10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-30975

TRANSGENOMIC, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	91-1789357
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)
12325 Emmet Street Omaha, NE	68164
(Address of Principal Executive Offices)	(Zip Code)

(402) 452-5400

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange On Which Registered
None	N/A

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.01 per share

(Title of Class)

 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes       No      X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes       No      X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes      X         No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes X    No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form10-K

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer ¨                   Accelerated Filer ¨

Non-Accelerated Filer ¨                     Smaller Reporting Company ý

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes       No  X

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based on the last reported closing price per share of Common Stock as reported on the OTCQB on the last business day of the registrant’s most recently completed second quarter was approximately $35.3 million.

At March 24, 2014, the registrant had 7,353,695 shares of common stock outstanding.

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TRANSGENOMIC, INC.

Index to Form 10-K for the Fiscal Year Ended December 31, 2013

PART I
	Item 1.	Business	4
	Item 1A.	Risk Factors	9
	Item 1B.	Unresolved Staff Comments	14
	Item 2.	Properties	15
	Item 3.	Legal Proceedings	15
	Item 4.	Mine Safety Disclosures	15
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
	Item 6.	Selected Consolidated Financial Data	18
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	30
	Item 8.	Financial Statements and Supplementary Data
		Report of Independent Registered Public Accounting Firm	31
		Consolidated Balance Sheets as of December 31, 2013 and 2012	33
		Consolidated Statements of Operations for the Years Ended December 31, 2013, 2012 and 2011	34
		Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2013, 2012 and 2011	35
		Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2013, 2012 and 2011	36
		Consolidated Statements of Cash Flows for the Years Ended December 31, 2013, 2012 and 2011	37
		Notes to the Consolidated Financial Statements for the Years Ended December 31, 2013, 2012 and 2011	39
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	63
	Item 9A.	Controls and Procedures	63
	Item 9B.	Other Information	64
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	64
	Item 11.	Executive Compensation	64
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	64
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	64
	Item 14.	Principal Accounting Fees and Services	64
PART IV
	Item 15.	Exhibits, Financial Statement Schedules	65
SIGNATURES			69

This Annual Report on Form 10-K references the following registered trademarks which are the property of Transgenomic, Inc.: Transgenomic, WAVE, WAVEMAKER, MutationDiscovery.com, OPTIMASE, DNASEP, OLIGOSEP, RNASEP, WAVE OPTIMIZED, SURVEYOR, FAMILION and ScoliScore^TM. The following trademarks are the property of Transgenomic, Inc.: Advancing Personalized Medicine, the helix logo, ProtocolWriter and Navigator. All other trademarks or trade names referred to in this Annual Report on Form 10-K are the property of their respective owners.

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PART I

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Annual Report”), including Management’s Discussion & Analysis of Financial Condition and Results of Operations, contains forward-looking statements. These statements are based on management’s current views, assumptions or beliefs of future events and financial performance and are subject to uncertainty and changes in circumstances. Readers of this report should understand that these statements are not guarantees of performance or results. Many factors could affect our actual financial results and cause them to vary materially from the expectations contained in the forward-looking statements. These factors include, among other things: our expected revenue, income (loss), receivables, operating expenses, supplier pricing, availability and prices of raw materials, Medicare/Medicaid/Insurance reimbursements, product pricing, foreign currency exchange rates, sources of funding operations and acquisitions, our ability to raise funds, sufficiency of available liquidity, future interest costs, future economic circumstances, business strategy, industry conditions and key trends, our ability to execute our operating plans, the success of our cost savings initiatives, competitive environment and related market conditions, expected financial and other benefits from our organizational restructuring activities, actions of governments and regulatory factors affecting our business and other risks as described in our reports filed with the Securities and Exchange Commission (the “SEC”). In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” or the negative of such terms and other similar expressions.

You are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Actual results may differ materially from those suggested by these forward-looking statements for a number of reasons including those described in Item 1A, “Risk Factors,” and other factors identified by cautionary language used elsewhere in this Annual Report.

We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Reverse Stock Split

On January 15, 2014, our Board of Directors approved a reverse split of our common stock, par value $0.01, at a ratio of one-for-twelve. This reverse stock split became effective on January 27, 2014 and, unless otherwise indicated, all share amounts, per share data, share prices, exercise prices and conversion rates set forth in this Annual Report have, where applicable, been adjusted retroactively to reflect this reverse stock split.

The following discussion should be read together with our financial statements and related notes contained in this Annual Report. Results for the year ended December 31, 2013 are not necessarily indicative of results that may be attained in the future.

Item 1. Our Business

Transgenomic, Inc.(“we”, “us”, “our Company” or “Transgenomic”) is a global biotechnology company advancing personalized medicine in the detection and treatment of cancer and inherited diseases through its proprietary molecular technologies and world-class clinical and research services. Our operations are organized and reviewed by management along its product lines and presented in the following two complementary business segments;

• Laboratory Services. Our laboratories specialize in genetic testing for cardiology, neurology, mitochondrial disorders and oncology. Our Patient Testing laboratories located in New Haven, Connecticut and Omaha, Nebraska are certified under the Clinical Laboratory Improvement Amendment (“CLIA”) as high complexity laboratories and our Omaha facility is also accredited by the College of American Pathologists (“CAP”). Our Biomarker Identification laboratory located in Omaha, Nebraska also provides pharmacogenomics research services supporting Phase II and Phase III clinical trials conducted by pharmaceutical companies. Our laboratories employ a variety of genomic testing service technologies, including ICE COLD-PCR technology. ICE COLD-PCR is a proprietary platform technology that can be run in any laboratory with standard PCR technology and that enables detection of multiple unknown mutations

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from virtually any sample type including tissue biopsies, blood, cell-free DNA (“cfDNA”) and circulating tumor cells (“CTCs”) at levels greater than 1,000-fold higher than standard DNA sequencing techniques.

• Genetic Assays and Platforms. Our proprietary product is the WAVE® System, which has broad applicability to genetic variation detection in both molecular genetic research and molecular diagnostics. We also distribute bioinstruments produced by other manufacturers (“OEM Equipment”) through our sales and distribution network. Service contracts to maintain installed systems are sold and supported by our technical support personnel. The installed WAVE base and some OEM Equipment platforms generate a demand for consumables that are required for the continued operation of the bioinstruments. We develop, manufacture and sell these consumable products. In addition, we manufacture and sell consumable products that can be used on multiple, independent platforms. These products include SURVEYOR® Nuclease and a range of chromatography columns.

Segment information related to revenues, a performance measure of profit, capital expenditures, and total assets is contained in Footnote 14- “Operating Segment and Geographic Information” to our accompanying consolidated financial statements.

Business Strategy

Our primary goal is to provide products and services to biomedical researchers, physicians, medical institutions and diagnostic and pharmaceutical companies that are tied to advancements in the field of genomics and, increasingly, personalized medicine. Advances in genomics have fueled our efforts to understand individual differences in disease susceptibility, disease progression and response to therapy.

The markets in which we compete require a wide variety of technologies, products and capabilities. The combination of technological complexity and rapid change within our markets makes it difficult for a single company to develop all of the technological solutions that it desires to offer within its family of products and services. We work to broaden the range of products and services we deliver to customers in target markets through acquisitions, investments and alliances. We employ the following strategies to address the need for new or enhanced products and services:

• Developing new technologies and products internally;

• Acquiring all or parts of other companies;

• Entering into joint-development efforts with other companies; and

• Reselling other 'companies' products.

Our strategy is to leverage the synergies of our segments, capitalizing on discoveries in our Research and Development (“R&D”) and Biomarker Identification laboratories to create “kits” or assays to distribute through our Genetic Assays and Platforms segment, as well as tests to conduct in our Patient Testing laboratories.

We will continue to develop new technologies, such as our ICE COLD-PCR, and capitalize on our expertise and intellectual properties to develop new unique tests, such as our CardioPredict Panel. We continue to cultivate new and expanded relationships with industry leaders across the globe, such as Perkin Elmer in our Genetic Assays and Platforms business, PDI in our Patient Testing laboratories and several medical research facilities working with our Laboratory Services segment.

We continue to evaluate a range of acquisition targets, including smaller single-test laboratories, larger private and public entities and divisions of entities. We acquired the FAMILION business in December 2010 and the ScoliScore^TM assay technology in September 2012, and we have integrated both into our existing business.

Products

Our highly specialized genetics service and expertise are delivered by our Biomarker Identification laboratory in Omaha, Nebraska and in our CLIA-certified Patient Testing laboratories in Omaha and New Haven, Connecticut. Our Biomarker Identification laboratory supports pharmaceutical companies in their clinical trials, primarily Phase II and Phase III trials. Our Patient Testing laboratories support medical professionals in the diagnosis and treatment of patients, primarily in the specialties of Cardiology and Neurology with a range of tests within each medical specialty.

In cardiology, our FAMILION® family of tests focuses on detecting mutations that can cause cardiac channelopathies, cardiomyopathies and other rare, potentially lethal heart conditions. The specific diseases include Long QT Syndrome (LQTS), Familial Atrial Fibrillation (FAF), Hypertrophic Cardiomyopathy (HCM) and Dilated Cardiomyopathy (DCM). By reducing uncertainty and finding the specific genetic causes of cardiac channelopathies and cardiomyopathies, the FAMILION tests can:

• Help diagnose a patient's disease;

• Guide treatment options; and

• Determine whether family members are at risk.

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Also in cardiology, our CardioPredict Panel seeks to identify the best treatment options for patients with heart disease. Certain genes in the panel identify the approximately 50% of patients with a genetic deficiency that prevents them from receiving the expected pharmacological benefit from clopidogrel (Plavix®). Information from the CardioPredict Panel can be used by the health care provider to ensure the most appropriate therapies are being used in an effort to reduce adverse cardiac events.

In Neurology, we have a focus on mitochondrial disorders and epilepsy and epilepsy-like diseases. We employ a wide variety of technologies, including industry standards such as Sanger sequencing and next generation sequencing. In 2013, we introduced whole exome sequencing, which is based on next-generation sequencing, and which specialists use to diagnose and treat exceptionally difficult to identify neurological disorders in patients.

ScoliScore™ is the first clinically validated and commercially available saliva-based multi-gene test that provides a highly accurate assessment of the likelihood of spinal curve progression for individuals diagnosed with Adolescent Idiopathic Scoliosis (“AIS”), or an abnormal lateral curve of the spine. The ScoliScore™ Test identifies patients that will not progress to a severe curvature of the spine and reduces those patients’ need for repeated doctor visits, physical examinations and, most importantly, years of exposure to radiation from frequent X-Rays.

Our oncology tests are focused heavily on genetic mutations commonly associated with the major cancer types - Lung, Colorectal, Breast and Prostate. We primarily test for mutations in the KRAS, NRAS, BRAF and PIK3CA genes, all associated with the most common cancers. We also offer tests for hereditary cancer-predisposing syndromes.

Our laboratory expertise is leveraged into our Genetic Assays and Platforms segment, which focuses on assembly and delivery of highly sensitive mutation detection equipment, primarily our WAVE platform. We also sell WAVE MCE and Hanabi instruments, as well as the bioconsumables, including test kits, used in these instruments for molecular testing and cytogenetics. Our equipment systems offer discovery and detection of genetic variations at close to 100% sensitivity, making them among the most sensitive and accurate technologies for detection of known and unknown mutations and single nucleotide polymorphisms (SNPs). These equipment systems are used throughout the world to screen for a large variety of diseases. More than 350 human genes have been screened entirely or partly by Direct High Pressure Liquid Chromatography (DHPLC), the underlying technology used by our equipment systems. A multitude of other applications are being used with WAVE Systems in such diverse areas as plant genomics, microbial analysis and drug sensitivity.

We continue to leverage the synergies of the two segments, capitalizing on discoveries in our R&D and Biomarker Identification laboratories to create “kits” or test assays to distribute through our Genetic Assays and Platforms segment, as well as tests to conduct in our Patient Testing laboratories.

Sales and Marketing

Our Sales and Support team consists of regionally based sales people, service engineers and applications scientists to support our sales and marketing activities worldwide. We have sold our products to customers in over 50 countries. We use a direct sales and support staff for sales in the U.S. and Europe. For the rest of the world, we sell our products through dealers and distributors within local markets. We have over 35 dealers and distributors.

Customers

Physicians requesting genetic tests for their patients are our primary source of revenues for laboratory services. Fees for laboratory testing services rendered for these physicians are billed either to the physician, the patient or the patient’s third-party payer such as an insurance company or Medicare. Billings are typically on a fee-for-service basis. The patient or third-party payer is billed at our patient fee schedule. Commercial insurance providers are billed at contracted rates or other generally accepted market reimbursement rates. Revenues received from Medicare billings are based on government established fee schedules and reimbursement rules.

Our customers include a number of large, established pharmaceutical, biotech and commercial companies as well as leading academic and medical institutions both in the U.S. and abroad. No customer accounted for more than 10% of our consolidated net sales for the years ended December 31, 2013, 2012 or 2011. Information regarding the revenues attributable to U.S. and international markets is set forth in Footnote 14 - “Operating Segment and Geographic Information” to our accompanying consolidated financial statements.

Research and Development

We continue to invest in research and development in order to remain competitive and to take advantage of new business opportunities as they arise. We maintain a program of research and development with respect to platform technologies, such as ICE COLD-PCR, instruments, test kits and services, engaging existing and new technologies to create scientific and medical

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applications that will add value to patient care as well as significant commercial value. Major areas of focus include the (i) development of ICE COLD-PCR application for ultra high sensitivity mutation detection in any tissue samples (fresh, frozen, FNA, FFPE, etc.) or body fluids (plasma, serum, ascites); (ii) development of a new strategy for mutation detection and sequence confirmation using microcapillary electrophoresis; (iii) development of SURVEYOR® Nuclease based oncology mutation detection kits utilizing multiple instrument platforms for aid in therapeutic treatment decisions for cancers such as colorectal, melanoma and non-small cell lung; (iv) use of commercially available assays and the development of custom assays for detection of somatic mutations in cancer samples using Next Generation Sequencing; and (v) development of a biomarker for FC Gamma receptor to aid in the selection of therapeutic options for monoclonal antibody cancer drugs. For the years ended December 31, 2013, 2012 and 2011, our research and development expenses were $3.2 million, $2.5 million and $2.2 million, respectively.

Manufacturing

We manufacture bioconsumable products including our test kits, separation columns, liquid reagents and enzymes. The major components of our WAVE Systems are manufactured for us by a third party. We integrate our hardware and software with these third party manufactured components. Our manufacturing facilities for WAVE Systems and bioconsumables are located in Omaha, Nebraska and San Jose, California.

Intellectual Property

To establish and protect our proprietary technologies and products, we rely on a combination of patent, copyright, trademark and trade-secret laws, license agreements' contractual provisions and confidentiality agreements. Our WAVE Systems and related consumables are protected by patents and in-licensed technologies that expire in various periods beginning in and continuing through 2030. Our ICE COLD-PCR platform technology is protected by in-licensed patents that expire in various periods through 2031. As part of the FAMILION acquisition in 2010, we acquired exclusive rights to the FAMILION family of genetic tests for inherited disease, including the patents protecting this technology. As we expand our product offerings, we also extend our patent development efforts to protect such product offerings. Established competitors, as well as companies that purchase and enforce patents and other intellectual property, may already have patents covering similar products. There is no assurance that we will be able to obtain patents covering our products, or that we will be able to obtain licenses from such companies on favorable terms or at all. However, while patents are an important element of our success, our business as a whole is not significantly dependent on any one patent.

We will continue to file patent applications, seek new licenses, take advantage of available copyright and trademark protections and implement appropriate trade-secret protocols to protect our intellectual property. Despite these precautions, there can be no assurance that misappropriation of our products and proprietary technologies will not occur.

In addition to our own products, we distribute or act as a sales agent for OEM Equipment developed by third parties. Our rights to those third-party products and the associated intellectual property rights are limited by the terms of the contractual agreement between us and the respective third-party.

Although we believe that our developed and licensed intellectual property rights do not infringe upon the proprietary rights of third parties, there can be no assurance that third parties will not assert infringement claims against us. Further, there can be no assurance that intellectual property protection will be available for our products in the U.S or foreign countries.

Like many companies in the biotechnology and other high-tech industries, third parties have in the past and may in the future assert claims or initiate litigation related to patent, copyright, trademark or other intellectual property rights to business processes, technologies and related standards that are relevant to us and our customers. These assertions have increased over time as a result of the general increase in patent claims assertions, particularly in the United States. Third parties may also claim that their intellectual property rights are being infringed by our customers' use of a business process method that utilizes products in conjunction with other products, which could result in indemnification claims against us by our customers. Any claim against us, with or without merit, could be time-consuming, result in costly litigation, cause product delivery delays, require us to enter into royalty or licensing agreements or pay amounts in settlement, or require us to develop alternative non-infringing technology. We could also be required to defend or indemnify our customers against such claims. A successful claim by a third-party of intellectual property infringement by us or one of our customers could compel us to enter into costly royalty or license agreements, pay significant damages or even stop selling certain products and incur additional costs to develop alternative non-infringing technology.

Government Regulation

We are subject to a variety of federal, state and municipal environmental and safety laws based on our use of hazardous materials in both manufacturing and research and development operations. We believe that we are in material compliance with applicable environmental laws and regulations. If we cause contamination to the environment, intentionally or unintentionally,

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we could be responsible for damages related to the clean-up of such contamination or individual injury caused by such contamination. We cannot predict how changes in laws and regulations will impact how we conduct our business operations in the future or whether the costs of compliance will increase in the future.

Regulation by governmental authorities in the United States and other countries is not expected to be a significant factor in the manufacturing, labeling, distribution and marketing of our products and systems. Please see the section entitled "Risk Factors" for other risks associated with the United States government.

Competition

The markets in which we operate are highly competitive and characterized by rapidly changing technological advances. A number of our competitors possess greater resources than us and may be able to develop and offer a greater breadth of products and/or services, coupled with significant marketing and distribution capabilities. We compete principally on the basis of uniquely enabling scientific technical advantages in specific but significant market segments.

Our Laboratory Services segment faces competition from a number of companies offering contract DNA sequencing and other genomic analysis services, including SeqWright and others. In addition, several clinical diagnostics service providers, such as Labcorp, Quest, GeneDx and Baylor College of Medicine, also offer related laboratory services. Finally, additional competition arises from academic core laboratory facilities. Competition for our WAVE System arises primarily from DNA sequencing and genotyping technologies. Competitors in these areas, among others, include Applied Biosystems, Qiagen, Roche, Sequenom and Illumina. Competition for some of our non-WAVE consumable products comes from numerous well-diversified life sciences reagents providers, including, among others, Invitrogen, Qiagen, Roche, Stratagene and Promega.

Employees

As of December 31, 2013 and 2012, we had employees focused in the following areas of operation:

	December 31,
	2013	2012
Manufacturing and Laboratory	76	86
Sales, Marketing and Administration	86	105
Research and Development	9	11
	171	202

Of our 171 total employees as of December 31, 2013, a total of 165 were full-time employees.

Our employees were employed in the following geographical locations:

	December 31,
	2013	2012
United States	151	181
Europe (other than the United Kingdom)	10	10
United Kingdom	10	11
	171	202

General Information

We were incorporated in Delaware on March 6, 1997. Our principal office is located at 12325 Emmet Street, Omaha, Nebraska 68164 (telephone: 402-452-5400). This facility houses certain administrative staff and laboratories. We maintain manufacturing facilities in Omaha, Nebraska and San Jose, California. We maintain research and development offices in Omaha, Nebraska. We maintain laboratories in Omaha, Nebraska and New Haven, Connecticut that have been certified under the CLIA. Our New Haven facility also houses certain administrative operations.

Our Internet website is located at http://www.transgenomic.com. The information on our website is not a part of this Annual Report. We make available free of charge on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the United States Securities and Exchange Commission ("SEC"). Our SEC reports can be accessed through the investor relations section of our Internet website.

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The public may also read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC's Internet website is located at http://www.sec.gov.

Executive Officers of the Registrant

Paul Kinnon. Mr. Kinnon, age 50, has served as our President and Chief Executive Officer and a Director since September 2013. Mr. Kinnon has more than 20 years of global leadership experience in innovative life science and diagnostics companies. From January through August 2013, he provided consulting services to the life science sector as a Partner at Arch Global Research. During a portion of this time, Mr. Kinnon provided consulting services to us. From January 2007 to December 2012, Mr. Kinnon was President, Chief Executive Officer and a Director of ZyGEM Corporation Limited, a biotechnology company, where he transformed the company from a regional enzyme provider into a leader in integrated microfluidic technologies for forensic and clinical diagnostic applications. From May 2006 to June 2007, Mr. Kinnon was Vice President & General Manager Environmental Diagnostics (later expanded to Applied Markets) at Invitrogen Corporation (now Life Technologies), a high growth life sciences and diagnostics firm, and from October 2004 until April 2006, he was Vice President, Global Strategic Alliances at Invitrogen. Previously, Mr. Kinnon also held business, sales and marketing roles of increasing responsibility at Guava Technologies, Inc., Cellomics, Inc. and other life science companies. Mr. Kinnon earned his Bachelor of Sciences degree in Applied Chemistry at Coventry University in the United Kingdom and holds a Diploma of Marketing.

Mark P Colonnese. Mr. Colonnese, age 58, was appointed as our Executive Vice President and Chief Financial Officer by the Board in September 2012. Mr. Colonnese has nearly 30 years of experience in leading business growth and financial strategies for life sciences companies. He most recently served as Executive Vice President, Commercial Operations and Chief Financial Officer at Salutria Pharmaceuticals, LLC, a privately-held, development-stage pharmaceutical company from April 2009 to August 2012. Prior to that, Mr. Colonnese served as an executive in a number of capacities at AtheroGenics, Inc., a development-stage pharmaceutical company, from January 1999 to April 2009, including Executive Vice President, Commercial Operations and Chief Financial Officer from May 2006 to April 2009, as Senior Vice President of Finance and Administration and Chief Financial Officer since 2002, and as Vice President of Finance and Administration and Chief Financial Officer since 1999. Prior to joining AtheroGenics, Mr. Colonnese served as Senior Vice President and Chief Financial Officer at Medaphis Corporation and has also held executive positions at Applied Analytical Industries, Inc. and Schering-Plough Corporation. Mr. Colonnese is a Certified Public Accountant.

Item 1A. Risk Factors

We have a history of operating losses and may incur losses in the future.

We have experienced annual losses from continuing operations since inception of our operations. Our operating loss for the years ended December 31, 2013, 2012 and 2011 was $15.8 million, $9.5 million and $3.0 million, respectively. These historical losses have been due principally to the expenses that we have incurred in order to develop and market our products, the fixed nature of our manufacturing costs and merger and acquisition costs.

Our future capital needs are uncertain and we may need to raise additional funds in the future.

Our future capital needs are uncertain and we may need to raise additional funds in the future through debt or equity offerings. Our future capital requirements will depend on many factors, including, but not limited to:

• revenue generated by sales of our products;

• expenses incurred in manufacturing and selling our products;

• costs of developing new products or technologies;

• costs associated with capital expenditures;

• the number and timing of acquisitions and other strategic transactions; or

• working capital requirements related to growing new acquisitions or existing business.

Governmental payers and health care plans have taken steps to control costs.

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Medicare, Medicaid and private insurers have increased their efforts to control the costs of health care services, including clinical testing services. They may reduce fee schedules or limit/exclude coverage for types of tests that we perform. Medicaid reimbursement varies by state and is subject to administrative and billing requirements and budget pressures. We expect efforts to reduce reimbursements, impose more stringent cost controls and reduce utilization of testing services will continue. These efforts, including changes in law or regulations, may have a material adverse impact on our business.

We might enter into new acquisitions that are difficult to integrate, disrupt our business, dilute stockholder value or divert management attention.

Our success will depend in part on our ability to continually enhance and broaden our product offerings in response to changing technologies, customer demands and competitive pressures. We expect to seek to acquire businesses, technologies or products that will complement or expand our existing business, including acquisitions that could be material in size and scope. Any acquisition we might make in the future might not provide us with the benefits we anticipated upon entering into the transaction. Any future acquisitions involve various risks, including:

• Difficulties in integrating the operations, technologies, products and personnel of the acquired entities;

• The risk of diverting management’s attention from normal daily operations of the business;

• Potential difficulties in completing projects associated with in-process research and development;

• Risks of entering markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;

• Initial dependence on unfamiliar supply chains or relatively small supply partners;

• Unexpected expenses resulting from the acquisition;

• Potential unknown liabilities associated with acquired businesses;

• Insufficient revenues to offset increased expenses associated with the acquisition; and

• The potential loss of key employees of the acquired entities.

An acquisition could result in the incurrence of debt, restructuring charges or significant one-time write-offs. Acquisitions also could result in goodwill and other intangible assets that are subject to impairment tests, which might result in future impairment charges. Furthermore, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted.

From time to time, we might enter into negotiations for acquisitions that are not ultimately consummated. Those negotiations could result in diversion of management time and potentially significant out-of-pocket costs. If we fail to evaluate and execute acquisitions accurately, we could fail to achieve our anticipated level of growth and our business and operating results could be adversely affected.

Weakness in U.S. or global economic conditions could have an adverse effect on our businesses.

The economies of the United States and other regions of the world in which we do business have experienced significant weakness, which, in the case of the U.S., has recently resulted in significant unemployment and slower growth in economic activity. A decline in economic conditions may adversely affect demand for our services and products, thus reducing our revenue. These conditions could also impair the ability of those with whom we do business to satisfy their obligations to us.

Sales have been variable.

Testing volumes in our Patient Testing laboratories are dependent on patient visits to doctors’ offices and other providers of health care and tend to fluctuate. Testing volume generally declines during the year-end holiday periods, other major holidays and the summer. Also, our laboratories perform project-based work that changes from quarter to quarter. Therefore, comparison of the results of successive quarters may not accurately reflect trends or results for the full year.

Changes in payer mix could have a material adverse impact on our net sales and profitability.

Testing services are billed to physicians, patients, government payors such as Medicare, and insurance companies. Tests may be billed to different payers depending on a particular patient’s medical insurance coverage. Government payers have increased their efforts to control the cost, utilization and delivery of health care services as well as reimbursement for laboratory testing services. Further reductions of reimbursement for Medicare and Medicaid services or changes in policy regarding coverage of tests or other requirements for payment, such as prior authorization or a physician or qualified practitioner’s signature on test requisitions, may be implemented from time to time. Reimbursement for the laboratory services component of our business is also subject to statutory and regulatory reduction. Reductions in the reimbursement rates and changes in payment policies of other third-party payers may occur as well. Such changes in the past have resulted in reduced payments as well as added costs and have decreased test utilization for the clinical laboratory industry by adding more complex new regulatory and administrative

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requirements. As a result, increases in the percentage of services billed to government payers could have an adverse impact on our net sales.

We may experience temporary disruptions and delays in processing biological samples at our facilities.

We may experience delays in processing biological samples caused by software and other errors. In early 2012, our laboratory information management system ("LIMS") installed in our New Haven, Connecticut laboratory testing facility experienced a software failure that resulted in reduced sample processing capacity. Although we have reviewed and improved our internal procedures to secure proper function of the LIMS and we believe that the full sample processing capacity has been restored, there are no assurances that we will not experience future temporary delays or disruptions in processing samples at our New Haven, Connecticut facility or at our other facilities. Any delay in processing samples could have an adverse effect on our business, financial condition and results of operations.

Our laboratories require ongoing CLIA certification.

CLIA extended federal oversight to virtually all clinical laboratories by requiring that they be certified by the federal government or by a federally approved accreditation agency. CLIA requires that all clinical laboratories meet quality assurance, quality control and personnel standards. Laboratories must also undergo proficiency testing and are subject to inspections.

The sanctions for failure to comply with CLIA requirements include suspension, revocation or limitation of a laboratory’s CLIA certificate, which is necessary to conduct business, cancellation or suspension of the laboratory’s approval to receive Medicare and/or Medicaid reimbursement, as well as significant fines and/or criminal penalties. The loss or suspension of a CLIA certification, imposition of a fine or other penalties, or future changes in the CLIA law or regulations (or interpretation of the law or regulations) could have a material adverse effect on us.

We believe that we are in compliance with all applicable laboratory requirements, but no assurances can be given that our laboratories will pass all future certification inspections.

Failure to comply with HIPAA could be costly.

The Health Insurance Portability and Accountability Act ("HIPAA") and associated regulations protect the privacy and security of certain patient health information and establish standards for electronic health care transactions in the United States. These privacy regulations establish federal standards regarding the uses and disclosures of protected health information. Our Molecular Labs are subject to HIPAA and its associated regulations. If we fail to comply with these laws and regulations we could suffer civil and criminal penalties, fines, exclusion from participation in governmental health care programs and the loss of various licenses, certificates and authorizations necessary to operate our Patient Testing business. We could also incur liabilities from third party claims.

Our business could be adversely impacted by health care reform.

Government attention to the health care industry in the United States is significant and may increase. The Patient Protection and Affordable Care Act passed by Congress and signed into law by the President in March 2010 could adversely impact our business. While certain portions of the legislation have already gone into effect, the ultimate impact of the legislation on the health care industry is still unknown, and the overall impact on our business is likely to be extensive and could result in significant changes to our business and our customers' businesses.

We may be subject to client lawsuits.

Providers of clinical testing services may be subject to lawsuits alleging negligence or other legal claims. Potential suits could involve claims for substantial damages. Litigation could also have an adverse impact on our client base and reputation. We maintain liability insurance coverage for certain claims that could result from providing or failing to provide clinical testing services, including inaccurate testing results and other exposures. Our insurance coverage limits our maximum recovery on individual claims and, therefore, there is no assurance that such coverage will be adequate.

Market demand is outside of our control.

There are many factors that affect the market demand for our products and services that we cannot control. Demand for our WAVE System is affected by the needs and budgetary resources of research institutions, universities, hospitals and others who use the WAVE System for genetic-variation research. The WAVE System represents a significant expenditure by these types of customers and often requires a long sales cycle. Similarly, the sales cycle for the OEM Equipment that we sell can be lengthy.

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The sale of our products and business operations in international markets subjects us to additional risks.

During the past several years, international sales have represented a significant portion of our total net sales. As a result, a major portion of our net sales are subject to risks associated with international sales and operations. These risks include:

• payment cycles in foreign markets are typically longer than in the U.S., and capital spending budgets for research agencies can vary over time with foreign governments;

• changes in foreign currency exchange rates can make our products more costly in local currencies since our foreign sales are typically paid for in British Pounds or the Euro;

• the potential for changes in U.S. and foreign laws or regulations that result in additional import or export restrictions, higher tariffs or other taxes, more burdensome licensing requirements or similar impediments to our ability to sell products and services profitably in these markets; and

• the fluctuation of foreign currency to the U.S. Dollar and the Euro to the British Pound can cause our net sales and expenses to increase or decrease, which adds risk to our financial statements.

Our WAVE System includes hardware components and instrumentation manufactured by a single supplier and if we are no longer able to obtain these components and instrumentation our ability to manufacture our products could be impaired.

We rely on a single supplier, Hitachi High Technologies America, to provide the basic instrument modules used in our WAVE Systems. While other suppliers of instrumentation are available, we believe that our arrangement with Hitachi offers strategic advantages. We have successfully converted the latest model of WAVE Systems to utilize Hitachi’s newest instrument line. If we were required to seek alternative sources of supply, it could be time consuming and may require significant and costly modification of our WAVE System. Also, if we were unable to obtain instruments from Hitachi in sufficient quantities or in a timely manner, our ability to manufacture our products could be impaired, which could limit our future net sales.

Our dependence on our suppliers exposes us to certain risks.

We rely on various suppliers for products and materials needed to produce our products. In the event that they would be unable to deliver those items due to product shortage or business closure, we may be unable to deliver our products to our customers timely or may need to increase our prices. The current economy poses additional risk of our suppliers’ ability to continue their businesses as usual.

Our markets are very competitive.

Many of our competitors have greater resources than we do and may enjoy other competitive advantages. This may allow them to more effectively market their products to our customers or potential customers, to develop products that make our products obsolete or to produce and sell products less expensively than us. As a result of these competitive factors, demand for and pricing of our products and services could be negatively affected.

Our patents may not protect us from others using our technology which could harm our business and competitive position.

Patent law relating to the scope of claims in the technology fields in which we operate is still evolving. The degree of future protection for our proprietary rights is uncertain. Furthermore, we cannot be certain that others will not independently develop similar or alternative products or technology, duplicate any of our products, or, if patents are issued to us, design around the patented products developed by us. Our patents or licenses could be challenged by litigation and, if the outcome of such litigation were adverse to us, our competitors could be free to use our technology. We may not be able to obtain additional patents for our technology, or if we are able to do so, patents may not provide us with adequate protection or be commercially beneficial. In addition, we could incur substantial costs in litigation if we are required to defend ourselves in patent suits brought by third parties or if we initiate such suits.

We cannot be certain that other measures taken to protect our intellectual property will be effective.

We rely upon trade secrets, copyright and trademark laws, non-disclosure agreements and other contractual provisions for some of our confidential and proprietary information that is not subject matter for which patent protection is being sought. Such measures, however, may not provide adequate protection for our trade secrets or other proprietary information. If such measures do not protect our rights, third parties could use our technology and our ability to compete in the market would be reduced.

We are dependent upon licensed technologies and may need to obtain additional licenses in the future to offer our products and remain competitive.

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We have licensed key components of our technologies from third parties. If these agreements were to terminate prematurely due to our breach of the terms of these licenses or we otherwise fail to maintain our rights to such technology, we may lose the right to manufacture or sell a substantial portion of our products. In addition, we may need to obtain licenses to additional technologies in the future in order to keep our products competitive. If we fail to license or otherwise acquire necessary technologies, we may not be able to develop new products that we need to remain competitive.

The protection of intellectual property in foreign countries is uncertain.

A significant percentage of our sales are to customers located outside the U.S. Patent and other intellectual property laws of some foreign countries may not protect our intellectual property rights to the same extent as U.S. laws. We may need to bring proceedings to defend our patent rights or to determine the validity of our competitors’ foreign patents. These proceedings could result in substantial cost and diversion of our efforts. Finally, some of our patent protection in the U.S. is not available to us in foreign countries due to the laws of those countries.

Our products could infringe on the intellectual property rights of others.

There are a significant number of U.S. and foreign patents and patent applications submitted for technologies in, or related to, our area of business. As a result, any application or exploitation of our technology by us could infringe patents or proprietary rights of others and any licenses that we might need as a result of such infringement might not be available to us on commercially reasonable terms, if at all. This may lead others to assert patent infringement or other intellectual property claims against us. We could incur substantial costs in litigation if we are required to defend against intellectual property claims by third parties.

Our failure to comply with any applicable government regulations or otherwise respond to claims relating to improper handling, storage or disposal of hazardous chemicals that we use may adversely affect our results of operations.

Our research and development and manufacturing activities involve the controlled use of hazardous materials and chemicals. We are subject to federal, state, local and international laws and regulations governing the use, storage, handling and disposal of hazardous materials and waste products. If we fail to comply with applicable laws or regulations, we could be required to pay penalties or be held liable for any damages that result and this liability could exceed our financial resources. We cannot assure you that accidental contamination or injury will not occur. Any such accident could damage our research and manufacturing facilities and operations, resulting in delays and increased costs.

We may need additional capital to finance our growth or to compete, which may cause dilution to existing stockholders or limit our flexibility in conducting our business activities.

We currently anticipate that existing cash and cash equivalents and cash flow from operations will be sufficient to meet our anticipated needs for working capital, operating expenses and capital expenditures for at least the next twelve months. However, we may need to raise additional capital in the future to fund expansion, respond to competitive pressures or acquire complementary businesses, technologies or services. Such additional financing may not be available on terms acceptable to us or at all. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution, and to the extent we engage in additional debt financing, if available, we may become subject to additional restrictive covenants that could limit our flexibility in conducting future business activities. If additional financing is not available or not available on acceptable terms, we may not be able to fund our expansion, promote our brands, take advantage of acquisition opportunities, develop or enhance services or respond to competitive pressures.

We may issue a substantial amount of our common stock to holders of options and warrants and this could reduce the market price for our stock.

At December 31, 2013, we had obligations to issue 3,785,709 shares of common stock upon exercise of outstanding stock options, warrants or conversion rights. In March 2014, we completed a private placement, pursuant to which we issued 1,443,297 shares of Series B convertible preferred stock, which is initially convertible into shares of our common stock at a rate of 1-for-1, subject to certain adjustments. The issuance of these underlying shares of common stock may be dilutive to our current stockholders and could negatively impact the market price of our common stock.

Our common stock is thinly traded and a large percentage of our shares are held by a small group of unrelated, institutional owners.

At December 31, 2013, we had 7,353,695 shares of common stock outstanding. The sale of a significant number of shares into the public market has the potential to cause significant downward pressure on the price of our common stock. This is particularly the case if the shares being placed into the market exceed the market’s ability to absorb the stock. This presents an opportunity for short sellers to contribute to the further decline of our stock price. If there are significant short sales of our stock, the price decline that would result from this activity will cause the share price to decline more so, which, in turn, may cause long holders

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of the stock to sell their shares, thereby contributing to sales of stock in the market. In addition, the large concentration of our shares held by a small group of stockholders could result in increased volatility in our stock price due to the limited number of shares available in the market.

Failure to comply with covenants in our loan agreement withaffiliates of Third Security, LLC could adversely affect us.

Our revolving line of credit and term loan with affiliates of Third Security, LLC (the “Lenders”) are governed by a Loan and Security Agreement, which contains affirmative and negative covenants. Under the term loan, we are required to maintain a minimum liquidity ratio and achieve a minimum amount of revenue, and we also agreed not to (i) pledge or otherwise encumber our assets other than to the Lenders, (ii) enter into additional borrowings or guarantees, (iii) repurchase our capital stock, or (iv) enter into certain mergers or acquisitions without the Lenders' consent. To secure the repayment of amounts borrowed under the revolving line of credit and term loan, we granted the Lenders a security interest in all of our assets. Failure to comply with the covenants under the loan agreement would be an event of default under the loan agreement that, if not cured or waived, would give the Lenders the right to cease making additional advances, accelerate repayment of all sums due and take action to collect the amounts owed to them, including foreclosing on their security interest, which would have a material adverse effect on our financial condition and results of operations.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties

We currently lease facilities throughout the world under non-cancelable leases with various terms. The following table summarizes certain information regarding our leased facilities. Annual rent amounts presented in the table are reflected in thousands.

Location	Function	Square Footage	2014 Scheduled Rent		Lease Term Expires
Omaha, Nebraska	WAVE and Consumable Manufacturing	25,000	$	145	July 2016
San Jose, California	Consumable Manufacturing	9,110	$	60	February 2016
Glasgow, Scotland	Multi Functional (1)	5,059	$	37	May 2017
Omaha, Nebraska	Multi Functional (1)	18,265	$	213	July 2022
Omaha, Nebraska	Multi Functional (1)	4,410	$	39	May 2017
New Haven, Connecticut	Multi Functional (1)	22,459	$	441	June 2018

(1) Multi Functional facilities include functions related to manufacturing, services, sales and marketing, research and development and/or administration.

We believe that these facilities are adequate to meet our current and planned needs. We believe that if additional space is needed in the future, we could find alternate space at competitive market rates without a substantial increase in cost.

Item 3. Legal Proceedings.

We are subject to a number of claims of various amounts which arise out of the normal course of our business. In our opinion, the disposition of pending claims will not have a material adverse effect on our financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information.    Share price information for our common stock is available on the OTCQB under the symbol “TBIO”. The following table sets forth the high and low closing prices for our common stock during each of the quarters of 2013 and 2012. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

	High		Low
Year Ended December 31, 2013
First Quarter	$	8.64	$	4.68
Second Quarter	$	5.88	$	3.72
Third Quarter	$	5.64	$	4.20
Fourth Quarter	$	7.32	$	4.68
Year Ended December 31, 2012
First Quarter	$	16.20	$	13.80
Second Quarter	$	13.56	$	9.36
Third Quarter	$	12.84	$	9.00
Fourth Quarter	$	11.64	$	6.48

Performance Graph.    We are a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Holders.    At December 31, 2013, there were 7,353,695 shares of our common stock outstanding and approximately 210 holders of record.

Dividends.    We have never declared or paid any cash dividends on our common stock and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Dividends on our common stock will be paid only if and when declared by our Board. The Board’s ability to declare a dividend is subject to limits imposed by Delaware corporate law. Additionally, pursuant to each of the Certificate of Designation of Series A Convertible Preferred Stock, as amended, and the Certificate of Designation of Series B Convertible Preferred Stock, we are prohibited from declaring dividends on our common stock without the prior written consent of the holders of at least two-thirds of the outstanding shares of preferred stock; provided that the Board may declare dividends payable solely in common stock without the prior written consent of the preferred holders. Pursuant to the terms of the Loan Agreement, our Board also may not pay any dividends without the prior consent of the Lenders; provided that our Board may pay dividends solely in common stock without such consent. In determining whether to declare dividends, the Board may consider our financial condition, results of operations, working capital requirements, future prospects and other relevant factors. The holders of our Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and our Series B Convertible Preferred Stock (the “Series B Preferred Stock”) are entitled to receive quarterly dividends, which accrue at the rate of 10% of the original price per share per annum for the Series A Preferred Stock and at the rate of 6% of the original price per share per annum for the Series B Preferred Stock, whether or not declared, and which compound annually and are cumulative.

Sale of Unregistered Securities.

2013 Private Placement: On January 24, 2013, we entered into a Securities Purchase Agreement with certain institutional and other accredited investors pursuant to which we: (i) sold to the investors an aggregate of 1,383,333 shares of common stock at a price per share of $6.00 for aggregate gross proceeds of approximately $8.3 million; and (ii) issued to the investors warrants to purchase up to an aggregate of 691,656 shares of common stock with an exercise price of $9.00 per share. The warrants may be exercised, in whole or in part, at any time from January 30, 2013 until January 30, 2018 and contain both cash and “cashless exercise” features. The warrants also impose penalties on us for failure to deliver the shares of common stock issuable upon exercise. The common stock and warrants were offered and sold in transactions exempt from registration under the Securities Act, in reliance on Section 4(2) thereof and Rule 506 of Regulation D thereunder. Each investor represented that it was

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an “accredited investor,” as defined in Regulation D, and acquired the common stock, warrants and shares issuable upon exercise of the warrants for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof.

We used the net proceeds from the offering for general corporate and working capital purposes, primarily to accelerate development of several of our key initiatives.

The above common stock transaction required the repricing and issuance of additional common stock warrants to the holders of warrants issued in our February 2012 common stock and warrant financing. The exercise price decreased from $15.00 per share to $12.96 per share and the number of shares issuable upon exercise of the warrants increased from 948,333 to 1,097,600.

In connection with the January 2013 financing, we also entered into a Registration Rights Agreement with the investors (the “2013 Registration Rights Agreement”). The 2013 Registration Rights Agreement required us to file a registration statement with the SEC within 45 days of the closing date of the offering for the resale by the investors of all of the common shares, the shares of common stock issuable upon exercise of the warrants, and all shares of common stock issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect thereto. The registration statement was declared effective by the SEC on March 29, 2013.

Lazard Capital Markets LLC served as the lead placement agent for the offering, and Craig-Hallum Capital Group LLC acted as co-placement agent. In consideration for services rendered as the placement agents in the offering, we agreed to (i) pay to the placement agents cash commissions equal 7% of the gross proceeds received in the offering, and (ii) reimburse the placement agent for reasonable out-of-pocket expenses, including fees paid to the placement agents' legal counsel, incurred in connection with the offering, which reimbursable expenses shall not exceed $25,000.

2014 Private Placement: On March 5, 2014, Transgenomic entered into a Series B Convertible Preferred Stock Purchase Agreement (the “Series B Purchase Agreement”) with certain accredited investors and/or their affiliates (collectively, the “2014 Investors”), pursuant to which Transgenomic, in a private placement, sold and issued to the 2014 Investors an aggregate of 1,443,297 shares of the Company’s Series B Convertible Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), at a price per share of $4.85 for an aggregate purchase price of approximately $7,000,000. Each share of Series B Preferred Stock issued pursuant to the Series B Purchase Agreement is initially convertible into shares of the Company’s common stock at a rate of 1-for-1, which conversion rate is subject to further adjustment as set forth in the Certificate of Designation of Series B Convertible Preferred Stock, as filed with the Secretary of State of the State of Delaware on March 5, 2014. The Series B Preferred Stock was offered and sold in transactions exempt from registration under the Securities Act, in reliance on Section 4(2) thereof and Rule 506 of Regulation D thereunder. Each investor represented that it was an “accredited investor,” as defined in Regulation D, and acquired the Series B Preferred Stock for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof.

We currently intend to use the net proceeds from the offering for general corporate and working capital purposes, primarily to accelerate development of several of our key initiatives.

In connection with the Series B financing, the Company also entered into a Registration Rights Agreement, dated March 5, 2014, with the 2014 Investors, pursuant to which the Company granted the 2014 Investors certain demand, “piggy-back” and S-3 registrations rights covering the resale of the shares of common stock underlying the Series B Preferred Stock issued pursuant to the Series B Purchase Agreement and all shares of common stock issuable upon any dividend or other distribution with respect thereto.

The 2014 Series B Preferred Stock financing required the repricing and issuance of additional common stock warrants to the holders of warrants issued in connection with our February 2012 private placement. The exercise price of these warrants decreased from $12.96 per share to $11.73 per share and the number of shares issuable upon exercise of the warrants increased from 1,097,600 to 2,540,897.

Information with respect to the securities as described above sold by us during the period covered by this Annual Report and thereafter through the date of the filing of this Annual Report with the SEC that were not registered under the Securities Act has previously been provided in our Current Reports on Form 8-K filed with the SEC on January 25, 2013, January 30, 2013 and March 6, 2014.

Issuer Purchases of Equity Securities.   We made no purchases of our common stock during the year ended December 31, 2013. Therefore, tabular disclosure is not presented.

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Item 6. Selected Consolidated Financial Data.

The selected consolidated balance sheet data as of December 31, 2013 and 2012 and the selected consolidated statements of operations data for each year ended December 31, 2013, 2012 and 2011 have been derived from our audited consolidated financial statements that are included elsewhere in this Annual Report. The selected consolidated balance sheet data as of December 31, 2011, 2010 and 2009 and the selected consolidated statements of operations data for each year ended December 31, 2010 and 2009 have been derived from our audited consolidated financial statements that are not included in this Annual Report. Dollar amounts, except per share data, are presented in thousands.

This data should be read together with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and the consolidated financial statements and related notes included elsewhere in this Annual Report. The financial information below is not necessarily indicative of the results of future operations. Future results could differ materially from historical results due to many factors, including those discussed in Item 1A in the section entitled "Risk Factors."

	Year Ended December 31,
	2013			2012			2011			2010				2009
Statement of Operations Data:
Net sales:
Laboratory Services	$	15,391		$	19,329		$	18,318		$	4,979			$	4,566
Genetic Assays and Platforms	12,153			12,151			13,653			15,069				17,457
	27,544			31,480			31,971			20,048				22,023
Cost of goods sold	15,048			16,470			13,534			10,284				10,418
Gross profit	12,496			15,010			18,437			9,764				11,605
Selling, general and administrative	25,043			22,023			19,150			10,933				10,319
Research and development	3,212			2,491			2,218			2,305				3,182
Restructuring charges (1)	—			—			41			138				—
Operating expenses	28,255			24,514			21,409			13,376				13,501
Other income (expense) (2)	(282		)	1,323			(6,765		)	628				18
Loss before income taxes	(16,041		)	(8,181		)	(9,737		)	(2,984		)		(1,878		)
Income tax expense	(54		)	146			45			150				42
Net Loss	$	(15,987	)	$	(8,327	)	$	(9,782	)	$	(3,134	)		$	(1,920	)
Preferred stock dividends and accretion (3)	(726		)	(660		)	(1,010		)	—				—
Net loss available to common stockholders	$	(16,713	)	$	(8,987	)	$	(10,792	)	$	(3,134	)		$	(1,920	)
Basic and diluted loss per share	$	(2.30	)	$	(1.55	)	$	(2.62	)	$	(0.76	)	—	$	(0.47	)
Basic and diluted weighted average shares outstanding	7,267			5,785			4,113			4,104				4,099
	As of December 31,
	2013			2012			2011			2010				2009
Balance Sheet Data:
Working capital	$	3,210		$	3,449		$	870		$	6,781			$	10,351
Total assets	30,278			38,791			33,562			32,027				16,004
Total liabilities and mezzanine equity	18,832			18,517			22,514			23,527				4,342
Total stockholders' equity	11,446			20,274			11,048			8,500				11,662

(1) Restructuring plans were implemented in 2011 and 2010 to reduce and align our expenses with current business prospects. The plans included employee terminations, office closures, termination of collaborations and write-offs of abandoned intellectual property. As a result, restructuring charges were recorded and are included in operating expenses.

(2) Other income in 2012 includes $2.2 million associated with the change in fair value of the common stock warrants. The income related to the change in fair value of the common stock warrants is a non-cash item. Other expense for 2011 includes expense associated with the Series A Preferred Stock and warrants to purchase shares of Series A Preferred Stock (the "Series A Warrants") of $6.1 million, which is due to the change in fair value of the preferred stock conversion feature. The expense associated with the change in value of the preferred stock conversion feature is a non-cash item. Other

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income in 2011 and 2010 includes $0.2 million and $0.6 million net of consulting fees, respectively, awarded in a federal grant under the Qualifying Therapeutic Discovery Project Program related to 2009 projects.

(3) 2013 and 2012 includes accrued dividends on Series A Preferred Stock of $0.7 million. 2011 includes accrued dividends on Series A Preferred Stock of $0.6 million and Series A Preferred Stock accretion of $0.4 million.

Item 7.        Management's Discussion and Analysis of Financial Condition and Results of Operations.

This Management Discussion and Analysis contains forward-looking statements that involve risks and uncertainties. Please see the section entitled "Forward-Looking Statements" at the beginning of Item 1 and the section entitled "Risk Factors" under Item 1A for important information to consider when evaluating such statements.

You are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements.

We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Transgenomic, Inc. ("we", "us", "our Company" or "Transgenomic") is a global biotechnology company advancing personalized medicine in the detection and treatment of cancer and inherited diseases through its proprietary molecular technologies and world-class clinical and research services. Our operations are presented in the following two complementary business segments.

• Laboratory Services. Our laboratories specialize in genetic testing for cardiology, neurology, mitochondrial disorders and oncology. Our Patient Testing laboratories located in New Haven, Connecticut and Omaha, Nebraska are certified under the Clinical Laboratory Improvement Amendment (“CLIA”) as high complexity labs and our Omaha facility is also accredited by the College of American Pathologists (“CAP”). Our Biomarker Identification laboratory located in Omaha, Nebraska also provides pharmacogenomics research services supporting Phase II and Phase III clinical trials conducted by pharmaceutical companies. Our laboratories employ a variety of genomic testing service technologies, including ICE COLD-PCR technology. ICE COLD-PCR is a proprietary platform technology that can be run in any laboratory with standard PCR technology and that enables detection of multiple unknown mutations from virtually any sample type including tissue biopsies, blood, cell-free DNA ("cfDNA") and circulating tumor cells (“CTCs”) at levels greater than 1,000-fold higher than standard DNA sequencing techniques.

• Genetic Assays and Platforms. Our proprietary product is the WAVE® System, which has broad applicability to genetic variation detection in both molecular genetic research and molecular diagnostics. We also distribute bioinstruments produced by other manufacturers (“OEM Equipment”) through our sales and distribution network. Service contracts to maintain installed systems are sold and supported by our technical support personnel. The installed WAVE base and some OEM Equipment platforms generate a demand for consumables that are required for the continued operation of the bioinstruments. We develop, manufacture and sell these consumable products. In addition, we manufacture and sell consumable products that can be used on multiple, independent platforms. These products include SURVEYOR® Nuclease and a range of chromatography columns.

The following discussion should be read together with our financial statements and related notes contained in this Annual Report. Results for the year ended December 31, 2013 are not necessarily indicative of results that may be attained in the future.

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Executive Summary

2013 Results

Net sales for the year ended December 31, 2013 of $27.5 million decreased $3.9 million or 13% versus the $31.5 million reported for the year ended December 31, 2012. The sales decrease primarily reflects decreased volume in Laboratory Services while Genetic Assays and Platforms performed at a comparable level compared to the prior year. The decrease in Laboratory Services is principally a result of lower test volumes particularly in neurology testing.

Gross profit for the year ended December 31, 2013 decreased to $12.5 million (45% of sales) versus $15.0 million (48% of sales) for the year ended December 31, 2012. Gross margins in 2013 were negatively impacted by the aforementioned lower test volumes and unfavorable change in product mix in Laboratory Services.

Operating expenses of $28.3 million for the year ended December 31, 2013 were $3.8 million higher than the comparable 2012 period and primarily reflects higher bad debt expense in 2013.

Loss from operations of $15.8 million for the year ended December 31, 2013 versus $9.5 million for the comparable 2012 period reflects the lower volumes, resultant lower gross profit and high operating expenses.

The Company reported a net loss of $15.9 million in 2013 versus $8.3 million for the year ended December 31, 2012.

2013 Overview and Recent Highlights

Transgenomic is advancing personalized medicine in cardiology, oncology, neurology and inherited diseases through our proprietary molecular diagnostic technologies and world-class clinical research services. Today, we are a global leader in molecular diagnostic testing with a family of innovative products.

As pioneers in the molecular diagnostic testing field, it is important to us to assemble a strong leadership team to ensure the development of dynamic strategies and effective execution of those strategies. To that end, in September 2013, Paul Kinnon was hired as President, Chief Executive Officer and Director, replacing Craig J. Tuttle. Mr. Kinnon brings over two decades of business and scientific leadership in the life sciences industries to Transgenomic, with a proven track record of developing and launching life science products. With broad experience covering clinical diagnostic, core life science research and applied markets, his appointment strengthens the executive leadership team and adds significant commercial, operational, and scientific expertise.

