) or more of the voting power of
            which is owned or controlled by us or by the holders of our voting
            securities outstanding immediately before such transfer in the same
            relative proportions to each other as existed before such event.

Mr. Blair will be paid a severance amount of $61,000 if his employment is
terminated at the end of his employment agreement or without cause, and his
benefits will be continued for up to twelve months.

Carl M. Bosch

Employment Agreement. Carl Bosch is employed under a twenty-four month
employment agreement effective January 1, 2005. The employment agreement
provides for an annual base salary of $149,000. Effective January 1, 2006, Mr.
Bosch's annual base salary was increased to $160,000.

The terms of Mr. Bosch's employment agreement are substantially identical to Mr.
Blair's employment agreement except that Mr. Bosch would be paid $298,000 if
terminated due to a change of control and $149,000 if terminated at the end of
his employment or without cause.

The Compensation Committee will, on an annual basis, review the performance of
our company and of Mr. Bosch and we may pay a bonus to Mr. Bosch as we deem
appropriate, in our discretion. Such review and bonus will be consistent with
any bonus plan adopted by the Compensation Committee that covers the executive
officers of our company generally.

Rodger A. Brown

Employment Agreement. Rodger Brown is employed under a twenty-four month
employment agreement effective January 1, 2005. The employment agreement
provides for an annual base salary of $124,000. Effective January 1, 2006, Mr.
Brown's annual base salary was increased to $129,000.

The terms of Mr. Brown's employment agreement are substantially identical to Mr.
Blair's employment agreement except that Mr. Brown would be paid $248,000 if
terminated due to a change of control and $124,000 if terminated at the end of
his employment or without cause.

The Compensation Committee will, on an annual basis, review the performance of
our company and of Mr. Brown and we may pay a bonus to Mr. Brown as we deem
appropriate, in our discretion. Such review and bonus will be consistent with
any bonus plan adopted by the Compensation Committee that covers the executive
officers of our company generally.

Brent L. Larson

Employment Agreement. Brent Larson is employed under a twenty-four month
employment agreement effective January 1, 2005. The employment agreement
provides for an annual base salary of $149,000. Effective January 1, 2006, Mr.
Larson's annual base salary was increased to $160,000.

The terms of Mr. Larson's employment agreement are substantially identical to
Mr. Blair's employment agreement except that Mr. Larson would be paid $298,000
if terminated due to a change of control and $149,000 if terminated at the end
of his employment or without cause.


                                       54





The Compensation Committee will, on an annual basis, review the performance of
our company and of Mr. Larson and we may pay a bonus to Mr. Larson as we deem
appropriate, in our discretion. Such review and bonus will be consistent with
any bonus plan adopted by the Compensation Committee that covers the executive
officers of our company generally.


                                       55





         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                 Security Ownership of Principal Stockholders,
                   Directors, Nominees and Executive Officers

The following table sets forth, as of March 15, 2006, certain information with
respect to the beneficial ownership of shares of our common stock by: (i) each
person known to us to be the beneficial owner of more than 5 percent of our
outstanding shares of common stock, (ii) each director or nominee for director
of our Company, (iii) each of the Named Executives (see "Executive Compensation
- - Summary Compensation Table"), and (iv) our directors and executive officers as
a group.



                                                            Number of Shares                Percent
      Beneficial Owner                                    Beneficially Owned (*)          of Class (**)
      ---------------------------------------             ----------------------          -------------
                                                                                 
      Carl J. Aschinger, Jr.                                 103,000         (a)               (o)
      Reuven Avital                                          264,256         (b)               (o)
      Anthony K. Blair                                        95,643         (c)               (o)
      Kirby I. Bland                                         110,000         (d)               (o)
      Carl M. Bosch                                          425,146         (e)               (o)
      Rodger A. Brown                                        317,848         (f)               (o)
      David C. Bupp                                        2,674,542         (g)              4.4%
      Julius R. Krevans                                      362,000         (h)               (o)
      Brent L. Larson                                        538,174         (i)               (o)
      Fred B. Miller                                         196,000         (j)               (o)
      Douglas L. Rash                                         56,616         (k)               (o)
      J. Frank Whitley, Jr.                                  216,000         (l)               (o)
      All directors and officers as a group                5,359,225        (m)(p)            8.5%
      (12 persons)

      Great Point Partners, L.P.                          30,000,000         (n)             33.9%
      2 Pickwick Plaza, Suite 450
      Greenwich, CT  06830


(*)   Beneficial ownership is determined in accordance with the rules of the
      Securities and Exchange Commission which generally attribute beneficial
      ownership of securities to persons who possess sole or shared voting power
      and/or investment power with respect to those securities. Unless otherwise
      indicated, voting and investment power are exercised solely by the person
      named above or shared with members of such person's household.

(**)  Percent of class is calculated on the basis of the number of shares
      outstanding on December 31, 2005, plus the number of shares the person has
      the right to acquire within 60 days of December 31, 2005.

(a)   This amount includes 80,000 shares issuable upon exercise of options which
      are exercisable within 60 days, but does not include 30,000 shares
      issuable upon exercise of options which are not exercisable within 60
      days.

(b)   This amount consists of 139,256 shares of our common stock owned by Mittai
      Investments Ltd. (Mittai), an investment fund under the management and
      control of Mr. Avital, and 125,000 shares issuable upon exercise of
      options which are exercisable within 60 days but does not include 30,000
      shares issuable upon exercise of options which are not exercisable within
      60 days. The shares held by Mittai were obtained through a distribution of
      2,785,123 shares previously held by Ma'Aragim Enterprise Ltd. (Ma'Aragim),
      another investment fund under the management and control of Mr. Avital. On
      February 28, 2005, Ma'Aragim distributed its shares to the partners in the
      fund. Mr. Avital is not an affiliate of the other fund to which the
      remaining 2,645,867 shares were distributed. Of the 2,785,123 shares
      previously held by Ma'Aragim, 2,286,712 were acquired in exchange for
      surrendering its shares in Cardiosonix Ltd. on December 31, 2001, in
      connection with our acquisition of Cardiosonix, and 498,411 were acquired
      by Ma'Aragim based on the satisfaction of certain developmental milestones
      on December 30, 2002, associated with our acquisition of Cardiosonix.

(c)   This amount includes 40,021 shares issuable upon exercise of options which
      are exercisable within 60 days and 5,622 shares in Mr. Blair's account in
      the 401(k) Plan, but does not include 79,979 shares issuable upon exercise
      of options which are not exercisable within 60 days.

(d)   This amount includes 110,000 shares issuable upon exercise of options
      which are exercisable within 60 days but does not include 30,000 shares
      issuable upon exercise of options which are not exercisable within 60
      days.


                                       56





(e)   This amount includes 333,361 shares issuable upon exercise of options
      which are exercisable within 60 days and 51,785 shares in Mr. Bosch's
      account in the 401(k) Plan, but does not include 116,639 shares issuable
      upon exercise of options which are not exercisable within 60 days.

(f)   This amount includes 317,848 shares issuable upon exercise of options
      which are exercisable within 60 days, but does not include 96,652 shares
      issuable upon exercise of options which are not exercisable within 60
      days.

(g)   This amount includes 993,467 shares issuable upon exercise of options
      which are exercisable within 60 days, 875,000 warrants which are
      exercisable within 60 days, a promissory note convertible into 250,000
      shares of our common stock, 57,875 shares that are held by Mr. Bupp's wife
      for which he disclaims beneficial ownership and 75,500 shares in Mr.
      Bupp's account in the 401(k) Plan, but it does not include 416,533 shares
      issuable upon exercise of options which are not exercisable within 60
      days.

(h)   This amount includes 360,000 shares issuable upon exercise of options
      which are exercisable within 60 days, but does not include 30,000 shares
      issuable upon the exercise of options which are not exercisable within 60
      days.

(i)   This amount includes 390,561 shares issuable upon exercise of options
      which are exercisable within 60 days and 52,113 shares in Mr. Larson's
      account in the 401(k) Plan, but it does not include 116,639 shares
      issuable upon exercise of options which are not exercisable within 60
      days.

(j)   This amount includes 185,000 shares issuable upon exercise of options
      which are exercisable within 60 days and 11,000 shares held by Mr.
      Miller's wife for which he disclaims beneficial ownership, but does not
      include 30,000 shares issuable upon the exercise of options which are not
      exercisable within 60 days.

(k)   This amount includes 53,348 shares issuable upon exercise of options which
      are exercisable within 60 days and 3,268 shares in Mr. Rash's account in
      the 401(k) Plan, but does not include 56,652 shares issuable upon exercise
      of options which are not exercisable within 60 days.

(l)   This amount includes 215,000 shares issuable upon exercise of options
      which are exercisable within 60 days, but does not include 30,000 shares
      issuable upon exercise of options which are not exercisable within 60
      days.

(m)   This amount includes 3,203,606 shares issuable upon exercise of options
      which are exercisable within 60 days and 188,288 shares held in the 401(k)
      Plan on behalf of certain officers, but it does not include 1,063,094
      shares issuable upon the exercise of options which are not exercisable
      within 60 days. The Company itself is the trustee of the Neoprobe 401(k)
      Plan and may, as such, share investment power over common stock held in
      such plan. The trustee disclaims any beneficial ownership of shares held
      by the 401(k) Plan. The 401(k) Plan holds an aggregate total of 345,868
      shares of common stock.

(n)   This amount includes 11,000,000 shares issuable upon conversion of
      promissory notes in the original principal amount of $4,400,000 held by
      Biomedical Value Fund, L.P. (BVF) that are convertible within 60 days,
      9,000,000 shares issuable upon conversion of promissory notes in the
      original principal amount of $3,600,000 held by Biomedical Offshore Value
      Fund, Ltd. (BOVF) that are convertible within 60 days, 5,500,000 warrants
      held by BVF that are exercisable within 60 days and 4,500,000 warrants
      held by BOVF that are exercisable within 60 days. BVF and BOVF are
      investment funds managed by Great Point Partners, LLP.

(o)   Less than one percent.

(p)   The address of all directors and executive offices is c/o Neoprobe
      Corporation, 425 Metro Place North, Suite 300, Dublin, Ohio 43017-1367.


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During April 2003, we completed a bridge loan agreement with our President and
CEO, David Bupp. Under the terms of the agreement, Mr. Bupp advanced us
$250,000. In consideration for the loan, we issued a note to Mr. Bupp in the
principal amount of $250,000. The note was secured by general assets of the
company, excluding accounts receivable. In addition, we issued Mr. Bupp 375,000
warrants to purchase our common stock at an exercise price of $0.13 per share,
expiring in April 2008. The note bore interest at 8.5% per annum, payable
monthly, and was originally due on June 30, 2004. On March 8, 2004, at the
request of the Board of Directors, Mr. Bupp agreed to extend the due date of the
note from June 30, 2004 to June 30, 2005. In exchange for extending the due date
of the note, we issued Mr. Bupp an additional 375,000 warrants to purchase our
common stock at an exercise price of $0.50 per share, expiring in March 2009. On
December 13, 2004, we repaid the balance of the note to Mr. Bupp.

In December 2004, we completed a private placement of Convertible Promissory
Notes in an aggregate principal amount of $8.1 million with Biomedical Value
Fund, L.P., Biomedical Offshore Value Fund, Ltd. and David C. Bupp (our
President and CEO). Biomedical Value Fund, L.P. and Biomedical Offshore Value
Fund, Ltd. are funds managed by Great Point Partners, LLC. The notes bear
interest at 8% per annum and are freely convertible into shares of our common
stock at a price of $0.40 per share. Neoprobe may force conversion of the notes
prior to their stated maturity under certain circumstances.


                                       57





The conversion price represents the ten-day volume weighted average trading
price of our common stock through December 10, 2004. As part of this
transaction, we issued the investors 10,125,000 warrants to purchase our common
stock at an exercise price of $0.46, expiring in December 2009. In connection
with this financing, we also issued 1,600,000 warrants to purchase our common
stock to the placement agents, containing substantially identical terms to the
warrants issued to the investors.


                          DESCRIPTION OF CAPITAL STOCK

Authorized and Issued Stock
- ---------------------------



                                              Number of Shares at March 15, 2006
                                       ------------------------------------------------
Title of Class                          Authorized      Outstanding           Reserved
- --------------                         -----------      -----------          ----------
                                                                    
Common Stock, $0.001 par
  value per share                      150,000,000       58,690,046          22,459,851

Preferred Stock, $0.001
  par value per share                    5,000,000                0           5,000,000


Common Stock

Dividends

Each share of common stock is entitled to receive an equal dividend, if one is
declared, which is unlikely. We have never paid dividends on our common stock
and do not intend to do so in the foreseeable future. We intend to retain any
future earnings to finance our growth. See Risk Factors.

Liquidation

If our company is liquidated, any assets that remain after the creditors are
paid, and the owners of preferred stock receive any liquidation preferences,
will be distributed to the owners of our common stock pro-rata.

Voting Rights

Each share of our common stock entitles the owner to one vote. There is no
cumulative voting. A simple majority can elect all of the directors at a given
meeting and the minority would not be able to elect any directors at that
meeting.

Preemptive Rights

Owners of our common stock have no preemptive rights. We may sell shares of our
common stock to third parties without first offering it to current stockholders.

Redemption Rights

We do not have the right to buy back shares of our common stock except in
extraordinary transactions such as mergers and court approved bankruptcy
reorganizations. Owners of our common stock do not ordinarily have the right to
require us to buy their common stock. We do not have a sinking fund to provide
assets for any buy back.

Conversion Rights

Shares of our common stock can not be converted into any other kind of stock
except in extraordinary transactions, such as mergers and court approved
bankruptcy reorganizations.


                                       58





Preferred Stock

Our certificate of incorporation authorizes our board of directors to issue
"blank check" preferred stock. The board of directors may divide this stock into
series and set their rights. To date, our board of directors has created one
series of preferred stock. The Board of Directors had designated 500,000 shares
of preferred stock as Series A Junior Participating Preferred Stock. However,
upon the August 28, 2005, expiration of the Company's Stockholder Rights Plan
the Board of Directors determined that the Company had no further reason to have
the Series A Junior Participating Preferred Stock authorized in the Company's
certificate of incorporation. Accordingly, the Company filed a certificate of
elimination removing from the Company's certificate of incorporation all
reference to the Series A Junior Participating Preferred Stock. Additionally,
The board of directors had previously designated 63,000 shares of preferred
stock as 5% Series B Convertible Preferred Stock, but these shares have been
redeemed and returned to the status of unissued shares. The board of directors
may, without prior stockholder approval, issue any of the 5,000,000 shares of
preferred stock with dividend, liquidation, conversion, voting or other rights
which could adversely affect the relative voting power or other rights of the
common stock. Preferred stock could be used as a method of discouraging,
delaying, or preventing a take-over of our company. Although we have no present
intention of issuing any shares of preferred stock, our board of directors may
do so in the future. If we do issue preferred stock in the future, it could have
a dilutive effect upon the common stock. See Risk Factors.

Anti-Takeover Charter Provisions and Laws

In addition to the blank check preferred stock described above, some features of
our certificate of incorporation and by-laws and the Delaware General
Corporation Law (DGCL), which are further described below, may have the effect
of deterring third parties from making takeover bids for control of our company
or may be used to hinder or delay a takeover bid. This would decrease the chance
that our stockholders would realize a premium over market price for their shares
of common stock as a result of a takeover bid. See Risk Factors.

Limitations on Stockholder Actions

Our certificate of incorporation provides that stockholder action may only be
taken at a meeting of the stockholders. Thus, an owner of a majority of the
voting power could not take action to replace the board of directors, or any
class of directors, without a meeting of the stockholders, nor could he amend
the by-laws without presenting the amendment to a meeting of the stockholders.
Furthermore, under the provisions of the certificate of incorporation and
by-laws, only the board of directors has the power to call a special meeting of
stockholders. Therefore, a stockholder, even one who owns a majority of the
voting power, may neither replace sitting board of directors members nor amend
the by-laws before the next annual meeting of stockholders.

Advance Notice Provisions

Our by-laws establish advance notice procedures for the nomination of candidates
for election as directors by stockholders, as well as for other stockholder
proposals to be considered at annual meetings. Generally, we must receive a
notice of intent to nominate a director or raise any other matter at a
stockholder meeting not less than 120 days before the first anniversary of the
mailing of our proxy statement for the previous year's annual meeting. The
notice must contain required information concerning the person to be nominated
or the matters to be brought before the meeting and concerning the stockholder
submitting the proposal.

Delaware Law

We are incorporated in Delaware, and as such are subject to Section 203 of the
DGCL, which provides that a corporation may not engage in any business
combination with an interested stockholder during the three years after he
becomes an interested stockholder unless:


                                       59





      o     the corporation's board of directors approved in advance either the
            business combination or the transaction which resulted in the
            stockholder becoming an interested stockholder;

      o     the interested stockholder owned at least 85 percent of the
            corporation's voting stock at the time the transaction commenced; or

      o     the business combination is approved by the corporation's board of
            directors and the affirmative vote of at least two-thirds of the
            voting stock which is not owned by the interested stockholder.

An interested stockholder is anyone who owns 15 percent or more of a
corporation's voting stock, or who is an affiliate or associate of the
corporation and was the owner of 15 percent or more of the corporation's voting
stock at any time within the previous three years; and the affiliates and
associates of any those persons. Section 203 of the DGCL makes it more difficult
for an interested stockholder to implement various business combinations with
our company for a three-year period, although our stockholders may vote to
exclude it from the law's restrictions.

