10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For The Quarterly Period Ended June 30, 2014

OR

o 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 001-33523

COMBIMATRIX CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware	47-0899439
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

310 Goddard, Suite 150,
Irvine, CA	92618
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:  (949) 753-0624

N/A

(Former name, former address and former fiscal year, if changed since last report.)

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 filing requirements for the past 90 days.  Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

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  o Accelerated filer  o Non-accelerated filer  o (Do not check if a smaller reporting company) Smaller reporting company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes o No x

As of August 8, 2014, 11,063,246 shares of CombiMatrix Corporation common stock, $0.001 par value were issued and outstanding.

COMBIMATRIX CORPORATION

Table of Contents

Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013	3
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2014 and 2013	4
	Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2014 and 2013	5
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.	Controls and Procedures	24
Part II. Other Information
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	26
Signatures		27
Exhibit Index		28

2

COMBIMATRIX CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

	June 30,			December 31,
	2014			2013
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,333		$	12,289
Short-term investments	6,765			1,747
Accounts receivable, net of allowance for doubtful accounts of $310 and $288	1,950			1,695
Supplies	281			171
Prepaid expenses and other assets	302			128
Total current assets	12,631			16,030
Property and equipment, net	716			581
Investments in unconsolidated subsidiaries and other	97			221
Total assets	$	13,444		$	16,832
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued expenses and other	$	1,901		$	1,367
Current portion, long-term debt	232			168
Common stock warrants	—			568
Total current liabilities	2,133			2,103
Capital lease obligations, net of current portion	109			65
Secured promissory note payable, net of current portion	205			—
Total liabilities	2,447			2,168
Commitments and contingencies (Note 7)
Stockholders’ equity:
Convertible preferred stock; $0.001 par value; 5 million shares authorized; Series D - 12,000 shares authorized; none and 2,200.7 shares issued and outstanding	—			—
Common stock; $0.001 par value; 25 million shares authorized; 11,063,246 and 9,870,838 shares issued and outstanding	11			10
Additional paid-in capital	96,005			95,098
Accumulated other comprehensive loss	(4		)	(4		)
Accumulated net losses	(85,015		)	(80,440		)
Total stockholders’ equity	10,997			14,664
Total liabilities and stockholders’ equity	$	13,444		$	16,832

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

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COMBIMATRIX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share information)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Revenues:
Diagnostic services	$	1,906		$	1,445		$	3,696		$	3,031
Royalties	35			55			67			80
Total revenues	1,941			1,500			3,763			3,111
Operating expenses:
Cost of services	1,053			851			2,051			1,788
Research and development	224			177			358			360
Sales and marketing	1,109			695			1,995			1,336
General and administrative	2,216			1,251			3,973			2,624
Patent amortization and royalties	28			66			60			126
Total operating expenses	4,630			3,040			8,437			6,234
Operating loss	(2,689		)	(1,540		)	(4,674		)	(3,123		)
Other income (expense):
Interest income	24			1			29			1
Interest expense	(22		)	(19		)	(38		)	(321		)
Warrant derivative gains	152			1,045			152			2,244
Warrant modification charge	(44		)	—			(44		)	—
Total other income (expense)	110			1,027			99			1,924
Net loss	$	(2,579	)	$	(513	)	$	(4,575	)	$	(1,199	)
Series A convertible preferred stock dividends	$	—		$	—		$	—		$	(246	)
Series C convertible preferred stock dividends	—			(11		)	—			(11		)
Deemed dividends from issuing Series B convertible preferred stock	—			—			—			(417		)
Deemed dividends from issuing Series C convertible preferred stock	—			(1,213		)	—			(1,213		)
Net loss attributable to common stockholders	$	(2,579	)	$	(1,737	)	$	(4,575	)	$	(3,086	)
Basic and diluted net loss per share	$	(0.23	)	$	(0.14	)	$	(0.42	)	$	(0.41	)
Series A convertible preferred stock dividends	—			—			—			(0.08		)
Deemed dividends from issuing Series B convertible preferred stock	—			—			—			(0.14		)
Deemed dividends from issuing Series C convertible preferred stock	—			(0.34		)	—			(0.41		)
Basic and diluted net loss per share attributable to common stockholders	$	(0.23	)	$	(0.48	)	$	(0.42	)	$	(1.04	)
Basic and diluted weighted average common shares outstanding	11,063,246			3,547,709			10,995,351			2,934,653

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

4

COMBIMATRIX CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except share and per share information)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Net loss	$	(2,579	)	$	(513	)	$	(4,575	)	$	(1,199	)
Unrealized gain on available-for-sale investments	5			—			—			—
Total comprehensive loss	$	(2,574	)	$	(513	)	$	(4,575	)	$	(1,199	)

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

5

COMBIMATRIX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2014			2013
Operating activities:
Net loss	$	(4,575	)	$	(1,199	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization	149			481
Non-cash stock compensation	266			179
Warrant derivative gains	(152		)	(2,244		)
Provision for bad debts	214			115
Warrant modification charge	44			—
Changes in assets and liabilities:
Accounts receivable	(426		)	(290		)
Supplies, prepaid expenses and other assets	(174		)	(18		)
Accounts payable, accrued expenses and other	608			160
Net cash flows from operating activities	(4,046		)	(2,816		)
Investing activities:
Purchases of property and equipment	(134		)	(80		)
Purchase of available-for-sale investments	(5,811		)	—
Sale of available-for-sale investments	750			—
Net cash flows from investing activities	(5,195		)	(80		)
Financing activities:
Proceeds from secured promissory note payable, net of issuance costs	328			—
Net proceeds from issuance of Series B convertible preferred and common stock	—			1,768
Net proceeds from issuance of Series C convertible preferred stock	—			2,314
Net proceeds from exercise of Series A common stock warrants	256			2,399
Cost of issuing Series D convertible preferred stock and other	(196		)	—
Payment of accrued financing costs from issuance of Series A convertible preferred stock and secured promissory note payable	—			(106		)
Payments on secured promissory note	(16		)	—
Payments of capital lease obligations	(87		)	(127		)
Net cash flows from financing activities	285			6,248
Change in cash and cash equivalents	(8,956		)	3,352
Cash and cash equivalents, beginning	12,289			2,372
Cash and cash equivalents, ending	$	3,333		$	5,724
Non-cash financing activities:
Reclassification of derivative liability to equity from warrant exercises and modifications	$	416		$	1,030
Property and equipment purchased under capital lease	$	88		$	—
Conversion of Series A convertible preferred stock into common stock	$	—		$	394
Conversion of Series B convertible preferred stock into common stock	$	—		$	303
Deemed dividends from issuing Series B convertible preferred stock	$	—		$	417
Deemed dividends from issuing Series C convertible preferred stock	$	—		$	1,213

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

6

COMBIMATRIX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    OVERVIEW AND BACKGROUND

CombiMatrix Corporation (the “Company,” “we,” “us” and “our”) was originally incorporated in October 1995 as a California corporation and later reincorporated as a Delaware corporation in September 2000. In December 2002, we merged with, and became a wholly owned subsidiary of Acacia Research Corporation (“Acacia”). In August 2007, we split-off from Acacia and became publicly traded on The Nasdaq Stock Market.  As a result of the split-off, we ceased to be a subsidiary of, or affiliated with, Acacia.

Description of the Company

We provide valuable molecular diagnostic solutions and comprehensive clinical support for the highest quality of care. We specialize in miscarriage analysis, prenatal and pediatric healthcare, offering DNA-based testing for the detection of genetic abnormalities beyond what can be identified through traditional methodologies. We perform genetic testing utilizing a variety of advanced cytogenomic techniques, including microarray, standardized and customized fluorescent in-situ hybridization (“FISH”) and high resolution karyotyping. We emphasize support for healthcare professionals, to ensure data understanding and communication of results to patients. We deliver high-technology driven answers, with a high degree of assistance for the ordering physician and staff.

We also own a one-third minority interest in Leuchemix, Inc. (“Leuchemix”), a private drug development company focused on developing a series of compounds to address a number of oncology-related diseases.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.  Accordingly, certain information and footnotes required by generally accepted accounting principles in annual financial statements have been omitted or condensed.  These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2013, as reported by us in our Annual Report on Form 10-K filed with the SEC on March 24, 2014.  The year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.  The consolidated financial statements include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of our financial position as of June 30, 2014, and results of operations and cash flows for the interim periods presented.  The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the entire year.

Liquidity and Risks

We have a history of incurring net losses and net operating cash flow deficits. We are also deploying new technologies and continue to develop new and improve existing commercial diagnostic testing services and related technologies. As of June 30, 2014, we had cash, cash equivalents and short-term investments of $10.1 million and anticipate that our cash and cash equivalent balances will be sufficient to meet our cash requirements for at least the next twelve months.  In order for us to ultimately achieve profitability, we may be required to obtain capital from external sources, increase revenues and reduce operating costs. However, there can be no assurance that our operations will become profitable or that external sources of financing, including the issuance of debt and/or equity securities, will be available at times and at terms acceptable to us, or at all. The issuance of additional equity or convertible debt securities will also cause dilution to our stockholders. If external financing sources are not available or are inadequate to fund our operations, we will be required to reduce operating costs, including research projects and personnel, which could jeopardize our future strategic initiatives and business plans.

Our business operations are also subject to certain risks and uncertainties, including:

·market acceptance of our technologies and services;

·technological advances that may make our technologies and services obsolete or less competitive;

7

COMBIMATRIX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

·increases in operating costs, including costs for supplies, personnel and equipment;

·variability in third-party reimbursement of our tests;

·the availability and cost of capital; and

·governmental regulation that may restrict our business.

Our services are concentrated in a highly competitive market that is characterized by rapid technological advances, frequent changes in customer requirements and evolving regulatory requirements and industry standards.  Failure to anticipate or respond adequately to technological advances, changes in customer requirements, changes in regulatory requirements or industry standards, or any significant delays in the development or introduction of planned services, could have a material adverse effect on our business and operating results.  The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern.  The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates.  The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Principles of Consolidation.  The accompanying consolidated financial statements include the accounts of the Company and our wholly owned and majority-owned subsidiaries.  Investments for which we possess the power to direct or cause the direction of the management and policies, either through majority ownership or other means, are accounted for under the consolidation method.  Material intercompany transactions and balances have been eliminated in consolidation.  Investments in companies in which we maintain an ownership interest of 20% to 50% or exercise significant influence over operating and financial policies are accounted for under the equity method.  The cost method is used where we maintain ownership interests of less than 20% and do not exercise significant influence over the investee.

Revenue Recognition. We recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been performed, (iii) amounts are fixed or determinable and (iv) collectability of amounts is reasonably assured.

Service revenues from providing diagnostic tests are recognized when the testing process is complete and test results are reported to the ordering physician or clinic. These diagnostic services are billed to various payors, including commercial insurance companies, healthcare institutions, government payors including Medicare and Medicaid, and individuals. We report revenues from contracted payors based on a contractual rate, or in the case of Medicare and Medicaid, published fee schedules for our tests. We report revenues from non-contracted payors based on the amounts expected to be collected. The differences between the amounts billed and the amounts expected to be collected from non-contracted payors are recorded as contractual allowances to arrive at net recognized revenues. The expected revenues from non-contracted payors are based on the historical collection experience of each payor or payor group, as appropriate. In each reporting period, we review our historical collection experience for non-contracted payors and adjust our expected revenues for current and subsequent periods accordingly. We also recognize additional revenue from actual cash payments that exceed amounts initially recognized, in the period the payments are received.  For the three and six months ended June 30, 2014 and 2013, net positive revenue adjustments were $121,000, $265,000, $67,000 and $268,000, respectively.  Because a substantial portion of our revenues is from non-contracted third-party payors, it is likely that we will be required to make adjustments to accounting estimates with respect to contractual allowances in the future, which may positively or adversely affect our results of operations.  In all cases described above, we report revenues net of any applicable statutory taxes collected from customers, as applicable.

8

COMBIMATRIX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Clinical trials support services revenue is recognized when the related support services have been delivered to and accepted by the customer.  Royalty revenue is recognized in the period when earned.

Cash Equivalents and Short-Term Investments.  We consider all highly liquid investments purchased with original maturities of three months or less when purchased to be cash equivalents. Short-term investments consist of fixed income investments with maturities between three and 12 months and other highly liquid investments that can be readily purchased or sold using established markets. These investments are classified as available-for-sale and are reported at fair value on the Company’s consolidated balance sheet. Unrealized holding gains and losses are reported within comprehensive loss in the consolidated statement of comprehensive loss. Fair value is based on available market information including quoted market prices, broker or dealer quotations or other observable inputs. If a decline in the fair value of a short-term investment below our cost basis is determined to be other than temporary, such investment is written down to its estimated fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge. To-date, no permanent impairment charges have been realized or recorded.

Fair Value Measurements.  We measure fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.  As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.  We utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

·Level 1:    Observable market inputs such as quoted prices in active markets;

·Level 2:   Observable market inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

·Level 3:   Unobservable inputs where there is little or no market data, which require the reporting entity to develop its own assumptions.

We classify our cash equivalents within the fair value hierarchy as Level 1 as these assets are valued using quoted prices in active markets for identical assets at the measurement date. We classify short-term investments within the fair value hierarchy as Level 2, primarily utilizing broker quotes in a non-active market for valuation of these investments.  Financial instruments that contain valuation inputs that are not readily determinable from active markets or from similar securities trading in active markets, such as derivative financial instruments, are classified within the fair value hierarchy as Level 3.

Derivative Financial Instruments.  We evaluate financial instruments for freestanding or embedded derivatives.  Derivative instruments that do not qualify for permanent equity classification are recorded as liabilities at fair value, with changes in value recognized as other income (expense) in the consolidated statements of operations in the period of change.  Derivative liabilities are categorized as either short-term or long-term based upon management’s estimates as to when the derivative instrument may be realized or based upon the holder’s ability to realize the instrument.

Concentration of Credit Risks.  Cash and cash equivalents are invested in deposits with certain financial institutions and may, at times, exceed federally insured limits.  We have not experienced any significant losses on our deposits of cash and cash equivalents.  We do not believe that we are exposed to significant credit risk on cash and cash equivalents or on our short-term investments.  Accounts receivable from two separate commercial insurance carriers of $355,000 and $224,000, respectively, each exceeded 10% of our total accounts receivable balance as of June 30, 2014.

Substantially all of the components and raw materials used in providing our testing services, including array slides and reagents, are currently provided to us from a limited number of sources or in some cases from a single source.  Although we believe that alternative sources for those components and raw materials are available, any supply interruption in a sole-sourced component or raw material might result in up to a several-month production delay and materially harm our ability to provide testing services until a new source of supply, if any, could be located and qualified.