In November 2013, Transgenomic appointed Stephen R. Miller as Senior Vice President and General Manager of the Patient Testing Business Unit. Mr. Miller brings over 22 years of experience in the diagnostics and biotechnology industries to Transgenomic. With expertise involving the commercialization of molecular diagnostic tests on a global basis, Mr. Miller also brings in-depth experience in developing and implementing strategic commercialization and reimbursement plans.

With a new focus on commercialization of our intellectual property assets, in the fourth quarter of 2013, we announced two strategic commercialization partnerships. In October, we announced the signing of a U.S. collaboration agreement with PDI, Inc. (Nasdaq: PDII) to commercialize CardioPredict™, a new 10-gene assay panel that identifies specific genes that influence the effectiveness and safety of many commonly used cardiovascular drugs including the platelet inhibitor, clopidogrel; several cholesterol-lowering drugs, known as “statins”; the blood thinner, warfarin; and certain blood pressure lowering drugs, known as beta blockers; among others. Developed by Transgenomic, CardioPredict™ is the most comprehensive assay of its kind currently on the market and can assist physicians with drug selection and dosing decisions.

Under the terms of the strategic collaboration agreement, PDI will be responsible for all U.S.-based marketing and promotion of CardioPredict™, while Transgenomic will be responsible for processing CardioPredict™ in its CLIA lab and all customer support. We believe that strategic partnerships such as this one will allow Transgenomic to globally commercialize our novel assays and clinical tests in order to more effectively address the expanding genetics market.

Shortly thereafter, in November, we announced an agreement with PerkinElmer, Inc. (NYSE: PKI) to market and distribute our oncology diagnostic test portfolio of products in territories outside the United States. Under the terms of the agreement, effective January 1, 2014, PerkinElmer has the non-exclusive right to begin sales, marketing, distribution and field service activities

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for our line of molecular diagnostic oncology products, including CRC RAScan™ and ACE™ kits, for use on its Caliper LabChip® platform. Europe will be the initial focus of PerkinElmer’s launch.

These commercial collaborations highlight our strategy, which aims to optimize, through channel partnerships, the commercial potential of our assets aimed at large genetic testing markets. Doing so allows us to focus resources on our areas of strength, including developing and marketing tests for rare genetic disorders in the U.S., where we are a market leader, marketing and selling our instrument lines focused on genetic and cytogenetic analyses, and most importantly, developing tests and companion diagnostics using proprietary technology that is unequalled in the identification and detection of low-level mutations.

This proprietary technology, which we have named ICE COLD-PCR and developed with the Dana Farber Cancer Institute, is our technological platform with transformative commercial potential for the company. ICE COLD-PCR is a technology we believe has unequalled sensitivity and the potential to revolutionize cancer screening, diagnosis, monitoring, and treatment selection by replacing the need for biopsies. We are aggressively pursuing activities to develop, protect and commercialize this opportunity.

In February 2014, we announced that the U.S. Patent and Trademark Office issued a new patent related to our licensed ICE COLD-PCR technology. This newly issued patent significantly strengthens our intellectual property portfolio and supports the ongoing development of ICE COLD-PCR. We intend to leverage this proprietary asset in both our patient testing business and with our pharmaceutical and biotechnology client companies, especially those looking for low level mutations in blood. The patent will protect the underlying technology until 2031.

In October 2013, we announced the results from an interim analysis of a research collaboration involving ICE COLD-PCR with the MD Anderson Cancer Center. Using Transgenomic’s ultrasensitive ICE COLD-PCR technology, investigators analyzed blood plasma samples collected from 60 patients with colorectal cancer, melanoma, non-small cell lung cancer and several other cancers, and compared them to corresponding samples taken from tumor tissue. The results demonstrated that in a high percentage of patients, the same KRAS and BRAF genetic mutations were detected in cell-free (cf) DNA present in the blood as were originally found in primary tumors. These findings demonstrate the clinical relevance and utility of analyzing cfDNA in blood to detect low level mutations as an alternative to the far more invasive and difficult-to-conduct tissue biopsy.

In June 2013, in a joint announcement with ApoCell, Inc., we announced the results of a research collaboration with the University of Texas MD Anderson Cancer Center that coupled ApoCell's ApoStream™ platform for isolating circulating tumor cells (CTCs) with our ICE COLD-PCR technology to detect signature mutations in CTCs isolated from the blood of lung cancer patients. This small pilot study demonstrated that ICE COLD-PCR technology was able to detect a number of the mutations in CTCs that were found in matched tumors from the same patient. The results were presented at the ASCO 2013 Annual Meeting.

These studies, along with other collaborations currently ongoing at leading research institutes, continue to explore concordance rates between tumor tissue, cfDNA and CTCs isolated from patients using ICE COLD-PCR. The broad use of this innovative technology has the potential to revolutionize cancer screening, diagnosis, monitoring, and therapy selection since it has the ability to perform safer, less invasive, and more frequent assessments of a cancer and its mutations, all through a simple blood draw. We are also completing a review of future diagnostic applications and utility of the ICE COLD-PCR technology and products for commercial applications.

In May 2013, we announced our entry into a collaboration with Amgen, Inc. for the development and launch of CRC RAScan™, a CE-IVD test to screen patients with metastatic colorectal cancer (mCRC) for KRAS and NRAS mutations (collectively referred to as “RAS mutations”). In June 2013, Amgen presented results of a predefined-retrospective subset analysis of a global, multicenter, randomized Phase 3 study at the American Society of Clinical Oncology (ASCO) 2013 Annual Meeting. The RAS mutations outlined in the study, identified using our CE-IVD CRC RAScan™ kits in conjunction with our Surveyor®-Wave® technology, provide physicians with important tumor mutation information that is highly relevant when considering administration of select EGFR inhibitor therapies for metastatic colorectal cancer. The CRC RAScan™ kit provides a single kit solution with superior sensitivity versus any other kit or sequencing method currently available.

CRC RAScan™ utilizes the DNA mismatch-cutting enzyme SURVEYOR Nuclease assay, developed exclusively by us. The SURVEYOR Nuclease assay can detect mutations at higher levels of sensitivity than stand-alone Sanger sequencing. CRC RAScan™ results can also be used to inform marginal or difficult to resolve sequencing results. Additionally, in gene regions where mutations exist at low frequencies, prescreening with CRC RAScan™ affords a cost and time-efficient workflow, as only CRC RAScan™ positive samples are advanced to the more complex and expensive Sanger sequencing analysis. In late 2013, Transgenomic also introduced CRC RASseq™, a CE-IVD mutation detection test kit for RAS mutations using traditional Sanger DNA sequencing systems.

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We continue to progress our commercial collaboration with the Medical College of Wisconsin, a world-renowned institution with a robust presence in genomics and genetic testing. As a result of this collaboration, we have recently launched a number of new offerings addressing neurological and mitochondrial disorders, including whole exome testing, using a next generation sequencing platform.

In 2013, we consolidated our Patient Testing Laboratories and our Biomarker Identification Laboratory into a single business segment, which we now refer to as our Laboratory Services segment. We continue to anticipate growth in both our Laboratory Services and Genetic Assays and Platforms segments, as we commercialize new technologies and tests we have developed internally, in-licensed, or acquired, and as we expand into other markets and regions worldwide.

Results of Continuing Operations

Net Sales.

Net sales consisted of the following:

2013 vs. 2012	Dollars in Thousands
	Year Ended December 31,				Change
	2013		2012		$			%
Laboratory Services	$	15,391	$	19,329	$	(3,938	)	(20	)%
Genetic Assays and Platforms	12,153		12,151		2			—	%
Total net sales	$	27,544	$	31,480	$	(3,936	)	(13	)%

Laboratory Services net sales decreased $3.9 million during the year ended December 31, 2013, compared to 2012. Revenue decreased in 2013 compared to 2012 primarily due to overall lower test volumes, primarily in Neurology testing. The decline in revenue was partially offset by higher contract work associated with a collaboration agreement.

Genetic Assays and Platforms sales during the year ended December 31, 2013 were even with the level achieved in 2012. The change in sales was the result of modestly lower instruments sales in 2013 offset by an increase in our sales of Bioconsumables.

2012 vs. 2011	Dollars in Thousands
	Year Ended December 31,				Change
	2012		2011		$			%
Laboratory Services	$	19,329	$	18,318	$	1,011		6	%
Genetic Assays and Platforms	12,151		13,653		(1,502		)	(11	)%
Total net sales	$	31,480	$	31,971	$	(491	)	(2	)%

Laboratory Services net sales increased $1.0 million during the year ended December 31, 2012, compared to 2011 due to higher test volumes, and a modest shift towards higher priced tests driven by sales of our recently launched NuclearMitome, C-GAAP and ScoliScore^TMtests.

Genetic Assays and Platforms net sales decreased $1.5 million, or 11%, during the year ended December 31, 2012, as compared to 2011. We sold more instruments in 2012 than in 2011, but there was a shift in sales to our distributor at lower distributor prices, which resulted in lower sales. Bioconsumables net sales were down $0.7 million, during the year ended December 31, 2012 compared to 2011 due to lower volume in our European market.

Costs of Goods Sold.

Costs of goods sold include material costs for the products that we sell and substantially all other costs associated with our manufacturing facilities (primarily personnel costs, rent and depreciation) as well as the wholesale price we pay manufacturers of OEM Equipment that we distribute. It also includes direct costs (primarily personnel costs, rent, supplies and depreciation) associated with our Laboratory Services operations.

Gross Profit.

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Gross profit and gross margins for each of our business segments were as follows:

2013 vs. 2012	Dollars in Thousands
	Year Ended December 31,				Margin %
	2013		2012		2013		2012
Laboratory Services	$	6,820	$	9,316	44	%	48	%
Genetic Assays and Platforms	5,676		5,694		47	%	47	%
Gross profit	$	12,496	$	15,010	45	%	48	%

Gross profit was $12.5 million, or 45%, of total net sales during the year ended December 31, 2013, compared to $15.0 million, or 48%, during the same period of 2012. During the year ended December 31, 2013, the gross margin for Laboratory Services was $6.8 million, or 44%, as compared to $9.3 million, or 48%, in the same period of 2012. The gross profit decline primarily reflects the lower test volumes noted above. Lower overall costs were more than offset by the sales decline. Genetic Assays and Platforms gross margin remained consistent in the year ended December 31, 2013 compared to the same period of 2012.

2012 vs. 2011	Dollars in Thousands
	Year Ended December 31,				Margin %
	2012		2011		2012		2011
Laboratory Services	$	9,316	$	10,528	48	%	57	%
Genetic Assays and Platforms	5,694		7,909		47	%	58	%
Gross profit	$	15,010	$	18,437	48	%	58	%

Gross profit during the year ended December 31, 2012 was $15.0 million, or 48%, of total net sales, compared to $18.4 million, or 58%, during the same period of 2011. During the year ended December 31, 2012, the gross margin for Laboratory Services was $9.3 million, or 49%, as compared to $10.5 million, or 57% in the same period of 2011. The change in the gross margin for the year ended December 31, 2012 is attributable to a change in the mix of tests performed and higher operating supplies, wages and software costs as we increased capacity in our anticipation of higher volume from our newly launched tests. Genetic Assays and Platforms gross margin decreased to 47% in the year ended December 31, 2012 from 58% in the same period of 2011 due to the shift to sales to our distributor at lower prices resulting in lower gross margins.

Operating expenses.

The following table summarizes operating expenses further described below for the years ended December 31, 2013, 2012 and 2011:

	Dollars in Thousands
	Year Ended December 31,
	2013		2012		2011
Selling, general and administrative	$	25,043	$	22,023	$	19,150
Research and development	3,212		2,491		2,218
Restructuring charges	—		—		41
Total	$	28,255	$	24,514	$	21,409

Selling, General and Administrative Expenses.

Selling, general and administrative expenses consist primarily of personnel costs, marketing, travel costs, professional fees, bad debt expense and facility costs. In addition, the effect of foreign currency revaluation is included here. Our selling, general and administrative costs increased to $25.0 million during the year ended December 31, 2013 compared to $22.0 million for the same period in 2012. The increase in selling, general and administrative costs primarily relates to a $3.0 million higher bad debt provision in 2013 as compared to 2012. In addition, the increased costs include severance costs in 2013 related to staffing reductions in the second quarter and an executive termination in the third quarter.

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Our selling, general and administrative costs increased to $22.0 million, from $19.2 million, during the year ended December 31, 2012 compared to 2011. The increase in our selling, general and administrative costs included $1.2 million in additional employee related expenses incurred to increase the size of our sales force to support the launch of both C-GAAP and ScoliScore^TM and higher marketing materials expenses. In addition, our bad debt provision was $0.7 million higher during the year ended December 31, 2012 compared to 2011.

Research and Development Expenses.

Research and development expenses include primarily personnel costs, intellectual property legal fees, outside services, collaboration expenses, supplies, and facility costs and are expensed in the period in which they are incurred. During the year ended December 31, 2013 and 2012 these costs totaled $3.2 million and $2.5 million, respectively. Research and development expenses totaled 12% and 8% of net sales during the years ended December 31, 2013 and 2012, respectively. The increase is due in part to activities related to converting a number of our tests to a more efficient Next Generation Sequencing instrument platform, activities related to our programs validating the use of ICE COLD-PCR, and expanding our portfolio of tests and kits and the platforms on which they are performed.

During the years ended December 31, 2012 and 2011 research and development costs totaled $2.5 million and $2.2 million, respectively. Research and development expenses totaled 8% and 7% of net sales during the years ended December 31, 2012 and 2011, respectively.

Other Income (Expense).

The following table summarizes other income (expense) for the years ended December 31, 2013, 2012 and 2011:

	Dollars in Thousands
	Year Ended December 31,
	2013			2012			2011
Interest expense	$	(642	)	$	(888	)	$	(958	)
Preferred stock and warrants expenses	—			—			(6,066		)
Income from change in fair value of warrants	300			2,200			—
Other, net	60			11			259
Total other income (expense), net	$	(282	)	$	1,323		$	(6,765	)

Other expense, net for the year ended December 31, 2013 totaled $0.3 million. Other expense, net included interest expense, offset by the income associated with the change in fair value of the common stock warrants. The income associated with the common stock warrants is a non-cash item.

Other income, net for the year ended December 31, 2012 totaled $1.3 million. Other income, net included the income associated with the change in fair value of the common stock warrants, offset by interest expense.

Other expense, net for the year ended December 31, 2011 totaled $6.8 million. Other expense, net included interest expense as well as the expense associated with the Series A Preferred Stock and Series A Warrants, which is due to the change in fair value of the preferred stock conversion feature and the consideration given to the owners of the Series A Convertible Preferred Stock in exchange for the Series A Preferred Stock Certificate Amendment. The expenses associated with the Series A Preferred Stock are non-cash items.

Income Tax (Benefit) Expense.

Income tax (benefit) expense recorded during the years ended December 31, 2013, 2012 and 2011 related to income taxes in states, foreign countries and other local jurisdictions and totaled $(0.1) million, $0.1 million, and less than $0.1 million, respectively. The effective tax rate for the year ended December 31, 2013 is 0.3%, which is primarily the result of valuation allowances against net operating losses for the United States, partially adjusted by permanent differences related to inter-company foreign currency exchange of our subsidiary outside the United States. The effective tax rate for the years ended December 31, 2012 and 2011 were negative 1.8% and negative 0.5%, respectively.

We continue to assess the recoverability of deferred tax assets and the related valuation allowance. To the extent we begin to generate taxable income in future periods and determine that such valuation allowance is no longer required, the tax benefit of the remaining deferred tax assets will be recognized at such time. Our net operating loss carry-forwards of $121.7 million will

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expire at various dates from 2018 through 2033, if not utilized. We also had state income tax loss carry-forwards of $33.0 million at December 31, 2013. These carry-forwards will also expire at various dates from 2018 to 2033 if not utilized.

Liquidity and Capital Resources

Our working capital positions at December 31, 2013 and 2012 were as follows (in thousands):

	December 31,
	2013		2012		Change
Current assets (including cash and cash equivalents of $1,626 and $4,497 respectively)	$	11,835	$	18,717	$	(6,882	)
Current liabilities	8,625		15,268		6,643
Working capital	$	3,210	$	3,449	$	(239	)

On March 5, 2014, Transgenomic entered into a Series B Convertible Preferred Stock Purchase Agreement (the “Purchase Agreement”) with certain accredited investors and/or their affiliates (collectively, the “Investors”), pursuant to which Transgenomic, in a private placement, sold and issued to the Investors an aggregate of 1,443,297 shares of the Company's Series B Convertible Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), at a price per share of $4.85 (the “Shares”) for an aggregate purchase price of approximately $7,000,000 (the “Private Placement”). Each share of Series B Preferred Stock issuable pursuant to the Purchase Agreement is initially convertible into shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), at a rate of 1-for-1, which conversion rate is subject to further adjustment as set forth in the Certificate of Designation of Series B Convertible Preferred Stock.

Please see the section entitled "Contractual Obligations and Other Commitments" that follows shortly in this document and Footnote 5 "Debt" to our accompanying consolidated financial statements for additional information regarding our outstanding debt and debt servicing obligations.

At December 31, 2013, we had cash and cash equivalents of $1.6 million and in March 2014 we received approximately $7.0 million in gross proceeds in connection with the Series B Convertible Preferred Stock Purchase Agreement. We believe that existing sources of liquidity as of December 31, 2013 along with the net proceeds of the March 2014 sale of Preferred Stock, are sufficient to meet expected cash needs. Accordingly, we believe we have sufficient liquidity to continue our operations for at least the next 12 months.

Analysis of Cash Flows

The following table presents a summary of our cash flows:

	(amounts in thousands)
	2013			2012			2011
Net cash provided by (used in):
Operating activities	$	(8,473	)	$	(10,204	)	$	220
Investing activities	(1,766		)	(4,878		)	(508		)
Financing activities	7,370			14,604			1,726
Effect of exchange rates on cash	(2		)	29			54
Net increase (decrease) in cash and cash equivalents	$	(2,871	)	$	(449	)	$	1,492

Net Change in Cash and Cash Equivalents. Cash and cash equivalents decreased by $2.9 million, decreased by $0.4 million and increased by $1.5 million for the periods ending December 31, 2013, 2012 and 2011, respectively.

Cash Flows Provided By (Used In) Operating Activities. We used cash for operating activities of $8.5 million and $10.2 million during 2013 and 2012, respectively. We provided cash from operating activities of $0.2 million during 2011. In 2013, cash flows used in operating activities of $8.5 million reflects the Company's cash loss from operations and an increase in accounts receivable of $2.8 million as a result of a slow-down in collections in Laboratory Services and high fourth quarter shipments in Genetic Assays and Platforms. A decrease in inventory of $1.1 million related to higher instrument sales and better inventory management partially offset the operating use. During 2012, the cash flows used in operating activities of $10.2 million includes an increase in accounts receivable of $2.9 million related to higher levels of past due receivables and an increase in inventories of $1.4 million to purchase additional OEM instruments in anticipation of future sales, coupled with the cash loss from operations. In 2011, the cash provided of $0.2 million reflects cash income from operations offset by an increase in accounts receivable and inventory.

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Cash Flows Used In Investing Activities. During 2013, the Company utilized $1.8 million of cash for investing activities, primarily related to additions to property, plant and equipment and patents of $0.9 million and final payment related to the 2012 acquisition of $0.9 million. During 2012, we acquired the intangible assets of ScoliScore^TM for $4.4 million, $3.6 million of which we paid in 2012. We recorded purchases of property and equipment totaling $0.9 million and $0.2 million during 2012 and 2011, respectively.

Cash Flows Provided By Financing Activities. During 2013, we recorded net proceeds from a private placement with institutional and accredited investors of $7.6 million, received proceeds from borrowings of $6.6 million and recorded principal payments of $6.2 million to settle the PGxHealth note payable. During 2012, we recorded net proceeds from a private placement with institutional and accredited investors of $17.5 million. We recorded principal payments on notes payable totaling $2.6 million during 2012. During 2011, we recorded proceeds from short term notes payable totaling $3.0 million. In 2011, cash provided by financing activities reflects the excess of borrowings over payments.

Contractual Obligations and Other Commitments

At December 31, 2013, our contractual obligations and other commitments were as follows:

	(Amounts in thousands)
	2014		2015		2016		2017		2018		After 2018		Total
Long term debt(1)	$	242	$	1,879	$	4,439	$	—	$	—	$	—	$	6,560
Interest(1)	180		493		325		—		—		—		998
Capital lease obligations(2)	160		37		3		1		—		—		201
Operating lease obligations(3)	1,097		1,013		880		763		485		862		5,100
Purchase obligations(4)	887		—		—		—		—		—		887
	$	2,566	$	3,422	$	5,647	$	764	$	485	$	862	$	13,746

(1) See Footnote 5 - "Debt" to our accompanying consolidated financial statements.

(2) See Footnote 6 - "Capital Leases" to our accompanying consolidated financial statements.

(3) These amounts represent non-cancellable operating leases for equipment, vehicles and operating facilities

(4) These amounts represent purchase commitments, including all open purchase orders

At December 31, 2013 , we had unrecognized tax benefits of $0.3 million. A reasonable estimate of the timing related to the $0.3 million is not possible.

Off Balance Sheet Arrangements

At December 31, 2013 and 2012, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

Accounting policies used in the preparation of the consolidated financial statements may involve the use of management judgments and estimates. Certain of our accounting policies are considered critical as they are both important to the portrayal of our financial statements and they require significant or complex judgments on the part of management. The preparation of consolidated financial statements 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 net sales and expenses during the reported period. In addition, estimates and assumptions associated with the determination of the fair value of certain assets and related impairments require considerable judgment by management. Our judgments and estimates are based on experience and assumptions that we believe are reasonable under the circumstances. Further, we evaluate our judgments and estimates from time to time as circumstances change. Actual financial results based on judgment or estimates may vary under different assumptions or circumstances. The following are certain critical accounting policies that may involve the use of judgment or estimates.

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Allowance for Doubtful Accounts and Contractual Allowances.

While payment terms are generally 30 days, we have also provided extended payment terms of up to 90 days in certain cases. We operate globally and some of the international payment terms can be greater than 90 days. Accounts receivable are carried at original invoice amount and shown net of allowance for doubtful accounts and contractual allowances. The estimate made for doubtful accounts is based on a review of all outstanding amounts on a quarterly basis. The estimate for contractual allowances is based on contractual terms or historical reimbursement rates and is recorded when revenue is recorded. We determine the allowance for doubtful accounts and contractual allowances by regularly evaluating individual payor receivables and considering a payor's financial condition, credit history, reimbursement rates and current economic conditions. Accounts receivable are written off when deemed uncollectible and after all collection efforts have been exhausted. Recoveries of accounts receivable previously written off are recorded as a reduction in bad debt expense when received.

Inventories.

Inventories are stated at the lower of cost or market net of allowance for obsolete and slow moving inventory. Cost is computed using standard costs for finished goods and average or latest actual cost for raw materials and work in process, which approximates the first-in, first-out (FIFO) method. We write down slow-moving and obsolete inventory by the difference between the value of the inventory and our estimate of the reduced value based on potential future uses, the likelihood that overstocked inventory will be sold and the expected selling prices of the inventory. If our ability to realize value on slow-moving or obsolete inventory is less favorable than assumed, additional write-downs of the inventory may be required.

Property and Equipment.

Property and equipment are carried at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the related assets.

Goodwill.

Goodwill is tested for impairment annually utilizing a combination of income and market approaches. The income approach applies a discounted cash flow methodology to the Company's future period projections and the market approach uses market available information on the Company. We perform this impairment analysis during the fourth quarter of each year or when a significant event occurs that may impact goodwill. Impairment may occur when the carrying value of the reporting unit exceeds its fair value. If the carrying value of the reporting unit exceeds its fair value, the fair value of all identifiable tangible and intangible assets and liabilities is determined as part of a hypothetical purchase price allocation to determine the amount of goodwill impairment. No impairment of goodwill has occurred to date.

Intangible Assets.

Intangible assets include intellectual property, patents and acquired products. At December 31, 2013, the Company revised its estimate of useful lives on certain intangible assets which will cause amortization expense in 2014 to be $0.4 million lower.

1. Intellectual Property.    Initial costs paid to license intellectual property from independent third parties are capitalized and amortized using the straight-line method over the license period. Ongoing royalties related to such licenses are expensed as incurred.

2. Patents.    We capitalize legal costs, filing fees and other expenses associated with obtaining patents on new discoveries and amortize these costs using the straight-line method over the shorter of the legal life of the patent or its economic life beginning on the date the patent is issued.

3. Acquired Products.    As a part of the FAMILION acquisition and acquisition of certain intangible assets from Axial, we acquired technology, in process technology, trademarks/tradenames, customer relationships, covenants not to compete and third party relationships. These costs will be amortized pursuant to the straight-line method over their estimated economic life of seven to eight years. See Footnote 4 "Intangibles and Other Assets" to our accompanying consolidated financial statements.

We review our amortizable long lived assets for impairment whenever events indicate that the carrying amount of the asset (group) may not be recoverable. An impairment loss may be needed if the sum of the future undiscounted cash flows is less than the carrying amount of the asset (group). The amount of the loss would be determined by comparing the fair market value of the asset to the carrying amount of the asset (group). No loss has been recorded during the years ended December 31, 2013, 2012 or 2011. 

Common Stock Warrants.

Our issued and outstanding 2012 warrants to purchase common stock do not qualify to be treated as equity, and accordingly, are recorded as a liability ("Common Stock Warrant Liability"). The Common Stock Warrant Liability was initially recorded at fair value using a Monte Carlo simulation model. We are required to present these instruments at fair value at each reporting date

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and any changes in fair values are recorded as an adjustment to earnings. The Common Stock Warrant Liability is considered a level three financial instrument. See Footnote 12 "Fair Value" to our accompanying consolidated financial statements.

Preferred Stock.   

Priorto the 2011 modification, the Series A Preferred Stock met the definition of mandatorily redeemable stock as it was preferred capital stock which was redeemable at the option of the holder and therefore was reported outside of equity. The Series A Preferred Stock was accreted to its redemption value. Prior to the 2011 modification, the warrants to purchase shares of Series A Preferred Stock issued in December 2010 (the “Series A Warrants”) did not qualify to be treated as equity and, accordingly, were recorded as a liability. A preferred stock conversion feature was embedded within the Series A Preferred Stock that met the definition of a derivative. The Series A Preferred Stock, Series A Warrant liability and Series A Preferred Stock conversion feature were all recorded separately and were initially recorded at fair value using the Black-Scholes model. We were required to record these instruments at fair value at each reporting date and changes were recorded as an adjustment to earnings. The Series A Warrant liability and Series A Preferred Stock conversion feature were considered Level 3 financial instruments.

We entered into a transaction with the holders of the Series A Preferred Stock (the “Series A Holders”), pursuant to an Agreement Regarding Preferred Stock (the “Amendment Agreement”), in which the Series A Holders agreed to (i) waive their rights to enforce the anti-dilution and redemption features of the Series A Preferred Stock and (ii) at the next annual stockholder meeting, vote to amend the Certificate of Designation for the Series A Preferred Stock to remove the anti-dilution and redemption features of the Series A Preferred Stock. In exchange, we issued shares of common stock to the Series A Holders having an aggregate market value of $0.3 million. Our stockholders approved the amendments to the Certificate of Designation for the Series A Preferred Stock at the 2012 Annual Meeting of Stockholders held on May 23, 2012, and we filed the Certificate of Designation for the Series A Preferred Stock with the Delaware Secretary of State on May 25, 2012.

As a result of the Amendment Agreement, the value of the Series A Preferred Stock and Series A Warrants, including the Series A Preferred Stock conversion feature and Series A Warrant liability, were reclassified into stockholders' equity as of the date of the Amendment Agreement.

Stock Based Compensation.

All stock-based awards to date have exercise prices equal to the market price of our common stock on the date of grant and have ten-year contractual terms. Unvested options as of December 31, 2013 had vesting periods of one or three years from date of grant. None of the stock options outstanding at December 31, 2013 are subject to performance or market-based vesting conditions.

We measure and recognize compensation expense for all stock-based awards made to employees and directors, including stock options. Compensation expense is based on the calculated fair value of the awards as measured at the grant date for stock options and for Stock Appreciation Rights ("SAR") is based on the calculated mark-to-market value of the awards at quarter end, with both expensed over the service period of the awards. The values are determined using the Black-Scholes methodology.

Income Taxes.

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities at each balance sheet date using tax rates expected to be in effect in the year the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent that it is more likely than not that they will not be realized. Our liability for uncertain tax positions was $0.3 million and $0.3 million as of December 31, 2013 and 2012, respectively.  We recorded less than $0.1 million of additional uncertain tax positions during the current year. We had no material interest or penalties during fiscal 2013 or fiscal 2012, and we do not anticipate any such items during the next twelve months. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations.

Net Sales Recognition.

Revenue is realized and earned when all of the following criteria are met:

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

• The seller’s price to the buyer is fixed or determinable; and

• Collectability is reasonably assured.

In Laboratory Services, net sales from Patient Testing labs are recognized on an individual test basis and take place when the test report is completed, reviewed and sent to the client less the reserve for insurance, Medicare and Medicaid contractual adjustments. There are no deferred net sales associated with our Patient Testing services. Adjustments to the allowances, based on actual receipts from third party payers, are reflected in the estimated contractual allowance applied prospectively. In our Biomarker Identification labs, we perform services on a project by project basis. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year.

28

Net sales of Genetic Assays and Platforms products are recognized in accordance with the terms of the sales arrangement. Such recognition is based on receipt of an unconditional customer order and transfer of title and risk of ownership to the customer, typically upon shipment of the product under a purchase order. Our sales terms do not provide for the right of return unless the product is damaged or defective. Net sales from certain services associated with the analytical instruments, to be performed subsequent to shipment of the products, is deferred and recognized when the services are provided. Such services, mainly limited to installation and training services that are not essential to the functionality of the instruments, typically are performed in a timely manner subsequent to shipment of the instrument. We also enter into various service contracts that cover installed instruments. These contracts cover specific time periods and net sales associated with these contracts are deferred and recognized ratably over the service period.

Taxes collected from customers and remitted to government agencies for specific net sales producing transactions are recorded net with no effect on the income statement.

Research and Development.

Research and development and various collaboration costs are charged to expense when incurred.

Translation of Foreign Currency.

Our foreign subsidiary uses the local currency of the country in which it is located as its functional currency. Its assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenues and expenses are translated at the average rates during the period.

Comprehensive Income.

Accumulated other comprehensive income at December 31, 2013, 2012 and 2011 consisted of foreign currency translation adjustments, net of applicable tax. During 2011, we reclassified $1.3 million from accumulated other comprehensive income (loss) to accumulated deficit with no effect on total stockholders' equity or net loss.

Loss Per Share.

Basic earnings per share is calculated based on the weighted-average number of common shares outstanding during each period. Diluted earnings per share include shares issuable upon exercise of outstanding stock options, warrants or conversion rights that have exercise or conversion prices below the market value of our common stock.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. The amendments in the Update do not change the current requirements for reporting net income or other comprehensive income in financial statements. The new amendments will require an organization to present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income if the item reclassified is required under generally accepted accounting principles in the U.S. (“U.S. GAAP”) to be reclassified to net income in its entirety in the same reporting period. Additionally, for other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP to provide additional detail about those amounts. For public companies, the amendments were effective for reporting periods beginning after December 15, 2012. Our adoption of this guidance did not have a material impact on our consolidated financial statements.

In February 2013 FASB issued ASU No. 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). ASU 2013-04 requires reporting and disclosure of obligations resulting from joint and several liability arrangements within the scope of Subtopic 405-40 for which the total amount of the obligation is fixed at the reporting date. For public companies, ASU 2013-04 is effective for fiscal years and interim periods within those years beginning after December 15, 2013. The guidance in ASU 2013-04 is to be applied retrospectively for those obligations resulting from joint and several liability arrangements within the scope of Subtopic 405-40 that exist at the beginning of an entity’s fiscal year of adoption. Earlier application is permitted. When adopted, ASU 2013-04 is not expected to materially impact our consolidated financial statements.

In March 2013, the FASB released ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force)(“ASU 2013-05”). ASU 2013-05 provides that, when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. The provisions of ASU 2013-05 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. When adopted, ASU 2013-05 is not expected to materially impact our consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with an option for early adoption. We intend to adopt this guidance at the beginning of our first quarter of fiscal year 2014, and do not expect the adoption of this standard will have a material impact on our financial statements.

Impact of Inflation

29

We do not believe that inflation has had a material effect on our current business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, for example, if the cost of our materials or the cost of shipping our products to customers were to incur substantial increases as a result of the rapid rise in the cost of oil, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

Item 7A. Quantitative and Qualitative Disclosure about Market Risk.

We are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information required under this item.

30

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Transgenomic, Inc.

We have audited the accompanying consolidated balance sheet of Transgenomic, Inc. and Subsidiary (the Company) as of December 31, 2013 and the related consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flow for the year then ended December 31, 2013. 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. We were not engaged to perform an audit of the Company’s 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Transgenomic, Inc. and Subsidiary at December 31, 2013, and the consolidated results of their operations and their cash flows for the year then ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

Hartford, CT

March 27, 2014

31

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Transgenomic, Inc.

We have audited the accompanying consolidated balance sheet of Transgenomic, Inc. and Subsidiary as of December 31, 2012, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for the years ended December 31, 2012 and 2011. 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 audits.

We conducted our audits 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 audits provide a reasonable basis for our opinions.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Transgenomic, Inc. and Subsidiary as of December 31, 2012, and the results of their operations and their cash flows for the years ended December 31, 2012 and 2011, in conformity with U.S. generally accepted accounting principles.

/s/ McGladrey LLP

Omaha, Nebraska

March 14, 2013

32

TRANSGENOMIC, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

December 31, 2013 and 2012

(Dollars in thousands except per share data)

	2013			2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,626		$	4,497
Accounts receivable (net of allowances for doubtful accounts of $3,838 and $2,171, respectively)	5,314			8,081
Inventories (net of allowances of $799 and $616, respectively)	3,957			5,092
Other current assets	938			1,047
Total current assets	11,835			18,717
PROPERTY AND EQUIPMENT:
Equipment	11,255			10,682
Furniture, fixtures & leasehold improvements	3,874			3,848
	15,129			14,530
Less: accumulated depreciation	(13,126		)	(12,340		)
	2,003			2,190
OTHER ASSETS:
Goodwill	6,918			6,918
Intangibles (net of accumulated amortization of $4,598 and $2,805, respectively)	9,195			10,764
Other assets	327			202
	$	30,278		$	38,791
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	2,860		$	2,052
Accrued compensation	1,330			1,121
Current maturities of long term debt	242			6,171
Accrued expenses	2,037			3,686
Deferred revenue	1,088			1,171
Other current liabilities	1,068			1,067
Total current liabilities	8,625			15,268
LONG TERM LIABILITIES:
Long term debt less current maturities	6,318			—
Common stock warrant liability	600			900
Other long-term liabilities	1,303			1,089
Accrued preferred stock dividend	1,986			1,260
Total liabilities	18,832			18,517
STOCKHOLDERS’ EQUITY:
Series A preferred stock, $.01 par value, 15,000,000 shares authorized, 2,586,205 shares issued and outstanding, respectively	26			26
Common stock, $.01 par value, 150,000,000 shares authorized, 7,353,695 and 5,970,477 shares issued and outstanding, respectively (1)	73			64
Additional paid-in capital (1)	179,459			171,538
Accumulated other comprehensive income	390			435
Accumulated deficit	(168,502		)	(151,789		)
Total stockholders’ equity	11,446			20,274
	$	30,278		$	38,791

(1) The common stock shares and additional paid-in capital for all periods presented reflect the one-for-twelve reverse stock split which took effect on January 27, 2014.

See notes to consolidated financial statements.

33

TRANSGENOMIC, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2013, 2012 and 2011

(Dollars in thousands except per share data)

	2013			2012			2011
NET SALES	$	27,544		$	31,480		$	31,971
COST OF GOODS SOLD	15,048			16,470			13,534
Gross profit	12,496			15,010			18,437
OPERATING EXPENSES:
Selling, general and administrative	25,043			22,023			19,150
Research and development	3,212			2,491			2,218
Restructuring charges	—			—			41
	28,255			24,514			21,409
LOSS FROM OPERATIONS	(15,759		)	(9,504		)	(2,972		)
OTHER INCOME (EXPENSE):
Interest expense, net	(642		)	(888		)	(958		)
Expense on preferred stock	—			—			(6,066		)
Warrant revaluation	300			2,200			—
Other, net	60			11			259
	(282		)	1,323			(6,765		)
LOSS BEFORE INCOME TAXES	(16,041		)	(8,181		)	(9,737		)
INCOME TAX (BENEFIT)EXPENSE	(54		)	146			45
NET LOSS	$	(15,987	)	$	(8,327	)	$	(9,782	)
PREFERRED STOCK DIVIDENDS AND ACCRETION	(726		)	(660		)	(1,010		)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS	$	(16,713	)	$	(8,987	)	$	(10,792	)
BASIC AND DILUTED LOSS PER COMMON SHARE (1)	$	(2.30	)	$	(1.55	)	$	(2.62	)
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING (1)	7,266,642			5,784,785			4,113,469

(1) Net loss per share and the number of shares used in the per share calculations for all periods presented reflect the one-for-twelve reverse stock split which took effect on January 27, 2014.

See notes to consolidated financial statements.

34

TRANSGENOMIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Years Ended December 31, 2013, 2012 and 2011

(Dollars in thousands)

	2013			2012			2011
Net Loss	$	(15,987	)	$	(8,327	)	$	(9,782	)
Other Comprehensive Loss; foreign currency translation adjustment, net of tax	(45		)	99			54
Comprehensive Loss	$	(16,032	)	$	(8,228	)	$	(9,728	)

See notes to consolidated financial statements.

35

TRANSGENOMIC, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31, 2013, 2012 and 2011

(Dollars in thousands except share data)

	Preferred Stock			Common Stock
	Outstanding Shares	Par Value		Outstanding Shares (1)	Par Value (1)			Additional Paid-in Capital (1)		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2010	—	$	—	4,107,473	$	46		$	140,182	$	(133,317	)	$	1,589		$	8,500
Net loss	—	—		—	—			—		(9,782		)				(9,782		)
Foreign currency translation adjustment, net of tax	—	—		—	—			—		—			54			54
Non-cash stock-based compensation	—	—		—	—			1,010		—			—			1,010
Issuance of shares of stock	—	—		7,513	—			24		—			—			24
Preferred stock accretion	—	—		—	—			—		(410		)	—			(410		)
Amendment of preferred stock agreement	2,586,205	26		20,492	—			12,226		—			—			12,252
Dividends on preferred stock	—	—		—	—			—		(600		)	—			(600		)
Reclassification of other comprehensive income (loss)	—	—		—	—			—		1,307			(1,307		)	—
Balance, December 31, 2011	2,586,205	$	26	4,135,478	$	46		$	153,442	$	(142,802	)	$	336		$	11,048
Net loss	—	—		—	—			—		(8,327		)				(8,327		)
Foreign currency translation adjustment, net of tax	—	—		—	—			—		—			99			99
Non-cash stock-based compensation	—	—		—	—			731		—			—			731
Issuance of shares of common stock	—	—		1,667	—			10		—			—			10
Private Placement, net	—	—		1,833,333	18			17,355								17,373
Dividends on preferred stock	—	—		—	—			—		(660		)	—			(660		)
Balance, December 31, 2012	2,586,205	$	26	5,970,478	$	64		$	171,538	$	(151,789	)	$	435		$	20,274
Net loss	—	—		—	—			—		(15,987		)				(15,987		)
Foreign currency translation adjustment, net of tax	—	—		—	—			—		—			(45		)	(45		)
Non-cash stock-based compensation	—	—		—	—			360		—			—			360
Private Placement, net	—			1,383,217	14			7,556		—						7,570
Dividends on preferred stock	—	—		—	—			—		(726		)	—			(726		)
Other	—	—		—	(5		)	5		—			—			—
Balance, December 31, 2013	2,586,205	$	26	7,353,695	$	73		$	179,459	$	(168,502	)	$	390		$	11,446

(1) The common stock shares and additional paid-in capital for all periods presented reflect the one-for-twelve reverse stock split which took effect on January 27, 2014.

See notes to consolidated financial statements.

36

TRANSGENOMIC, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2013, 2012 and 2011

(Dollars in thousands)

	2013			2012			2011
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss	$	(15,987	)	$	(8,327	)	$	(9,782	)
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:
Depreciation and amortization	2,748			2,278			2,101
Non-cash, stock based compensation	462			731			1,010
Provision for losses on doubtful accounts	5,548			2,468			1,738
Provision for losses on inventory obsolescence	217			129			48
Preferred stock revaluation	—			—			6,066
Warrant revaluation	(300		)	(2,200		)	—
Loss on disposal of fixed assets	9			23			—
Deferred income taxes	62			(25		)	(133		)
Other	(62		)	—			—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(2,757		)	(2,913		)	(2,212		)
Inventories	908			(1,373		)	(620		)
Prepaid expenses and other current assets	122			(209		)	243
Accounts payable	801			(576		)	1,028
Accrued liabilities	(371		)	96			332
Other long term liabilities	127			(306		)	401
Net cash flows provided by (used in) operating activities	(8,473		)	(10,204		)	220
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisitions	(849		)	(3,551		)	—
Purchase of property and equipment	(605		)	(882		)	(231		)
Purchase of short term investments	—			(8,994		)	—
Proceeds from the sale of short term investments	—			8,994			—
Change in other assets	(312		)	(445		)	(277		)
Net cash flows used in investing activities	(1,766		)	(4,878		)	(508		)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from note payable	6,560			—			3,000
Principal payments on capital lease obligations	(348		)	(328		)	(391		)
Payment of deferred financing costs	(241		)	—			—
Issuance of common stock and related warrants, net	7,570			17,483			24
Principal payments on note payable	(6,171		)	(2,551		)	(907		)
Net cash flows provided by financing activities	7,370			14,604			1,726
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH	(2		)	29			54
NET CHANGE IN CASH AND CASH EQUIVALENTS	(2,871		)	(449		)	1,492
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	4,497			4,946			3,454
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,626		$	4,497		$	4,946

37

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	724	$	964	$	732
Income taxes, net	9		123		108
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Acquisition of equipment through capital leases	$	—	$	175	$	756
Dividends accrued on preferred stock	726		660		600
Note payable converted to Equity	—		3,000		—
Acquisition of intangibles	—		849		—
Common stock issued for elimination of derivatives on preferred stock	—		—		300
Goodwill purchase price adjustment	—		—		165

See notes to consolidated financial statements.

38

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

1. BUSINESS DESCRIPTION

Business Description.

Transgenomic, Inc.("we", "us","our Company" or "Transgenomic") is a global biotechnology company advancing personalized medicine in the detection and treatment of cancer and inherited diseases through its proprietary molecular technologies and world-class clinical and research services. Our operations are organized and reviewed by management along its product lines and presented in the following two complementary business segments.

• Laboratory Services. Our laboratories specialize in genetic testing for cardiology, neurology, mitochondrial disorders and oncology. Our Patient Testing laboratories located in New Haven, Connecticut and Omaha, Nebraska are certified under the Clinical Laboratory Improvement Amendment (“CLIA”) as high complexity labs and our Omaha facility is also accredited by the College of American Pathologists (“CAP”). Our Biomarker Identification laboratory located in Omaha, Nebraska also provides pharmacogenomics research services supporting Phase II and Phase III clinical trials conducted by pharmaceutical companies. Our laboratories employ a variety of genomic testing service technologies, including ICE COLD-PCR technology. ICE COLD-PCR is a proprietary platform technology that can be run in any laboratory with standard PCR technology and that enables detection of multiple unknown mutations from virtually any sample type including tissue biopsies, blood, cell-free DNA ("cfDNA") and circulating tumor cells (“CTCs”) at levels greater than 1,000-fold higher than standard DNA sequencing techniques.

• Genetic Assays and Platforms. Our proprietary product is the WAVE® System, which has broad applicability to genetic variation detection in both molecular genetic research and molecular diagnostics. We also distribute bioinstruments produced by other manufacturers (“OEM Equipment”) through our sales and distribution network. Service contracts to maintain installed systems are sold and supported by our technical support personnel. The installed WAVE base and some OEM Equipment platforms generate a demand for consumables that are required for the continued operation of the bioinstruments. We develop, manufacture and sell these consumable products. In addition, we manufacture and sell consumable products that can be used on multiple, independent platforms. These products include SURVEYOR® Nuclease and a range of chromatography columns.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation.

The consolidated financial statements include the accounts of Transgenomic, Inc. and its wholly owned subsidiary. All inter-company balances and transactions have been eliminated in consolidation.

Risks and Uncertainties.

Certain risks and uncertainties are inherent in our day-to-day operations and to the process of preparing our financial statements. The more significant of those risks are presented below and throughout the notes to the financial statements.

Use of Estimates.

The preparation of consolidated financial statements 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 net sales and expenses during the reporting period. In addition, estimates and assumptions associated with the determination of the fair value of certain assets and related impairments require considerable judgment by management. The key estimates included in the consolidated financial statements include stock option valuations, goodwill and intangible valuations, accounts receivable and inventory valuations, warrant valuations and contractual allowances. Actual results could differ from the estimates and assumptions used in preparing these consolidated financial statements.

Basis of Presentation.

On January 15, 2014, the Board of Directors of the Company approved a reverse split of the Company's common stock, par value $0.01, at a ratio of one-for twelve. This reverse stock split became effective on January 27, 2014 and, unless otherwise indicated, all share amounts, per share data, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split. Additionally, accrued preferred stock dividends have been re-classed to conform to the current year presentation.

39

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

Fair Value.

Unless otherwise specified, book value approximates fair market value. The Company's Level 1 financial instruments include cash and cash equivalents. The Company's Level 3 financial instruments include the common stock warrant liability, preferred stock warrant liability and conversion feature, and debt. Due to its variable interest component, debt approximates fair value.  The common stock warrant liability and Series A Convertible Preferred Stock (“Series A Preferred Stock”) warrant liability and conversion feature are recorded at fair value.  See Footnote 12 Fair Value.

Cash and Cash Equivalents.

Cash and cash equivalents include cash and investments with original maturities at the date of acquisition of three months or less. Such investments presently consist of temporary overnight investments

Concentrations of Cash.

From time to time, we may maintain a cash position with financial institutions in amounts that exceed federally insured limits. We have not experienced any losses on such accounts as of December 31, 2013.

Accounts Receivable.

The following is a summary of activity for the allowance for doubtful accounts during the years ended December 31, 2013, 2012 and 2011:

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs			Ending Balance
Year ended December 31, 2013	$	2,171	$	5,548	$	(3,881	)	$	3,838
Year ended December 31, 2012	$	1,088	$	2,468	$	(1,385	)	$	2,171
Year ended December 31, 2011	$	334	$	1,738	$	(984	)	$	1,088

While payment terms are generally 30 days, we have also provided extended payment terms of up to 90 days in certain cases. We operate globally and some of the international payment terms can be greater than 90 days. Accounts receivable are carried at original invoice amount and shown net of allowance for doubtful accounts and contractual allowances. The estimate made for doubtful accounts is based on a review of all outstanding amounts on a quarterly basis. The estimate for contractual allowances is based on contractual terms or historical reimbursement rates and is recorded when revenue is recorded. We determine the allowance for doubtful accounts and contractual allowances by regularly evaluating individual payor receivables and considering a payor's financial condition, credit history, reimbursement rates and current economic conditions. Accounts receivable are written off when deemed uncollectible and after all collection efforts have been exhausted. Recoveries of accounts receivable previously written off are recorded as a reduction in bad debt expense when received.

Inventories.

Inventories are stated at the lower of cost or market net of allowance for obsolete and slow moving inventory. Cost is computed using standard costs for finished goods and average or latest actual cost for raw materials and work in process, which approximates the first-in, first-out (FIFO) method. We write down slow-moving and obsolete inventory by the difference between the value of the inventory and our estimate of the reduced value based on potential future uses, the likelihood that overstocked inventory will be sold and the expected selling prices of the inventory. If our ability to realize value on slow-moving or obsolete inventory is less favorable than assumed, additional write-downs of the inventory may be required.

The following is a summary of activity for the allowance for obsolete inventory during the year ended December 31, 2013, 2012 and 2011:

40

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs			Ending Balance
Year ended December 31, 2013	$	616	$	217	$	(34	)	$	799
Year ended December 31, 2012	$	511	$	129	$	(24	)	$	616
Year ended December 31, 2011	$	518	$	48	$	(55	)	$	511

We determine the allowance for obsolescence by evaluating inventory quarterly for items deemed to be slow moving or obsolete.

Property and Equipment.

Property and equipment are carried at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the related assets as follows:

Leasehold improvements	1 to 10 years
Furniture and fixtures	3 to 7 years
Production equipment	3 to 7 years
Computer equipment	3 to 7 years
Research and development equipment	2 to 7 years

Depreciation expense related to property and equipment during the years ended December 31, 2013, 2012 and 2011 was $0.6 million, $0.8 million and $0.6 million, respectively. Included in depreciation for the years ended December 31, 2013, 2012 and 2011 was $0.3 million, $0.3 million and $0.2 million, respectively, related to equipment acquired under capital leases.

Goodwill.

Goodwill is tested for impairment annually utilizing a combination of income and market approaches. The income approach applies a discounted cash flow methodology to the Company's future period projections and the market approach uses market available information on the Company. We perform this impairment analysis during the fourth quarter of each year or when a significant event occurs that may impact goodwill. Impairment may occur when the carrying value of the reporting unit exceeds its fair value. If the carrying value of the reporting unit exceeds its fair value, the fair value of all identifiable tangible and intangible assets and liabilities is determined as part of a hypothetical purchase price allocation to determine the amount of goodwill impairment. No impairment of goodwill has occurred to date.

Intangibles.

Intangible assets include intellectual property, patents and acquired products. At December 31, 2013, the Company revised its estimate of useful lives on certain intangible assets which will cause amortization expense in 2014 to be $0.4 million lower.

1. Intellectual Property.    Initial costs paid to license intellectual property from independent third parties are capitalized and amortized using the straight-line method over the license period. Ongoing royalties related to such licenses are expensed as incurred.

2. Patents.    We capitalize legal costs, filing fees and other expenses associated with obtaining patents on new discoveries and amortize these costs using the straight-line method over the shorter of the legal life of the patent or its economic life beginning on the date the patent is issued.

3. Acquired Products.    As a part of the FAMILION acquisition and acquisition of certain intangible assets from Axial, we acquired technology, in process technology, trademarks/tradenames, customer relationships, covenants not to compete and third party relationships. These costs will be amortized pursuant to the straight-line method over their estimated economic life of seven to eight years. See Footnote 4 "Intangibles and Other Assets" to our accompanying consolidated financial statements.

We review our amortizable long lived assets for impairment whenever events indicate that the carrying amount of the asset (group) may not be recoverable. An impairment loss may be needed if the sum of the future undiscounted cash flows is less than the carrying amount of the asset (group). The amount of the loss would be determined by comparing the fair market value of the asset to the carrying amount of the asset (group). No loss has been recorded during the years ended December 31, 2013, 2012 or 2011. 

41

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

Common Stock Warrants.

Our issued and outstanding 2012 warrants to purchase common stock do not qualify to be treated as equity and accordingly, are recorded as a liability (“Common Stock Warrant Liability”). The Common Stock Warrant Liability was initially recorded at fair value using a Monte Carlo simulation model. We are required to present these instruments at fair value at each reporting date and any changes in fair values are recorded as an adjustment to earnings. The Common Stock Warrant Liability is considered a Level 3 financial instrument. See Footnote 12 - Fair Value.

Preferred Stock.   

Priorto the 2011 modification, the Series A Preferred Stock met the definition of mandatorily redeemable stock as it was preferred capital stock which was redeemable at the option of the holder and therefore was reported outside of equity. The Series A Preferred Stock was accreted to its redemption value. Prior to the 2011 modification, the warrants to purchase shares of series A Preferred Stock (“Series A Warrants”) did not qualify to be treated as equity and accordingly, were recorded as a liability. A preferred stock conversion feature was embedded within the Series A Preferred Stock that met the definition of a derivative. The Series A Preferred Stock, Series A Warrant liability and Series A Preferred Stock conversion feature were all recorded separately and were initially recorded at fair value using the Black-Scholes model. We were required to record these instruments at fair value at each reporting date and changes were recorded as an adjustment to earnings. The Series A Warrant liability and Series A Preferred Stock conversion feature were considered Level 3 financial instruments.

In November 2011, we entered into a transaction with the holders of the Series A Preferred Stock (the “Series A Holders”), pursuant to an Agreement Regarding Preferred Stock (the “Amendment Agreement”), in which the Series A Holders agreed to (i) waive their rights to enforce the anti-dilution and redemption features of the Series A Preferred Stock and (ii) at the next annual stockholder meeting, vote to amend the Certificate of Designation for the Series A Preferred Stock to remove the anti-dilution and redemption features of the Series A Preferred Stock. In exchange, we issued shares of common stock to the Series A Holders having an aggregate market value of $0.3 million. Our stockholders approved the amendments to the Certificate of Designation for the Series A Preferred Stock at the 2012 Annual Meeting of Stockholders held on May 23, 2012, and we filed the Certificate of Designation for the Series A Preferred Stock with the Delaware Secretary of State on May 25, 2012.

As a result of the Amendment Agreement, the value of the Series A Preferred Stock and Series A Warrants, including the Series A Preferred Stock conversion feature and Series A Warrant liability, were reclassified into stockholders' equity as of the date of the Amendment Agreement.

Expense on Preferred Stock.

For 2011, we recorded expense associated with the Series A Preferred Stock and Series A Warrants of $6.1 million, which is due to the change in fair value of the Series A Preferred Stock conversion feature and Series A Warrant liability of $5.8 million and the issuance of $0.3 million in common stock to the investors of Series A Preferred Stock. The expense associated with the change in value of the Series A Preferred Stock conversion feature is a non-cash item. There was no expense on preferred stock in 2013 or 2012.