Classified Board

Our certificate of incorporation and by-laws divide our board of directors into
three classes with staggered three year terms. There are currently nine
directors, three in each class. At each annual meeting of stockholders, the
terms of one class of directors will expire and the newly nominated directors of
that class will be elected for a term of three years. The board of directors
will be able to determine the total number of directors constituting the full
board of directors and the number of directors in each class, but the total
number of directors may not exceed 17 nor may the number of directors in any
class exceed six. Subject to these rules, the classes of directors need not have
equal numbers of members. No reduction in the total number of directors or in
the number of directors in a given class will have the effect of removing a
director from office or reducing the term of any then sitting director.
Stockholders may only remove directors for cause. If the board of directors
increases the number of directors in a class, it will be able to fill the
vacancies created for the full remaining term of a director in that class even
though the term may extend beyond the next annual meeting. The directors will
also be able to fill any other vacancies for the full remaining term of the
director whose death, resignation or removal caused the vacancy.

A person who has a majority of the voting power at a given meeting will not in
any one year be able to replace a majority of the directors since only one class
of the directors will stand for election in any one year. As a result, at least
two annual meeting elections will be required to change the majority of the
directors by the requisite vote of stockholders. The purpose of classifying the
board of directors is to provide for a continuing body, even in the face of a
person who accumulates a sufficient amount of voting power, whether by ownership
or proxy or a combination, to have a majority of the voting power at a given
meeting and who may seek to take control of our company without paying a fair
premium for control to all of the owners of our common stock. This will allow
the board of directors time to negotiate with such a person and to protect the
interests of the other stockholders who may constitute a majority of the shares
not actually owned by that person. However, it may also have the effect of
deterring third parties from making takeover bids for control of our company or
may be used to hinder or delay a takeover bid.


                                       60





               ACQUISITION OF COMMON STOCK BY SELLING STOCKHOLDERS

General

During April 2003, we completed a bridge loan agreement with our President and
CEO, David Bupp. Under the terms of the agreement, Mr. Bupp advanced us
$250,000. In consideration for the loan, we issued a note to Mr. Bupp in the
principal amount of $250,000. The note was secured by general assets of the
company, excluding accounts receivable. In addition, we issued Mr. Bupp 375,000
warrants to purchase our common stock at an exercise price of $0.13 per share,
expiring in April 2008. The note bore interest at 8.5% per annum, payable
monthly, and was originally due on June 30, 2004. On March 8, 2004, at the
request of the Board of Directors, Mr. Bupp agreed to extend the due date of the
note from June 30, 2004 to June 30, 2005. In exchange for extending the due date
of the note, we issued Mr. Bupp an additional 375,000 warrants to purchase our
common stock at an exercise price of $0.50 per share, expiring in March 2009. On
December 13, 2004, we repaid the balance of the note to Mr. Bupp. The shares
covered by this prospectus include the 375,000 shares of common stock issuable
pursuant to the warrants granted to Mr. Bupp in March 2004.

In December 2004, we completed a private placement of Convertible Promissory
Notes in an aggregate principal amount of $8.1 million with Biomedical Value
Fund, L.P., Biomedical Offshore Value Fund, Ltd. and David C. Bupp (our
President and CEO). Biomedical Value Fund, L.P. and Biomedical Offshore Value
Fund, Ltd. are funds managed by Great Point Partners, LLC. The notes bear
interest at 8% per annum and are freely convertible into shares of our common
stock at a price of $0.40 per share. Neoprobe may force conversion of the notes
prior to their stated maturity under certain circumstances. The conversion price
represents the ten-day volume weighted average trading price of our common stock
through December 10, 2004. As part of this transaction, we issued the investors
10,125,000 warrants to purchase our common stock at an exercise price of $0.46,
expiring in December 2009. The shares covered by this prospectus include
20,250,000 shares of common stock issuable upon conversion of the notes, and the
10,125,000 shares of our common stock issuable upon the exercise of the
warrants.

During 2004 we engaged the services of two investment banking firms to assist us
in raising capital, Roth Capital Partners, LLC (Roth) and Laidlaw & Co.
(Laidlaw). In exchange for the services of Roth, we agreed to pay $320,000 in
cash, plus warrants to purchase 800,000 shares of our common stock. The warrants
have an exercise price of $0.46 per share. This prospectus covers the resale of
the shares of common stock issuable upon the exercise of warrants.

In exchange for the services of Laidlaw, we agreed to pay $320,000 in cash, plus
warrants to purchase 800,000 shares of our common stock. The warrants have an
exercise price of $0.46 per share. This prospectus covers the resale of the
shares of common stock issuable upon the exercise of warrants by the
underwriters which received warrants to purchase shares of our common stock as a
result of their participation in the offering on behalf of Laidlaw.

With the exception of the warrants granted to Mr. Bupp in March 2004, all
warrants issued in connection with this transaction expire in December 2009.
This prospectus covers the resale of shares of common stock issuable upon
conversion of the convertible promissory notes, warrants issued to Mr. Bupp in
exchange for extending the due date of the note executed in his favor in
connection with the April 2003 bridge loan agreement, and the shares of common
stock issuable pursuant to the warrants granted to the parties to the Securities
Purchase Agreement and the placement agents and their assignees.


                                       61





                              SELLING STOCKHOLDERS

The following table presents information regarding the selling stockholders and
the shares that may be sold by them pursuant to this prospectus. See also
Security Ownership of Certain Beneficial Owners and Management.



                                                              Percentage of                        Percentage of
                                                  Shares       Outstanding                         Outstanding
                                                  Owned          Shares           Shares to be     Shares Owned
            Selling                               Before       Owned Before       Sold in the         After
          Stockholders                           Offering       Offering(1)         Offering        Offering(1)
    -----------------------------               ----------    -------------       ------------     -------------
                                                                                             
    David C. Bupp(2)                             2,674,542         4.4%               750,000            3.2%

    Great Point Partners, LLC(3)                30,000,000        33.8%            30,000,000             0%

    Roth Capital Partners, LLC(4)                  800,000         1.3%               800,000             0%

    Bonanza Trust(5)                               200,000           *                200,000             0%
    KWG Trust(6)                                   200,000           *                200,000             0%
    Linda Sterling(7)                              120,000           *                120,000             0%
    Aharon Orlansky(8)                             140,000           *                140,000             0%
    Jonathan Lawrence(9)                           140,000           *                140,000             0%

- ----------
*     Represents beneficial ownership of less than 1% of our outstanding common
      stock.

(1)   The number of shares listed in these columns include all shares
      beneficially owned and all options or warrants to purchase shares held,
      whether or not deemed to be beneficially owned, by each selling
      stockholder. The ownership percentages listed in these columns include
      only shares beneficially owned by the listed selling stockholder.
      Beneficial ownership is determined in accordance with the rules of the
      Securities and Exchange Commission. In computing the percentage of shares
      beneficially owned by a selling stockholder, shares of common stock
      subject to options or warrants held by that selling stockholder that were
      exercisable on or within 60 days after March 15, 2006, were deemed
      outstanding for the purpose of computing the percentage ownership of any
      other person. The ownership percentages are calculated assuming that
      58,690,046 shares of common stock were outstanding on March 15, 2006.

(2)   Mr. Bupp is a director of the Company, and also serves as our President
      and Chief Executive Officer. Prior to giving effect to the offering, Mr.
      Bupp held 993,467 shares issuable upon exercise of options which are
      exercisable within 60 days, 875,000 warrants which are exercisable within
      60 days, a promissory note convertible into 250,000 shares of our common
      stock, 57,875 shares that are held by Mr. Bupp's wife for which he
      disclaims beneficial ownership and 75,500 shares in Mr. Bupp's account in
      the 401(k) Plan. After giving effect to the offering Mr. Bupp will hold
      993,467 shares issuable upon exercise of options which are exercisable
      within 60 days, 375,000 warrants which are exercisable within 60 days,
      57,875 shares that are held by Mr. Bupp's wife for which he disclaims
      beneficial ownership and 75,500 shares in Mr. Bupp's account in the 401(k)
      Plan. As of April 3, 2006, Mr. Bupp had sold none of the shares of our
      common stock that he may sell pursuant to this prospectus.

(3)   Prior to giving effect to the offering, Great Point Partners, LLC held
      exercisable warrants to purchase 10,000,000 shares of our common stock and
      promissory notes convertible into 20,000,000 shares of our common stock.
      This amount consists of exercisable warrants to purchase 5,500,000 shares
      of our common stock, and a promissory note convertible into 11,000,000
      shares of our common stock, held by Biomedical Value Fund, L.P., an
      investment fund under the management and control of Great Point Partners,
      LLC; and, exercisable warrants to purchase 4,500,000 shares of our common
      stock, and a promissory note convertible into 9,000,000 shares of our
      common stock, held by Biomedical Offshore Value Fund, Ltd., an investment
      fund also under the management and control of Great Point Partners, LLC.
      Following the offering Great Point Partners, LLC will not hold any
      warrants to purchase shares of our common stock or any convertible shares
      of our common stock. As of April 3, 2006, Great Point Partners, LLC had
      sold none of the shares of our common stock that it may sell pursuant to
      this prospectus.


                                       62





(4)   Prior to giving effect to the offering, Roth Capital Partners, LLC held
      exercisable warrants to purchase 800,000 shares of our common stock.
      Following the offering Roth Capital Partners, LLC will not hold any
      warrants to purchase shares of our common stock. As of April 3, 2006, Roth
      Capital Partners, LLC had sold none of the shares of our common stock that
      it may sell pursuant to this prospectus.

(5)   Prior to giving effect to the offering, Bonanza Trust held exercisable
      warrants to purchase 200,000 shares of our common stock. Following the
      offering, Bonanza Trust will not hold any warrants to purchase shares of
      our common stock. As of April 3, 2006, Bonanza Trust had sold none of the
      shares of our common stock that it may sell pursuant to this prospectus.

(6)   Prior to giving effect to the offering, KWG Trust held exercisable
      warrants to purchase 200,000 shares of our common stock. Following the
      offering, KWG Trust will not hold any warrants to purchase shares of our
      common stock. As of April 3, 2006, KWG Trust had sold none of the shares
      of our common stock that it may sell pursuant to this prospectus.

(7)   Prior to giving effect to the offering, Ms. Sterling held exercisable
      warrants to purchase 120,000 shares of our common stock. Following the
      offering, Ms. Sterling will not hold any warrants to purchase shares of
      our common stock. As of April 3, 2006, Ms. Sterling had sold none of the
      shares of our common stock that she may sell pursuant to this prospectus.

(8)   Prior to giving effect to the offering, Mr. Orlansky held exercisable
      warrants to purchase 140,000 shares of our common stock. Following the
      offering, Mr. Orlansky will not hold any warrants to purchase shares of
      our common stock. As of April 3, 2006, Mr. Orlansky had sold none of the
      shares of our common stock that he may sell pursuant to this prospectus.

(9)   Prior to giving effect to the offering, Mr. Lawrence held exercisable
      warrants to purchase 140,000 shares of our common stock. Following the
      offering, Mr. Lawrence will not hold any warrants to purchase shares of
      our common stock. As of April 3, 2006, Mr. Lawrence had sold none of the
      shares of our common stock that he may sell pursuant to this prospectus.


                                       63





                              PLAN OF DISTRIBUTION

The Selling Stockholders and any of their pledgees, donees, transferees,
assignees and successors-in-interest may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The Selling Stockholders may use any one or more of
the following methods when selling shares:

      o     ordinary brokerage transactions and transactions in which the
            broker-dealer solicits investors;

      o     block trades in which the broker-dealer will attempt to sell the
            shares as agent but may position and resell a portion of the block
            as principal to facilitate the transaction;

      o     purchases by a broker-dealer as principal and resale by the
            broker-dealer for its account;

      o     an exchange distribution in accordance with the rules of the
            applicable exchange;

      o     privately negotiated transactions;

      o     to cover short sales made after the date that this Registration
            Statement is declared effective by the Commission;

      o     broker-dealers may agree with the Selling Stockholders to sell a
            specified number of such shares at a stipulated price per share;

      o     a combination of any such methods of sale; and

      o     any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.

The Selling Stockholders may from time to time pledge or grant a security
interest in some or all of the Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell shares of common stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.

Upon the Company being notified in writing by a Selling Stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
common stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of each such Selling Stockholder and of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such the shares of common stock were sold, (iv)the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus, and (vi) other facts material to the transaction. In addition,
upon the Company being notified in writing by a Selling Stockholder that a donee
or pledgee intends to sell more than 500 shares of common stock, a supplement to
this prospectus will be filed if then required in accordance with applicable
securities law.


                                       64





The Selling Stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.

The Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, that can be attributed to the sale of
Securities will be paid by the Selling Stockholder and/or the purchasers. Each
Selling Stockholder has represented and warranted to the Company that it
acquired the securities subject to this registration statement in the ordinary
course of such Selling Stockholder's business and, at the time of its purchase
of such securities such Selling Stockholder had no agreements or understandings,
directly or indirectly, with any person to distribute any such securities.

The Company has advised each Selling Stockholder that it may not use shares
registered on this Registration Statement to cover short sales of Common Stock
made prior to the date on which this Registration Statement shall have been
declared effective by the Commission. If a Selling Stockholder uses this
prospectus for any sale of the common stock, it will be subject to the
prospectus delivery requirements of the Securities Act. The Selling Stockholders
will be responsible to comply with the applicable provisions of the Securities
Act and Exchange Act, and the rules and regulations thereunder promulgated,
including, without limitation, Regulation M, as applicable to such Selling
Stockholders in connection with resales of their respective shares under this
Registration Statement.

The Company is required to pay all fees and expenses incident to the
registration of the shares, but the Company will not receive any proceeds from
the sale of the common stock. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.

                                  LEGAL OPINION

The validity of the shares offered hereby has been passed upon for us by Porter,
Wright, Morris & Arthur LLP, 41 South High Street, Columbus, Ohio 43215.

                                     EXPERTS

The 2005 consolidated financial statements included in this Prospectus have been
audited by BDO Seidman, LLP, an independent registered public accounting firm,
to the extent and for the period set forth in their report appearing elsewhere
herein and are included in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting.

The consolidated financial statements of Neoprobe Corporation as of December 31,
2004, have been included herein and in the registration statement in reliance
upon the report of KPMG LLP, an independent registered public accounting firm,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

                                       65




                             ADDITIONAL INFORMATION

We are subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, and file reports, proxy statements and other information with
the Securities and Exchange Commission. These reports, proxy statements and
other information may be inspected and copied at the public reference facilities
maintained by the Securities and Exchange Commission at 100 F Street, N.E.,
Washington, D.C. 20549 and at the Securities and Exchange Commission's regional
offices located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 233 Broadway, New York, New York 10279.
You can obtain copies of these materials from the Public Reference Section of
the Securities and Exchange Commission upon payment of fees prescribed by the
Securities and Exchange Commission. You may obtain information on the operation
of the Public Reference Room by calling the Securities and Exchange Commission
at 1-800-SEC-0330. The Securities and Exchange Commission's Web site contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Securities and Exchange
Commission. The address of that site is http://www.sec.gov.

We have filed a Registration Statement on Form SB-2 with the Securities and
Exchange Commission under the Securities Act with respect to the securities
offered in this prospectus. This prospectus, which is filed as part of a
Registration Statement, does not contain all of the information set forth in the
Registration Statement, some portions of which have been omitted in accordance
with the Securities and Exchange Commission's rules and regulations. Statements
made in this prospectus as to the contents of any contract, agreement or other
document referred to in this prospectus are not necessarily complete and are
qualified in their entirety by reference to each such contract, agreement or
other document which is filed as an exhibit to the Registration Statement. The
Registration Statement may be inspected without charge at the public reference
facilities maintained by the Securities and Exchange Commission, and copies of
such materials can be obtained from the Public Reference Section of the
Securities and Exchange Commission at prescribed rates. You may also obtain
additional information regarding the Company on our website, located at
http://www.neoprobe.com


                                       66





                       NEOPROBE CORPORATION and SUBSIDIARIES

                          Index to Financial Statements

Consolidated Financial Statements of Neoprobe Corporation

   Report of Independent Registered Public Accounting Firm
      BDO Seidman, LLP                                                      F-2

   Report of Independent Registered Public Accounting Firm
      KPMG LLP                                                              F-3

   Consolidated Balance Sheets as of
      December 31, 2005 and December 31, 2004                               F-4

   Consolidated Statements of Operations for the years ended
      December 31, 2005 and December 31, 2004                               F-6

   Consolidated Statements of Stockholders' Equity for the years
      ended December 31, 2005 and December 31, 2004                         F-7

   Consolidated Statements of Cash Flows for the years ended
      December 31, 2005 and December 31, 2004                               F-8

   Notes to the Consolidated Financial Statements                           F-9


                                      F-1





Report of Independent Registered Public Accounting Firm


Board of Directors
Neoprobe Corporation
Dublin, Ohio

We have audited the accompanying consolidated balance sheet of Neoprobe
Corporation as of December 31, 2005 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Neoprobe Corporation
at December 31, 2005 and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America.