9

COMBIMATRIX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Accounts Receivable and Allowance for Doubtful Accounts.  Accounts receivable are stated at principal amounts and are primarily comprised of amounts contractually due from customers for services performed.  An allowance for doubtful accounts is recorded for estimated uncollectible amounts due from various payor groups such as commercial insurance companies, healthcare institutions, government payors and individuals.  The process for estimating the allowance for doubtful accounts involves significant assumptions and judgments.  Specifically, the allowance for doubtful accounts is adjusted periodically and is principally based upon specific identification of past due or disputed accounts.  We also review the age of receivables by payor class to assess our allowance at each period end.  The payment realization cycle for certain governmental and commercial insurance payors can be lengthy, involving denial, appeal and adjudication processes, and is subject to periodic adjustments that may be significant.  Accounts receivable are periodically written off when identified as uncollectible and deducted from the allowance for doubtful accounts after appropriate collection efforts have been exhausted. Additions to the allowance for doubtful accounts are charged to bad debt expense as a component of general and administrative expenses in the consolidated statements of operations.  Collection of governmental, private health insurer, and client receivables are generally a function of providing complete and correct billing information to the insurers and clients within the filing deadlines required by each payor.  Collection of receivables due from patients and clients is generally subject to increased credit risk due to credit-worthiness or inability to pay.

Stock-Based Compensation.  The compensation cost for all employee stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense, on a straight-line basis, over the employee’s requisite service period (generally the vesting period of the equity award) which is generally four years.  The fair value of each stock option award is estimated on the date of grant using a Black-Scholes option valuation model.  The fair value of each restricted stock unit (“RSU”) award is based on the number of shares granted and the quoted price of our common stock on the date of grant.  Stock-based compensation expense is recognized only for those awards that are expected to vest using an estimated forfeiture rate.  We estimate pre-vesting option forfeitures at the time of grant and reflect the impact of estimated pre-vesting option forfeitures in compensation expense recognized.  Stock-based compensation expense for all periods presented attributable to our functional expense categories from stock option and RSU awards vesting during the periods presented were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Cost of services	$	5	$	2	$	9	$	3
Research and development	—		—		—		—
Sales and marketing	19		2		30		5
General and administrative	165		103		227		171
Total non-cash stock compensation	$	189	$	107	$	266	$	179

Net Loss Per Share.  Basic and diluted net loss per share has been computed by dividing the net loss by the weighted average number of common shares issued and outstanding during the periods presented.  Options and warrants to purchase common stock as well as preferred stock convertible into shares of common stock are anti-dilutive and therefore are not included in the determination of the diluted net loss per share.  The following table reflects the excluded dilutive securities:

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2014	2013	2014	2013
Common stock options	695,989	625,769	695,989	625,769
Restricted stock units	380,220	—	380,220	—
Common stock warrants	7,412,372	2,010,222	7,412,372	2,010,222
Series B preferred stock convertible into common stock	—	117,232	—	117,232
Series C preferred stock convertible into common stock	—	839,870	—	839,870
Excluded potentially dilutive securities	8,488,581	3,593,093	8,488,581	3,593,093

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COMBIMATRIX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Segments.  We have determined that we operate in one segment for financial reporting purposes.

Recent Accounting Pronouncements.  In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance regarding revenue recognition, which when effective will supersede existing revenue recognition requirements and will eliminate most industry-specific guidance from generally accepted accounting principles.  The core principle of the new guidance is to require an entity to recognize as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods or services as it transfers control to its customers. The new guidance requires additional disclosures including those that are qualitative and quantitative disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  An entity can apply the new guidance retrospectively to each prior reporting period presented (i.e., the full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings.  The new guidance becomes effective and will be adopted in the first quarter of fiscal year 2017 with early adoption not permitted. We are currently evaluating the appropriate transition method and any further impact of this guidance on our consolidated financial statements and related disclosures.

In April 2014, the FASB amended guidance to clarify the accounting for disposals of groups of assets and business units. The amendments alter the definition of a discontinued operation to cover only asset disposals that are a strategic shift with a major effect on an entity’s operations and finances. The changes should be applied in fiscal years that start on December 15, 2014, or later, but the changes can be applied ahead of the effective date for asset disposals that have not been reported in a set of financial statements.  We do not believe adoption of this guidance will have a material impact on our consolidated financial statements or related disclosures.

In July 2013, the FASB issued guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists.  Under this guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit that exists at the reporting date, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if certain criteria are met.  This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013 with early adoption permitted.  The adoption of this guidance did not have a material impact on our consolidated financial statements or related disclosures.

In February 2013, the FASB amended its guidance to require an entity to present the effect of certain significant reclassifications out of accumulated other comprehensive income or loss on the respective line items in net income or loss.  The new accounting guidance does not change the items that must be reported in other comprehensive income or loss or when an item of other comprehensive income or loss must be reclassified to net income or loss.  The guidance is effective prospectively for fiscal years beginning after December 15, 2012 and we were required to adopt these new provisions during the first quarter of 2013.  As the guidance requires additional presentation only, there was no impact to our consolidated financial statements or related disclosures.

Reclassifications.  Certain prior period amounts have been reclassified to conform to the current period presentation.  We reclassified $392,000 and $1.0 million of the derivative warrant gain originally reported for the three and six months ended June 30, 2013, respectively, to additional paid-in capital for the estimated fair value of warrants exercised during these periods.  As a result of these reclassifications, the net loss and the net loss attributable to common stockholders for the three and six months ended June 30, 2013 reported herein have been increased by these amounts.  These reclassifications had no impact on total stockholders’ equity nor any other balance sheet components as of March 31, 2013 or June 30, 2013, and had no impact on total revenues, total operating expenses, and the operating loss reported for the three and six months ended June 30, 2013.

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COMBIMATRIX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

3.CASH AND SHORT-TERM INVESTMENTS

As of June 30, 2014, we held $10.1 million in cash, cash equivalents and short-term investments, which are reported at fair value.  Cash, cash equivalents and short-term investments consisted of the following as of June 30, 2014 and December 31, 2013 (in thousands):

	As of June 30, 2014									As of December 31, 2013
			Unrealized					Fair				Unrealized					Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
Cash and money market securities	$	3,333	$	—	$	—		$	3,333	$	11,290	$	—	$	—		$	11,290
Government bonds	751		—		—			751		—		—		—			—
Corporate bonds	1,788		—		—			1,788		—		—		—			—
Certificates of deposit	4,230		—		(4		)	4,226		2,750		—		(4		)	2,746
	$	10,102	$	—	$	(4	)	$	10,098	$	14,040	$	—	$	(4	)	$	14,036
Included in cash and cash equivalents	$	3,333	$	—	$	—		$	3,333	$	12,290	$	—	$	(1	)	$	12,289
Included in short-term investments	6,769		—		(4		)	6,765		1,750		—		(3		)	1,747
	$	10,102	$	—	$	(4	)	$	10,098	$	14,040	$	—	$	(4	)	$	14,036

4.FAIR VALUE MEASUREMENTS

The following table summarizes, for each major category of financial assets measured on a recurring basis, the respective fair value at June 30, 2014 and December 31, 2013 and the classification by level of input within the fair value hierarchy defined above (in thousands):

			Fair Value Measurements
June 30, 2014	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	2,224	$	2,224	$	—	$	—
Short-term investments	6,765		2,539		4,226		—
Cash equivalents	$	8,989	$	4,763	$	4,226	$	—

			Fair Value Measurements
December 31, 2013	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	8,263	$	7,264	$	999	$	—
Short-term investments	1,747		—		1,747		—
Cash equivalents	$	10,010	$	7,264	$	2,746	$	—
Liabilities:
Derivative warrant liability	$	568	$	—	$	—	$	568

The following table is a reconciliation of financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2014 (in thousands):

	Derivative
	Warrant
	Liability
Balance, December 31, 2013	$	568
Changes in fair value	(152		)
Reclassifications	(416		)
Balance, June 30, 2014	$	—

12

COMBIMATRIX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

The fair value of the derivative warrant liability is based on Level 3 inputs.  For this liability, we developed our own assumptions that do not have observable inputs or available market data to support the fair value recorded.  See Note 6 for further discussion of the derivative warrant liability and for the June 2014 modifications, which resulted in permanent equity classification of the warrant liability as of June 30, 2014.

5.SECURED PROMISSORY NOTE

On May 20, 2014 (“Execution Date”), we executed a secured promissory note (the “Note”) with ACC Investment Ltd. in the amount of $350,000, payable in equal amortized payments over a thirty-six month period (the “Term”) from the Execution Date.  The note bears an annual interest rate of 10% and is secured by certain laboratory equipment used in our microarray services business.  Legal and other closing costs totaling $22,000 were capitalized with the Note and are being amortized over the Term as interest expense.  As of June 30, 2014, the fair value of the Note approximated its carrying value of $312,000, net of unamortized closing costs of $21,000.

6.STOCKHOLDERS’ EQUITY

Series A Convertible Preferred Stock and Warrants Financing

During the fourth quarter of 2012, we issued Series A convertible preferred stock (the “Series A Stock”) and warrants to purchase common stock (the “Series A Warrants”) to certain accredited investors (the “Series A Investors”) for gross proceeds of $2.5 million.  During the fourth quarter of 2012 and the first quarter of 2013, all of the Series A convertible preferred stock converted into 1.25 million shares of common stock, and during 2013, 1.2 million shares of common stock were issued from the exercise of the Series A Warrants, leaving Series A Warrants to purchase 292,817 shares of common stock unexercised as of December 31, 2013.   During the six months ended June 30, 2014, Series A Investors exercised Series A Warrants to purchase 124,111 shares of our common stock, resulting in proceeds of $256,000 to us.

Holders of the Series A Stock were entitled to receive accruing dividends at the annual rate of 6%, payable semi-annually.  Upon conversion of Series A Stock into common stock, we paid to each holder of Series A Stock converting to common stock, as a “make-whole” payment in common stock, an amount equal to $118 per $1,000 of stated value of Series A Stock so converted, less the aggregate amount of dividends previously paid on such converting Series A Stock.  During the first six months of 2013, the Series A Investors converted all of the remaining shares of Series A Stock into 822,421 shares of common stock.  In addition, 50,307 shares of common stock were issued to the Series A Investors in payment of the make-whole and accrued dividends related to the Series A Stock conversions.  The combination of make-whole and accrued dividends paid in shares of common stock for the six months ended June 30, 2013 was $246,000.

For as long as the Series A Warrants remain unexercised through their expiration date in April 2018, we may not sell securities at an effective price per share less than $4.91 except for certain exempt issuances, unless waivers from the Series A Investors are obtained.  Prior to June 2014, the exercise price of the Series A Warrants and the number of shares of common stock underlying the Series A Warrants were subject to full-ratchet anti-dilution adjustments in the event we issue securities, other than certain excepted issuances, at a price below the then current exercise price of the Series A Warrants.  In June 2014, we executed modification agreements (the “Modification”) with the remaining Series A Investors to remove the full-ratchet anti-dilution adjustment provisions as well as the Black-Scholes cash buy-back provisions from the terms of the Series A Warrants, thereby eliminating the requirement for derivative accounting and liability classification for the Series A Warrants as of the Modification date.  In consideration for agreeing to these Modifications, we issued additional warrants to the Series A Investors to purchase 25,303 shares of common stock at an exercise price of $2.06 per share and an expiration date in April 2018, which are equivalent to the terms of the existing Series A Warrants as modified by the Modification, but are not subject to any registration rights.

We account for stock purchase warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreements.  Under applicable accounting guidance, stock warrants must be accounted for as derivative financial instruments if the warrants contain full-ratchet anti-dilution provisions, which preclude the warrants from being considered indexed to our own stock.  Prior to the Modification, the Series A Warrants issued to Series A Investors contained such provisions, thus requiring us to treat them as derivative financial instruments, to be recorded at fair value at issuance and subsequently adjusted to fair value at each reporting date, with the corresponding adjustment reflected as a non-operating credit / charge in the consolidated statement of operations. 

13

COMBIMATRIX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

We valued the Series A Warrants using the Monte-Carlo simulation method using the following assumptions immediately prior to the Modification:  (i) closing stock price and Series A Warrant contractual exercise price; (ii) term to expiration commensurate with the individual Series A Warrant terms of 3.8 years; (iii) historical volatilities commensurate with the term of the Series A Warrants of 129.6%; (iv) risk-free interest rates commensurate with the term of the Series A Warrants of 1.2%; and (v) simulated anti-dilution impact assuming various probabilities that we will raise additional capital by issuing equity securities at prices above or below the current contractual Series A Warrant exercise prices during the Series A Warrant terms.  The result of this valuation simulation was to value the remaining Series A Warrants held by Series A Investors at $281,000 as of the Modification date.  As a result, warrant derivative gains of $152,000 were recognized, and the remaining $281,000 was reclassified to additional paid-in capital.  As a result of a similar valuation analysis performed during the first quarter ended March 31, 2014, the combined warrant derivative gains recognized in our consolidated statements of operations and the amount of warrant derivative liabilities reclassified to stockholders’ equity resulting from Series A Warrant exercises for the six months ended June 30, 2014 was $152,000 and $416,000, respectively.  The additional Series A Warrants to purchase 25,303 shares of common stock issued to Series A Investors as consideration for agreeing to the Modification were valued using the Black-Scholes valuation model, using the following assumptions as of the Modification:  (i) closing stock price and Series A Warrant contractual exercise price; (ii) term to expiration commensurate with the individual Series A Warrant terms of 3.8 years; (iii) historical volatility commensurate with the term of the Series A Warrants of 129.6%; and (iv) risk-free interest rates commensurate with the term of the Series A Warrants of 1.2%.  The resulting valuation of $44,000 was recognized as a non-operating charge in our consolidated statements of operations for the three and six months ended June 30, 2014.

We valued the Series A Warrants using the Monte-Carlo simulation method using the following assumptions at June 30, 2013:  (i) closing stock price and Series A Warrant contractual exercise price; (ii) term to expiration commensurate with the remaining Series A Warrant terms of 4.7 years; (iii) historical volatilities commensurate with the term of the remaining Series A Warrants of 120.5%; (iv) risk-free interest rates commensurate with the term of the remaining Series A Warrants of 1.3%; and (v) simulated anti-dilution impact assuming various probabilities that we will raise additional capital by issuing equity securities at prices above or below the current contractual Series A Warrant exercise price during the Series A Warrant terms.  The result of these valuation simulations was to value the remaining Series A Warrants at $1.2 million, which was $1.4 million below their carrying value as of March 31, 2013.  As a result, we recognized a $1.0 million non-operating, warrant derivative gain in our consolidated statement of operations for the three months ended June 30, 2013, whereas warrant derivative liabilities from Series A Warrant exercises in the amount of $392,000 were reclassified to stockholders’ equity.  As a result of a similar valuation analysis performed during the first quarter ended March 31, 2013, the combined warrant derivative gains recognized in our consolidated statements of operations and the amount of warrant derivative liabilities reclassified to stockholders’ equity resulting from Series A Warrant exercises for the six months ended June 30, 2013 was $2.2 million and $1.0 million, respectively.

