Unassociated Document

NEOPROBE CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

			Pro Forma Adjustments
	June 30, 2011 Actual							June 30,
ASSETS	Neoprobe		GDS Business		Asset Sale			2011 Pro Forma
Current assets:
Cash	$	7,544,395	$	--	$	27,200,000	(a)	$	34,744,395
Accounts receivable, net		2,032,933		2,026,798		--			6,135
Inventory, net		1,642,095		797,892		--			844,203
Prepaid expenses and other		160,252		34,396		--			125,856
Total current assets		11,379,675		2,859,086					35,720,589

Property and equipment		2,459,225		1,023,396		--			1,435,829
Less accumulated depreciation and amortization		1,952,850		927,845		--			1,025,005
		506,375		95,551					410,824

Patents and trademarks		544,599		502,014		--			42,585
Less accumulated amortization		450,758		429,587		--			21,171
		93,841		72,427					21,414

Other assets		7,421		--		--			7,421

Total assets	$	11,987,312	$	3,027,064				$	36,160,248

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,578,508		$	665,793	$	(86,958	)	(b)	$	825,757
Accrued liabilities and other		2,663,246			134,209		(533,333	)	(b)		1,995,704
Notes payable to finance companies		9,072			--		--				9,072
Deferred revenue, current portion		735,954			735,954		--				--
Total current liabilities		4,986,780			1,535,956						2,830,532

Deferred revenue		841,074			841,074		--				--
Derivative liabilities		60,218			--		--				60,218
Other liabilities		21,843			--		--				21,843
Total liabilities		5,909,915			2,377,030						2,912,593

Stockholders’ equity:
Preferred stock		10					--				10
Common stock		94,538					--				94,538
Additional paid-in capital		263,514,167					--				263,514,167
Accumulated deficit		(257,531,318	)				27,170,257		(c)		(230,361,061	)
Total stockholders’ equity		6,077,397									33,247,654

Total liabilities and stockholders’ equity	$	11,987,312								$	36,160,248

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

NEOPROBE CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

				Pro Forma Adjustments						Six
	Three Months Ended June 30, 2011 Actual									Months Ended
				GDS						June 30, 2011
	Neoprobe			Business		Asset Sale				Pro Forma
Revenues:
Net sales	$	5,642,974		$	5,642,974	$	-			$	-
License and other revenue		392,097			50,000		--				342,097
Total revenues		6,035,071			5,692,974		--				342,097

Cost of goods sold		1,758,963			1,758,963		--				--

Gross profit		4,276,108			3,934,011		--				342,097

Operating expenses:
Research and development		4,553,428			341,299		--				4,212,129
Selling, general and administrative		5,379,205			248,901		--				5,130,304
Total operating expenses		9,932,633			590,200		--				9,342,433

(Loss) income from operations		(5,656,525	)		3,343,811		--				(9,000,336	)

Other expense, net		(961,400	)		--		--				(961,400	)

(Loss) income from continuing operations before income tax		(6,617,925	)		3,343,811		--				(9,961,736	)

Provision for income tax		--			1,136,896		1,136,896		(d)		--

Net (loss) income from continuing operations		(6,617,925	)		2,206,916		(1,136,896	)			(9,961,736	)

Preferred stock dividends		(50,000	)		--		--				(50,000	)

Net (loss) income from continuing operations attributable to common stockholders	$	(6,667,925	)	$	2,206,916	$	(1,136,896	)		$	(10,011,736	)

Loss per share from continuing operations:
Basic and diluted	$	(0.08	)							$	(0.11	)

Weighted average shares outstanding:
Basic and diluted		87,549,776									87,549,776

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

NEOPROBE CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

				Pro Forma Adjustments						Six
	Three Months Ended June 30, 2010 Actual									Months Ended
				GDS						June 30, 2010
	Neoprobe			Business		Asset Sale				Pro Forma
Revenues:
Net sales	$	5,171,748		$	5,171,748	$	--			$	--
License and other revenue		50,000			50,000		--				--
Total revenues		5,221,748			5,221,748		--				--

Cost of goods sold		1,700,621			1,700,621		--				--

Gross profit		3,521,127			3,521,127		--				--

Operating expenses:
Research and development		4,139,173			208,044		--				3,931,129
Selling, general and administrative		2,046,544			230,170		--				1,816,374
Total operating expenses		6,185,717			438,214		--				5,747,503

(Loss) income from operations		(2,664,590	)		3,082,913		--				(5,747,503	)

Other expense, net		(42,852,793	)		--		--				(42,852,793	)