                                         /s/ BDO Seidman, LLP

Chicago, Illinois
March 30, 2006


                                      F-2





Report of Independent Registered Public Accounting Firm


The Board of Directors and Stockholders
Neoprobe Corporation:

We have audited the accompanying consolidated balance sheet of Neoprobe
Corporation and subsidiaries as of December 31, 2004, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Neoprobe Corporation
and subsidiaries as of December 31, 2004, and the results of their operations
and their cash flows for the year then ended, in conformity with U.S. generally
accepted accounting principles.

/s/ KPMG LLP

Columbus, Ohio
March 31, 2005


                                      F-3





Neoprobe Corporation and Subsidiaries
Consolidated Balance Sheets

December 31, 2005 and 2004

ASSETS                                                  2005            2004
                                                    ------------    ------------
Current assets:
    Cash and cash equivalents                       $  4,940,946    $  9,842,658
    Available-for-sale securities                      1,529,259              --
    Accounts receivable, net                             673,008         411,856
    Inventory                                            803,703         855,022
    Prepaid expenses and other                           501,557         327,408
                                                    ------------    ------------

         Total current assets                          8,448,473      11,436,944
                                                    ------------    ------------

Property and equipment                                 2,051,793       2,341,785
    Less accumulated depreciation
      and amortization                                 1,768,558       2,003,942
                                                    ------------    ------------

                                                         283,235         337,843
                                                    ------------    ------------

Patents and trademarks                                 3,162,547       3,155,334
Non-compete agreements                                        --         584,516
Acquired technology                                      237,271         237,271
                                                    ------------    ------------
                                                       3,399,818       3,977,121
    Less accumulated amortization                      1,300,908       1,458,012
                                                    ------------    ------------

                                                       2,098,910       2,519,109
                                                    ------------    ------------

Other assets                                             739,823       1,071,999
                                                    ------------    ------------

         Total assets                               $ 11,570,441    $ 15,365,895
                                                    ============    ============
Continued


                                      F-4





Neoprobe Corporation and Subsidiaries
Consolidated Balance Sheets, continued



LIABILITIES AND STOCKHOLDERS' EQUITY                                                2005             2004
                                                                               -------------     -------------
                                                                                           
Current liabilities:
   Accounts payable                                                            $     207,824     $     198,912
   Accrued liabilities and other                                                     821,781           378,247
   Capital lease obligations, current                                                 19,530            13,863
   Deferred revenue, current                                                         252,494           176,192
   Notes payable to finance companies                                                200,054           242,722
                                                                               -------------     -------------

          Total current liabilities                                                1,501,683         1,009,936
                                                                               -------------     -------------

Capital lease obligations                                                             31,855            30,297
Deferred revenue                                                                      41,132            57,591
Notes payable to CEO, net of discounts of $26,249
   and $32,204, respectively                                                          73,751            67,796
Notes payable to investor, net of discounts of $2,099,898
   and $2,576,302, respectively                                                    5,900,102         5,423,698
Liability related to warrants to purchase common stock                                    --         2,560,307
Other liabilities                                                                      5,122            52,440
                                                                               -------------     -------------

           Total liabilities                                                       7,553,645         9,202,065
                                                                               -------------     -------------

Commitments and contingencies

Stockholders' equity:
   Preferred stock; $.001 par value; 5,000,000 shares authorized at
     December 31, 2005 and 2004; none issued and outstanding (500,000
     shares designated as Series A, $.001 par
     value, at December 31, 2004; none outstanding)                                       --                --
   Common stock; $.001 par value; 150,000,000 shares authorized,
     58,622,059 shares issued and outstanding at December 31, 2005;
     100,000,000 shares authorized, 58,378,143 shares issued and
     outstanding at December 31, 2004                                                 58,622            58,378
   Additional paid-in capital                                                    134,903,259       132,123,605
   Accumulated deficit                                                          (130,947,103)     (126,018,153)
   Accumulated other comprehensive income                                              2,018                --
                                                                               -------------     -------------

          Total stockholders' equity                                               4,016,796         6,163,830
                                                                               -------------     -------------

              Total liabilities and stockholders' equity                       $  11,570,441     $  15,365,895
                                                                               =============     =============



          See accompanying notes to consolidated financial statements.


                                      F-5





Neoprobe Corporation and Subsidiaries
Consolidated Statements of Operations


                                                    Years Ended December 31,
                                                 -------------------------------
                                                    2005               2004
                                                 ------------      -------------
Revenues:
   Net sales                                     $  5,919,473      $  5,352,640
   License and other revenue                               --           600,000
                                                 ------------      ------------
       Total revenues                               5,919,473         5,952,640
                                                 ------------      ------------

Cost of goods sold                                  2,376,211         2,344,925
                                                 ------------      ------------

Gross profit                                        3,543,262         3,607,715
                                                 ------------      ------------

Operating expenses:
   Research and development                         4,031,790         2,453,755
   Selling, general and administrative              3,155,674         3,153,059
                                                 ------------      ------------
       Total operating expenses                     7,187,464         5,606,814
                                                 ------------      ------------

Loss from operations                               (3,644,202)       (1,999,099)
                                                 ------------      ------------

Other income (expense):
   Interest income                                    226,663            28,869
   Interest expense                                (1,350,592)         (334,196)
   Increase in warrant liability                     (142,427)       (1,245,307)
   Other                                              (18,392)            8,711
                                                 ------------      ------------
       Total other expenses                        (1,284,748)       (1,541,923)
                                                 ------------      ------------

Net loss                                         $ (4,928,950)     $ (3,541,022)
                                                 ============      ============

Net loss per common share:
  Basic                                          $      (0.08)     $      (0.06)
  Diluted                                        $      (0.08)     $      (0.06)

Weighted average shares outstanding:
  Basic                                            58,433,895        56,763,710
  Diluted                                          58,433,895        56,763,710


          See accompanying notes to consolidated financial statements.


                                      F-6





Neoprobe Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity




                                                                                                  Accumulated
                                           Common Stock           Additional                         Other
                                     --------------------------     Paid-in       Accumulated    Comprehensive
                                       Shares         Amount        Capital         Deficit          Income         Total
                                     ----------   -------------  -------------   -------------   -------------  -------------
                                                                                              
Balance, December 31, 2003           51,520,723   $      51,521  $ 127,684,555   $(122,477,131)  $          --  $   5,258,945

Issued stock upon conversion of
  note payable to investor            1,098,851           1,099        250,748              --              --        251,847
Issued warrants in exchange for
  extension of note payable to
  CEO                                        --              --        171,801              --              --        171,801
Issued stock upon exercise of
  warrants                            3,251,354           3,251        874,488              --              --        877,739
Issued stock in connection with
  stock purchase agreement            2,416,129           2,416      1,468,918              --              --      1,471,334
Issued stock options to
  consultants                                --              --        172,736              --              --        172,736
Effect of beneficial conversion
  feature of convertible
  promissory notes                           --              --      1,315,000              --              --      1,315,000
Issued warrants as fees to
  investment banking firms                   --              --        208,014              --              --        208,014
Issued stock to 401(k) plan
  at $0.16                               91,086              91         14,402              --              --         14,493
Paid offering costs related to
  issuance of stock and warrants             --              --        (37,057)             --              --        (37,057)
Net loss                                     --              --             --      (3,541,022)             --     (3,541,022)
                                  -------------   -------------  -------------   -------------   -------------  -------------

Balance, December 31, 2004           58,378,143          58,378    132,123,605    (126,018,153)             --      6,163,830

Issued stock upon exercise of
  warrants                              206,865             207         57,715              --              --         57,922
Issued stock to 401(k) plan
  at $0.39                               37,051              37         19,205              --              --         19,242
Reclassified liability related
  to warrants to purchase
  common stock                               --              --      2,702,734              --              --      2,702,734
Comprehensive income (loss):
    Net loss                                 --              --             --      (4,928,950)             --     (4,928,950)
    Unrealized gain on
      available-for-sale
      securities                             --              --             --              --           2,018          2,018
                                                                                                                -------------
Total comprehensive loss                                                                                           (4,926,932)
                                  -------------   -------------  -------------   -------------   -------------  -------------

Balance, December 31, 2005           58,622,059   $      58,622  $ 134,903,259   $(130,947,103)  $       2,018  $   4,016,796
                                  =============   =============  =============   =============   =============  =============



          See accompanying notes to consolidated financial statements.


                                      F-7





Neoprobe Corporation and Subsidiaries
Consolidated Statements of Cash Flows




                                                                           Years Ended December 31,
                                                                          ---------------------------
                                                                              2005          2004
                                                                          ------------   ------------
                                                                                   
Cash flows from operating activities:
   Net loss                                                               $ (4,928,950)  $ (3,541,022)
   Adjustments to reconcile net loss to net cash used in
    operating activities:
      Depreciation of property and equipment                                   163,121        154,703
      Amortization of intangible assets                                        440,629        434,728
      Provision for bad debts                                                      320         79,718
      Net loss on disposal and abandonment of assets                             6,650         11,467
      Amortization of debt discount and offering costs                         687,370        266,580
      Increase in warrant liability                                            142,427      1,245,307
      Stock options granted for research and development                            --        172,736
      Other                                                                     (8,199)        15,551
      Change in operating assets and liabilities:
         Accounts receivable                                                  (261,472)       616,226
         Inventory                                                              34,163        131,532
         Prepaid expenses and other assets                                     257,005        169,001
         Accounts payable                                                        8,912        (26,120)
         Accrued liabilities and other liabilities                             396,201        166,026
         Deferred revenue                                                       59,843       (721,804)
                                                                          ------------   ------------

   Net cash used in operating activities                                    (3,001,980)      (825,371)
                                                                          ------------   ------------

Cash flows from investing activities:
   Purchases of available-for-sale securities                               (5,480,787)            --
   Maturities of available-for-sale securities                               3,950,000             --
   Purchases of property and equipment                                         (86,004)       (87,923)
   Proceeds from sales of property and equipment                                11,092          2,960
   Patent and trademark costs                                                  (20,625)       (25,779)
                                                                          ------------   ------------

   Net cash used in investing activities                                    (1,626,324)      (110,742)
                                                                          ------------   ------------

Cash flows from financing activities:
   Proceeds from issuance of common stock                                       57,922      2,349,073
   Payment of offering costs                                                        --        (37,057)
   Proceeds from notes payable                                                      --      8,100,000
   Payment of debt issuance costs                                              (29,635)      (729,978)
   Payment of notes payable                                                   (286,035)      (476,125)
   Payments under capital leases                                               (15,680)       (15,902)
   Other                                                                            20             --
                                                                          ------------   ------------

   Net cash (used in) provided by financing activities                        (273,408)     9,190,011
                                                                          ------------   ------------

   Net (decrease) increase in cash and cash equivalents                     (4,901,712)     8,253,898

   Cash and cash equivalents, beginning of year                              9,842,658      1,588,760
                                                                          ------------   ------------

   Cash and cash equivalents, end of year                                 $  4,940,946   $  9,842,658
                                                                          ============   ============



          See accompanying notes to consolidated financial statements.


                                      F-8





                 Notes to the Consolidated Financial Statements


1.    Organization and Summary of Significant Accounting Policies:

a.    Organization and Nature of Operations: Neoprobe Corporation (Neoprobe, the
      company, or we), a Delaware corporation, is engaged in the development and
      commercialization of innovative surgical and diagnostic products that
      enhance patient care by meeting the critical decision making needs of
      physicians. We currently manufacture two lines of medical devices: the
      first is a line of gamma radiation detection equipment used in the
      application of intraoperative lymphatic mapping (ILM), and the second is a
      line of blood flow monitoring devices for a variety of diagnostic and
      surgical applications.

      Our gamma detection device products are marketed throughout most of the
      world through a distribution arrangement with Ethicon Endo-Surgery, Inc.
      (EES), a Johnson & Johnson company. For the years ended December 31, 2005
      and 2004, 92% and 91% of net sales, respectively, were made to EES. The
      loss of this customer would have a significant adverse effect on our
      operating results.

      Our blood flow measurement device product line is in the early stages of
      commercialization. Our activity with this product line was initiated with
      our acquisition of Cardiosonix Ltd. (Cardiosonix, formerly Biosonix Ltd.),
      located in Ra'anana, Israel, on December 31, 2001.

      We also have developmental and/or intellectual property rights related to
      two drugs that might be used in connection with gamma detection devices in
      cancer surgeries. The first, LymphoseekTM, is intended to be used in
      tracing the spread of certain solid tumor cancers. The second, RIGScan(R)
      CR, is intended to be used to help surgeons locate cancerous tissue during
      colorectal cancer surgeries. Both of these drug products are still in
      development and must be cleared for marketing by the appropriate
      regulatory bodies before they can be sold in any markets.

      In addition, in January 2005 we formed a new corporation, Cira
      Biosciences, Inc. (Cira Bio), to explore the development of
      patient-specific cellular therapies that have shown positive patient
      responses in a variety of clinical settings. Cira Bio is combining our
      activated cellular therapy (ACT) technology for patient-specific oncology
      treatment with similar technology licensed from Cira LLC, a privately held
      company, for treating viral and autoimmune diseases. Neoprobe owns
      approximately 90% of the outstanding shares of Cira Bio with the remaining
      shares being held by the principals of Cira LLC.

b.    Principles of Consolidation: Our consolidated financial statements include
      the accounts of Neoprobe, our wholly-owned subsidiary, Cardiosonix, and
      our majority-owned subsidiary, Cira Bio. All significant inter-company
      accounts were eliminated in consolidation.

c.    Fair Value of Financial Instruments: The following methods and assumptions
      were used to estimate the fair value of each class of financial
      instruments:

      (1)   Cash and cash equivalents, accounts receivable, accounts payable,
            and accrued liabilities: The carrying amounts approximate fair value
            because of the short maturity of these instruments.

      (2)   Available-for-sale securities: Available-for-sale securities are
            recorded at fair value. Unrealized holding gains and losses, net of
            the related tax effect, on available-for-sale securities are
            excluded from earnings and are reported as a separate component of
            other comprehensive income (loss) until realized. Realized gains and
            losses from the sale of available-for-sale securities are determined
            on a specific identification basis.

            A decline in the market value of any available-for-sale security
            below cost that is deemed to be other than temporary results in a
            reduction in carrying amount to fair value. The impairment is
            charged to earnings and a new cost basis for the security is
            established. Premiums and discounts are amortized or accreted over
            the life of the related available-for-sale security as an adjustment
            to yield using the effective interest method. Dividend and interest
            income are recognized when earned.


                                      F-9





                 Notes to the Consolidated Financial Statements


            Available-for-sale securities are classified as current based on our
            intent to use them to fund short-term working capital needs.

      (3)   Notes payable to finance companies: The fair value of our debt is
            estimated by discounting the future cash flows at rates currently
            offered to us for similar debt instruments of comparable maturities
            by banks or finance companies. At December 31, 2005 and 2004, the
            carrying values of these instruments approximate fair value.

      (4)   Notes payable to CEO: The carrying value of our debt is presented as
            the face amount of the notes less the unamortized discounts related
            to the value of the beneficial conversion features and the initial
            estimated fair value of the warrants to purchase common stock issued
            in connection with the notes. At December 31, 2005, the carrying
            value of the note payable to our CEO approximates fair value. At
            December 31, 2004, the fair value of the note payable to our CEO was
            approximately $75,000, as determined by a third-party valuation
            expert.

      (5)   Notes payable to outside investors: The carrying value of our debt
            is presented as the face amount of the notes less the unamortized
            discounts related to the value of the beneficial conversion features
            and the initial estimated fair value of the warrants to purchase
            common stock issued in connection with the notes. At December 31,
            2005, the carrying value of the note payable to outside investors
            approximates fair value. At December 31, 2004, the fair value of the
            note payable to outside investors was approximately $6.0 million, as
            determined by a third-party valuation expert.

d.    Cash and Cash Equivalents: There were no cash equivalents at December 31,
      2005 or 2004. As of December 21, 2005 and 2004, $8,000 and $19,000,
      respectively, was restricted to secure bank guarantees related to
      sub-lease agreements for Cardiosonix' office space.

e.    Inventory: All components of inventory are valued at the lower of cost
      (first-in, first-out) or market. We adjust inventory to market value when
      the net realizable value is lower than the carrying cost of the inventory.
      Market value is determined based on recent sales activity and margins
      achieved. The components of net inventory at December 31, 2005 and 2004
      are as follows:

                                             2005             2004
                                          ----------        ----------

      Materials and component parts       $  461,218        $  486,323
      Finished goods                         342,485           368,699
                                          ----------        ----------
                                          $  803,703        $  855,022
                                          ==========        ==========

      During 2005 and 2004, we wrote off $58,000 and $107,000, respectively, of
      excess and obsolete materials, primarily due to reduced demand for our
      laparoscopic probes and design changes to our Quantix(R) product line.

f.    Property and Equipment: Property and equipment are stated at cost.
      Property and equipment under capital leases are stated at the present
      value of minimum lease payments. Depreciation is computed using the
      straight-line method over the estimated useful lives of the depreciable
      assets ranging from 2 to 7 years, and includes amortization related to
      equipment under capital leases. Maintenance and repairs are charged to
      expense as incurred, while renewals and improvements are capitalized.
      Property and equipment includes $78,000 and $56,000 of equipment under
      capital leases with accumulated amortization of $33,000 and $14,000 at
      December 31, 2005 and 2004, respectively. During 2005 and 2004, we
      recorded losses of $7,000 and $4,000, respectively, on the disposal of
      property and equipment.