Stock Based Compensation.

All stock-based awards to date have exercise prices equal to the market price of our common stock on the date of grant and have ten-year contractual terms. Unvested options as of December 31, 2013 had vesting periods of one or three years from date of grant. None of the stock options outstanding at December 31, 2013 are subject to performance or market-based vesting conditions.

We measure and recognize compensation expense for all stock-based awards made to employees and directors, including stock options. Compensation expense is based on the calculated fair value of the awards as measured at the grant date and is expensed over the service period of the awards.

Income Taxes.

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities at each balance sheet date using tax rates expected to be in effect in the year the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent that it is more likely than not that they will not be

42

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

realized. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations.

Net Sales Recognition.

Revenue is realized and earned when all of the following criteria are met:

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

• The seller’s price to the buyer is fixed or determinable; and

• Collectability is reasonably assured.

In Laboratory Services, net sales from Patient Testing labs are recognized on an individual test basis and take place when the test report is completed, reviewed and sent to the client less the reserve for insurance, Medicare and Medicaid contractual adjustments. There are no deferred net sales associated with our Patient Testing services. Adjustments to the allowances, based on actual receipts from third party payers, are reflected in the estimated contractual allowance applied prospectively. In our Biomarker Identification labs, we perform services on a project by project basis. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year. At December 31, 2013 and 2012, deferred net sales associated with pharmacogenomics research projects, included in the balance sheet in deferred revenue, was $0.2 million and $0.2 million, respectively.

Net sales of Genetic Assays and Platforms products are recognized in accordance with the terms of the sales arrangement. Such recognition is based on receipt of an unconditional customer order and transfer of title and risk of ownership to the customer, typically upon shipment of the product under a purchase order. Our sales terms do not provide for the right of return unless the product is damaged or defective. Net sales from certain services associated with the analytical instruments, to be performed subsequent to shipment of the products, is deferred and recognized when the services are provided. Such services, mainly limited to installation and training services that are not essential to the functionality of the instruments, typically are performed in a timely manner subsequent to shipment of the instrument. We also enter into various service contracts that cover installed instruments. These contracts cover specific time periods and net sales associated with these contracts are deferred and recognized ratably over the service period. At December 31, 2013 and 2012, deferred net sales, mainly associated with our service contracts, included in the balance sheet in deferred revenue was approximately $0.9 million and $1.0 million, respectively.

Taxes collected from customers and remitted to government agencies for specific net sales producing transactions are recorded net with no effect on the income statement.

Research and Development.

Research and development and various collaboration costs are charged to expense when incurred.

Translation of Foreign Currency.

Our foreign subsidiary uses the local currency of the country in which it is located as its functional currency. Its assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. A translation loss of 0.1 million is reported in other comprehensive income on the accompanying consolidated balance sheet as of December 31, 2013. A translation gain of $0.1 million was reported in other comprehensive income on the accompanying consolidated balance sheet as of December 31, 2012. Revenues and expenses are translated at the average rates during the period. For transactions that are not denominated in the functional currency, we recognized foreign currency translation income of less than $0.1 million for the year ended December 31, 2013 and foreign currency translation loss of less than $0.1 million for each of the years ended December 31, 2012 and 2011.

Other Income.

Other income in the year ended December 31, 2011 includes an award of a federal grant under the Qualifying Therapeutic Discovery Project related to COLD-PCR, Surveyor Scan kit development for detecting key cancer pathway gene mutations and mtDNA damage assays. Income related to this federal grant net of consulting fees was $0.2 million. There was no such other income in the years ended December 31, 2013 and 2012.

Comprehensive Income.

43

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

Accumulated other comprehensive income at December 31, 2013, 2012 and 2011 consisted of foreign currency translation adjustments, net of applicable tax of zero. During 2011, we reclassified $1.3 million from accumulated other comprehensive income (loss) to accumulated deficit with no effect on total stockholders' equity or net loss.

Earnings Per Share.

Basic earnings per share is calculated based on the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share include shares issuable upon exercise of outstanding stock options, warrants or conversion rights that have exercise or conversion prices below the market value of our common stock, as long as the effect is not anti-dilutive. Options, warrants and conversion rights pertaining to 3,785,709, 2,471,670 and 1,470,689 shares of our common stock have been excluded from the computation of diluted earnings per share at December 31, 2013, 2012 and 2011, respectively. The options, warrants and conversion rights that were exercisable in 2013, 2012 and 2011 were not included because the effect would be anti-dilutive due to the net loss.

Recently Issued Accounting Pronouncements.

In February 2013, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. The amendments in the Update do not change the current requirements for reporting net income or other comprehensive income in financial statements. The new amendments will require an organization to present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income if the item reclassified is required under generally accepted accounting principles in the U.S. (“U.S. GAAP”) to be reclassified to net income in its entirety in the same reporting period. Additionally, for other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP to provide additional detail about those amounts. For public companies, the amendments were effective for reporting periods beginning after December 15, 2012. Our adoption of this guidance did not have a material impact on our consolidated financial statements.

In February 2013 FASB issued ASU No. 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). ASU 2013-04 requires reporting and disclosure of obligations resulting from joint and several liability arrangements within the scope of Subtopic 405-40 for which the total amount of the obligation is fixed at the reporting date. For public companies, ASU 2013-04 is effective for fiscal years and interim periods within those years beginning after December 15, 2013. The guidance in ASU 2013-04 is to be applied retrospectively for those obligations resulting from joint and several liability arrangements within the scope of Subtopic 405-40 that exist at the beginning of an entity’s fiscal year of adoption. Earlier application is permitted. When adopted, ASU 2013-04 is not expected to materially impact our consolidated financial statements.

In March 2013, the FASB released ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force)(“ASU 2013-05”). ASU 2013-05 provides that, when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. The provisions of ASU 2013-05 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. When adopted, ASU 2013-05 is not expected to materially impact our consolidated financial statements.

In July 2013, the FASB issued Accounting Standards Update, or ASU, No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with an option for early adoption. The Company intends to adopt this guidance at the beginning of our first quarter of fiscal year 2014, and does not expect the adoption of this standard will have a material impact on its financial statements.

3.    INVENTORIES

Inventories (net of allowance for slow moving and obsolescence) consisted of the following:

44

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

	Dollars in Thousands
	December 31, 2013			December 31, 2012
Finished goods	$	2,978		$	4,057
Raw materials and work in process	1,567			1,547
Demonstration inventory	211			104
	$	4,756		$	5,708
Less allowances	(799		)	(616		)
Total	$	3,957		$	5,092

4.    INTANGIBLE ASSETS AND OTHER ASSETS

Long-lived intangible assets and other assets consisted of the following:

	Dollars in Thousands
	December 31, 2013						December 31, 2012
	Cost		Accumulated Amortization		Net Book Value		Cost		Accumulated Amortization		Net Book Value
Acquired technology	$	9,009	$	3,175	$	5,834	$	9,009	$	1,910	$	7,099
Assay royalties	1,434		614		820		1,434		410		1,024
Third party payor relationships	367		73		294		367		49		318
Tradenames and trademarks	824		233		591		824		115		709
Customer relationships	652		54		598		652		11		641
Covenants not to compete	184		77		107		184		15		169
Patents	1,153		336		817		929		280		649
Intellectual property	170		36		134		170		15		155
	$	13,793	$	4,598	$	9,195	$	13,569	$	2,805	$	10,764

	Estimated Useful Life
Acquired technology	7 – 10 years
Assay royalties	7 years
Third party payor relationships	15 years
Tradenames and trademarks	7 years
Customer relationships	15 years
Covenants not to compete	3 years
Patents	Life of the patent
Intellectual property	7 years

Amortization expense for intangible assets was $1.9 million, $1.4 million and less than $1.3 million during the years ended December 31, 2013, 2012 and 2011. At December 31, 2013, the Company revised its estimate of useful lives on certain intangible assets which will cause amortization expense in 2014 to be $0.4 million lower. Amortization expense for intangible assets for each of the five succeeding fiscal years is expected to be $1.4 million, $1.3 million, $1.3 million, $1.3 million and 1.0 million for the years ended December 31, 2014, 2015, 2016, 2017 and 2018, respectively.

Other assets include U.S. security deposits and deferred tax assets, net of applicable valuation allowances.

45

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

5.         DEBT

	Dollars in Thousands
	Year Ended December 31,
	2013			2012
Revolving Line (1)	$	2,560		$	—
Term Loan (2)	4,000			—
PGxHealth note payable (the “First Note”) (3)	—			6,171
Total debt	6,560			6,171
Current portion of long term debt	(242		)	(6,171		)
Long term debt, net of current maturities	$	6,318		$	—

On March 13, 2013 (the “Effective Date”), we entered into a Loan and Security Agreement with affiliates of Third Security, LLC (the “Lenders”) for (a) a revolving line of credit (the “Revolving Line”) with borrowing availability of up to $4.0 million, subject to reduction based on our eligible accounts receivable, and (b) a term loan (the “Term Loan”) of $4.0 million (the “Loan Agreement”). Proceeds were used to pay off the First Note and for general corporate and working capital purposes.

On August 2, 2013, we entered into an amendment to the Loan Agreement (the “Amendment”). The Amendment, which became effective as of June 30, 2013, reduces our future minimum revenue covenants under the Loan Agreement and modifies the interest rates applicable to the amounts advanced under the Revolving Line.

On November 14, 2013, we entered into a second amendment to the Loan Agreement (the “Second Amendment”). The Second Amendment, which is effective as of October 31, 2013, reduces our future minimum revenue covenant under the Loan Agreement.

On January 27, 2014, we entered into a third amendment to the Loan Agreement (the “Third Amendment”). Pursuant to the Third Amendment, the Lenders agreed to waive certain events of default under the Loan Agreement, and the parties amended certain provisions of the Loan Agreement, including the minimum liquidity ratio that we must maintain during the term of the Loan Agreement.

On March 3, 2014, we entered into a fourth amendment to the Loan Agreement (the “Fourth Amendment”). The Fourth Amendment provides that we will not be required to make any principal or interest payments under the Term Loan for the period from March 1, 2014 through March 31, 2015. Accordingly, pursuant to the Loan Agreement as amended by the Fourth Amendment, the next principal and interest payment under the Term Loan will be due on April 1, 2015.

(1) Revolving Line of Credit.Amounts advanced under the Revolving Line bear interest at an annual rate equal to the greater of (a) 4.25% or (b) the Wall Street Journal prime rate plus 1%. Interest is payable on a monthly basis, with the balance payable at the maturity of the Revolving Line. Under the Amendment, amounts advanced under the Revolving Line bear interest at an annual rate equal to the greater of (x) 6.25% or (y) the Wall Street Journal prime rate plus 3%. The current interest rate is 6.25%. Under the Loan Agreement, we paid the Lenders an upfront fee of $20,000, and will pay the Lenders an additional commitment fee of $20,000 on each one year anniversary of the Effective Date during the term of the Revolving Line. In addition, a fee of 0.5% per annum is payable quarterly on the unused portion of the Revolving Line. The Revolving Line matures on September 1, 2016.

(2) Term Loan. We received $4.0 million under the Term Loan on the Effective Date. Pursuant to the terms of the Loan Agreement, as amended by the Fourth Amendment, we are required to make monthly payments of interest to the Lenders commencing on April 1, 2015. The current interest rate is 9.1%.

We paid the Lenders an upfront fee of $40,000 for the Term Loan, and will pay the Lenders an additional final payment of $120,000 at maturity or prepayment of the Term Loan. In addition, if we repay the Term Loan prior to maturity, we will pay the Lenders a prepayment penalty of 5% of the total outstanding balance under the Term Loan if the prepayment occurs within one year after the Effective Date, 2.5% of the total outstanding balance under the Term Loan if the prepayment occurs between one and two years after the Effective Date, and 1% of the total outstanding balance under the Term Loan if the prepayment occurs thereafter.

46

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

Additional Terms

The Loan Agreement contains affirmative and negative covenants. Under the Term Loan, we are required to maintain a minimum liquidity ratio and achieve a minimum amount of revenue, and we also agreed not to (i) pledge or otherwise encumber our assets other than to the Lenders, (ii) enter into additional borrowings or guarantees, (iii) repurchase our capital stock, or (iv) enter into certain mergers or acquisitions without the Lenders' consent. Additionally, the Loan Agreement contains a subjective acceleration clause at the discretion of the Lenders. As of December 31, 2013, the Company was in compliance with the minimum revenue covenant. The Company was not in compliance with the minimum liquidity ratio. Pursuant to the Third Amendment, the Lenders agreed to waive the event of default.

To secure the repayment of any amounts borrowed under the Revolving Line and the Term Loan, we granted the Lenders a security interest in all of our assets. The occurrence of an event of default under the Loan Agreement could result in the acceleration of our obligations under the Loan Agreement and would increase the applicable interest rate under the Revolving Line or Term Loan (or both) by 5%, and permit the Lenders to exercise remedies with respect to the collateral under the Loan Agreement.

(3) First Note. The First Note was a three year senior secured promissory note payable to PGxHealth, LLC which was entered into on December 29, 2010 in conjunction with our acquisition of the FAMILION family of genetic tests. Interest was payable at 10% per year with quarterly interest payments through March 29, 2012. Thereafter, quarterly installments included both principal and interest through December 30, 2013. The First Note was paid in full on March 13, 2013.

The aggregate minimum principal maturities of the debt for the following fiscal years are as follows (dollars in thousands):

2014	$	242
2015	1,879
2016	4,439
	$	6,560

6.    CAPITAL LEASES

The following is an analysis of the property acquired under capital leases.

	Dollars in Thousands
	Asset Balances at
Classes of Property	December 31, 2013			December 31, 2012
Equipment	$	1,514		$	1,323
Less: Accumulated amortization	(721		)	(420		)
Total	$	793		$	903

The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2013.

Year ending December 31:

47

	Dollars in Thousands
2014	$	160
2015	37
2016	3
2017	1
Total minimum lease payments	$	201
Less: Amount representing interest	(17		)
Present value of net minimum lease payments	$	184

The short term portion of our capital leases is included in accrued expenses and the long term portion is included in other long-term liabilities on the Balance Sheet. Included in depreciation for the years ended December 31, 2013, 2012 and 2011 was $0.3 million, $0.3 million and less than $0.2 million, respectively, related to equipment acquired under capital leases.

7.    COMMITMENTS AND CONTINGENCIES

We are subject to a number of claims of various amounts, which arise out of the normal course of business. In the opinion of management, the disposition of pending claims will not have a material adverse effect on our financial position, results of operations or cash flows.

Rent expense under all operating leases, was $1.0 million, $1.0 million and $0.9 million in 2013, 2012 and 2011, respectively. We lease certain equipment, vehicles and operating facilities under non-cancellable operating leases , some of which have escalation clauses that expire on various dates through 2022. Future minimum lease payments under non-cancellable operating leases are as follows (in thousands):

2014	$	1,097
2015	1,013
2016	880
2017	763
2018	485
thereafter	862
	$	5,100

At December 31, 2013, firm commitments to vendors totaled $0.9 million.

48

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

8.    INCOME TAXES

The Company’s provision for income taxes for the years ended December 31, 2013, 2012 and 2011 relates to income taxes in states, foreign countries and other local jurisdictions and differs from the amounts determined by applying the statutory Federal income tax rate to loss before income taxes for the following reasons:

	Dollars in Thousands
	2013			2012			2011
Benefit at federal rate	$	(5,454	)	$	(2,781	)	$	(3,311	)
Increase (decrease) resulting from:
State income taxes—net of federal benefit	(518		)	2			2
Foreign subsidiary tax rate difference	(3		)	(27		)	(94		)
Tax contingency	23			22			28
Expiring net operating loss carryforwards	—			1,472			988
Earnings repatriation	—			582			—
Miscellaneous permanent differences	155			284			332
Liability warrants	(102		)	(748		)	2,062
Tax credits	—			215			—
State, net operating loss expiration/true-up	1,179			—			—
Other—net	(80		)	15			(53		)
Valuation allowance	4,746			1,110			91
Total income tax (benefit) expense	$	(54	)	$	146		$	45

	Dollars in Thousands
	2013			2012		2011
Federal:
Current	$	—		$	—	$	16
Deferred	—			—		—
Total Federal	$	—		$	—	$	16
State:
Current	$	—		$	3	$	3
Deferred	—			—		—
Total State	$	—		$	3	$	3
Foreign:
Current	$	20		$	46	$	159
Deferred	(74		)	97		(133		)
Total Foreign	$	(54	)	$	143	$	26
Total Tax Provision	$	(54	)	$	146	$	45

The Company’s deferred income tax asset at December 31, 2013 and 2012 is comprised of the following temporary differences:

49

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

	Dollars in Thousands
	2013			2012
Deferred Tax Asset:
Net operating loss carryforward	$	42,950		$	39,481
Research and development credit carryforwards	951			1,017
Deferred revenue	174			188
Inventory	275			224
Other	1,997			1,111
	46,347			42,021
Less valuation allowance	(46,088		)	(41,342		)
Deferred Tax Asset	$	259		$	679
Deferred Tax Liability:
Foreign earnings	$	25		$	398
Property and equipment	186			300
Deferred Tax Liability	$	211		$	698
Net Deferred Asset (Liability)	$	48		$	(19	)

At December 31, 2013, we had total unused federal tax net operating loss carryforwards of $121.7 million. The expiration dates are as follows (amounts in thousands):

2018	$	1,838
2019	8,181
2020	9,662
2021	8,228
2022	16,862
2023	16,173
2024	17,390
2025	8,153
2026	6,792
2027	3,238
2028	1,272
2029	591
2031	2,784
2032	8,358
2033	12,137
	$	121,659

Of these federal net operating loss carryforwards, $1.2 million were obtained in the acquisition of Annovis, Inc. and may be subject to certain restrictions. Remaining net operating loss carryforwards could be subject to limitations under section 382 of the Internal Revenue Code. At December 31, 2013, we had unused state tax net operating loss carryforwards of approximately $33.0 million that expire at various times beginning in 2014. At December 31, 2013, we had unused research and development credit carry-forwards of $1.0 million that expire at various times between 2014 and 2024. A valuation allowance has been provided for the remaining deferred tax assets, due to the cumulative losses in recent years and an inability to utilize any additional losses as carrybacks. We will continue to assess the recoverability of deferred tax assets and the related valuation allowance. To the extent we begin to generate income in future years and it is determined that such valuation allowance is no longer required, the tax benefit of the remaining deferred tax assets will be recognized at such time.

Our liability for uncertain certain tax positions, which was included in other long term liabilities, was $0.3 million as of December 31, 2013 and 2012.  We recorded less than $0.1 million of additional uncertain tax positions during each of the years

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

ended 2013 and 2012. We had no material interest or penalties during fiscal 2013 or fiscal 2012, and we do not anticipate any such items during the next twelve months. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations. We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. We have statutes of limitation open for Federal income tax returns related to tax years 2010 through 2013. We have state income tax returns subject to examination primarily for tax years 2010 through 2013. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period. Open tax years related to foreign jurisdictions remain subject to examination. Our primary foreign jurisdiction is the United Kingdom, which has open tax years for 2010 through 2013.

9.        EMPLOYEE BENEFIT PLAN

We maintain an employee 401(k) retirement savings plan that allows for voluntary contributions into designated investment funds by eligible employees. Effective October 1, 2010, Transgenomic discontinued matching employee 401(k) contributions. Beginning January 1, 2012, we reinstated matching employee 401(k) contributions. We currently match the employee's contributions at the rate of 100% on the first 3% of contributions and 50% on the next 2% of contributions. We may, at the discretion of our Board of Directors, make additional contributions on behalf of the Plan’s participants. Contributions to the 401(k) plan were $0.4 million, $0.3 million and zero for the years ended December 31, 2013, 2012 and 2011, respectively.

10.    STOCKHOLDERS’ EQUITY

Common Stock.

Pursuant to our Third Amended and Restated Certificate of Incorporation as amended, we currently have 150,000,000 shares of common stock authorized for issuance.

On February 2, 2012 we entered into definitive agreements with institutional and other accredited investors and raised approximately $22.0 million in a private placement financing (the “Private Placement”), which includes an aggregate of $3.0 million in convertible notes (the “Convertible Notes”) issued in December 2011 to entities affiliated with Third Security, LLC (the “Third Security Investors”), a related party, that automatically convert into shares of our common stock and warrants to purchase such common stock on the same terms as all investors in the Private Placement. Pursuant to the applicable purchase agreement, we issued an aggregate of 1,583,333 shares of our common stock at a price per share of $12.00, as well as five-year warrants to purchase up to an aggregate of 823,333 shares of common stock with an exercise price of $15.00 per share. In connection with the conversion of the Convertible Notes, the Third Security Investors received an aggregate of 250,000 shares of common stock and 125,000 warrants on the same terms as all investors in the Private Placement. Craig-Hallum Capital Group LLC served as the sole placement agent for the offering. In consideration for services rendered as the placement agent in the offering, we agreed to (i) pay to the placement agent cash commissions equal to $1,330,000, or 7.0% of the gross proceeds received in the offering, (ii) issue to the placement agent a five-year warrant to purchase up to 31,666 shares of our common stock (representing 2% of the shares sold in the Private Placement) with an exercise price of $15.00 per share and other terms that are the same as the terms of the warrants issued in the Private Placement; and (iii) reimburse the placement agent for reasonable out-of-pocket expenses, including fees paid to the placement agent’s legal counsel, incurred in connection with the offering, which reimbursable expenses shall not exceed $125,000. The costs incurred to complete the Private Placement were recorded as a reduction in equity in the amount of $1.5 million. Net proceeds from this offering have been used for general corporate and working capital purposes, primarily to accelerate development of several of our key initiatives.

On January 24, 2013, we entered into a Securities Purchase Agreement with certain institutional and other accredited investors pursuant to which we: (i) sold to the investors an aggregate of 1,383,333 shares of our common stock at a price per share of $6.00 for aggregate gross proceeds of approximately $8.3 million; and (ii) issued to the investors warrants to purchase up to an aggregate of 691,656 shares of our common stock with an exercise price of $9.00 per share (the “Offering”). The warrants may be exercised, in whole or in part, at any time from January 30, 2013 until January 30, 2018 and contain both cash and “cashless exercise” features. The Third Security Investors purchased an aggregate of 500,000 shares of common stock and warrants to purchase an aggregate of 250,000 shares of common stock in the Offering on the same terms as the other investors. We are using the net proceeds from the Offering for general corporate and working capital purposes, primarily to accelerate development of several of our key initiatives.

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

In connection with the Offering, we entered into a registration rights agreement with the investors (the “Registration Rights Agreement”). The Registration Rights Agreement required that we file with the SEC a registration statement to register for resale the shares of common stock sold and the shares of common stock issuable upon exercise of the warrants by March 16, 2013. The registration statement was filed with the SEC on March 15, 2013 and was declared effective by the SEC on March 29, 2013.

The above common stock transaction required the repricing and issuance of additional common stock warrants to the holders of warrants issued in the February 2012 common stock and warrant sale. The exercise price of the warrants decreased from $15.00 per share to $12.96 per share and the number of shares issuable upon exercise of the warrants increased from 948,333 to 1,097,600.

Common Stock Warrants.

There were 840,939 common stock warrants issued during the 12 months ended December 31, 2013 and none of the issued warrants were exercised. Included in the warrants issued in 2013 were 149,272 warrants issued due to re-pricing requirements of the Private Placement. Common stock warrants issued during the 12 months ended December 31, 2012 were 948,333 and none of the issued warrants were exercised. Warrants to purchase an aggregate of 2,220,281 shares of common stock were outstanding at December 31, 2013.

Warrant Holder	Issue Year	Expiration	Underlying Shares	Exercise Price
Third Security Investors(1)	2010	December 2015	431,025	$6.96
Various Institutional Holders(2)	2012	February 2017	952,925	$12.96
Third Security Investors(2)	2012	February 2017	144,675	$12.96
Various Institutional Holders(3)	2013	January 2018	441,656	$9.00
Third Security Investors(3)	2013	January 2018	250,000	$9.00
			2,220,281

(1) This Warrant was issued in connection with the issuance of warrants to purchase shares of our Series A Preferred Stock to the Third Security Investors in December 2010. The number of underlying shares shown reflects the number of shares of common stock issuable upon conversion of the shares of Series A Preferred Stock for which this Warrant is currently exercisable.

(2) These Warrants were issued in connection with the Private Placement completed in February 2012 and are classified as a liability in our financial statements. See Footnote 12 - Fair Value. These warrants also contain certain anti-dilution provisions that provide for an adjustment to the exercise price and number of shares issuable upon exercise of the warrant in the event that we engage in certain issuances of shares of our common stock at a price lower than the exercise price of the warrant.

(3) These warrants were issued in connection with the offering, which was completed in January 2013.

Preferred Stock.

The Company’s Board of Directors is authorized to issue up to 15,000,000 shares of preferred stock in one or more series, from time to time, with such designations, powers, preferences and rights and such qualifications, limitations and restrictions as may be provided in a resolution or resolutions adopted by the Board of Directors. The authority of the Board of Directors includes, but is not limited to, the determination or fixing of the following with respect to shares of such class or any series thereof: (i) the number of shares; (ii) the dividend rate, whether dividends shall be cumulative and, if so, from which date; (iii) whether shares are to be redeemable and, if so, the terms and amount of any sinking fund providing for the purchase or redemption of such shares; (iv) whether shares shall be convertible and, if so, the terms and provisions thereof; (v) what restrictions are to apply, if any, on the issue or reissue of any additional preferred stock; and (vi) whether shares have voting rights. The preferred stock may be issued with a preference over the common stock as to the payment of dividends. We have no current plans to issue any additional preferred stock. Classes of stock such as the preferred stock may be used, in certain circumstances, to create voting impediments on extraordinary corporate transactions or to frustrate persons seeking to effect a merger or otherwise to gain control of the Company. For the foregoing reasons, any additional preferred stock issued by the Company could have an adverse effect on the rights of the holders of the common stock.

On December 29, 2010, we entered into a transaction with the Third Security Investors, pursuant to the terms of Series A Convertible Preferred Stock Purchase Agreement (the “Series A Purchase Agreement”), in which we: (i) sold an aggregate of

52

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

2,586,205 shares of Series A Preferred Stock at a price of $2.32 per share; and (ii) issued Series A Warrants to purchase up to an aggregate of 1,293,102 shares of Series A Preferred Stock having an exercise price of $2.32 per share (the sale of Series A Preferred Stock and issuance of the Series A Warrants hereafter referred to together as the “Financing”). The Series A Warrants may be exercised at any time from December 29, 2010 until December 28, 2015 and contain a “cashless exercise” feature. The gross proceeds from the Series A financing were $6.0 million. The $0.2 million of costs incurred to complete the Series A financing were recorded as a reduction in the value of the Series A Preferred Stock. We used the net proceeds from the financing to acquire the FAMILION family of genetic tests from PGxHealth, a subsidiary of Clinical Data, Inc. Until the November 2011 modifications, the Series A Preferred Stock met the definition of mandatorily redeemable stock as it was preferred capital stock that was redeemable at the option of the holder through December 2015 and was reported outside of equity. The Series A Preferred Stock was to be accreted to its redemption value of $6.0 million. Until the November 2011 modifications, the Series A Warrants did not qualify to be treated as equity and, accordingly, were recorded as a liability. A preferred stock anti-dilution feature is embedded within the Series A Preferred Stock that met the definition of a derivative.

In connection with the Series A financing, we filed a Certificate of Designation of Series A Convertible Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of the State of Delaware, designating 3,879,307 shares of our preferred stock as Series A Preferred Stock. As of December 31, 2013, the Series A Preferred Stock, including the Series A Preferred Stock issuable upon exercise of the Series A Warrants, was convertible into shares of our common stock at a rate of 4-for-1, which conversion rate is subject to further adjustment as set forth in the Series A Certificate of Designation. Giving effect to the reverse split of our stock in January 2014, the conversion rate was adjusted to 1-for-3. Certain rights of the holders of the Series A Preferred Stock are senior to the rights of the holders of our common stock. The Series A Preferred Stock has a liquidation preference equal to its original price per share, plus any accrued and unpaid dividends thereon. The holders of the Series A Preferred Stock are entitled to receive quarterly dividends, which accrue at the rate of 10% of the original price per share per annum, whether or not declared, and which shall compound annually and shall be cumulative. In any calendar quarter in which we have positive distributable cash flow as defined in the Series A Purchase Agreement, we are required to pay from funds legally available a cash dividend in the amount equal to the lesser of 50% of such distributable cash flow or the aggregate amount of dividends accrued on the Series A Preferred Stock. During the years ended December 31, 2013 and 2012, we recorded $0.7 million and $0.6 million in accrued dividends, respectively.

Generally, the holders of the Series A Preferred Stock are entitled to vote together with the holders of common stock, as a single group, on an as-converted basis. However, the Series A Certificate of Designation provides that we shall not perform some activities, subject to certain exceptions, without the affirmative vote of a majority of the holders of the outstanding shares of Series A Preferred Stock. The holders of the Series A Preferred Stock, along with the holders of the Series B Preferred Stock, also are entitled to elect or appoint, as a single group, two directors of the Company.

In connection with the Series A financing, we also entered into a registration rights agreement with the Third Security Investors (the “Registration Rights Agreement”). Pursuant to the terms of the Registration Rights Agreement, the Company has granted certain demand, “piggyback” and S-3 registration rights covering the resale of the shares of common stock underlying the Series A Preferred Stock issued pursuant to the Series A Purchase Agreement and issuable upon exercise of the Series A Warrants and all shares of common stock issuable upon any dividend or other distribution with respect thereto.

In November 2011, we entered into a transaction with the Third Security Investors, pursuant to an Agreement Regarding Preferred Stock (the “Amendment Agreement”), in which the Third Security Investors agreed to (i) waive their rights to enforce the anti-dilution and redemption features of the Series A Preferred Stock and (ii) at the next annual stockholders' meeting, vote to amend the Series A Certificate of Designation to remove the anti-dilution and redemption features of the Series A Preferred Stock. In exchange, the Company issued shares of common stock to the Third Security Investors having an aggregate market value of $0.3 million.

As a result of the Amendment Agreement, the values of the Series A Preferred Stock and Series A Warrants, including the Series A Preferred Stock conversion feature and Series A Warrant liability, were reclassified into stockholders' equity as of the date of the Amendment Agreement.

11.         EQUITY INCENTIVE PLAN

The Company’s 2006 Equity Incentive Plan (the “Plan”) allows the Company to make awards of various types of equity-based compensation, including stock options, dividend equivalent rights (“DERs”), stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance units, performance shares and other awards, to employees and directors of the Company. As of December 31, 2013, the Company was authorized to issue 833,333 shares under the Plan; provided, that no more than

53

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

416,667 of such shares may be used for grants of restricted stock, restricted stock units, performance units, performance shares and other awards.

The Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”), which has the authority to set the number, exercise price, term and vesting provisions of the awards granted under the Plan, subject to the terms thereof. Either incentive or non-qualified stock options may be granted to employees of the Company, but only non-qualified stock options may be granted to non-employee directors and advisors. However, in either case, the Plan requires that stock options must be granted at exercise prices not less than the fair market value of the common stock on the date of the grant. Options issued under the plan vest over periods as determined by the Committee and expire 10 years after the date the option was granted. To date, the only awards made under the Plan have been non-incentive stock options.

For the year ended December 31, 2013, 2012 and 2011, we recorded compensation expense of $0.5 million, $0.7 million and $1.0 million, respectively within selling, general and administrative expense. As of December 31, 2013, there was $1.4 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of approximately three years.

The fair value of the options and SARs granted during 2013 was estimated on their respective grant dates using the Black-Scholes option pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 0.73% to 1.75%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of four to five years, based on historical exercise activity; and volatility of 105% to 106% for grants made during the year ended December 31, 2013 based on the historical volatility of our stock over a time that is consistent with the expected life of the option. A small group of senior executives hold the majority of the stock options granted in 2013 and are expected to hold the options until they are vested. Forfeitures of 2% to 4% have been assumed in the calculation.

The fair value of the options granted during 2012 was estimated on their respective grant dates using the Black-Scholes option-pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 0.62% to 1.03%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of five to eight years, based on historical exercise activity; and volatility of 101% to 114% for grants made during the year ended December 31, 2012 based on the historical volatility of our stock over a time that is consistent with the expected life of the option. Forfeitures of 2% to 4% have been assumed in the calculation.

The fair value of the options granted during 2011 was estimated on their respective grant dates using the Black-Scholes option-pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 0.92% to 2.16%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of five years, based on historical exercise activity; and volatility of 105% to 107% for grants made during the year ended December 31, 2011 based on the historical volatility of our stock over a time that is consistent with the expected life of the option. Forfeitures of 1% to 4% have been assumed in the calculation.

The weighted average grant date fair value per share of options granted during the years ended December 31, 2013, 2012 and 2011 was $3.72, $9.72 and $9.96 respectively.

Stock Options.

The following table summarizes stock option activity under the Plan during the year ended December 31, 2013:

	Number of Options		Weighted Average Exercise Price
Balance at January 1, 2013:	362,764		$	12.60
Granted	421,667		4.56
Forfeited	(80,889	)	(9.48		)
Expired	(138,514	)	(12.48		)
Balance at December 31, 2013:	565,028		$	6.60
Exercisable at December 31, 2013	153,793		$	12.72

All stock options outstanding were issued to employees, officers or outside directors.

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

As of December 31, 2013, 565,028 outstanding options were expected to vest. The weighted average exercise price of these options was $6.60 and the aggregate intrinsic value was $0.5 million with a remaining weighted average contractual life of 8.7 years.

As of December 31, 2013, 153,793 options were exercisable with a weighted average exercise price of $12.72 and an aggregate intrinsic value of less than $10 thousand. The weighted average contractual life of these options was 6.2 years.

No options were exercised in 2013. During 2012 and 2011, 1,667 and 2,500 shares were exercised, respectively, with an intrinsic value of less than $10,000.

The total fair value of shares that vested during 2013, 2012 and 2011 was $0.6 million, $0.6 million and $0.3 million, respectively.

Stock Appreciation Rights (“SARs”).

The following table summarizes SARs activity under the Plan during the year ended December 31, 2013:

	Number of Options	Weighted Average Exercise Price
Balance at January 1, 2013:	—	$	—
Granted	138,333	4.32
Balance at December 31, 2013:	138,333	$	4.32
Exercisable at December 31, 2013	—	$	—

All SARs outstanding were issued to officers.

As of December 31, 2013, 138,333 outstanding SARs shares were expected to vest. The weighted average exercise price of these options was $4.32 and the aggregate intrinsic value was $0.4 million with a remaining weighted average contractual life of 4.5 years.

As of December 31, 2013, zero SARs shares were exercisable and no SARs shares were exercised in 2013, 2012 and 2011. At December 31, 2013, a liability of $0.1 million was recorded in accrued expenses.

12.    FAIR VALUE

FASB guidance on fair value measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements for our financial assets and liabilities, as well as for other assets and liabilities that are carried at fair value on a recurring basis in our consolidated financial statements.

FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2—Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets; and

Level 3—Unobservable inputs reflecting our own assumptions and best estimate of what inputs market participants would use in pricing the asset or liability.

Debt

Our long term debt is considered a Level 3 liability for which book value approximates fair market value due to the variable interest rate it bears.

Common Stock Warrant Liability

Certain of our issued and outstanding warrants to purchase common stock do not qualify to be treated as equity, and accordingly are recorded as a liability. The Common Stock Warrant Liability represents the fair value of the 0.9 million warrants

55

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

issued in February 2012. We are required to record these instruments at fair value at each reporting date and changes are recorded as a non-cash adjustment to earnings. The gains or losses included in earnings are reported in other income (expense) in our Statement of Operations. Management does not believe that this liability will be settled by a use of cash.

The Common Stock Warrant Liability is considered a Level 3 financial instrument and is valued using a Monte Carlo simulation. This method is well suited to value options with non-standard features, such as anti-dilution protection. A Monte Carlo simulation model uses repeated random sampling to simulate significant uncertainty in inputs. Assumptions and inputs used in the valuation of the common stock warrants are broken down into four sections: Static Business Inputs; Static Technical Inputs; Simulated Business Inputs; and Simulated Technical Inputs.

Static Business Inputs include: Our equity value, which was estimated using our stock price of $5.52 as of December 31, 2013; the amount of the down-round financing, the timing of the down-round financing, the expected exercise period of 3.11 years from the valuation date and the fact that no other potential fundamental transactions are expected during the term of the common stock warrants.

Static Technical Inputs include: volatility of 45% based on implied and historical rates over the expected term and the risk-free interest rate of 0.78% based on the 3 year U.S. Treasury yield interpolated from the 3 year and 5 year U.S. Treasury bonds.

Simulated Business Inputs include: the probability of down-round financing, which was estimated to be 45% for simulated equity values below the down-round financing cut-off point.

Simulated Technical Inputs include: our equity value in periods 1-10 follows a geometric Brownian motion and is simulated over 10 independent six-month periods; a down-round financing event was randomly simulated in an iteration based on the 45% discrete probability of a down-round financing for those iterations where our simulated equity value at the expected timing of down-round financing was below the down-round financing cut-off point.

During the year ended December 31, 2013, the changes in the fair value of the liability measured using significant unobservable inputs (Level 3) was comprised of the following:

	Dollars in Thousands
	For the Year Ended
	December 31, 2013
Balance at December 31, 2012	$	900
Total gains or losses:
Recognized in earnings	(300		)
Balance at December 31, 2013	$	600

Preferred Stock Warrant Liability and Conversion Feature

Prior to November 2011, we were required to record our 0.4 million of Series A Preferred Stock warrants and the Series A Preferred Stock's conversion feature at their respective fair values at each reporting date and changes were recorded as an adjustment to earnings. The gains or losses included in earnings were reported in other income (expense) in our Statement of Operations.

Due to a change in terms we are no longer required to recognize the Series A Preferred Stock warrant and Series A Preferred Stock conversion feature as liabilities. They were reclassified into stockholders' equity as of the date of the amended agreement.

The Series A Preferred Stock warrant liability and Series A Preferred Stock conversion feature were considered Level 3 financial instruments and were valued using the Black-Scholes call option pricing formula, which approximates a binomial model for the Series A Preferred Stock conversion feature. This method is among the most common and widely used valuation approaches for call options. The model relates an option's value to five variables: the current price of the underlying asset, the strike price of the option, the time to expiration or exercise of the option, a risk free interest rate, and the volatility of the underlying asset.

The following assumptions were used in the November 8, 2011 valuation of the Series A Preferred Stock conversion feature: the closing share price of our common stock on November 8, 2011 discounted 15% due to the lack of marketability and liquidity, an exercise price of $0.39, expected term of 4.00 years, risk-free interest rate of 0.65% based on a linear interpolation of 3 year and five year U.S. Treasury rates and volatility of 50%.

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

The following assumptions were used in the November 8, 2011 valuation of the Series A Preferred Stock warrants: an exercise price of $2.32, expected term of 1.0 years, risk-free interest rate of 0.25% based on a one year U.S. Treasury and volatility of 50%.

During the year ended December 31, 2011, the changes in the fair value of the liabilities measured using significant unobservable inputs (Level 3) were comprised of the following:

	Dollars in Thousands
	For the year ended
	December 31, 2011
	Preferred Stock Conversion Feature			Preferred Stock Warrant Liability			Total
Beginning balance at January 1, 2011	$	1,983		$	2,351		$	4,334
Total gains or losses:
Recognized in earnings	5,317			449			5,766
Balance at November 8, 2011	7,300			2,800			10,100
Reclassification to stockholders' equity due to Amendment Agreement	(7,300		)	(2,800		)	(10,100		)
Balance as of December 31, 2011	$	—		$	—		$	—

The change in unrealized gains or losses of Level 3 liabilities is included in earnings and is reported in other income (expense) in our Statement of Operations.

13.    SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

	In thousands except per share data
	March 31			June 30			September 30			December 31
2013
Net Sales	$	7,374		$	7,306		$	6,646		$	6,218
Gross Profit	3,681			3,410			2,851			2,554
Net Loss	(3,586		)	(2,867		)	(5,552		)	(3,982		)
Basic and diluted loss per common share	$	(0.54	)	$	(0.41	)	$	(0.78	)	$	(0.57	)
2012
Net Sales	$	7,206		$	9,093		$	7,889		$	7,292
Gross Profit	3,104			4,562			3,800			3,544
Net Income (Loss)	(2,696		)	(563		)	(2,754		)	(2,314		)
Basic and diluted loss per common share	$	(0.55	)	$	(0.12	)	$	(0.49	)	$	(0.42	)

14.    OPERATING SEGMENT AND GEOGRAPHIC INFORMATION

Our company’s chief operating decision-maker is the Chief Executive Officer, who regularly evaluates our performance based on net sales and gross profit. The preparation of this segment analysis requires management to make estimates and assumptions around expenses below the gross profit level. While we believe the segment information to be materially correct, actual results could differ from the estimates and assumptions used in preparing this information.

We have two reportable operating segments, Laboratory Services and Genetic Assays and Platforms. These lines of business are complementary with the Biomarker Identification labs driving innovation and leading to kit production in our Genetic Assays and Platforms segment and new tests in our Patient Testing labs.

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

The accounting policies of the segments are the same as the policies discussed in Footnote 2 – Summary of Significant Accounting Policies.

Segment information for the years ended December 31, 2013, 2012 and 2011 is as follows:

	Dollars in Thousands
	2013
	Laboratory Services			Genetic Assays and Platforms			Total
Net Sales	$	15,391		$	12,153		$	27,544
Gross Profit	6,820			5,676			12,496
Net Loss before Taxes	(12,486		)	(3,555		)	(16,041		)
Income Tax Expense	—			(54		)	(54		)
Net Loss	$	(12,486	)	$	(3,501	)	$	(15,987	)
Depreciation/Amortization	$	2,467		$	281		$	2,748
Interest Expense	(398		)	(244		)	(642		)
	December 31, 2013
Total Assets	$	21,711		$	8,567		$	30,278
Goodwill	6,918			—			6,918

	Dollars in Thousands
	2012
	Laboratory Services			Genetic Assays and Platforms			Total
Net Sales	$	19,329		$	12,151		$	31,480
Gross Profit	9,316			5,694			15,010
Net (Loss) before Taxes	(6,874		)	(1,307		)	(8,181		)
Income Tax Expense	—			146			146
Net (Loss)	$	(6,874	)	$	(1,453	)	$	(8,327	)
Depreciation/Amortization	$	1,960		$	318		$	2,278
Interest Expense	(851		)	(37		)	(888		)
	December 31, 2012
Total Assets	$	29,196		$	9,595		$	38,791
Goodwill	6,918			—			6,918

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

	Dollars in Thousands
	2011
	Laboratory Services			Genetic Assays and Platforms		Total
Net Sales	$	18,318		$	13,653	$	31,971
Gross Profit	10,528			7,909		18,437
Net Loss before Taxes	(11,370		)	1,633		(9,737		)
Income Tax Expense	—			45		45
Net Loss	$	(11,370	)	$	1,588	$	(9,782	)
Depreciation/Amortization	$	1,810		$	291	$	2,101
Restructure	29			12		41
Interest Expense	(958		)	—		(958		)
	December 31, 2011
Total Assets	$	23,668		$	9,894	$	33,562
Goodwill	6,440			—		6,440

Net sales for the year ended December 31, 2013, 2012 and 2011 by country were as follows:

	Dollars in Thousands
	Years Ended December 31,
	2013		2012		2011
United States	$	20,119	$	22,727	$	22,626
Italy	1,530		2,524		3,152
Germany	1,218		907		750
United Kingdom	748		1,703		778
France	681		679		758
All Other Countries	3,248		2,940		3,907
Total	$	27,544	$	31,480	$	31,971

No other country accounted for more than 5% of total net sales.

More than 99% of our long-lived assets are located within the United States. Substantially all of the remaining long-lived assets are located within Europe.

15.    ACQUISITIONS

ScoliScore^TM 

On September 21, 2012, we acquired certain intangible assets from Axial Biotech, Inc. ("Axial") related to the ScoliScore^TMassay. In consideration for the purchase of the intangible assets, we made a cash payment of approximately$3.4 millionto Axial and certain of its creditors. In addition, following the transfer of all of the assets related to the ScoliScore^TMassay and confirmation that the ScoliScore^TMassay operates, within our laboratories pursuant to protocol agreed upon by us and Axial, during the years ended December 31, 2012 and 2013 we paid an additional$0.2 million and $0.8 million, respectively, to Axial and certain of its creditors. The total consideration paid was$4.4 million. This acquisition provides us with the ScoliScore^TMassay technology and intellectual property, and an established revenue and customer base.

The following intangible assets were each valued separately using valuation approaches most appropriate for each specific asset.

59

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

Acquired technology	Relief from Royalty Method
Tradenames	Relief from Royalty Method
Customer relationships	Multi-Period Excess Earnings Method
Covenants not to compete	With and Without Method
Patents	Relief from Royalty Method

The Income Approach uses valuation techniques to convert future amounts, cash flows or earnings, to a single, discounted amount. The fair value measure is based on the value that is indicated by market expectations about the present value of those future amounts.

The Relief from Royalty Method assumes that if the Company did not have proprietary ownership of the genetic testing processes on which its revenues depend, it might elect to lease the rights or licenses from another company. The fair value is measured as the estimated discounted cash flows of the royalty payments avoided by ownership.

The Multi Period Excess Earnings Method measures the fair value as the estimated discounted cash flows of the existing customer relationships over a period during which revenues from existing customer relationships are assumed to have been substantially replaced by revenues from future customers.

The With and Without Method measures the fair value of the non-competition agreements as the probability adjusted difference between the estimated discounted cash flows with and without the effect of competition. The model that includes competition includes lost revenues as well as increased expenses required to rebuild the lost revenues.

The acquired intangibles have the following useful lives; acquired technology - 10 years; third party payor relationships - 15 years; assay royalties 7 years; tradenames and trademarks - 7 years.

The assets acquired were $3.9 million in identifiable intangible assets and $0.5 million in goodwill. No liabilities were assumed. The acquired assets are reported as a component of our laboratory services segment.

The goodwill arising from the acquisition has been assigned to our Laboratory Services segment and is expected to be deductible for tax purposes.

16.         RESTRUCTURING CHARGES

In the third quarter of 2010 we made a decision to consolidate our research and development activities in Omaha, Nebraska. We substantially completed the transition at December 31, 2010. We have recognized expenses for restructuring, including but not limited to, severance, facility costs and costs to move equipment from Gaithersburg, Maryland to Omaha, Nebraska. These restructuring charges are attributable to our Clinical Laboratories (now Laboratory services) and Diagnostic Tools (now Genetic Assays and Platforms) segments.

In the fourth quarter of 2010 we had a reduction in workforce of five employees with severance payments of less than $0.1 million which was attributable to our Diagnostic Tools (now Genetic Assays and Platforms) segment.

Restructuring charges include:

	Dollars in Thousands
	Costs Incurred in the year ended December 31, 2011		Cumulative Costs Incurred at December 31, 2011		Total Expected  Costs
Severance and related costs	$	—	$	53	$	53
Facility closure costs	28		74		74
Other	13		52		52
Restructuring charges	$	41	$	179	$	179

17.    SUBSEQUENT EVENTS

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

Amended Certificate of Incorporation and Reverse Stock Split

At a special meeting of stockholders of Transgenomic held on January 14, 2014 (the “Special Meeting”), the stockholders of the Company approved the authorization of the Board to, in its discretion, amend the Company’s Third Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to effect a reverse split of the Company’s common stock, par value $0.01 at a ratio of between one-for-four to one-for-twenty-five, with such ratio to be determined by the Board. On January 15, 2014, the Board determined to set the reverse stock split ratio at one-for-twelve (the “Reverse Stock Split”) and approved the final form of Certificate of Amendment to the Certificate of Incorporation to effectuate the Reverse Stock Split (the “Certificate of Amendment”). The Certificate of Amendment was filed with the Secretary of State of the State of Delaware on January 24, 2014, and the Reverse Stock Split became effective in accordance with the terms of the Certificate of Amendment at 5:00 p.m. Central Time on January 27, 2014 (the “Effective Time”).

At the Effective Time, every 12 shares of common stock issued and outstanding were automatically combined into one share of issued and outstanding common stock, without any change in the par value per share. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders who otherwise would be entitled to receive a fractional share in connection with the Reverse Stock Split received a cash payment in lieu thereof.

After giving effect to the Reverse Stock Split, the common stock and outstanding preferred stock have the same proportional voting rights and rights to dividends and distributions and are identical in all other respects to the rights of the common stock and preferred stock as of immediately prior to the Effective Time (with the conversion rate of the outstanding Series A Convertible Preferred Stock being proportionately reduced), except for immaterial changes and adjustments resulting from the treatment of fractional shares.

Increase in Shares Available for Issuance Pursuant to 2006 Equity Incentive Plan

At the Special Meeting, the stockholders of the Company approved amendments to the Plan to increase the number of shares of common stock that may be issued under the Plan by 833,333 shares and to provide for a corresponding increase in the limits on the number of incentive stock options and awards other than options or stock appreciation rights that may be granted under the Plan. The amendments to the Plan were conditioned upon the approval by the Company’s stockholders, and the effectiveness, of the Reverse Stock Split. Therefore, at the Effective Time, the total number of shares that the Company may issue under the Plan was increased to 1,666,667 shares; and the total number of such shares that may be used for grants of restricted stock, restricted stock units, performance units, performance shares and other awards was increased to no more than 1,250,000 shares.

Amended Loan and Security Agreement

On January 27, 2014, we entered into a third amendment to the Loan Agreement. Pursuant to the third amendment, the Lenders agreed to waive certain events of default under the Loan Agreement, and the parties amended certain provisions of the Loan Agreement, including the minimum liquidity ratio that we must maintain during the term of the Loan Agreement. On March 3, 2014, we entered into a fourth amendment to our Loan Agreement with the Lenders, which provides that we will not be required to make any principal or interest payments under the Term Loan for the period from March 1, 2014 through March 31, 2015. Accordingly, pursuant to the amended Loan Agreement, the next principal and interest payment under the Term Loan will be due on April 1, 2015.

Issuance of Series B Preferred Stock

On March 5, 2014, the Company entered into a Series B Convertible Preferred Stock Purchase Agreement (the “Series B Purchase Agreement”) with affiliates of Third Security (the “2014 Third Security Investors”), pursuant to which the Company, in a private placement, sold and issued an aggregate of 1,443,297 shares of the Company’s Series B Convertible Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), at a price per share of $4.85 for an aggregate purchase price of approximately $7,000,000. Each share of Series B Preferred Stock issued pursuant to the Series B Purchase Agreement is initially convertible into shares of the Company’s common stock at a rate of 1-for-1, which conversion rate is subject to further adjustment as set forth in the Certificate of Designation of Series B Convertible Preferred Stock.

In connection with the Series B financing, the Company also entered into a Registration Rights Agreement, dated March 5, 2014, with the 2014 Third Security Investors, pursuant to which the Company granted certain demand, “piggy-back” and S-3 registrations rights covering the resale of the shares of common stock underlying the Series B Preferred Stock issued pursuant to the Series B Purchase Agreement and all shares of common stock issuable upon any dividend or other distribution with respect thereto.

Third Security, LLC and its affiliates (collectively, “Third Security”), which holds more than 10% of the outstanding voting stock of the Company, participated in the Series B financing. Additionally, Doit L. Koppler II and Robert M. Patzig, directors of the Company, are affiliated with Third Security, LLC.

61

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2013, 2012 and 2011

The 2014 Series B Preferred Stock financing required the repricing and issuance of additional common stock warrants to the investors in the Company's February 2012 common stock and warrant financing. The exercise price of these warrants decreased from $12.96 per share to $11.73 per share and the number of shares issuable upon exercise of the warrants increased from 1,097,600 to 1,212,665.

62

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.

As previously disclosed in the Company’s Current Report on Form 8-K filed on July 12, 2013, our Audit Committee, on July 8, 2013 appointed Ernst & Young LLP as our principal independent accountant. There were no disagreements or reportable events related to the change in accountants requiring disclosure under Item 304(b) of Regulation S-K.

Item 9A. Controls and Procedures.

(a)         Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report, management performed, with the participation of our Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and no evaluation of controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2013, our disclosure controls and procedures were effective.

(b)         Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. Our system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes those policies and procedures that:

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets;

• provide reasonable assurance that our transactions are recorded as necessary to permit preparation of our financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.

Management has conducted, with the participation of our Chief Executive Officer and our Chief Financial Officer, an assessment, including testing of the effectiveness of our internal control over financial reporting as defined in Rule 13(a)-15(f) under the Exchange Act as of December 31, 2013. Management’s assessment of internal control over financial reporting was conducted using the criteria in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2013.

This Annual Report does not include an attestation report of Transgenomic’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to Item 308(b) of Regulation S-K, which permits the Company to provide only management’s report in this Annual Report.

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(c)         Changes in internal control over financial reporting

There have been no changes in internal control over financial reporting that occurred during the quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

Part III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated by reference to the information set forth in the sections titled “Board of Directors and Committees”, “Section 16(a) Beneficial Ownership Reporting Compliance”, “Business Ethics Policy”, “Corporate Governance - Committees of our Board of Directors”, “Corporate Governance - Audit Committee” and “Corporate Governance - Compensation Committee” in our definitive proxy statement to be filed with the SEC in connection with the annual meeting of stockholders to be held in 2014 (the “2014 Proxy Statement”). The information required by this item related to the executive officers can be found in the section captioned “Executive Officers of the Registrant” under Part I, “Item 1. Business” of this Annual Report on Form 10-K, and is also incorporated herein by reference.

Item 11. Executive Compensation.