Amortization of the deferred offering-related costs allocated to the Series A Warrants was $280,000 during the six-month period ended June 30, 2013, and was recognized as a component of interest expense.

Series B Convertible Preferred Stock Financing

On March 19, 2013, we entered into a securities purchase agreement (the “Series B Purchase Agreement”) with an existing institutional investor (the “Series B Investor”) to purchase 130,000 shares of common stock at a price of $3.05 per share and approximately 1,610.4 units consisting of, in the aggregate, Series B 6% convertible preferred stock (the “Series B Stock”) and warrants to purchase up to 275,000 shares of common stock at an exercise price of $3.49 per share (the “Series B Warrants”) in a registered direct offering (the “Series B Financing”) of securities sold off of our existing shelf registration statement on Form S-3 (File No. 333-176372).  The Series B Financing closed on March 20, 2013 (the “Series B Closing”).  The Series B Stock and Series B Warrants were sold in multiples of fixed combinations, with each fixed combination consisting of one share of Series B Stock and a Series B Warrant to purchase approximately 171 shares of common stock.  Each fixed combination of Series B Stock and Series B Warrants was sold at a price of $1,000.  The Series B Stock was initially convertible into an aggregate of 528,000 shares of common stock at an initial conversion price of $3.05 per share.  During 2013, the Series B Investor converted all of the Series B Stock into common stock.

14

COMBIMATRIX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

The Series B Warrants were not exercisable for six months from the Series B Closing, and the Series B Stock accrued dividends at an annual rate of 6% beginning six months after the Series B Closing, assuming the Series B Stock had not been converted by that time.  Upon the Series B Closing, we received proceeds of $1.8 million, net of placement agent fees and other related paid and accrued costs.  Given that the effective conversion price of the Series B Stock was below the closing market price of our common stock at the time of the Series B Closing, we recognized a beneficial conversion feature in the amount of $417,000.  Since the Series B Stock was immediately convertible into common stock, the beneficial conversion feature was treated as a deemed dividend charged to retained earnings.

The Series B Warrants have a 5½ year term as well as a cashless exercise provision in the event there is no effective registration statement covering the common stock issuable upon exercise of the Series B Warrants, and were not exercisable for the first six months following issuance.  The Series B Warrants are not subject to price anti-dilution protection.  We also agreed with the Series B Investor pursuant to the Series B Purchase Agreement that, except under certain permitted circumstances, until the time that less than 7.5% of the Series B Warrants remain outstanding, neither we nor our subsidiaries shall issue, or enter into any agreement to issue, common stock or equivalents thereof at a price below the exercise price of the Series B Warrants.

Series C Convertible Preferred Stock Financing

On May 3, 2013, we entered into a securities purchase agreement (the “Series C Purchase Agreement”) with certain accredited investors (the “Series C Investors”), pursuant to which we sold and issued 1,200 shares of our newly created Series C 6% convertible preferred stock (the “Series C Stock”) to the Series C Investors at a purchase price of $1,000 per share in an initial closing that occurred on May 6, 2013 (the “Series C First Closing”) and sold and issued 1,200 additional shares of Series C Stock to the Series C Investors on June 28, 2013 at a purchase price of $1,000 per share after stockholder approval was obtained on June 27, 2013 (the “Series C Second Closing”) (combined, the “Series C Financing”). After certain offering-related costs paid, the net proceeds from the Series C Financing was approximately $2.2 million.

As a result of the Series C Second Closing, the conversion price for the Series C Stock was set to $2.85759 per share, or the equivalent of 839,870 shares of common stock issuable upon conversion of all Series C Stock.  The Series C Stock was entitled to 6% annual dividends, and accrued dividends were payable semi-annually, and also on the date of conversion of any Series C Stock, in cash or, subject to certain conditions and at our election, in shares of common stock. If the dividends were paid in shares of common stock, the number of shares of common stock comprising the dividend on each share of Series C Stock was valued at a 20% discount to the average of the daily volume weighted average price for the five-day trading period immediately prior to the dividend payment date.  Given that the effective conversion price of the Series C Stock was below the closing market price of our common stock at the time of both of the Series C closings, we recognized beneficial conversion features in the amount of $1.2 million, which were limited to and reduced the net proceeds allocated to the Series C Stock.  Since the Series C Stock was immediately convertible into common stock, the beneficial conversion feature was treated as a deemed dividend charged to retained earnings.  During the remainder of 2013, the Series C Investors converted all 2,400 shares of Series C stock into 839,864 shares of common stock.

In addition to the issuance of the Series C Stock, we issued warrants at the Series C First Closing to purchase 491,803 shares of our common stock with an exercise price of $3.77 per share and at the Series C Second Closing, we issued additional warrants to purchase 491,803 shares of our common stock with an exercise price of $3.55 per share (collectively, the “Series C Warrants”).  The Series C Warrants have a 5½ year term, were not exercisable for the first six months following issuance and include a cash-less exercise provision which is only applicable if the common stock underlying the Series C Warrants is not subject to an effective registration statement or otherwise cannot be sold without restriction pursuant to Rule 144.  Until all Series C Investors no longer hold Series C Warrants:  (i) we may not sell any variable rate securities except for certain exempt issuances; and (ii) if we enter into a subsequent financing on more favorable terms than the Series C Financing, then the agreements between us and the Series C Investors will be amended to include such more favorable terms.  In addition, until 7.5% or less of the Series C Warrants remain unexercised, we may not sell any dilutive securities, except for certain exempt issuances.

15

COMBIMATRIX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

Series D Convertible Preferred Stock Financing

On December 20, 2013 (the “Series D Closing”), we closed an underwritten public offering (the “Series D Offering”) and issued 12,000 units of securities to investors, with each unit consisting of: (i) one share of Series D preferred stock (“Series D Stock”) convertible into shares of our common stock equal to 1,000 divided by the conversion price of $2.06, which was 72.5% of the consolidated closing bid price of our common stock on the Nasdaq Capital Market on December 16, 2013, the date we executed the underwriting agreement (“UA date”); and (ii) one warrant exercisable for 485.4369 shares of our common stock, at an exercise price per share equal to $3.12 (“Series D Warrants”), which was 110% of the consolidated closing bid price of our common stock on the Nasdaq Capital Market on the UA date. The shares of common stock underlying the Series D Stock and Series D Warrants were registered on Form S-1 (File No. 333-191221), which was declared effective by the SEC on December 16, 2013. The Series D Stock was immediately convertible and the Series D Warrants were immediately exercisable for shares of common stock and have a term of five years. In total, there were 5,825,243 shares of common stock issuable upon conversion of the Series D Stock and up to 5,825,243 shares of common stock issuable upon exercise of the Series D Warrants. The units were sold for a purchase price equal to $1,000 per unit, resulting in gross proceeds of $12 million at the Series D Closing. After certain offering-related costs paid to the underwriters and others at the closing and through June 30, 2014, net proceeds received by us were approximately $10.7 million. As of December 31, 2013, 9,799.3 shares of Series D Stock have converted into 4,756,946 shares of common stock. During the first quarter of 2014, all of the remaining Series D Stock converted into an additional 1,068,297 shares of common stock. Also as a result of the Series D Offering, the exercise price of the then-outstanding Series A Warrants automatically ratcheted down by their terms from their then exercise price of $2.86 per share to an adjusted exercise price of $2.06 per share, and the underlying shares exercisable was automatically increased by 81,910 shares.  A registration statement on Form S-3 was filed in order to register these shares as per the terms of our original Series A offering documents.

Warrants

Outstanding warrants to purchase common stock are as follows:

	Shares of Common Stock
	Issuable from Warrants
	Outstanding as of
	June 30,	December 31,	Exercise
	2014	2013	Price	Expiration
Liability-classified warrants:
October 2012	—	292,817	$2.06(1)	March 2018
Equity-classified warrants:
December 2013	5,825,243	5,825,243	$3.55	December 2018
June 2013	491,803	491,803	$3.55	December 2018
May 2013	491,803	491,803	$3.77	November 2018
March 2013	275,000	275,000	$3.49	September 2018
October 2012	194,009	—	$2.06(1)	April 2018
April 2011	131,047	131,047	$21.40	April 2016
October 2009	3,000	3,000	$77.80	October 2014
May 2009	467	2,967	$75.00 - $90.00	May 2014 - July 2014
May 2009	—	109,997	$90.00	May 2014
Total	7,412,372	7,330,860
Total - all warrants	7,412,372	7,623,677

(1)Prior to the anti-dilution adjustments which occurred on March 20, 2013, June 28, 2013 and December 20, 2013, these warrants had an initial exercise price of $9.50 per share.  Also, due to the Modification previously discussed, these warrants are no longer liability classified as of June 30, 2014.

Subsequent to June 30, 2014, the remaining May 2009 warrants listed above expired unexercised.

16

COMBIMATRIX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Unaudited)

7.    COMMITMENTS AND CONTINGENCIES

Executive Severance

We provide certain severance benefits such that if an executive officer of CombiMatrix Corporation is terminated for other than cause, death or disability, the executive will receive payments equal to three months’ base salary plus medical and dental benefits.  In addition, we have implemented a Restated Executive Change of Control Severance Plan (the “Severance Plan”) that affects certain of our senior management-level employees who are classified as “Section 16 Officers” of the Company.  Pursuant to the Severance Plan, if a participating employee is involuntarily terminated (other than for death, disability or for cause) or resigns for “good reason” (as defined in the Severance Plan) during the two-year period following a “change of control” (as defined in the Severance Plan) of the Company, then, subject to execution of a release of claims against the Company, the employee will be entitled to receive: (i) one-half times annual base salary; (ii) immediate vesting of outstanding compensatory equity awards; and (iii) payment of COBRA premiums for the participating employee and eligible dependents for a pre-determined period of time.  Payment of benefits under the Severance Plan will be limited by provisions contained in Section 409A of the U.S. Internal Revenue Code.  The Severance Plan is administered by a plan administrator, which initially is the Compensation Committee of the Board of Directors.  In order to participate in the Severance Plan, an eligible employee must waive any prior retention or severance agreements.

Litigation

In 2002, we entered into a settlement agreement with Nanogen, Inc. (“Nanogen”) to settle all pending litigation between the parties.  Pursuant to the terms of the settlement agreement, we agreed to make quarterly payments to Nanogen equal to 12.5% of total sales of products developed by us and our affiliates based on the patents that had been in dispute in the litigation, up to an annual maximum amount of $1.5 million.  The minimum quarterly payments under the settlement agreement are $25,000 per quarter until the patents expire in 2018.  Royalty expenses recognized under the agreement were $25,000 and $50,000 for the three and six months ended June 30, 2014 and 2013, respectively, and are included in patent amortization and royalties in the accompanying consolidated statements of operations.

On February 14, 2011, Relator Michael Strathmann (“Strathmann”) served us with a complaint (“the Complaint”) filed in the Superior Court of the State of California for the County of Orange.  The Complaint alleges we and our former parent Acacia Research Corporation submitted false and fraudulent insurance claims to National Union Fire Insurance Company under the Directors and Officers Policy issued to Acacia, in connection with a prior lawsuit that was settled with Nanogen, Inc., thereby allegedly violating the California Insurance Fraud Prevention Act, and seeks penalties and unspecified treble damages.  On May 4, 2011, the Superior Court dismissed the Complaint by ordering that it be stricken for violation of the California Anti-SLAPP statute, which prevents plaintiffs from filing abusive lawsuits against public policy.  On June 15, 2011, Strathmann filed a Notice of Appeal with the California Court of Appeals, appealing the granting of the Motion to Strike.  On October 24, 2012, the California Court of Appeals reversed the Superior Court’s dismissal, finding that the anti-SLAPP statute was not applicable and remanding the case to the Superior Court.  Strathmann filed an Amended Complaint, and we and Acacia filed our Answer to that pleading.  Discovery has commenced and concluded.  We and Acacia filed a motion for summary judgment to dismiss many, if not all, of the claims on the grounds of, among other things, lack of merit, inapplicability of the Insurance Fraud Prevention Act to tenders of defense under third party policies, statute of limitations, jurisdiction and standing.  On April 30, 2014, the court denied the motion, finding there were certain “triable issues of fact.”  As a result, trial before the court commenced on June 9, 2014 and has continued through the date of this filing, though the trial is expected to conclude later in August.  We continue to vigorously pursue the full defenses of this matter.  Nevertheless, there can be no assurance we will be ultimately successful.

From time to time, we are subject to other claims and legal actions that arise in the ordinary course of business.  We believe that the ultimate liability with respect to these claims and legal actions, if any, will not have a material effect on our financial position, results of operations or cash flows.  Any legal costs resulting from claims or legal actions are expensed as incurred.

17

Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement

You should read the following discussion and analysis in conjunction with the consolidated financial statements and related notes thereto contained in Part I, Item 1 of this report.  The information contained in this Quarterly Report on Form 10-Q is not a complete description of our businesses or the risks associated with an investment in our common stock.  We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the U.S. Securities and Exchange Commission, or “SEC,” including our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 24, 2014.