                                      F-10





                 Notes to the Consolidated Financial Statements


      The major classes of property and equipment are as follows:



                                                            Useful Life           2005             2004
                                                          -------------        -----------      -----------
                                                                                       
      Production machinery and equipment                        5 years        $   999,106      $ 1,060,610
      Other machinery and equipment, primarily
         computers and research equipment                   2 - 5 years            543,313          663,772
      Furniture and fixtures                                    7 years            334,275          360,663
      Leasehold improvements                              Life of Lease(1)          74,682          134,856
      Software                                                  3 years            100,417          121,884
                                                                               -----------      -----------
                                                                               $ 2,051,793      $ 2,341,785
                                                                               -----------      -----------


      1     We amortize leasehold improvements over the life of the lease, which
            in all cases we believe is shorter than the estimated useful life of
            the asset.

g.    Intangible Assets: Intangible assets consist primarily of patents and
      other acquired intangible assets. Intangible assets are stated at cost,
      less accumulated amortization. Patent costs are amortized using the
      straight-line method over the estimated useful lives of the patents of 5
      to 15 years. Patent application costs are deferred pending the outcome of
      patent applications. Costs associated with unsuccessful patent
      applications and abandoned intellectual property are expensed when
      determined to have no recoverable value. Acquired technology costs are
      amortized using the straight-line method over the estimated useful life of
      seven years. Non-compete agreements were amortized using the straight-line
      method over their estimated useful lives of four years. Non-compete
      agreements expired as of December 31, 2005. We evaluate the potential
      alternative uses of all intangible assets, as well as the recoverability
      of the carrying values of intangible assets on a recurring basis.

      The major classes of intangible assets are as follows:



                                                           December 31, 2005                       December 31, 2004
                                                    -------------------------------         -------------------------------
                                      Wtd              Gross                                   Gross
                                      Avg             Carrying          Accumulated           Carrying          Accumulated
                                      Life             Amount          Amortization            Amount          Amortization
                                     ------         -----------        ------------         -----------        ------------
                                                                                                
      Patents and trademarks         10 yrs         $ 3,162,547        $  1,164,763         $ 3,155,334        $    915,571
      Non-compete agreements           --                    --                  --             584,516             440,005
      Acquired technology            3 yrs              237,271             136,145             237,271             102,436
                                                    -----------        ------------         -----------        ------------

      Total                                         $ 3,399,818        $  1,300,908         $ 3,977,121        $  1,458,012
                                                    ===========        ============         ===========        ============


      During 2005 and 2004, we recorded general and administrative expenses of
      $440,000 and $442,000, respectively, of intangible asset amortization
      expense. Of those amounts, $11,000 and $7,000, respectively, was related
      to the abandonment of gamma detection patents and patent applications that
      were deemed no longer recoverable or part of our ongoing business.


                                      F-11





                 Notes to the Consolidated Financial Statements


      The estimated future amortization expenses for the next five fiscal years
      are as follows:

                                                    Estimated
                                                   Amortization
                                                     Expense
                                                   ------------

      For the year ended 12/31/2006                $  262,992
      For the year ended 12/31/2007                   226,830
      For the year ended 12/31/2008                   201,976
      For the year ended 12/31/2009                   168,267
      For the year ended 12/31/2010                   168,267

h.    Other Assets:

      Other assets consist primarily of deferred debt issuance costs. We defer
      costs associated with the issuance of notes payable and amortize those
      costs over the period of the notes using the effective interest method. In
      2005 and 2004, we incurred $10,000 and $938,000, respectively, of debt
      issuance costs related to notes payable. Of the debt issuance costs
      incurred in 2004, $208,000 was non-cash in nature. See Note 6.

i.    Revenue Recognition:

      (1)   Product Sales: We derive revenues primarily from sales of our
            medical devices. Our standard shipping terms are FOB shipping point,
            and title and risk of loss passes to the customer upon delivery to a
            common carrier. We generally recognize sales revenue when the
            products are shipped and the earnings process has been completed.
            However, in cases where product is shipped but the earnings process
            is not yet completed, revenue is deferred until it has been
            determined that the earnings process has been completed. Our
            customers have no right to return products purchased in the ordinary
            course of business.

            Sales prices on gamma detection products sold to EES are subject to
            retroactive annual adjustment based on a fixed percentage of the
            actual sales prices achieved by EES on sales to end customers made
            during each fiscal year, subject to a minimum (i.e., floor) price.
            To the extent that we can reasonably estimate the end customer
            prices received by EES, we record sales to EES based upon these
            estimates. To the extent that we are not able to reasonably estimate
            end customer sales prices related to certain products sold to EES,
            we record revenue related to these product sales at the floor price
            provided for under our distribution agreement with EES.

            We recognize revenue related to the sales of products to be used for
            demonstration units when products are shipped and the earnings
            process has been completed. Our distribution agreements do not
            permit return of purchased demonstration units in the ordinary
            course of business nor do we have any performance obligations other
            than normal product warranty obligations. To the extent that the
            earnings process has not been completed, revenue is deferred. To the
            extent we enter into multiple-element arrangements, we allocate
            revenue based on the relative fair value of the elements.

      (2)   Extended Warranty Revenue: We derive revenues from the sale of
            extended warranties covering our medical devices over periods of one
            to four years. We recognize revenue from extended warranty sales on
            a pro-rata basis over the period covered by the extended warranty.
            Expenses related to the extended warranty are recorded when
            incurred.

      (3)   Service Revenue: We derive revenues from the repair and service of
            our medical devices that are in use beyond the term of the original
            warranty and that are not covered by an extended warranty. We
            recognize revenue from repair and service activities once the
            activities are complete and the repaired or serviced device has been
            shipped back to the customer.


                                      F-12





                 Notes to the Consolidated Financial Statements


      (4)   License Revenue: We recognized license revenue in connection with
            our distribution agreement with EES on a straight-line basis over
            the five-year initial term of the agreement based on our obligations
            to provide ongoing support for the intellectual property being
            licensed such as patent maintenance and regulatory filings. As the
            license related to intellectual property held or licensed to us, we
            incurred no significant cost associated with the recognition of this
            revenue. The license revenue was fully recognized as of September
            30, 2004.

j.    Research and Development Costs: All costs related to research and
      development are expensed as incurred.

k.    Income Taxes: Income taxes are accounted for under the asset and liability
      method. Deferred tax assets and liabilities are recognized for the future
      tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases, and operating loss and tax credit carryforwards.
      Deferred tax assets and liabilities are measured using enacted tax rates
      expected to apply to taxable income in the years in which those temporary
      differences are expected to be recovered or settled. The effect on
      deferred tax assets and liabilities of a change in tax rates is recognized
      in income in the period that includes the enactment date. Due to the
      uncertainty surrounding the realization of these favorable tax attributes
      in future tax returns, all of the net deferred tax assets have been fully
      offset by a valuation allowance at December 31, 2005.

l.    Stock Option Plans: At December 31, 2005, we have three stock-based
      employee compensation plans. (See Note 8(a).) We apply the intrinsic
      value-based method of accounting prescribed by Accounting Principles Board
      (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and
      related interpretations, in accounting for our stock options. As such,
      compensation expense is recorded on the date of grant and amortized over
      the period of service only if the current market price of the underlying
      stock exceeds the exercise price. No stock-based employee compensation
      cost related to options is reflected in net income (loss), as all options
      granted under those plans had an exercise price equal to the market value
      of the underlying common stock on the date of grant.

      The fair value of each option grant was estimated on the date of the grant
      using the Black-Scholes option-pricing model with the following
      assumptions for 2005 and 2004, respectively: average risk-free interest
      rates of 4.3% and 3.0%; volatility of 79% for 2005 and 127% for 2004; and
      no dividend rate for any year. The weighted average fair value of options
      granted in 2005 and 2004 was $0.28 and $0.39, respectively.

      The following table illustrates the effect on net income (loss) and
      earnings (loss) per share if compensation cost for our stock-based
      compensation plans had been determined based on the fair value at the
      grant dates for awards under those plans consistent with Statement of
      Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
      Compensation:

                                                     Years Ended December 31,
                                                   ----------------------------
                                                       2005            2004
                                                   -----------      -----------

      Net loss, as reported                        $(4,928,950)     $(3,541,022)
      Deduct:  Total stock-based employee
        compensation expense determined under
        fair value based method for all awards        (511,712)        (304,266)
                                                   -----------      -----------

      Pro forma net loss                           $(5,440,662)     $(3,845,288)
                                                   ===========      ===========

      Loss per common share:
         As reported (basic and diluted)           $     (0.08)     $     (0.06)
         Pro forma (basic and diluted)             $     (0.09)     $     (0.07)


                                      F-13





                 Notes to the Consolidated Financial Statements


m.    Equity Issued to Non-Employees: We account for equity instruments granted
      to non-employees in accordance with the provisions of SFAS No. 123 and
      Emerging Issues Task Force Issue No. 96-18, Accounting for Equity
      Instruments that are Issued to Other Than Employees for Acquiring, or in
      Conjunction with Selling, Goods or Services. All transactions in which
      goods or services are the consideration received for the issuance of
      equity instruments are accounted for based on the fair value of the
      consideration received or the equity instrument issued, whichever is more
      reliably measurable. The measurement date of the fair value of the equity
      instrument issued is the earlier of the date on which the counterparty's
      performance is complete or the date on which it is probable that
      performance will occur. During 2004, we issued 250,000 options to
      non-employee consultants and recognized $173,000 of research and
      development expense related to options granted to consultants.

n.    Use of Estimates: The preparation of financial statements in conformity
      with accounting principles generally accepted in the United States of
      America 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.

o.    Comprehensive Income (Loss): Due to our net operating loss position, there
      are no income tax effects on comprehensive income (loss) components for
      the year ended December 31, 2005.


                                                               Year Ended
                                                              December 31,
                                                                  2005
                                                              ------------

      Net loss                                                $ (4,928,950)
      Unrealized gains on available-for-sale securities              2,018
                                                              ------------

      Other comprehensive loss                                $ (4,926,932)
                                                              ============

      We had no accumulated other comprehensive income (loss) activity during
      the year ended December 31, 2004.

p.    Impairment or Disposal of Long-Lived Assets: We account for long-lived
      assets in accordance with the provisions of SFAS No. 144, Accounting for
      the Impairment or Disposal of Long-Lived Assets. This Statement requires
      that long-lived assets and certain identifiable intangibles be reviewed
      for impairment whenever events or changes in circumstances indicate that
      the carrying amount of an asset may not be recoverable. Recoverability of
      assets to be held and used is measured by a comparison of the carrying
      amount of an asset to future net undiscounted cash flows expected to be
      generated by the asset. If such assets are considered to be impaired, the
      impairment recognized is measured by the amount by which the carrying
      amount of the assets exceeds the fair value of the assets. Assets to be
      disposed of are reported at the lower of the carrying amount or fair value
      less costs to sell.

q.    Recent Accounting Developments: In November 2004, the Financial Accounting
      Standards Board (FASB) issued SFAS No. 151, Inventory Costs - An Amendment
      of ARB No. 43, Chapter 4. This statement amends the guidance in ARB No. 43
      Chapter 4, Inventory Pricing, to clarify the accounting for abnormal
      amounts of idle facility expense, freight, handling costs, and wasted
      material (spoilage). Paragraph 5 of ARB No. 43, Chapter 4, previously
      stated that " . . . under some circumstances, items such as idle facility
      expense, excessive spoilage, double freight, and rehandling costs may be
      so abnormal to require treatment as a current period charge...." This
      statement requires that those items be recognized as current-period
      charges regardless of whether they meet the criterion of "so abnormal." In
      addition, this statement requires that allocation of fixed production
      overheads to the costs of conversion be based on the normal capacity of
      the production facilities. The provisions of this statement will be
      effective for inventory costs during fiscal years beginning after June 15,
      2005. Neoprobe does not believe that the adoption of this statement will
      have a material impact on its financial condition or results of
      operations.


                                      F-14





                 Notes to the Consolidated Financial Statements


      In December 2004, the FASB issued SFAS No. 123 (revised 2004), Share-Based
      Payment, which is a revision of SFAS No. 123, Accounting for Stock-Based
      Compensation (SFAS No. 123R). SFAS No. 123R supersedes APB Opinion No. 25,
      Accounting for Stock Issued to Employees, and amends SFAS No. 95,
      Statement of Cash Flows. Generally, the approach in SFAS No. 123R is
      similar to the approach described in SFAS No. 123. However, SFAS No. 123R
      requires all share-based payments to employees, including grants of
      employee stock options, to be recognized in the income statement based on
      their fair values. Pro forma disclosure is no longer an alternative. We
      must adopt SFAS No. 123R for interim or annual reporting periods beginning
      after December 15, 2005. Early adoption will be permitted in periods in
      which financial statements have not yet been issued. We adopted SFAS No.
      123R effective January 1, 2006.

      As permitted by SFAS No. 123, during 2005 Neoprobe accounted for
      share-based payments to employees using APB Opinion No. 25's intrinsic
      value method and, as such, generally recognized no compensation cost for
      employee stock options. However, had we adopted SFAS No. 123R in prior
      periods, the impact of that standard would have approximated the impact of
      SFAS No. 123 as described in the disclosure of pro forma net loss and loss
      per share in Note 1(l) to our consolidated financial statements. The
      adoption of SFAS No. 123R's fair value method will have a significant
      impact on our results of operations, although it will have no impact on
      our overall cash position. Based on options outstanding at December 31,
      2005, we estimate that the adoption of SFAS No. 123R will result in
      additional compensation expense of approximately $260,000 in 2006 and
      $115,000 in 2007. However, these amounts may change significantly
      depending on levels of share-based payments granted in the future and the
      assumptions for the variables which impact the computation. SFAS No. 123R
      also requires the benefits of tax deductions in excess of recognized
      compensation cost to be reported as a financing cash flow, rather than as
      an operating cash flow as required under current literature.

      In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary
      Assets - An Amendment of APB Opinion No. 29, Accounting for Nonmonetary
      Transactions (SFAS No. 153). SFAS No. 153 eliminates the exception from
      fair value measurement for nonmonetary exchanges of similar productive
      assets in paragraph 21(b) of APB Opinion No. 29, Accounting for
      Nonmonetary Transactions, and replaces it with an exception for exchanges
      that do not have commercial substance. SFAS No. 153 specifies that a
      nonmonetary exchange has commercial substance if the future cash flows of
      the entity are expected to change significantly as a result of the
      exchange. SFAS No. 153 is effective for fiscal periods beginning after
      June 15, 2005 and is required to be adopted by Neoprobe beginning January
      1, 2006. Neoprobe is currently evaluating the effect that the adoption of
      SFAS No. 153 will have on its consolidated results of operations and
      financial condition but does not expect it to have a material impact.

      In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
      Corrections - A Replacement of APB Opinion No. 20 and FASB Statement No. 3
      (SFAS No. 154). SFAS No. 154 supersedes APB Opinion No. 20, Accounting
      Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial
      Statements. SFAS No. 154 requires retrospective application to prior
      periods' financial statements of a voluntary change in accounting
      principle unless it is impracticable. APB Opinion No. 20 previously
      required that most voluntary changes in accounting principle be recognized
      by including in net income of the period of the change the cumulative
      effect of changing to the new accounting principle. SFAS No. 154 requires
      that a change in method of depreciation, amortization, or depletion for
      long-lived, nonfinancial assets be accounted for as a change in accounting
      estimate that is effected by a change in accounting principle. ABP Opinion
      No. 20 previously required that such a change be reported as a change in
      accounting principle. SFAS No. 154 carries forward many provisions of APB
      Opinion No. 20 without change, including the provisions related to the
      reporting of a change in accounting estimate, a change in the reporting
      entity, and the correction of an error. SFAS No. 154 also carries forward
      the provisions of SFAS No. 3 that govern reporting accounting changes in
      interim financial statements. SFAS No. 154 is effective for fiscal years
      beginning after December 15, 2005 and is required to be adopted by
      Neoprobe beginning January 1, 2006. We do not expect the adoption of SFAS
      No. 154 to have a material impact on our consolidated results of
      operations and financial condition.


                                      F-15





                 Notes to the Consolidated Financial Statements


      In September 2005, the Emerging Issues Task Force (EITF) ratified EITF No.
      05-8, Income Tax Consequences of Issuing Convertible Debt with a
      Beneficial Conversion Feature (EITF No. 05-8). EITF No. 05-8 determined
      that (a) the issuance of convertible debt with a beneficial conversion
      feature results in a difference between book basis and tax basis of the
      debt instrument, (b) such difference between book basis and tax basis of
      the debt instrument is temporary in nature, and (c) the recognition of
      deferred taxes for the temporary difference of convertible debt with a
      beneficial conversion feature should be recorded as an adjustment to
      additional paid-in capital. EITF No. 05-8 is required to be applied
      retrospectively, and is effective beginning in the first interim or annual
      reporting period beginning after December 15, 2005. Neoprobe is required
      to adopt EITF No. 05-8 beginning January 1, 2006. We do not expect the
      adoption of EITF No. 05-8 to have a material impact on our consolidated
      results of operations or financial condition, however we do expect the
      adoption of EITF No. 05-8 to result in a material change in our income tax
      disclosures.