The information required by this item is incorporated by reference to the information set forth in the sections titled “2013 Executive Compensation” and “Director Compensation” in the 2014 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item is incorporated by reference to the information set forth in the sections titled “Beneficial Ownership of Common Stock”, “Beneficial Ownership of Preferred Stock” and “Equity Compensation Plan Information” in the 2014 Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated by reference to the information set forth in the sections titled “Review and Approval of Related Person Transactions” and “Director Independence” in the 2014 Proxy Statement.

Item 14. Principal Accountant Fees and Services.

The information required by this item is incorporated by reference to the information set forth in the section titled “Independent Registered Public Accounting Firm” in the 2014 Proxy Statement.

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Part IV

Item 15. Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this report:

1 Financial Statements. The following financial statements of the Registrant are included in response to Item 8 of this report:

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets of the Registrant and Subsidiary as of December 31, 2013 and 2012.

Consolidated Statements of Operations of the Registrant and Subsidiary for the years ended December 31, 2013, 2012 and 2011.

Consolidated Statements of Comprehensive Loss of the Registrant and Subsidiary for the years ended December 31, 2013, 2012 and 2011.

Consolidated Statements of Stockholders’ Equity of the Registrant and Subsidiary for the years ended December 31, 2013, 2012 and 2011.

Consolidated Statements of Cash Flows of the Registrant and Subsidiary for the years ended December 31, 2013, 2012 and 2011.

Notes to Consolidated Financial Statements of the Registrant and Subsidiary.

2 Financial Statement Schedules.

All financial statement schedules are omitted because the information is inapplicable or presented in the notes to the financial statements.

3 Exhibits. The following exhibits are filed as required by Item 15(a)(3) of this report. Exhibit numbers refer to the paragraph numbers under Item 601 of Regulation S-K:

†2.1	Asset Purchase Agreement among the Registrant, Scoli Acquisition Sub, Inc. and Axial Biotech, Inc. dated August 27, 2012 (incorporated by reference to Exhibit 2.1 to the Registrant's Quarterly Report on Form 10-Q filed on November 8, 2012).
3.1	Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Quarterly Report on Form 10-Q filed on November 14, 2005).
3.2	Certificate of Amendment of Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on May 29, 2012).
3.3	Certificate of Amendment of Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on January 28, 2014).
3.4	Certificate of Amendment of Certificate of Designation of Series A Convertible Preferred Stock of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on March 6, 2014).
3.5	Certificate of Designation of Series B Convertible Preferred Stock of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on March 6, 2014).
3.6	Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3(ii) to the Registrant’s Current Report on Form 8-K filed on May 25, 2007).
4.1	Form of Certificate of the Registrant’s Common Stock (incorporated by reference to Exhibit 4 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).

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4.2	Form of Series A Convertible Preferred Stock Warrant issued to Third Security Senior Staff 2008 LLC, Third Security Staff 2010 LLC and Third Security Incentive 2010 LLC (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on January 4, 2011).
4.3	Registration Rights Agreement, dated December 29, 2010, by and among the Registrant, Third Security Senior Staff 2008 LLC, Third Security Staff 2010 LLC and Third Security Incentive 2010 LLC (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on January 4, 2011).
4.4	First Amendment to Registration Rights Agreement dated November 8, 2011 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on November 14, 2011).
4.5	Form of Warrant issued by the Registrant to the Third Security Entities on February 7, 2012 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 7, 2012).
4.6	Form of Warrant issued by the Registrant to the Investors on February 7, 2012 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 7, 2012).
4.7	Form of Registration Rights Agreement entered into by and among the Registrant, the Third Security Entities and the Investors dated February 2, 2012 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 7, 2012).
4.8	Registration Rights Agreement, entered into by and among the Registrant and the Investors, dated January 24, 2013 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K/A filed on January 31, 2013).
4.9	Form of Warrant issued by the Registrant to the Investors on January 30, 2013 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K/A filed on January 31, 2013).
4.10	Registration Rights Agreement, dated as of March 5, 2014, by and among the Registrant, Third Security Senior Staff 2008 LLC, Third Security Staff 2014 LLC and Third Security Incentive 2010 LLC (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on March 6, 2014).
*10.1	The Registrant’s 2006 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 28, 2014).
*10.2	1999 UK Approved Stock Option Sub Plan of the Registrant (incorporated by reference to Exhibit 10.7 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).
10.3	License Agreement, dated August 20, 1997, between the Registrant and Leland Stanford Junior University (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).
10.4	License Agreement, dated December 1, 1989, between Cruachem Holdings Limited (a wholly owned subsidiary of the Registrant) and Millipore Corporation (incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K filed on March 25, 2002).
10.5	Sublicense Agreement, dated October 1, 1991, between Cruachem Holdings Limited (a wholly owned subsidiary of the Registrant) and Applied Biosystems, Inc. (incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K filed on March 25, 2002).
10.6	Missives, dated May 17, 2002, between Cruachem Limited (a wholly-owned subsidiary of the Registrant) and Robinson Nugent (Scotland) Limited (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2002).
10.7	License Amendment Agreement, dated June 2, 2003, by and between Geron Corporation and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on August 12, 2003).
10.8	Supply Agreement, dated January 1, 2000, between the Registrant and Hitachi Instruments (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).
10.9	License Agreement between the Registrant and the Dana-Farber Cancer Institute dated October 8, 2009 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 5, 2009).

66

*10.10	Employment Agreement between the Registrant and Mark P. Colonnese (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 17, 2012).
10.11	Securities Purchase Agreement, entered into by and among the Registrant and the Investors, dated January 24, 2013 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K/A filed on January 31, 2013).
10.12	Forbearance Agreement, dated February 7, 2013, by and between the Registrant and Dogwood Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 8, 2013).
10.13	Loan and Security Agreement among the Registrant, Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, dated March 13, 2013 (incorporated by reference to Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K filed on March 14, 2013).
10.14	First Amendment to Loan and Security Agreement among the Registrant, Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, dated August 2, 2013 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 6, 2013).
*10.15	Employment Agreement between the Registrant and Paul Kinnon, effective September 30, 2013 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 30, 2013).
*10.16	Form of Incentive Stock Option Agreement between the Registrant and Paul Kinnon, effective September 30, 2013 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2014).
*10.17	Form of Stock Appreciation Rights Agreement between the Registrant and Paul Kinnon, effective September 30, 2013 (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2014).
*10.18	Form of Stock Appreciation Rights Agreement between the Registrant and Mark Colonnese, effective September 30, 2013 (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2014).
*10.19	Form of Stock Appreciation Rights Agreement under the 2006 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on September 30, 2013).
10.20	Second Amendment to Loan and Security Agreement among the Registrant, Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, effective October 31, 2013 (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2014).
10.21	Limited Waiver and Third Amendment to Loan and Security Agreement among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, dated January 27, 2014.
10.22	Fourth Amendment to Loan and Security Agreement among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, dated March 3, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 6, 2014).
10.23	Series B Convertible Preferred Stock Purchase Agreement, dated as of March 5, 2014, by and among Transgenomic, Inc. and Third Security Senior Staff 2008 LLC, Third Security Staff 2014 LLC and Third Security Incentive 2010 LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on March 6, 2014).
‡10.24	Collaboration Agreement, dated as of October 9, 2013, by and between the Registrant and PDI, Inc.
21	Subsidiaries of the Registrant.
23.1	Consent of Independent Registered Public Accounting Firm - Ernst & Young LLP
23.2	Consent of Independent Registered Public Accounting Firm - McGladrey LLP
24	Powers of Attorney (included on signature page hereto).
31	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

67

**32	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
†	Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this agreement have been omitted. The Registrant agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request.
*	Denotes exhibit that constitutes a management contract, or compensatory plan or arrangement.
**	These certifications are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates it by reference.
+	Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
‡	The Registrant has requested confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of March 2014.

TRANSGENOMIC, INC.
By:	/s/ PAUL KINNON
	Paul Kinnon, President and Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ PAUL KINNON Paul Kinnon	Director, President and Chief Executive Officer (Principal Executive Officer)	March 27, 2014
/s/ MARK P. COLONNESE Mark P. Colonnese	Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	March 27, 2014
/s/ RODNEY S. MARKIN Rodney S. Markin	Director	March 27, 2014
/s/ ANTONIUS P. SCHUH Antonius P. Schuh	Director	March 27, 2014
/s/ ROBERT M. PATZIG Robert M. Patzig	Director	March 27, 2014
/s/ DOIT L. KOPPLER II Doit L. Koppler II	Director	March 27, 2014
/s/ MICHAEL A. LUTHER Michael A. Luther	Director	March 27, 2014

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EX-10.21

Exhibit 10.21

LIMITED WAIVER AND THIRD AMENDMENT TO

LOAN AND SECURITY AGREEMENT

(TERM LOAN AND REVOLVING LOAN)

This LIMITED WAIVER AND THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”), dated as of January 27, 2014 (the “Effective Date”), is entered into by and among THIRD SECURITY SENIOR STAFF 2008 LLC, as administrative agent (the “Agent”), and a lender, the other lenders party hereto (collectively, the “Lenders”), and TRANSGENOMIC, INC., a Delaware corporation (the “Borrower”).

WHEREAS, the Borrower, the Agent and the Lenders are parties to that certain Loan and Security Agreement (Term Loan and Revolving Loan), dated as of March 13, 2013 (as amended, restated, supplemented, or otherwise modified from time to time, the “Loan Agreement”), whereby the Lenders have extended to the Borrower a loan facility pursuant to the Loan Agreement on the terms and subject to the conditions contained therein;

WHEREAS, Events of Default exist under Section 8.2(a) of the Loan Agreement as a result of the Borrower’s failure to: (i) comply with Section 6.2(a) of the Loan Agreement by failing to timely provide Monthly Financial Statements for the month of November 2013; (ii) comply with Section 6.2(b) of the Loan Agreement by failing to timely provide a Compliance Certificate for the month of November 2013; (iii) satisfy the Minimum Liquidity Ratio requirement in Section 6.9(a) of the Loan Agreement for the monthly periods ending November 30, 2013 and December 31, 2013; and (iv) satisfy the Minimum Net Revenue requirement in Section 6.9(b) of the Loan Agreement for the six month period ending November 30, 2013 (collectively, the “Specified Events of Default”); and

WHEREAS, the Borrower has requested that the Agent and the Lenders, and the Agent and the Lenders have agreed to, subject to the terms and conditions set forth in this Amendment, (i) waive the Specified Events of Default and (ii) amend certain provisions of the Loan Agreement, in each case, effective as of the Effective Date.

NOW, THEREFORE, in consideration of the foregoing premises, and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.    Definitions. Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in the Loan Agreement.

2.    Limited Waiver. Subject to the terms, and the timely satisfaction of each of the conditions precedent in Section 4 of this Amendment, the Agent and the Lenders hereby waive the Specified Events of Default.

3.    Amendments to the Loan Agreement. Effective as of the Effective Date, the Loan Agreement is amended as follows:

(a)    Section 6.9(a) of the Loan Agreement is amended by deleting the existing text of such subsection in its entirety and inserting, in lieu thereof, the following:

Minimum Liquidity Ratio. Commencing with the monthly period ending on March 31, 2014, a ratio of (i) unrestricted and unencumbered cash and cash equivalents plus Eligible Accounts dividedby (ii) all Funded Indebtedness (the “Minimum Liquidity Ratio”) of not less than 1.00:1.00 at the end of each month.

(b)    Section 14.1 of the Loan Agreement is amended by amending and restating the definition of “Borrowing Base” as follows:

“Borrowing Base” is the product of the Advance Rate multiplied by the Eligible Accounts; provided, however, that Agent has the right to adjust the foregoing in its good faith business judgment to mitigate the impact of events, conditions, contingencies, or risks which may adversely affect the Collateral or its value; and provided further, that, the proceeds for any sale of the Borrower's intellectual property shall not be included for purposes of calculating the Borrowing Base; provided, further, that until March 31, 2014, the Borrowing Base shall be equal to the Revolving Line.

4.    Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent:

(a)    receipt by the Agent of a copy of this Amendment, duly executed and delivered by the Borrower and the Required Lenders;

(b)    receipt by the Agent of any other documents or agreements reasonably requested by the Agent in connection with the transactions contemplated by this Amendment;

(c)    the truth and accuracy of the representations and warranties contained in Section 6 of this Amendment; and

(d)    receipt by the Lenders and the Agent of any fees and expenses due and payable on or before the Effective Date under the Loan Agreement or this Amendment.

5.    Reaffirmation. The Borrower hereby reaffirms each of the agreements, covenants, and undertakings set forth in the Loan Agreement and each and every other Loan Document as of the Effective Date as if the Borrower was making said agreements, covenants and undertakings as of the Effective Date.

6.    Representations, Warranties, Covenants and Acknowledgments. To induce the Agent and Lenders to enter into this Amendment, the Borrower hereby:

(a)    represents and warrants that (i) as of the Effective Date, all of the representations and warranties made or deemed to be made under the Loan Documents are true and correct in all material respects (other than any representation or warranty that is qualified by materiality or Material Adverse Effect, in which case such representation or warranty is true and correct in all respects) on and as of the Effective Date to the same extent

as though made on and as of the Effective Date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true and correct in all material respects (other than any representation or warranty that is qualified by materiality or Material Adverse Effect, in which case such representation or warranty was true and correct in all respects) on and as of such earlier date; (ii) as of the Effective Date, after giving effect to the terms of this Amendment, there exists no Default or Event of Default under the Loan Agreement or any of the other Loan Documents; (iii) the Borrower has the corporate power and is duly authorized to enter into, deliver and perform this Amendment; and (iv) this Amendment is the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability;

(b)    acknowledges and agrees that (i) this Amendment does not and shall not create (nor shall the Borrower or any of its Subsidiaries rely upon the existence of or claim or assert that there exists) any obligation of the Agent or any Lender to consider or agree to any further consent, waiver or amendment with respect to any Loan Document and, in the event that the Agent or any Lender subsequently agrees to consider any further consent, waiver or amendment with respect to any Loan Document, neither this Amendment nor any other conduct of the Agent or any Lender shall be of any force or effect on the Agent’s or such Lender’s consideration or decision with respect thereto, and neither the Agent nor any Lender shall have any further obligation whatsoever to consider or agree to any further consent, waiver or amendment with respect to any Loan Document; and (ii) except as expressly set forth in this Amendment, the Agent and each Lender reserves all of their respective rights pursuant to the Loan Agreement and all other Loan Documents;

(c)    further acknowledges and agrees that the Agent’s and Lenders’ agreement to waive and amend the specific matters addressed in this Amendment, do not and shall not create (nor shall the Borrower or any of its Subsidiaries rely upon the existence of or claim or assert that there exists) any obligation of the Agent or any Lender to consider or agree to any further waivers, consents or amendments and, in the event that the Agent or any Lender subsequently agrees to consider any further waivers, consents or amendments, neither this Amendment nor any other conduct of the Agent or any Lender shall be of any force or effect on the Agent’s or any Lender’s consideration or decision with respect to any such requested consent;

(d)    further acknowledges and agrees that no right of offset, defense, counterclaim, claim, cause of action or objection in favor of the Borrower against any Lender exists arising out of or with respect to (i) this Amendment, the Loan Agreement or any other Loan Document, or (ii) any other documents now or heretofore evidencing, securing or in any way relating to the foregoing; and

(e)    further acknowledges and agrees that this Amendment shall be deemed a Loan Document for all purposes under the Loan Agreement and the other Loan Documents.

7.    Effect of Non-Compliance. To the extent any representation or warranty made herein shall be untrue in any material respect, such occurrence shall be deemed an Event of Default pursuant to the terms of the Loan Agreement and the other Loan Documents.

8.    Release; Indemnitees.

(a)    In further consideration of the execution of this Amendment by the Agent and each Lender, the Borrower, individually and on behalf of its successors (including, without limitation, any trustees acting on behalf of the Borrower and any debtor-in-possession with respect to the Borrower), assigns, subsidiaries and Affiliates, hereby forever releases the Agent, each Lender and their respective successors, assigns, parents, subsidiaries, Affiliates, officers, employees, directors, agents and attorneys (collectively, the “Releasees”) from any and all debts, claims, demands, liabilities, responsibilities, disputes, causes, damages, actions and causes of actions (whether at law or in equity) and obligations of every nature whatsoever, whether liquidated or unliquidated, whether known or unknown, matured or unmatured, fixed or contingent (collectively, “Claims”) that the Borrower may have against the Releasees which arise from or relate to any actions which the Releasees may have taken or omitted to take in connection with the Loan Agreement or the other Loan Documents prior to the Effective Date, including, without limitation, with respect to the Obligations, any Collateral, the Loan Agreement, any other Loan Document and any third parties liable in whole or in part for the Obligations. This provision shall survive and continue in full force and effect whether or not the Borrower shall satisfy all other provisions of this Amendment, the Loan Documents or the Loan Agreement, including payment in full of all Obligations.

(b)    The Borrower hereby further agrees to indemnify and hold the Releasees harmless with respect to any and all liabilities, obligations, losses, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever incurred by the Releasees, or any of them, whether direct, indirect or consequential, as a result of or arising from or relating to any proceeding by, or on behalf of any Person, including, without limitation, officers, directors, agents, trustees, creditors, partners or shareholders of the Borrower or any parent, Subsidiary or Affiliate of the Borrower, whether threatened or initiated, asserting any claim for legal or equitable remedy under any statutes, regulation or common law principle arising from or in connection with the negotiation, preparation, execution, delivery, performance, administration and enforcement of this Amendment. The foregoing indemnity shall survive the payment in full of the Obligations and the termination of this Amendment, the Loan Agreement and the other Loan Documents.

9.    Effect; Relationship of Parties. Except as expressly modified hereby, the Loan Agreement and each other Loan Document shall be and remain in full force and effect as originally written, and shall constitute the legal, valid, binding and enforceable obligations of the Borrower to the Agent and Lenders. The relationship of the Agent and Lenders, on the one hand, and the Borrower, on the other hand, has been and shall continue to be, at all times, that of creditor and debtor and not as joint venturers or partners. Nothing contained in this Amendment, any instrument, document or agreement delivered in connection herewith or in the Loan Agreement or any of the

other Loan Documents shall be deemed or construed to create a fiduciary relationship between or among the parties.

10.    Expenses. The Borrower shall pay the Agent all of its actual, documented and reasonable costs and expenses in connection with the preparation, negotiation, execution and enforcement of this Amendment in accordance with the Loan Agreement (including, without limitation, all actual, documented and reasonable fees, expenses and disbursements of counsel to the Agent).

11.    Miscellaneous. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. This Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. California law governs this Amendment, without regard to principles of conflicts of law. This Amendment embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written negotiations, agreements and understandings of the parties with respect to the subject matter hereof. Time is of the essence of this Amendment.

[remainder of page intentionally blank]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the Effective Date.

BORROWER:

TRANSGENOMIC, INC.

By:    /s/ Mark P. Colonnese            

Name:    Mark P. Colonnese            

Title:    Executive Vice President        

AGENT:

THIRD SECURITY SENIOR STAFF 2008 LLC

As Agent for Lenders

By /s/ Randal J. Kirk    
Name: Randal J. Kirk
Title: Manager, Third Security, LLC, which is
the Manager of Third Security Senior
Staff 2008 LLC

LENDERS:

THIRD SECURITY SENIOR STAFF 2008 LLC

By /s/ Randal J. Kirk                

       Randal J. Kirk

        Manager, Third Security, LLC, which is the

        Manager of Third Security Senior Staff 2008 LLC

THIRD SECURITY STAFF 2010 LLC

By /s/ Randal J. Kirk                

       Randal J. Kirk

        Manager, Third Security, LLC, which is the

        Manager of Third Security Staff 2010 LLC

THIRD SECURITY INCENTIVE 2010 LLC

By /s/ Randal J. Kirk                

        Randal J. Kirk

        Manager, Third Security, LLC, which is the

        Manager of Third Security Incentive 2010 LLC

EX-10.24

Exhibit ‡10.24

*** Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4)

and 240.24b-2

COLLABORATION AGREEMENT

By and Between

TRANSGENOMIC, INC.

and

PDI, INC.

Dated as of October 9, 2013

TABLE OF CONTENTS

Article 1 DEFINITIONS		1
1.1	Definitions	1
1.2	Construction	7
1.3	Headings	7
1.4	Number and Gender	7
1.5	Knowledge	7
1.6	Statutes	7
1.7	“Including”, “Herein” and References	7
Article 2 COLLABORATION		8
2.1	Appointment	8
2.2	Collaboration (Phase One)	8
2.3	Collaboration (Phase Two)	10
2.4	Obligations During Phase One and Phase Two	11
2.5	Profit Sharing	17
2.6	Loan Provisions	23
2.7	Restrictions and Other Agreements	25
2.8	C-GAAP	26
Article 3 TERM AND TERMINATION		27
3.1	Term of Agreement	27
3.2	Survival	29
Article 4 REPRESENTATIONS AND WARRANTIES OF INTERPACE		29
4.1	Representations and Warranties of Interpace	29
Article 5 REPRESENTATIONS AND WARRANTIES OF TRANSGENOMIC		31
5.1	Representations and Warranties of Transgenomic	31
Article 6 INDEMNIFICATION AND LIMITATIONS OF LIABILITY		33
6.1	Indemnification of Interpace	33
6.2	Indemnification of Transgenomic	34
6.3	Notice of Claim	35
6.4	Third Person or Governmental Body Claims	35
6.5	LIMITATION OF LIABILITY	36
Article 7 RELATIONSHIP OF THE PARTIES; TAXES		36
7.1	Independent Contractor; No Co-employment.	36
7.2	Sales, Use and Excise Taxes.	37
Article 8 COMMUNICATIONS; COORDINATION		37
8.1	Communications from Third Parties.	37
8.2	Coordination between the Parties.	37
Article 9 INSURANCE		37
9.1	Interpace Insurance Coverage.	38
9.2	Transgenomic Insurance Coverage.	38
Article 10 AGENCY ACTIONS		39

10.1	Agency Actions.	39
Article 11 CONFIDENTIAL INFORMATION		39
11.1	Confidential Information	39
11.2	Return of Confidential Information	40
11.3	Injunctive Relief	40
11.4	Existing CDA.	40
Article 12 FAILURE TO PERFORM; LICENSE; RIGHTS UPON INSOLVENCY		41
12.1	Failure to Perform	41
12.2	License Restrictions.	41
12.3	Rights Upon Insolvency	42
Article 13 MISCELLANEOUS		42
13.1	Succession and Assignment	42
13.2	Press Releases and Public Announcements	43
13.3	No Third-Party Beneficiaries	43
13.4	Entire Agreement	43
13.5	Counterparts	43
13.6	Notices	43
13.7	Governing Law	44
13.8	Submission to Jurisdiction; Consent to Service of Process	45
13.9	Amendments and Waivers	45
13.10	Severability	46
13.11	Expenses	46

COLLABORATION AGREEMENT

COLLABORATION AGREEMENT, dated as of October 9, 2013 (the “Effective Date”), by and between TRANSGENOMIC,INC., a Delaware corporation (“Transgenomic”) and PDI, Inc. a Delaware corporation d/b/a Interpace Diagnostics (“Interpace”).

RECITALS

Transgenomic is a global biotechnology company advancing personalized medicine in cardiology, oncology, and inherited diseases through its proprietary molecular technologies and clinical and research services.

Transgenomic has certain rights to one diagnostic test called CardioPredict Pharmacogenomic Optimization Panel (“CardioPredict”), and a second diagnostic test called Clopidogrel Genetic Absorption Activation Panel (“C-GAAP”).

Interpace provides strategic planning, full commercial operations, and comprehensive sales and marketing support to pharmaceutical, biotechnology, medical device, and diagnostics manufacturers.

Interpace and Transgenomic desire to collaborate on the marketing, promotion and commercialization of CardioPredict as well as the possible future marketing, promotion and commercialization of C-GAAP, pursuant to the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, Interpace and Transgenomic hereby agree as follows:

Article 1DEFINITIONS

1.1Definitions

In this Agreement, the following terms have the meanings specified or referred to in this Section 1.1 and will be equally applicable to both the singular and plural forms. Any agreement referred to below will mean such agreement as amended, supplemented and modified from time to time to the extent permitted by the applicable provisions thereof and by this Agreement.

“Affiliate” of any Person means any other Person which directly or indirectly controls, is controlled by or is under common control with, such Person. The term “control” (including its correlative meanings “controlled by” and “under common control with”) means possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).

“Agency” or “Agencies” means any governmental regulatory authority responsible for granting approvals for the sale or maintaining regulatory oversight of CardioPredict, including, without limitation, the United States Food and Drug Administration (“FDA”).

1    *Confidential Treatment Requested

“Agreement” means this Collaboration Agreement (including all exhibits hereto) as may be amended from time to time.

“Applicable Law” means any federal, state or local statute, law (including the common law), ordinance, rule, code, or regulation that applies in whole or in part to, as the case may be, the obligations or rights of Transgenomic or Interpace under this Agreement. Any reference to any federal, state or local statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.

“Applicable Period” has the meaning set forth in Section 2.5(a).

“Background Technology” means Technology that a Party (a) has developed or acquired prior to the Effective Date and/or (b) can show it developed entirely independently of and without any reference to any information, data or materials of the other Party.

“Brinkman Application” means International Patent Application No. PCT/EP2000/07314, filed July 28, 2000; and nationalized in the United States as Serial No. 10/048,427, filed on July 28, 2000, now abandoned, from which now pending Serial No. 10/965,348, filed October 14, 2004, claims priority; and also regionalized as European Patent Application No. 00972654.8, filed July 28, 2000, which matured into European Patent No. EP 1 232 260; or any other patent application filed anywhere in the world claiming priority of such international patent application.

“Cardiology Field” means that branch of medicine that deals with diagnosis and/or treatment of disorders and/or diseases of or related to the heart and/or vascular systems, including use of diagnosis tests such as, for example, CardioPredict, C-GAAP and other similar tests, with respect thereto.

“CardioPredict” has the meaning set forth in the Recitals to this Agreement, including any applicable Variations.

“CardioPredict Costs” means, for any Applicable Period, Transgenomic’s CardioPredict Costs and Interpace’s CardioPredict Costs, for such Applicable Period.

“CardioPredict Intellectual Property Rights” means all Intellectual Property Rights other than Trademarks that are reasonably necessary to make, have made, import, sell or use CardioPredict.

“CardioPredict Technology” means all Technology that is reasonably necessary to make, have made, import, sell or use CardioPredict.

“CardioPredict Validation” means a validation study for submission to a New York State-certified organization showing that CardioPredict meets analytical and clinical validation requirements using standard and well-accepted NY CLIA approval guidelines and NY CLIA submission standards.

“C-GAAP” has the meaning set forth in the Recitals to this Agreement, including any applicable Variations.

2    *Confidential Treatment Requested

“C-GAAP Intellectual Property Rights” means all Intellectual Property Rights other than Trademarks that are reasonably necessary to make, have made, import, sell or use C-GAAP.

“C-GAAP Technology” means all Technology that is reasonably necessary to make, have made, import, sell or use C-GAAP and that are licensable or sublicensable by Transgenomic to Interpace.

“Claim Notice” has the meaning set forth in Section 6.3.

“CLIA Approved Lab” means a clinical laboratory that has been certified under the Clinical Laboratory Improvement Amendments of 1988, as amended.

“Collaboration” means the collaboration between the Parties under Article 2.

“Commercialization Plans” means, collectively, the Phase One Commercialization Plan and the Phase Two Commercialization Plan.

“Competing Test” means a […***…] that analyzes genomic DNA from a cardiovascular patient for […***…] in order to help guide selection and/or dosage of one or more of the […***…], as well as to […***…]. The definition of Competing Test will be updated during the Term as mutually agreed by the Parties to accommodate Variations of the Tests.

“Convertible Note” has the meaning set forth in Section 2.6.

“Detail” means an interactive, face-to-face visit by an Interpace sales representative with targets selected by Interpace in accordance with the Commercialization Plans during which such sales representative may discuss the benefits of the Test (as applicable) and otherwise promote use of the Tests, using, as necessary or desirable, the Product Promotional Materials. When used as a verb, “Detail” or “Detailing” means to engage in a Detail as defined herein.

“Effective Date” has the meaning set forth in the introductory paragraph of this Agreement.

“Excluded Variation” means any tests for additional genes beyond those used in the then-current version of the Test and that is not a Variation and is not a Competing Test.

“Expenses” means all reasonable out-of-pocket expenses incurred in connection with defending any claim, action, suit or proceeding incident to any matter indemnified hereunder (including court filing fees, court costs, arbitration or mediation fees or costs, and reasonable fees and disbursements of legal counsel).

“Force Majeure Event” means any fire, flood, sabotage, shipwreck, embargo, explosion, accident, riot, acts of war or insurrection, and similar events beyond the reasonable control of any Party.

3    *Confidential Treatment Requested

“Governmental Body” means any United States government, whether federal, state, municipal or local, or other governmental, legislative, executive or judicial authority, commission or regulatory body or agency.

“Indemnified Party” has the meaning set forth in Section 6.3.

“Initial Profit” has the meaning set forth in Section 2.5(a).

“Improvements” means any improvements, modifications, enhancements, additions, revisions, extensions, upgrades, updates and derivatives.

“Interpace” has the meaning set forth in the introductory paragraph of this Agreement.

“Interpace Documents” has the meaning set forth in Section 4.1(b).

“Intellectual Property Rights” means, collectively, Patents, Trade Secrets, Copyrights, Trademarks, moral rights, and all other intellectual property rights and proprietary rights. For purposes of this Agreement: (a) “Patents” means all patent rights and all rights, title and interests in all patent applications and patents to issue on them, all letters patent or equivalent rights and applications, including any reissue, extension, division, continuation, or continuation-in-part applications throughout the world; (b) “Trade Secrets” means all rights, title and interests in all trade secrets and trade secret rights arising under common law, state law, federal law or laws of foreign countries; (c) “Copyrights” means all copyrights, and all rights, title and interests in all copyrights, copyright registrations and applications for copyright registration, certificates of copyright and copyrighted interests throughout the world, and all rights, title and interests in related applications and registrations throughout the world; and (d) “Trademarks” means all trademarks, service marks, trade names, rights in trade dress, and all trademark interests throughout the world, and all right, title and interest in related applications and registrations throughout the world, whether arising under the laws of the United States or any other country or other jurisdiction.

“Interpace’s CardioPredict Costs” has the meaning set forth in Section 2.5(a).

“Interpace Indemnitees” has the meaning set forth in Section 6.1.

“Legal Proceeding” means any action, suit, proceeding, hearing, mediation, claim (including any counterclaim), written notice or other written assertion of legal liability or investigation of, in, or before any Governmental Body or before any United States arbitrator.

“Loan” and “Loans” have the meanings set forth in Section 2.5(a).

“Losses” means any and all losses, costs, obligations, liabilities, settlement payments, awards, judgments, fines, penalties, damages, reasonable expenses, deficiencies, debts, adverse claims or other charges.

“Material Adverse Change” means (i) any change, effect, event, occurrence or state of facts, other than a Force Majeure Event, that causes Transgenomic to be unable to perform its material obligations under this Agreement for a period of sixty (60) days or more due to a

4    *Confidential Treatment Requested

material adverse effect to Transgenomic’s business, properties, assets, or financial condition, taken as a whole; (ii) any material adverse change in the […***…] caused by any material change in the […***…] for which Transgenomic is unable to comply with after it is given a reasonable period of time to meet any such material change […***…], any material adverse change in the […***…], or any other material adverse change of similar magnitude; (iii) the failure to obtain Patent Issuance; and/or (iv) a final unappealable judgment or decree of any Governmental Body in the United States that CardioPredict infringes, misappropriates or violates the United States Intellectual Property Rights of any third party.

“Net Profit” has the meaning set forth in Section 2.5(a).

“Net Revenue” has the meaning set forth in Section 2.5(a).

“New Test” means any diagnostic genetic test developed by Transgenomic during the Term that is not a Competing Test, that adds additional genes beyond those used in the then-current version of the Tests, and that is used for applications other than helping guide selection and/or dosage for cardiovascular medications.

“Organic Documents” means, with respect to a corporation, such corporation’s charter or certificate of incorporation and by-laws, or, with respect to a general or limited partnership, such partnership’s general or limited partnership agreement, or, with respect to a limited liability company, such limited liability company’s certificate of formation and operating agreement.

“Parties” means Interpace and Transgenomic, collectively, and “Party” means any one of them.

“Patent Issuance” means the issuance of a U.S. patent from the Brinkman Application, which patent will […***…].

“Permits” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Body.

“Person” means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or other entity.

“Phase One” means that portion of the Collaboration described in Section 2.2.

“Phase One Commercialization Plan” has the meaning set forth in Section 2.2(a).

“Phase One Period” has the meaning set forth in Section 2.2(c).

“Phase Two” means that portion of the Collaboration described in Section 2.3.

5    *Confidential Treatment Requested

“Phase Two Commercialization Plan” has the meaning set forth in Section 2.3(a).

“Phase Two Notification” has the meaning set forth in Section 2.2(c).

“Product Promotional Materials” means all written, printed, digital or graphic material, promotional and marketing material, published literature, research findings, and such other promotional materials created by or for Interpace in connection with marketing and promoting CardioPredict (and C-GAAP, as applicable) in the Cardiology Field in the United States (and approved for use by Transgenomic in accordance with Section 2.4(k)), to be utilized by Interpace sales representatives, sales managers and other field sales force personnel, including but not limited to hard copy or digital visual aids, file cards, premium items, clinical studies, reprints, test information updates and any other promotional support items.

“Security Agreement” has the meaning set forth in Section 2.6(c).

“Security Interest” means any mortgage, pledge, lien, deed of trust, claim, lease, option, right of first refusal, easement, servitude, proxy, voting trust or agreement, transfer restriction under any shareholder or similar agreement, encumbrance, charge, or other security interest, restriction or limitation.

“Technology” means, collectively, designs, formulae, procedures, methods, techniques, ideas, know-how, results of research and development, software, inventions, apparatus, creations, works of authorship and other similar materials, and all recordings, graphs, drawings, reports, analyses, and other writings, and any other embodiments of the above, in any form whether or not specifically listed herein.

“Term” has the meaning set forth in Section 3.1(a).

“Tests” means CardioPredict and C-GAAP.

“Third Party Claim” has the meaning set forth in Section 6.4.

“Third Party Infringement” means the infringement upon, misappropriation, or violation of any Intellectual Property Rights of any third party.

“Transgenomic” has the meaning set forth in the introductory paragraph of this Agreement.

“Transgenomic Documents” has the meaning set forth in Section 5.1(b)

“Transgenomic Indemnitees” has the meaning set forth in Section 6.2.

“Transgenomic’s CardioPredict Costs” has the meaning set forth in Section 2.5(a).

“Variation” means an Improvement to CardioPredict or C-GAAP, as the case may be, solely within the Cardiology Field, that either (1) uses the same genes that are used in the then-current version of the Test, or (2) adds additional genes beyond those used in the then-current version of the Test but is limited to helping guide selection and/or dosage for cardiovascular medications, and,

6    

in either case (A) which have been mutually agreed upon by the Parties, and (B) for which all Permits and any and all assignments, releases, consents, approvals, immunities or other rights in connection with the marketing, promotion, and disposition of, commercialization and exploitation of such Improvement to CardioPredict or C-GAAP, as the case may be, have been obtained.

1.2Construction

The Parties have participated jointly in the negotiation and preparation of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.

1.3Headings

The division of this Agreement into articles, sections, subsections, and exhibits and the insertion of headings are for convenience of reference only and will not affect the construction or interpretation of this Agreement. The article, section, subsection and exhibit headings in this Agreement are not intended to be full or precise descriptions of the text to which they refer and are not to be considered part of this Agreement.

1.4Number and Gender

In this Agreement, words in the singular include the plural and vice-versa and words in one gender include all genders.

1.5Knowledge

Where any representation or warranty contained in this Agreement is expressly qualified by reference to the “Knowledge” of a natural Person, it shall be deemed to refer to the actual knowledge of such Person after reasonable due inquiry, and where any representation or warranty contained in this Agreement is expressly qualified by reference to the “Knowledge” of a Person that is not an individual, it shall be deemed to refer to the actual knowledge after reasonable due inquiry of such Person’s executive officers and other senior management having responsibility relating to the applicable matter.

1.6Statutes

Unless specified otherwise, reference in this Agreement to a statute refers to that statute or to any amended or restated legislation of comparable effect. Reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.

1.7“Including”, “Herein” and References

The word “including” means “including without limitation” and will not be construed to limit any general statement which it follows to the specific or similar items or matters immediately following it. All uses of the words “herein”, “hereto”, “hereof”, “hereby” and “hereunder” and

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similar expressions refer to this Agreement and not to any particular section or portion of it. References to an Article, Section, Subsection or Exhibit refer to the applicable article, section, subsection or exhibit of this Agreement.

Article 2COLLABORATION

2.1Appointment

Transgenomic hereby appoints Interpace as its exclusive marketer and promoter of CardioPredict (and, if applicable, C-GAAP pursuant to Section 2.8 below) (including Variations as mutually agreed by the Parties) solely in the Cardiology Field and solely in the United States during the Term in accordance with the terms and conditions of this Agreement. For clarification, Interpace’s marketing and promotional efforts are not in any way limited to cardiologists and Details and other promotional efforts may be geared to primary care physicians, or other physicians and targets generally, who are treating patients with needs in the Cardiology Field in the United States. Without limiting the generality of the foregoing and subject to Transgenomic’s approval rights under Section 2.4(k) and other terms and conditions of this Agreement, Interpace shall have the right (i) to market and promote CardioPredict (and C-GAAP as applicable) and to create Product Promotional Materials, and (ii) to use the Trademarks of Transgenomic relating to CardioPredict (and C-GAAP as applicable), provided that such use of Trademarks by Interpace shall be solely in the Cardiology Field in the United States and solely for the benefit and account of Transgenomic in furtherance of the Collaboration.

2.2Collaboration (Phase One)

(a)As soon as reasonably practicable (and in any event not later than within fifteen (15) days of the Effective Date) Interpace will provide Transgenomic with a written general commercialization plan to market and promote CardioPredict in the Cardiology Field as a pilot program in the United States during Phase One (the “Phase One Commercialization Plan”). The Phase One Commercialization Plan shall contain: (i) an overall general marketing plan consisting of strategy and tactics for commercialization during Phase One and (ii) an overall budget for Phase One commercialization (the “Phase One Budget”) with separate line item budgets for specific marketing tactics to be utilized during Phase One. During the thirty (30) day period following Interpace’s delivery of the Phase One Commercialization Plan to Transgenomic, the Parties will review and discuss in good faith the Phase One Commercialization Plan and Interpace will make any modifications to the Phase One Commercialization Plan as the Parties may mutually agree. Transgenomic’s comments, modifications and suggested changes to the Phase One Commercialization Plan shall be considered in good faith by Interpace; however Interpace shall have final decision making authority with respect to the strategy and tactics for commercialization during Phase One and, subject to the cap on Interpace’s Phase One commercialization efforts set forth in Section 2.2(b) below, Transgenomic shall have final decision making authority with respect to the Phase One Budget. Interpace will begin the process of implementing the Phase One Commercialization Plan promptly upon Interpace’s receipt of written notice from Transgenomic of Transgenomic’s agreement with the Phase One Budget.

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(b)It is anticipated that as part of Interpace’s Phase One collaboration efforts, Interpace will commit to putting in place promotional resources (including sales representatives and non-personal promotion) as may be necessary to implement the Phase One Commercialization Plan; provided, however: (i) Interpace will not be required to undertake any commercialization efforts not agreed upon in the Phase One Commercialization Plan; and (ii) Interpace will not be required to commit to spend more than […***…], in the aggregate, as part of such Phase One commercialization efforts. Expenditures reasonably and actually incurred by Interpace and that are directly attributable to Interpace’s Phase One commercialization efforts prior to execution of this Agreement, will be made in accordance with Section 2.5(a)(iii) below, and will be included when calculating Interpace’s overall spend during Phase One of the Collaboration. During Phase One, Interpace will not unilaterally spend an amount, in the aggregate, that is materially more than […***…] in such Phase One commercialization efforts unless Interpace reasonably determines that such expenditures are reasonably necessary to fully implement the Phase One Commercialization Plan and, in no event will Interpace spend, in the aggregate, more than […***…]in such Phase One commercialization efforts without the prior written approval of Transgenomic. Interpace’s expenditures referenced in this Section 2.2(b) will be made in accordance with Section 2.5(a)(iii) below.

(c)The term “Phase One Period” will mean the period commencing as of the Effective Date and continuing for a period not longer than […***…] months from the Effective Date; provided,however, if there is no Patent Issuance during such […***…] month period or if any of the representations in Sections 5.1(e) and 5.1(f) is no longer true and correct as of the end of such seven month period, then Interpace may, in its discretion, elect to extend the Phase One Period for an additional period not to exceed […***…] months. Any such election by Interpace to so extend the Phase One Period will be made by written notice to Transgenomic provided no later than the end of the initial […***…] month period of Phase One. Neither Party will have the right to terminate Phase One prior to the expiration of the Phase One Period, except as otherwise set forth in Article 3 below, without the prior written consent of the other Party. At any time during the Phase One Period, Interpace may (but is not obligated to) notify Transgenomic, in writing (the “Phase Two Notification”), that Interpace elects to proceed with Phase Two of the Collaboration, as set forth in Section 2.3 below. After the expiration of the Phase One Period, Interpace will not have the right to elect to proceed with Phase Two of the Collaboration unless Transgenomic agrees otherwise in writing. Unless and until Interpace provides Transgenomic with the Phase Two Notification, neither Party will have any obligation to proceed with Phase Two of the Collaboration. If Interpace provides Transgenomic with Phase Two Notification prior to the expiration of the Phase One Period, the Parties will be obligated to proceed with Phase Two of the Collaboration, in accordance with Section 2.3 below, commencing on the date as set forth in the Phase Two Notification, which date will be no later than the expiration of the Phase One Period. If Interpace does not provide the Phase Two Notification to Transgenomic prior to the expiration of the Phase One Period, Phase One will be deemed to have expired as of the expiration of the Phase One Period, and the Parties shall not proceed with Phase Two of the Collaboration unless the Parties agree in writing.

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2.3Collaboration (Phase Two)

(a)Not later than the commencement of Phase Two, Interpace will provide Transgenomic with a written and expanded general commercialization plan to market and promote CardioPredict in the Cardiology Field in the United States during the first Applicable Period in Phase Two (the “Phase Two Commercialization Plan”). The Phase Two Commercialization Plan shall contain: (i) an overall general marketing plan consisting of strategy and tactics for the commercialization during Phase Two and (ii) an overall budget for Phase Two commercialization (the “Phase Two Budget”) with separate line item budgets for specific marketing tactics to be utilized during Phase Two. During the thirty (30) day period following Interpace’s delivery of the Phase Two Commercialization Plan to Transgenomic, the Parties will review and discuss the Phase Two Commercialization Plan. Interpace shall consider in good faith Transgenomic’s comments, modifications and suggested changes to the Phase Two Commercialization Plan; provided however Interpace shall have final decision making authority for the strategy and tactics for commercialization during Phase Two and Transgenomic shall have final decision making authority with respect to the Phase Two Budget. Interpace will begin the process of implementing the Phase Two Commercialization Plan promptly upon Interpace’s receipt of written notice from Transgenomic of Transgenomic’s agreement with the Phase Two Budget.

(b)It is anticipated that as part of Interpace’s Phase Two commercialization efforts, Interpace will commit to putting in place an expanded infrastructure for more comprehensive marketing and promotional efforts, including an appropriate increase in personal and non-personal promotional activities conducted by Interpace, consistent with the Phase Two Commercialization Plan. Transgenomic shall have a period of thirty (30) days from its receipt of the Phase Two Commercialization Plan to review and approve the Phase Two Budget, which approval shall not be unreasonably delayed or conditioned. The Parties shall attempt to resolve all budget disputes in good faith. In the event Transgenomic does not approve the Phase Two Budget, Interpace will commit to spend no more than the greater of (i) the lesser of the different two amounts proposed by the Parties for the Phase Two Budget, and (ii) […***…], for the first Applicable Period in Phase Two commercialization efforts (or a pro rata amount of that total in the event that the first Applicable Period in Phase Two is less than a full calendar year) unless the Parties agree otherwise in writing. Interpace’s expenditures referenced in this Section 2.3(b) will be made in accordance with Section 2.5(a)(iii) below.

(c)Sixty (60) days prior to the commencement of the second Applicable Year in Phase Two, and continuing each Applicable Year in Phase Two thereafter, Interpace will provide Transgenomic with the Phase Two Commercialization Plan for such Applicable Year in Phase Two, in accordance with the process set forth in Section 2.3(a) above. The Parties shall review and agree upon the Phase Two Commercialization Plan for the second Applicable Year in Phase Two, and each Applicable Year in Phase Two thereafter, in accordance with the process set forth in Section 2.3(b) above.

(d)Transgenomic understands and agrees that decisions regarding implementation and execution of the Phase One Commercialization Plan and Phase Two Commercialization Plan will be made by Interpace in its reasonable discretion; provided, however, it is understood and agreed

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that any changes to any Phase Two Commercialization Plan that are prepared by Interpace will be provided to Transgenomic for review and comment, and Interpace will consider all comments provided by Transgenomic to the same in good faith, and any material changes to the Phase One Budget or the Phase Two Budget (or material changes to the allocation of expenditures thereof) shall require the prior written approval of Transgenomic, which approval shall not be unreasonably withheld or delayed. In addition, any changes prepared by Interpace that reflect a fundamental shift or substantial alteration of the basic strategy and tactics in any Commercialization Plan will be shared with Transgenomic at least thirty days before the commencement of implementation.

2.4Obligations During Phase One and Phase Two

(a)As set forth in detail in Section 2.4(e) hereof, Transgenomic agrees to provide any reasonably necessary product support to Interpace to assist Interpace in its implementation and execution of the Commercialization Plans, as may be reasonably requested by Interpace from time to time.

(b)Interpace will recruit, interview and hire candidates for the positions of sales representatives to Detail CardioPredict pursuant to the Phase One Commercialization Plan and Phase Two Commercialization Plan. Interpace will ensure that the sales representatives will generally meet the criteria and profile agreed to by the Parties in the aforementioned Commercialization Plans. The sales representatives will be of a high character and fitness, will be professional in manner and appearance, will have proper training and necessary skills, will have passed a background check, and will be hired in accordance with Applicable Laws. Each sales representative will have a valid driver’s license. Interpace will have the sole authority to reject any applicant for employment as a sales representative. Interpace will be solely responsible for paying all salary, payroll taxes, and benefits with respect to all Interpace sales representatives and other Interpace field personnel (i.e., district sales manager(s), regional director(s), national sales director(s) and/or trainer(s)) retained by Interpace to execute the Collaboration pursuant to the Commercialization Plans. Transgenomic has the right to meet with and review the sales representatives retained by Interpace to execute the Commercialization Plans; it being understood and agreed, however, that Interpace is solely responsible for all hiring, termination, compensation, and other conditions of employment of the sales representatives. If Transgenomic believes in good faith that the performance of any Interpace sales representative is unsatisfactory or is not in compliance with the provisions of this Agreement, Transgenomic shall notify Interpace and Interpace shall promptly address the performance or conduct of such person in accordance with its internal human resource policies, which policies shall be in compliance with Applicable Law. In the event that Transgenomic determines in good faith that an Interpace sales representative has violated Applicable Law or agreed upon written policy, or breached this Agreement (or caused Interpace to do so), Transgenomic shall notify Interpace, in writing and Interpace shall promptly address the issue and take all reasonable and appropriate action (including but not limited to termination of such employee) to finally resolve such matter. No such employment action taken by Interpace with respect to its sales representatives shall be contrary to Interpace’s internal human resource policies and procedures, which policies and procedures shall be in compliance with Applicable Law.

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(c)When providing Details, the Interpace sales representatives: (x) will only use Product Promotional Materials that have been prepared by Interpace and reviewed and approved by Transgenomic pursuant to Section 2.4 (k) below, (y) will not alter any Product Promotional Materials in any manner, and (z) will Detail CardioPredict (and/or C-GAAP, as applicable) in conformity with the Product Promotional Materials and in accordance with Applicable Laws. Interpace will ensure that none of its sales representatives make any representation, statement, warranty or guaranty with respect to a Test that is inconsistent with the Product Promotional Materials, that is deceptive or misleading, or that disparages the Test or the good name, goodwill and reputation of Transgenomic.

(d)Transgenomic will create and provide to Interpace all order forms and specimen collection kits, conduct all specimen testing for CardioPredict (and C-GAAP, as applicable); and report the patients’ results to the physician all in accordance with Applicable Laws.

(e)Transgenomic will also provide the following support obligations:

(i)support as reasonably necessary all technical inquiries from physicians, legally empowered designees, medical/office staff, and all Interpace field personnel;

(ii)provide any reasonably necessary information to Interpace to assist Interpace in the development of Product Promotional Materials as deemed necessary or appropriate by Interpace to carry out the Phase Two Commercialization Plan;

(iii)provide reasonably necessary information to Interpace to assist Interpace in the development of training materials as deemed necessary or appropriate by Interpace to effectively train its field personnel to carry out the Phase Two Commercialization Plan;

(iv)provide scientific training to Interpace’s field personnel as reasonably requested by Interpace;

(v)provide customer service support for patients or their legal designees regarding insurance coverage, testing status, general information about the tests and other standard customer service activities; and

(vi)provide other information and resources that may be reasonably required by Interpace from Transgenomic as deemed necessary or appropriate by Interpace in its reasonable discretion in good faith to carry out each Phase Two Commercialization Plan.

(f)Transgenomic is solely responsible for: (i) execution of CardioPredict (and C-GAAP, as applicable) in a CLIA Approved Lab, (ii) ensuring that CardioPredict (and C-GAAP, as applicable), as and in the form provided by Transgenomic, will at all times conform to Applicable Laws, (iii) maintaining all relevant laboratory approvals, including securing and retaining NY CLIA Lab Approval for the Tests; (iv) ensuring that all materials used in and provided solely by

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Transgenomic in support of the Collaboration but only as and in the form provided by Transgenomic comply with Applicable Laws.

(g)Transgenomic will be responsible for all billing and collection, arranging for insurance pre-authorization when necessary, assuring proper coding for insurance or under other payer’s requirements, and negotiating managed care contracts.

(h)Transgenomic will be responsible for preparing and submitting a CardioPredict Validation to a New York State-certified organization. Transgenomic will reasonably consider any comments Interpace may have to the CardioPredict Validation, but final authority and control for the CardioPredict Validation and the content thereof will remain with Transgenomic.

(i)Transgenomic will use commercially reasonable efforts to obtain the Patent Issuance as soon as reasonably possible and will keep Interpace reasonably updated on all developments in connection therewith. Transgenomic will consider Interpace’s comments, suggestions and proposed strategies concerning how to obtain Patent Issuance. Transgenomic shall further keep Interpace reasonably and regularly updated on efforts and material issues affecting Patent Issuance. Prior to Phase Two, Transgenomic shall also notify Interpace within a reasonable period of time should, to Transgenomic’s Knowledge, any of its representations in Sections 5.1(e) and 5.1(f) no longer be true and correct.

(j)Transgenomic has advised Interpace that the […***…]. Transgenomic agrees that within three months following the Effective Date, Transgenomic will have […***…], including Transgenomic’s obligations under Article 12. Such assurance may take the form of a consent from […***…], or other steps reasonably satisfactory to Interpace.

(k)Interpace will ensure that the Product Promotional Materials comply with all Applicable Laws, and with Transgenomic’s Trademark usage rules, guidelines, and practices as provided by Transgenomic to Interpace in writing from time to time, and as may be amended at any time at the sole discretion of Transgenomic, with respect to the appearance and manner of use of the Trademarks of Transgenomic. All Product Promotional Materials must be kept strictly confidential by Interpace until such Product Promotional Materials have been approved by Transgenomic for publication or other general dissemination (such approval not to be unreasonably withheld or delayed). Interpace shall submit to Transgenomic samples of the Product Promotional Materials prior to their use for marketing and promotion of CardioPredict (and C-GAAP, as applicable) for Transgenomic’s prior written approval. Transgenomic will provide Interpace with written notice of approval or disapproval within thirty (30) calendar days of the receipt of any sample. Upon notice of disapproval, the Parties will discuss as soon as reasonably practical to resolve any issues and develop mutually agreeable materials. No approval that Transgenomic may give hereunder will constitute or imply any representation or belief by Transgenomic that the Product Promotional Materials comply with Applicable Laws, industry standards or codes, nor will any such approval limit or relieve Interpace from its obligations under this Agreement (including with respect to indemnification to Transgenomic). Without the prior written consent of Transgenomic (i) Interpace may not use any Product Promotional Materials for any other Person or product anywhere in the world and (ii) Interpace may not use the Product Promotional Materials in connection with

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CardioPredict (or C-GAAP, as applicable) outside of the Cardiology Field or outside of the United States except to the extent a written agreement is entered into between the Parties that permits Interpace to commercialize CardioPredict (or C-GAAP, as applicable) outside of the Cardiology Field or outside of the United States in accordance with Sections 2.7(c) or 2.8(c).

(l)Transgenomic will use commercially reasonable efforts to seek to maximize: (i) the net reimbursement per Test agreed to be paid by a maximum number of nationally recognized third party insurance companies and (ii) the net reimbursement per Test paid by the Centers for Medicare and Medicaid Services (“CMS”) for each such Test. Transgenomic shall also use commercially reasonable efforts to pursue reimbursement for the testing of the ABCB1/MDR1 gene in a reasonably expeditious manner. Transgenomic will consider Interpace’s comments, suggestions and proposed strategies concerning reimbursement of the Tests.