(Loss) income from continuing operations before income tax		(45,517,383	)		3,082,913		--				(48,600,296	)

Provision for income tax		--			1,048,190		1,048,190		(d)		--

Net (loss) income from continuing operations		(45,517,383	)		2,034,723		(1,048,190	)			(48,600,296	)

Preferred stock dividends		(8,156,745	)		--		--				(8,156,745	)

Net (loss) income from continuing operations attributable to common stockholders	$	(53,674,128	)	$	2,034,723	$	(1,048,190	)		$	(56,757,041	)

Loss per share from continuing operations:
Basic and diluted	$	(0.67	)							$	(0.71	)

Weighted average shares outstanding:
Basic and diluted		79,917,641									79,917,641

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

NEOPROBE CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

				Pro Forma Adjustments
	Year Ended December 31, 2010 Actual								Year Ended December 31,
				GDS					2010
	Neoprobe			Business		Asset Sale			Pro Forma
Revenues:
Net sales	$	9,983,174		$	9,983,174	$	--		$	--
License and other revenue		717,392			100,000		--			617,392
Total revenues		10,700,566			10,083,174		--			617,392

Cost of goods sold		3,206,709			3,206,709		--			--

Gross profit		7,493,857			6,876,465		--			617,392

Operating expenses:
Research and development		9,221,421			417,999		--			8,803,422
Selling, general and administrative		4,583,503			427,815		--			4,155,688
Total operating expenses		13,804,924			845,814		--			12,959,110

(Loss) income from operations		(6,311,067	)		6,030,651		--			(12,341,718	)

Other expense, net		(43,567,204	)		--		--			(43,567,204	)

(Loss) income from continuing operations before income tax		(49,878,271	)		6,030,651		--			(55,908,922	)

Provision for income tax		--			2,412,260		2,412,260	(d)		--

Net (loss) income from continuing operations		(49,878,271	)		3,618,391		2,102,312			(55,908,922	)

Preferred stock dividends		(8,206,745	)		--		--			(8,206,745	)

Net (loss) income from continuing operations attributable to common stockholders	$	(58,085,016	)	$	3,618,391	$	2,412,260		$	(64,115,667	)

Loss per share from continuing operations:
Basic and diluted	$	(0.72	)						$	(0.79	)

Weighted average shares outstanding:
Basic and diluted		80,726,498								80,726,498

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

NEOPROBE CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

				Pro Forma Adjustments
	Year Ended December 31, 2009 Actual								Year Ended December 31,
				GDS					2009
	Neoprobe			Business		Asset Sale			Pro Forma
Revenues:
Net sales	$	9,418,032		$	9,418,032	$	--		$	--
License and other revenue		100,000			100,000		--			--
Total revenues		9,518,032			9,518,032		--			--

Cost of goods sold		3,134,740			3,134,740		--			--

Gross profit		6,383,292			6,383,292		--			--

Operating expenses:
Research and development		4,967,861			736,064		--			4,231,797
Selling, general and administrative		3,240,337			391,449		--			2,848,888
Total operating expenses		8,208,198			1,127,513		--			7,080,685

(Loss) income from operations		(1,824,906	)		5,255,779		--			(7,080,685	)

Other expense, net		(35,890,586	)		--		--			(35,890,586	)

(Loss) income from continuing operations before income tax		(37,715,492	)		5,255,779		--			(42,971,271	)

Provision for income tax		--			2,102,312		2,102,312	(d)		--

Net (loss) income from continuing operations		(37,715,492	)		3,153,467		2,102,312			(42,971,271	)

Preferred stock dividends		(240,000	)		--		--			(240,000	)

Net (loss) income from continuing operations attributable to common stockholders	$	(37,955,492	)	$	3,153,467		2,102,312		$	(43,211,271	)

Loss per share from continuing operations:
Basic and diluted	$	(0.51	)						$	(0.59	)

Weighted average shares outstanding:
Basic and diluted		73,771,871								73,771,871

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

NEOPROBE CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

				Pro Forma Adjustments
	Year Ended December 31, 2008 Actual								Year Ended December 31,
				GDS					2008
	Neoprobe			Business		Asset Sale			Pro Forma
Revenues:
Net sales	$	7,417,751		$	7,417,751	$	--		$	--
License and other revenue		171,750			171,750		--			--
Total revenues		7,589,501			7,589,501		--			--