      In February 2006, the FASB issued SFAS No. 155, Accounting for Certain
      Hybrid Financial Instruments - An Amendment of FASB Statements No. 133 and
      140 (SFAS No. 155). SFAS No. 155 amends SFAS No. 133, Accounting for
      Derivative Instruments and Hedging Activities, and SFAS No. 140,
      Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities. SFAS No. 155 (a) permits fair value
      remeasurement for any hybrid financial instrument that contains an
      embedded derivative that otherwise would require bifurcation, (b)
      clarifies which interest-only strips and principal-only strips are not
      subject to the requirements of SFAS No. 133, (c) establishes a requirement
      to evaluate interests in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation, (d)
      clarifies that concentrations of credit risk in the form of subordination
      are not embedded derivatives, and (e) amends SFAS No. 140 to eliminate the
      prohibition on a qualifying special-purpose entity from holding a
      derivative financial instrument that pertains to a beneficial interest
      other than another derivative financial instrument. SFAS No. 155 is
      effective for all financial instruments acquired or issued after the
      beginning of an entity's first fiscal year that begins after September 15,
      2006 and is required to be adopted by Neoprobe beginning January 1, 2007.
      We do not expect the adoption of SFAS No. 155 to have a material impact on
      our consolidated results of operations and financial condition.

2.    Earnings Per Share:

      Basic earnings (loss) per share are calculated using the weighted average
      number of common shares outstanding during the periods. Diluted earnings
      (loss) per share is calculated using the weighted average number of common
      shares outstanding during the periods, adjusted for the effects of
      convertible securities, options and warrants, if dilutive.



                                               Year Ended                       Year Ended
                                           December 31, 2005               December 31, 2004
                                        -------------------------       -------------------------
                                          Basic         Diluted           Basic         Diluted
                                         Earnings       Earnings         Earnings       Earnings
                                        Per Share      Per Share        Per Share      Per Share
                                        ----------     ----------       ----------     ----------
                                                                           
      Outstanding shares                58,622,059     58,622,059       58,378,143     58,378,143
      Effect of weighting changes
        in outstanding shares              (58,164)       (58,164)      (1,484,433)    (1,484,433)
      Contingently issuable shares        (130,000)      (130,000)        (130,000)      (130,000)
                                        ----------     ----------       ----------     ----------

      Adjusted shares                   58,433,895     58,433,895       56,763,710     56,763,710
                                        ==========     ==========       ==========     ==========



                                      F-16





                 Notes to the Consolidated Financial Statements


      There is no difference in basic and diluted loss per share related to 2005
      or 2004. The net loss per common share for 2005 and 2004 excludes
      40,648,684 and 37,982,562, respectively, of common shares issuable upon
      exercise of outstanding stock options and warrants into our common stock
      or upon the conversion of convertible debt since such inclusion would be
      anti-dilutive.

3.    Accounts Receivable and Concentrations of Credit Risk:

      Accounts receivable at December 31, 2005 and 2004, net of allowance for
      doubtful accounts of $1,000 and $2,000, respectively, consist of the
      following:

                                                   2005           2004
                                                 --------       --------

      Trade                                      $663,898       $403,674
      Other                                         9,110          8,182
                                                 --------       --------
                                                 $673,008       $411,856
                                                 ========       ========


      At December 31, 2005 and 2004, approximately 91% and 88%, respectively, of
      net accounts receivable are due from EES. We do not believe we are exposed
      to significant credit risk related to EES based on the overall financial
      strength and credit worthiness of the customer and its parent company. We
      believe that we have adequately addressed other credit risks in estimating
      the allowance for doubtful accounts.

      We estimate an allowance for doubtful accounts based on a review and
      assessment of specific accounts receivable and write off accounts when
      deemed uncollectible. The activity in the allowance for doubtful accounts
      for the years ended December 31, 2005 and 2004 is as follows:

                                                           2005        2004
                                                         --------    --------

      Allowance for doubtful accounts
        at beginning of year                             $  1,694    $ 46,000
      Provision for bad debts                                 320       8,718
      Write-offs charged against the allowance             (1,435)    (53,024)
      Recoveries of amounts previously
        written off                                           287          --
                                                         --------    --------
      Allowance for doubtful accounts at end of year     $    866    $  1,694
                                                         ========    ========


4.    Accrued Liabilities:

      Accrued liabilities at December 31, 2005 and 2004 consist of the
      following:

                                                   2005           2004
                                                 --------       --------

      Contracted services and other              $540,932       $241,608
      Compensation                                204,421         56,547
      Warranty reserve                             41,185         66,000
      Inventory purchases                          35,243         14,092
                                                 --------       --------
                                                 $821,781       $378,247
                                                 ========       ========

5.    Product Warranty:


      We warrant our products against defects in design, materials, and
      workmanship generally for a period of one year from the date of sale to
      the end customer except in cases where the product has a limited use as
      designed. Our accrual for warranty expenses is adjusted periodically to
      reflect actual experience. EES also reimburses us for a portion of
      warranty expense incurred based on end customer sales they make during a
      given fiscal year. Payments charged against the reserve are disclosed net
      of EES' estimated reimbursement.


                                      F-17





                 Notes to the Consolidated Financial Statements


      The activity in the warranty reserve account for the years ended December
      31, 2005 and 2004 is as follows:

                                                   2005           2004
                                                 --------       --------

      Warranty reserve, at beginning of year     $ 66,000       $ 53,000
      Provision for warranty claims and
         changes in reserve for warranties         24,539         20,849
      Payments charged against the reserve        (49,354)        (7,849)
                                                 --------       --------
      Warranty reserve, at end of year           $ 41,185       $ 66,000
                                                 ========       ========

6.    Notes Payable:

      During April 2003, we completed a bridge loan agreement with our President
      and CEO, David Bupp. Under the terms of the agreement, Mr. Bupp advanced
      us $250,000. In consideration for the loan, we issued a note to Mr. Bupp
      in the principal amount of $250,000. The note was secured by general
      assets of the company, excluding accounts receivable. In addition, we
      issued Mr. Bupp 375,000 warrants to purchase our common stock at an
      exercise price of $0.13 per share, expiring in April 2008. The per share
      value of these warrants was $0.10 on the date of issuance using the
      Black-Scholes option pricing model with the following assumptions: an
      average risk-free interest rate of 2.9%, volatility of 139% and no
      expected dividend rate. The note bore interest at 8.5% per annum, payable
      monthly, and the note was originally due on June 30, 2004. On March 8,
      2004, at the request of the Board of Directors, Mr. Bupp agreed to extend
      the due date of the note from June 30, 2004 to June 30, 2005. In exchange
      for extending the due date of the note, we issued Mr. Bupp an additional
      375,000 warrants to purchase our common stock at an exercise price of
      $0.50 per share, expiring in March 2009. The per share value of these
      warrants was $0.46 on the date of issuance using the Black-Scholes option
      pricing model with the following assumptions: an average risk-free
      interest rate of 2.7%, volatility of 152% and no expected dividend rate.
      The total estimated fair values for the warrants issued to Mr. Bupp in
      April 2003 and March 2004 were $31,755 and $171,801, respectively. These
      amounts were recorded as discounts on the note and were amortized over the
      period of the note. On December 13, 2004, we paid the balance of the note
      to Mr. Bupp. The discount remaining at the date of payment totaling
      $74,230 was recorded as interest expense.

      During April 2003, we also completed a bridge loan agreement with an
      outside investor for an additional $250,000. In consideration for the
      loan, we issued a note to the investor in the principal amount of
      $250,000. The note was secured by general assets of the company, excluding
      accounts receivable. In addition, we issued the investor 500,000 warrants
      to purchase our common stock at an exercise price of $0.13 per share,
      expiring in April 2008. The per share value of these warrants was $0.10 on
      the date of issuance using the Black-Scholes option pricing model with the
      following assumptions: an average risk-free interest rate of 2.9%,
      volatility of 139% and no expected dividend rate. The total estimated fair
      value for the warrants issued to the outside investor was $40,620. Under
      the terms of the agreement, the note bore interest at 9.5% per annum,
      payable monthly, was convertible into common stock and was due on June 30,
      2004. Fifty percent of the principal and accrued interest of the note was
      convertible into common stock at a 15% discount to the closing market
      price on the date of conversion, subject to a floor conversion price of
      $0.10. The remaining 50% of the principal and accrued interest was
      convertible into common stock based on a 15% discount to the closing
      market price on the date of conversion, subject to a floor conversion
      price of $0.10 and a ceiling conversion price of $0.20. The intrinsic
      value of the conversion feature of the note to the outside investor was
      estimated at $40,620 based on the effective conversion price at the date
      of issuance and was recorded as an additional discount on the note. The
      estimated fair value of the warrants and the intrinsic value of the
      conversion feature were recorded as discounts on the note and were
      amortized over the term of the note. During January 2004, the outside
      investor converted the entire balance of the note into 1.1 million shares
      of common stock according to the conversion terms of the agreement. The
      total value of the shares issued in conversion of the note was $378,955
      based on the closing market prices for our common stock on the dates of
      conversion. The discount remaining at conversion totaling $27,604 was
      recorded as interest expense.


                                      F-18





                 Notes to the Consolidated Financial Statements


      In December 2004, we completed a private placement of four-year
      convertible promissory notes in an aggregate principal amount of $8.1
      million with Biomedical Value Fund, L.P., Biomedical Offshore Value Fund,
      Ltd. and David C. Bupp (our President and CEO). Biomedical Value Fund,
      L.P. and Biomedical Offshore Value Fund, Ltd. are funds managed by Great
      Point Partners, LLC. The notes bear interest at 8% per annum, payable
      quarterly on each March 31, June 30, September 30 and December 31 of each
      year, and are freely convertible into shares of our common stock at a
      price of $0.40 per share. Neoprobe may force conversion of the notes prior
      to their stated maturity under certain circumstances. All of our material
      assets, except the intellectual property associated with our Lymphoseek
      and RIGS(R) products under development, have been pledged as collateral
      for these notes.

      In addition to the security interest in our assets, the notes carry
      substantial covenants that impose significant requirements on us,
      including, among others, requirements that: we pay all principal, interest
      and other charges on the notes when due; we use the proceeds from the sale
      of the notes only for permitted purposes such as Lymphoseek development
      and general corporate purposes; we nominate and recommend for election as
      a director a person designated by the holders of the notes; we keep
      reserved out of our authorized shares of common stock sufficient shares to
      satisfy our obligation to issue shares on conversion of the notes and the
      exercise of the warrants issued in connection with the sale of the notes;
      we achieve annual revenues on a consolidated basis of at least $5.4
      million in 2005, $6.5 million in 2006, and $9.0 million in each year
      thereafter; we maintain minimum cash balances of $4.5 million at the end
      of the first six months of 2005, $4.0 million at the end of the second six
      months of 2005, and $3.5 million at the end of each six-month period
      thereafter; and we indemnify the purchasers of the notes against certain
      liabilities. Additionally, with certain exceptions, the notes prohibit us
      from: amending our organizational or governing agreements and documents,
      entering into any merger or consolidation, dissolving the company or
      liquidating its assets, or acquiring all or any substantial part of the
      business or assets of any other person; engaging in transactions with any
      affiliate; entering into any agreement inconsistent with our obligations
      under the Notes and related agreements; incurring any indebtedness,
      capital leases, or contingent obligations outside the ordinary course of
      business; granting or permitting liens against or security interests in
      our assets; making any material dispositions of our assets outside the
      ordinary course of business; declaring or paying any dividends or making
      any other restricted payments; or making any loans to or investments in
      other persons outside of the ordinary course of business.

      As part of this transaction, we issued the investors 10,125,000 Series T
      warrants to purchase our common stock at an exercise price of $0.46,
      expiring in December 2009. The fair value of the warrants issued to the
      investors was $1,315,000 on the date of issuance and was determined by a
      third-party valuation expert using the Black-Scholes option pricing model
      with the following assumptions: an average risk-free interest rate of
      3.4%, volatility of 50% and no expected dividend rate. In connection with
      this financing, we also issued 1,600,000 warrants to purchase our common
      stock to the placement agents, containing substantially the same terms as
      the warrants issued to the investors. The fair value of the warrants
      issued to the placement agents was $208,014 using the Black-Scholes option
      pricing model with the same assumptions used to determine the fair value
      of the warrants issued to the investors. The intrinsic value of the
      conversion feature of the notes was estimated at $1,315,000 based on the
      effective conversion price at the date of issuance. The fair value of the
      warrants issued to the investors and the intrinsic value of the conversion
      feature were recorded as discounts on the note and will be amortized over
      the term of the note using an effective interest rate of 19.8%. The fair
      value of the warrants issued to the placement agents was recorded as a
      deferred debt issuance cost and will be amortized over the term of the
      note. See Note 1(h). If we issue equity at prices below the conversion
      rate for the promissory notes (and for the warrants below the exercise
      price), then we would be required to reset the exercise and conversion
      prices for these securities. This provision results in a contingent
      beneficial conversion feature that may require us to estimate an
      additional debt discount if a reset occurs.

      U.S. generally accepted accounting principles also required us to classify
      the warrants issued in connection with the placement as a liability due to
      penalty provisions contained in the securities purchase agreement. The
      penalty provisions could have required us to pay a penalty of 0.0667% per
      day of the total debt amount if we failed to meet certain registration
      deadlines, or if our stock was suspended from trading for more than 30
      days. As a liability, the warrants were considered derivative instruments
      that were required to be periodically "marked to market" on our balance
      sheet. We estimated the fair value of the warrants at December 31, 2004
      using the Black-Scholes option pricing model with the following
      assumptions: an average risk-free interest rate of 3.4%, volatility of 50%
      and no expected dividend rate. On February 16, 2005, Neoprobe and the
      investors confirmed in writing their intention that the penalty provisions
      which led to this accounting treatment were intended to apply only to the
      $8.1 million principal balance of the promissory notes and underlying
      conversion shares and not to the warrant shares. Because the value of our
      stock increased $0.19 per share from $0.40 per share at the closing date
      of the financing on December 14, 2004 to $0.59 per share at December 31,
      2004, our year end, the effect of marking the warrant liability to
      "market" at December 31, 2004 resulted in an increase in the estimated
      fair value of the warrant liability of $1.2 million which was recorded as
      non-cash expense during the fourth quarter of 2004. Subsequently, the
      value of our stock increased $0.02 per share from $0.59 at December 31,
      2004 to $0.61 per share at February 16, 2005, such that marking the
      warrant liability to "market" at February 16, 2005 resulted in an increase
      in the estimated fair value of the warrant liability of $142,427 which was
      recorded as non-cash expense during the first quarter of 2005. The
      estimated fair value of the warrant liability was then reclassified to
      additional paid-in capital during the first quarter of 2005.


                                      F-19





                 Notes to the Consolidated Financial Statements


7.    Income Taxes:

      As of December 31, 2005, our net deferred tax assets in the U.S. were
      approximately $38.1 million. Approximately $33.4 million of the deferred
      tax assets relate principally to net operating loss carryforwards of
      approximately $91.8 million available to offset future federal taxable
      income, and net operating loss carryforwards of approximately $39.4
      million available to offset future state taxable income, if any, through
      2025. An additional $4.3 million relates to tax credit carryforwards
      (principally research and development) available to reduce future income
      tax liability after utilization of tax loss carryforwards, if any, through
      2025. The remaining $325,000 relates to temporary differences between the
      carrying amount of assets and liabilities and their tax bases. Due to the
      uncertainty surrounding the realization of these favorable tax attributes
      in future tax returns, all of the net deferred tax assets have been fully
      offset by a valuation allowance at December 31, 2005.

      As of December 31, 2005, Cardiosonix had net deferred tax assets in Israel
      of approximately $2 million, primarily related to net operating loss
      carryforwards available to offset future taxable income, if any. Under
      current Israeli tax law, net operating loss carryforwards do not expire.
      Due to the uncertainty surrounding the realization of these favorable tax
      attributes in future tax returns, all of the net deferred tax assets have
      been fully offset by a valuation allowance at December 31, 2005. Since a
      valuation allowance was recognized for the deferred tax asset for
      Cardiosonix' deductible temporary differences and operating loss
      carryforwards at the acquisition date, the tax benefits for those items
      that are first recognized (that is, by elimination of the valuation
      allowance) in financial statements after the acquisition date shall be
      applied (a) first to reduce to zero other noncurrent intangible assets
      related to the acquisition and (b) second to reduce income tax expense.

      Under Sections 382 and 383 of the Internal Revenue Code (IRC) of 1986, as
      amended, the utilization of U.S. net operating loss and tax credit
      carryforwards may be limited under the change in stock ownership rules of
      the IRC. As a result of ownership changes as defined by Sections 382 and
      383, which have occurred at various points in our history, we believe
      utilization of our net operating loss carryfowards and tax credit
      carryforwards will likely be significantly limited under certain
      circumstances.

8.    Equity:

      a.    Stock Options: At December 31, 2005, we have three stock-based
            compensation plans. Under the Amended and Restated Stock Option and
            Restricted Stock Purchase Plan (the Amended Plan), the 1996 Stock
            Incentive Plan (the 1996 Plan), and the 2002 Stock Incentive Plan
            (the 2002 Plan), we may grant incentive stock options, nonqualified
            stock options, and restricted stock awards to full-time employees,
            and nonqualified stock options and restricted awards may be granted
            to our consultants and agents. Total shares authorized under each
            plan are 2 million shares, 1.5 million shares and 5 million shares,
            respectively. The Amended Plan was approved by the stockholders in
            1994, and although options are still outstanding under this plan,
            the Amended Plan is considered expired and no new grants may be made
            from it. Under all three plans, the exercise price of each option is
            greater than or equal to the closing market price of our common
            stock on the day prior to the date of the grant.