This report contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact included in this report, are forward-looking statements. Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this report. Such statements may be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “would,” “could,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “plan,” “predict,” “seek,” “potential,” “continue,” “focus,” “ongoing,” or similar terms, variations of such terms or the negative of such terms, and include, but are not limited to, statements regarding projected results of operations, capital expenditures, earnings, management’s future strategic plans, development of new technologies and services, litigation, regulatory matters, market acceptance and performance of our services, the success and effectiveness of our technologies and services, our ability to retain and hire key personnel, the competitive nature of and anticipated growth in our markets, market position of our services, marketing efforts and partnerships, liquidity and capital resources, our accounting estimates, and our assumptions and judgments.  Such statements are based on management’s current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by us, all of which are subject to change. These forward looking statements are not guarantees of future results and are subject to a number of risks, uncertainties and assumptions that are difficult to predict and that could cause actual results to differ materially and adversely from those described in the forward-looking statements.  The risks and uncertainties referred to above include, but are not limited to, our ability to successfully increase the volume of our existing tests, expand the number of tests offered by our laboratory, increase the number of customers and partners and improve reimbursement for our testing; market acceptance of chromosomal microarray analysis (“CMA”) as a preferred method over karyotyping; the rate of transition to CMA from karyotyping; changes in consumer demand; our ability to attract and retain a qualified sales force and key technical personnel; our ability to successfully develop and introduce new technologies and services; rapid technological change in our markets; supply availability; the outcome of existing litigation; our ability to bill and obtain reimbursement for highly specialized tests; our ability to comply with regulations to which our business is subject, including changes in coding and reimbursement methods; legislative, regulatory and competitive developments in markets in which we and our subsidiaries operate; our limited market capitalization; future economic conditions; other circumstances affecting anticipated revenues and costs; and other factors as more fully disclosed in our discussion of risk factors in Item 1A of Part II of this report and in the “Risk Factors” described in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on March 24, 2014.  Additional factors that could cause such results to differ materially from those described in the forward-looking statements are set forth in connection with the forward-looking statements.  These forward-looking statements speak only as of the date of this report and we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by law.

General

We provide valuable molecular diagnostic solutions and comprehensive clinical support for the highest quality of care.  We specialize in miscarriage analysis, prenatal and pediatric healthcare, offering DNA-based testing for the detection of genetic abnormalities beyond what can be identified through traditional methodologies.  We perform genetic testing utilizing a variety of advanced cytogenomic techniques, including microarray, standardized and customized fluorescent in-situ hybridization (“FISH”) and high resolution karyotyping.  We emphasize support for healthcare professionals, to ensure data understanding and communication of results to patients.  We deliver high-technology driven answers, with a high degree of assistance for the ordering physician and staff.  Our clinical lab and corporate offices are located in Irvine, California.

18

We also own a one-third minority interest in Leuchemix, Inc. (“Leuchemix”), a private drug development company focused on developing a series of compounds to address a number of oncology-related diseases.

Overview

For the three and six months ended June 30, 2014, our operating activities included the recognition of $1.9 million and $3.8 million of total revenues, respectively, which increased by $441,000 and $652,000, respectively, from the comparable periods in 2013 due primarily to increased volumes of molecular diagnostic tests performed.  Our net losses for the three and six months ended June 30, 2014 increased over the comparable periods in 2013 due primarily to increased operating expenses as a result of sales and marketing expansion and increased litigation expenses, as well as from non-cash warrant derivative gains of $1.0 million and $2.2 million that were recognized during the three and six months ended June 30, 2013, respectively, compared to relatively insignificant such gains in the 2014 comparable periods.

On April 9, 2014, we announced that Trilochan Sahoo, M.D. FACMG, had joined the Company as Director of Cytogenetics. Dr. Sahoo’s expertise is in the development, evaluation and implementation of microarray-based technologies, especially as used as an important diagnostic tool in clinical cytogenetics and genomics.  On May 13, 2014, we announced that Long Island Pathology (“LI Path”) began offering its patients our chromosomal microarray analysis (“CMA”) testing for miscarriage analysis.  LI Path, based in East Setauket, New York, is a physician-led diagnostic pathology laboratory serving the New York, New Jersey and northeastern Pennsylvania areas.  On July 15, 2014, we announced that our CMA test to identify development disorders in pediatric patients, known as the CombiSNP™ Array for Pediatric Analysis, had received conditional approval from the New York Department of Health (“NYDOH”) for testing on patient samples.  On July 22, 2014, we announced a contract with Stratose Networks Division, one of the largest directly-managed PPO networks in U.S., to provide coverage of our diagnostic testing services.  On July 31, 2014, we announced that that our SNP-based CMA test for miscarriage analysis, known as the CombiSNP™ Array for Pregnancy Loss, had also received conditional approval from the NYDOH. This approval was for testing on fresh tissue patient samples as well as for formalin fixed paraffin embedded patient samples.

Critical Accounting Estimates

Our unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.  Preparation of these statements requires management to make judgments and estimates.  Some accounting policies have a significant impact on amounts reported in these financial statements.  A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 24, 2014, in the Notes to the Consolidated Financial Statements and the Critical Accounting Estimates sections.  In addition, refer to Note 2 to the consolidated interim financial statements included in Part I, Item 1 of this report.

Comparison of the Results of Operations for the Three and Six Months Ended June 30, 2014 and 2013

Revenues and Cost of Services (dollars in thousands):

	Three Months Ended										Six Months Ended
	June 30,						Change				June 30,						Change
	2014			2013			$			%	2014			2013			$			%
Diagnostic services	$	1,906		$	1,445		$	461		32%	$	3,696		$	3,031		$	665		22%
Royalties	35			55			(20		)	(36)%	67			80			(13		)	(16)%
Cost of services	(1,053		)	(851		)	(202		)	(24)%	(2,051		)	(1,788		)	(263		)	(15)%

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Diagnostic Services.  Diagnostic services revenues are generated from providing DNA-based genomic testing services primarily in the areas of prenatal and postnatal development disorders in children and, to a lesser extent, in oncology.  The key drivers and metrics relating to the change in diagnostic services revenues were as follows:

	Three Months Ended										Six Months Ended
	June 30,						Change				June 30,						Change
	2014			2013			#			%	2014			2013			#			%
Total billable tests	1,840			1,485			355			24%	3,513			3,203			310			10%
Microarray tests	1,431			1,106			325			29%	2,800			2,136			664			31%
Microarray %age of total tests	77.8		%	74.5		%					79.7		%	66.7		%
Total prenatal(1) microarray tests	872			546			326			60%	1,609			1,007			602			60%
Prenatal percentage of total microarray tests	60.9		%	49.4		%					57.5		%	47.1		%
Revenue per test - total	$	1,036		$	973		$	63		6%	$	1,052		$	946		$	106		11%
Revenue per test - microarrays	$	1,251		$	1,213		$	38		3%	$	1,251		$	1,299		$	(48	)	(4)%
Revenue per test - prenatal microarrays	$	1,400		$	1,531		$	(131	)	(9)%	$	1,456		$	1,660		$	(204	)	(12)%

(1) includes both miscarriage analysis and prenatal microarray tests

Although total billable testing volumes increased by 24% and 10% for the three and six months ended June 30, 2014 over the comparable periods in 2013, respectively, diagnostic services revenues for the three and six months ended June 30, 2014 increased by 32% and 22% over the comparable periods in 2013, respectively.  The reason that diagnostic services revenues have increased by greater percentages than have total billable testing volumes is due to a shift in test mix during 2014 towards a higher concentration of microarray testing, particularly in the prenatal testing market.  Because microarray tests are priced and reimbursed at significantly higher rates than our nonarray-based tests, our overall average revenue per test has increased for all periods presented, thereby driving higher revenues in the first half of 2014 compared to the first half of 2013.  In addition, decreases in oncology testing volumes were offset by increases in prenatal testing, resulting in an overall increase in diagnostic services revenues quarter-over-quarter and year-over-year.  The change in test mix has been driven by a change in sales and marketing efforts towards the prenatal diagnostic testing market and less towards pediatric and oncology markets.  The change in payor mix and adoption of new billing codes for molecular testing that we adopted during the second quarter of 2013 has resulted in lower average reimbursement per microarray test in the prenatal microarray segment in 2014 as compared to 2013.

Diagnostic services revenues also include adjustments relating to our revenue recognition policy of periodically adjusting our estimate for contractual allowances for revenues from non-contracted payors as well as from receiving cash payments in excess of amounts previously recognized for services revenues. For the three and six months ended June 30, 2014 and 2013, net positive revenue adjustments were $121,000, $265,000, $67,000 and $268,000, respectively.   Because approximately 67% of our diagnostic revenues are billed to non-contracted third-party payors, it is likely that we will be required to make adjustments to accounting estimates with respect to contractual allowances in the future, which may positively or adversely affect our revenues and results of operations. In addition, recent changes to the molecular codes used by laboratories such as ours for microarray testing could positively or negatively impact reimbursement from certain non-contracted payors for our microarray tests, which would have a commensurate impact on revenues recognized from those payors.

Royalties.  In 2010, we entered into an exclusive licensing agreement with CustomArray, Inc. (“CA”), a private company located in Washington State, for certain of our patents and intellectual property developed as part of our prior microarray manufacturing business.  This agreement requires CA to pay us royalties as a percentage of their gross revenues, not less than $25,000 per quarter.  CA’s sales activities were lower in 2014 compared to 2013, resulting in lower royalty revenues recognized for all periods presented.  It is uncertain whether in future periods, CA’s revenues will increase or continue at the minimum contractual amounts.

Cost of Services.  Cost of services relating to our diagnostic tests performed include direct materials such as microarray slides, reagents and related laboratory materials, direct laboratory labor (wages and benefits), allocation of administrative overhead and stock-compensation expenses.   Increases in cost of services were due primarily to increased diagnostic testing volumes quarter-over-quarter.  However, the percentage growth in cost of services was lower than the increase in diagnostic services revenues as a result of lower materials costs for our microarray tests, due to the conversion to a new microarray testing platform that was completed in the second quarter of 2013.  For the three and six months ended June 30, 2014 and 2013, non-cash stock compensation expenses were not significant.

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Operating Expenses (dollars in thousands):

	Three Months Ended							Six Months Ended
	June 30,				Change			June 30,				Change
	2014		2013		$		%	2014		2013		$			%
Research and development	$	224	$	177	$	47	27%	$	358	$	360	$	(2	)	(1)%
Sales and marketing	1,109		695		414		60%	1,995		1,336		659			49%
General and administrative	2,216		1,251		965		77%	3,973		2,624		1,349			51%

Research and Development.  These expenses include labor (wages and benefits), non-cash stock compensation expenses and laboratory supply costs associated with investigating and validating new tests and technology platforms, costs to maintain and improve our existing suite of diagnostic tests offered and process improvement projects.  Prior to launching a new test or technology, or modifying an existing test, appropriate clinical trials and extensive laboratory validations, consistent with the various regulations that govern our industry, must be performed.  These costs are classified as research and development for all periods presented.  For the three months ended June 30, 2014, research and development expenses increased from the comparable 2013 period due primarily to increased headcount and increased new test development activities.  For the six months ended June 30, 2014, research and development expenses nearly matched the prior period amounts as new test development activities primarily in the second quarter of 2014 were nearly equivalent to the microarray platform change efforts that were incurred mostly in the first quarter of 2013 but not repeated in the first quarter of 2014.

Sales and Marketing.  These expenses include salaries and wages associated with our sales force and marketing resources, sales commissions and other expenses associated with promotional and advertising efforts as well as non-cash stock compensation expenses.  For the three and six months ended June 30, 2014, sales and marketing expenses increased from the comparable 2013 periods due primarily to increased headcount in sales representatives as well as increased marketing and promotional related activities.  For the three and six months ended June 30, 2014 and 2013, non-cash stock compensation expenses were not significant.

General and Administrative.  These expenses include compensation and benefit costs of our administrative staff, client billing and collections, information technology, executive management, human resources and accounting personnel, as well as facilities-related costs, insurance, legal, audit and other professional services.    For the three and six months ended June 30, 2014, general and administrative expenses increased from the comparable 2013 periods due primarily to increased litigation expense, where we incurred $860,000 and $1.3 million, respectively, of litigation-related costs and expenses compared to only $66,000 and $92,000 in the comparable 2013 periods, respectively.  Also included in general and administrative expenses are non-cash stock-based compensation expenses, which were $165,000, $227,000, $103,000 and $171,000 for the three and six months ended June 30, 2014 and 2013, respectively.  Changes to stock-based compensation expenses are driven by timing of when option awards are granted compared to when older awards become fully vested or expire due to forfeitures, as well as by the valuations attributed to individual awards at the time they are granted.  See Note 2 to our consolidated interim financial statements included elsewhere in this report for a detailed description of the amounts of non-cash stock compensation expense recognized for the periods presented.

Other Non-Operating Items (dollars in thousands):

	Three Months Ended										Six Months Ended
	June 30,						Change				June 30,						Change
	2014			2013			$			%	2014			2013			$			%
Interest expense	$	(22	)	$	(19	)	$	(3	)	(16)%	$	(38	)	$	(321	)	$	283		88%
Warrant derivative gains	152			1,045			(893		)	—	152			2,244			(2,092		)	—

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Interest Expense.  Historically, interest expense was entirely comprised of interest charges associated with certain capital leases for laboratory equipment, which were $22,000, $38,000, $19,000 and $41,000 for the three and six months ended June 30, 2014 and 2013, respectively.  For the six month period ended June 30, 2013, $280,000 of interest expense recognized was related to the amortization of offering-related costs incurred during the fourth quarter of 2012.  These costs were being amortized over the Series A Warrant exercise restriction period of six months from issuance, but due to a modification on February 22, 2013 to the Series A Warrants resulting in immediate exercisability, all of the unamortized offering related costs as of December 31, 2012 were charged to interest expense during the first quarter of 2013.

Warrant Derivatives Gains.  We account for stock purchase warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreements.  Under applicable accounting guidance, stock warrants must be accounted for as derivative financial instruments if the warrants contain full-ratchet anti-dilution provisions, which preclude the warrants from being considered indexed to our own stock.  Prior to June 2014, the Series A Warrants issued to Series A Investors contained such provisions, thus requiring us to treat them as derivative financial instruments, to be recorded at fair value at issuance and subsequently adjusted to fair value at each reporting date, with the corresponding adjustment reflected as a non-operating gain or charge in the consolidated statement of operations.  We valued the Series A Warrants using the Monte-Carlo simulation method using the following assumptions immediately prior to the Modification:  (i) closing stock price and Series A Warrant contractual exercise price; (ii) term to expiration commensurate with the individual Series A Warrant terms of 3.8 years; (iii) historical volatilities commensurate with the term of the Series A Warrants of 129.6%; (iv) risk-free interest rates commensurate with the term of the Series A Warrants of 1.2%; and (v) simulated anti-dilution impact assuming various probabilities that we will raise additional capital by issuing equity securities at prices above or below the current contractual Series A Warrant exercise prices during the Series A Warrant terms.  The result of this valuation simulation was to value the remaining Series A Warrants held by Series A Investors at $281,000 as of the Modification date.  As a result, warrant derivative gains of $152,000 were recognized, and the remaining $281,000 was reclassified to additional paid-in capital.  As a result of a similar valuation analysis performed during the first quarter ended March 31, 2014, the combined warrant derivative gains recognized in our consolidated statements of operations and the amount of warrant derivative liabilities reclassified to stockholders’ equity resulting from Series A Warrant exercises for the six months ended June 30, 2014 was $152,000 and $416,000, respectively.  The additional Series A Warrants to purchase 25,303 shares of common stock issued to the Series A Investors as consideration for agreeing to the Modification were valued using the Black-Scholes valuation model, using the following assumptions as of the Modification:  (i) closing stock price and Series A Warrant contractual exercise price; (ii) term to expiration commensurate with the individual Series A Warrant terms of 3.8 years; (iii) historical volatility commensurate with the term of the Series A Warrants of 129.6%; and (iv) risk-free interest rates commensurate with the term of the Series A Warrants of 1.2%.  The resulting valuation of $44,000 was recognized as a non-operating charge in our consolidated statements of operations for the three and six months ended June 30, 2014.