Cost of goods sold		2,845,498			2,845,498		--			--

Gross profit		4,744,003			4,744,003		--			--

Operating expenses:
Research and development		4,286,474			648,515		--			3,637,959
Selling, general and administrative		2,965,342			243,734		--			2,721,608
Total operating expenses		7,251,816			892,249		--			6,359,567

(Loss) income from operations		(2,507,813	)		3,851,754		--			(6,359,567	)

Other expense, net		(2,124,090	)		--		--			(2,124,090	)

(Loss) income from continuing operations before taxes		(4,631,903	)		3,851,754		--			(8,483,657	)

Provision for income tax		--			1,540,702		1,540,702	(d)		--

Net (loss) income from continuing operations	$	(4,631,903	)	$	2,311,052	$	1,540,702		$	(8,483,657	)

Loss per share from continuing operations:
Basic and diluted	$	(0.07	)						$	(0.12	)

Weighted average shares outstanding:
Basic and diluted		68,594,172								68,594,172

The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.

NEOPROBE CORPORATION AND SUBSIDIARIES

NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

1.	Basis of Presentation

Pro forma information is intended to reflect the impact of the Asset Sale on Neoprobe’s historical financial position and results of operations through adjustments that are directly attributable to the Asset Sale, that are factually supportable and that are expected to have continuing impact. In order to accomplish this, we have eliminated the unaudited financial statements of the GDS Business of Neoprobe as presented earlier in this proxy statement from the Neoprobe Corporation historical financial statements. This pro forma information attempts to represent the financial position and results of operations of Neoprobe’s Remaining Businesses. However, we did not account for the GDS Business as, and it was not operated as, a separate, stand-alone entity, subsidiary or division of Neoprobe for the periods presented. The unaudited pro forma consolidated financial statements do not purport to represent, and are not necessarily indicative of, what our actual financial position and results of operations would have been had the Asset Sale occurred on the dates indicated. In addition, the unaudited pro forma consolidated financial statements should not be considered to be fully indicative of our future financial performance.

These unaudited pro forma consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary to present fairly the pro forma financial position and results of operations.

In the preparation of the pro forma consolidated balance sheet, the assumption was made that the assets were sold and liabilities were assumed by Devicor pursuant to the Asset Purchase Agreement on June 30, 2011. In the preparation of the pro forma consolidated statements of operations, the assumption was made that the Asset Sale took place on January 1, 2008.

1.	Pro Forma Adjustments

The pro forma adjustments to the balance sheet and statements of operations include:

(a)

This amount reflects estimated net cash proceeds to be received related to the sale of the GDS Business to Devicor. The sale price was $30.0 million, and we expect to incur approximately $2.8 million in costs and expenses related to the transaction. Of the $2.8 million in costs and expenses, $2.55 million is payable for financial advisory services and $272,000 is payable for legal and other costs. The cash proceeds amount does not include any of the $20.0 million in potential future royalties, nor does it include any adjustment for net working capital at closing. Pursuant to the Asset Purchase Agreement, if the net working capital balance at the time of closing exceeds the target amount of net working capital as set forth in the Asset Purchase Agreement, then the purchase price will be adjusted upward in an amount equal to the excess, and if the net working capital balance at the time of closing is less than the target amount, then the purchase price will be adjusted downward in an amount equal to the deficiency.

(b)

This amount reflects payment of invoices included in accounts payable and accruals included in accrued liabilities at June 30, 2011 that are assumed to be paid as part of the $2.8 million in costs and expenses related to the transaction.

(c)

This amount represents the excess of the net cash proceeds of the sale over the net book value of the assets and liabilities being sold to Devicor, adjusted for amounts in accounts payable and accrued liabilities that are assumed to be paid as part of the $2.8 million in costs and expenses related to the transaction. The Asset Sale is expected to be subject to some amount of Federal, state and local income tax. However, this pro forma adjustment assumes that no income taxes are payable on the Asset Sale as the majority of the gain is expected to be offset by net operating loss carryforwards.

(d)

This amount represents the offset of the estimated GDS Business stand-alone tax provision which would have been payable if the GDS Business were a stand-alone company.

The pro forma adjustments to the statements of operations do not include the following revenues and expenses:

Royalty payments that Neoprobe would be entitled to receive upon the achievement of GDS product sales revenues through 2017 in excess of baseline sales levels as outlined in the Asset Purchase Agreement.

Expenses related to (a) the termination of the Business Employees, including the payout of accrued but unused paid time off of $38,000 and the vesting of unvested stock options of $94,000 upon the closing of the Asset Sale, and (b) the Asset Sale of $2.8 million, as such expenses would not be recurring.