                                      F-20





                 Notes to the Consolidated Financial Statements


            Options granted under the Amended Plan, the 1996 Plan and the 2002
            Plan generally vest on an annual basis over one to three years.
            Outstanding options under the plans, if not exercised, generally
            expire ten years from their date of grant or 90 days from the date
            of an optionee's separation from employment with us.

            A summary of the status of stock options under our stock option
            plans as of December 31, 2005 and 2004, and changes during the years
            ended on those dates is presented below:



                                                   2005                       2004
                                         -----------------------     -----------------------
                                                        Weighted                    Weighted
                                                        Average                     Average
                                                        Exercise                    Exercise
                                          Options        Price        Options        Price
                                         ---------      --------     ---------      --------
                                                                        
            Outstanding at
               beginning of year         4,857,641      $   0.51     2,931,308      $   0.56
            Granted                        993,000      $   0.40     2,278,000      $   0.41
            Forfeited                     (326,667)     $   1.42      (351,667)     $   0.30
            Exercised                           --            --            --            --
                                         ---------                   ---------

            Outstanding at
               end of year               5,523,974      $   0.44     4,857,641      $   0.51
                                         =========                   =========

            Exercisable at
               end of year               3,394,308      $   0.46     2,046,321      $   0.59
                                         =========                   =========


            Of the options granted during 2004, 250,000 were granted to
            non-employee consultants. All of these consultant options remain
            outstanding as of December 31, 2005. During 2004, we recognized
            $173,000 of research and development expense related to options
            granted to consultants.

            The following table summarizes information about our stock options
            outstanding at December 31, 2005:



                                       Number           Weighted                          Number
                                    Outstanding          Average         Weighted       Exercisable        Weighted
            Range of Exercise          as of            Remaining        Average           as of           Average
                  Prices            December 31,       Contractual       Exercise       December 31,       Exercise
                                       2005               Life            Price            2005              Price
            -----------------       ------------       -----------       --------       -------------      ---------
                                                                                             
             $ 0.13 - $ 0.30         1,960,001           6 years          $ 0.24            966,992         $ 0.22
             $ 0.31 - $ 0.41         1,230,500           7 years          $ 0.39            762,507         $ 0.40
             $ 0.42 - $ 0.50         1,468,000           6 years          $ 0.47          1,232,668         $ 0.46
             $ 0.59 - $ 5.63           865,473           7 years          $ 0.89            432,141         $ 1.10
                                     ---------                                            ---------
                                     5,523,974           7 years          $ 0.44          3,394,308         $ 0.46
                                     =========                                            =========


      b.    Restricted Stock: At December 31, 2005, we have 130,000 restricted
            shares outstanding, all of which are pending cancellation due to
            failure to vest under the terms of issuance of these shares.
            Restricted shares, if any, generally vest on a change of control of
            our company as defined in the specific grant agreements. As a
            result, we have not recorded any deferred compensation related to
            past grants of restricted stock due to the inability to assess the
            probability of the vesting event.

      c.    Stock Warrants: At December 31, 2005, there are 17.0 million
            warrants outstanding to purchase our common stock. The warrants are
            exercisable at prices ranging from $0.13 to $0.75 per share with a
            weighted average exercise price per share of $0.40.


                                      F-21





                 Notes to the Consolidated Financial Statements


            The following table summarizes information about our outstanding
            warrants at December 31, 2005:

                          Exercise          Number of
                           Price            Warrants           Expiration Date
                          --------         ----------          ---------------

            Series O       $ 0.75              25,000           October 2006
            Series Q       $ 0.13             875,000            April 2008
            Series Q       $ 0.50             375,000            March 2009
            Series R       $ 0.28           2,808,898           October 2008
            Series S       $ 0.28           1,195,478           October 2008
            Series T       $ 0.46          10,125,000           December 2009
            Series U       $ 0.46           1,600,000           December 2009
                                           ----------

                           $ 0.40          17,004,376
                                           ==========

      d.    Common Stock Reserved: We have reserved 42,778,350 shares of
            authorized common stock for the exercise of all outstanding options,
            warrants, and convertible debt.

      e.    Common Stock Purchase Agreement: On November 19, 2001, we entered
            into a common stock purchase agreement with an investment fund,
            Fusion Capital Fund II, LLC (Fusion) for the issuance and purchase
            of our common stock. Under the stock purchase agreement, Fusion
            committed to purchase up to $10 million of our common stock over a
            forty-month period that commenced in May 2002. A registration
            statement registering for resale up to 5 million shares of our
            common stock became effective on April 15, 2002. Under the terms of
            the agreement, we can request daily drawdowns, subject to a daily
            base amount currently set at $12,500. The number of shares we are to
            issue to Fusion in return for that money will be based on the lower
            of (a) the closing sale price for our common stock on the day of the
            draw request or (b) the average of the three lowest closing sales
            prices for our common stock during a twelve day period prior to the
            draw request. However, no shares may be sold to Fusion at lower than
            a floor price currently set at $0.30, which may be reduced by us,
            but in no case below $0.20 without Fusion's prior consent. Upon
            execution of the common stock purchase agreement in 2001, we issued
            449,438 shares of our common stock to Fusion as a partial payment of
            the commitment fee. During 2004, we sold Fusion a total of 2,350,000
            shares of our common stock and realized net proceeds of $1,468,874.
            We also issued Fusion 66,129 shares of our common stock for
            commitment fees related to the sales of our common stock to them
            during 2004.

      f.    Private Placement: In November 2003, we executed common stock
            purchase agreements with certain investors for the purchase of
            12,173,914 shares of our common stock at a price of $0.23 per share
            for net proceeds of $2.4 million. In addition, we issued the
            purchasers 6,086,959 Series R warrants to purchase our common stock
            at an exercise price of $0.28 per share, expiring in October 2008,
            and issued the placement agents 1,354,348 Series S warrants to
            purchase our common stock on similar terms. During 2005 and 2004,
            certain investors and placement agents exercised a total of 206,865
            and 3,308,327 warrants related to this placement, resulting in the
            issuance of 206,865 and 3,197,854 shares of our common stock and we
            realized net proceeds of $57,922 and $871,398, respectively.

9.    Shareholder Rights Plan:

      During July 1995, our Board of Directors adopted a shareholder rights
      plan. Under the plan, one "Right" was to be distributed for each share of
      common stock held by shareholders on the close of business on August 28,
      1995. The Rights were exercisable only if a person and its affiliate
      commenced a tender offer or exchange offer for 15% or more of our common
      stock, or if there was a public announcement that a person and its
      affiliate had acquired beneficial ownership of 15% or more of the common
      stock, and if we did not redeem the Rights during the specified redemption
      period. Initially, each Right, upon becoming exercisable, would have
      entitled the holder to purchase from us one unit consisting of 1/100th of
      a share of Series A Junior Participating preferred stock at an exercise
      price of $35 (which was subject to adjustment). Once the Rights became
      exercisable, if any person, including its affiliate, acquired 15% or more
      of our common stock, each Right other than the Rights held by the
      acquiring person and its affiliate would have become a right to acquire
      common stock having a value equal to two times the exercise price of the
      Right. We were entitled to redeem the Rights for $0.01 per Right at any
      time prior to the expiration of the redemption period. The shareholder
      rights plan and the Rights expired on August 28, 2005.


                                      F-22





                 Notes to the Consolidated Financial Statements


10.   Segments and Subsidiary Information:

      a.    Segments: We report information about our operating segments using
            the "management approach" in accordance with SFAS No. 131,
            Disclosures about Segments of an Enterprise and Related Information.
            This information is based on the way management organizes and
            reports the segments within the enterprise for making operating
            decisions and assessing performance. Our reportable segments are
            identified based on differences in products, services and markets
            served. There were no inter-segment sales. We own or have rights to
            intellectual property involving two primary types of medical device
            products, including gamma detection instruments currently used
            primarily in the application of ILM, and blood flow measurement
            devices. We also own or have rights to intellectual property related
            to several drug and therapy products.


                                      F-23





                 Notes to the Consolidated Financial Statements


            The information in the following table is derived directly from each
            reportable segment's financial reporting.



                                                           Gamma       Blood      Drug and
            ($ amounts in thousands)                     Detection     Flow       Therapy
            2005                                          Devices     Devices     Products    Corporate     Total
            -------------------------------------------------------------------------------------------------------
                                                                                            
            Net sales:
               United States(1)                          $   5,459    $    58     $     --    $      --    $  5,517
               International                                   120        282           --           --         402
            Research and development expenses                  276      1,414        2,342           --       4,032
            Selling, general and administrative
              expenses, excluding depreciation
              and amortization(2)                               --         --           --        2,572       2,572
            Depreciation and amortization                      183        401           --           --         584
            Income (loss) from operations(3)                 2,897     (1,627)      (2,342)      (2,572)     (3,644)
            Other income (expense)(4)                           --         --           --       (1,285)     (1,285)

            Total assets, net of depreciation and
              amortization:
                 United States operations                    1,171        318           28        7,734       9,251
                 Israeli operations (Cardiosonix Ltd.)          --      2,319           --           --       2,319
            Capital expenditures                                27         58            1           --          86

            2004
            ------------------------------------------
            Net sales
               United States(1)                          $   5,173    $    --     $     --    $      --    $  5,173
               International                                    91         89           --           --         180
            License and other revenue                          600         --           --           --         600
            Research and development expenses                  404      1,561          489           --       2,454
            Selling, general and administrative
              expenses, excluding depreciation
              and amortization(2)                               --         --           --        2,566       2,566
            Depreciation and amortization                      173        414           --           --         587
            Income (loss) from operations(3)                 3,169     (2,113)        (489)      (2,566)     (1,999)

            Other income (expense) (4)                          --         --           --       (1,542)     (1,542)
            Total assets, net of depreciation and
              amortization:
                 United States operations                    1,160         64            3       11,240      12,467
                 Israeli operations (Cardiosonix Ltd.)          --      2,899           --           --       2,899
            Capital expenditures                                12         22           --           54          88


      (1)   All sales to EES are made in the United States. EES distributes the
            product globally through its international affiliates.
      (2)   Selling, general and administrative costs, excluding depreciation
            and amortization, represent costs that relate to the general
            administration of the Company and as such are not currently
            allocated to our individual reportable segments.
      (3)   Income (loss) from operations does not reflect the allocation of
            selling, general and administrative costs to our individual
            reportable segments.
      (4)   Amounts consist primarily of interest income and interest expense
            which are currently not allocated to our individual reportable
            segments.

      b.    Subsidiary: On December 31, 2001, we acquired 100 percent of the
            outstanding common shares of Cardiosonix, an Israeli company. The
            aggregate purchase price included common stock valued at $4,271,095;
            payment of vested options of Cardiosonix employees in the amount of
            $17,966; and acquisition costs of $167,348. We accounted for the
            acquisition under SFAS No. 141, Business Combinations, and certain
            provisions of SFAS No. 142, Goodwill and Other Intangible Assets.
            The results of Cardiosonix' operations have been included in our
            consolidated results from the date of acquisition.


                                      F-24





                 Notes to the Consolidated Financial Statements


            As a part of the acquisition, we also entered into a royalty
            agreement with the three founders of Cardiosonix. Under the terms of
            the royalty agreement, which expires December 31, 2006, we are
            obligated to pay the founders an aggregate one percent royalty on up
            to $120 million in net revenue generated by the sale of Cardiosonix
            blood flow products through 2006. As of December 31, 2005,
            approximately $1,000 of royalties were accrued under the royalty
            agreement.

11.   Agreements:

      a.    Supply Agreements: In December 1997, we entered into an exclusive
            supply agreement with eV Products (eV), a division of II-VI
            Incorporated, for the supply of certain crystals and associated
            electronics to be used in the manufacture of our proprietary line of
            hand-held gamma detection instruments. The original term of the
            agreement expired on December 31, 2002 and was automatically
            extended during 2002 through December 31, 2005; however, the
            agreement was no longer exclusive throughout the extended period.
            Total purchases under the supply agreement were $430,000 and
            $555,000 for the years ended December 31, 2005 and 2004,
            respectively. We have issued purchase orders for $347,000 of crystal
            modules for delivery of product through September 2006 under the
            same terms as the original agreement.

            In February 2004, we entered into a product supply agreement with
            TriVirix International (TriVirix) for the manufacture of the neo2000
            control unit, 14mm probe, 11mm laparoscopic probe, Quantix/ORTM
            control unit and Quantix/NDTM control unit. The initial term of the
            agreement expires in January 2007, but may be automatically extended
            for successive one-year periods. Either party has the right to
            terminate the agreement at any time upon one hundred eighty (180)
            days prior written notice, or may terminate the agreement upon a
            material breach or repeated non-material breaches by the other.
            Total purchases under the product supply agreement were $1.1 million
            and $1.2 million for the years ended December 31, 2005 and 2004,
            respectively. We have issued purchase orders for $1.5 million of our
            products for delivery through December 2006.

      b.    Marketing and Distribution Agreement: During 1999, we entered into a
            distribution agreement with EES covering our gamma detection devices
            used in ILM. The initial five-year term expired December 31, 2004,
            with options to extend for two successive two-year terms. See Note
            16(a). Under the agreement, we manufacture and sell our current line
            of ILM products exclusively to EES, who distributes the products
            globally, except in Japan. EES agreed to purchase minimum quantities
            of our products over the first three years of the term of the
            agreement and to reimburse us for certain research and development
            costs and a portion of our warranty costs. We are obligated to
            continue certain product maintenance activities and to provide
            ongoing regulatory support for the products.

            EES may terminate the agreement if we fail to supply products for
            specified periods, commit a material breach of the agreement, suffer
            a change of control to a competitor of EES, or become insolvent. If
            termination were due to failure to supply or a material breach by
            us, EES would have the right to use our intellectual property and
            regulatory information to manufacture and sell the products
            exclusively on a global basis for the remaining term of the
            agreement with no additional financial obligation to us. If
            termination is due to insolvency or a change of control that does
            not affect supply of the products, EES has the right to continue to
            sell the products on an exclusive global basis for a period of six
            months or require us to repurchase any unsold products in its
            inventory.

            Under the agreement, EES received a non-exclusive worldwide license
            to our ILM intellectual property to make and sell other products
            that may be developed using our ILM intellectual property. The term
            of the license is the same as that of the agreement. EES paid us a
            non-refundable license fee of $4 million. We recognized the license
            fee as revenue on a straight-line basis over the five-year initial
            term of the agreement, and the license fee was fully amortized into
            income as of the end of September 2004. If we terminate the
            agreement as a result of a material breach by EES, they would be
            required to pay us a royalty on all products developed and sold by
            EES using our ILM intellectual property. In addition, we are
            entitled to a royalty on any ILM product commercialized by EES that
            does not infringe any of our existing intellectual property.


                                      F-25





                 Notes to the Consolidated Financial Statements


      c.    Research and Development Agreements: Cardiosonix' research and
            development efforts have been partially financed through grants from
            the Office of the Chief Scientist of the Israeli Ministry of
            Industry and Trade (the OCS). Through the end of 2004, Cardiosonix
            received a total $775,000 in grants from the OCS. In return for the
            OCS's participation, Cardiosonix is committed to pay royalties to
            the Israeli Government at a rate of 3% to 5% of the sales if its
            products, up to 300% of the total grants received, depending on the
            portion of manufacturing activity that takes place in Israel. There
            are no future performance obligations related to the grants received
            from the OCS. However, under certain limited circumstances, the OCS
            may withdraw its approval of a research program or amend the terms
            of its approval. Upon withdrawal of approval, Cardiosonix may be
            required to refund the grant, in whole or in part, with or without
            interest, as the OCS determines. In January 2006, the OCS consented
            to the transfer of manufacturing as long as we comply with the terms
            of the OCS statutes under Israeli law. As long as we maintain at
            least 10% Israeli content in our blood flow devices, we will pay a
            royalty rate of 4% on sales of applicable blood flow devices and
            must repay the OCS a total of $1.2 million in royalties. However,
            should the amount of Israeli content of our blood flow device
            products decrease below 10%, the royalty rate could increase to 5%
            and the total royalty payments due could increase to $2.3 million.
            As such, the total amount we will have to repay the OCS will likely
            be 150% to 300% of the amounts of the original grants. Through
            December 2005, we have paid the OCS a total of $22,000 in royalties
            related to sales of products developed under this program. As of
            December 31, 2005, we have accrued obligations for royalties
            totaling $2,000.

            During January 2002, we completed a license agreement with the
            University of California, San Diego (UCSD) for a proprietary
            compound that we believe could be used as a lymph node locating
            agent in ILM procedures. The license agreement is effective until
            the later of the expiration date of the longest-lived underlying
            patent or January 30, 2023. Under the terms of the license
            agreement, UCSD has granted us the exclusive rights to make, use,
            sell, offer for sale and import licensed products as defined in the
            agreement and to practice the defined licensed methods during the
            term of the agreement. We may also sublicense the patent rights,
            subject to the approval of certain sublicense terms by UCSD. In
            consideration for the license rights, we agreed to pay UCSD a
            license issue fee of $25,000 and license maintenance fees of $25,000
            per year. We also agreed to pay UCSD milestone payments related to
            successful regulatory clearance for marketing of the licensed
            products, a royalty on net sales of licensed products subject to a
            $25,000 minimum annual royalty, fifty percent of all sublicense fees
            and fifty percent of sublicense royalties. We also agreed to
            reimburse UCSD for all patent-related costs. Total costs related to
            the UCSD license agreement were $44,000 and $87,000 in 2005 and
            2004, respectively, and were recorded in research and development
            expenses.