(m)Interpace will execute and perform the Commercialization Plans in a diligent and professional manner and in accordance with the terms in this Agreement and the Commercialization Plans, and in accordance all usual and customary industry practices and Applicable Laws. In addition to and without limiting the generality of the foregoing, Interpace and its sales representatives and field personnel will not engage in any illegal or unethical practices or practices that would harm the reputation of Transgenomic or a Test in connection with the marketing, sales, and commercialization of such Test. Interpace will comply (and will ensure its officers, directors, employees and contractors, subcontractors, agents and any person or entity acting on its behalf or under its control comply) with all applicable U.S. anti-corruption laws and regulations, including but not limited to the U.S. Foreign Corrupt Practices Act. No payments or transfers of value will be made which have the purpose or effect of public or commercial bribery, acceptance or acquiescence in extortion, kickbacks or other unlawful or improper means of obtaining or retaining business or directing business to any person or entity. Interpace will cooperate fully in Transgenomic’s efforts to enforce the terms of this provision, including but not limited to providing, upon request from Transgenomic (i) certification of compliance with this provision as signed by an authorized representative of Interpace and (ii) reasonable cooperation at Transgenomic’s expense with respect to any investigation relating to this provision.

(n)Interpace will use its diligent efforts to promote, market, advertise, and sell CardioPredict (and C-GAAP, as applicable) in the United States. Interpace will, in accordance with Section 2.4(b) hereof, organize and maintain a competent sales force and will pursue all commercially desirable sales prospects in accordance with the Commercialization Plans. Interpace will call upon all sales prospects in accordance with the Commercialization Plans. The Parties will give attention to and address any and all complaints from customers and prospective customers of CardioPredict (and/or C-GAAP, as applicable). For the avoidance of doubt, the foregoing shall not modify, limit, restrict, condition or otherwise affect Interpace’s obligation to implement the Commercialization Plans.

(o)Unless otherwise mutually agreed upon by the Parties and set forth in the Commercialization Plans, at least (i) […***…] units of CardioPredict in the Cardiology Field in the United States will be sold as of the result of the efforts of Interpace during the first […***…]

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months of Phase Two and (ii) […***…] units of CardioPredict in the Cardiology Field in the United States will be sold as of the result of the efforts of Interpace during the […***…] calendar year (i.e. during the period beginning January 1, […***…] and ending December 31, […***…]) (individually and collectively, the “Minimum Sales”). The Parties shall meet at least sixty (60) days prior to the commencement of each Applicable Period following December 31, […***…] to discuss in good faith and agree upon the minimum sales for each subsequent Applicable Period during the remainder of Phase Two and such agreed upon minimum sales for each subsequent Applicable Period for Phase Two shall be, and shall be deemed to be, “Minimum Sales” for purposes of this Agreement. In the event the Parties are unable to agree on Minimum Sales to apply in any Applicable Period following December 31, […***…] at least thirty days prior to the commencement of such Applicable Period, then the Chief Executive Officer and/or Chief Financial Officer for each Party shall meet to resolve such dispute and discuss in good faith and agree upon the Minimum Sales to apply in such Applicable Period within thirty (30) days of such meeting.

(p)During the Term and for a period of […***…] years thereafter, each Party will keep and maintain detailed and accurate books and records with regard to the marketing, sales, and commercialization of CardioPredict in the United States, including all Interpace’s CardioPredict Costs and Transgenomic’s CardioPredict Costs, as applicable, and the basis of calculation thereof. Each Party will have the right, at its own expense, and upon reasonable advance written notice to the other Party, but not more than twice annually, to inspect and audit the books and records and other relevant information of the other Party during such other Party’s normal business hours to verify its compliance with the terms and conditions of this Agreement, including the costs incurred and charges due. Each Party will maintain the confidentiality of the books, records and other information of the other Party to the extent required under Article 11.

(q)Each Party will retain ownership of all right, title, and interest in and to its Background Technology. During the Term, Transgenomic and Interpace will jointly own all copyrights in the United States to the Product Promotional Materials solely created as a part of the Collaboration (i) for which the Parties would be considered joint authors under the US Copyright Act of 1976, as amended from time to time (the “Copyright Act”), and/or (ii) are considered compilations under the Copyright Act, in which case the Parties will jointly own the copyright in such compilations in the United States, except that in such case, the copyright to the compilation is limited to the compilation per se and not to the underlying contributions for which ownership resides in the respective Party creating such contribution. Material described in the preceding clauses (i)-(ii) are the “Jointly Owned Copyrights”. Each Party’s rights in the Jointly Owned Copyrights expressly excludes any respective underlying Background Technology and Improvements thereto of the other Party. Neither Party shall have a duty to account to the other with respect to the Jointly Owned Copyrights. With the sole exception of the Parties’ joint ownership in the Jointly Owned Copyrights as and to the extent set forth in this Section 2.4(q), Transgenomic owns: (i) all of its Background Technology, (ii) all Technology, data, or other materials in connection with the Tests, (iii) all Technology, information and other materials created, conceived, or reduced to practice in connection with this Agreement and (iv) any Improvements to any of the foregoing (collectively, the “Transgenomic IP”) and all Intellectual Property Rights in and to the Transgenomic IP. To the extent Interpace has any right, title, or interest in or to any Transgenomic IP, Interpace hereby irrevocably grants, conveys, transfers, assigns and delivers to Transgenomic all right, title, and interest in and to the Transgenomic IP and all Intellectual Property Rights therein in perpetuity and

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throughout the world, effective immediately upon the inception, conception, creation or development thereof. To the extent, if any, that any Transgenomic IP or Intellectual Property Rights therein are not assignable or that Interpace retains any right, title or interest in and to any such Transgenomic IP, Interpace (a) unconditionally and irrevocably waives the enforcement of such rights, and all claims and causes of action of any kind against Transgenomic with respect to such rights; (b) agrees, at Transgenomic’s request and expense, to consent to and join in any action to enforce such rights; and (c) hereby grants to Transgenomic a perpetual, irrevocable, fully paid-up, royalty-free, transferable, sublicensable (through multiple levels of sublicensees), exclusive,worldwide right and license to use, reproduce, distribute, display and perform (whether publicly or otherwise), prepare derivative works of and otherwise modify, make, sell, offer to sell, import and otherwise use and exploit (and have others exercise such rights on behalf of Transgenomic) all or any portion of the Transgenomic IP, in any form or media (now known or later developed). The foregoing license includes, without limitation, the right to make any modifications to the Transgenomic IP regardless of the effect of such modifications. Interpace further irrevocably waives any “moral rights” or other rights with respect to attribution of authorship or integrity of the Transgenomic IP that Interpace may have under any applicable law under any legal theory. To the extent that any Transgenomic IP uses or incorporates in any manner any Background Technology of Interpace (“Interpace IP”), Interpace hereby grants to Transgenomic a perpetual, irrevocable, fully paid-up, royalty-free, transferable, sublicensable (through multiple levels of sublicensees), non-exclusive,worldwide right and license to use, reproduce, distribute, display and perform (whether publicly or otherwise), prepare derivative works of and otherwise modify, make, sell, offer to sell, import and otherwise use and exploit such Interpace IP to the extent necessary to enable Transgenomic to freely use and exploit and otherwise exercise its ownership rights in the Transgenomic IP in any manner without restriction. Following expiration or termination of this Agreement for any reason, Transgenomic shall own exclusively all Product Promotional Materials (including exclusive ownership of all Jointly Owned Copyrights) (except for any underlying Background Technology of Interpace, which shall remain the sole and exclusive property of Interpace), and Interpace hereby irrevocably grants, conveys, transfers, assigns and delivers to Transgenomic all right, title and interest in and to such Product Promotional Materials and all Intellectual Property Rights therein in perpetuity and throughout the world, provided that Transgenomic shall not exercise its exclusive ownership rights to any of the foregoing until expiration or termination of this Agreement. For clarification, neither the foregoing nor anything else in this Agreement shall affect or restrict in any manner Transgenomic’s rights as a joint owner as set forth in this Section 2.4(q) or otherwise in this Agreement or under Applicable Law.

(r)In the event that Transgenomic notifies Interpace that, other than due to a shortage or event effecting the diagnostic test industry as a whole, or due to a supplier’s fault or inability to supply or other reason not beyond Transgenomic’s control, Transgenomic will not be able to […***…], or will be unable to […***…], in each case for a period of at least sixty (60) consecutive days (each a “Supply Event”), then immediately following such notification the Parties will meet and discuss and agree in good faith on a resolution to resolve the Supply Event, but if a mutually acceptable resolution cannot be agreed upon by the Parties, then, and only through and until such time as Transgenomic is able to […***…] or is able to […***…], as applicable, and subject to the

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terms and conditions of this Agreement, Transgenomic will grant Interpace a non-exclusive, limited, non-transferable, non-sublicensable license under the CardioPredict Intellectual Property Rights that Transgenomic owns or has the right to license or sublicense (and C-GAAP Intellectual Property Rights that Transgenomic owns or has the right to license or sublicense, if applicable) to […***…] to […***…], solely in the Cardiology Field and solely in the United States and solely during the duration of the Supply Event. In the event Transgenomic notifies Interpace that Transgenomic will not be able to […***…], other than a […***…], for a period of at least sixty (60) consecutive days, then immediately following such notification the Parties will meet and discuss and agree in good faith on a resolution (which resolution may include […***…]) and the Parties will provide reasonable assistance and cooperation in connection with such resolution; provided that such resolution shall apply only through and until such time as Transgenomic […***…].

2.5Profit Sharing

(a)Certain defined terms:

(i)“Applicable Period” means any full calendar year during the Term: except that (x) the entire duration of Phase One will be considered one complete Applicable Period, regardless of whether such period is less than a full calendar year and/or whether such period includes portions of more than one calendar year, (y) if Phase Two begins on a date which is other than January 1st of such calendar year, that portion of such calendar year in which Phase Two was in effect will be considered one complete Applicable Period regardless of whether such period is less than a full calendar year; (z) in event the Agreement ends on a day other than December 31st of any calendar year, then the portion of such calendar year in which the Agreement was in place will be considered one complete Applicable Period regardless of whether such period is less than a full calendar year.    

(ii)“Initial Profit” means, for any calendar month, Applicable Period or other cumulative period: (x) the […***…] for such calendar month, Applicable Period or other cumulative period, as the case may be less (y) […***…] for such calendar month, Applicable Period or other cumulative period, as the case may be.

(iii)“Interpace’s CardioPredict Costs” means, for any calendar month, Applicable Period or other cumulative period, as the case may be:

(A) Interpace’s CardioPredict Costs are those direct costs to market and sell CardioPredict for such Applicable Period, incurred in accordance with the agreed Commercialization Plans following the

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general principles and cost categories outlined below and for Sales Representatives, in the attached Exhibit C. The general categories of principles and cost are the following:

(1)Sales Representatives in accordance with the following principles and cost categories as set forth in Exhibit C:

(a)Start up and one-time costs including initial recruiting of sales representatives, setup and systems configuration costs, to be reimbursed based on the rates previously discussed and to be mutually agreed;

(b)     Pass through costs that are directly related, without need for allocation, to selling CardioPredict including sales representatives and district managers salary, bonus and related payroll taxes, sales representatives and sales managers field travel, training and sales meetings, business development funds for use by sales representatives, and shipping of materials or sample kits; with such costs estimated and reconciled based on actual cost incurred by Interpace;

(c)    Direct costs that are assigned to the program as set forth in the applicable exhibit including sales representative and district manager benefits, support of the field sales leader when not dedicated to the program, fleet, backfill recruiting, training systems and support, computer systems and related support sales operations and related support, and such Interpace costs to be reimbursed based on the rates previously discussed and mutually agreed;

(d)    Indirect costs that relate to the program as set forth in the applicable exhibit including sales representative support from Interpace’s compliance, human resources, finance and infrastructure related to the program. The amount for indirect costs will not exceed […***…]% of the sum of (a) – (c) and such Interpace costs to be reimbursed based on the rates previously discussed and mutually agreed.

(2)Participation by Group DCA:

(a)Staff – Actual Cost including taxes and benefits (at PDI overall company rates) using a calculated overall blended rate.

(b)Indirect Support – Which includes indirect support of staff calculated on an overall GDCA basis – amount not

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to exceed […***…]% of total Staff and Indirect Support. Third party costs – GDCA cost.

(3)Direct Interpace Diagnostics management – Which initially will include a General Manager and a Marketing Director.

(a) Direct Cost – No more than […***…]% of actual salary including taxes and benefits (at PDI overall company rates). If either initial positions are filled by non-employees during Phase 1 actual cost will be charged.

(b) Indirect Support – No more than […***…]% of the total cost of Direct Cost (per (a) above) of the Interpace Diagnostics management.

(4) Other third party expenses specifically related to the selling and marketing of the Tests not included in (1) – (3) above – Actual Cost.

(5)It is acknowledged and agreed that in determining amounts in this Section 2.5(A) that actual direct costs are not determinable in all cases and allocations consistent with normal practices will be required.

(B) For the avoidance of doubt, Interpace’s CardioPredict Costs will not include any amount for general management and infrastructure of PDI or any mark up for profit.

(C) Utilizing the principles outlined in these Sections 2.5(a)(iii)(A) and 2.5(a)(iii)(B), Interpace and Transgenomic will agree on Interpace’s CardioPredict Costs for each Applicable Period (or shorter periods if agreed by the Parties).

(iv)“Net Profit” means, for any calendar month, Applicable Period or other cumulative period, (x) the […***…] for such calendar month, Applicable Period or other cumulative period, as the case may be less (y) […***…] for such calendar month, Applicable Period or other cumulative period, as the case may be.

(v)“Net Revenue” means for any calendar month, Applicable Period or other cumulative period, the net revenue recorded by Transgenomic for the performance of the tests on a GAAP basis (including reductions for allowance for doubtful accounts, trade discounts, etc.) for such calendar month, Applicable Period or other cumulative period, as the case may be.

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(vi)“Transgenomic’s CardioPredict Costs” means, for any calendar month, Applicable Period or other cumulative period, as the case may be:

(A)Transgenomic’s direct costs to process CardioPredict, provide customer service support and billing and collection. Transgenomic will submit a budget for such costs at the same time Interpace submits a budget for each Commercialization Plan. Consistent with the specific principles to be agreed upon and outlined in the attached Exhibit C. The general categories of cost are the following:

(1)cost of all direct materials to perform the test and logistical costs to get kit from physician office or patient to Transgenomic for testing,

(2)direct labor time costs,

(3)royalties or other consideration payable to a third party in connection with the manufacture, use, sale, importation, or other disposition of, commercialization or exploitation of CardioPredict or C-GAAP,

(4)an overhead factor to compensate for other direct costs. In general this overhead factor should represent the incremental cost of other direct costs.

(5) In determining amounts in (A)(1) - (4) above, actual direct costs are not determinable in all instances and estimates, averages, allocations, etc. will be required.

(B) For the avoidance of doubt, Transgenomic’s CardioPredict Costs will not include any amount for general management and infrastructure of Transgenomic or any mark up for profit.

(C) Utilizing the principles outlined in (A) and (B) above, the Parties will agree on Transgenomic’s CardioPredict Costs cost as follows:

(1)During Phase One - A fixed amount per CardioPredict test to be applied to all CardioPredict tests processed during Phase One. Preliminary calculation of this amount is $[…***…] U.S. Dollars but will be finalized during the Commercialization Plan approval process.

(2)During Phase Two - A fixed amount established for each Applicable Period based on ranges of volumes anticipated for each Applicable period. Amounts will be established and agreed no later than thirty (30) days prior to the start of an Applicable Period.

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(D)On a weekly basis, Transgenomic agrees to report (weekly) the number of tests processed and (weekly) Transgenomic’s CardioPredict Costs (as set forth in subsection (C) above).

(b)Reporting and Payment

(i)    During Phase One -

Within […***…] business days following the end of each calendar month during Phase One, Transgenomic will report to Interpace Net Revenue and Initial Profit for such month and cumulatively from the Effective Date through the end of such month. Also within […***…] business days following the end of such month, Interpace will report to Transgenomic, Interpace’s CardioPredict Costs for such month and for the cumulative period from the Effective Date through the end of such month. Based on these reports, Transgenomic and Interpace will calculate Net Profit and agree on amounts owed to Interpace for the month following the principles below:

(A)     So long as cumulative Net Profit from the Effective Date is negative then the amount owed to Interpace for the month is the Initial Profit calculated for such month. At the end of the first month that the cumulative Net Profit from the Effective Date is at least $[…***…], the amount owed to Interpace for such month is the Initial Profit for such month reduced by […***…]% of the amount of cumulative Net Profit for such month from the Effective Date that is over $[…***…] up to $[…***…], by […***…]% of the amount of cumulative Net Profit in the month from the Effective Date that is between $[…***…] and $[…***…] and by […***…]% of cumulative Net Profit for the month from the Effective Date that is over $[…***…]. After first month that the cumulative Net Profit from the Effective Date is at least $[…***…], the amount owed to Interpace for such month is the Initial Profit for such month reduced by […***…]% of the amount of the Net Profit for such month that is over $[…***…] up to $[…***…], by […***…]% of the amount of Net Profit in the month that is between $[…***…] and $[…***…] and by […***…]% of Net Profit for the month that is over $[…***…]. If the cumulative Net Profit in a future month during Phase One becomes negative, the amount owed to Interpace for the month is the Initial Profit for the month increased by all prior deductions (i.e., all prior reductions from payments made to Interpace for prior months representing that portion of Net Profit for such prior months that was retained by Transgenomic, as aforementioned) for Net Profit over $[…***…]. Detailed procedures will be agreed by the Parties. Transgenomic will pay Interpace within […***…] days of the end of the month for which such calculations apply.

(ii)    During Phase Two - Until Net Profit is achieved for both an Applicable Period and cumulatively from the Effective Date -

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Within […***…] business days following the end of each calendar month, Transgenomic will report to Interpace, Net Revenue and Initial Profit for: (x) such month, (y) the year to date portion of the Applicable Period in which such month occurs, and (z) the cumulative period from the Effective Date through the end of such month. Also within […***…] business days following the end of such month, Interpace will report to Transgenomic, Interpace’s CardioPredict Costs for each of the periods described in (x), (y) and (z) above. Based on these reports, Transgenomic and Interpace will calculate Net Profit for each of the periods described in (x), (y) and (z) above, and agree on amounts owed to Interpace for the month following the principles below:

(A) So long as cumulative Net Profit from the Effective Date is negative then the amount owed to Interpace for the month is the Initial Profit calculated for such month. At the end of the first month that the cumulative Net Profit from the Effective Date is at least $[…***…], the amount owed to Interpace for such month is the Initial Profit for such month reduced by […***…]% of the amount of cumulative Net Profit for such month from the Effective Date that is over $[…***…] up to $[…***…], by […***…]% of the amount of cumulative Net Profit in the month from the Effective Date that is between $[…***…] and $[…***…] and by […***…]% of cumulative Net Profit for the month from the Effective Date that is over $[…***…]. After first month that the cumulative Net Profit from the Effective Date is at least $[…***…], the amount owed to Interpace for such month is the Initial Profit for such month reduced by […***…]% of the amount of the Net Profit for such month that is over $[…***…] up to $[…***…], by […***…]% of the amount of Net Profit in the month that is between $[…***…] and $[…***…] and by […***…]% of Net Profit for the month that is over $[…***…]. If the cumulative Net Profit in a future month in the Applicable Period becomes negative, the amount owed to Interpace for that month is the Initial Profit for such month increased by all deductions (i.e., all prior reductions from payments made to Interpace for prior months representing that portion of Net Profit for such prior months that was retained by Transgenomic, as aforementioned) in the Applicable Period for Net Profit over $[…***…]. Detailed procedures will be agreed by the parties. Transgenomic will pay Interpace within […***…] days of the end of the month for which such calculations apply until positive Net Profit is achieved. After cumulative positive Net Profit is achieved, Transgenomic will pay Interpace within […***…] days of the end of the month for which such calculations apply, unless other Collaboration-related events cause a negative effect on cash flow, upon which the parties will meet to agree on an appropriate time frame for Transgenomic payments to be made to Interpace.

(iii)    During Phase Two – For Each Applicable Period after the first Applicable Period that Net Profit is achieved for both the Applicable Period and cumulatively from the Effective Date -

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Within […***…] business days following the end of each calendar month, Transgenomic will report to Interpace Net Revenue and Initial Profit for (x) such month and (y) the year to date portion of the Applicable Period in which such month occurs. Also within […***…] business days following the end of such month, Interpace will report to Transgenomic Interpace’s CardioPredict Costs for such each of the periods described in (x) and (y) above. Based on these reports, Transgenomic and Interpace will calculate Net Profit for each of the periods described in (x) and (y) above and agree on amounts owed to Interpace for the month following the principles below:

(A) So long as cumulative Net Profit for the Applicable Period is negative then the amount owed to Interpace for the month is the Initial Profit calculated for such month. If, at the end of a month, the cumulative Net Profit for the Applicable Period is at least $[…***…], the amount owed to Interpace for the month is the Initial Profit for such month, reduced by […***…]% of the amount of Net Profit for the month that represents the cumulative Net Profit from the Effective Date that is over $[…***…] up to $[…***…], […***…]% of the amount of Net Profit in the month for that portion of the cumulative Net Profit from the Effective Date that is between $[…***…] and $[…***…] and […***…]% of Net Profit for the month for that portion of the cumulative Net Profit from the Effective Date that is over $[…***…]. If the cumulative Net Profit in a future month in the Applicable Period becomes negative, the amount owed to Interpace for that month is the Initial Profit for such month increased by all deductions (i.e., all prior reductions from payments made to Interpace for prior months representing that portion of Net Profit for such prior months that was retained by Transgenomic, as aforementioned) in the Applicable Period for Net Profit over $[…***…]. Detailed procedures will be agreed by the Parties. Transgenomic will pay Interpace within […***…] days of the end of the month for which such calculations apply until positive Net Profit is achieved. After cumulative positive Net Profit is achieved, Transgenomic will pay Interpace within […***…] days of the end of the month for which such calculations apply. For purposes of clarity, the terms and conditions of this Section 2.5 shall be applicable during any period in which Interpace is exercising the license rights set forth in Sections 2.4(r) and 12.1, provided that Transgenomic shall not be required to share any amounts with Interpace following expiration or termination of this Agreement.

2.6Loan Provisions

(a)Subject to the terms of this Section 2.6, Interpace agrees, from time to time during Phase Two, to make certain loans to Transgenomic in such amounts as may be reasonably requested by Transgenomic (each a “Loan” and collectively the “Loans”), subject to, conditioned upon and in accordance with the following:

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(i)    Transgenomic agrees that all such Loan proceeds will be used solely for Transgenomic’s working capital required for CardioPredict during Phase Two. In no event will Interpace have any obligation to make any Loans to Transgenomic until after Phase Two has begun.

(ii)    Within […***…] business days following the end of the calendar month in which Phase Two commences, Interpace will, upon written request from Transgenomic, advance to Transgenomic an amount equal to Transgenomic’s CardioPredict Costs for the prior […***…] months.

(iii)     Within […***…] business days following the end of each month after the first month in which Phase Two commenced, Interpace will, upon written request from Transgenomic, advance to Transgenomic an amount equal to difference between Transgenomic’s CardioPredict Costs for the then prior […***…] months and the total amount of previous Loans made by Interpace to Transgenomic. However, if, based on this calculation method, Interpace has advanced Transgenomic, in the aggregate, an amount that is more than Transgenomic’s CardioPredict Costs for such prior […***…] month period, then Interpace will have no obligation to make such Loan and will no longer have any obligation to make any Loans to Transgenomic until any such period when Transgenomic’s CardioPredict Costs for the […***…] month period exceed the total amount of the previous loans.

(iv)    In no event will Interpace be required to make any Loans which, when taken together with all outstanding principal and interest under all Loans made by Interpace to Transgenomic, would cause total outstanding amounts, including the loan amount requested, to exceed Three Million Dollars ($3,000,000).

(v)    If, at any time, Net Profit, calculated on a monthly basis, is greater than zero for […***…] consecutive months, Interpace will no longer have any obligation to make any new Loans to Transgenomic, unless other Collaboration-related events cause a negative effect on cash flow, upon which the Parties will meet to consider granting Loans to Transgenomic.

(b)All Loans will be evidenced by a convertible note in substantially the form attached hereto as Exhibit A (the “Convertible Note”).The Convertible Note will bear simple interest at an annual rate equal to the lesser of: (i) the maximum rate permitted by Applicable Law, and (ii) […***…] as of the Effective Date, with principal and accrued interest payable on the eighth anniversary of the Effective Date, and will be convertible at any time at the option of Interpace into shares of common stock of Transgenomic at a conversion rate of seventy-five cents ($0.75) per share of common stock (subject to adjustments for stock splits, stock dividends, recapitalizations and the like); provided, however, that, any time after any Loan is outstanding for more than […***…] years, Interpace may, by written notice to Transgenomic elect to terminate all, but not less than all, of the conversion rights under the Convertible Note and upon termination of such conversion rights, all Loans under the Convertible Note will become payable over a period of thirty-six (36) months

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(or such shorter period in the event the eighth anniversary of the Effective Date is then less than thirty-six (36) months from the date of the written notice of election to terminate Interpace’s conversion rights) in consecutive, equal monthly installments of principal and interest, commencing on the first day of the second full calendar month following the date of Interpace’s written notice of election to terminate its conversion rights.

(c)As security for the full and timely payment of all amounts that may from time to time become due under the Convertible Note, Transgenomic will grant Interpace a blanket security interest in substantially all of Transgenomic’s assets by executing and delivering contemporaneously with the execution and delivery of the Convertible Note by Transgenomic, a security agreement in substantially the form attached hereto as Exhibit B (the “Security Agreement”) . The security interest granted to Interpace under the Security Agreement will be a first priority lien, subject to (i) the security interest in Transgenomic’s assets held by Third Security, LLC and its affiliates (collectively, “Third Security”) pursuant to Transgenomic’s outstanding credit facility with Third Security (as may be amended or restated from time to time), (ii) liens for taxes, assessments or charges of any Governmental Body for claims not yet due, (iii) liens imposed by laws, such as mechanics’ liens and other similar liens, arising in the ordinary course of business which secure payment of obligations not more than thirty (30) days past due; and (iv) any additional liens of record that Interpace may consent to in its sole discretion at the time of extending a Loan that may have superior priority to Interpace’s lien by operation of law.

2.7Restrictions and Other Agreements

(a)Transgenomic agrees that during the Term, subject to Section 2.7(d) hereof, neither Transgenomic nor any of its Affiliates will, directly or indirectly (either for itself, through or with any third parties, or otherwise): (i) market, promote, sell or otherwise commercialize CardioPredict (including any Variation) in the Cardiology Field in the United States, other than in support of the Collaboration, or any Competing Test within or for the Cardiology Field in the United States, or (ii) conduct, perform or execute CardioPredict (including any Variation) or any Competing Test, in each case, within or for the Cardiology Field in the United States, other than in support of the Collaboration, or (iii) transfer, sell, assign, license, sublicense or grant any interest in the CardioPredict Intellectual Property Rights owned by or licensed to Transgenomic for use within or for the Cardiology Field within the United States other than in support of the Collaboration.

(b)Interpace agrees that during the Term, neither Interpace nor any of its Affiliates will, directly or indirectly (either for itself, through or with any third parties, or otherwise) (i) market, promote, sell or otherwise commercialize CardioPredict (including any Variation) other than within or for the Cardiology Field within the United States in support of the Collaboration and/or (ii) market, promote, sell or otherwise commercialize any Competing Test within or for the Cardiology Field within the United States.

(c)During the Term and only if Interpace is and has throughout the Term been performing in compliance with its material obligations hereunder (including meeting all Minimum Sales targets) then, in the event Transgenomic intends to market, promote, sell or otherwise

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commercialize with a third party (i) CardioPredict (including any Variation) outside the Cardiology Field within the United States or (ii) any New Test inside the Cardiology Field

within the United States, Transgenomic shall give Interpace written notice thereof (the “Commercialization Notice”). Interpace shall have […***…] days from its receipt of the Commercialization Notice to advise Transgenomic, in writing, if Interpace desires to collaborate with Transgenomic on such commercialization. In the event Interpace does not respond within such […***…] day period, or advises Transgenomic, in writing, that it does not desire to collaborate with Transgenomic on such commercialization, then Transgenomic may pursue such opportunity with any third party. In the event Interpace advises Transgenomic, in writing, that it desires to collaborate with Transgenomic on such commercialization within […***…] days from its receipt of the Commercialization Notice, then for a period of […***…] days following receipt of Interpace’s written notice, Transgenomic agrees to negotiate exclusively with Interpace the terms and conditions pursuant which such collaboration might occur. At the end of such […***…] day period Transgenomic may pursue such commercialization with any third party. Notwithstanding the foregoing, nothing herein shall limit or restrict in any manner the right of Transgenomic to directly (without any third party) market, promote, sell or otherwise dispose of, commercialize and exploit CardioPredict (or variations thereof) outside of the Cardiology Field and/or outside of the United States.

(d)For clarification, Transgenomic and its Affiliates shall be free to, directly or indirectly, market, promote, sell, commercialize, conduct, perform, and execute any Excluded Variations, inside and outside of the Cardiology Field and inside or outside of the United States without any restrictions of any type or kind.

2.8C-GAAP

(a)    Transgenomic understands and agrees that Interpace is not undertaking the obligation to assist or otherwise collaborate with Transgenomic regarding the commercialization of C-GAAP. Notwithstanding the above, Transgenomic agrees that during the Term, other than as set forth in Section 2.8(b) below and subject to Section 2.7(d) hereof, neither Transgenomic nor any of its Affiliates will, directly or indirectly (either for itself, through or with any third parties, or otherwise) (i) market, promote, sell or otherwise commercialize C-GAAP (including any Variation) in the Cardiology Field in the United States or conduct, perform or execute C-GAAP (including any Variation) in the Cardiology Field in the United States, in each case, other than in support of the Collaboration and/or (ii) transfer, sell, assign, license, sublicense or grant any interest in the C-GAAP Intellectual Property Rights owned by or licensed to Transgenomic for use within or for the Cardiology Field within the United States other than in support of the Collaboration.

(b)    During the Term, the Parties will continue to engage in discussions concerning the possible commercialization of C-GAAP in the Cardiology Field in the United States, it being understood and agreed that Interpace shall have the right to explore third party discussions regarding possible commercialization of C-GAAP provided the Parties reach an understanding regarding the nature and scope of such third party communications in advance and in writing. In the event the Parties agree to commercialize C-GAAP in the Cardiology Field in the United States, the commercialization of C-GAAP shall become part of this Agreement and the Parties shall meet and

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agree on updating the Commercialization Plans, in writing, to include the commercialization of C-GAAP in the Cardiology Field in the United States. In the event the Parties agree to commercialize C-GAAP in the Cardiology Field in the United States, references to CardioPredict set forth in this Agreement shall include C-GAAP.

(c)    During the Term and only if Interpace is and has throughout the Term been performing in compliance with its material obligations hereunder (including meeting all Minimum Sales targets) then, in the event Transgenomic intends to market, promote, sell or otherwise commercialize C-GAAP (including any Variation) outside of the Cardiology Field and/or outside of the United States, in either case with a third party, it shall give Interpace written notice thereof (the “C-GAAPNon Cardiology Commercialization Notice”). Interpace shall have […***…] days from its receipt of the C-GAAP Non Cardiology Commercialization Notice to advise Transgenomic, in writing, if it desires to collaborate with Transgenomic on the commercialization of C-GAAP outside of the Cardiology Field and/or outside of the United States, as applicable. In the event Interpace does not respond within such […***…] day period, or advises Transgenomic, in writing, that it does not desire to collaborate with Transgenomic on the commercialization of C-GAAP outside of the Cardiology Field and/or outside of the United States, as applicable, Transgenomic may pursue such opportunity with any third party. In the event Interpace advises Transgenomic, in writing, that it desires to collaborate with Transgenomic on the commercialization of C-GAAP outside of the Cardiology Field and/or outside of the United States, as applicable, within […***…] days from its receipt of the C-GAAP Non Cardiology Commercialization Notice then, for a period of […***…] days following receipt of Interpace’s written notice, Transgenomic agrees to negotiate exclusively with Interpace the terms and conditions pursuant which such collaboration might occur. At the end of such […***…] day period Transgenomic may pursue the commercialization of C-GAAP outside of the Cardiology Field and/or outside of the United States with any third party. Notwithstanding the foregoing, nothing herein shall limit or restrict in any manner the right of Transgenomic to directly (without any third party) market, promote, sell or otherwise dispose of, commercialize and exploit C-GAAP outside of the Cardiology Field and/or outside of the United States.

Article 3TERM AND TERMINATION

3.1Term of Agreement

(e)This Agreement will commence on the Effective Date and will continue until terminated or expired in accordance with Section 3.1(b) below (the “Term”).

(f)This Agreement may expire or be terminated as provided below:

(i)The Agreement will expire automatically upon the expiration of the Phase One Period unless Interpace elects to proceed to Phase Two in accordance with the provisions of Section 2.2(c).

(ii)In the event Interpace elects to proceed to Phase Two in accordance with the provisions of Section 2.2(c), this Agreement will expire on date that is ninety (90) days following the eighth year anniversary of the date that Phase Two began,

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provided, however, this Agreement will renew automatically year to year unless and until either Party provides notice of non-renewal to the other Party at least ninety (90) days prior to the expiration of such initial term or any renewal term.

(iii)Interpace and Transgenomic will have the right to terminate this Agreement by mutual written consent at any time.

(iv)Transgenomic may terminate this Agreement upon sixty (60) days’ prior written notice to Interpace in the event of a material breach by Interpace of any of its representations, warranties, covenants, or obligations contained in this Agreement. Upon the expiration of such notice period, this Agreement will terminate without the need for further action by either Party; provided, however, that if the breach upon which such notice of termination is based will have been cured within such sixty (60) day period, to the reasonable satisfaction of Transgenomic, then such notice of termination will be deemed rescinded, and this Agreement will continue in full force and effect.

(v)    Interpace will have the right to terminate this Agreement upon sixty (60) days’ prior written notice to Transgenomic in the event of a material breach by Transgenomic of any of its representations, warranties, covenants, or obligations contained in this Agreement. Upon the expiration of such notice period, this Agreement will terminate without the need for further action by either Party; provided, however, that if the breach upon which such notice of termination is based will have been cured by Transgenomic within such sixty (60) day period, to the reasonable satisfaction of Interpace, then such notice of termination will be deemed rescinded, and this Agreement will continue in full force and effect.

(vi)    Interpace may terminate this Agreement upon sixty (60) days’ prior written notice to Transgenomic in the event of a Material Adverse Change, provided that at the end of such sixty (60) day period such Material Adverse Change continues to exist.

(vii)    Transgenomic may terminate this Agreement if the Minimum Sales are not met during any Applicable Period during the Term; provided, however, that, prior to terminating this Agreement pursuant to this Section 3.1(b)(vii), Transgenomic will provide notice to Interpace of the Minimum Sales shortfall and the Parties will meet and discuss and agree in good faith on a resolution to resolve the shortfall, but if a mutually acceptable resolution cannot be agreed upon by the Parties, then Transgenomic may terminate this Agreement upon sixty (60) days’ prior written notice to Interpace. In the event an acceptable resolution is met, but such resolution fails to remedy the Minimum Sales shortfall within the time prescribed by the agreed upon resolution, then Transgenomic may terminate this Agreement upon sixty (60) days’ prior written notice to Interpace. The exclusive remedy available for Interpace’s failure to solely achieve Minimum Sales in any Applicable Period despite performing all of its obligations under this Agreement is limited to Transgenomic’s right to terminate this Agreement as set forth in this Section 3.1(b)(vii); provided however

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that for clarification, the foregoing shall not in any way limit, modify or condition or act as a waiver of Transgenomic’s rights or remedies under this Agreement or at law or in equity for any breach by Interpace of its obligations under this Agreement.

(viii)    Interpace may terminate this Agreement upon written notice to Interpace at the earlier of (i) the date of the expiration of the Phase One Period and (ii) the date of the Phase Two Notification, if any of the representations and warranties set forth in Sections 5.1(e) and 5.1(f) are no longer true and correct as of such date.

3.2Survival

The provisions of Articles 1, 6, 7, 10, 11, and 13, and Sections 2.4(c) (last sentence only), 2.4(k) (last two sentences only), 2.4(p), 2.4(q), 3.2, 4.1(i), 4.1(j), 5.1(j) and 5.1(k) will survive any termination or expiration of this Agreement.

Article 4REPRESENTATIONS AND WARRANTIES OF INTERPACE

4.1Representations and Warranties of Interpace

Interpace represents and warrants to Transgenomic that:

(a)Organization of Interpace. Interpace is a corporation duly formed, validly existing, and in good standing under the laws of the State of Delaware.

(b)Authorization of Transaction. Interpace has full limited liability company power and authority to execute and deliver this Agreement and each other agreement, document, or instrument or certificate contemplated by this Agreement or to be executed by Interpace in connection with the transactions contemplated by this Agreement (the “Interpace Documents”) and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly and validly executed and delivered by Interpace and this Agreement constitutes, and each of the Interpace Documents when so executed and delivered will constitute (in each case assuming due authorization, execution and delivery by each other Party hereto or thereto), the valid and legally binding obligation of Interpace, enforceable in accordance with its or their respective terms and conditions, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting enforcement of creditors’ rights or by principles of equity (the “Enforceability Exceptions”).

(c)Noncontravention. Neither the execution and the delivery of this Agreement nor any of the Interpace Documents, nor the consummation of the transactions contemplated hereby or thereby, will (i) violate any of Interpace’s Organic Documents or any Applicable Law to which Interpace is subject, or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which Interpace is a party or by which it is bound or to which any of its material assets are subject.

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Except for any filing requirements in connection with applicable securities laws, Interpace is not required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of, any Person or Governmental Body in connection with the execution and delivery of this Agreement or in order for Interpace to perform its obligations contemplated by this Agreement.

(d)Brokers’ Fees. Interpace has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Transgenomic could become liable or obligated.

(e)Financial Capability. Interpace has sufficient cash or other sources of immediately available funds to make the Loans contemplated by this Agreement.

(f)Personnel. Interpace has the requisite qualified personnel, facilities, equipment, expertise, experience and skill to perform its obligations set forth in this Agreement in a diligent, professional, and competent manner, and its employees will perform the Phase One Commercialization Plan and Phase Two Commercialization Plan (if applicable) in diligent, professional and competent manner in accordance with best industry practices and all Applicable Laws.

(g)Permits. Interpace has all necessary Permits to carry out its obligations under this Agreement.

(h)Legal Compliance.    Interpace complies and at all times has complied in all material respects with all Applicable Laws, and no Legal Proceeding has been filed or commenced against Interpace alleging any failure so to comply or any liability pursuant to any Applicable Law. To the Knowledge of Interpace, Interpace is not under investigation with respect to the violation of any Applicable Law.

(i)Remedies. EXCEPT IN THE EVENT INTERPACE IS IN BREACH OF A REPRESENTATION OR WARRANTY SET FORTH IN SECTION 4.1(h) ON THE EFFECTIVE DATE, IN WHICH CASE TRANSGENOMIC SHALL BE ENTITLED TO ANY REMEDIES IT MAY HAVE UNDER APPLICABLE LAW, TRANSGENOMIC’S SOLE AND EXCLUSIVE REMEDY FOR BREACH OF THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTION 4.1(h) SHALL OTHERWISE BE AS AND TO THE EXTENT SET FORTH IN THE INDEMNIFICATION SECTION IN SECTION 6.2. FURTHER, FOR THE AVOIDANCE OF DOUBT, FOR BREACHES OF SECTIONS 4.1(c), 4.1(d), 4.1(f) AND/OR 4.1(g), THE CURE PERIOD SET FORTH IN SECTION 3.1(b)(iv) SHALL APPLY.

(j)Disclaimer of Representations.    Interpace makes no representation or warranty to Transgenomic except as specifically made in this Article 4, and, except as specifically made in this Article 4, Interpace makes no and hereby specifically and expressly disclaims all warranties and representations of any kind, whether express, implied, or statutory.

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Article 5REPRESENTATIONS AND WARRANTIES OF TRANSGENOMIC

5.1Representations and Warranties of Transgenomic

Transgenomic represents and warrants to Interpace that:

(a)Organization of Transgenomic. Transgenomic is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware.

(b)Authorization of Transaction. Transgenomic has full corporate power and authority to execute and deliver this Agreement and each other agreement, document, or instrument or certificate contemplated by this Agreement or to be executed by Transgenomic in connection with the transactions contemplated by this Agreement (the “Transgenomic Documents”) and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. This Agreement has been duly and validly executed and delivered by Transgenomic and this Agreement constitutes, and each of the Transgenomic Documents when so executed and delivered will constitute (in each case assuming due authorization, execution and delivery by each other Party hereto or thereto), the valid and legally binding obligation of Transgenomic, enforceable in accordance with its or their respective terms and conditions, except as such enforcement may be limited by the Enforceability Exceptions.

(c)Noncontravention. Neither the execution and the delivery of this Agreement nor any of the Transgenomic Documents will (i) violate any of Transgenomic’s Organic Documents or any Applicable Law to which Transgenomic is subject, or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any material agreement, contract, lease, license, instrument, or other arrangement to which Transgenomic is a party or by which it is bound or to which any of its material assets are subject. Except for any filing requirements in connection with applicable securities laws, Transgenomic is not required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of, any Person or Governmental Body in connection with the execution and delivery of this Agreement or in order for Transgenomic to perform its obligations contemplated by this Agreement.

(d)Brokers’ Fees. Transgenomic has no liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement for which Interpace could become liable or obligated.

(e)Litigation. As of the Effective Date and the earlier of: (i) the date of the expiration of the Phase One Period and (ii) the date of the Phase Two Notification, there is no pending and served or, to the Knowledge of Transgenomic, threatened litigation, arbitration or government investigation involving or relating to the Tests.

(f)Intellectual Property.

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(i)    As of the Effective Date and the earlier of: (i) the date of the expiration of the Phase One Period and (ii) the date of the Phase Two Notification, there is no Legal Proceeding pending and served to Transgenomic or, to the Knowledge of Transgenomic, pending but not served, or threatened, by any third party against Transgenomic and/or its licensor or co-owner before any court or tribunal (including, without limitation, the United States Patent and Trademark Office or equivalent authority anywhere in the world) relating to the CardioPredict Intellectual Property Rights, nor has Transgenomic received any written charge, complaint, claim, demand, or notice alleging that CardioPredict or exploitation of the CardioPredict Intellectual Property infringes, misappropriates, or violates the Intellectual Property Rights of any third party in the United States (including any claim that Transgenomic must obtain a license to or refrain from using any third party Intellectual Property Rights), nor does Transgenomic have any Knowledge of facts which, taken together, would constitute such a claim. As of the Effective Date, Transgenomic has not brought any Legal Proceeding (other than claims that have been resolved to Transgenomic’s satisfaction) against any Person for infringing, misappropriating, or violating any of the CardioPredict Intellectual Property Rights in the United States, and, to the Knowledge of Transgenomic, no third party has infringed, misappropriated, or violated any of the CardioPredict Intellectual Property Rights owned by Transgenomic in the United States.

(ii) Except for the […***…], Transgenomic has exclusive rights in and to the Brinkman Application in the United States. To Transgenomic’s Knowledge, Transgenomic owns all right, title and interest in and to, or has continuing rights to use, sell, license and sublicense, the CardioPredict Intellectual Property Rights (and C-GAAP Intellectual Property Rights, if applicable) for CardioPredict (and C-GAAP, if applicable) as and in the form CardioPredict and C-GAAP currently exist as of the Effective Date. Transgenomic has the right to grant Interpace the licenses set forth in Sections 2.4(r) and 12.1 hereof.

(g)CLIA Status. Transgenomic has submitted a CLIA application (Form CMS-116) and it and all accompanying documents have been submitted to and accepted by the NYDOH for a laboratory facility selected by Transgenomic and the NYDOH has issued a certificate of compliance (containing a CLIA number) with all applicable CLIA requirements to such laboratory authorizing it to conduct the Tests.

(h)CardioPredict Validation. Within thirty (30) days of the Effective Date, Transgenomic will prepare and submit a CardioPredict Validation to a New York State-certified organization and throughout the Term, Transgenomic shall maintain and secure all relevant laboratory approvals for CardioPredict in the United States, including securing and retaining NY CLIA Lab Approval.

(i)Legal Compliance.    Transgenomic complies and at all times has complied in all material respects with all Applicable Laws, and no Legal Proceeding has been filed or commenced against Transgenomic alleging any failure so to comply or any liability pursuant to any Applicable Law. To the Knowledge of Transgenomic, Transgenomic is not under investigation with respect to the violation of any Applicable Law.

(j)Remedies. EXCEPT IN THE EVENT TRANSGENOMIC IS IN BREACH OF A REPRESENTATION OR WARRANTY SET FORTH IN SECTIONS 5.1(e), 5.1(f), OR 5.1(i) ON

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THE EFFECTIVE DATE, IN WHICH CASE INTERPACE SHALL BE ENTITLED TO ANY REMEDIES IT MAY HAVE UNDER APPLICABLE LAW, (A) INTERPACE’S SOLE AND EXCLUSIVE REMEDY FOR BREACH OF THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTIONS 5.1(e) AND 5.1(f) AT THE EARLIER OF (X) THE DATE OF THE EXPIRATION OF THE PHASE ONE PERIOD AND (Y) THE DATE OF THE PHASE TWO NOTIFICATION SHALL BE INTERPACE’S RIGHT TO TERMINATE THIS AGREEMENT AS AND TO THE EXTENT SET FORTH IN SECTION 3.1(b)(viii); PROVIDED THAT THE FOREGOING SHALL NOT LIMIT TRANSGENOMIC’S INDEMNIFICATION OBLIGATIONS SET FORTH IN SECTION 6.1, AND (B) INTERPACE’S SOLE AND EXCLUSIVE REMEDY FOR BREACH OF THE REPRESENTATIONS AND WARRANTIES SET FORTH IN SECTIONS 5.1(e), 5.1(f) AND 5.1(i) SHALL OTHERWISE BE AS AND TO THE EXTENT SET FORTH IN THE INDEMNIFICATION SECTION IN SECTION 6.1. FURTHER, FOR THE AVOIDANCE OF DOUBT, FOR BREACHES OF SECTIONS 5.1(c), 5.1(d), 5.1(g) AND/OR 5.1(h), THE CURE PERIOD SET FORTH IN SECTION 3.1(b)(v) SHALL APPLY.

(k)Disclaimer of Representations.    Transgenomic makes no representation or warranty to Interpace except as specifically made in this Article 5, and, except as specifically made in this Article 5, Transgenomic makes no and hereby specifically and expressly disclaims all warranties and representations of any kind, whether express, implied, or statutory.

Article 6INDEMNIFICATION AND LIMITATIONS OF LIABILITY

6.1Indemnification of Interpace

Except to the extent claims arise or result from acts or omissions of Interpace or its employees (including its sales representatives), agents or contractors, that constitute a breach of this Agreement, a violation of Applicable Law or negligent or intentional misconduct, Transgenomic will indemnify Interpace, its Affiliates and each of their officers, directors, employees, stockholders, agents and representatives (collectively, the “Interpace Indemnitees”) against and hold them harmless from any Losses and Expenses suffered or incurred by any such Interpace Indemnitee arising from any third party claim to the extent such third party claim results from:

(a)the material breach by Transgenomic or its employees of any of its representations or, warranties under the Agreement;

(b)a negligent, willful or reckless act or omission, intentional wrongdoing, dishonesty or fraud or violation of Applicable Laws, on the part of Transgenomic or its employees or other agents or contractors (other than Interpace and its employees (including its sales representatives), agents and contractors);

(c)a product liability claim relating to CardioPredict or C-GAAP, whether arising out of warranty, negligence of Transgenomic, strict liability (including manufacturing, design, warning or instruction claims) or any other product based statutory claim, except to the extent based upon a breach by Interpace or its employees (including its sales representatives) or other agents or

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contractors of the representations and warranties set forth in Article 4 or any of its covenants or obligations under this Agreement; and/or

(d)any claim that CardioPredict (or C-GAAP, if applicable) infringes upon, misappropriates, or violates the Intellectual Property Rights of any third party in the United States, except to the extent based upon a breach by Interpace or its employees (including its sales representatives) or other agents or contractors of the representations and warranties set forth in Article 4 or any of its covenants or obligations under this Agreement.

EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE FOREGOING CONSTITUTES THE ENTIRE LIABILITY OF TRANSGENOMIC, AND INTERPACE’S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO ANY CLAIMS BY THIRD PARTIES OF INFRINGEMENT OR OTHERWISE.

6.2Indemnification of Transgenomic

Except to the extent claims arise or result from acts or omissions of Transgenomic or its employees that constitute a breach of this Agreement, a violation of Applicable Law or negligent or intentional misconduct, Interpace will indemnify Transgenomic and its Affiliates, agents, attorneys, representatives, successors and permitted assigns (collectively, the “Transgenomic Indemnitees”) against and hold them harmless from any Losses and Expenses suffered or incurred by any such Transgenomic Indemnitee arising from any third party claim to the extent such third party claim results from:

(a)the material breach by Interpace or its employees (including its sales representatives) or other agents or contractors of any of its representations or warranties under the Agreement;

(b)a negligent, willful or reckless act or omission, intentional wrongdoing, dishonesty or fraud or violation of Applicable Laws, on the part of Interpace or its employees (including its sales representatives) or other agents or contractors (including any third parties exercising rights for the benefit and account of Interpace under Section 2.4(r) or Section 12.1);

(c)any federal or state claims or assessment for nonpayment or late payment by Interpace of any tax or contribution based on compensation or other benefits owed to any of Interpace’s employees (including its sales representatives) or other agents or contractors;

(d)any claims filed by an Interpace employee (including its sales representatives) or other agents or contractors relating to the payment of compensation to such employee or other agent or contractor, except to the extent caused by an act or omission of Transgenomic, its employees and agents (other than Interpace);

(e)any claims relating to CardioPredict or C-GAAP arising out of or in connection with Interpace’s exercise of the licenses set forth in Section 2.4(r) or Section 12.1, including any acts by Interpace that exceed or are inconsistent with such licenses, except to the extent based upon a breach by Transgenomic or its employees of the representations and warranties set forth in Article 5 or any of its covenants under this Agreement;

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(f)any deceptive, misleading, unethical, or illegal practices of Interpace or its employees (including its sales representatives) or other agents or contractors, misuse or alteration of any Product Promotional Material, or the failure to Detail the Tests in conformity with the Product Promotional Materials; and/or

(g)any claim or threat thereof that any of the Product Promotional Material or any other materials or information provided or made available by or for Interpace, or the activities or conduct of Interpace or any of its employees (including its sales representatives) or other agents or contractors hereunder constitute Third Party Infringement.

EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE FOREGOING CONSTITUTES THE ENTIRE LIABILITY OF INTERPACE, AND TRANSGENOMIC’S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO ANY CLAIMS BY THIRD PARTIES OF INFRINGEMENT OR OTHERWISE.

6.3Notice of Claim

Any Party seeking indemnification hereunder (the “Indemnified Party”) will give to the Party obligated to provide indemnification to such Indemnified Party (the “Indemnitor”) a notice (a “Claim Notice”) describing in reasonable detail the facts giving rise to any claim for indemnification hereunder and will include in such Claim Notice a reference to the provision of this Agreement, Transgenomic Document or Interpace Document upon which such claim is based; provided, that a Claim Notice in respect of any Legal Proceeding by or against a third Person as to which indemnification will be sought will be given, promptly reasonable after the action or suit is commenced; and provided, further, that failure to give a Claim Notice will not relieve the Indemnitor of its obligations hereunder except to the extent it will have been actually and materially prejudiced by such failure.

6.4Third Person or Governmental Body Claims

The Indemnitor will have the right to conduct and control, through counsel of its choosing, who is reasonably satisfied to the Indemnified Party, the defense, compromise or settlement of any third Person or Governmental Body claim, action or suit (a “Third Party Claim”) against any Indemnified Party as to which indemnification will be sought by such Indemnified Party from such Indemnitor hereunder. If the Indemnitor elects to defend against, compromise, or, settle any Third Party Claim which relates to any Losses indemnified by it hereunder, it will within ten (10) days of the Indemnified Party’s Claim Notice with respect to such Third Party Claim in accordance with Section 6.3 (or sooner, if the nature of the Third Party Claim so requires) notify the Indemnified Party of its intent to do so; provided, that the Indemnitor must conduct the defense of the Third Party Claim actively and diligently thereafter in order to preserve its rights in this regard. If the Indemnitor elects not to defend against, negotiate, settle or otherwise deal with any Third Party Claim which relates to any Losses indemnified against hereunder or fails to notify the Indemnified Party of its election as herein provided, the Indemnified Party may defend against, negotiate, settle or otherwise deal with such Third Party Claim. If the Indemnified Party defends any Third Party Claim, then the Indemnitor will promptly reimburse the Indemnified Party, for reasonable attorneys’ fees and other expenses of defending such Third Party Claim upon submission

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of periodic bills. The Parties will, in connection with any Third Party Claim the Indemnitor has elected to defend against, compromise or settle, furnish such records, information as may be reasonably requested by the Indemnitor in connection therewith. The Indemnified Party may participate, through counsel chosen by it and at its own expense, in the defense of any Third Party Claim as to which the Indemnitor has so elected to conduct and control the defense compromise or settlement thereof; provided, however, that such Indemnified Party will be entitled to participate in any such defense with separate counsel at the expense of the Indemnitor, and all reasonable attorneys’ fees and costs of defense incurred in the defense thereof will be paid promptly, if (i) so requested by the Indemnitor to participate and (ii) in the reasonable opinion of counsel to the Indemnified Party, a conflict or potential conflict exists between the Indemnified Party and the Indemnitor as determined in accordance with the applicable rules of professional conduct that would make such separate representation advisable; and provided, further, that the Indemnitor will not be required to pay for more than one such counsel for all Indemnified Parties in connection with any Third Party Claim.Notwithstanding anything in this Section 6.4 to the contrary, neither the Indemnitor nor the Indemnified Party will, without the written consent of the other party, settle or compromise any Third Party Claim or permit a default or consent to entry of any judgment unless the claimant or claimants and such party provide to such other party an unqualified release from all liability in respect of the Third Party Claim.