We valued the Series A Warrants using the Monte-Carlo simulation method using the following assumptions at June 30, 2013:  (i) closing stock price and Series A Warrant contractual exercise price; (ii) term to expiration commensurate with the remaining Series A Warrant terms of 4.7 years; (iii) historical volatilities commensurate with the term of the remaining Series A Warrants of 120.5%; (iv) risk-free interest rates commensurate with the term of the remaining Series A Warrants of 1.3%; and (v) simulated anti-dilution impact assuming various probabilities that we will raise additional capital by issuing equity securities at prices above or below the current contractual Series A Warrant exercise price during the Series A Warrant terms.  The result of these valuation simulations was to value the remaining Series A Warrants at $1.2 million, which was $1.4 million below their carrying value as of March 31, 2013.  As a result, we recognized a $1.0 million non-operating, warrant derivative gain in our consolidated statement of operations for the three months ended June 30, 2013, whereas warrant derivative liabilities from Series A Warrant exercises in the amount of $392,000 were reclassified to stockholders’ equity.  As a result of a similar valuation analysis performed during the first quarter ended March 31, 2013, the combined warrant derivative gains recognized in our consolidated statements of operations and the amount of warrant derivative liabilities reclassified to stockholders’ equity resulting from Series A Warrant exercises for the six months ended June 30, 2013 was $2.2 million and $1.0 million, respectively.

Inflation

Inflation has not had a significant impact on our business, results of operations or financial condition.

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Liquidity and Capital Resources

At June 30, 2014, cash and cash equivalents totaled $10.1 million, compared to $14.0 million at December 31, 2013.  Cash is held primarily in general checking accounts as well as in money market mutual funds backed by U.S. government securities.  Short-term investments are comprised primarily of certificates of deposits and fixed income securities issued by U.S. financial institutions.  Working capital was $10.5 million and $13.9 million at June 30, 2014 and December 31, 2013, respectively.  The primary reason for the decrease in working capital was lower cash balances at June 30, 2014 compared to December 31, 2013, driven by operating, investing and financing activities described below:

	Six Months Ended
	June 30,
	2014			2013			Change
Net cash provided by (used in):
Operating activities	$	(4,046	)	$	(2,816	)	$	(1,230	)
Investing activities	(5,195		)	(80		)	(5,115		)
Financing activities	285			6,248			(5,963		)
(Decrease) Increase in cash and cash equivalents	$	(8,956	)	$	3,352		$	(12,308	)

Operating Activities.  The increase in net cash flows used in operating activities resulted primarily from higher operating expenses driven by higher litigation and sales and marketing expenses described above, partially offset by higher cash reimbursement from customers in 2014 compared to 2013.

Investing Activities.  The increase in net cash flows used in investing activities was due primarily to additional purchases of short-term investments made during the six months ended June 30, 2014, whereas we did not hold short-term investments nor purchase or sell short-term investments during the comparable period in 2013.

Financing Activities.  The decrease in net cash flows from financing activities was due primarily to the $4.1 million of net proceeds received from the Series B and C Financing coupled with $2.4 million in proceeds from the exercise of certain Series A Warrants during the first six months of 2013, whereas there were no capital raises during the first six months of 2014.  During 2014, we entered into a secured promissory note for gross proceeds of $350,000 with an accredited investor, to be paid back over a three-year term.  Also, proceeds from Series A Warrant exercises during the six months ended June 30, 2014 were nearly offset by Series D offering related costs that were paid during the first half of 2014.

Future Liquidity.  We have a history of incurring net losses and net operating cash flow deficits.  We are also deploying new technologies and continue to develop commercial technologies and services.  We believe that our cash and cash equivalent balances as of June 30, 2014 will be sufficient to meet our expected cash requirements for current operations for at least the next twelve months.  In order for us to ultimately achieve profitability, we may be required to obtain capital from external sources, increase revenues and reduce operating costs.  However, there can be no assurance that our operations will become profitable or that external sources of financing, including the issuance of debt and/or equity securities, will be available at times and at terms acceptable to us, or at all.  The issuance of additional equity or convertible debt securities will also cause dilution to our stockholders.  If external financing sources are not available or are inadequate to fund our operations, we will be required to reduce operating costs, including research projects and personnel, which could jeopardize our future strategic initiatives and business plans.  See Note 1 to the consolidated financial statements included elsewhere in this report for additional discussion of these matters.

Capital Requirements.  We may also encounter unforeseen difficulties that may deplete our capital resources more rapidly than anticipated.  As a result, we may be required to seek additional funding through equity, debt or other external financing, and there can be no assurance that additional funding will be available on favorable terms, in a timely fashion or at all.  At this time, we have no significant commitments for capital expenditures in 2014 or beyond.  However, our long-term capital requirements could be substantial and the adequacy of available funds will depend upon many factors, including:

·the costs of commercialization activities, including sales and marketing costs and capital equipment;

·competing technological developments;

·the creation and formation of strategic partnerships;

·the costs associated with leasing and improving our Irvine, California facility; and

·other factors that may not be within our control.

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Off-Balance Sheet Arrangements

As of June 30, 2014, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC.  Our existing operating lease for laboratory space and corporate offices, totaling approximately 12,200 square feet, expires in January of 2015.  We have no significant commitments for capital expenditures for the remainder of 2014 or beyond.  Also as of June 30, 2014, we had thirteen active capital leases totaling $503,000 for certain laboratory and IT-related equipment, with lease payments continuing through 2019.

Recent Accounting Pronouncements

See Note 2 to the consolidated interim financial statements located elsewhere in this report for a discussion on recent accounting pronouncements.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

Item 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Based on this evaluation, our principal executive officer and our principal financial officer concluded that as of June 30, 2014, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods prescribed by the SEC and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our last fiscal quarter (the quarter ended June 30, 2014) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

On February 14, 2011, Relator Michael Strathmann (“Strathmann”) served us with a complaint (“the Complaint”) filed in the Superior Court of the State of California for the County of Orange.  The Complaint alleges we and our former parent Acacia Research Corporation submitted false and fraudulent insurance claims to National Union Fire Insurance Company under the Directors and Officers Policy issued to Acacia, in connection with a prior lawsuit that was settled with Nanogen, Inc., thereby allegedly violating the California Insurance Fraud Prevention Act, and seeks penalties and unspecified treble damages.  On May 4, 2011, the Superior Court dismissed the Complaint by ordering that it be stricken for violation of the California Anti-SLAPP statute, which prevents plaintiffs from filing abusive lawsuits against public policy.  On June 15, 2011, Strathmann filed a Notice of Appeal with the California Court of Appeals, appealing the granting of the Motion to Strike.  On October 24, 2012, the California Court of Appeals reversed the Superior Court’s dismissal, finding that the anti-SLAPP statute was not applicable and remanding the case to the Superior Court.  Strathmann filed an Amended Complaint, and we and Acacia filed our Answer to that pleading.  Discovery has commenced and concluded.  We and Acacia filed a motion for summary judgment to dismiss many, if not all, of the claims on the grounds of, among other things, lack of merit, inapplicability of the Insurance Fraud Prevention Act to tenders of defense under third party policies, statute of limitations, jurisdiction and standing.  On April 30, 2014, the court denied the motion, finding there were certain “triable issues of fact.”  As a result, trial before the court commenced on June 9, 2014 and has continued through the date of this filing, though the trial is expected to conclude later in August.  We continue to vigorously pursue the full defenses of this matter.  Nevertheless, there can be no assurance we will be ultimately successful.

From time to time, we are involved in other litigation arising in the normal course of business.  Management believes that resolution of these other matters will not result in any payment that, in the aggregate, would be material to our financial position or results of operations.

Item 1A.  RISK FACTORS

The following risk factors include any and all material changes to, and should be read in conjunction with, the risk factors contained in Part 1, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the SEC on March 24, 2014.

A supply interruption in the components and raw materials we use in providing our testing services would have a material adverse effect on our business, financial condition and results of operations.

Substantially all of the components and raw materials used in providing our testing services, including array slides and reagents, are currently provided to us from a limited number of sources or in some cases from a single source.  Any supply interruption in a sole-sourced component or raw material might result in up to a several-month production delay and materially harm our ability to provide testing services until a new source of supply, if any, could be located and qualified.

Exposure to possible litigation and legal liability may materially adversely affect our business, financial condition and results of operations.

On February 14, 2011, Relator Michael Strathmann (“Strathmann”) served us with a complaint (“the Complaint”) filed in the Superior Court of the State of California for the County of Orange.  The Complaint alleges we and our former parent Acacia Research Corporation submitted false and fraudulent insurance claims to National Union Fire Insurance Company under the Directors and Officers Policy issued to Acacia, in connection with a prior lawsuit that was settled with Nanogen, Inc., thereby allegedly violating the California Insurance Fraud Prevention Act, and seeks penalties and unspecified treble damages.  On May 4, 2011, the Superior Court dismissed the Complaint by ordering that it be stricken for violation of the California Anti-SLAPP statute, which prevents plaintiffs from filing abusive lawsuits against public policy.  On June 15, 2011, Strathmann filed a Notice of Appeal with the California Court of Appeals, appealing the granting of the Motion to Strike.  On October 24, 2012, the California Court of Appeals reversed the Superior Court’s dismissal, finding that the anti-SLAPP statute was not applicable and remanding the case to the Superior Court.  Strathmann filed an Amended Complaint, and we and Acacia filed our Answer to that pleading.  Discovery has commenced and concluded.  We and Acacia filed a motion for summary judgment to dismiss many, if not all, of the claims on the grounds of, among other things, lack of merit, inapplicability of the Insurance Fraud Prevention Act to tenders of defense under third party policies, statute of limitations, jurisdiction and standing.  On April 30, 2014, the court denied the motion, finding there were certain “triable issues of fact.”  As a result, trial before the court commenced on June 9, 2014 and has continued through the date of this filing, though the trial is expected to conclude later in August.  We continue to vigorously pursue the full defenses of this matter.  Nevertheless, there can be no assurance we will be ultimately successful.  The cost of defending this lawsuit alone could have a material adverse effect on our financial condition and results of operations.

25

Our stock price could decline because of the potentially dilutive effect of future financings, warrant anti-dilution provisions or exercises of warrants and common stock options.

Assuming exercise in full of all options and warrants outstanding as of June 30, 2014 (not taking into account any price based or anti-dilution adjustments), approximately 19.6 million shares of our common stock would be outstanding. Any additional equity or convertible debt financings in the future could result in further dilution to our stockholders.

Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

As previously reported, on June 4, 2014, we entered into a Modification to our Series A Warrants with Series A Investors and, in consideration of such Modification, we issued additional warrants to Series A Investors to purchase up to an aggregate of 25,303 shares of our common stock.  On June 13, 2014, in consideration of such Modification, we issued additional warrants to another Series A Investor to purchase up to an aggregate of 90 shares of our common stock, which warrants contain the same terms as the Series A Warrants, as amended by the Modification, including having an exercise price per share of $2.06 and an expiration date of April 1, 2018, but are not subject to any registration rights.  The above-described issuance has been determined to be exempt from registration under the Securities Act of 1933 in reliance on Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder, as a transaction by an issuer not involving a public offering, in which the investor is accredited and has acquired the securities for investment purposes only and not with a view to or for sale in connection with any distribution thereof.

Item 3.  DEFAULTS UPON SENIOR SECURITIES

None.

Item 4.  MINE SAFETY DISCLOSURES

Not applicable.

Item 5.  OTHER INFORMATION

As previously reported, our stockholders approved the amendment and restatement of our 2006 Stock Incentive Plan to increase the number of shares of common stock available for grant thereunder by 848,154 shares, from 1,151,846 shares to 2,000,000 shares, and to effect various other improvements thereunder, including the removal of the annual “evergreen” reserve increase feature.

Item 6.  EXHIBITS

An index of exhibits is found on page 28 of this report.

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SIGNATURES

Pursuant to the requirements 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.

COMBIMATRIX CORPORATION
By:	/s/ MARK MCDONOUGH
	Mark McDonough
	Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ SCOTT R. BURELL
	Scott R. Burell
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

Date:   August 11, 2014

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EXHIBIT INDEX

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 (SEC File No. 333-139679) filed with the SEC on December 26, 2006.
3.2	Certificate of Amendment to Amended and Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1A to the Company’s Quarterly Report on Form 10-Q (File No. 001-33523) filed with the SEC on August 14, 2008.
3.3	Certificate of Amendment to Amended and Restated Certificate of Incorporation. Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-33523) filed with the SEC on December 4, 2012.
3.4	Certificate of Designation of Preferences, Rights and Limitations of Series A 6% Convertible Preferred Stock. Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-33523) filed with the SEC on October 1, 2012.
3.5	Certificate of Designation of Preferences, Rights and Limitations of Series B 6% Convertible Preferred Stock. Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-33523) filed with the SEC on March 20, 2013.
3.6	Certificate of Designation of Preferences, Rights and Limitations of Series C 6% Convertible Preferred Stock. Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 001-33523) filed with the SEC on May 6, 2013.
3.7	Certificate of Designation of Preferences, Rights and Limitations of Series D Convertible Preferred Stock. Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-33523) filed with the SEC on December 23, 2013.
3.8	Second Amended and Restated Bylaws. Incorporated by reference to Exhibit 3.2 to the Company’s Annual Report on Form 10-K (File No. 001-33523) filed with the SEC on March 18, 2010.
10.1	2006 Stock Incentive Plan, as amended. Incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8 (File No. 333-197322) filed with the SEC on July 9, 2014.
10.2	Form of June 2014 Amendment No. 2 to Common Stock Purchase Warrant. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-33523) filed with the SEC on June 10, 2014.
10.3	Form of Additional Common Stock Purchase Warrant issued June 2014. Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-33523) filed with the SEC on June 10, 2014.
31.1	Certification of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (*).
31.2	Certification of Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 (*).
32.1	Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2	Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.0	The following materials from CombiMatrix Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013; (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013; (iii) Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2014 and 2013; (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013; and (v) Notes to Consolidated Financial Statements.

(*)       Included herewith.