            UCSD has the right to terminate the agreement or change the nature
            of the agreement to a non-exclusive agreement if it is determined
            that we have not been diligent in developing and commercializing the
            covered products, marketing the products within six months of
            receiving regulatory approval, reasonably filling market demand or
            obtaining all the necessary government approvals.

            During April 2005, we completed an evaluation license agreement with
            UCSD expanding the field of use for the proprietary compound
            developed by UCSD researchers. The expanded field of use will allow
            Lymphoseek to be developed as an optical or ultrasound agent. The
            evaluation license agreement is effective until March 31, 2007.
            Under the terms of the agreement, UCSD has granted us limited rights
            to make and use licensed products as defined in the agreement and to
            practice the defined licensed methods during the term of the
            agreement for the sole purpose of evaluating our interest in
            negotiating a commercial license. We may also sublicense the patent
            rights, subject to the approval of certain sublicense terms by UCSD.
            In consideration for the license rights, we agreed to pay UCSD an
            evaluation license fee of $36,000 and evaluation license maintenance
            fees of $9,000 payable on the first year anniversary of the
            effective date, $9,000 payable on the eighteen-month anniversary of
            the effective date, and $18,000 payable prior to termination. We
            also agreed to pay UCSD fifty percent of any sublicense fees and to
            reimburse UCSD for all patent-related costs. Total costs related to
            the UCSD evaluation license agreement were $36,000 in 2005, and were
            recorded in research and development expenses.


                                      F-26





                 Notes to the Consolidated Financial Statements


            During January 2005, we executed a license agreement with the Ohio
            State University (OSU), Cira LLC, and Cira Bio for certain
            technology relating to activated cellular therapy. The license
            agreement is effective until the expiration date of the
            longest-lived underlying patent. Under the terms of the license
            agreement, OSU has granted the licensees the exclusive rights to
            make, have made, use, lease, sell and import licensed products as
            defined in the agreement and to utilize the defined licensed
            practices. We may also sublicense the patent rights. In
            consideration for the license rights, we agreed to pay OSU a license
            fee of $5,000 on January 31, 2006. We also agreed to pay OSU
            additional license fees related to initiation of Phase II and Phase
            III clinical trials, a royalty on net sales of licensed products
            subject to a minimum annual royalty of $100,000 beginning in 2012,
            and a percentage of any non-royalty license income. Also during
            January 2005, we completed a business venture agreement with Cira
            LLC that defines each party's responsibilities and commitments with
            respect to Cira Bio and the license agreement with OSU.

      d.    Employment Agreements: We maintain employment agreements with six of
            our officers. The employment agreements contain change in control
            provisions that would entitle each of the officers to one to two
            times their current annual salaries, vest outstanding restricted
            stock and options to purchase common stock, and continue certain
            benefits if there is a change in control of our company (as defined)
            and their employment terminates. Our maximum contingent liability
            under these agreements in such an event is approximately $1.9
            million. The employment agreements also provide for severance,
            disability and death benefits. See Note 16(b).

12.   Leases:

      We lease certain office equipment under capital leases which expire from
      2007 to 2009. In August 2003, we entered into an operating lease agreement
      for office space, which originally expired in September 2006. In February
      2005, we entered into another operating lease agreement for additional
      office space expiring in January 2008. The February 2005 lease agreement
      also extended the term of the original lease through January 2008.

      In April 2002, Cardiosonix entered into an operating sublease agreement
      for office and parking space that expired in April 2004. In June 2004,
      Cardiosonix entered into a new operating sublease agreement for office
      space that expired in June 2005. In July 2004, Cardiosonix entered into a
      sublease agreement for parking space that expired in June 2005, and
      automatically renewed until either party terminated the agreement. The
      Cardiosonix office space and parking space subleases expired in January
      2006.

      The future minimum lease payments for the years ending December 31 are as
      follows:

                                              Capital        Operating
                                              Leases          Leases
                                             --------        ---------

      2006                                   $ 24,769        $ 100,771
      2007                                     18,008          100,129
      2008                                     15,889            8,561
      2009                                      2,485               --
      2010                                         --               --
                                             --------        ---------
                                               61,151        $ 209,461
                                                             =========
      Less amount representing interest         9,766
                                             --------
      Present value of net minimum
         lease payments                        51,385
      Less current portion                     19,530
                                             --------
      Capital lease obligations,
         excluding current portion           $ 31,855
                                             ========

      Total rental expense was $221,000 and $218,000 for the years ended
      December 31, 2005 and 2004, respectively.


                                      F-27





                 Notes to the Consolidated Financial Statements


13.   Employee Benefit Plan:

      We maintain an employee benefit plan under Section 401(k) of the Internal
      Revenue Code. The plan allows employees to make contributions and we may,
      but are not obligated to, match a portion of the employee's contribution
      with our common stock, up to a defined maximum. We accrued expenses of
      $27,000 and $19,000 during 2005 and 2004, respectively, related to common
      stock to be subsequently contributed to the plan.

14.   Supplemental Disclosure for Statements of Cash Flows:

      We paid interest aggregating $677,000 and $52,000 for the years ended
      December 31, 2005 and 2004, respectively. During 2005 and 2004, we
      purchased equipment under capital leases totaling $23,000 and $27,000,
      respectively. During 2005 and 2004, we transferred $17,000 and $22,000,
      respectively, in inventory to fixed assets related to the creation and
      maintenance of a pool of service loaner equipment. Also during 2005 and
      2004, we prepaid $243,000 and $277,000, respectively, in insurance through
      the issuance of notes payable to finance companies with weighted average
      interest rates of 6% and 5%, respectively. The note payable to a finance
      company issued in 2005 matures in September 2006.

15.   Contingencies:

      We are subject to legal proceedings and claims that arise in the ordinary
      course of business. In our opinion, the amount of ultimate liability, if
      any, with respect to these actions will not materially affect our
      financial position.

16.   Subsequent Events:

      a.    Distribution Agreement: In March 2006, EES exercised its option for
            a second two-year term extension of the distribution agreement
            covering our gamma detection devices, thus extending the
            distribution agreement through the end of 2008. See Note 11(b).

      b.    Employment Agreements: Effective January 1, 2006, we entered into
            new employment agreements with two executive officers. The new
            agreements have substantially similar terms to the previous
            agreements. See Note 11(d).


                                      F-28





                 Notes to the Consolidated Financial Statements


17.   Supplemental Information (Unaudited):

      The following summary financial data are derived from our consolidated
      financial statements that have been audited by our independent registered
      public accounting firm. These data are qualified in their entirety by, and
      should be read in conjunction with, our Consolidated Financial Statements
      and Notes thereto included herein.




      (Amounts in thousands, except per share data)                   Years Ended December 31,
                                                      --------------------------------------------------------------
                                                         2005        2004         2003         2002          2001
                                                      ---------    ---------    ---------    ---------    ---------
                                                                                           
      Statement of Operations Data:
      Net sales                                       $   5,919    $   5,353    $   5,564    $   3,383    $   6,764
      License and other revenue                              --          600          946        1,538        1,428
      Gross profit                                        3,543        3,608        3,385        2,570        3,802
      Research and development expenses                   4,032        2,454        1,894        2,324          948
      Selling, general and administrative
        expenses                                          3,156        3,153        3,103        3,267        2,321
      Acquired in-process research and
        development                                          --           --           --          (28)         885
                                                      ---------    ---------    ---------    ---------    ---------
      (Loss) income from operations                      (3,644)      (1,999)      (1,611)      (2,993)        (352)
                                                      ---------    ---------    ---------    ---------    ---------

      Other (expenses) income                            (1,285)      (1,542)        (188)          29          370
                                                      ---------    ---------    ---------    ---------    ---------

      Net (loss) income                               $  (4,929)   $  (3,541)   $  (1,799)   $  (2,964)   $      15
                                                      =========    =========    =========    =========    =========

      (Loss) income per common share:
         Basic                                        $   (0.08)   $   (0.06)   $   (0.04)   $   (0.08)   $    0.00
         Diluted                                      $   (0.08)   $   (0.06)   $   (0.04)   $   (0.08)   $    0.00

      Shares used in computing (loss) income
        per common share:(1)
         Basic                                           58,434       56,764       40,338       36,045       25,899
         Diluted                                         58,434       56,764       40,338       36,045       26,047

                                                                            As of December 31,
                                                      --------------------------------------------------------------
                                                           2005         2004         2003         2002         2001
                                                      ---------    ---------    ---------    ---------    ---------
      Balance Sheet Data:
      Total assets                                    $  11,570    $  15,366    $   7,385    $   7,080    $  11,329
      Long-term obligations                               6,052        8,192          585        1,169        1,981
      Accumulated deficit                              (130,947)    (126,018)    (122,477)    (120,678)    (117,714)


      (1)   Basic earnings (loss) per share are calculated using the weighted
            average number of common shares outstanding during the periods.
            Diluted earnings (loss) per share is calculated using the weighted
            average number of common shares outstanding during the periods,
            adjusted for the effects of convertible securities, options and
            warrants, if dilutive.


                                      F-29





                PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. Indemnification of Directors and Officers.

Section 145 of the General Corporation Law of the State of Delaware (Section
145) provides that directors and officers of Delaware corporations may, under
certain circumstances, be indemnified against expenses (including attorneys'
fees) and other liabilities actually and reasonably incurred by them as a result
of any suit brought against them in their capacity as a director or officer, if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, if they had no reasonable cause to believe their
conduct was unlawful. Section 145 also provides that directors and officers may
also be indemnified against expenses (including attorneys' fees) incurred by
them in connection with a derivative suit if they acted in good faith and in a
manner they reasonably believed to be in or not opposed to the best interests of
the corporation, except that no indemnification may be made without court
approval if such person was adjudged liable to the corporation.

Article V of the Company's By-laws contains provisions which require that the
Company indemnify its officers, directors, employees and agents, in
substantially the same language as Section 145.

Article Nine, section (b), of the Company's Certificate of Incorporation further
provides that no director will be personally liable to the Company or its
stockholders for monetary damages or for any breach of fiduciary duty except for
breach of the director's duty of loyalty to the Company or its stockholders, for
acts or omissions not in good faith or involving intentional misconduct or a
knowing violation of law, pursuant to Section 174 of the Delaware General
Corporation Law (which imposes liability in connection with the payment of
certain unlawful dividends, stock purchases or redemptions), or any amendment or
successor provision thereto, or for any transaction from which a director
derived an improper personal benefit.

Item 25. Other Expenses of Issuance and Distribution.

The following table sets forth the expenses expected to be incurred in
connection with the issuance and distribution of the securities being
registered.

      SEC Registration....................................   $2056.11
      Legal Fees and Expenses*............................    $65,000
      Accounting Fees*....................................     $5,000
      Miscellaneous*......................................    $10,000
      Total............................................... $82,056.11

- ---------------
* Estimated

Item 26. Recent Sales of Unregistered Securities

The following sets forth certain information regarding the sale of equity
securities of our company during the period covered by this report that were not
registered under the Securities Act of 1933 (the Securities Act).

In June 2005, July 2004, and March 2003, our Board of Directors authorized the
issuance of 37,051, 91,086 and 100,327 shares of common stock, respectively, to
the trustees of our 401(k) employee benefit plan (the Plan) without
registration. Such issuance is exempt from registration under the Securities Act
under Section 3(a)(2). The Plan is a pension, profit sharing or stock bonus plan
that is qualified under Section 401 of the Internal Revenue Code. The assets of
the Plan are held in a single trust fund for the benefit of our employees, which
does not hold assets for the benefit of the employees of any other employer. All
of the contributions to the Plan from our employees have been invested in assets
other than our common stock. We have contributed all of the Neoprobe common
stock held by the Plan as a matching contribution that has been less in value at
the time it was contributed to the Plan than the employee contributions that it
matches.


                                      II-1





On November 19, 2001, we entered into a common stock purchase agreement with an
investment fund, Fusion Capital Fund II, LLC (Fusion) for the issuance and
purchase of our common stock. Under the stock purchase agreement, Fusion
committed to purchase up to $10 million of our common stock over a forty-month
period that commenced in May 2002. A registration statement registering for
resale up to 5 million shares of our common stock was declared effective on
April 15, 2002. Under the terms of the agreement, we can request daily draw
downs, subject to a daily base amount currently set at $12,500. The number of
shares we are to issue to Fusion in return for that money is based on the lower
of (a) the closing sale price for our common stock on the day of the draw
request or (b) the average of the three lowest closing sales prices for our
common stock during a twelve-day period prior to the draw request. However, no
shares may be sold to Fusion at lower than a floor price currently set at $0.30,
which may be reduced by us, but in no case below $0.20 without Fusion's prior
consent. Upon execution of the common stock purchase agreement in 2001, we
issued 449,438 shares of our common stock to Fusion as a partial payment of the
commitment fee. During 2004 and 2003, we sold Fusion a total of 2,350,000 and
473,869 shares of common stock and realized net proceeds of $1,468,874 and
$143,693, respectively. We also issued Fusion 66,129 and 6,462 shares of common
stock, respectively, for commitment fees related to the sales of our common
stock to them during 2004 and 2003. The issuances of the shares of common stock
to Fusion pursuant to the common stock purchase agreement were exempt from
registration under Sections 4(2) and 4(6) of the Securities Act and Regulation
D.

During April 2003, we completed a bridge loan agreement with our President and
CEO, David Bupp. Under the terms of the agreement, Mr. Bupp advanced us
$250,000. In consideration for the loan, we issued a note to Mr. Bupp in the
principal amount of $250,000. The note was secured by general assets of the
company, excluding accounts receivable. In addition, we issued Mr. Bupp 375,000
warrants to purchase our common stock at an exercise price of $0.13 per share,
expiring in April 2008. The note bore interest at 8.5% per annum, payable
monthly, and was originally due on June 30, 2004. On March 8, 2004, at the
request of the Board of Directors, Mr. Bupp agreed to extend the due date of the
note from June 30, 2004 to June 30, 2005. In exchange for extending the due date
of the note, we issued Mr. Bupp an additional 375,000 warrants to purchase our
common stock at an exercise price of $0.50 per share, expiring in March 2009.
Mr. Bupp's 750,000 warrants related to this transaction remain outstanding. The
issuances of the note and warrants to Mr. Bupp were exempt from registration
under Sections 4(2) and 4(6) of the Securities Act and Regulation D.

During April 2003, we also completed a convertible bridge loan agreement with an
outside investor for an additional $250,000. In consideration for the loan, we
issued a note to the investor in the principal amount of $250,000. The note was
secured by general assets of the company, excluding accounts receivable. In
addition, we issued the investor 500,000 warrants to purchase our common stock
at an exercise price of $0.13 per share, expiring in April 2008. Under the terms
of the agreement, the note bore interest at 9.5% per annum, payable monthly, and
was due on June 30, 2004. During January 2004, the investor converted the entire
balance of the note into 1.1 million shares of common stock according to the
conversion terms of the agreement. The investor's 500,000 warrants remain
outstanding. The issuances of the note and warrants to the investor were exempt
from registration under Sections 4(2) and 4(6) of the Securities Act and
Regulation D. As further consideration for the loans, we agreed to file a
registration statement under which Mr. Bupp and the investor could resell to the
public shares of common stock issuable on exercise of the warrants and
conversion of the outside investor's note. The shares were included in a
registration statement filed in December 2003.

During 2003, we engaged the services of two investment banking firms to assist
us in raising capital, Alberdale Capital, LLC (Alberdale) and Trautman Wasserman
& Company, Inc. (Trautman Wasserman). In exchange for Alberdale's services, we
paid them a monthly retainer of $10,000, half in cash and half in common stock,
and we agreed to pay them additional compensation upon the successful completion
of a private placement of our securities. We terminated the agreement with
Alberdale in September 2003, but issued them a total of 150,943 shares of common
stock in payment for one half of their retainer. In addition, warrants to
purchase 78,261 shares of our common stock were issued in exchange for their
assistance in arranging an accounts receivable financing transaction. The
warrants had an exercise price of $0.28 per share, and were exercised on a
cashless basis in exchange for 53,500 shares of our common stock in 2004. In
exchange for the services of Trautman Wasserman, we agreed to pay a retainer of
$10,000, payable in cash and common stock, and to pay further compensation upon
successful completion of a private placement. We issued Trautman Wasserman a
total of 27,199 shares of common stock in payment for one half of their
retainer. The services of Trautman Wasserman were terminated in September 2003.
The issuances of the shares and warrants to Alberdale and Trautman Wasserman
were exempt from registration under Sections 4(2) and 4(6) of the Securities Act
and Regulation D.