6.5LIMITATION OF LIABILITY

EXCEPT FOR A PARTY’S DUTY TO INDEMNIFY THE OTHER AS SET FORTH HEREIN, OR IN THE EVENT OF A PARTY’S INTENTIONAL MISCONDUCT OR FRAUD, TO THE MAXIMUM EXTENT PERMISSIBLE BY APPLICABLE LAW, IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL, OR PUNITIVE DAMAGES HOWEVER CAUSED, ARISING OUT OF OR RELATING TO THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR A PARTY’S DUTY TO INDEMNIFY THE OTHER AS SET FORTH HEREIN OR A PARTY’S PAYMENT OBLIGATIONS HEREUNDER, OR IN THE EVENT OF A PARTY’S INTENTIONAL MISCONDUCT OR FRAUD, TO THE MAXIMUM EXTENT PERMISSIBLE BY APPLICABLE LAW, IN NO EVENT WILL THE TOTAL, CUMULATIVE LIABILITY OF ONE PARTY TO THE OTHER PARTY ARISING OUT OF OR RELATING TO THIS AGREEMENT EXCEED $[…***…].

Article 7RELATIONSHIP OF THE PARTIES; TAXES

7.1Independent Contractor; No Co-employment.

(a)Interpace and Transgenomic are “independent contractors.” Interpace employees will not be, and will not be considered to be, employees of Transgenomic for any purpose, and

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employees of Transgenomic performing activities in furtherance of the Collaboration will not be, and will not be considered to be, employees of Interpace. Neither Party will have any responsibility for the hiring, termination, compensation, or other conditions of employment of the other Party’s employees. Neither Party’s employees will be eligible to participate in any pension plans, profit sharing plans, insurance plans or any other employee benefit plans offered from time to time by the other Party to its employees.

(b)Nothing contained in this Agreement will be construed as creating a partnership or joint venture between the Parties or, except as otherwise expressly provided herein, as granting to either Party the authority to bind or contract any obligations in the name of or on the account of the other Party or to make any guarantees or warranties on behalf of the other Party.

7.2Sales, Use and Excise Taxes.

If any state or other governmental authorities determine that non-income taxes such as sales, use or excise taxes are applicable to Interpace’s services performed hereunder, Interpace will promptly accrue and pay such taxes to the appropriate taxing authorities and Transgenomic will promptly, upon receipt of invoices therefor by Interpace, reimburse Interpace for all such taxes. In addition, Transgenomic will be responsible for the payment of any such taxes related to Product Promotional Materials. Transgenomic and Interpace will use commercially reasonable efforts to minimize the imposition of any such taxes applicable to the services performed hereunder.

Article 8COMMUNICATIONS; COORDINATION

8.1Communications from Third Parties.

Interpace will communicate to Transgenomic all comments, statements, requests and inquiries from members of the medical profession or any other third parties relating to CardioPredict that are out of the ordinary, or are not covered by Product Promotional Materials, of which Interpace becomes aware as a result of providing the Details.

8.2Coordination between the Parties.

Each of Transgenomic and Interpace will designate an employee to be a designated liaison for the purpose of coordinating all communications and activities under this Agreement with the other Party. Within thirty (30) days after signing this Agreement each Party will notify the other as to the name of the individual so appointed. Each Party may replace its designated liaison at any time, upon oral notice to the other Party. The liaisons will meet periodically, but at least once per month, to review and discuss the actual results compared to the marketing plans for Detailing of CardioPredict and the overall performance of the program described herein. Each Party will promptly share, on a regular basis, with the other Party, all reports, audits and other data it develops relative to CardioPredict and/or the services and activities of such Party provided hereunder.

Article 9INSURANCE

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9.1Interpace Insurance Coverage. During the Term of this Agreement, Interpace will maintain at its sole expense insurance coverages as follows:

(a)Professional Liability/Errors & Omissions as it pertains to work performed under this Agreement in amounts of not less than $[…***…];

(b)Workers Compensation and appropriate employer liability insurance in amounts required by Applicable Laws;

(c)Commercial General Liability insurance with a combined single limit of $[…***…] each occurrence and $[…***…] in the aggregate;

(d)Comprehensive Vehicle insurance in amounts of not less than $[…***…] and as required by Applicable Law in the state where the vehicles are registered; and

(e)Excess liability insurance with minimum combined single limits of $[…***…].

(f)All of the foregoing insurance will be maintained with responsible carriers and the terms of coverage will be evidenced by certificates of insurance to be furnished by Interpace to Transgenomic on or prior to the Effective Date of this Agreement, and on or prior to each anniversary of such date. Such certificates of insurance will provide that at least 30 days’ prior written notice will be given to Transgenomic prior to cancellation or modification of any of the material terms of coverage of any policy. Transgenomic will be named as an additional insured with respect to the coverages described in Sections 9.1(c) and 9.1(e).

9.2Transgenomic Insurance Coverage. Transgenomic will maintain, at its sole expense, insurance coverage during the Term of this Agreement, and with respect to product liability, as follows:

(a)Product liability insurance with respect to CardioPredict with coverage limits of not less than […***…] per occurrence and […***…] in the aggregate; and

(b)Commercial General Liability insurance with a combined single limit of $[…***…], minimum liability of $[…***…] each occurrence and $[…***…] in the aggregate; and

(c)    Umbrella insurance with coverage limits of […***…] each occurrence and […***…] in the aggregate.

All of the foregoing insurance will be maintained with responsible carriers and the terms of coverage will be evidenced by certificates of insurance to be furnished by Transgenomic to Interpace on or prior to the Effective Date of this Agreement, and on or prior to each anniversary of such date. Such certificates of insurance will provide that at least 30 days’ prior written notice will be given to Interpace prior to cancellation or modification of any of the material terms of coverage of any policy. Interpace will be named as an additional insured with respect to the coverages described in Sections 9.2(a) and 9.2(b).

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Article 10AGENCY ACTIONS

10.1Agency Actions. Transgenomic and Interpace will immediately notify the other Party of any written notice, letter, or other document concerning filed or a threatened to be filed, litigation, arbitration, government proceeding, or government investigation which may affect CardioPredict. All responses to Agencies concerning CardioPredict will be the responsibility of Transgenomic. Interpace will: (a) use commercially reasonable efforts to assist Transgenomic with respect to communications from Agencies to the extent reasonably requested by Transgenomic, including responding to such communications and providing forms, documents and related records within its possession and control, and (b) respond to any Agency subpoena directed to it concerning CardioPredict. Interpace will be reimbursed by Transgenomic for all documented costs and expenses reasonably and actually incurred in Interpace’s performing any of the foregoing, including, but not limited to, reasonable attorneys’ fees and expenses, the use of third party vendors and/or its allocated in-house resources. Interpace and Transgenomic will each issue appropriate instructions during the field representatives’ training program with respect to the foregoing.

Article 11CONFIDENTIAL INFORMATION

11.1Confidential Information. Each Party acknowledges and agrees that it will have access to, or become acquainted with, Confidential Information of the other Party in connection with the performance of its obligations under this Agreement. For the purposes of this Agreement, “Confidential Information” will mean any confidential or proprietary information of the disclosing Party or any Affiliate thereof, including but not limited to, information which relates to pricing, marketing strategy, designs, methods, discoveries, improvements, documents, trade secrets, proprietary rights, business affairs, customer information or employee information of such disclosing Party or its Affiliate. In addition to and without limiting the generality of the foregoing, the Confidential Information of Transgenomic includes all information and materials in connection with the Tests. Confidential Information will not include any information to the extent that it:

(a)was known to the receiving Party prior to the date of this Agreement, without an obligation to keep it confidential;

(b)was lawfully obtained by the receiving Party from a third party without any obligation of confidentiality;

(c)is, at the time of disclosure, in the public knowledge;

(d)becomes part of the public knowledge after disclosure by publication or otherwise except by breach of this Agreement;

(e)is developed by the receiving Party independently and apart from this Agreement; or

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(f)is knowledge possessed by the receiving Party or its employees as the result of their industry experience or education.

The receiving Party will keep all Confidential Information in confidence and will not, at any time during the term of this Agreement and (i) for all Confidential Information constituting the trade secret of a Party, during such period of time in which such Confidential Information remains a trade secret, and (ii) for all other Confidential Information, a period of three (3) years from the termination of this Agreement, without the disclosing Party’s prior written consent, disclose or otherwise make available, directly or indirectly, any item of Confidential Information to anyone other than its employees (and its legal counsel, advisors, consultants, and contractors) who (a) need to know the same in connection with fulfilling the purposes of this Agreement, (b) have been informed of the proprietary and confidential nature of the Confidential Information, and (c) are parties to confidentiality agreements which contain at least the same degree of protection with respect to such Confidential Information as is set forth herein. The disclosing Party shall remain fully responsible and liable for the acts and omissions of its employees, legal counsel, advisors, consultants, and contractors, including any action or inaction that would constitute a breach of this Section 11.1 of the Agreement if done by the disclosing Party which, for purposes thereof, will be deemed to be a breach by the disclosing Party. The receiving Party will use the Confidential Information only in connection with fulfilling the purposes of this Agreement and for no other purpose. Notwithstanding the foregoing, the receiving Party’s obligations under this Section 11.1 will not apply with respect to any Confidential Information that is required to be disclosed by the receiving Party to comply with Applicable Laws, or with the order of a court or tribunal of competent jurisdiction, provided that: (i) the disclosing Party receives prior written notice of such disclosure, (ii) the receiving Party affords the disclosing Party a reasonable opportunity, at the disclosing Party’s sole cost and expense, to obtain confidential treatment for such disclosure and, if possible, to minimize the extent of such disclosure, and (iii) the receiving Party makes only the most limited disclosure reasonably required to be made in order to comply with such Applicable Laws or order.

11.2Return of Confidential Information. Upon the expiration or termination of this Agreement, or at any time at the other Party’s request, (a) the receiving Party shall promptly return to the disclosing Party, or, at the disclosing Party’s request, destroy, all materials (in written, electronic or other form) containing or constituting Confidential Information of the disclosing Party, including, without limitation, any copies and portions thereof, which return or destruction must be certified by a duly authorized officer of the receiving Party in a form prepared by the disclosing Party to be considered valid and completed and (b) the receiving Party shall not use or disclose the Confidential Information of the disclosing Party in any way for any purpose.

11.3Injunctive Relief. In the event of the actual or threatened breach by the receiving Party of any of the terms of this Article 11, the disclosing Party will have the right to obtain specific performance and injunctive relief without the posting of any bond or security. The rights granted by this Section 11.2 are in addition to all other remedies and rights available at law or in equity

11.4Existing CDA.

The Parties entered into a confidential disclosure agreement dated as of March 7, 2013 (the “Confidential Disclosure Agreement”). If any terms or conditions set forth in this Section 11 conflict

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with or are inconsistent with the terms and conditions of the Confidential Disclosure Agreement with respect to any Confidential Information disclosed thereunder that would be considered Confidential Information hereunder, this Section 11 will govern over the Confidential Disclosure Agreement with respect to such Confidential Information to the extent of such conflict or inconsistency.  Subject to the foregoing, the Confidential Disclosure Agreement shall remain in full force and effect, in accordance with its terms, with respect to Confidential Information disclosed thereunder to the extent such Confidential Information thereunder would not be considered Confidential Information hereunder.

Article 12FAILURE TO PERFORM; LICENSE; RIGHTS UPON INSOLVENCY

12.1Failure to Perform. Transgenomic hereby grants Interpace, effective as of and from the Effective Date and continuing throughout the Term, a non-exclusive, limited, non-transferable, non-sublicensable license under […***…] that Transgenomic […***…] (and […***…] that Transgenomic […***…]) to use […***…] that Transgenomic […***…] (and […***…] that Transgenomic […***…]) to […***…]), solely (i) in the Cardiology Field, (ii) in the United States, and (iii) during the duration of a Supply Event caused by […***…]; provided, however, the foregoing license is expressly conditioned upon the license restrictions set forth in Section 12.2 hereof, and is subject to the other terms and conditions of this Agreement. Interpace covenants and agrees that it will not exercise the foregoing license unless and until (i) a Supply Event caused by […***…], (ii) a Title 11 case is commenced by or against Transgenomic and has not been dismissed within thirty (30) days of its filing and (iii) the trustee under such Title 11 case has rejected this Agreement. In the event the consent of one or more third parties is required for Interpace to use […***…], Transgenomic shall use commercially reasonable efforts to obtain such consent. Interpace may use third parties to exercise its license rights under this Section 12.1, but solely for the benefit and account of Interpace. For purposes of clarity, the terms and conditions set forth in […***…] shall be applicable to […***…] in this Section 12.1; however, in such event, (a) any […***…] as agreed upon by the Parties in advance and in writing to […***…] during the duration of the Supply Event; and (b) any royalties or other consideration payable to any third party as a result of Transgenomic’s license or sublicense of […***…] shall be considered […***…].

12.2LicenseRestrictions.

The licenses set forth in Sections 2.4(r) and 12.1 are expressly conditioned on Interpace’s […***…] only at a facility which has all necessary Permits to […***…]. At all times in which Interpace is […***…], Transgenomic will regularly be […***…] and Interpace will immediately […***…] in the event

[…***…], are not using materials approved by Transgenomic, or does not comply with Transgenomic’s quality control standards and specifications.

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12.3Rights Upon Insolvency. All rights and licenses to Intellectual Property Rights granted under this Agreement by Transgenomic to Interpace are, for all purposes of Title 11, licenses of rights to intellectual property as defined in Title 11. If a case is commenced by or against Transgenomic under Title 11, then, unless and until this Agreement is rejected as provided in Title 11, Transgenomic (in any capacity, including debtor-in-possession) and its successors and assigns (including, without limitation, a Title 11 trustee) will perform all of the obligations provided in this Agreement to be performed by Transgenomic. All rights, powers and remedies of Interpace, as a licensee hereunder, provided herein are in addition to and not in substitution for any and all other rights, powers and remedies now or hereafter existing at law or in equity (including, without limitation, Title 11) in the event of the commencement of a Title 11 case by or against Transgenomic. Transgenomic specifically acknowledges that if this Agreement is rejected under Title 11, Interpace shall have the rights of a licensee under 11 U.S.C. § 365(n). Interpace, in addition to the rights, powers and remedies expressly provided herein, will be entitled to exercise all other such rights and powers and resort to all other such remedies as may now or hereafter exist at law or in equity (including Title 11) in such event.

Article 13MISCELLANEOUS

13.1Succession and Assignment

(a)This Agreement will be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Parties; provided, however, that (x) Interpace may (i) assign this Agreement and/or any or all of its rights and interests hereunder to any entity with which it may merge or consolidate, or which acquires all or substantially all of its business and assets, (ii) assign this Agreement and/or any or all of its rights and interests hereunder to one or more of its Affiliates and/or (iii) designate one or more of its Affiliates to perform its obligations hereunder, provided that, in each case, the assignee agrees to be bound by and comply with all of the terms and conditions of this Agreement, and (y) Transgenomic may assign this Agreement to any entity with which it may merge or consolidate, or which acquires all or substantially all of its business or assets relating to this Agreement, provided that such entity or assignee, as the case may be, agrees to assume all of Transgenomic’s obligations hereunder.

(b)In the event Interpace assigns this Agreement to Interpace Diagnostics, LLC or any other Affiliate, PDI shall unconditionally and absolutely guarantee the full and complete performance of such entity’s obligations under this Agreement. PDI, Inc. will acknowledge that it controls Interpace Diagnostics, LLC or such other Affiliate and has no need for Transgenomic to give it notice of the financial condition or performance of Interpace Diagnostics, LLC or such other Affiliate hereunder, of any modifications to the business or operations of Interpace Diagnostics, LLC or such other Affiliate and hereby, as permitted by California Civil Code Section 2856, waives any rights and defenses that are or may become available to PDI, Inc. as guarantor or surety by reason of any statute governing guaranties or suretyship, including but not limited to Sections 2787 to 2855, inclusive of the California Civil Code.

42    *Confidential Treatment Requested

(c)    In addition, and without limiting any of the forgoing, Transgenomic will not sell, assign or otherwise transfer or dispose of any substantial portion of its business or assets relating to CardioPredict and, if applicable, C-GAAP unless such sale, assignment, transfer or other disposition includes an assignment of this Agreement.

13.2Press Releases and Public Announcements

No Party will issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of Interpace and Transgenomic; provided, however, that any Party may make any public disclosure it believes in good faith is required by Applicable Law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will use all commercially reasonable efforts to advise the other Parties prior to making the disclosure).

13.3No Third-Party Beneficiaries

This Agreement will not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns.

13.4Entire Agreement

This Agreement and the Confidentiality Agreement constitute the entire understanding and agreement among the Parties with respect to the subject matter hereof and supersede any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they related in any way to the subject matter hereof.

13.5Counterparts

For the convenience of the Parties, this agreement may be executed in counterparts and by facsimile or email exchange of pdf signatures, each of which counterpart will be deemed to be an original, and both of which taken together, will constitute one agreement binding on the Parties.

13.6Notices

All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder will be deemed duly given if (and then two Business Days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

43    *Confidential Treatment Requested

IF TO Interpace: PDI, Inc. Morris Corporate Center 1, Building A 300 Interpace Parkway Parsippany, NJ 07054   Attn: Jeffrey Smith, CFO	COPY TO: Norris McLaughlin & Marcus, P.A.   721 Route 202-206, Suite 200 Bridgewater, NJ 08807   Attn: David S. Blatteis, Esq.
IF TO TRANSGENOMIC: Transgenomic, Inc. 12325 Emmet Street Omaha, NE 68164 Attn: CEO	COPY TO: Paul Hastings LLP 1117 S. California Avenue Palo Alto, CA 94304 Attn: Jeff Hartlin, Esq

Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, or ordinary mail, but not electronic mail or messaging), but no such notice, request, demand, claim, or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

13.7Governing Law

This Agreement, and all claims or causes of action that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action based upon, arising out of or related to any representation or covenant made in or in connection with this Agreement or as an inducement to enter into this Agreement), will be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and performed in such State without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

44    *Confidential Treatment Requested

13.8Submission to Jurisdiction; Consent to Service of Process

(a)The Parties hereto hereby irrevocably submit to the non-exclusive jurisdiction of any federal or state court located within the State of Delaware over any dispute arising out of or relating to this Agreement or any of the transactions contemplated hereby and each Party hereby irrevocably agrees that all claims in respect of such dispute or any suit, action proceeding related thereto may be heard and determined in such courts. The Parties hereby irrevocably waive, to the fullest extent permitted by Applicable Laws, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the Parties hereto agrees that a judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Applicable Laws.

(b)Each of the Parties hereto hereby consents to process being served by any Party to this Agreement in any suit, action or proceeding by delivery of a copy thereof in accordance with the provisions of Section 13.8.

(c)THE PARTIES TO THIS AGREEMENT EACH HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR (ii) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION WILL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

13.9Amendments and Waivers

No amendment of any provision of this Agreement will be valid unless the same will be in writing and signed by each of the Parties hereto. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, will be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. No action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, will be deemed to constitute a waiver by the Party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder will operate as a waiver thereof, nor will any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

45    *Confidential Treatment Requested

13.10Severability

Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction will not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

13.11Expenses

Each Party will bear its and their own costs and expenses (including legal fees and expenses) incurred in connection with the negotiation, preparation, execution and delivery of this Agreement and each other agreement, document and instrument contemplated by this Agreement.

[signature page follows]

46    *Confidential Treatment Requested

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed the day and year first above written.

TRANSGENOMIC, INC. By:_/s/_Mark P. Colonesse________ Print Name: Mark P. Colonesse         Title: EVP                       PDI, Inc. By:/s/ Nancy Lurker Print Name:____Nancy Lurker _____________ Title:___CEO_____________________

47    *Confidential Treatment Requested

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

LEGAL NAME	JURISDICTION OF ORGANIZATION
Transgenomic Limited	United Kingdom
Transgenomic Japan, Inc.	Delaware
Annovis, Inc.	Delaware

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 No’s 333-41714, 333-69334 and 333-139999) of Transgenomic, Inc. of our report dated March 27, 2014, with respect to the consolidated financial statements of Transgenomic, Inc. and Subsidiary included in this Annual Report (Form 10-K) for the year ended December 31, 2013.

/s/ Ernst & Young LLP

Hartford, CT

March 27, 2014

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statements (No.’s 333-41714, 333-69334, and 333-139999) on Form S-8 of Transgenomic, Inc. and Subsidiary of our report dated March 14, 2013, relating to our audit of the consolidated financial statements of Transgenomic, Inc. and Subsidiary as of December 31, 2012 and for the years ended December 31, 2012 and 2011, included in this Annual Report on Form 10-K for the year ended December 31, 2013.

/s/ McGladrey LLP

Omaha, Nebraska

March 27, 2014

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Paul Kinnon, certify that:

1. I have reviewed this annual report on Form 10-K of Transgenomic, Inc. (the Registrant);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

/s/ PAUL KINNON

Paul Kinnon

President and Chief Executive Officer

Date: March 27, 2014

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Mark P. Colonnese, certify that:

1. I have reviewed this annual report on Form 10-K of Transgenomic, Inc. (the Registrant);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and

5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

/s/ MARK P. COLONNESE

Mark P. Colonnese

Executive Vice President and Chief Financial Officer

Date: March 27, 2014

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Annual Report on Form 10-K of Transgenomic, Inc. for the period ended December 31, 2013, I, Paul Kinnon, Chief Executive Officer of Transgenomic, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1) Such Annual Report on Form 10-K of Transgenomic, Inc. for the period ended December 31, 2013, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in such Annual Report on Form 10-K of Transgenomic, Inc. for the period ended December 31, 2013, fairly presents, in all material respects, the financial condition and results of operations of Transgenomic, Inc.

/s/ PAUL KINNON

Paul Kinnon

President and Chief Executive Officer

Date: March 27, 2014

A signed original of the certification required by Section 906 has been provided to Transgenomic, Inc. and will be retained by Transgenomic, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Annual Report on Form 10-K of Transgenomic, Inc. for the period ended December 31, 2013, I, Mark P. Colonnese, Chief Financial Officer of Transgenomic, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1) Such Annual Report on Form 10-K of Transgenomic, Inc. for the period ended December 31, 2013, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in such Annual Report on Form 10-K of Transgenomic, Inc. for the period ended December 31, 2013, fairly presents, in all material respects, the financial condition and results of operations of Transgenomic, Inc.

/s/ MARK P. COLONNESE

Mark P. Colonnese

Executive Vice President and Chief Financial Officer

Date: March 27, 2014

A signed original of the certification required by Section 906 has been provided to Transgenomic, Inc. and will be retained by Transgenomic, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

OPERATING SEGMENT AND GEOGRAPHIC INFORMATION (Tables)

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

	Dollars in Thousands
	2011
	Laboratory Services			Genetic Assays and Platforms		Total
Net Sales	$	18,318		$	13,653	$	31,971
Gross Profit	10,528			7,909		18,437
Net Loss before Taxes	(11,370		)	1,633		(9,737		)
Income Tax Expense	—			45		45
Net Loss	$	(11,370	)	$	1,588	$	(9,782	)
Depreciation/Amortization	$	1,810		$	291	$	2,101
Restructure	29			12		41
Interest Expense	(958		)	—		(958		)
	December 31, 2011
Total Assets	$	23,668		$	9,894	$	33,562
Goodwill	6,440			—		6,440

	Dollars in Thousands
	2012
	Laboratory Services			Genetic Assays and Platforms			Total
Net Sales	$	19,329		$	12,151		$	31,480
Gross Profit	9,316			5,694			15,010
Net (Loss) before Taxes	(6,874		)	(1,307		)	(8,181		)
Income Tax Expense	—			146			146
Net (Loss)	$	(6,874	)	$	(1,453	)	$	(8,327	)
Depreciation/Amortization	$	1,960		$	318		$	2,278
Interest Expense	(851		)	(37		)	(888		)
	December 31, 2012
Total Assets	$	29,196		$	9,595		$	38,791
Goodwill	6,918			—			6,918

Segment information for the years ended December 31, 2013, 2012 and 2011 is as follows:

	Dollars in Thousands
	2013
	Laboratory Services			Genetic Assays and Platforms			Total
Net Sales	$	15,391		$	12,153		$	27,544
Gross Profit	6,820			5,676			12,496
Net Loss before Taxes	(12,486		)	(3,555		)	(16,041		)
Income Tax Expense	—			(54		)	(54		)
Net Loss	$	(12,486	)	$	(3,501	)	$	(15,987	)
Depreciation/Amortization	$	2,467		$	281		$	2,748
Interest Expense	(398		)	(244		)	(642		)
	December 31, 2013
Total Assets	$	21,711		$	8,567		$	30,278
Goodwill	6,918			—			6,918

Schedule of Revenue from External Customers and Long-Lived Assets, by Geographical Areas

Net sales for the year ended December 31, 2013, 2012 and 2011 by country were as follows:

	Dollars in Thousands
	Years Ended December 31,
	2013		2012		2011
United States	$	20,119	$	22,727	$	22,626
Italy	1,530		2,524		3,152
Germany	1,218		907		750
United Kingdom	748		1,703		778
France	681		679		758
All Other Countries	3,248		2,940		3,907
Total	$	27,544	$	31,480	$	31,971

XML

STOCKHOLDERS' EQUITY (Details) (USD $)	0 Months Ended			1 Months Ended		12 Months Ended						0 Months Ended		12 Months Ended															0 Months Ended
	Feb. 02, 2012	Dec. 31, 2011	Dec. 29, 2010	Feb. 28, 2013	Jan. 24, 2013	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011	May 23, 2012	Dec. 29, 2010 Series A Preferred Stock	Dec. 29, 2010 Preferred Stock Series A Preferred Stock	Dec. 31, 2013 Preferred Stock Series A Preferred Stock	Dec. 31, 2012 Preferred Stock Series A Preferred Stock	Dec. 31, 2013 Common Stock	Dec. 31, 2012 Common Stock	Dec. 31, 2011 Common Stock	Dec. 31, 2013 Minimum Director	Dec. 31, 2013 Maximum	Feb. 02, 2012 Third Security LLC And Affiliates	Feb. 02, 2012 Affiliates of Third Security, LLC; December 2015		Feb. 02, 2012 Various Institutional Holders; February 2017		Feb. 02, 2012 Affiliates of Third Security, LLC; February 2017		Mar. 13, 2013 Various Institutional Holders; January 2018	Mar. 13, 2013 Affiliates of Third Security, LLC; January 2018
Class of Stock [Line Items]
Common stock, shares authorized						150,000,000	[1]	100,000,000	[1]		150,000,000
Proceeds from issuance of common stock and convertable notes	$ 22,000,000	$ 3,000,000	$ 6,000,000
Common stock, shares issued	1,583,333.3333333333					7,353,695	[1]	5,970,477	[1]
Common stock, sale price per share (in dollars per share)	$ 12
Common stock warrants, term						5 years
Common stock warrant, common stock called	823,333				691,656	2,220,281													948,333	1,097,600		431,025	[2]	952,925	[3]			441,656	250,000
Common stock warrant, exercise price	15.00											2.32	2.32						12.96	15.00		6.96	[2]	12.96	[3]	12.96	[3]	9	9
Convertible notes, common stock callable												1,293,102									250,000
Convertible notes, warrants callable																					125,000					144,675	[3]
Stock issuance costs	1,330,000											200,000
Payments of stock issuance costs, percentage of gross offering proceeds	7.00%
Payments of stock issuance costs, warrant right to purchase common stock shares	31,666
Payments of stock issuance costs, warrant right to purchase common stock shares, percentage of shares in offering	2.00%
Stock issuance costs, reimbursable expenses	125,000
Payments of stock issuance costs, reduction to equity						1,500,000
Private Placement, net, shares					1,383,333								2,586,205			1,383,217													500,000
Share price					$ 6.00	$ 5.52
Private Placement, net					8,300,000	7,570,000		17,373,000								14,000	18,000
Class of warrant or right, number of securities called by warrants or rights, price per share					$ 9.00
Common stock warrants issued				900,000		840,939		948,333
Class of warrant or right, number of issued warrants or rights due to repricing requirements				149,272
Preferred stock, shares authorized						15,000,000		15,000,000						3,879,307
Preferred stock, dividend rate, percentage														10.00%
Preferred stock, dividend rate, compound percentage maximum														50.00%
Dividends accrued on preferred stock						726,000		660,000		600,000				700,000	600,000
Number of directors																			2
Preferred stock revaluation						$ 0		$ 0		$ 6,066,000								$ 300,000

[1] The common stock shares and additional paid-in capital for all periods presented reflect the one-for-twelve reverse stock split which took effect on January 27, 2014.

[2] This Warrant was issued in connection with the issuance of warrants to purchase shares of our Series A Preferred Stock to the Third Security Investors in December 2010. The number of underlying shares shown reflects the number of shares of common stock issuable upon conversion of the shares of Series A Preferred Stock for which this Warrant is currently exercisable.

[3] These Warrants were issued in connection with the Private Placement completed in February 2012 and are classified as a liability in our financial statements. See Footnote 12 - Fair Value. These warrants also contain certain anti-dilution provisions that provide for an adjustment to the exercise price and number of shares issuable upon exercise of the warrant in the event that we engage in certain issuances of shares of our common stock at a price lower than the exercise price of the warrant.

XML

INTANGIBLES AND OTHER ASSETS Goodwill and Intangible Assets Disclosure (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	$ 13,793,000	$ 13,569,000
Finite-lived intangible assets, accumulated amortization	4,598,000	2,805,000
Finite-lived intangible assets, net book value	9,195,000	10,764,000
Amortization expense	1,900,000	1,400,000	1,300,000
Amortization expense, 2014 decrease	400,000
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Amortization expense, 2014	1,400,000
Amortization expense, 2015	1,300,000
Amortization expense, 2016	1,300,000
Amortization expense, 2017	1,300,000
Amortization expense, 2018	1,000,000
Acquired technology
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	9,009,000	9,009,000
Finite-lived intangible assets, accumulated amortization	3,175,000	1,910,000
Finite-lived intangible assets, net book value	5,834,000	7,099,000
Acquired technology | Minimum
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life	7 years
Acquired technology | Maximum
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible asset, useful life	10 years
Assay royalties
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	1,434,000	1,434,000
Finite-lived intangible assets, accumulated amortization	614,000	410,000
Finite-lived intangible assets, net book value	820,000	1,024,000
Finite-lived intangible asset, useful life	7 years
Third party payor relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	367,000	367,000
Finite-lived intangible assets, accumulated amortization	73,000	49,000
Finite-lived intangible assets, net book value	294,000	318,000
Finite-lived intangible asset, useful life	3 years
Tradenames and trademarks
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	824,000	824,000
Finite-lived intangible assets, accumulated amortization	233,000	115,000
Finite-lived intangible assets, net book value	591,000	709,000
Finite-lived intangible asset, useful life	7 years
Customer relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	652,000	652,000
Finite-lived intangible assets, accumulated amortization	54,000	11,000
Finite-lived intangible assets, net book value	598,000	641,000
Finite-lived intangible asset, useful life	15 years
Covenants not to compete
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	184,000	184,000
Finite-lived intangible assets, accumulated amortization	77,000	15,000
Finite-lived intangible assets, net book value	107,000	169,000
Finite-lived intangible asset, useful life	3 years
Patents
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	1,153,000	929,000
Finite-lived intangible assets, accumulated amortization	336,000	280,000
Finite-lived intangible assets, net book value	817,000	649,000
Intellectual property
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, cost	170,000	170,000
Finite-lived intangible assets, accumulated amortization	36,000	15,000
Finite-lived intangible assets, net book value	$ 134,000	$ 155,000
Finite-lived intangible asset, useful life	7 years

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EQUITY INCENTIVE PLAN (Details) (USD $)	12 Months Ended							12 Months Ended
	Dec. 31, 2013	Dec. 31, 2013 Selling, general and administrative expenses	Dec. 31, 2012 Selling, general and administrative expenses	Dec. 31, 2011 Selling, general and administrative expenses	Mar. 24, 2014 Equity incentive plan 2006	Dec. 31, 2013 Equity incentive plan 2006	Dec. 31, 2013 Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares And Other Awards Equity incentive plan 2006	Dec. 31, 2013 Stock Appreciation Rights (SARs)	Dec. 31, 2013 Stock Appreciation Rights (SARs) Accrued expenses	Dec. 31, 2013 Stock Appreciation Rights (SARs) Minimum	Dec. 31, 2013 Stock Appreciation Rights (SARs) Maximum	Dec. 31, 2013 Stock Options	Dec. 31, 2012 Stock Options	Dec. 31, 2011 Stock Options	Dec. 31, 2012 Stock Options Minimum	Dec. 31, 2011 Stock Options Minimum	Dec. 31, 2012 Stock Options Maximum	Dec. 31, 2011 Stock Options Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, number of shares authorized					1,666,667	833,333	416,667
Share-based compensation, award expiration period						10 years
Share-based compensation expense		$ 500,000	$ 700,000	$ 1,000,000					$ 100,000
Share-based compensation, unrecognized compensation expense related to unvested stock options	1,400,000
Share-based compensation, weighted average period that unrecognized compensation expense related to unvested stock options is recognized	3 years
Stock options, fair value assumptions, risk free interest rate										0.73%	1.75%				0.62%	0.92%	1.03%	2.16%
Stock options, fair value assumptions, dividend yield								0.00%					0.00%	0.00%
Stock options, fair value assumptions, expected life										4 years	5 years			5 years	5 years		8 years
Stock options, fair value assumptions, historical volatility rate										105.00%	106.00%				101.00%	105.00%	114.00%	107.00%
Stock options, fair value assumptions, forfeiture rate										2.00%	4.00%				2.00%	1.00%	4.00%	4.00%
Stock options, grants in period, weighted average grant date fair value												$ 3.72	$ 9.72	$ 9.96
Number of Options [Rollforward]
Balance												362,763.9166666667
Granted												421,667
Forfeited												(80,889)
Cancelled												(138,513.9166666667)
Balance												565,028	362,763.9166666667
Exercisable												153,793
Weighted Average Exercise Price [Roll Forward]
Balance												$ 12.60
Granted												$ 4.56
Forfeited												$ (9.48)
Cancelled												$ (12.48)
Balance												$ 6.60	$ 12.60
Exercisable												$ 12.72
Stock options, outstanding, aggregate intrinsic value												500,000
Remaining Weighted-Average Contractual Life												8 years 8 months 18 days
Stock options, exercisable, aggregate intrinsic value												10,000
Stock options, remaining weighted-average contractual life												6 years 2 months 12 days
Stock options, exercised												0	1,667	2,500
Stock options, exercises in period, aggregate intrinsic value												10,000
Stock options vested in current year, fair value												600,000	600,000	300,000
Number of Options [Roll Forward]
Balance								0
Granted								138,333
Balance								138,333
Exercisable								0
Weighted Average Exercise Price [Abstract]
Balance								$ 0.00
Grants								$ 4.32
Balance								$ 4.32
Exercisable								$ 0.00
Intrinsic value								$ 400,000
Weighted average remaining contractual terms								4 years 6 months

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Policies (Details) (USD $)	12 Months Ended											12 Months Ended							0 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011	Jan. 27, 2014		Dec. 31, 2013 Pharmacogenomic services	Dec. 31, 2012 Pharmacogenomic services	Dec. 31, 2013 Diagnostic tools	Dec. 31, 2012 Diagnostic tools	Dec. 31, 2011 Warrant	Dec. 31, 2011 Common Stock	Dec. 31, 2011 Accumulated Deficit	Dec. 31, 2013 Minimum	Dec. 31, 2013 Maximum	Dec. 31, 2013 Familion Minimum	Dec. 31, 2013 Familion Maximum	Jan. 27, 2014 Subsequent event
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reverse stock split, conversion ratio																			0.0833
Common stock, par value	$ 0.01	[1]	$ 0.01	[1]		$ 0.01	[1]
Amortization expense, 2014 decrease	$ 400,000
Finite-lived intangible asset, useful life																	7 years	8 years
Preferred stock revaluation	0		0		6,066,000							5,800,000	300,000
Equity awards, contractual term	10 years
Equity awards, vesting period															1 year	3 years
Deferred revenue	1,088,000		1,171,000					200,000	200,000	900,000	1,000,000
Other accrued liabilities	2,037,000		3,686,000
Foreign currency translation adjustment, net of tax	(45,000)		99,000		54,000
Foreign currency translation income (loss)	100,000		(100,000)
Federal grant income, net of consulting fees					200,000
Reclassification of other comprehensive income (loss)					$ 0									$ 1,307,000
Options, warrants and conversion rights, common stock callable and antidilutive (in shares)	3,785,709		2,471,670		1,470,689

[1] The common stock shares and additional paid-in capital for all periods presented reflect the one-for-twelve reverse stock split which took effect on January 27, 2014.

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COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Future minimum lease payments under non-cancellable operating leases are as follows (in thousands):

2014	$	1,097
2015	1,013
2016	880
2017	763
2018	485
thereafter	862
	$	5,100

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SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Quarterly Financial Information Disclosure [Abstract]
Net Sales	$ 6,218	$ 6,646	$ 7,306	$ 7,374	$ 7,292	$ 7,889	$ 9,093	$ 7,206	$ 27,544		$ 31,480		$ 31,971
Gross Profit	2,554	2,851	3,410	3,681	3,544	3,800	4,562	3,104	12,496		15,010		18,437
Net Loss	$ (3,982)	$ (5,552)	$ (2,867)	$ (3,586)	$ (2,314)	$ (2,754)	$ (563)	$ (2,696)	$ (15,987)		$ (8,327)		$ (9,782)
Basic and diluted loss per common share (in dollars per share)	$ (0.57)	$ (0.78)	$ (0.41)	$ (0.54)	$ (0.42)	$ (0.49)	$ (0.12)	$ (0.55)	$ (2.30)	[1]	$ (1.55)	[1]	$ (2.62)	[1]

[1] Net loss per share and the number of shares used in the per share calculations for all periods presented reflect the one-for-twelve reverse stock split which took effect on January 27, 2014.

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RESTRUCTURING CHARGES

12 Months Ended

Dec. 31, 2013

Restructuring Charges [Abstract]

Restructuring

RESTRUCTURING CHARGES

In the third quarter of 2010 we made a decision to consolidate our research and development activities in Omaha, Nebraska. We substantially completed the transition at December 31, 2010. We have recognized expenses for restructuring, including but not limited to, severance, facility costs and costs to move equipment from Gaithersburg, Maryland to Omaha, Nebraska. These restructuring charges are attributable to our Clinical Laboratories (now Laboratory services) and Diagnostic Tools (now Genetic Assays and Platforms) segments.

In the fourth quarter of 2010 we had a reduction in workforce of five employees with severance payments of less than $0.1 million which was attributable to our Diagnostic Tools (now Genetic Assays and Platforms) segment.

Restructuring charges include:

	Dollars in Thousands
	Costs Incurred in the year ended December 31, 2011		Cumulative Costs Incurred at December 31, 2011		Total Expected  Costs
Severance and related costs	$	—	$	53	$	53
Facility closure costs	28		74		74
Other	13		52		52
Restructuring charges	$	41	$	179	$	179

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CAPITAL LEASES (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2014	$ 160,000
2015	37,000
2016	3,000
2017	1,000
Total minimum lease payments	201,000
Less: Amount representing interest	(17,000)
Present value of net minimum lease payments	184,000
Depreciation expense	600,000	800,000	600,000
Equipment
Capital Leased Assets [Line Items]
Equipment	1,514,000	1,323,000
Less: Accumulated amortization	(721,000)	(420,000)
Total	793,000	903,000
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Depreciation expense	$ 300,000	$ 300,000	$ 200,000

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BUSINESS DESCRIPTION (Details)	12 Months Ended
	Dec. 31, 2013 operating_segments
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of operating segments	2

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FAIR VALUE (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

During the year ended December 31, 2013, the changes in the fair value of the liability measured using significant unobservable inputs (Level 3) was comprised of the following:

	Dollars in Thousands
	For the Year Ended
	December 31, 2013
Balance at December 31, 2012	$	900
Total gains or losses:
Recognized in earnings	(300		)
Balance at December 31, 2013	$	600

During the year ended December 31, 2011, the changes in the fair value of the liabilities measured using significant unobservable inputs (Level 3) were comprised of the following:

	Dollars in Thousands
	For the year ended
	December 31, 2011
	Preferred Stock Conversion Feature			Preferred Stock Warrant Liability			Total
Beginning balance at January 1, 2011	$	1,983		$	2,351		$	4,334
Total gains or losses:
Recognized in earnings	5,317			449			5,766
Balance at November 8, 2011	7,300			2,800			10,100
Reclassification to stockholders' equity due to Amendment Agreement	(7,300		)	(2,800		)	(10,100		)
Balance as of December 31, 2011	$	—		$	—		$	—

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INCOME TAXES (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Expense (Benefit), Continuing Operations, Income Tax Reconciliation [Abstract]
Benefit at federal rate	$ (5,454,000)	$ (2,781,000)	$ (3,311,000)
State income taxes—net of federal benefit	(518,000)	2,000	2,000
Foreign subsidiary tax rate difference	(3,000)	(27,000)	(94,000)
Tax contingency	23,000	22,000	28,000
Expiring net operating loss carryforwards	0	1,472,000	988,000
Earnings repatriation	0	582,000	0
Miscellaneous permanent differences	155,000	284,000	332,000
Liability warrants	(102,000)	(748,000)	2,062,000
Tax credits	0	215,000	0
State, net operating loss expiration/true-up	1,179,000	0	0
Other—net	(80,000)	15,000	(53,000)
Valuation allowance	4,746,000	1,110,000	91,000
Total income tax (benefit) expense	(54,000)	146,000	45,000
Federal:
Current	0	0	16,000
Deferred	0	0	0
Total Federal	0	0	16,000
State:
Current	0	3,000	3,000
Deferred	0	0	0
Total State	0	3,000	3,000
Foreign:
Current	20,000	46,000	159,000
Deferred	(74,000)	97,000	(133,000)
Total Foreign	(54,000)	143,000	26,000
Deferred Tax Asset:
Net operating loss carryforward	42,950,000	39,481,000
Research and development credit carryforwards	951,000	1,017,000
Deferred revenue	174,000	188,000
Inventory	275,000	224,000
Other	1,997,000	1,111,000
Deferred Tax Assets, Gross	46,347,000	42,021,000
Less valuation allowance	(46,088,000)	(41,342,000)
Deferred Tax Asset	259,000	679,000
Deferred Tax Liability:
Foreign earnings	25,000	398,000
Property and equipment	186,000	300,000
Deferred Tax Liability	211,000	698,000
Net Deferred Asset (Liability)	48,000	(19,000)
Operating Loss Carry Forward [Abstract]
2018	1,838,000
2019	8,181,000
2020	9,662,000
2021	8,228,000
2022	16,862,000
2023	16,173,000
2024	17,390,000
2025	8,153,000
2026	6,792,000
2027	3,238,000
2028	1,272,000
2029	591,000
2031	2,784,000
2032	8,358,000
Operating Loss Carry Forward, Expiring in Twenty Years	12,137,000
Operating loss carryforwards	121,659,000
Increase (Decrease) In Uncertain Tax Positions	100,000	100,000
Research Tax Credit Carryforward [Member]
Operating Loss Carry Forward [Abstract]
Tax Credit Carryforward, Amount	1,017,000
Other Long-Term Liabilities
Operating Loss Carry Forward [Abstract]
Liability for uncertain tax positions, noncurrent	300,000
Federal Tax Authority | Annovis, Inc.
Operating Loss Carry Forward [Abstract]
Operating loss carryforwards	1,200,000
State and Local Jurisdiction
Operating Loss Carry Forward [Abstract]
Operating loss carryforwards	$ 33,000,000

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SUBSEQUENT EVENTS (Details) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	12 Months Ended												0 Months Ended	3 Months Ended	0 Months Ended
	Jan. 24, 2013	Dec. 31, 2013		Dec. 31, 2012		Jan. 27, 2014		Feb. 02, 2012	Dec. 31, 2013 Maximum	Dec. 31, 2013 Minimum	Mar. 24, 2014 Equity incentive plan 2006	Dec. 31, 2013 Equity incentive plan 2006	Dec. 31, 2013 Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares And Other Awards Equity incentive plan 2006	Jan. 27, 2014 Subsequent event	Mar. 24, 2014 Subsequent event	Mar. 05, 2014 Subsequent event Series B Preferred Stock Preferred Stock Third Security LLC And Affiliates	Mar. 05, 2014 Subsequent event Maximum Third Security LLC And Affiliates	Mar. 05, 2014 Subsequent event Minimum Third Security LLC And Affiliates	Mar. 24, 2014 Subsequent event Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares And Other Awards Equity incentive plan 2006
Subsequent Event [Line Items]
Common stock, par value		$ 0.01	[1]	$ 0.01	[1]	$ 0.01	[1]
Common stock reverse stock split, conversion ratio														0.0833
Number of additional shares authorized															833,333
Share-based compensation, number of shares authorized											1,666,667	833,333	416,667						1,250,000
Stock issued during period, shares, new issues	1,383,333															1,443,297
Preferred stock, par value		$ 0.01		$ 0.01												$ 0.01
Share price	$ 6.00	$ 5.52														$ 4.85
Private Placement, net	$ 8,300	$ 7,570		$ 17,373												$ 7,000
Stock ownership percentage																10.00%
Common stock warrant, exercise price								15.00	15.00	12.96							12.96	11.73
Common stock warrant, common stock called	691,656	2,220,281						823,333	1,097,600	948,333							1,212,665	1,097,600

[1] The common stock shares and additional paid-in capital for all periods presented reflect the one-for-twelve reverse stock split which took effect on January 27, 2014.

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INVENTORIES (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Inventory Disclosure [Abstract]
Finished goods	$ 2,978	$ 4,057
Raw materials and work in process	1,567	1,547
Demonstration inventory	211	104
Inventory, gross	4,756	5,708
Less allowances	(799)	(616)	(511)	(518)
Total	$ 3,957	$ 5,092

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss	$ (15,987)	$ (8,327)	$ (9,782)
Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:
Depreciation and amortization	2,748	2,278	2,101
Non-cash, stock based compensation	462	731	1,010
Provision for losses on doubtful accounts	5,548	2,468	1,738
Provision for losses on inventory obsolescence	217	129	48
Preferred stock revaluation	0	0	6,066
Warrant revaluation	(300)	(2,200)	0
Loss on disposal of fixed assets	9	23	0
Deferred income taxes	62	(25)	(133)
Other	(62)	0	0
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(2,757)	(2,913)	(2,212)
Inventories	908	(1,373)	(620)
Prepaid expenses and other current assets	122	(209)	243
Accounts payable	801	(576)	1,028
Accrued liabilities	(371)	96	332
Other long term liabilities	127	(306)	401
Net cash flows provided by (used in) operating activities	(8,473)	(10,204)	220
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisitions	(849)	(3,551)	0
Purchase of property and equipment	(605)	(882)	(231)
Purchase of short term investments	0	(8,994)	0
Proceeds from the sale of short term investments	0	8,994	0
Change in other assets	(312)	(445)	(277)
Net cash flows used in investing activities	(1,766)	(4,878)	(508)
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from note payable	6,560	0	3,000
Principal payments on capital lease obligations	(348)	(328)	(391)
Payment of deferred financing costs	(241)	0	0
Issuance of common stock and related warrants, net	7,570	17,483	24
Principal payments on note payable	(6,171)	(2,551)	(907)
Net cash flows provided by financing activities	7,370	14,604	1,726
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH	(2)	29	54
NET CHANGE IN CASH AND CASH EQUIVALENTS	(2,871)	(449)	1,492
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	4,497	4,946	3,454
CASH AND CASH EQUIVALENTS AT END OF PERIOD	1,626	4,497	4,946
Cash paid during the period for:
Interest	724	964	732
Income taxes, net	9	123	108
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Acquisition of equipment through capital leases	0	175	756
Dividends accrued on preferred stock	726	660	600
Note payable converted to Equity	0	3,000	0
Acquisition of intangibles	0	849
Common stock issued for elimination of derivatives on preferred stock	0	0	300
Goodwill purchase price adjustment	$ 0	$ 0	$ 165

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounts Receivable (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	$ 2,171	$ 1,088	$ 334
Provision	5,548	2,468	1,738
Write Offs	(3,881)	(1,385)	(984)
Ending Balance	$ 3,838	$ 2,171	$ 1,088
Accounts receivable, general payment terms	30 days
Accounts receivable, domestic extended payment terms	90 days
Accounts receivable, international extended payment terms greater than	90 days

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INVENTORIES (Tables)

12 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

Inventories

Inventories (net of allowance for slow moving and obsolescence) consisted of the following:

	Dollars in Thousands
	December 31, 2013			December 31, 2012
Finished goods	$	2,978		$	4,057
Raw materials and work in process	1,567			1,547
Demonstration inventory	211			104
	$	4,756		$	5,708
Less allowances	(799		)	(616		)
Total	$	3,957		$	5,092

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Allowance for doubtful accounts rollforward

The following is a summary of activity for the allowance for doubtful accounts during the years ended December 31, 2013, 2012 and 2011:

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs			Ending Balance
Year ended December 31, 2013	$	2,171	$	5,548	$	(3,881	)	$	3,838
Year ended December 31, 2012	$	1,088	$	2,468	$	(1,385	)	$	2,171
Year ended December 31, 2011	$	334	$	1,738	$	(984	)	$	1,088

Allowance for obsolete inventory rollforward

The following is a summary of activity for the allowance for obsolete inventory during the year ended December 31, 2013, 2012 and 2011:

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs			Ending Balance
Year ended December 31, 2013	$	616	$	217	$	(34	)	$	799
Year ended December 31, 2012	$	511	$	129	$	(24	)	$	616
Year ended December 31, 2011	$	518	$	48	$	(55	)	$	511

Schedule of property and equipment, useful lives

Depreciation is computed by the straight-line method over the estimated useful lives of the related assets as follows:

Leasehold improvements	1 to 10 years
Furniture and fixtures	3 to 7 years
Production equipment	3 to 7 years
Computer equipment	3 to 7 years
Research and development equipment	2 to 7 years

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FAIR VALUE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	2 Months Ended	12 Months Ended
	Feb. 28, 2013	Dec. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jan. 24, 2013	Feb. 02, 2012	Nov. 08, 2011
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Common stock warrant, common stock called			2,220,281			691,656	823,333
Common stock warrants issued	900,000		840,939	948,333
Share price			$ 5.52			$ 6.00
Stock options, fair value assumptions, expected life			3 years 1 month 9 days
Term of u.s. treasury bond			3 years
Risk-free interest rate			0.78%
Volatility			45.00%
Percentage of simulated equity values below the down-round financing cut-off point			45.00%
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance				$ 0	$ 4,334			$ 10,100
Total gains or losses
Recognized in earnings					5,766
Reclassification to stockholders' equity due to Amendment Agreement		(10,100)
Ending balance		0			0			10,100
Preferred Stock, Conversion Feature [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair Value Assumptions, Discount Rate					15.00%
Fair value assumptions, exercise price		$ 0.39			$ 0.39
Fair value assumptions, risk free interest rate, basis term				3 years
Term of u.s. treasury bond				4 years
Risk-free interest rate					0.65%
Volatility					50.00%
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance				0	1,983			7,300
Total gains or losses
Recognized in earnings					5,317
Reclassification to stockholders' equity due to Amendment Agreement		(7,300)
Ending balance		0			0			7,300
Liability
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance			900
Total gains or losses
Recognized in earnings			(300)
Ending balance			600
Preferred Stock Warrant Liability [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair value assumptions, exercise price		$ 2.32			$ 2.32
Fair value assumptions, risk free interest rate, basis term				1 year
Term of u.s. treasury bond				1 year
Risk-free interest rate					0.25%
Volatility					50.00%
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance				0	2,351			2,800
Total gains or losses
Recognized in earnings					449
Reclassification to stockholders' equity due to Amendment Agreement		(2,800)
Ending balance		$ 0			$ 0			$ 2,800
Minimum
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Common stock warrant, common stock called			948,333
Term of u.s. treasury bond			3 years
Maximum
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Common stock warrant, common stock called			1,097,600
Term of u.s. treasury bond			5 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Inventories (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Obsolete Inventory [Roll Forward]
Beginning Balance	$ 616	$ 511	$ 518
Provision	217	129	48
Write Offs	34	24	55
Ending Balance	$ 799	$ 616	$ 511

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INTANGIBLES AND OTHER ASSETS (Tables)

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Indefinite-Lived and Finite-Lived Intangible Assets

	Estimated Useful Life
Acquired technology	7 – 10 years
Assay royalties	7 years
Third party payor relationships	15 years
Tradenames and trademarks	7 years
Customer relationships	15 years
Covenants not to compete	3 years
Patents	Life of the patent
Intellectual property	7 years

Long-lived intangible assets and other assets consisted of the following:

	Dollars in Thousands
	December 31, 2013						December 31, 2012
	Cost		Accumulated Amortization		Net Book Value		Cost		Accumulated Amortization		Net Book Value
Acquired technology	$	9,009	$	3,175	$	5,834	$	9,009	$	1,910	$	7,099
Assay royalties	1,434		614		820		1,434		410		1,024
Third party payor relationships	367		73		294		367		49		318
Tradenames and trademarks	824		233		591		824		115		709
Customer relationships	652		54		598		652		11		641
Covenants not to compete	184		77		107		184		15		169
Patents	1,153		336		817		929		280		649
Intellectual property	170		36		134		170		15		155
	$	13,793	$	4,598	$	9,195	$	13,569	$	2,805	$	10,764

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DEBT (Tables)

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Schedule of Debt

	Dollars in Thousands
	Year Ended December 31,
	2013			2012
Revolving Line (1)	$	2,560		$	—
Term Loan (2)	4,000			—
PGxHealth note payable (the “First Note”) (3)	—			6,171
Total debt	6,560			6,171
Current portion of long term debt	(242		)	(6,171		)
Long term debt, net of current maturities	$	6,318		$	—

On March 13, 2013 (the “Effective Date”), we entered into a Loan and Security Agreement with affiliates of Third Security, LLC (the “Lenders”) for (a) a revolving line of credit (the “Revolving Line”) with borrowing availability of up to $4.0 million, subject to reduction based on our eligible accounts receivable, and (b) a term loan (the “Term Loan”) of $4.0 million (the “Loan Agreement”). Proceeds were used to pay off the First Note and for general corporate and working capital purposes.