28

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark McDonough, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of CombiMatrix Corporation;

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 controls over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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 subsidiaries, 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 such 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 functions):

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.

Date: August 11, 2014	/s/ MARK MCDONOUGH
	Mark McDonough Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Scott R. Burell, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of CombiMatrix Corporation;

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 controls over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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 subsidiaries, 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 such 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 functions):

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.

Date: August 11, 2014	/s/ SCOTT R. BURELL
	Scott R. Burell Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of CombiMatrix Corporation (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2014, as filed with the Securities and Exchange Commission (the “Report”), I, Mark McDonough, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:

/s/ MARK MCDONOUGH

Mark McDonough

Chief Executive Officer

(Principal Executive Officer)

August 11, 2014

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies this report and is being furnished pursuant to Item 601(b)(32) of Regulation S-K promulgated under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This certification shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed “filed” by the Registrant for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, or incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference into such a filing.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of CombiMatrix Corporation (the “Company”) on Form 10-Q for the quarterly period ended June 30, 2014, as filed with the Securities and Exchange Commission (the “Report”), I, Scott R. Burell, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:

/s/ SCOTT R. BURELL

Scott R. Burell

Chief Financial Officer

(Principal Financial and Accounting Officer)

August 11, 2014

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies this report and is being furnished pursuant to Item 601(b)(32) of Regulation S-K promulgated under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This certification shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed “filed” by the Registrant for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, or incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference into such a filing.

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Note 4 - Fair Value Measurements (Details) - Financial Assets Measured on Recurring Basis (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Assets:
Cash equivalents	$ 2,224	$ 8,263
Short-term investments	6,765	1,747
Cash equivalents and Short-term investments	8,989	10,010
Liabilities:
Derivative warrant liability		568
Fair Value, Inputs, Level 1 [Member]
Assets:
Cash equivalents	2,224	7,264
Short-term investments	2,539
Cash equivalents and Short-term investments	4,763	7,264
Fair Value, Inputs, Level 2 [Member]
Assets:
Cash equivalents		999
Short-term investments	4,226	1,747
Cash equivalents and Short-term investments	4,226	2,746
Fair Value, Inputs, Level 3 [Member]
Liabilities:
Derivative warrant liability		$ 568

XML

Note 3 - Cash and Short-Term Investments

6 Months Ended

Jun. 30, 2014

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents Disclosure [Text Block]

3. CASH AND SHORT-TERM INVESTMENTS

As of June 30, 2014, we held $10.1 million in cash, cash equivalents and short-term investments, which are reported at fair value. Cash, cash equivalents and short-term investments consisted of the following as of June 30, 2014 and December 31, 2013 (in thousands):

	As of June 30, 2014									As of December 31, 2013
			Unrealized					Fair				Unrealized					Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
Cash and money market securities	$	3,333	$	-	$	-		$	3,333	$	11,290	$	-	$	-		$	11,290
Government bonds		751		-		-			751		-		-		-			-
Corporate bonds		1,788		-		-			1,788		-		-		-			-
Certificates of deposit		4,230		-		(4	)		4,226		2,750		-		(4	)		2,746
	$	10,102	$	-	$	(4	)	$	10,098	$	14,040	$	-	$	(4	)	$	14,036
Included in cash and cash equivalents	$	3,333	$	-	$	-		$	3,333	$	12,290	$	-	$	(1	)	$	12,289
Included in short-term investments		6,769		-		(4	)		6,765		1,750		-		(3	)		1,747
	$	10,102	$	-	$	(4	)	$	10,098	$	14,040	$	-	$	(4	)	$	14,036

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Note 6 - Stockholders' Equity (Details) - Outstanding Warrants (USD $)	Jun. 30, 2014	Dec. 31, 2013	Dec. 31, 2012
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding	7,412,372	7,623,677
Exercise Price (in Dollars per share)			$ 9.50
Liability-classified Warrants [Member]
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding		292,817
Exercise Price (in Dollars per share)	$ 2.06
December 2013 [Member]
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding	5,825,243	5,825,243
Exercise Price (in Dollars per share)	$ 3.55
June 2013 [Member]
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding	491,803	491,803
Exercise Price (in Dollars per share)	$ 3.55
May 2013 [Member]
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding	491,803	491,803
Exercise Price (in Dollars per share)	$ 3.77
March 2013 [Member]
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding	275,000	275,000
Exercise Price (in Dollars per share)	$ 3.49
October 2012 [Member]
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding	194,009
Exercise Price (in Dollars per share)	$ 2.06
April 2011 [Member]
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding	131,047	131,047
Exercise Price (in Dollars per share)	$ 21.40
October 2009 [Member]
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding	3,000	3,000
Exercise Price (in Dollars per share)	$ 77.80
May 2009 [Member]
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding	467	2,967
May 2009 [Member] | Minimum [Member]
Class of Warrant or Right [Line Items]
Exercise Price (in Dollars per share)	$ 75.00
May 2009 [Member] | Maximum [Member]
Class of Warrant or Right [Line Items]
Exercise Price (in Dollars per share)	$ 90.00
May 2009 II [Member]
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding		109,997
Exercise Price (in Dollars per share)	$ 90.00
Equity-classified Warrants [Member]
Class of Warrant or Right [Line Items]
Shares of Common Stock Issuable From Warrants Outstanding	7,412,372	7,330,860

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Note 6 - Stockholders' Equity (Details) (USD $)	1 Months Ended	3 Months Ended		6 Months Ended				3 Months Ended	6 Months Ended				3 Months Ended	1 Months Ended	3 Months Ended	0 Months Ended	1 Months Ended	6 Months Ended		1 Months Ended		3 Months Ended	12 Months Ended		1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended		6 Months Ended			1 Months Ended					6 Months Ended	1 Months Ended
	Mar. 19, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2012 Series A Convertible Preferred Stock [Member] Series A Warrants [Member]	Jun. 30, 2014 Series A Convertible Preferred Stock [Member]	Jun. 30, 2013 Series A Convertible Preferred Stock [Member]	Mar. 31, 2013 Series A Convertible Preferred Stock [Member]	Jun. 30, 2014 Series A Preferred Stock [Member]	Mar. 19, 2013 Series B Purchase Agreement [Member]	Mar. 19, 2013 Series B Convertible Preferred Stock [Member]	Mar. 19, 2013 Series B Convertible Preferred Stock [Member]	May 03, 2013 Series C Convertible Preferred Stock [Member]	Jun. 28, 2013 Series C Convertible Preferred Stock [Member]	Dec. 31, 2013 Series C Convertible Preferred Stock [Member]	Jun. 30, 2013 Series C Convertible Preferred Stock [Member]	Dec. 31, 2013 Series D Convertible Preferred Stock [Member] Net of Offering Costs [Member]	Dec. 31, 2013 Series D Convertible Preferred Stock [Member]	Mar. 31, 2014 Series D Convertible Preferred Stock [Member]	Dec. 31, 2013 Series D Convertible Preferred Stock [Member]	Mar. 31, 2014 Series A Warrants [Member] Before Adjustment [Member]	Jun. 30, 2014 Series A Warrants [Member]	Jun. 30, 2014 Series A Warrants [Member]	Jun. 30, 2013 Series A Warrants [Member]	Jun. 30, 2014 Series A Warrants [Member]	Jun. 30, 2013 Series A Warrants [Member]	Dec. 31, 2013 Series A Warrants [Member]	Mar. 31, 2014 Series A Warrants [Member]	Jun. 30, 2014 Series A Warrants [Member] Minimum [Member]	Jun. 30, 2013 Series A Warrants [Member] Minimum [Member]	Mar. 19, 2013 Series B Warrants [Member] Fixed Combination [Member]	Mar. 19, 2013 Series B Warrants [Member]	Mar. 19, 2013 Series B Warrants [Member] Maximum [Member]	Jun. 28, 2013 Series C Warrant [Member]	May 03, 2013 Series C Warrant [Member]	Dec. 31, 2013 Series D Warrant [Member]	Jun. 30, 2013 Amortization of Deferred Offering Costs [Member]	Dec. 31, 2013 Net [Member]
Note 6 - Stockholders' Equity (Details) [Line Items]
Proceeds from Issuance of Preferred Stock, Preference Stock, and Warrants (in Dollars)								$ 2,500,000
Conversion of Stock, Shares Converted											1,250,000							2,400			9,799.3
Stock Issued During Period, Shares, Warrant Exercised																												124,111		1,200,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights																					485.4369		485.4369		25,303	25,303		25,303		292,817	81,910			171	275,000		491,803	491,803
Proceeds from Warrant Exercises (in Dollars)				256,000	2,399,000																							256,000
Preferred Stock, Dividend Rate, Percentage									6.00%					6.00%	6.00%	6.00%
Make Whole Payment, Per Share (in Dollars per share)		$ 118		$ 118
Preferred Stock, Stated Value (in Dollars per share)												$ 1,000
Stock Issued During Period, Shares, Conversion of Convertible Securities	528,000									822,421
Stock Dividends, Shares										50,307
Dividends, Preferred Stock (in Dollars)										246,000
Share Price (in Dollars per share)																$ 1,000	$ 1,000																$ 4.91	$ 1,000
Warrants Issued																									25,303
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)							$ 9.50														$ 3.12		$ 3.12	$ 2.86	$ 2.06	$ 2.06		$ 2.06			$ 2.06			$ 3.05	$ 3.49		$ 3.55	$ 3.77
Fair Value Assumptions, Expected Term																													4 years 255 days			3 years 292 days
Fair Value Assumptions, Expected Volatility Rate																												129.60%	120.50%
Fair Value Assumptions, Risk Free Interest Rate																												1.20%	1.30%
Warrants and Rights Outstanding (in Dollars)						568,000																			281,000	281,000	1,200,000	281,000	1,200,000
Derivative, Gain on Derivative (in Dollars)																										152,000	1,000,000	152,000	2,200,000
Warrant Liability Reclassified to Stockholders Equity (in Dollars)				416,000	1,030,000																					281,000	392,000	416,000	1,000,000
Fair Value Adjustment of Warrants (in Dollars)		44,000		44,000																							1,400,000
Interest Expense (in Dollars)		22,000	19,000	38,000	321,000																																			280,000
Stock Issued During Period, Shares, New Issues													130,000		1,610.4	1,200	1,200						12,000
Sale of Stock, Price Per Share (in Dollars per share)														$ 3.05	$ 3.05						$ 1,000		$ 1,000
Proceeds from Issuance of Convertible Preferred Stock (in Dollars)														1,800,000			2,200,000		2,314,000	10,700,000																					12,000,000
Debt Instrument, Convertible, Beneficial Conversion Feature (in Dollars)														$ 417,000			$ 1,200,000
Warrants, Term																					5 years														5 years
Warrant Agreement, Percentage of Warrants Outstanding Threshold																																				7.50%	7.50%
Convertible Preferred Stock, Conversion Price (in Dollars per share)																	$ 2.85759
Convertible Preferred Stock, Shares Issued upon Conversion																	839,870				5,825,243		5,825,243																5,825,243
Fair Value Inputs, Discount Rate																	20.00%
Conversion of Stock, Shares Issued																		839,864			4,756,946	1,068,297
Debt Instrument, Convertible, Conversion Price (in Dollars per share)																					$ 2.06		$ 2.06

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Note 7 - Commitments and Contingencies (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Commitments and Contingencies Disclosure [Abstract]
Litigation Settlement Percentage	12.50%		12.50%
Maximum Annual Litigation Payment	$ 1,500,000		$ 1,500,000
Minimum Quarterly Litigation Payment	25,000		25,000
Royalty Expense	$ 25,000	$ 25,000	$ 50,000	$ 50,000

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Note 2 - Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Principles of Consolidation. The accompanying consolidated financial statements include the accounts of the Company and our wholly owned and majority-owned subsidiaries. Investments for which we possess the power to direct or cause the direction of the management and policies, either through majority ownership or other means, are accounted for under the consolidation method. Material intercompany transactions and balances have been eliminated in consolidation. Investments in companies in which we maintain an ownership interest of 20% to 50% or exercise significant influence over operating and financial policies are accounted for under the equity method. The cost method is used where we maintain ownership interests of less than 20% and do not exercise significant influence over the investee.

Revenue Recognition. We recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been performed, (iii) amounts are fixed or determinable and (iv) collectability of amounts is reasonably assured.

Service revenues from providing diagnostic tests are recognized when the testing process is complete and test results are reported to the ordering physician or clinic. These diagnostic services are billed to various payors, including commercial insurance companies, healthcare institutions, government payors including Medicare and Medicaid, and individuals. We report revenues from contracted payors based on a contractual rate, or in the case of Medicare and Medicaid, published fee schedules for our tests. We report revenues from non-contracted payors based on the amounts expected to be collected. The differences between the amounts billed and the amounts expected to be collected from non-contracted payors are recorded as contractual allowances to arrive at net recognized revenues. The expected revenues from non-contracted payors are based on the historical collection experience of each payor or payor group, as appropriate. In each reporting period, we review our historical collection experience for non-contracted payors and adjust our expected revenues for current and subsequent periods accordingly. We also recognize additional revenue from actual cash payments that exceed amounts initially recognized, in the period the payments are received. For the three and six months ended June 30, 2014 and 2013, net positive revenue adjustments were $121,000, $265,000, $67,000 and $268,000, respectively. Because a substantial portion of our revenues is from non-contracted third-party payors, it is likely that we will be required to make adjustments to accounting estimates with respect to contractual allowances in the future, which may positively or adversely affect our results of operations. In all cases described above, we report revenues net of any applicable statutory taxes collected from customers, as applicable.

Clinical trials support services revenue is recognized when the related support services have been delivered to and accepted by the customer. Royalty revenue is recognized in the period when earned.

Cash Equivalents and Short-Term Investments. We consider all highly liquid investments purchased with original maturities of three months or less when purchased to be cash equivalents. Short-term investments consist of fixed income investments with maturities between three and 12 months and other highly liquid investments that can be readily purchased or sold using established markets. These investments are classified as available-for-sale and are reported at fair value on the Company’s consolidated balance sheet. Unrealized holding gains and losses are reported within comprehensive loss in the consolidated statement of comprehensive loss. Fair value is based on available market information including quoted market prices, broker or dealer quotations or other observable inputs. If a decline in the fair value of a short-term investment below our cost basis is determined to be other than temporary, such investment is written down to its estimated fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge. To-date, no permanent impairment charges have been realized or recorded.

Fair Value Measurements. We measure fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. We utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

●     Level 1:     Observable market inputs such as quoted prices in active markets;

●     Level 2:      Observable market inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

●     Level 3:     Unobservable inputs where there is little or no market data, which require the reporting entity to develop its own assumptions.