                                      II-2





In November 2003, we executed common stock purchase agreements with third
parties introduced to us by a third investment banking firm, Rockwood, Inc., for
the purchase of 12,173,914 shares of our common stock at a price of $0.23 per
share for net proceeds of $2.4 million. In addition, we issued the purchasers
warrants to purchase 6,086,959 shares of common stock at an exercise price of
$0.28 per share, expiring in October 2008, and issued the placement agents
warrants to purchase 1,354,348 shares of our common stock on similar terms.
During 2004, the warrant holders exercised a total of 3,230,066 warrants in
exchange for 3,197,854 shares of our common stock. Of the warrants exercised in
2004, 3,134,783 were exercised in exchange for 3,134,783 shares of our common
stock resulting in net proceeds of $871,398. The remaining 95,283 warrants
exercised in 2004 were exercised on a cashless basis in exchange for 63,071
shares of our common stock. During the first quarter of 2005 to date, certain
investors and placement agents exercised a total of 206,865 warrants and we
realized proceeds of $57,922. The issuances of the shares and warrants to the
purchasers and the placement agents were exempt from registration under Sections
4(2) and 4(6) of the Securities Act and Regulation D. As required under the
terms of the stock purchase agreements, in December 2003 we filed a registration
statement under which the investors and placement agents may resell the shares
of common stock to the public.

In December, 2004, we completed a private placement of Convertible Promissory
Notes in an aggregate principal amount of $8.1 million with Biomedical Value
Fund, L.P., Biomedical Offshore Value Fund, Ltd. and David C. Bupp (our
President and CEO). Biomedical Value Fund, L.P. and Biomedical Offshore Value
Fund, Ltd. are funds managed by Great Point Partners, LLC. The notes bear
interest at 8% per annum and are freely convertible into shares of our common
stock at a price of $0.40 per share. Neoprobe may force conversion of the notes
prior to their stated maturity under certain circumstances. The conversion price
represents the ten-day volume weighted average trading price of our common stock
through December 10, 2004. As part of this transaction, we issued the investors
10,125,000 warrants to purchase our common stock at an exercise price of $0.46,
expiring in December 2009. In connection with this financing, we also issued
1,600,000 warrants to purchase our common stock to placement agents, containing
substantially identical terms to the warrants issued to the investors. The
issuances of the shares and warrants to the purchasers and the placement agents
were exempt from registration under Sections 4(2) and 4(6) of the Securities Act
and Regulation D.

During 2004 we engaged the services of two investment banking firms to assist us
in raising capital, Roth Capital Partners, LLC (Roth) and Laidlaw & Co.
(Laidlaw). In exchange for the services of Roth, we agreed to pay $320,000 in
cash, plus warrants to purchase 800,000 shares of our common stock. In exchange
for the services of Laidlaw, we agreed to pay $320,000 in cash, plus warrants to
purchase 800,000 shares of our common stock. The warrants have an exercise price
of $0.46 per share. The issuances of the warrants to Roth and Laidlaw were
exempt from registration under Sections 4(2) and 4(6) of the Securities Act and
Regulation D.

During 2004, the certain investors who received warrants to purchase our common
stock in connection with a November 2003 financing exercised a total of
3,230,066 warrants in exchange for 3,197,854 shares of our common stock. Of the
warrants exercised by these investors in 2004, 3,134,783 were exercised in
exchange for 3,134,783 shares of our common stock resulting in net proceeds of
$871,398. The remaining 95,283 warrants exercised in 2004 were exercised on a
cashless basis in exchange for 63,071 shares of our common stock.During 2005,
the certain investors and placement agents who received warrants to purchase our
common stock in connection with a November 2003 financing exercised a total of
206,865 warrants in exchange for 206,865 shares of our common stock, resulting
in net proceeds of $57,922. The issuances of the shares and warrants to the
investors and the placement agents were exempt from registration under Sections
4(2) and 4(6) of the Securities Act and Regulation D.


                                      II-3





Item 27. Exhibits.

     Exhibit
     Number                       Exhibit Description
     -------                      -------------------

      3.1     Amended and Restated Certificate of Incorporation of Neoprobe
              Corporation as corrected February 18, 1994 and amended June 27,
              1994, June 3, 1996, March 17, 1999, May 9, 2000, June 13, 2003,
              July 27, 2004 and June 22, 2005 (incorporated by reference to
              Exhibit 3.1 to the Company's June 30, 2005 Form 10-QSB).

      3.2     Amended and Restated By-Laws dated July 21, 1993, as amended July
              18, 1995 and May 30, 1996 (filed as Exhibit 99.4 to the Company's
              Current Report on Form 8-K dated June 20, 1996, and incorporated
              herein by reference).

      5.1     Opinion of Porter, Wright, Morris & Arthur LLP**

      10.1    Amended and Restated Stock Option and Restricted Stock Purchase
              Plan dated March 3, 1994 (incorporated by reference to Exhibit
              10.2.26 to the Company's December 31, 1993 Form 10-K).

      10.2    1996 Stock Incentive Plan dated January 18, 1996 as amended March
              13, 1997 (incorporated by reference to Exhibit 10.2.37 to the
              Company's December 31, 1997 Form 10-K).

      10.3    Neoprobe Corporation Amended and Restated 2002 Stock Incentive
              Plan (incorporated by reference to Appendix A to the Company's
              Definitive Proxy Statement (File No. 000-26520), filed with the
              Securities and Exchange Commission on April 29, 2005).

      10.4    Employment Agreement between the Company and David C. Bupp, dated
              January 1, 2004 (incorporated by reference to Exhibit 10.12 to the
              Company's December 31, 2003 Form 10-KSB).

      10.5    Employment Agreement between the Company and Brent L. Larson,
              dated January 1, 2005 (Incorporated by reference to Exhibit 10.1
              to the Company's Current Report on Form 8-K filed January 5, 2005.
              This is one of five substantially identical employment agreements.
              A schedule identifying the other agreements and setting forth the
              material details in which such agreements differ from the one that
              is incorporated by reference herein was filed as Exhibit 10.6 to
              the Company's Annual Report on Form 10-KSB filed March 31, 2006).

      10.6    Schedule identifying material differences between the employment
              agreement incorporated by reference as Exhibit 10.5 to this
              Post-effective Amendment No. 1 to Registration Statement on Form
              SB-2, and other substantially identical employment agreements.
              (incorporated by reference to Exhibit 10.6 to the Company's Annual
              Report on Form 10-KSB filed March 31, 2006).

      10.7    Technology Transfer Agreement dated July 29, 1992 between the
              Company and The Dow Chemical Corporation (portions of this Exhibit
              have been omitted pursuant to a request for confidential treatment
              and have been filed separately with the Commission) (incorporated
              by reference to Exhibit 10.10 to the Company's Form S-1 filed
              October 15, 1992).

      10.8    Cooperative Research and Development Agreement between the Company
              and the National Cancer Institute (incorporated by reference to
              Exhibit 10.3.31 to the Company's September 30, 1995 Form 10-QSB).

      10.9    License dated May 1, 1996 between the Company and The Dow Chemical
              Company (incorporated by reference to Exhibit 10.3.45 to the
              Company's June 30, 1996 Form 10-QSB).


                                      II-4






     10.10    License Agreement dated May 1, 1996 between the Company and The
              Dow Chemical Company (portions of this Exhibit have been omitted
              pursuant to a request for confidential treatment and have been
              filed separately with the Commission) (incorporated by reference
              to Exhibit 10.3.46 to the Company's June 30, 1996 Form 10-QSB).

     10.11    License Agreement dated January 30, 2002 between the Company and
              the Regents of the University of California, San Diego, as amended
              on May 27, 2003 and February 1, 2006 (portions of this Exhibit
              have been omitted pursuant to a request for confidential treatment
              and have been filed separately with the Commission) (incorporated
              by reference to Exhibit 10.11 to the Company's Annual Report on
              Form 10-KSB filed March 31, 2006).

     10.12    Evaluation License Agreement dated March 31, 2005 between the
              Company and the Regents of the University of California, San Diego
              (portions of this Exhibit have been omitted pursuant to a request
              for confidential treatment and have been filed separately with the
              Commission) (incorporated by reference to Exhibit 10.12 to the
              Company's Annual Report on Form 10-KSB filed March 31, 2006).

     10.13    Distribution Agreement between the Company and Ethicon
              Endo-Surgery, Inc. dated October 1, 1999 (portions of this Exhibit
              have been omitted pursuant to a request for confidential treatment
              and have been filed separately with the Commission), (incorporated
              by reference to Exhibit 10.4.39 to the Company's September 30,
              1999 Form 10-Q).

     10.14    Product Supply Agreement between the Company and TriVirix
              International, Inc., dated February 5, 2004 (portions of this
              Exhibit have been omitted pursuant to a request for confidential
              treatment and have been filed separately with the Commission)
              (incorporated by reference to Exhibit 10.17 to the Company's
              December 31, 2004 Form 10-KSB).

     10.15    Warrant to Purchase Common Stock of Neoprobe Corporation dated
              March 8, 2004 between the Company and David C. Bupp (incorporated
              by reference to Exhibit 10.28 to the Company's December 31, 2003
              Form 10-KSB).

     10.16    Warrant to Purchase Common Stock of Neoprobe Corporation dated
              April 2, 2003 between the Company and Donald E. Garlikov
              (incorporated by reference to Exhibit 99(g) to the Company's
              Current Report on Form 8-K filed April 2, 2003).

     10.17    Warrant to Purchase Common Stock of Neoprobe Corporation dated
              April 2, 2003 between the Company and David C. Bupp (incorporated
              by reference to Exhibit 99(h) to the Company's Current Report on
              Form 8-K filed April 2, 2003).

     10.18    Registration Rights Agreement dated April 2, 2003 between the
              Company, David C. Bupp and Donald E. Garlikov (incorporated by
              reference to Exhibit 99(i) to the Company's Current Report on Form
              8-K filed April 2, 2003).

     10.19    Stock Purchase Agreement dated October 22, 2003 between the
              Company and Bridges & Pipes, LLC (incorporated by reference to
              Exhibit 10.32 to the Company's registration statement on Form SB-2
              filed December 2, 2003).

     10.20    Registration Rights Agreement dated October 22, 2003 between the
              Company and Bridges & Pipes, LLC (incorporated by reference to
              Exhibit 10.33 to the Company's registration statement on Form SB-2
              filed December 2, 2003).

     10.21    Series R Warrant Agreement dated October 22, 2003 between the
              Company and Bridges & Pipes, LLC (incorporated by reference to
              Exhibit 10.34 to the Company's registration statement on Form SB-2
              filed December 2, 2003).

     10.22    Series S Warrant Agreement dated November 21, 2003 between the
              Company and Alberdale Capital, LLC (incorporated by reference to
              Exhibit 10.35 to the Company's registration statement on Form SB-2
              filed December 2, 2003).


                                      II-5





     10.23    Securities Purchase Agreement, dated as of December 13, 2004,
              among Neoprobe Corporation, Biomedical Value Fund, L.P.,
              Biomedical Offshore Value Fund, Ltd. and David C. Bupp
              (incorporated by reference to Exhibit 10.1 to the Company's
              Current Report on Form 8-K filed December 16, 2004).

     10.24    Form of Neoprobe Corporation 8% Series A Convertible Promissory
              Note (Incorporated by reference to Exhibit 10.2 to the Company's
              Current Report on Form 8-K filed December 16, 2004. This is the
              form of three substantially identical agreements. A schedule
              identifying the other agreements and setting forth the material
              details in which such agreements differ from the one that is
              incorporated by reference herein was filed as Exhibit 10.4 to the
              Company's Current Report on Form 8-K filed December 16, 2004).

     10.25    Form of Series T Neoprobe Corporation Common Stock Purchase
              Warrant (Incorporated by reference to Exhibit 10.3 to the
              Company's Current Report on Form 8-K filed December 16, 2004. This
              is the form of three substantially identical agreements. A
              schedule identifying the other agreements and setting forth the
              material details in which such agreements differ from the one that
              is incorporated by reference herein was filed as Exhibit 10.4 to
              the Company's Current Report on Form 8-K filed December 16, 2004).

     10.26    Security Agreement, dated as of December 13, 2004, made by
              Neoprobe Corporation in favor of Biomedical Value Fund, L.P.,
              Biomedical Offshore Value Fund, Ltd. and David C. Bupp
              (incorporated by reference to Exhibit 10.1 to the Company's
              Current Report on Form 8-K filed December 16, 2004).

     10.27    Form of Series U Warrant Agreement dated December 13, 2004 between
              the Company and the placement agents for the Series A Convertible
              Promissory Notes and Series T Warrants. (Incorporated by reference
              to Exhibit 10.35 to the Company's December 31, 2004 Form 10-KSB.
              This is the form of six substantially identical agreements. A
              schedule identifying the other agreements and setting forth the
              material details in which such agreements differ from the one that
              is incorporated by reference herein was filed as Exhibit 10.36 to
              the Company's December 31, 2004 Form 10-KSB).

     21.1     Subsidiaries of the registrant.*

     23.1     Consent of BDO Seidman, LLP.*

     23.2     Consent of KPMG LLP.*

     23.3     Consent of Porter, Wright, Morris & Arthur LLP (included in
              Exhibit 5.1 herein).

     24.1     Powers of Attorney.**

     *    Filed herewith.
     **   Previously filed.


                                      II-6





Item 28. Undertakings.

The undersigned hereby undertakes:

(1)   To file, during any period in which offers or sales are being made, a
      post-effective amendment to this Registration Statement:

      (i)   To include any prospectus required by section 10(a)(3) of the
            Securities Act of 1933;

      (ii)  To reflect in the prospectus any facts or events which, individually
            or in the aggregate, represent a fundamental change in the
            information set forth in the registration statement. Notwithstanding
            the foregoing, any increase or decrease in volume of securities
            offered (if the total dollar value of securities offered would not
            exceed that which was registered) and any deviation from the low or
            high end of the estimated maximum offering range may be reflected in
            the form of prospectus filed with the Commission pursuant to Rule
            424(b) if, in the aggregate, the changes in volume and price
            represent no more than a 20% change in the maximum aggregate
            offering price set forth in the "Calculation of Registration Fee"
            table in the effective registration statement; and

      (iii) To include any additional or changed material information on the
            plan of distribution.

(2)   That, for the purpose of determining any liability under the Securities
      Act of 1933, each such post-effective amendment shall be deemed to be a
      new registration statement relating to the securities offered therein, and
      the offering of such securities at that time shall be deemed to be the
      initial bona fide offering thereof.

(3)   To file a post-effective amendment to remove from registration any of the
      securities that remain unsold at the end of the offering.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to the registrant's directors, officers, and controlling
persons pursuant to the foregoing provisions, or otherwise, the registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a directors, officers or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.


                                      II-7





                                   SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has authorized this
Post-effective Amendment No. 1 to Registration Statement on Form SB-2 to be
signed on its behalf by the undersigned in the City of Dublin, Ohio, on April 3,
2006.

                            Neoprobe Corporation

                            By: /s/ David C. Bupp
                                ------------------------------------------------
                                    David C. Bupp, President and Chief Executive
                                      Officer

In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated:



Signature                                               Title                                 Date
- ---------                                               -----                                 ----

                                                                                   
/s/ David C. Bupp                           President, Chief Executive Officer           April 3, 2006
- ------------------------------------        and Director
David C. Bupp                               (principal executive officer)

/s/ Brent L. Larson*                        Vice President, Finance and Chief            April 3, 2006
- ------------------------------------        Financial Officer
Brent L. Larson                             (principal financial officer and
                                            principal accounting officer)

/s/ Julius R. Krevans*                      Chairman of the Board of Directors           April 3, 2006
- ------------------------------------
Julius R. Krevans

/s/ Carl J. Aschinger, Jr.*                 Director                                     April 3, 2006
- ------------------------------------
Carl J. Aschinger, Jr.

 /s/ Reuven Avital*                         Director                                     April 3, 2006
- ------------------------------------
Reuven Avital

 /s/ Kirby I. Bland*                        Director                                     April 3, 2006
- ------------------------------------
Kirby I. Bland

/s/ Fred B. Miller*                         Director                                     April 3, 2006
- ------------------------------------
Fred B. Miller

/s/ Frank Whitley, Jr.*                     Director                                     April 3, 2006
- ------------------------------------
J. Frank Whitley, Jr.


*By: /s/ David C. Bupp
     -----------------------------------
         David C. Bupp, Attorney-in fact


                                      II-8

EX-21.1

                                                                    Exhibit 21.1


                                Jurisdiction of           Percentage Owned
       Subsidiaries             Incorporation             by Registrant
       ------------             ---------------           ----------------

       Cardiosonix Ltd.             Israel                      100%
    Cira Biosciences, Inc.       Delaware, USA                   90%

EX-23.1

                                                                    Exhibit 23.1


            Consent of Independent Registered Public Accounting Firm

Neoprobe Corporation
Dublin, Ohio

We  hereby  consent  to the use in the  Prospectus  constituting  a part of this
Registration  Statement of our report dated March 30, 2006, relating to the 2005
consolidated  financial statements of Neoprobe Corporation which is contained in
that Prospectus.

We also  consent  to the  reference  to us under the  caption  "Experts"  in the
Prospectus.

                                      /s/ BDO Seidman, LLP

Chicago, Illinois
March 30, 2006

EX-23.2

                                                                    Exhibit 23.2

            Consent of Independent Registered Public Accounting Firm


The Board of Directors
Neoprobe Corporation:


We consent to the use of our report  dated March 31,  2005,  with respect to the
consolidated  balance sheet of Neoprobe Corporation as of December 31, 2004, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year then ended,  included herein and to the reference to our firm
under the heading "Experts" in the prospectus.

/s/ KPMG LLP

Columbus, Ohio
March 31, 2006