On August 2, 2013, we entered into an amendment to the Loan Agreement (the “Amendment”). The Amendment, which became effective as of June 30, 2013, reduces our future minimum revenue covenants under the Loan Agreement and modifies the interest rates applicable to the amounts advanced under the Revolving Line.

On November 14, 2013, we entered into a second amendment to the Loan Agreement (the “Second Amendment”). The Second Amendment, which is effective as of October 31, 2013, reduces our future minimum revenue covenant under the Loan Agreement.

On January 27, 2014, we entered into a third amendment to the Loan Agreement (the “Third Amendment”). Pursuant to the Third Amendment, the Lenders agreed to waive certain events of default under the Loan Agreement, and the parties amended certain provisions of the Loan Agreement, including the minimum liquidity ratio that we must maintain during the term of the Loan Agreement.

On March 3, 2014, we entered into a fourth amendment to the Loan Agreement (the “Fourth Amendment”). The Fourth Amendment provides that we will not be required to make any principal or interest payments under the Term Loan for the period from March 1, 2014 through March 31, 2015. Accordingly, pursuant to the Loan Agreement as amended by the Fourth Amendment, the next principal and interest payment under the Term Loan will be due on April 1, 2015.

(1) Revolving Line of Credit.Amounts advanced under the Revolving Line bear interest at an annual rate equal to the greater of (a) 4.25% or (b) the Wall Street Journal prime rate plus 1%. Interest is payable on a monthly basis, with the balance payable at the maturity of the Revolving Line. Under the Amendment, amounts advanced under the Revolving Line bear interest at an annual rate equal to the greater of (x) 6.25% or (y) the Wall Street Journal prime rate plus 3%. The current interest rate is 6.25%. Under the Loan Agreement, we paid the Lenders an upfront fee of $20,000, and will pay the Lenders an additional commitment fee of $20,000 on each one year anniversary of the Effective Date during the term of the Revolving Line. In addition, a fee of 0.5% per annum is payable quarterly on the unused portion of the Revolving Line. The Revolving Line matures on September 1, 2016.

(2) Term Loan. We received $4.0 million under the Term Loan on the Effective Date. Pursuant to the terms of the Loan Agreement, as amended by the Fourth Amendment, we are required to make monthly payments of interest to the Lenders commencing on April 1, 2015. The current interest rate is 9.1%.

We paid the Lenders an upfront fee of $40,000 for the Term Loan, and will pay the Lenders an additional final payment of $120,000 at maturity or prepayment of the Term Loan. In addition, if we repay the Term Loan prior to maturity, we will pay the Lenders a prepayment penalty of 5% of the total outstanding balance under the Term Loan if the prepayment occurs within one year after the Effective Date, 2.5% of the total outstanding balance under the Term Loan if the prepayment occurs between one and two years after the Effective Date, and 1% of the total outstanding balance under the Term Loan if the prepayment occurs thereafter.

Additional Terms

The Loan Agreement contains affirmative and negative covenants. Under the Term Loan, we are required to maintain a minimum liquidity ratio and achieve a minimum amount of revenue, and we also agreed not to (i) pledge or otherwise encumber our assets other than to the Lenders, (ii) enter into additional borrowings or guarantees, (iii) repurchase our capital stock, or (iv) enter into certain mergers or acquisitions without the Lenders' consent. Additionally, the Loan Agreement contains a subjective acceleration clause at the discretion of the Lenders. As of December 31, 2013, the Company was in compliance with the minimum revenue covenant. The Company was not in compliance with the minimum liquidity ratio. Pursuant to the Third Amendment, the Lenders agreed to waive the event of default.

To secure the repayment of any amounts borrowed under the Revolving Line and the Term Loan, we granted the Lenders a security interest in all of our assets. The occurrence of an event of default under the Loan Agreement could result in the acceleration of our obligations under the Loan Agreement and would increase the applicable interest rate under the Revolving Line or Term Loan (or both) by 5%, and permit the Lenders to exercise remedies with respect to the collateral under the Loan Agreement.

(3) First Note. The First Note was a three year senior secured promissory note payable to PGxHealth, LLC which was entered into on December 29, 2010 in conjunction with our acquisition of the FAMILION family of genetic tests. Interest was payable at 10% per year with quarterly interest payments through March 29, 2012. Thereafter, quarterly installments included both principal and interest through December 30, 2013. The First Note was paid in full on March 13, 2013.

Schedule of Maturities of Long-term Debt

The aggregate minimum principal maturities of the debt for the following fiscal years are as follows (dollars in thousands):

2014	$	242
2015	1,879
2016	4,439
	$	6,560

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY PARENTHETICALS (Subsequent event)	0 Months Ended
	Jan. 27, 2014
Subsequent event
Common stock reverse stock split, conversion ratio	0.0833

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CAPITAL LEASES (Tables)

12 Months Ended

Dec. 31, 2013

Leases [Abstract]

Schedule of Capital Leased Assets

The following is an analysis of the property acquired under capital leases.

	Dollars in Thousands
	Asset Balances at
Classes of Property	December 31, 2013			December 31, 2012
Equipment	$	1,514		$	1,323
Less: Accumulated amortization	(721		)	(420		)
Total	$	793		$	903

Schedule of Future Minimum Lease Payments for Capital Leases

Year ending December 31:

	Dollars in Thousands
2014	$	160
2015	37
2016	3
2017	1
Total minimum lease payments	$	201
Less: Amount representing interest	(17		)
Present value of net minimum lease payments	$	184

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ACQUISITIONS (Tables)

12 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

Schedule Of Intangible Assets, Valuation Approach

The following intangible assets were each valued separately using valuation approaches most appropriate for each specific asset.

Acquired technology	Relief from Royalty Method
Tradenames	Relief from Royalty Method
Customer relationships	Multi-Period Excess Earnings Method
Covenants not to compete	With and Without Method
Patents	Relief from Royalty Method

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EMPLOYEE BENEFIT PLAN (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined contribution plan, cost recognized	$ 0.4	$ 0.3	$ 0
First Three Percentage of Contributions [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined contribution plan, employer matching contribution, percent of match		100.00%
Defined contribution plan, employer matching contribution, percent		3.00%
Next Two Percentage of Contributions [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Defined contribution plan, employer matching contribution, percent of match		50.00%
Defined contribution plan, employer matching contribution, percent		2.00%

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012
CURRENT ASSETS:
Cash and cash equivalents	$ 1,626		$ 4,497
Accounts receivable (net of allowances for doubtful accounts of $3,838 and $2,171, respectively)	5,314		8,081
Inventories (net of allowances of $799 and $616, respectively)	3,957		5,092
Other current assets	938		1,047
Total current assets	11,835		18,717
PROPERTY AND EQUIPMENT:
Equipment	11,255		10,682
Furniture, fixtures & leasehold improvements	3,874		3,848
Property, plant and equipment, gross	15,129		14,530
Less: accumulated depreciation	(13,126)		(12,340)
Property, plant and equipment, net	2,003		2,190
OTHER ASSETS:
Goodwill	6,918		6,918
Intangibles (net of accumulated amortization of $4,598 and $2,805, respectively)	9,195		10,764
Other assets	327		202
Assets	30,278		38,791
CURRENT LIABILITIES:
Accounts payable	2,860		2,052
Accrued compensation	1,330		1,121
Current maturities of long term debt	242		6,171
Accrued expenses	2,037		3,686
Deferred revenue	1,088		1,171
Other current liabilities	1,068		1,067
Total current liabilities	8,625		15,268
LONG TERM LIABILITIES:
Long term debt less current maturities	6,318		0
Common stock warrant liability	600		900
Other long-term liabilities	1,303		1,089
Accrued preferred stock dividend	1,986		1,260
Total liabilities	18,832		18,517
STOCKHOLDERS’ EQUITY:
Series A preferred stock, $.01 par value, 15,000,000 shares authorized, 2,586,205 shares issued and outstanding, respectively	26		26
Common stock, $.01 par value, 150,000,000 shares authorized, 7,353,695 and 5,970,477 shares issued and outstanding, respectively	73	[1]	64	[1]
Additional paid-in capital	179,459	[1]	171,538	[1]
Accumulated other comprehensive income	390		435
Accumulated deficit	(168,502)		(151,789)
Total stockholders’ equity	11,446		20,274
Liabilities and equity	$ 30,278		$ 38,791

[1] The common stock shares and additional paid-in capital for all periods presented reflect the one-for-twelve reverse stock split which took effect on January 27, 2014.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Property, Plant and Equipment (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Property, Plant and Equipment [Line Items]
Depreciation expense	$ 0.6	$ 0.8	$ 0.6
Depreciation expense, capital leases	$ 0.3	$ 0.3	$ 0.2
Leasehold improvements | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	1 year
Leasehold improvements | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	10 years
Furniture and fixtures | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	3 years
Furniture and fixtures | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	7 years
Production equipment | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	3 years
Production equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	7 years
Computer equipment | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	3 years
Computer equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	7 years
Research and development equipment | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	2 years
Research and development equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	7 years

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Statement of Comprehensive Income [Abstract]
Net loss	$ (15,987)	$ (8,327)	$ (9,782)
Other Comprehensive Loss; foreign currency translation adjustment, net of tax	(45)	99	54
Comprehensive Loss	$ (16,032)	$ (8,228)	$ (9,728)

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ACQUISITIONS (Details) (USD $)	12 Months Ended				0 Months Ended				12 Months Ended
	Dec. 31, 2011	Dec. 31, 2013 Customer relationships	Dec. 31, 2013 Assay royalties	Dec. 31, 2013 Tradenames and trademarks	Sep. 21, 2012 ScoliScore Assay	Sep. 21, 2012 ScoliScore Assay Axial	Sep. 21, 2012 ScoliScore Assay Axial Accrued expenses	Sep. 21, 2012 ScoliScore Assay Certain Of Axial's Creditors	Dec. 31, 2013 ScoliScore Assay Acquired technology	Dec. 31, 2013 ScoliScore Assay Customer relationships	Dec. 31, 2013 ScoliScore Assay Assay royalties	Dec. 31, 2013 ScoliScore Assay Tradenames and trademarks
Business Acquisition [Line Items]
Acquisitions of intangibles	$ 0				$ 3,400,000	$ 200,000
Future payments to acquire intangible assets							800,000
Finite-lived intangible asset, useful life		15 years	7 years	7 years					10 years	15 years	7 years	7 years
Finite-lived intangible assets acquired					3,900,000
Goodwill, acquired during period					500,000
Fair value of consideration transferred								$ 4,400,000

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STOCKHOLDERS' EQUITY (Tables)

12 Months Ended

Dec. 31, 2013

Stockholders' Equity Note [Abstract]

Schedule of Stockholders' Equity Note, Warrants or Rights

Warrants to purchase an aggregate of 2,220,281 shares of common stock were outstanding at December 31, 2013.

Warrant Holder	Issue Year	Expiration	Underlying Shares	Exercise Price
Third Security Investors(1)	2010	December 2015	431,025	$6.96
Various Institutional Holders(2)	2012	February 2017	952,925	$12.96
Third Security Investors(2)	2012	February 2017	144,675	$12.96
Various Institutional Holders(3)	2013	January 2018	441,656	$9.00
Third Security Investors(3)	2013	January 2018	250,000	$9.00
			2,220,281

(1) This Warrant was issued in connection with the issuance of warrants to purchase shares of our Series A Preferred Stock to the Third Security Investors in December 2010. The number of underlying shares shown reflects the number of shares of common stock issuable upon conversion of the shares of Series A Preferred Stock for which this Warrant is currently exercisable.

(2) These Warrants were issued in connection with the Private Placement completed in February 2012 and are classified as a liability in our financial statements. See Footnote 12 - Fair Value. These warrants also contain certain anti-dilution provisions that provide for an adjustment to the exercise price and number of shares issuable upon exercise of the warrant in the event that we engage in certain issuances of shares of our common stock at a price lower than the exercise price of the warrant.

(3) These warrants were issued in connection with the offering, which was completed in January 2013.

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SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

	In thousands except per share data
	March 31			June 30			September 30			December 31
2013
Net Sales	$	7,374		$	7,306		$	6,646		$	6,218
Gross Profit	3,681			3,410			2,851			2,554
Net Loss	(3,586		)	(2,867		)	(5,552		)	(3,982		)
Basic and diluted loss per common share	$	(0.54	)	$	(0.41	)	$	(0.78	)	$	(0.57	)
2012
Net Sales	$	7,206		$	9,093		$	7,889		$	7,292
Gross Profit	3,104			4,562			3,800			3,544
Net Income (Loss)	(2,696		)	(563		)	(2,754		)	(2,314		)
Basic and diluted loss per common share	$	(0.55	)	$	(0.12	)	$	(0.49	)	$	(0.42	)

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EQUITY INCENTIVE PLAN (Tables)

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity

The following table summarizes stock option activity under the Plan during the year ended December 31, 2013:

	Number of Options		Weighted Average Exercise Price
Balance at January 1, 2013:	362,764		$	12.60
Granted	421,667		4.56
Forfeited	(80,889	)	(9.48		)
Expired	(138,514	)	(12.48		)
Balance at December 31, 2013:	565,028		$	6.60
Exercisable at December 31, 2013	153,793		$	12.72

Schedule of Other Share-based Compensation, Activity

Stock Appreciation Rights (“SARs”).

The following table summarizes SARs activity under the Plan during the year ended December 31, 2013:

	Number of Options	Weighted Average Exercise Price
Balance at January 1, 2013:	—	$	—
Granted	138,333	4.32
Balance at December 31, 2013:	138,333	$	4.32
Exercisable at December 31, 2013	—	$	—

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ACQUISITIONS

12 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

Acquisition

ACQUISITIONS

ScoliScore^TM 

On September 21, 2012, we acquired certain intangible assets from Axial Biotech, Inc. ("Axial") related to the ScoliScore^TMassay. In consideration for the purchase of the intangible assets, we made a cash payment of approximately$3.4 millionto Axial and certain of its creditors. In addition, following the transfer of all of the assets related to the ScoliScore^TMassay and confirmation that the ScoliScore^TMassay operates, within our laboratories pursuant to protocol agreed upon by us and Axial, during the years ended December 31, 2012 and 2013 we paid an additional$0.2 million and $0.8 million, respectively, to Axial and certain of its creditors. The total consideration paid was$4.4 million. This acquisition provides us with the ScoliScore^TMassay technology and intellectual property, and an established revenue and customer base.

The following intangible assets were each valued separately using valuation approaches most appropriate for each specific asset.

Acquired technology	Relief from Royalty Method
Tradenames	Relief from Royalty Method
Customer relationships	Multi-Period Excess Earnings Method
Covenants not to compete	With and Without Method
Patents	Relief from Royalty Method

The Income Approach uses valuation techniques to convert future amounts, cash flows or earnings, to a single, discounted amount. The fair value measure is based on the value that is indicated by market expectations about the present value of those future amounts.

The Relief from Royalty Method assumes that if the Company did not have proprietary ownership of the genetic testing processes on which its revenues depend, it might elect to lease the rights or licenses from another company. The fair value is measured as the estimated discounted cash flows of the royalty payments avoided by ownership.

The Multi Period Excess Earnings Method measures the fair value as the estimated discounted cash flows of the existing customer relationships over a period during which revenues from existing customer relationships are assumed to have been substantially replaced by revenues from future customers.

The With and Without Method measures the fair value of the non-competition agreements as the probability adjusted difference between the estimated discounted cash flows with and without the effect of competition. The model that includes competition includes lost revenues as well as increased expenses required to rebuild the lost revenues.

The acquired intangibles have the following useful lives; acquired technology - 10 years; third party payor relationships - 15 years; assay royalties 7 years; tradenames and trademarks - 7 years.

The assets acquired were $3.9 million in identifiable intangible assets and $0.5 million in goodwill. No liabilities were assumed. The acquired assets are reported as a component of our laboratory services segment.

The goodwill arising from the acquisition has been assigned to our Laboratory Services segment and is expected to be deductible for tax purposes.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) In Thousands, except Share data, unless otherwise specified	Total	Preferred Stock	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)
Balance at Dec. 31, 2010	$ 8,500	$ 0	$ 46	$ 140,182	$ (133,317)	$ 1,589
Balance, shares at Dec. 31, 2010		0	4,107,473
Increase (Decrease) in Stockholders' Equity
Net loss	(9,782)				(9,782)
Foreign currency translation adjustment, net of tax	54					54
Non-cash stock-based compensation	1,010			1,010
Issuance of shares of stock, shares			7,513
Issuance of shares of stock	24		0	24
Preferred stock accretion	(410)				(410)
Amendment of preferred stock agreement, shares		2,586,205	20,492
Amendment of preferred stock agreement	12,252	26	0	12,226
Dividends on preferred stock	(600)				(600)
Reclassification of other comprehensive income (loss)	0				1,307	(1,307)
Balance at Dec. 31, 2011	11,048	26	46	153,442	(142,802)	336
Balance, shares at Dec. 31, 2011		2,586,205	4,135,478
Increase (Decrease) in Stockholders' Equity
Net loss	(8,327)				(8,327)
Foreign currency translation adjustment, net of tax	99					99
Non-cash stock-based compensation	731			731
Issuance of shares of stock, shares			1,667
Issuance of shares of stock	10		0	10
Private Placement, net	17,373		18	17,355
Dividends on preferred stock	(660)				(660)
Balance at Dec. 31, 2012	20,274	26	64	171,538	(151,789)	435
Balance, shares at Dec. 31, 2012		2,586,205	5,970,478
Increase (Decrease) in Stockholders' Equity
Net loss	(15,987)				(15,987)
Foreign currency translation adjustment, net of tax	(45)					(45)
Non-cash stock-based compensation	360			360
Private Placement, net, shares			1,383,217
Private Placement, net	7,570		14	7,556
Dividends on preferred stock	(726)				(726)
Other, shares			0
Other	0		(5)	5
Balance at Dec. 31, 2013	$ 11,446	$ 26	$ 73	$ 179,459	$ (168,502)	$ 390
Balance, shares at Dec. 31, 2013		2,586,205	7,353,695

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CONSOLIDATED BALANCE SHEETS PARENTHETICALS (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2013		Dec. 31, 2012
Allowances for bad debt	$ 3,838		$ 2,171
Allowances for obsolescence	799		616
Accumulated Amortization On Intangibles	$ 4,598		$ 2,805
STOCKHOLDERS’ EQUITY:
Common stock, par value	$ 0.01	[1]	$ 0.01	[1]
Common stock, shares authorized	150,000,000	[1]	100,000,000	[1]
Common stock, shares issued	7,353,695	[1]	5,970,477	[1]
Common stock, shares outstanding	7,353,695	[1]	5,970,477	[1]
Preferred stock, par value	$ 0.01		$ 0.01
Preferred stock, shares authorized	15,000,000		15,000,000
Preferred stock, shares issued	2,586,205		2,586,205
Preferred stock, shares outstanding	2,586,205		2,586,205

[1] The common stock shares and additional paid-in capital for all periods presented reflect the one-for-twelve reverse stock split which took effect on January 27, 2014.

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INCOME TAXES

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax

INCOME TAXES

The Company’s provision for income taxes for the years ended December 31, 2013, 2012 and 2011 relates to income taxes in states, foreign countries and other local jurisdictions and differs from the amounts determined by applying the statutory Federal income tax rate to loss before income taxes for the following reasons:

	Dollars in Thousands
	2013			2012			2011
Benefit at federal rate	$	(5,454	)	$	(2,781	)	$	(3,311	)
Increase (decrease) resulting from:
State income taxes—net of federal benefit	(518		)	2			2
Foreign subsidiary tax rate difference	(3		)	(27		)	(94		)
Tax contingency	23			22			28
Expiring net operating loss carryforwards	—			1,472			988
Earnings repatriation	—			582			—
Miscellaneous permanent differences	155			284			332
Liability warrants	(102		)	(748		)	2,062
Tax credits	—			215			—
State, net operating loss expiration/true-up	1,179			—			—
Other—net	(80		)	15			(53		)
Valuation allowance	4,746			1,110			91
Total income tax (benefit) expense	$	(54	)	$	146		$	45

	Dollars in Thousands
	2013			2012		2011
Federal:
Current	$	—		$	—	$	16
Deferred	—			—		—
Total Federal	$	—		$	—	$	16
State:
Current	$	—		$	3	$	3
Deferred	—			—		—
Total State	$	—		$	3	$	3
Foreign:
Current	$	20		$	46	$	159
Deferred	(74		)	97		(133		)
Total Foreign	$	(54	)	$	143	$	26
Total Tax Provision	$	(54	)	$	146	$	45

The Company’s deferred income tax asset at December 31, 2013 and 2012 is comprised of the following temporary differences:

	Dollars in Thousands
	2013			2012
Deferred Tax Asset:
Net operating loss carryforward	$	42,950		$	39,481
Research and development credit carryforwards	951			1,017
Deferred revenue	174			188
Inventory	275			224
Other	1,997			1,111
	46,347			42,021
Less valuation allowance	(46,088		)	(41,342		)
Deferred Tax Asset	$	259		$	679
Deferred Tax Liability:
Foreign earnings	$	25		$	398
Property and equipment	186			300
Deferred Tax Liability	$	211		$	698
Net Deferred Asset (Liability)	$	48		$	(19	)

At December 31, 2013, we had total unused federal tax net operating loss carryforwards of $121.7 million. The expiration dates are as follows (amounts in thousands):

2018	$	1,838
2019	8,181
2020	9,662
2021	8,228
2022	16,862
2023	16,173
2024	17,390
2025	8,153
2026	6,792
2027	3,238
2028	1,272
2029	591
2031	2,784
2032	8,358
2033	12,137
	$	121,659

Of these federal net operating loss carryforwards, $1.2 million were obtained in the acquisition of Annovis, Inc. and may be subject to certain restrictions. Remaining net operating loss carryforwards could be subject to limitations under section 382 of the Internal Revenue Code. At December 31, 2013, we had unused state tax net operating loss carryforwards of approximately $33.0 million that expire at various times beginning in 2014. At December 31, 2013, we had unused research and development credit carry-forwards of $1.0 million that expire at various times between 2014 and 2024. A valuation allowance has been provided for the remaining deferred tax assets, due to the cumulative losses in recent years and an inability to utilize any additional losses as carrybacks. We will continue to assess the recoverability of deferred tax assets and the related valuation allowance. To the extent we begin to generate income in future years and it is determined that such valuation allowance is no longer required, the tax benefit of the remaining deferred tax assets will be recognized at such time.

Our liability for uncertain certain tax positions, which was included in other long term liabilities, was $0.3 million as of December 31, 2013 and 2012.  We recorded less than $0.1 million of additional uncertain tax positions during each of the years ended 2013 and 2012. We had no material interest or penalties during fiscal 2013 or fiscal 2012, and we do not anticipate any such items during the next twelve months. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations. We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. We have statutes of limitation open for Federal income tax returns related to tax years 2010 through 2013. We have state income tax returns subject to examination primarily for tax years 2010 through 2013. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period. Open tax years related to foreign jurisdictions remain subject to examination. Our primary foreign jurisdiction is the United Kingdom, which has open tax years for 2010 through 2013.

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DOCUMENT AND ENTITY INFORMATION (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Mar. 24, 2014	Jun. 30, 2013
Entity Information [Line Items]
Entity Registrant Name	TRANSGENOMIC INC
Entity Central Index Key	0001043961
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-K
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Common Stock, Shares Outstanding		7,353,695
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 35.3

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EMPLOYEE BENEFIT PLAN

12 Months Ended

Dec. 31, 2013

Compensation and Retirement Disclosure [Abstract]

Employee Benefit Plan

EMPLOYEE BENEFIT PLAN

We maintain an employee 401(k) retirement savings plan that allows for voluntary contributions into designated investment funds by eligible employees. Effective October 1, 2010, Transgenomic discontinued matching employee 401(k) contributions. Beginning January 1, 2012, we reinstated matching employee 401(k) contributions. We currently match the employee's contributions at the rate of 100% on the first 3% of contributions and 50% on the next 2% of contributions. We may, at the discretion of our Board of Directors, make additional contributions on behalf of the Plan’s participants. Contributions to the 401(k) plan were $0.4 million, $0.3 million and zero for the years ended December 31, 2013, 2012 and 2011, respectively.

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011
Income Statement [Abstract]
NET SALES	$ 27,544		$ 31,480		$ 31,971
COST OF GOODS SOLD	15,048		16,470		13,534
Gross profit	12,496		15,010		18,437
OPERATING EXPENSES:
Selling, general and administrative	25,043		22,023		19,150
Research and development	3,212		2,491		2,218
Restructuring charges	0		0		41
Operating Expenses	28,255		24,514		21,409
LOSS FROM OPERATIONS	(15,759)		(9,504)		(2,972)
OTHER INCOME (EXPENSE):
Interest expense, net	(642)		(888)		(958)
Expense on preferred stock	0		0		(6,066)
Warrant revaluation	300		2,200		0
Other, net	60		11		259
Other Income (Expense)	(282)		1,323		(6,765)
LOSS BEFORE INCOME TAXES	(16,041)		(8,181)		(9,737)
INCOME TAX (BENEFIT)EXPENSE	(54)		146		45
NET LOSS	(15,987)		(8,327)		(9,782)
PREFERRED STOCK DIVIDENDS AND ACCRETION	(726)		(660)		(1,010)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS	$ (16,713)		$ (8,987)		$ (10,792)
BASIC AND DILUTED LOSS PER COMMON SHARE (IN DOLLARS PER SHARE)	$ (2.30)	[1]	$ (1.55)	[1]	$ (2.62)	[1]
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING	7,266,642	[1]	5,784,785	[1]	4,113,469	[1]

[1] Net loss per share and the number of shares used in the per share calculations for all periods presented reflect the one-for-twelve reverse stock split which took effect on January 27, 2014.

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INVENTORIES

12 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

Inventory Disclosure

INVENTORIES

Inventories (net of allowance for slow moving and obsolescence) consisted of the following:

	Dollars in Thousands
	December 31, 2013			December 31, 2012
Finished goods	$	2,978		$	4,057
Raw materials and work in process	1,567			1,547
Demonstration inventory	211			104
	$	4,756		$	5,708
Less allowances	(799		)	(616		)
Total	$	3,957		$	5,092

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Significant Accounting Policies

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation.

The consolidated financial statements include the accounts of Transgenomic, Inc. and its wholly owned subsidiary. All inter-company balances and transactions have been eliminated in consolidation.

Risks and Uncertainties.

Certain risks and uncertainties are inherent in our day-to-day operations and to the process of preparing our financial statements. The more significant of those risks are presented below and throughout the notes to the financial statements.

Use of Estimates.

The preparation of consolidated financial statements 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 net sales and expenses during the reporting period. In addition, estimates and assumptions associated with the determination of the fair value of certain assets and related impairments require considerable judgment by management. The key estimates included in the consolidated financial statements include stock option valuations, goodwill and intangible valuations, accounts receivable and inventory valuations, warrant valuations and contractual allowances. Actual results could differ from the estimates and assumptions used in preparing these consolidated financial statements.

Basis of Presentation.

On January 15, 2014, the Board of Directors of the Company approved a reverse split of the Company's common stock, par value $0.01, at a ratio of one-for twelve. This reverse stock split became effective on January 27, 2014 and, unless otherwise indicated, all share amounts, per share data, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split. Additionally, accrued preferred stock dividends have been re-classed to conform to the current year presentation.

Fair Value.

Unless otherwise specified, book value approximates fair market value. The Company's Level 1 financial instruments include cash and cash equivalents. The Company's Level 3 financial instruments include the common stock warrant liability, preferred stock warrant liability and conversion feature, and debt. Due to its variable interest component, debt approximates fair value.  The common stock warrant liability and Series A Convertible Preferred Stock (“Series A Preferred Stock”) warrant liability and conversion feature are recorded at fair value.  See Footnote 12 Fair Value.

Cash and Cash Equivalents.

Cash and cash equivalents include cash and investments with original maturities at the date of acquisition of three months or less. Such investments presently consist of temporary overnight investments

Concentrations of Cash.

From time to time, we may maintain a cash position with financial institutions in amounts that exceed federally insured limits. We have not experienced any losses on such accounts as of December 31, 2013.

Accounts Receivable.

The following is a summary of activity for the allowance for doubtful accounts during the years ended December 31, 2013, 2012 and 2011:

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs			Ending Balance
Year ended December 31, 2013	$	2,171	$	5,548	$	(3,881	)	$	3,838
Year ended December 31, 2012	$	1,088	$	2,468	$	(1,385	)	$	2,171
Year ended December 31, 2011	$	334	$	1,738	$	(984	)	$	1,088

While payment terms are generally 30 days, we have also provided extended payment terms of up to 90 days in certain cases. We operate globally and some of the international payment terms can be greater than 90 days. Accounts receivable are carried at original invoice amount and shown net of allowance for doubtful accounts and contractual allowances. The estimate made for doubtful accounts is based on a review of all outstanding amounts on a quarterly basis. The estimate for contractual allowances is based on contractual terms or historical reimbursement rates and is recorded when revenue is recorded. We determine the allowance for doubtful accounts and contractual allowances by regularly evaluating individual payor receivables and considering a payor's financial condition, credit history, reimbursement rates and current economic conditions. Accounts receivable are written off when deemed uncollectible and after all collection efforts have been exhausted. Recoveries of accounts receivable previously written off are recorded as a reduction in bad debt expense when received.

Inventories.

Inventories are stated at the lower of cost or market net of allowance for obsolete and slow moving inventory. Cost is computed using standard costs for finished goods and average or latest actual cost for raw materials and work in process, which approximates the first-in, first-out (FIFO) method. We write down slow-moving and obsolete inventory by the difference between the value of the inventory and our estimate of the reduced value based on potential future uses, the likelihood that overstocked inventory will be sold and the expected selling prices of the inventory. If our ability to realize value on slow-moving or obsolete inventory is less favorable than assumed, additional write-downs of the inventory may be required.

The following is a summary of activity for the allowance for obsolete inventory during the year ended December 31, 2013, 2012 and 2011:

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs			Ending Balance
Year ended December 31, 2013	$	616	$	217	$	(34	)	$	799
Year ended December 31, 2012	$	511	$	129	$	(24	)	$	616
Year ended December 31, 2011	$	518	$	48	$	(55	)	$	511

We determine the allowance for obsolescence by evaluating inventory quarterly for items deemed to be slow moving or obsolete.

Property and Equipment.

Property and equipment are carried at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the related assets as follows:

Leasehold improvements	1 to 10 years
Furniture and fixtures	3 to 7 years
Production equipment	3 to 7 years
Computer equipment	3 to 7 years
Research and development equipment	2 to 7 years

Depreciation expense related to property and equipment during the years ended December 31, 2013, 2012 and 2011 was $0.6 million, $0.8 million and $0.6 million, respectively. Included in depreciation for the years ended December 31, 2013, 2012 and 2011 was $0.3 million, $0.3 million and $0.2 million, respectively, related to equipment acquired under capital leases.

Goodwill.

Goodwill is tested for impairment annually utilizing a combination of income and market approaches. The income approach applies a discounted cash flow methodology to the Company's future period projections and the market approach uses market available information on the Company. We perform this impairment analysis during the fourth quarter of each year or when a significant event occurs that may impact goodwill. Impairment may occur when the carrying value of the reporting unit exceeds its fair value. If the carrying value of the reporting unit exceeds its fair value, the fair value of all identifiable tangible and intangible assets and liabilities is determined as part of a hypothetical purchase price allocation to determine the amount of goodwill impairment. No impairment of goodwill has occurred to date.

Intangibles.

Intangible assets include intellectual property, patents and acquired products. At December 31, 2013, the Company revised its estimate of useful lives on certain intangible assets which will cause amortization expense in 2014 to be $0.4 million lower.

1. Intellectual Property.    Initial costs paid to license intellectual property from independent third parties are capitalized and amortized using the straight-line method over the license period. Ongoing royalties related to such licenses are expensed as incurred.

2. Patents.    We capitalize legal costs, filing fees and other expenses associated with obtaining patents on new discoveries and amortize these costs using the straight-line method over the shorter of the legal life of the patent or its economic life beginning on the date the patent is issued.

3. Acquired Products.    As a part of the FAMILION acquisition and acquisition of certain intangible assets from Axial, we acquired technology, in process technology, trademarks/tradenames, customer relationships, covenants not to compete and third party relationships. These costs will be amortized pursuant to the straight-line method over their estimated economic life of seven to eight years. See Footnote 4 "Intangibles and Other Assets" to our accompanying consolidated financial statements.

We review our amortizable long lived assets for impairment whenever events indicate that the carrying amount of the asset (group) may not be recoverable. An impairment loss may be needed if the sum of the future undiscounted cash flows is less than the carrying amount of the asset (group). The amount of the loss would be determined by comparing the fair market value of the asset to the carrying amount of the asset (group). No loss has been recorded during the years ended December 31, 2013, 2012 or 2011. 

Common Stock Warrants.

Our issued and outstanding 2012 warrants to purchase common stock do not qualify to be treated as equity and accordingly, are recorded as a liability (“Common Stock Warrant Liability”). The Common Stock Warrant Liability was initially recorded at fair value using a Monte Carlo simulation model. We are required to present these instruments at fair value at each reporting date and any changes in fair values are recorded as an adjustment to earnings. The Common Stock Warrant Liability is considered a Level 3 financial instrument. See Footnote 12 - Fair Value.

Preferred Stock.   

Priorto the 2011 modification, the Series A Preferred Stock met the definition of mandatorily redeemable stock as it was preferred capital stock which was redeemable at the option of the holder and therefore was reported outside of equity. The Series A Preferred Stock was accreted to its redemption value. Prior to the 2011 modification, the warrants to purchase shares of series A Preferred Stock (“Series A Warrants”) did not qualify to be treated as equity and accordingly, were recorded as a liability. A preferred stock conversion feature was embedded within the Series A Preferred Stock that met the definition of a derivative. The Series A Preferred Stock, Series A Warrant liability and Series A Preferred Stock conversion feature were all recorded separately and were initially recorded at fair value using the Black-Scholes model. We were required to record these instruments at fair value at each reporting date and changes were recorded as an adjustment to earnings. The Series A Warrant liability and Series A Preferred Stock conversion feature were considered Level 3 financial instruments.

In November 2011, we entered into a transaction with the holders of the Series A Preferred Stock (the “Series A Holders”), pursuant to an Agreement Regarding Preferred Stock (the “Amendment Agreement”), in which the Series A Holders agreed to (i) waive their rights to enforce the anti-dilution and redemption features of the Series A Preferred Stock and (ii) at the next annual stockholder meeting, vote to amend the Certificate of Designation for the Series A Preferred Stock to remove the anti-dilution and redemption features of the Series A Preferred Stock. In exchange, we issued shares of common stock to the Series A Holders having an aggregate market value of $0.3 million. Our stockholders approved the amendments to the Certificate of Designation for the Series A Preferred Stock at the 2012 Annual Meeting of Stockholders held on May 23, 2012, and we filed the Certificate of Designation for the Series A Preferred Stock with the Delaware Secretary of State on May 25, 2012.

As a result of the Amendment Agreement, the value of the Series A Preferred Stock and Series A Warrants, including the Series A Preferred Stock conversion feature and Series A Warrant liability, were reclassified into stockholders' equity as of the date of the Amendment Agreement.

Expense on Preferred Stock.

For 2011, we recorded expense associated with the Series A Preferred Stock and Series A Warrants of $6.1 million, which is due to the change in fair value of the Series A Preferred Stock conversion feature and Series A Warrant liability of $5.8 million and the issuance of $0.3 million in common stock to the investors of Series A Preferred Stock. The expense associated with the change in value of the Series A Preferred Stock conversion feature is a non-cash item. There was no expense on preferred stock in 2013 or 2012.

Stock Based Compensation.

All stock-based awards to date have exercise prices equal to the market price of our common stock on the date of grant and have ten-year contractual terms. Unvested options as of December 31, 2013 had vesting periods of one or three years from date of grant. None of the stock options outstanding at December 31, 2013 are subject to performance or market-based vesting conditions.

We measure and recognize compensation expense for all stock-based awards made to employees and directors, including stock options. Compensation expense is based on the calculated fair value of the awards as measured at the grant date and is expensed over the service period of the awards.

Income Taxes.

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities at each balance sheet date using tax rates expected to be in effect in the year the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent that it is more likely than not that they will not be realized. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations.

Net Sales Recognition.

Revenue is realized and earned when all of the following criteria are met:

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

• The seller’s price to the buyer is fixed or determinable; and

• Collectability is reasonably assured.

In Laboratory Services, net sales from Patient Testing labs are recognized on an individual test basis and take place when the test report is completed, reviewed and sent to the client less the reserve for insurance, Medicare and Medicaid contractual adjustments. There are no deferred net sales associated with our Patient Testing services. Adjustments to the allowances, based on actual receipts from third party payers, are reflected in the estimated contractual allowance applied prospectively. In our Biomarker Identification labs, we perform services on a project by project basis. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year. At December 31, 2013 and 2012, deferred net sales associated with pharmacogenomics research projects, included in the balance sheet in deferred revenue, was $0.2 million and $0.2 million, respectively.

Net sales of Genetic Assays and Platforms products are recognized in accordance with the terms of the sales arrangement. Such recognition is based on receipt of an unconditional customer order and transfer of title and risk of ownership to the customer, typically upon shipment of the product under a purchase order. Our sales terms do not provide for the right of return unless the product is damaged or defective. Net sales from certain services associated with the analytical instruments, to be performed subsequent to shipment of the products, is deferred and recognized when the services are provided. Such services, mainly limited to installation and training services that are not essential to the functionality of the instruments, typically are performed in a timely manner subsequent to shipment of the instrument. We also enter into various service contracts that cover installed instruments. These contracts cover specific time periods and net sales associated with these contracts are deferred and recognized ratably over the service period. At December 31, 2013 and 2012, deferred net sales, mainly associated with our service contracts, included in the balance sheet in deferred revenue was approximately $0.9 million and $1.0 million, respectively.

Taxes collected from customers and remitted to government agencies for specific net sales producing transactions are recorded net with no effect on the income statement.

Research and Development.

Research and development and various collaboration costs are charged to expense when incurred.

Translation of Foreign Currency.

Our foreign subsidiary uses the local currency of the country in which it is located as its functional currency. Its assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. A translation loss of 0.1 million is reported in other comprehensive income on the accompanying consolidated balance sheet as of December 31, 2013. A translation gain of $0.1 million was reported in other comprehensive income on the accompanying consolidated balance sheet as of December 31, 2012. Revenues and expenses are translated at the average rates during the period. For transactions that are not denominated in the functional currency, we recognized foreign currency translation income of less than $0.1 million for the year ended December 31, 2013 and foreign currency translation loss of less than $0.1 million for each of the years ended December 31, 2012 and 2011.

Other Income.

Other income in the year ended December 31, 2011 includes an award of a federal grant under the Qualifying Therapeutic Discovery Project related to COLD-PCR, Surveyor Scan kit development for detecting key cancer pathway gene mutations and mtDNA damage assays. Income related to this federal grant net of consulting fees was $0.2 million. There was no such other income in the years ended December 31, 2013 and 2012.

Comprehensive Income.

Accumulated other comprehensive income at December 31, 2013, 2012 and 2011 consisted of foreign currency translation adjustments, net of applicable tax of zero. During 2011, we reclassified $1.3 million from accumulated other comprehensive income (loss) to accumulated deficit with no effect on total stockholders' equity or net loss.

Earnings Per Share.

Basic earnings per share is calculated based on the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share include shares issuable upon exercise of outstanding stock options, warrants or conversion rights that have exercise or conversion prices below the market value of our common stock, as long as the effect is not anti-dilutive. Options, warrants and conversion rights pertaining to 3,785,709, 2,471,670 and 1,470,689 shares of our common stock have been excluded from the computation of diluted earnings per share at December 31, 2013, 2012 and 2011, respectively. The options, warrants and conversion rights that were exercisable in 2013, 2012 and 2011 were not included because the effect would be anti-dilutive due to the net loss.

Recently Issued Accounting Pronouncements.

In February 2013, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. The amendments in the Update do not change the current requirements for reporting net income or other comprehensive income in financial statements. The new amendments will require an organization to present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income if the item reclassified is required under generally accepted accounting principles in the U.S. (“U.S. GAAP”) to be reclassified to net income in its entirety in the same reporting period. Additionally, for other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP to provide additional detail about those amounts. For public companies, the amendments were effective for reporting periods beginning after December 15, 2012. Our adoption of this guidance did not have a material impact on our consolidated financial statements.

In February 2013 FASB issued ASU No. 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). ASU 2013-04 requires reporting and disclosure of obligations resulting from joint and several liability arrangements within the scope of Subtopic 405-40 for which the total amount of the obligation is fixed at the reporting date. For public companies, ASU 2013-04 is effective for fiscal years and interim periods within those years beginning after December 15, 2013. The guidance in ASU 2013-04 is to be applied retrospectively for those obligations resulting from joint and several liability arrangements within the scope of Subtopic 405-40 that exist at the beginning of an entity’s fiscal year of adoption. Earlier application is permitted. When adopted, ASU 2013-04 is not expected to materially impact our consolidated financial statements.

In March 2013, the FASB released ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force)(“ASU 2013-05”). ASU 2013-05 provides that, when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. The provisions of ASU 2013-05 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. When adopted, ASU 2013-05 is not expected to materially impact our consolidated financial statements.

In July 2013, the FASB issued Accounting Standards Update, or ASU, No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with an option for early adoption. The Company intends to adopt this guidance at the beginning of our first quarter of fiscal year 2014, and does not expect the adoption of this standard will have a material impact on its financial statements.

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OPERATING SEGMENT AND GEOGRAPHIC INFORMATION

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Operating Segment And Geographic Information

OPERATING SEGMENT AND GEOGRAPHIC INFORMATION

Our company’s chief operating decision-maker is the Chief Executive Officer, who regularly evaluates our performance based on net sales and gross profit. The preparation of this segment analysis requires management to make estimates and assumptions around expenses below the gross profit level. While we believe the segment information to be materially correct, actual results could differ from the estimates and assumptions used in preparing this information.

We have two reportable operating segments, Laboratory Services and Genetic Assays and Platforms. These lines of business are complementary with the Biomarker Identification labs driving innovation and leading to kit production in our Genetic Assays and Platforms segment and new tests in our Patient Testing labs.

The accounting policies of the segments are the same as the policies discussed in Footnote 2 – Summary of Significant Accounting Policies.

Segment information for the years ended December 31, 2013, 2012 and 2011 is as follows:

	Dollars in Thousands
	2013
	Laboratory Services			Genetic Assays and Platforms			Total
Net Sales	$	15,391		$	12,153		$	27,544
Gross Profit	6,820			5,676			12,496
Net Loss before Taxes	(12,486		)	(3,555		)	(16,041		)
Income Tax Expense	—			(54		)	(54		)
Net Loss	$	(12,486	)	$	(3,501	)	$	(15,987	)
Depreciation/Amortization	$	2,467		$	281		$	2,748
Interest Expense	(398		)	(244		)	(642		)
	December 31, 2013
Total Assets	$	21,711		$	8,567		$	30,278
Goodwill	6,918			—			6,918

	Dollars in Thousands
	2012
	Laboratory Services			Genetic Assays and Platforms			Total
Net Sales	$	19,329		$	12,151		$	31,480
Gross Profit	9,316			5,694			15,010
Net (Loss) before Taxes	(6,874		)	(1,307		)	(8,181		)
Income Tax Expense	—			146			146
Net (Loss)	$	(6,874	)	$	(1,453	)	$	(8,327	)
Depreciation/Amortization	$	1,960		$	318		$	2,278
Interest Expense	(851		)	(37		)	(888		)
	December 31, 2012
Total Assets	$	29,196		$	9,595		$	38,791
Goodwill	6,918			—			6,918

	Dollars in Thousands
	2011
	Laboratory Services			Genetic Assays and Platforms		Total
Net Sales	$	18,318		$	13,653	$	31,971
Gross Profit	10,528			7,909		18,437
Net Loss before Taxes	(11,370		)	1,633		(9,737		)
Income Tax Expense	—			45		45
Net Loss	$	(11,370	)	$	1,588	$	(9,782	)
Depreciation/Amortization	$	1,810		$	291	$	2,101
Restructure	29			12		41
Interest Expense	(958		)	—		(958		)
	December 31, 2011
Total Assets	$	23,668		$	9,894	$	33,562
Goodwill	6,440			—		6,440

Net sales for the year ended December 31, 2013, 2012 and 2011 by country were as follows:

	Dollars in Thousands
	Years Ended December 31,
	2013		2012		2011
United States	$	20,119	$	22,727	$	22,626
Italy	1,530		2,524		3,152
Germany	1,218		907		750
United Kingdom	748		1,703		778
France	681		679		758
All Other Countries	3,248		2,940		3,907
Total	$	27,544	$	31,480	$	31,971

No other country accounted for more than 5% of total net sales.

More than 99% of our long-lived assets are located within the United States. Substantially all of the remaining long-lived assets are located within Europe.

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STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2013

Stockholders' Equity Attributable to Parent [Abstract]

Stockholders' Equity

STOCKHOLDERS’ EQUITY

Common Stock.

Pursuant to our Third Amended and Restated Certificate of Incorporation as amended, we currently have 150,000,000 shares of common stock authorized for issuance.

On February 2, 2012 we entered into definitive agreements with institutional and other accredited investors and raised approximately $22.0 million in a private placement financing (the “Private Placement”), which includes an aggregate of $3.0 million in convertible notes (the “Convertible Notes”) issued in December 2011 to entities affiliated with Third Security, LLC (the “Third Security Investors”), a related party, that automatically convert into shares of our common stock and warrants to purchase such common stock on the same terms as all investors in the Private Placement. Pursuant to the applicable purchase agreement, we issued an aggregate of 1,583,333 shares of our common stock at a price per share of $12.00, as well as five-year warrants to purchase up to an aggregate of 823,333 shares of common stock with an exercise price of $15.00 per share. In connection with the conversion of the Convertible Notes, the Third Security Investors received an aggregate of 250,000 shares of common stock and 125,000 warrants on the same terms as all investors in the Private Placement. Craig-Hallum Capital Group LLC served as the sole placement agent for the offering. In consideration for services rendered as the placement agent in the offering, we agreed to (i) pay to the placement agent cash commissions equal to $1,330,000, or 7.0% of the gross proceeds received in the offering, (ii) issue to the placement agent a five-year warrant to purchase up to 31,666 shares of our common stock (representing 2% of the shares sold in the Private Placement) with an exercise price of $15.00 per share and other terms that are the same as the terms of the warrants issued in the Private Placement; and (iii) reimburse the placement agent for reasonable out-of-pocket expenses, including fees paid to the placement agent’s legal counsel, incurred in connection with the offering, which reimbursable expenses shall not exceed $125,000. The costs incurred to complete the Private Placement were recorded as a reduction in equity in the amount of $1.5 million. Net proceeds from this offering have been used for general corporate and working capital purposes, primarily to accelerate development of several of our key initiatives.

On January 24, 2013, we entered into a Securities Purchase Agreement with certain institutional and other accredited investors pursuant to which we: (i) sold to the investors an aggregate of 1,383,333 shares of our common stock at a price per share of $6.00 for aggregate gross proceeds of approximately $8.3 million; and (ii) issued to the investors warrants to purchase up to an aggregate of 691,656 shares of our common stock with an exercise price of $9.00 per share (the “Offering”). The warrants may be exercised, in whole or in part, at any time from January 30, 2013 until January 30, 2018 and contain both cash and “cashless exercise” features. The Third Security Investors purchased an aggregate of 500,000 shares of common stock and warrants to purchase an aggregate of 250,000 shares of common stock in the Offering on the same terms as the other investors. We are using the net proceeds from the Offering for general corporate and working capital purposes, primarily to accelerate development of several of our key initiatives.

In connection with the Offering, we entered into a registration rights agreement with the investors (the “Registration Rights Agreement”). The Registration Rights Agreement required that we file with the SEC a registration statement to register for resale the shares of common stock sold and the shares of common stock issuable upon exercise of the warrants by March 16, 2013. The registration statement was filed with the SEC on March 15, 2013 and was declared effective by the SEC on March 29, 2013.

The above common stock transaction required the repricing and issuance of additional common stock warrants to the holders of warrants issued in the February 2012 common stock and warrant sale. The exercise price of the warrants decreased from $15.00 per share to $12.96 per share and the number of shares issuable upon exercise of the warrants increased from 948,333 to 1,097,600.

Common Stock Warrants.

There were 840,939 common stock warrants issued during the 12 months ended December 31, 2013 and none of the issued warrants were exercised. Included in the warrants issued in 2013 were 149,272 warrants issued due to re-pricing requirements of the Private Placement. Common stock warrants issued during the 12 months ended December 31, 2012 were 948,333 and none of the issued warrants were exercised. Warrants to purchase an aggregate of 2,220,281 shares of common stock were outstanding at December 31, 2013.

Warrant Holder	Issue Year	Expiration	Underlying Shares	Exercise Price
Third Security Investors(1)	2010	December 2015	431,025	$6.96
Various Institutional Holders(2)	2012	February 2017	952,925	$12.96
Third Security Investors(2)	2012	February 2017	144,675	$12.96
Various Institutional Holders(3)	2013	January 2018	441,656	$9.00
Third Security Investors(3)	2013	January 2018	250,000	$9.00
			2,220,281

(1) This Warrant was issued in connection with the issuance of warrants to purchase shares of our Series A Preferred Stock to the Third Security Investors in December 2010. The number of underlying shares shown reflects the number of shares of common stock issuable upon conversion of the shares of Series A Preferred Stock for which this Warrant is currently exercisable.

(2) These Warrants were issued in connection with the Private Placement completed in February 2012 and are classified as a liability in our financial statements. See Footnote 12 - Fair Value. These warrants also contain certain anti-dilution provisions that provide for an adjustment to the exercise price and number of shares issuable upon exercise of the warrant in the event that we engage in certain issuances of shares of our common stock at a price lower than the exercise price of the warrant.

(3) These warrants were issued in connection with the offering, which was completed in January 2013.

Preferred Stock.

The Company’s Board of Directors is authorized to issue up to 15,000,000 shares of preferred stock in one or more series, from time to time, with such designations, powers, preferences and rights and such qualifications, limitations and restrictions as may be provided in a resolution or resolutions adopted by the Board of Directors. The authority of the Board of Directors includes, but is not limited to, the determination or fixing of the following with respect to shares of such class or any series thereof: (i) the number of shares; (ii) the dividend rate, whether dividends shall be cumulative and, if so, from which date; (iii) whether shares are to be redeemable and, if so, the terms and amount of any sinking fund providing for the purchase or redemption of such shares; (iv) whether shares shall be convertible and, if so, the terms and provisions thereof; (v) what restrictions are to apply, if any, on the issue or reissue of any additional preferred stock; and (vi) whether shares have voting rights. The preferred stock may be issued with a preference over the common stock as to the payment of dividends. We have no current plans to issue any additional preferred stock. Classes of stock such as the preferred stock may be used, in certain circumstances, to create voting impediments on extraordinary corporate transactions or to frustrate persons seeking to effect a merger or otherwise to gain control of the Company. For the foregoing reasons, any additional preferred stock issued by the Company could have an adverse effect on the rights of the holders of the common stock.

On December 29, 2010, we entered into a transaction with the Third Security Investors, pursuant to the terms of Series A Convertible Preferred Stock Purchase Agreement (the “Series A Purchase Agreement”), in which we: (i) sold an aggregate of 2,586,205 shares of Series A Preferred Stock at a price of $2.32 per share; and (ii) issued Series A Warrants to purchase up to an aggregate of 1,293,102 shares of Series A Preferred Stock having an exercise price of $2.32 per share (the sale of Series A Preferred Stock and issuance of the Series A Warrants hereafter referred to together as the “Financing”). The Series A Warrants may be exercised at any time from December 29, 2010 until December 28, 2015 and contain a “cashless exercise” feature. The gross proceeds from the Series A financing were $6.0 million. The $0.2 million of costs incurred to complete the Series A financing were recorded as a reduction in the value of the Series A Preferred Stock. We used the net proceeds from the financing to acquire the FAMILION family of genetic tests from PGxHealth, a subsidiary of Clinical Data, Inc. Until the November 2011 modifications, the Series A Preferred Stock met the definition of mandatorily redeemable stock as it was preferred capital stock that was redeemable at the option of the holder through December 2015 and was reported outside of equity. The Series A Preferred Stock was to be accreted to its redemption value of $6.0 million. Until the November 2011 modifications, the Series A Warrants did not qualify to be treated as equity and, accordingly, were recorded as a liability. A preferred stock anti-dilution feature is embedded within the Series A Preferred Stock that met the definition of a derivative.

In connection with the Series A financing, we filed a Certificate of Designation of Series A Convertible Preferred Stock (the “Series A Certificate of Designation”) with the Secretary of State of the State of Delaware, designating 3,879,307 shares of our preferred stock as Series A Preferred Stock. As of December 31, 2013, the Series A Preferred Stock, including the Series A Preferred Stock issuable upon exercise of the Series A Warrants, was convertible into shares of our common stock at a rate of 4-for-1, which conversion rate is subject to further adjustment as set forth in the Series A Certificate of Designation. Giving effect to the reverse split of our stock in January 2014, the conversion rate was adjusted to 1-for-3. Certain rights of the holders of the Series A Preferred Stock are senior to the rights of the holders of our common stock. The Series A Preferred Stock has a liquidation preference equal to its original price per share, plus any accrued and unpaid dividends thereon. The holders of the Series A Preferred Stock are entitled to receive quarterly dividends, which accrue at the rate of 10% of the original price per share per annum, whether or not declared, and which shall compound annually and shall be cumulative. In any calendar quarter in which we have positive distributable cash flow as defined in the Series A Purchase Agreement, we are required to pay from funds legally available a cash dividend in the amount equal to the lesser of 50% of such distributable cash flow or the aggregate amount of dividends accrued on the Series A Preferred Stock. During the years ended December 31, 2013 and 2012, we recorded $0.7 million and $0.6 million in accrued dividends, respectively.