We classify our cash equivalents within the fair value hierarchy as Level 1 as these assets are valued using quoted prices in active markets for identical assets at the measurement date. We classify short-term investments within the fair value hierarchy as Level 2, primarily utilizing broker quotes in a non-active market for valuation of these investments. Financial instruments that contain valuation inputs that are not readily determinable from active markets or from similar securities trading in active markets, such as derivative financial instruments, are classified within the fair value hierarchy as Level 3.

Derivative Financial Instruments. We evaluate financial instruments for freestanding or embedded derivatives. Derivative instruments that do not qualify for permanent equity classification are recorded as liabilities at fair value, with changes in value recognized as other income (expense) in the consolidated statements of operations in the period of change. Derivative liabilities are categorized as either short-term or long-term based upon management’s estimates as to when the derivative instrument may be realized or based upon the holder’s ability to realize the instrument.

Concentration of Credit Risks. Cash and cash equivalents are invested in deposits with certain financial institutions and may, at times, exceed federally insured limits. We have not experienced any significant losses on our deposits of cash and cash equivalents. We do not believe that we are exposed to significant credit risk on cash and cash equivalents or on our short-term investments. Accounts receivable from two separate commercial insurance carriers of $355,000 and $224,000, respectively, each exceeded 10% of our total accounts receivable balance as of June 30, 2014.

Substantially all of the components and raw materials used in providing our testing services, including array slides and reagents, are currently provided to us from a limited number of sources or in some cases from a single source. Although we believe that alternative sources for those components and raw materials are available, any supply interruption in a sole-sourced component or raw material might result in up to a several-month production delay and materially harm our ability to provide testing services until a new source of supply, if any, could be located and qualified.

Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable are stated at principal amounts and are primarily comprised of amounts contractually due from customers for services performed. An allowance for doubtful accounts is recorded for estimated uncollectible amounts due from various payor groups such as commercial insurance companies, healthcare institutions, government payors and individuals. The process for estimating the allowance for doubtful accounts involves significant assumptions and judgments. Specifically, the allowance for doubtful accounts is adjusted periodically and is principally based upon specific identification of past due or disputed accounts. We also review the age of receivables by payor class to assess our allowance at each period end. The payment realization cycle for certain governmental and commercial insurance payors can be lengthy, involving denial, appeal and adjudication processes, and is subject to periodic adjustments that may be significant. Accounts receivable are periodically written off when identified as uncollectible and deducted from the allowance for doubtful accounts after appropriate collection efforts have been exhausted. Additions to the allowance for doubtful accounts are charged to bad debt expense as a component of general and administrative expenses in the consolidated statements of operations. Collection of governmental, private health insurer, and client receivables are generally a function of providing complete and correct billing information to the insurers and clients within the filing deadlines required by each payor. Collection of receivables due from patients and clients is generally subject to increased credit risk due to credit-worthiness or inability to pay.

Stock-Based Compensation. The compensation cost for all employee stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense, on a straight-line basis, over the employee’s requisite service period (generally the vesting period of the equity award) which is generally four years. The fair value of each stock option award is estimated on the date of grant using a Black-Scholes option valuation model. The fair value of each restricted stock unit (“RSU”) award is based on the number of shares granted and the quoted price of our common stock on the date of grant. Stock-based compensation expense is recognized only for those awards that are expected to vest using an estimated forfeiture rate. We estimate pre-vesting option forfeitures at the time of grant and reflect the impact of estimated pre-vesting option forfeitures in compensation expense recognized. Stock-based compensation expense for all periods presented attributable to our functional expense categories from stock option and RSU awards vesting during the periods presented were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Cost of services	$	5	$	2	$	9	$	3
Research and development		-		-		-		-
Sales and marketing		19		2		30		5
General and administrative		165		103		227		171
Total non-cash stock compensation	$	189	$	107	$	266	$	179

Net Loss Per Share. Basic and diluted net loss per share has been computed by dividing the net loss by the weighted average number of common shares issued and outstanding during the periods presented. Options and warrants to purchase common stock as well as preferred stock convertible into shares of common stock are anti-dilutive and therefore are not included in the determination of the diluted net loss per share. The following table reflects the excluded dilutive securities:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Common stock options		695,989		625,769		695,989		625,769
Restricted stock units		380,220		-		380,220		-
Common stock warrants		7,412,372		2,010,222		7,412,372		2,010,222
Series B preferred stock convertible into common stock		-		117,232		-		117,232
Series C preferred stock convertible into common stock		-		839,870		-		839,870
Excluded potentially dilutive securities		8,488,581		3,593,093		8,488,581		3,593,093

Segments. We have determined that we operate in one segment for financial reporting purposes.

Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance regarding revenue recognition, which when effective will supersede existing revenue recognition requirements and will eliminate most industry-specific guidance from generally accepted accounting principles. The core principle of the new guidance is to require an entity to recognize as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods or services as it transfers control to its customers. The new guidance requires additional disclosures including those that are qualitative and quantitative disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. An entity can apply the new guidance retrospectively to each prior reporting period presented (i.e., the full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings. The new guidance becomes effective and will be adopted in the first quarter of fiscal year 2017 with early adoption not permitted. We are currently evaluating the appropriate transition method and any further impact of this guidance on our consolidated financial statements and related disclosures.

In April 2014, the FASB amended guidance to clarify the accounting for disposals of groups of assets and business units. The amendments alter the definition of a discontinued operation to cover only asset disposals that are a strategic shift with a major effect on an entity's operations and finances. The changes should be applied in fiscal years that start on December 15, 2014, or later, but the changes can be applied ahead of the effective date for asset disposals that have not been reported in a set of financial statements. We do not believe adoption of this guidance will have a material impact on our consolidated financial statements or related disclosures.

In July 2013, the FASB issued guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Under this guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit that exists at the reporting date, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if certain criteria are met. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013 with early adoption permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements or related disclosures.

In February 2013, the FASB amended its guidance to require an entity to present the effect of certain significant reclassifications out of accumulated other comprehensive income or loss on the respective line items in net income or loss. The new accounting guidance does not change the items that must be reported in other comprehensive income or loss or when an item of other comprehensive income or loss must be reclassified to net income or loss. The guidance is effective prospectively for fiscal years beginning after December 15, 2012 and we were required to adopt these new provisions during the first quarter of 2013. As the guidance requires additional presentation only, there was no impact to our consolidated financial statements or related disclosures.

Reclassifications. Certain prior period amounts have been reclassified to conform to the current period presentation. We reclassified $392,000 and $1.0 million of the derivative warrant gain originally reported for the three and six months ended June 30, 2013, respectively, to additional paid-in capital for the estimated fair value of warrants exercised during these periods.  As a result of these reclassifications, the net loss and the net loss attributable to common stockholders for the three and six months ended June 30, 2013 reported herein have been increased by these amounts.  These reclassifications had no impact on total stockholders’ equity nor any other balance sheet components as of March 31, 2013 or June 30, 2013, and had no impact on total revenues, total operating expenses, and the operating loss reported for the three and six months ended June 30, 2013.

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Consolidated Balance Sheets (Current Period Unaudited) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 3,333,000	$ 12,289,000
Short-term investments	6,765,000	1,747,000
Accounts receivable, net of allowance for doubtful accounts of $310 and $288	1,950,000	1,695,000
Supplies	281,000	171,000
Prepaid expenses and other assets	302,000	128,000
Total current assets	12,631,000	16,030,000
Property and equipment, net	716,000	581,000
Investments in unconsolidated subsidiaries and other	97,000	221,000
Total assets	13,444,000	16,832,000
Current liabilities:
Accounts payable, accrued expenses and other	1,901,000	1,367,000
Current portion, long-term debt	232,000	168,000
Common stock warrants		568,000
Total current liabilities	2,133,000	2,103,000
Capital lease obligations, net of current portion	109,000	65,000
Secured promissory note payable, net of current portion	205,000
Total liabilities	2,447,000	2,168,000
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock	0	0
Common stock; $0.001 par value; 25 million shares authorized; 11,063,246 and 9,870,838 shares issued and outstanding	11,000	10,000
Additional paid-in capital	96,005,000	95,098,000
Accumulated other comprehensive loss	(4,000)	(4,000)
Accumulated net losses	(85,015,000)	(80,440,000)
Total stockholders' equity	10,997,000	14,664,000
Total liabilities and stockholders' equity	13,444,000	16,832,000
Short-term Investments [Member]
Current assets:
Short-term investments	6,765,000	1,747,000
Series D Convertible Preferred Stock [Member]
Stockholders' equity:
Preferred stock	$ 0	$ 0

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Consolidated Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2013 Series B Convertible Preferred Stock and Common Stock [Member]	Jun. 30, 2013 Series C Convertible Preferred Stock [Member]	Jun. 30, 2013 Series A Convertible Preferred Stock [Member]	Jun. 30, 2013 Series B Convertible Preferred Stock [Member]	Jun. 30, 2014 Warrant Modifcations [Member]	Jun. 30, 2014 Warrant Exercises [Member]
Net loss	$ (4,575,000)	$ (1,199,000)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation and amortization	149,000	481,000
Non-cash stock compensation	266,000	179,000
Warrant derivative gains	(152,000)	(2,244,000)
Provision for bad debts	214,000	115,000
Warrant modification charge	44,000
Accounts receivable	(426,000)	(290,000)
Supplies, prepaid expenses and other assets	(174,000)	(18,000)
Accounts payable, accrued expenses and other	608,000	160,000
Net cash flows from operating activities	(4,046,000)	(2,816,000)
Investing activities:
Purchases of property and equipment	(134,000)	(80,000)
Purchase of available-for-sale investments	(5,811,000)
Sale of available-for-sale investments	750,000
Net cash flows from investing activities	(5,195,000)	(80,000)
Financing activities:
Proceeds from secured promissory note payable, net of issuance costs	328,000
Net proceeds from issuance of stock			1,768,000	2,314,000
Net proceeds from exercise of Series A common stock warrants	256,000	2,399,000
Cost of issuing Series D convertible preferred stock and other	(196,000)
Payment of accrued financing costs from issuance of Series A convertible preferred stock and secured promissory note payable		(106,000)
Payments on secured promissory note	(16,000)
Payments of capital lease obligations	(87,000)	(127,000)
Net cash flows from financing activities	285,000	6,248,000
Change in cash and cash equivalents	(8,956,000)	3,352,000
Cash and cash equivalents, beginning	12,289,000	2,372,000
Cash and cash equivalents, ending	3,333,000	5,724,000
Non-cash financing activities:
Reclassification of derivative liability to equity	416,000	1,030,000					281,000	135,000
Property and equipment purchased under capital lease	88,000
Conversion of convertible preferred stock into common stock					394,000	303,000
Deemed dividends from issuing convertible preferred stock				$ 1,213,000		$ 417,000

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Note 2 - Summary of Significant Accounting Policies (Details) - Anti-dilutive Securities In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	8,488,581	3,593,093	8,488,581	3,593,093
Equity Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	695,989	625,769	695,989	625,769
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	380,220		380,220
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities	7,412,372	2,010,222	7,412,372	2,010,222
Series B Convertible Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities		117,232		117,232
Series C Convertible Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive securities		839,870		839,870

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Note 3 - Cash and Short-Term Investments (Details) - Cash and Short-Term Investments (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013	Dec. 31, 2012
Note 3 - Cash and Short-Term Investments (Details) - Cash and Short-Term Investments [Line Items]
Cash and Cash Equivalents, Cost	$ 10,102	$ 14,040
Cash and Cash Equivalents, Unrealized Loss	(4)	(4)
Cash and Cash Equivalents, Fair Value	10,098	14,036
Included in cash and cash equivalents	3,333	12,290
Included in cash and cash equivalents		(1)
Included in cash and cash equivalents	3,333	12,289	5,724	2,372
Included in short-term investments	6,765	1,747
Short-term Investments [Member]
Note 3 - Cash and Short-Term Investments (Details) - Cash and Short-Term Investments [Line Items]
Included in short-term investments	6,769	1,750
Included in short-term investments	(4)	(3)
Included in short-term investments	6,765	1,747
Cash and Money Market Securities [Member]
Note 3 - Cash and Short-Term Investments (Details) - Cash and Short-Term Investments [Line Items]
Cash and Cash Equivalents, Cost	3,333	11,290
Cash and Cash Equivalents, Fair Value	3,333	11,290
Government Securities [Member]
Note 3 - Cash and Short-Term Investments (Details) - Cash and Short-Term Investments [Line Items]
Cash and Cash Equivalents, Cost	751
Cash and Cash Equivalents, Fair Value	751
Corporate Bonds [Member]
Note 3 - Cash and Short-Term Investments (Details) - Cash and Short-Term Investments [Line Items]
Cash and Cash Equivalents, Cost	1,788
Cash and Cash Equivalents, Fair Value	1,788
Certificates of Deposit [Member]
Note 3 - Cash and Short-Term Investments (Details) - Cash and Short-Term Investments [Line Items]
Cash and Cash Equivalents, Cost	4,230	2,750
Cash and Cash Equivalents, Unrealized Loss	(4)	(4)
Cash and Cash Equivalents, Fair Value	$ 4,226	$ 2,746

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Note 1 - Overview and Background

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. OVERVIEW AND BACKGROUND

CombiMatrix Corporation (the “Company,” “we,” “us” and “our”) was originally incorporated in October 1995 as a California corporation and later reincorporated as a Delaware corporation in September 2000. In December 2002, we merged with, and became a wholly owned subsidiary of Acacia Research Corporation (“Acacia”). In August 2007, we split-off from Acacia and became publicly traded on The Nasdaq Stock Market. As a result of the split-off, we ceased to be a subsidiary of, or affiliated with, Acacia.

Description of the Company

We provide valuable molecular diagnostic solutions and comprehensive clinical support for the highest quality of care. We specialize in miscarriage analysis, prenatal and pediatric healthcare, offering DNA-based testing for the detection of genetic abnormalities beyond what can be identified through traditional methodologies. We perform genetic testing utilizing a variety of advanced cytogenomic techniques, including microarray, standardized and customized fluorescent in-situ hybridization (“FISH”) and high resolution karyotyping. We emphasize support for healthcare professionals, to ensure data understanding and communication of results to patients. We deliver high-technology driven answers, with a high degree of assistance for the ordering physician and staff.