Generally, the holders of the Series A Preferred Stock are entitled to vote together with the holders of common stock, as a single group, on an as-converted basis. However, the Series A Certificate of Designation provides that we shall not perform some activities, subject to certain exceptions, without the affirmative vote of a majority of the holders of the outstanding shares of Series A Preferred Stock. The holders of the Series A Preferred Stock, along with the holders of the Series B Preferred Stock, also are entitled to elect or appoint, as a single group, two directors of the Company.

In connection with the Series A financing, we also entered into a registration rights agreement with the Third Security Investors (the “Registration Rights Agreement”). Pursuant to the terms of the Registration Rights Agreement, the Company has granted certain demand, “piggyback” and S-3 registration rights covering the resale of the shares of common stock underlying the Series A Preferred Stock issued pursuant to the Series A Purchase Agreement and issuable upon exercise of the Series A Warrants and all shares of common stock issuable upon any dividend or other distribution with respect thereto.

In November 2011, we entered into a transaction with the Third Security Investors, pursuant to an Agreement Regarding Preferred Stock (the “Amendment Agreement”), in which the Third Security Investors agreed to (i) waive their rights to enforce the anti-dilution and redemption features of the Series A Preferred Stock and (ii) at the next annual stockholders' meeting, vote to amend the Series A Certificate of Designation to remove the anti-dilution and redemption features of the Series A Preferred Stock. In exchange, the Company issued shares of common stock to the Third Security Investors having an aggregate market value of $0.3 million.

As a result of the Amendment Agreement, the values of the Series A Preferred Stock and Series A Warrants, including the Series A Preferred Stock conversion feature and Series A Warrant liability, were reclassified into stockholders' equity as of the date of the Amendment Agreement.

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CAPITAL LEASES

12 Months Ended

Dec. 31, 2013

Leases [Abstract]

Capital Leases

CAPITAL LEASES

The following is an analysis of the property acquired under capital leases.

	Dollars in Thousands
	Asset Balances at
Classes of Property	December 31, 2013			December 31, 2012
Equipment	$	1,514		$	1,323
Less: Accumulated amortization	(721		)	(420		)
Total	$	793		$	903

The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2013.

Year ending December 31:

	Dollars in Thousands
2014	$	160
2015	37
2016	3
2017	1
Total minimum lease payments	$	201
Less: Amount representing interest	(17		)
Present value of net minimum lease payments	$	184

The short term portion of our capital leases is included in accrued expenses and the long term portion is included in other long-term liabilities on the Balance Sheet. Included in depreciation for the years ended December 31, 2013, 2012 and 2011 was $0.3 million, $0.3 million and less than $0.2 million, respectively, related to equipment acquired under capital leases.

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RESTRUCTURING CHARGES (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended						3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2011 Severance and related costs	Dec. 31, 2011 Facility closure costs	Dec. 31, 2011 Other	Dec. 31, 2010 Diagnostic tools Employee
Restructuring Cost and Reserve [Line Items]
Number of severed employees							5
Restructuring Charges	$ 0	$ 0	$ 41				$ 100
Costs Incurred in the year ended December 31, 2011			41	0	28	13
Cumulative Costs Incurred at December 31, 2011			179	53	74	52
Total Expected Costs			$ 179	$ 53	$ 74	$ 52

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INTANGIBLES AND OTHER ASSETS

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Intangibles And Other Assets

INTANGIBLE ASSETS AND OTHER ASSETS

Long-lived intangible assets and other assets consisted of the following:

	Dollars in Thousands
	December 31, 2013						December 31, 2012
	Cost		Accumulated Amortization		Net Book Value		Cost		Accumulated Amortization		Net Book Value
Acquired technology	$	9,009	$	3,175	$	5,834	$	9,009	$	1,910	$	7,099
Assay royalties	1,434		614		820		1,434		410		1,024
Third party payor relationships	367		73		294		367		49		318
Tradenames and trademarks	824		233		591		824		115		709
Customer relationships	652		54		598		652		11		641
Covenants not to compete	184		77		107		184		15		169
Patents	1,153		336		817		929		280		649
Intellectual property	170		36		134		170		15		155
	$	13,793	$	4,598	$	9,195	$	13,569	$	2,805	$	10,764

	Estimated Useful Life
Acquired technology	7 – 10 years
Assay royalties	7 years
Third party payor relationships	15 years
Tradenames and trademarks	7 years
Customer relationships	15 years
Covenants not to compete	3 years
Patents	Life of the patent
Intellectual property	7 years

Amortization expense for intangible assets was $1.9 million, $1.4 million and less than $1.3 million during the years ended December 31, 2013, 2012 and 2011. At December 31, 2013, the Company revised its estimate of useful lives on certain intangible assets which will cause amortization expense in 2014 to be $0.4 million lower. Amortization expense for intangible assets for each of the five succeeding fiscal years is expected to be $1.4 million, $1.3 million, $1.3 million, $1.3 million and 1.0 million for the years ended December 31, 2014, 2015, 2016, 2017 and 2018, respectively.

Other assets include U.S. security deposits and deferred tax assets, net of applicable valuation allowances.

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DEBT

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Debt

DEBT

	Dollars in Thousands
	Year Ended December 31,
	2013			2012
Revolving Line (1)	$	2,560		$	—
Term Loan (2)	4,000			—
PGxHealth note payable (the “First Note”) (3)	—			6,171
Total debt	6,560			6,171
Current portion of long term debt	(242		)	(6,171		)
Long term debt, net of current maturities	$	6,318		$	—

On March 13, 2013 (the “Effective Date”), we entered into a Loan and Security Agreement with affiliates of Third Security, LLC (the “Lenders”) for (a) a revolving line of credit (the “Revolving Line”) with borrowing availability of up to $4.0 million, subject to reduction based on our eligible accounts receivable, and (b) a term loan (the “Term Loan”) of $4.0 million (the “Loan Agreement”). Proceeds were used to pay off the First Note and for general corporate and working capital purposes.

On August 2, 2013, we entered into an amendment to the Loan Agreement (the “Amendment”). The Amendment, which became effective as of June 30, 2013, reduces our future minimum revenue covenants under the Loan Agreement and modifies the interest rates applicable to the amounts advanced under the Revolving Line.

On November 14, 2013, we entered into a second amendment to the Loan Agreement (the “Second Amendment”). The Second Amendment, which is effective as of October 31, 2013, reduces our future minimum revenue covenant under the Loan Agreement.

On January 27, 2014, we entered into a third amendment to the Loan Agreement (the “Third Amendment”). Pursuant to the Third Amendment, the Lenders agreed to waive certain events of default under the Loan Agreement, and the parties amended certain provisions of the Loan Agreement, including the minimum liquidity ratio that we must maintain during the term of the Loan Agreement.

On March 3, 2014, we entered into a fourth amendment to the Loan Agreement (the “Fourth Amendment”). The Fourth Amendment provides that we will not be required to make any principal or interest payments under the Term Loan for the period from March 1, 2014 through March 31, 2015. Accordingly, pursuant to the Loan Agreement as amended by the Fourth Amendment, the next principal and interest payment under the Term Loan will be due on April 1, 2015.

(1) Revolving Line of Credit.Amounts advanced under the Revolving Line bear interest at an annual rate equal to the greater of (a) 4.25% or (b) the Wall Street Journal prime rate plus 1%. Interest is payable on a monthly basis, with the balance payable at the maturity of the Revolving Line. Under the Amendment, amounts advanced under the Revolving Line bear interest at an annual rate equal to the greater of (x) 6.25% or (y) the Wall Street Journal prime rate plus 3%. The current interest rate is 6.25%. Under the Loan Agreement, we paid the Lenders an upfront fee of $20,000, and will pay the Lenders an additional commitment fee of $20,000 on each one year anniversary of the Effective Date during the term of the Revolving Line. In addition, a fee of 0.5% per annum is payable quarterly on the unused portion of the Revolving Line. The Revolving Line matures on September 1, 2016.

(2) Term Loan. We received $4.0 million under the Term Loan on the Effective Date. Pursuant to the terms of the Loan Agreement, as amended by the Fourth Amendment, we are required to make monthly payments of interest to the Lenders commencing on April 1, 2015. The current interest rate is 9.1%.

We paid the Lenders an upfront fee of $40,000 for the Term Loan, and will pay the Lenders an additional final payment of $120,000 at maturity or prepayment of the Term Loan. In addition, if we repay the Term Loan prior to maturity, we will pay the Lenders a prepayment penalty of 5% of the total outstanding balance under the Term Loan if the prepayment occurs within one year after the Effective Date, 2.5% of the total outstanding balance under the Term Loan if the prepayment occurs between one and two years after the Effective Date, and 1% of the total outstanding balance under the Term Loan if the prepayment occurs thereafter.

Additional Terms

The Loan Agreement contains affirmative and negative covenants. Under the Term Loan, we are required to maintain a minimum liquidity ratio and achieve a minimum amount of revenue, and we also agreed not to (i) pledge or otherwise encumber our assets other than to the Lenders, (ii) enter into additional borrowings or guarantees, (iii) repurchase our capital stock, or (iv) enter into certain mergers or acquisitions without the Lenders' consent. Additionally, the Loan Agreement contains a subjective acceleration clause at the discretion of the Lenders. As of December 31, 2013, the Company was in compliance with the minimum revenue covenant. The Company was not in compliance with the minimum liquidity ratio. Pursuant to the Third Amendment, the Lenders agreed to waive the event of default.

To secure the repayment of any amounts borrowed under the Revolving Line and the Term Loan, we granted the Lenders a security interest in all of our assets. The occurrence of an event of default under the Loan Agreement could result in the acceleration of our obligations under the Loan Agreement and would increase the applicable interest rate under the Revolving Line or Term Loan (or both) by 5%, and permit the Lenders to exercise remedies with respect to the collateral under the Loan Agreement.

(3) First Note. The First Note was a three year senior secured promissory note payable to PGxHealth, LLC which was entered into on December 29, 2010 in conjunction with our acquisition of the FAMILION family of genetic tests. Interest was payable at 10% per year with quarterly interest payments through March 29, 2012. Thereafter, quarterly installments included both principal and interest through December 30, 2013. The First Note was paid in full on March 13, 2013.

The aggregate minimum principal maturities of the debt for the following fiscal years are as follows (dollars in thousands):

2014	$	242
2015	1,879
2016	4,439
	$	6,560

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

We are subject to a number of claims of various amounts, which arise out of the normal course of business. In the opinion of management, the disposition of pending claims will not have a material adverse effect on our financial position, results of operations or cash flows.

Rent expense under all operating leases, was $1.0 million, $1.0 million and $0.9 million in 2013, 2012 and 2011, respectively. We lease certain equipment, vehicles and operating facilities under non-cancellable operating leases , some of which have escalation clauses that expire on various dates through 2022. Future minimum lease payments under non-cancellable operating leases are as follows (in thousands):

2014	$	1,097
2015	1,013
2016	880
2017	763
2018	485
thereafter	862
	$	5,100

At December 31, 2013, firm commitments to vendors totaled $0.9 million.

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate Reconciliation

The Company’s provision for income taxes for the years ended December 31, 2013, 2012 and 2011 relates to income taxes in states, foreign countries and other local jurisdictions and differs from the amounts determined by applying the statutory Federal income tax rate to loss before income taxes for the following reasons:

	Dollars in Thousands
	2013			2012			2011
Benefit at federal rate	$	(5,454	)	$	(2,781	)	$	(3,311	)
Increase (decrease) resulting from:
State income taxes—net of federal benefit	(518		)	2			2
Foreign subsidiary tax rate difference	(3		)	(27		)	(94		)
Tax contingency	23			22			28
Expiring net operating loss carryforwards	—			1,472			988
Earnings repatriation	—			582			—
Miscellaneous permanent differences	155			284			332
Liability warrants	(102		)	(748		)	2,062
Tax credits	—			215			—
State, net operating loss expiration/true-up	1,179			—			—
Other—net	(80		)	15			(53		)
Valuation allowance	4,746			1,110			91
Total income tax (benefit) expense	$	(54	)	$	146		$	45

Schedule of Components of Income Tax Expense (Benefit)

	Dollars in Thousands
	2013			2012		2011
Federal:
Current	$	—		$	—	$	16
Deferred	—			—		—
Total Federal	$	—		$	—	$	16
State:
Current	$	—		$	3	$	3
Deferred	—			—		—
Total State	$	—		$	3	$	3
Foreign:
Current	$	20		$	46	$	159
Deferred	(74		)	97		(133		)
Total Foreign	$	(54	)	$	143	$	26
Total Tax Provision	$	(54	)	$	146	$	45

Schedule of Deferred Tax Assets and Liabilities

The Company’s deferred income tax asset at December 31, 2013 and 2012 is comprised of the following temporary differences:

	Dollars in Thousands
	2013			2012
Deferred Tax Asset:
Net operating loss carryforward	$	42,950		$	39,481
Research and development credit carryforwards	951			1,017
Deferred revenue	174			188
Inventory	275			224
Other	1,997			1,111
	46,347			42,021
Less valuation allowance	(46,088		)	(41,342		)
Deferred Tax Asset	$	259		$	679
Deferred Tax Liability:
Foreign earnings	$	25		$	398
Property and equipment	186			300
Deferred Tax Liability	$	211		$	698
Net Deferred Asset (Liability)	$	48		$	(19	)

Summary of Operating Loss Carryforwards

At December 31, 2013, we had total unused federal tax net operating loss carryforwards of $121.7 million. The expiration dates are as follows (amounts in thousands):

2018	$	1,838
2019	8,181
2020	9,662
2021	8,228
2022	16,862
2023	16,173
2024	17,390
2025	8,153
2026	6,792
2027	3,238
2028	1,272
2029	591
2031	2,784
2032	8,358
2033	12,137
	$	121,659

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2014	$ 1,097,000.000
2015	1,013,000.000
2016	880,000.000
2017	763,000.000
2018	485,000.000
thereafter	862,000.000
Operating leases, future minimum payments due	5,100,000
Operating leases, rent expense	1,000,000	1,000,000	900,000
Firm commitments to vendors	$ 900,000

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FAIR VALUE

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Financial Instruments Disclosure

FAIR VALUE

FASB guidance on fair value measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements for our financial assets and liabilities, as well as for other assets and liabilities that are carried at fair value on a recurring basis in our consolidated financial statements.

FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2—Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets; and

Level 3—Unobservable inputs reflecting our own assumptions and best estimate of what inputs market participants would use in pricing the asset or liability.

Debt

Our long term debt is considered a Level 3 liability for which book value approximates fair market value due to the variable interest rate it bears.

Common Stock Warrant Liability

Certain of our issued and outstanding warrants to purchase common stock do not qualify to be treated as equity, and accordingly are recorded as a liability. The Common Stock Warrant Liability represents the fair value of the 0.9 million warrants issued in February 2012. We are required to record these instruments at fair value at each reporting date and changes are recorded as a non-cash adjustment to earnings. The gains or losses included in earnings are reported in other income (expense) in our Statement of Operations. Management does not believe that this liability will be settled by a use of cash.

The Common Stock Warrant Liability is considered a Level 3 financial instrument and is valued using a Monte Carlo simulation. This method is well suited to value options with non-standard features, such as anti-dilution protection. A Monte Carlo simulation model uses repeated random sampling to simulate significant uncertainty in inputs. Assumptions and inputs used in the valuation of the common stock warrants are broken down into four sections: Static Business Inputs; Static Technical Inputs; Simulated Business Inputs; and Simulated Technical Inputs.

Static Business Inputs include: Our equity value, which was estimated using our stock price of $5.52 as of December 31, 2013; the amount of the down-round financing, the timing of the down-round financing, the expected exercise period of 3.11 years from the valuation date and the fact that no other potential fundamental transactions are expected during the term of the common stock warrants.

Static Technical Inputs include: volatility of 45% based on implied and historical rates over the expected term and the risk-free interest rate of 0.78% based on the 3 year U.S. Treasury yield interpolated from the 3 year and 5 year U.S. Treasury bonds.

Simulated Business Inputs include: the probability of down-round financing, which was estimated to be 45% for simulated equity values below the down-round financing cut-off point.

Simulated Technical Inputs include: our equity value in periods 1-10 follows a geometric Brownian motion and is simulated over 10 independent six-month periods; a down-round financing event was randomly simulated in an iteration based on the 45% discrete probability of a down-round financing for those iterations where our simulated equity value at the expected timing of down-round financing was below the down-round financing cut-off point.

During the year ended December 31, 2013, the changes in the fair value of the liability measured using significant unobservable inputs (Level 3) was comprised of the following:

	Dollars in Thousands
	For the Year Ended
	December 31, 2013
Balance at December 31, 2012	$	900
Total gains or losses:
Recognized in earnings	(300		)
Balance at December 31, 2013	$	600

Preferred Stock Warrant Liability and Conversion Feature

Prior to November 2011, we were required to record our 0.4 million of Series A Preferred Stock warrants and the Series A Preferred Stock's conversion feature at their respective fair values at each reporting date and changes were recorded as an adjustment to earnings. The gains or losses included in earnings were reported in other income (expense) in our Statement of Operations.

Due to a change in terms we are no longer required to recognize the Series A Preferred Stock warrant and Series A Preferred Stock conversion feature as liabilities. They were reclassified into stockholders' equity as of the date of the amended agreement.

The Series A Preferred Stock warrant liability and Series A Preferred Stock conversion feature were considered Level 3 financial instruments and were valued using the Black-Scholes call option pricing formula, which approximates a binomial model for the Series A Preferred Stock conversion feature. This method is among the most common and widely used valuation approaches for call options. The model relates an option's value to five variables: the current price of the underlying asset, the strike price of the option, the time to expiration or exercise of the option, a risk free interest rate, and the volatility of the underlying asset.

The following assumptions were used in the November 8, 2011 valuation of the Series A Preferred Stock conversion feature: the closing share price of our common stock on November 8, 2011 discounted 15% due to the lack of marketability and liquidity, an exercise price of $0.39, expected term of 4.00 years, risk-free interest rate of 0.65% based on a linear interpolation of 3 year and five year U.S. Treasury rates and volatility of 50%.

The following assumptions were used in the November 8, 2011 valuation of the Series A Preferred Stock warrants: an exercise price of $2.32, expected term of 1.0 years, risk-free interest rate of 0.25% based on a one year U.S. Treasury and volatility of 50%.

During the year ended December 31, 2011, the changes in the fair value of the liabilities measured using significant unobservable inputs (Level 3) were comprised of the following:

	Dollars in Thousands
	For the year ended
	December 31, 2011
	Preferred Stock Conversion Feature			Preferred Stock Warrant Liability			Total
Beginning balance at January 1, 2011	$	1,983		$	2,351		$	4,334
Total gains or losses:
Recognized in earnings	5,317			449			5,766
Balance at November 8, 2011	7,300			2,800			10,100
Reclassification to stockholders' equity due to Amendment Agreement	(7,300		)	(2,800		)	(10,100		)
Balance as of December 31, 2011	$	—		$	—		$	—

The change in unrealized gains or losses of Level 3 liabilities is included in earnings and is reported in other income (expense) in our Statement of Operations.

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2013

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

Amended Certificate of Incorporation and Reverse Stock Split

At a special meeting of stockholders of Transgenomic held on January 14, 2014 (the “Special Meeting”), the stockholders of the Company approved the authorization of the Board to, in its discretion, amend the Company’s Third Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to effect a reverse split of the Company’s common stock, par value $0.01 at a ratio of between one-for-four to one-for-twenty-five, with such ratio to be determined by the Board. On January 15, 2014, the Board determined to set the reverse stock split ratio at one-for-twelve (the “Reverse Stock Split”) and approved the final form of Certificate of Amendment to the Certificate of Incorporation to effectuate the Reverse Stock Split (the “Certificate of Amendment”). The Certificate of Amendment was filed with the Secretary of State of the State of Delaware on January 24, 2014, and the Reverse Stock Split became effective in accordance with the terms of the Certificate of Amendment at 5:00 p.m. Central Time on January 27, 2014 (the “Effective Time”).

At the Effective Time, every 12 shares of common stock issued and outstanding were automatically combined into one share of issued and outstanding common stock, without any change in the par value per share. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders who otherwise would be entitled to receive a fractional share in connection with the Reverse Stock Split received a cash payment in lieu thereof.

After giving effect to the Reverse Stock Split, the common stock and outstanding preferred stock have the same proportional voting rights and rights to dividends and distributions and are identical in all other respects to the rights of the common stock and preferred stock as of immediately prior to the Effective Time (with the conversion rate of the outstanding Series A Convertible Preferred Stock being proportionately reduced), except for immaterial changes and adjustments resulting from the treatment of fractional shares.

Increase in Shares Available for Issuance Pursuant to 2006 Equity Incentive Plan

At the Special Meeting, the stockholders of the Company approved amendments to the Plan to increase the number of shares of common stock that may be issued under the Plan by 833,333 shares and to provide for a corresponding increase in the limits on the number of incentive stock options and awards other than options or stock appreciation rights that may be granted under the Plan. The amendments to the Plan were conditioned upon the approval by the Company’s stockholders, and the effectiveness, of the Reverse Stock Split. Therefore, at the Effective Time, the total number of shares that the Company may issue under the Plan was increased to 1,666,667 shares; and the total number of such shares that may be used for grants of restricted stock, restricted stock units, performance units, performance shares and other awards was increased to no more than 1,250,000 shares.

Amended Loan and Security Agreement

On January 27, 2014, we entered into a third amendment to the Loan Agreement. Pursuant to the third amendment, the Lenders agreed to waive certain events of default under the Loan Agreement, and the parties amended certain provisions of the Loan Agreement, including the minimum liquidity ratio that we must maintain during the term of the Loan Agreement. On March 3, 2014, we entered into a fourth amendment to our Loan Agreement with the Lenders, which provides that we will not be required to make any principal or interest payments under the Term Loan for the period from March 1, 2014 through March 31, 2015. Accordingly, pursuant to the amended Loan Agreement, the next principal and interest payment under the Term Loan will be due on April 1, 2015.

Issuance of Series B Preferred Stock

On March 5, 2014, the Company entered into a Series B Convertible Preferred Stock Purchase Agreement (the “Series B Purchase Agreement”) with affiliates of Third Security (the “2014 Third Security Investors”), pursuant to which the Company, in a private placement, sold and issued an aggregate of 1,443,297 shares of the Company’s Series B Convertible Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), at a price per share of $4.85 for an aggregate purchase price of approximately $7,000,000. Each share of Series B Preferred Stock issued pursuant to the Series B Purchase Agreement is initially convertible into shares of the Company’s common stock at a rate of 1-for-1, which conversion rate is subject to further adjustment as set forth in the Certificate of Designation of Series B Convertible Preferred Stock.

In connection with the Series B financing, the Company also entered into a Registration Rights Agreement, dated March 5, 2014, with the 2014 Third Security Investors, pursuant to which the Company granted certain demand, “piggy-back” and S-3 registrations rights covering the resale of the shares of common stock underlying the Series B Preferred Stock issued pursuant to the Series B Purchase Agreement and all shares of common stock issuable upon any dividend or other distribution with respect thereto.

Third Security, LLC and its affiliates (collectively, “Third Security”), which holds more than 10% of the outstanding voting stock of the Company, participated in the Series B financing. Additionally, Doit L. Koppler II and Robert M. Patzig, directors of the Company, are affiliated with Third Security, LLC.

The 2014 Series B Preferred Stock financing required the repricing and issuance of additional common stock warrants to the investors in the Company's February 2012 common stock and warrant financing. The exercise price of these warrants decreased from $12.96 per share to $11.73 per share and the number of shares issuable upon exercise of the warrants increased from 1,097,600 to 1,212,665.

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DEBT (Details) (USD $)			0 Months Ended					0 Months Ended	12 Months Ended		0 Months Ended					0 Months Ended				12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Mar. 13, 2013 Line of Credit Revolving Credit Facility	Dec. 31, 2013 Line of Credit Revolving Credit Facility		Dec. 31, 2012 Line of Credit Revolving Credit Facility		Mar. 13, 2013 Line of Credit Revolving Credit Facility Wall Street Journal Prime Rate	Dec. 31, 2013 Line of Credit Revolving Credit Facility Wall Street Journal Prime Rate	Mar. 13, 2013 Line of Credit Revolving Credit Facility Third Security LLC And Affiliates	Mar. 13, 2013 Term Loan	Dec. 31, 2013 Term Loan		Dec. 31, 2012 Term Loan		Mar. 13, 2013 Term Loan Prepayment within one year after the effective date	Mar. 13, 2013 Term Loan Prepayment between one and two years after the effective date	Mar. 13, 2013 Term Loan Prepayment greater than two years after the effective date	Mar. 13, 2013 Term Loan Third Security LLC And Affiliates	Dec. 31, 2013 Notes Payable, Other Payables PGxHealth Note Payable (the First Note)		Dec. 31, 2012 Notes Payable, Other Payables PGxHealth Note Payable (the First Note)
Debt Instrument [Line Items]
Total debt	$ 6,560,000	$ 6,171,000		$ 2,560,000	[1]	$ 0	[1]					$ 4,000,000	[2]	$ 0	[2]					$ 0	[3]	$ 6,171,000	[3]
Current maturities of long term debt	(242,000)	(6,171,000)
Long term debt less current maturities	6,318,000	0
Line of credit facility, current borrowing capacity										4,000,000.0
Debt instrument, face amount																			4,000,000.0
Debt instrument, interest rate, stated percentage			4.25%	6.25%																10.00%
Debt instrument, basis spread on variable rate								1.00%	3.00%
Debt instrument, interest rate, effective percentage				6.25%
Line of credit facility, upfront fee			20,000
Line of credit facility, commitment fee amount			20,000
Line of credit facility, unused capacity, commitment fee percentage			0.50%
Proceeds from issuance of long-term debt											4,000,000
Long-term debt, percentage bearing variable interest, percentage rate												9.10%
Debt instrument, upfront fee											40,000
Debt instrument, future debt extinguishment costs											120,000
Debt instrument, prepayment penalty percent																5.00%	2.50%	1.00%
Debt instrument, debt default, interest rate, stated percentage increase											5.00%
Debt instrument, term																				3 years
2014	242,000
2015	1,879,000
2016	$ 4,439,000

[1] Revolving Line of Credit. Amounts advanced under the Revolving Line bear interest at an annual rate equal to the greater of (a) 4.25% or (b) the Wall Street Journal prime rate plus 1%. Interest is payable on a monthly basis, with the balance payable at the maturity of the Revolving Line. Under the Amendment, amounts advanced under the Revolving Line bear interest at an annual rate equal to the greater of (x) 6.25% or (y) the Wall Street Journal prime rate plus 3%. The current interest rate is 6.25%. Under the Loan Agreement, we paid the Lenders an upfront fee of $20,000, and will pay the Lenders an additional commitment fee of $20,000 on each one year anniversary of the Effective Date during the term of the Revolving Line. In addition, a fee of 0.5% per annum is payable quarterly on the unused portion of the Revolving Line. The Revolving Line matures on September 1, 2016.

[2] Term Loan. We received $4.0 million under the Term Loan on the Effective Date. Pursuant to the terms of the Loan Agreement, as amended by the Fourth Amendment, we are required to make monthly payments of interest to the Lenders commencing on April 1, 2015. The current interest rate is 9.1%.We paid the Lenders an upfront fee of $40,000 for the Term Loan, and will pay the Lenders an additional final payment of $120,000 at maturity or prepayment of the Term Loan. In addition, if we repay the Term Loan prior to maturity, we will pay the Lenders a prepayment penalty of 5% of the total outstanding balance under the Term Loan if the prepayment occurs within one year after the Effective Date, 2.5% of the total outstanding balance under the Term Loan if the prepayment occurs between one and two years after the Effective Date, and 1% of the total outstanding balance under the Term Loan if the prepayment occurs thereafter.Additional TermsThe Loan Agreement contains affirmative and negative covenants. Under the Term Loan, we are required to maintain a minimum liquidity ratio and achieve a minimum amount of revenue, and we also agreed not to (i) pledge or otherwise encumber our assets other than to the Lenders, (ii) enter into additional borrowings or guarantees, (iii) repurchase our capital stock, or (iv) enter into certain mergers or acquisitions without the Lenders' consent. Additionally, the Loan Agreement contains a subjective acceleration clause at the discretion of the Lenders. As of December 31, 2013, the Company was in compliance with the minimum revenue covenant. The Company was not in compliance with the minimum liquidity ratio. Pursuant to the Third Amendment, the Lenders agreed to waive the event of default. To secure the repayment of any amounts borrowed under the Revolving Line and the Term Loan, we granted the Lenders a security interest in all of our assets. The occurrence of an event of default under the Loan Agreement could result in the acceleration of our obligations under the Loan Agreement and would increase the applicable interest rate under the Revolving Line or Term Loan (or both) by 5%, and permit the Lenders to exercise remedies with respect to the collateral under the Loan Agreement.

[3] First Note. The First Note was a three year senior secured promissory note payable to PGxHealth, LLC which was entered into on December 29, 2010 in conjunction with our acquisition of the FAMILION family of genetic tests. Interest was payable at 10% per year with quarterly interest payments through March 29, 2012. Thereafter, quarterly installments included both principal and interest through December 30, 2013. The First Note was paid in full on March 13, 2013.

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RESTRUCTURING CHARGES (Tables)

12 Months Ended

Dec. 31, 2013

Restructuring Charges [Abstract]

Schedule of Restructuring Reserve by Type of Cost

Restructuring charges include:

	Dollars in Thousands
	Costs Incurred in the year ended December 31, 2011		Cumulative Costs Incurred at December 31, 2011		Total Expected  Costs
Severance and related costs	$	—	$	53	$	53
Facility closure costs	28		74		74
Other	13		52		52
Restructuring charges	$	41	$	179	$	179

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CONSOLIDATED STATEMENTS OF OPERATIONS PARENTHETICALS (Subsequent event)	0 Months Ended
	Jan. 27, 2014
Subsequent event
Common stock reverse stock split, conversion ratio	0.0833

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BUSINESS DESCRIPTION

12 Months Ended

Dec. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business Description

BUSINESS DESCRIPTION

Business Description.

Transgenomic, Inc.("we", "us","our Company" or "Transgenomic") is a global biotechnology company advancing personalized medicine in the detection and treatment of cancer and inherited diseases through its proprietary molecular technologies and world-class clinical and research services. Our operations are organized and reviewed by management along its product lines and presented in the following two complementary business segments.

• Laboratory Services. Our laboratories specialize in genetic testing for cardiology, neurology, mitochondrial disorders and oncology. Our Patient Testing laboratories located in New Haven, Connecticut and Omaha, Nebraska are certified under the Clinical Laboratory Improvement Amendment (“CLIA”) as high complexity labs and our Omaha facility is also accredited by the College of American Pathologists (“CAP”). Our Biomarker Identification laboratory located in Omaha, Nebraska also provides pharmacogenomics research services supporting Phase II and Phase III clinical trials conducted by pharmaceutical companies. Our laboratories employ a variety of genomic testing service technologies, including ICE COLD-PCR technology. ICE COLD-PCR is a proprietary platform technology that can be run in any laboratory with standard PCR technology and that enables detection of multiple unknown mutations from virtually any sample type including tissue biopsies, blood, cell-free DNA ("cfDNA") and circulating tumor cells (“CTCs”) at levels greater than 1,000-fold higher than standard DNA sequencing techniques.

• Genetic Assays and Platforms. Our proprietary product is the WAVE® System, which has broad applicability to genetic variation detection in both molecular genetic research and molecular diagnostics. We also distribute bioinstruments produced by other manufacturers (“OEM Equipment”) through our sales and distribution network. Service contracts to maintain installed systems are sold and supported by our technical support personnel. The installed WAVE base and some OEM Equipment platforms generate a demand for consumables that are required for the continued operation of the bioinstruments. We develop, manufacture and sell these consumable products. In addition, we manufacture and sell consumable products that can be used on multiple, independent platforms. These products include SURVEYOR® Nuclease and a range of chromatography columns.

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OPERATING SEGMENT AND GEOGRAPHIC INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013 operating_segments	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting Information [Line Items]
Number of operating segments (in operating segments)									2
Net Sales	$ 6,218	$ 6,646	$ 7,306	$ 7,374	$ 7,292	$ 7,889	$ 9,093	$ 7,206	$ 27,544	$ 31,480	$ 31,971
Gross Profit	2,554	2,851	3,410	3,681	3,544	3,800	4,562	3,104	12,496	15,010	18,437
Net income (loss) before taxes									(16,041)	(8,181)	(9,737)
Income tax benefit									(54)	146	45
Net loss	(3,982)	(5,552)	(2,867)	(3,586)	(2,314)	(2,754)	(563)	(2,696)	(15,987)	(8,327)	(9,782)
Depreciation/Amortization									2,748	2,278	2,101
Restructuring Charges									0	0	41
Interest expense, net									(642)	(888)	(958)
Total Assets	30,278				38,791				30,278	38,791	33,562
Goodwill	6,918				6,918				6,918	6,918	6,440
Clinical laboratories
Segment Reporting Information [Line Items]
Net Sales									15,391	19,329	18,318
Gross Profit									6,820	9,316	10,528
Net income (loss) before taxes									(12,486)	(6,874)	(11,370)
Income tax benefit									0	0	0
Net loss									(12,486)	(6,874)	(11,370)
Depreciation/Amortization									2,467	1,960	1,810
Restructuring Charges											29
Interest expense, net									(398)	(851)	(958)
Total Assets	21,711				29,196				21,711	29,196	23,668
Goodwill	6,918				6,918				6,918	6,918	6,440
Genetic assays and platforms
Segment Reporting Information [Line Items]
Net Sales									12,153	12,151	13,653
Gross Profit									5,676	5,694	7,909
Net income (loss) before taxes									(3,555)	(1,307)	1,633
Income tax benefit									(54)	146	45
Net loss									(3,501)	(1,453)	1,588
Depreciation/Amortization									281	318	291
Restructuring Charges											12
Interest expense, net									(244)	(37)	0
Total Assets	8,567				9,595				8,567	9,595	9,894
Goodwill	0				0				0	0	0
United states
Segment Reporting Information [Line Items]
Net Sales									20,119	22,727	22,626
Italy
Segment Reporting Information [Line Items]
Net Sales									1,530	2,524	3,152
Germany
Segment Reporting Information [Line Items]
Net Sales									1,218	907	750
United kingdom
Segment Reporting Information [Line Items]
Net Sales									748	1,703	778
France
Segment Reporting Information [Line Items]
Net Sales									681	679	758
All Other Countries
Segment Reporting Information [Line Items]
Net Sales									$ 3,248	$ 2,940	$ 3,907
Maximum | All Other Countries
Segment Reporting Information [Line Items]
Percent of revenue from countries not separately disclosed									5.00%
Minimum | United states
Segment Reporting Information [Line Items]
Long-lived asset percentage held in a specific location	99.00%								99.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation.

The consolidated financial statements include the accounts of Transgenomic, Inc. and its wholly owned subsidiary. All inter-company balances and transactions have been eliminated in consolidation.

Risks and Uncertainties

Risks and Uncertainties.

Certain risks and uncertainties are inherent in our day-to-day operations and to the process of preparing our financial statements. The more significant of those risks are presented below and throughout the notes to the financial statements.

Use of Estimates

Use of Estimates.

The preparation of consolidated financial statements 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 net sales and expenses during the reporting period. In addition, estimates and assumptions associated with the determination of the fair value of certain assets and related impairments require considerable judgment by management. The key estimates included in the consolidated financial statements include stock option valuations, goodwill and intangible valuations, accounts receivable and inventory valuations, warrant valuations and contractual allowances. Actual results could differ from the estimates and assumptions used in preparing these consolidated financial statements.

Basis of Presentation

Basis of Presentation.

On January 15, 2014, the Board of Directors of the Company approved a reverse split of the Company's common stock, par value $0.01, at a ratio of one-for twelve. This reverse stock split became effective on January 27, 2014 and, unless otherwise indicated, all share amounts, per share data, share prices, exercise prices and conversion rates set forth in these notes and the accompanying consolidated financial statements have, where applicable, been adjusted retroactively to reflect this reverse stock split. Additionally, accrued preferred stock dividends have been re-classed to conform to the current year presentation.

Fair Value

Fair Value.

Unless otherwise specified, book value approximates fair market value. The Company's Level 1 financial instruments include cash and cash equivalents. The Company's Level 3 financial instruments include the common stock warrant liability, preferred stock warrant liability and conversion feature, and debt. Due to its variable interest component, debt approximates fair value.  The common stock warrant liability and Series A Convertible Preferred Stock (“Series A Preferred Stock”) warrant liability and conversion feature are recorded at fair value.  See Footnote 12 Fair Value.

Cash and Cash Equivalents

Cash and Cash Equivalents.

Cash and cash equivalents include cash and investments with original maturities at the date of acquisition of three months or less. Such investments presently consist of temporary overnight investments

Concentration of Cash

Concentrations of Cash.

From time to time, we may maintain a cash position with financial institutions in amounts that exceed federally insured limits. We have not experienced any losses on such accounts as of December 31, 2013.

Accounts Receivable

While payment terms are generally 30 days, we have also provided extended payment terms of up to 90 days in certain cases. We operate globally and some of the international payment terms can be greater than 90 days. Accounts receivable are carried at original invoice amount and shown net of allowance for doubtful accounts and contractual allowances. The estimate made for doubtful accounts is based on a review of all outstanding amounts on a quarterly basis. The estimate for contractual allowances is based on contractual terms or historical reimbursement rates and is recorded when revenue is recorded. We determine the allowance for doubtful accounts and contractual allowances by regularly evaluating individual payor receivables and considering a payor's financial condition, credit history, reimbursement rates and current economic conditions. Accounts receivable are written off when deemed uncollectible and after all collection efforts have been exhausted. Recoveries of accounts receivable previously written off are recorded as a reduction in bad debt expense when received.

Inventories

Inventories.

Inventories are stated at the lower of cost or market net of allowance for obsolete and slow moving inventory. Cost is computed using standard costs for finished goods and average or latest actual cost for raw materials and work in process, which approximates the first-in, first-out (FIFO) method. We write down slow-moving and obsolete inventory by the difference between the value of the inventory and our estimate of the reduced value based on potential future uses, the likelihood that overstocked inventory will be sold and the expected selling prices of the inventory. If our ability to realize value on slow-moving or obsolete inventory is less favorable than assumed, additional write-downs of the inventory may be required.

Inventory Obsolescence

We determine the allowance for obsolescence by evaluating inventory quarterly for items deemed to be slow moving or obsolete.

Property and Equipment

Property and Equipment.

Property and equipment are carried at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the related assets

Goodwill

Goodwill.

Goodwill is tested for impairment annually utilizing a combination of income and market approaches. The income approach applies a discounted cash flow methodology to the Company's future period projections and the market approach uses market available information on the Company. We perform this impairment analysis during the fourth quarter of each year or when a significant event occurs that may impact goodwill. Impairment may occur when the carrying value of the reporting unit exceeds its fair value. If the carrying value of the reporting unit exceeds its fair value, the fair value of all identifiable tangible and intangible assets and liabilities is determined as part of a hypothetical purchase price allocation to determine the amount of goodwill impairment. No impairment of goodwill has occurred to date.

Intangibles

Intangibles.

Intangible assets include intellectual property, patents and acquired products. At December 31, 2013, the Company revised its estimate of useful lives on certain intangible assets which will cause amortization expense in 2014 to be $0.4 million lower.

1. Intellectual Property.    Initial costs paid to license intellectual property from independent third parties are capitalized and amortized using the straight-line method over the license period. Ongoing royalties related to such licenses are expensed as incurred.

2. Patents.    We capitalize legal costs, filing fees and other expenses associated with obtaining patents on new discoveries and amortize these costs using the straight-line method over the shorter of the legal life of the patent or its economic life beginning on the date the patent is issued.

3. Acquired Products.    As a part of the FAMILION acquisition and acquisition of certain intangible assets from Axial, we acquired technology, in process technology, trademarks/tradenames, customer relationships, covenants not to compete and third party relationships. These costs will be amortized pursuant to the straight-line method over their estimated economic life of seven to eight years. See Footnote 4 "Intangibles and Other Assets" to our accompanying consolidated financial statements.

We review our amortizable long lived assets for impairment whenever events indicate that the carrying amount of the asset (group) may not be recoverable. An impairment loss may be needed if the sum of the future undiscounted cash flows is less than the carrying amount of the asset (group). The amount of the loss would be determined by comparing the fair market value of the asset to the carrying amount of the asset (group). No loss has been recorded during the years ended December 31, 2013, 2012 or 2011. 

Common Stock Warrants

Common Stock Warrants.

Our issued and outstanding 2012 warrants to purchase common stock do not qualify to be treated as equity and accordingly, are recorded as a liability (“Common Stock Warrant Liability”). The Common Stock Warrant Liability was initially recorded at fair value using a Monte Carlo simulation model. We are required to present these instruments at fair value at each reporting date and any changes in fair values are recorded as an adjustment to earnings. The Common Stock Warrant Liability is considered a Level 3 financial instrument. See Footnote 12 - Fair Value.

Preferred Stock

Preferred Stock.   

Priorto the 2011 modification, the Series A Preferred Stock met the definition of mandatorily redeemable stock as it was preferred capital stock which was redeemable at the option of the holder and therefore was reported outside of equity. The Series A Preferred Stock was accreted to its redemption value. Prior to the 2011 modification, the warrants to purchase shares of series A Preferred Stock (“Series A Warrants”) did not qualify to be treated as equity and accordingly, were recorded as a liability. A preferred stock conversion feature was embedded within the Series A Preferred Stock that met the definition of a derivative. The Series A Preferred Stock, Series A Warrant liability and Series A Preferred Stock conversion feature were all recorded separately and were initially recorded at fair value using the Black-Scholes model. We were required to record these instruments at fair value at each reporting date and changes were recorded as an adjustment to earnings. The Series A Warrant liability and Series A Preferred Stock conversion feature were considered Level 3 financial instruments.

In November 2011, we entered into a transaction with the holders of the Series A Preferred Stock (the “Series A Holders”), pursuant to an Agreement Regarding Preferred Stock (the “Amendment Agreement”), in which the Series A Holders agreed to (i) waive their rights to enforce the anti-dilution and redemption features of the Series A Preferred Stock and (ii) at the next annual stockholder meeting, vote to amend the Certificate of Designation for the Series A Preferred Stock to remove the anti-dilution and redemption features of the Series A Preferred Stock. In exchange, we issued shares of common stock to the Series A Holders having an aggregate market value of $0.3 million. Our stockholders approved the amendments to the Certificate of Designation for the Series A Preferred Stock at the 2012 Annual Meeting of Stockholders held on May 23, 2012, and we filed the Certificate of Designation for the Series A Preferred Stock with the Delaware Secretary of State on May 25, 2012.

As a result of the Amendment Agreement, the value of the Series A Preferred Stock and Series A Warrants, including the Series A Preferred Stock conversion feature and Series A Warrant liability, were reclassified into stockholders' equity as of the date of the Amendment Agreement.

Expense on Preferred Stock

The expense associated with the change in value of the Series A Preferred Stock conversion feature is a non-cash item. There was no expense on preferred stock in 2013 or 2012.

Stock Based Compensation

Stock Based Compensation.

All stock-based awards to date have exercise prices equal to the market price of our common stock on the date of grant and have ten-year contractual terms. Unvested options as of December 31, 2013 had vesting periods of one or three years from date of grant. None of the stock options outstanding at December 31, 2013 are subject to performance or market-based vesting conditions.

We measure and recognize compensation expense for all stock-based awards made to employees and directors, including stock options. Compensation expense is based on the calculated fair value of the awards as measured at the grant date and is expensed over the service period of the awards.

Income Taxes

Income Taxes.

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities at each balance sheet date using tax rates expected to be in effect in the year the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent that it is more likely than not that they will not be realized. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations.

Net Sales Recognition

Net Sales Recognition.

Revenue is realized and earned when all of the following criteria are met:

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

• The seller’s price to the buyer is fixed or determinable; and

• Collectability is reasonably assured.

In Laboratory Services, net sales from Patient Testing labs are recognized on an individual test basis and take place when the test report is completed, reviewed and sent to the client less the reserve for insurance, Medicare and Medicaid contractual adjustments. There are no deferred net sales associated with our Patient Testing services. Adjustments to the allowances, based on actual receipts from third party payers, are reflected in the estimated contractual allowance applied prospectively. In our Biomarker Identification labs, we perform services on a project by project basis. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year. At December 31, 2013 and 2012, deferred net sales associated with pharmacogenomics research projects, included in the balance sheet in deferred revenue, was $0.2 million and $0.2 million, respectively.

Net sales of Genetic Assays and Platforms products are recognized in accordance with the terms of the sales arrangement. Such recognition is based on receipt of an unconditional customer order and transfer of title and risk of ownership to the customer, typically upon shipment of the product under a purchase order. Our sales terms do not provide for the right of return unless the product is damaged or defective. Net sales from certain services associated with the analytical instruments, to be performed subsequent to shipment of the products, is deferred and recognized when the services are provided. Such services, mainly limited to installation and training services that are not essential to the functionality of the instruments, typically are performed in a timely manner subsequent to shipment of the instrument. We also enter into various service contracts that cover installed instruments. These contracts cover specific time periods and net sales associated with these contracts are deferred and recognized ratably over the service period. At December 31, 2013 and 2012, deferred net sales, mainly associated with our service contracts, included in the balance sheet in deferred revenue was approximately $0.9 million and $1.0 million, respectively.

Taxes collected from customers and remitted to government agencies for specific net sales producing transactions are recorded net with no effect on the income statement.

Research and Development

Research and Development.

Research and development and various collaboration costs are charged to expense when incurred.

Translation of Foreign Currency

Translation of Foreign Currency.

Our foreign subsidiary uses the local currency of the country in which it is located as its functional currency. Its assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date.

Other Income

Other Income.

Other income in the year ended December 31, 2011 includes an award of a federal grant under the Qualifying Therapeutic Discovery Project related to COLD-PCR, Surveyor Scan kit development for detecting key cancer pathway gene mutations and mtDNA damage assays.

Comprehensive Income

Comprehensive Income.

Accumulated other comprehensive income at December 31, 2013, 2012 and 2011 consisted of foreign currency translation adjustments, net of applicable tax of zero.

Earnings Per Share

Earnings Per Share.

Basic earnings per share is calculated based on the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share include shares issuable upon exercise of outstanding stock options, warrants or conversion rights that have exercise or conversion prices below the market value of our common stock, as long as the effect is not anti-dilutive.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements.

In February 2013, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. The amendments in the Update do not change the current requirements for reporting net income or other comprehensive income in financial statements. The new amendments will require an organization to present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income if the item reclassified is required under generally accepted accounting principles in the U.S. (“U.S. GAAP”) to be reclassified to net income in its entirety in the same reporting period. Additionally, for other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP to provide additional detail about those amounts. For public companies, the amendments were effective for reporting periods beginning after December 15, 2012. Our adoption of this guidance did not have a material impact on our consolidated financial statements.

In February 2013 FASB issued ASU No. 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (“ASU 2013-04”). ASU 2013-04 requires reporting and disclosure of obligations resulting from joint and several liability arrangements within the scope of Subtopic 405-40 for which the total amount of the obligation is fixed at the reporting date. For public companies, ASU 2013-04 is effective for fiscal years and interim periods within those years beginning after December 15, 2013. The guidance in ASU 2013-04 is to be applied retrospectively for those obligations resulting from joint and several liability arrangements within the scope of Subtopic 405-40 that exist at the beginning of an entity’s fiscal year of adoption. Earlier application is permitted. When adopted, ASU 2013-04 is not expected to materially impact our consolidated financial statements.

In March 2013, the FASB released ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force)(“ASU 2013-05”). ASU 2013-05 provides that, when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. The provisions of ASU 2013-05 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. When adopted, ASU 2013-05 is not expected to materially impact our consolidated financial statements.

In July 2013, the FASB issued Accounting Standards Update, or ASU, No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. ASU 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013, with an option for early adoption. The Company intends to adopt this guidance at the beginning of our first quarter of fiscal year 2014, and does not expect the adoption of this standard will have a material impact on its financial statements.

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SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Tables)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information

	In thousands except per share data
	March 31			June 30			September 30			December 31
2013
Net Sales	$	7,374		$	7,306		$	6,646		$	6,218
Gross Profit	3,681			3,410			2,851			2,554
Net Loss	(3,586		)	(2,867		)	(5,552		)	(3,982		)
Basic and diluted loss per common share	$	(0.54	)	$	(0.41	)	$	(0.78	)	$	(0.57	)
2012
Net Sales	$	7,206		$	9,093		$	7,889		$	7,292
Gross Profit	3,104			4,562			3,800			3,544
Net Income (Loss)	(2,696		)	(563		)	(2,754		)	(2,314		)
Basic and diluted loss per common share	$	(0.55	)	$	(0.12	)	$	(0.49	)	$	(0.42	)

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EQUITY INCENTIVE PLAN

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity Incentive Plan

EQUITY INCENTIVE PLAN

The Company’s 2006 Equity Incentive Plan (the “Plan”) allows the Company to make awards of various types of equity-based compensation, including stock options, dividend equivalent rights (“DERs”), stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance units, performance shares and other awards, to employees and directors of the Company. As of December 31, 2013, the Company was authorized to issue 833,333 shares under the Plan; provided, that no more than 416,667 of such shares may be used for grants of restricted stock, restricted stock units, performance units, performance shares and other awards.

The Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”), which has the authority to set the number, exercise price, term and vesting provisions of the awards granted under the Plan, subject to the terms thereof. Either incentive or non-qualified stock options may be granted to employees of the Company, but only non-qualified stock options may be granted to non-employee directors and advisors. However, in either case, the Plan requires that stock options must be granted at exercise prices not less than the fair market value of the common stock on the date of the grant. Options issued under the plan vest over periods as determined by the Committee and expire 10 years after the date the option was granted. To date, the only awards made under the Plan have been non-incentive stock options.

For the year ended December 31, 2013, 2012 and 2011, we recorded compensation expense of $0.5 million, $0.7 million and $1.0 million, respectively within selling, general and administrative expense. As of December 31, 2013, there was $1.4 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of approximately three years.

The fair value of the options and SARs granted during 2013 was estimated on their respective grant dates using the Black-Scholes option pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 0.73% to 1.75%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of four to five years, based on historical exercise activity; and volatility of 105% to 106% for grants made during the year ended December 31, 2013 based on the historical volatility of our stock over a time that is consistent with the expected life of the option. A small group of senior executives hold the majority of the stock options granted in 2013 and are expected to hold the options until they are vested. Forfeitures of 2% to 4% have been assumed in the calculation.

The fair value of the options granted during 2012 was estimated on their respective grant dates using the Black-Scholes option-pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 0.62% to 1.03%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of five to eight years, based on historical exercise activity; and volatility of 101% to 114% for grants made during the year ended December 31, 2012 based on the historical volatility of our stock over a time that is consistent with the expected life of the option. Forfeitures of 2% to 4% have been assumed in the calculation.

The fair value of the options granted during 2011 was estimated on their respective grant dates using the Black-Scholes option-pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 0.92% to 2.16%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of five years, based on historical exercise activity; and volatility of 105% to 107% for grants made during the year ended December 31, 2011 based on the historical volatility of our stock over a time that is consistent with the expected life of the option. Forfeitures of 1% to 4% have been assumed in the calculation.

The weighted average grant date fair value per share of options granted during the years ended December 31, 2013, 2012 and 2011 was $3.72, $9.72 and $9.96 respectively.

Stock Options.

The following table summarizes stock option activity under the Plan during the year ended December 31, 2013:

	Number of Options		Weighted Average Exercise Price
Balance at January 1, 2013:	362,764		$	12.60
Granted	421,667		4.56
Forfeited	(80,889	)	(9.48		)
Expired	(138,514	)	(12.48		)
Balance at December 31, 2013:	565,028		$	6.60
Exercisable at December 31, 2013	153,793		$	12.72

All stock options outstanding were issued to employees, officers or outside directors.

As of December 31, 2013, 565,028 outstanding options were expected to vest. The weighted average exercise price of these options was $6.60 and the aggregate intrinsic value was $0.5 million with a remaining weighted average contractual life of 8.7 years.

As of December 31, 2013, 153,793 options were exercisable with a weighted average exercise price of $12.72 and an aggregate intrinsic value of less than $10 thousand. The weighted average contractual life of these options was 6.2 years.

No options were exercised in 2013. During 2012 and 2011, 1,667 and 2,500 shares were exercised, respectively, with an intrinsic value of less than $10,000.

The total fair value of shares that vested during 2013, 2012 and 2011 was $0.6 million, $0.6 million and $0.3 million, respectively.

Stock Appreciation Rights (“SARs”).

The following table summarizes SARs activity under the Plan during the year ended December 31, 2013:

	Number of Options	Weighted Average Exercise Price
Balance at January 1, 2013:	—	$	—
Granted	138,333	4.32
Balance at December 31, 2013:	138,333	$	4.32
Exercisable at December 31, 2013	—	$	—

All SARs outstanding were issued to officers.

As of December 31, 2013, 138,333 outstanding SARs shares were expected to vest. The weighted average exercise price of these options was $4.32 and the aggregate intrinsic value was $0.4 million with a remaining weighted average contractual life of 4.5 years.

As of December 31, 2013, zero SARs shares were exercisable and no SARs shares were exercised in 2013, 2012 and 2011. At December 31, 2013, a liability of $0.1 million was recorded in accrued expenses.