We also own a one-third minority interest in Leuchemix, Inc. (“Leuchemix”), a private drug development company focused on developing a series of compounds to address a number of oncology-related diseases.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnotes required by generally accepted accounting principles in annual financial statements have been omitted or condensed. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2013, as reported by us in our Annual Report on Form 10-K filed with the SEC on March 24, 2014. The year-end consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The consolidated financial statements include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of our financial position as of June 30, 2014, and results of operations and cash flows for the interim periods presented. The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results to be expected for the entire year.

Liquidity and Risks

We have a history of incurring net losses and net operating cash flow deficits. We are also deploying new technologies and continue to develop new and improve existing commercial diagnostic testing services and related technologies. As of June 30, 2014, we had cash, cash equivalents and short-term investments of $10.1 million and anticipate that our cash and cash equivalent balances will be sufficient to meet our cash requirements for at least the next twelve months. In order for us to ultimately achieve profitability, we may be required to obtain capital from external sources, increase revenues and reduce operating costs. However, there can be no assurance that our operations will become profitable or that external sources of financing, including the issuance of debt and/or equity securities, will be available at times and at terms acceptable to us, or at all. The issuance of additional equity or convertible debt securities will also cause dilution to our stockholders. If external financing sources are not available or are inadequate to fund our operations, we will be required to reduce operating costs, including research projects and personnel, which could jeopardize our future strategic initiatives and business plans.

Our business operations are also subject to certain risks and uncertainties, including:

• market acceptance of our technologies and services;

• technological advances that may make our technologies and services obsolete or less competitive;

• increases in operating costs, including costs for supplies, personnel and equipment;

• variability in third-party reimbursement of our tests;

• the availability and cost of capital; and

• governmental regulation that may restrict our business.

Our services are concentrated in a highly competitive market that is characterized by rapid technological advances, frequent changes in customer requirements and evolving regulatory requirements and industry standards. Failure to anticipate or respond adequately to technological advances, changes in customer requirements, changes in regulatory requirements or industry standards, or any significant delays in the development or introduction of planned services, could have a material adverse effect on our business and operating results. The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein.

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Allowance for doubtful accounts (in Dollars)	$ 310	$ 288
Convertible preferred stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock; shares authorized	5,000,000	5,000,000
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	25,000,000	25,000,000
Common stock, shares issued	11,063,246	9,870,838
Common stock, shares outstanding	11,063,246	9,870,838
Series D Convertible Preferred Stock [Member]
Preferred stock; shares authorized	12,000	12,000
Convertible preferred stock, shares issued	0	2,201
Convertible preferred stock, shares outstanding	0	2,201

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Note 4 - Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

			Fair Value Measurements
June 30, 2014	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	2,224	$	2,224	$	-	$	-
Short-term investments		6,765		2,539		4,226		-
Cash equivalents	$	8,989	$	4,763	$	4,226	$	-

			Fair Value Measurements
December 31, 2013	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	8,263	$	7,264	$	999	$	-
Short-term investments		1,747		-		1,747		-
Cash equivalents	$	10,010	$	7,264	$	2,746	$	-
Liabilities:
Derivative warrant liability	$	568	$	-	$	-	$	568

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

	Derivative
	Warrant
	Liability
Balance, December 31, 2013	$	568
Changes in fair value		(152	)
Reclassifications		(416	)
Balance, June 30, 2014	$	-

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Document And Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 01, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	CombiMatrix Corp
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		11,063,246
Amendment Flag	false
Entity Central Index Key	0001383183
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Note 6 - Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

	Shares of Common Stock
	Issuable from Warrants
	Outstanding as of
	June 30,		December 31,		Exercise
	2014		2013		Price			Expiration
Liability-classified warrants:
October 2012		-		292,817	$	2.06	(1)	March 2018
Equity-classified warrants:
December 2013		5,825,243		5,825,243	$	3.55		December 2018
June 2013		491,803		491,803	$	3.55		December 2018
May 2013		491,803		491,803	$	3.77		November 2018
March 2013		275,000		275,000	$	3.49		September 2018
October 2012		194,009		-	$	2.06	(1)	April 2018
April 2011		131,047		131,047	$	21.40		April 2016
October 2009		3,000		3,000	$	77.80		October 2014
May 2009		467		2,967	$	75.00 - $90.00		May 2014 - July 2014
May 2009		-		109,997	$	90.00		May 2014
Total		7,412,372		7,330,860
Total - all warrants		7,412,372		7,623,677

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Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:
Royalties	$ 35,000	$ 55,000	$ 67,000	$ 80,000
Total revenues	1,941,000	1,500,000	3,763,000	3,111,000
Operating expenses:
Cost of services	1,053,000	851,000	2,051,000	1,788,000
Research and development	224,000	177,000	358,000	360,000
Sales and marketing	1,109,000	695,000	1,995,000	1,336,000
General and administrative	2,216,000	1,251,000	3,973,000	2,624,000
Patent amortization and royalties	28,000	66,000	60,000	126,000
Total operating expenses	4,630,000	3,040,000	8,437,000	6,234,000
Operating loss	(2,689,000)	(1,540,000)	(4,674,000)	(3,123,000)
Other income (expense):
Interest income	24,000	1,000	29,000	1,000
Interest expense	(22,000)	(19,000)	(38,000)	(321,000)
Warrant derivative gains	152,000	1,045,000	152,000	2,244,000
Warrant modification charge	(44,000)		(44,000)
Total other income (expense	110,000	1,027,000	99,000	1,924,000
Net loss	(2,579,000)	(513,000)	(4,575,000)	(1,199,000)
Net loss attributable to common stockholders	(2,579,000)	(1,737,000)	(4,575,000)	(3,086,000)
Basic and diluted net (loss) per share (in Dollars per share)	$ (0.23)	$ (0.14)	$ (0.42)	$ (0.41)
Basic and diluted net loss per share attributable to common stockholders (in Dollars per share)	$ (0.23)	$ (0.48)	$ (0.42)	$ (1.04)
Basic and diluted weighted average common shares outstanding (in Shares)	11,063,246	3,547,709	10,995,351	2,934,653
Series A Convertible Preferred Stock [Member] | Dividend Declared [Member]
Other income (expense):
Convertible preferred stock dividends				(246,000)
Convertible preferred stock dividends per share (in Dollars per share)				$ (0.08)
Series C Convertible Preferred Stock [Member] | Dividend Declared [Member]
Other income (expense):
Convertible preferred stock dividends		(11,000)		(11,000)
Series C Convertible Preferred Stock [Member] | Deemed Dividend From Issuing Stock [Member]
Other income (expense):
Convertible preferred stock dividends		(1,213,000)		(1,213,000)
Convertible preferred stock dividends per share (in Dollars per share)		$ (0.34)		$ (0.41)
Series B Convertible Preferred Stock [Member] | Deemed Dividend From Issuing Stock [Member]
Other income (expense):
Convertible preferred stock dividends				(417,000)
Convertible preferred stock dividends per share (in Dollars per share)				$ (0.14)
Diagnostics Services [Member]
Revenues:
Diagnostic services	$ 1,906,000	$ 1,445,000	$ 3,696,000	$ 3,031,000

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Note 6 - Stockholders' Equity

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

6. STOCKHOLDERS’ EQUITY

Series A Convertible Preferred Stock and Warrants Financing

During the fourth quarter of 2012, we issued Series A convertible preferred stock (the “Series A Stock”) and warrants to purchase common stock (the “Series A Warrants”) to certain accredited investors (the “Series A Investors”) for gross proceeds of $2.5 million. During the fourth quarter of 2012 and the first quarter of 2013, all of the Series A convertible preferred stock converted into 1.25 million shares of common stock, and during 2013, 1.2 million shares of common stock were issued from the exercise of the Series A Warrants, leaving Series A Warrants to purchase 292,817 shares of common stock unexercised as of December 31, 2013. During the six months ended June 30, 2014, Series A Investors exercised Series A Warrants to purchase 124,111 shares of our common stock, resulting in proceeds of $256,000 to us.

Holders of the Series A Stock were entitled to receive accruing dividends at the annual rate of 6%, payable semi-annually. Upon conversion of Series A Stock into common stock, we paid to each holder of Series A Stock converting to common stock, as a “make-whole” payment in common stock, an amount equal to $118 per $1,000 of stated value of Series A Stock so converted, less the aggregate amount of dividends previously paid on such converting Series A Stock. During the first six months of 2013, the Series A Investors converted all of the remaining shares of Series A Stock into 822,421 shares of common stock. In addition, 50,307 shares of common stock were issued to the Series A Investors in payment of the make-whole and accrued dividends related to the Series A Stock conversions. The combination of make-whole and accrued dividends paid in shares of common stock for the six months ended June 30, 2013 was $246,000.

For as long as the Series A Warrants remain unexercised through their expiration date in April 2018, we may not sell securities at an effective price per share less than $4.91 except for certain exempt issuances, unless waivers from the Series A Investors are obtained. Prior to June 2014, the exercise price of the Series A Warrants and the number of shares of common stock underlying the Series A Warrants were subject to full-ratchet anti-dilution adjustments in the event we issue securities, other than certain excepted issuances, at a price below the then current exercise price of the Series A Warrants. In June 2014, we executed modification agreements (the “Modification”) with the remaining Series A Investors to remove the full-ratchet anti-dilution adjustment provisions as well as the Black-Scholes cash buy-back provisions from the terms of the Series A Warrants, thereby eliminating the requirement for derivative accounting and liability classification for the Series A Warrants as of the Modification date. In consideration for agreeing to these Modifications, we issued additional warrants to the Series A Investors to purchase 25,303 shares of common stock at an exercise price of $2.06 per share and an expiration date in April 2018, which are equivalent to the terms of the existing Series A Warrants as modified by the Modification, but are not subject to any registration rights.

We account for stock purchase warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreements. Under applicable accounting guidance, stock warrants must be accounted for as derivative financial instruments if the warrants contain full-ratchet anti-dilution provisions, which preclude the warrants from being considered indexed to our own stock. Prior to the Modification, the Series A Warrants issued to Series A Investors contained such provisions, thus requiring us to treat them as derivative financial instruments, to be recorded at fair value at issuance and subsequently adjusted to fair value at each reporting date, with the corresponding adjustment reflected as a non-operating credit / charge in the consolidated statement of operations. We valued the Series A Warrants using the Monte-Carlo simulation method using the following assumptions immediately prior to the Modification: (i) closing stock price and Series A Warrant contractual exercise price; (ii) term to expiration commensurate with the individual Series A Warrant terms of 3.8 years; (iii) historical volatilities commensurate with the term of the Series A Warrants of 129.6%; (iv) risk-free interest rates commensurate with the term of the Series A Warrants of 1.2%; and (v) simulated anti-dilution impact assuming various probabilities that we will raise additional capital by issuing equity securities at prices above or below the current contractual Series A Warrant exercise prices during the Series A Warrant terms. The result of this valuation simulation was to value the remaining Series A Warrants held by Series A Investors at $281,000 as of the Modification date. As a result, warrant derivative gains of $152,000 were recognized, and the remaining $281,000 was reclassified to additional paid-in capital. As a result of a similar valuation analysis performed during the first quarter ended March 31, 2014, the combined warrant derivative gains recognized in our consolidated statements of operations and the amount of warrant derivative liabilities reclassified to stockholders’ equity resulting from Series A Warrant exercises for the six months ended June 30, 2014 was $152,000 and $416,000, respectively. The additional Series A Warrants to purchase 25,303 shares of common stock given to Series A Investors as consideration for agreeing to the Modification were valued using the Black-Scholes valuation model, using the following assumptions as of the Modification: (i) closing stock price and Series A Warrant contractual exercise price; (ii) term to expiration commensurate with the individual Series A Warrant terms of 3.8 years; (iii) historical volatility commensurate with the term of the Series A Warrants of 129.6%; and (iv) risk-free interest rates commensurate with the term of the Series A Warrants of 1.2%. The resulting valuation of $44,000 was recognized as a non-operating charge in our consolidated statements of operations for the three and six months ended June 30, 2014.

We valued the Series A Warrants using the Monte-Carlo simulation method using the following assumptions at June 30, 2013: (i) closing stock price and Series A Warrant contractual exercise price; (ii) term to expiration commensurate with the remaining Series A Warrant terms of 4.7 years; (iii) historical volatilities commensurate with the term of the remaining Series A Warrants of 120.5%; (iv) risk-free interest rates commensurate with the term of the remaining Series A Warrants of 1.3%; and (v) simulated anti-dilution impact assuming various probabilities that we will raise additional capital by issuing equity securities at prices above or below the current contractual Series A Warrant exercise price during the Series A Warrant terms. The result of these valuation simulations was to value the remaining Series A Warrants at $1.2 million, which was $1.4 million below their carrying value as of March 31, 2013. As a result, we recognized a $1.0 million non-operating, warrant derivative gain in our consolidated statement of operations for the three months ended June 30, 2013, whereas warrant derivative liabilities from Series A Warrant exercises in the amount of $392,000 were reclassified to stockholders’ equity. As a result of a similar valuation analysis performed during the first quarter ended March 31, 2013, the combined warrant derivative gains recognized in our consolidated statements of operations and the amount of warrant derivative liabilities reclassified to stockholders’ equity resulting from Series A Warrant exercises for the six months ended June 30, 2013 was $2.2 million and $1.0 million, respectively.

Amortization of the deferred offering-related costs allocated to the Series A Warrants was $280,000 during the six-month period ended June 30, 2013, and was recognized as a component of interest expense.

Series B Convertible Preferred Stock Financing

On March 19, 2013, we entered into a securities purchase agreement (the “Series B Purchase Agreement”) with an existing institutional investor (the “Series B Investor”) to purchase 130,000 shares of common stock at a price of $3.05 per share and approximately 1,610.4 units consisting of, in the aggregate, Series B 6% convertible preferred stock (the “Series B Stock”) and warrants to purchase up to 275,000 shares of common stock at an exercise price of $3.49 per share (the “Series B Warrants”) in a registered direct offering (the “Series B Financing”) of securities sold off of our existing shelf registration statement on Form S-3 (File No. 333-176372). The Series B Financing closed on March 20, 2013 (the “Series B Closing”). The Series B Stock and Series B Warrants were sold in multiples of fixed combinations, with each fixed combination consisting of one share of Series B Stock and a Series B Warrant to purchase approximately 171 shares of common stock. Each fixed combination of Series B Stock and Series B Warrants was sold at a price of $1,000. The Series B Stock was initially convertible into an aggregate of 528,000 shares of common stock at an initial conversion price of $3.05 per share. During 2013, the Series B Investor converted all of the Series B Stock into common stock.

The Series B Warrants were not exercisable for six months from the Series B Closing, and the Series B Stock accrued dividends at an annual rate of 6% beginning six months after the Series B Closing, assuming the Series B Stock had not been converted by that time. Upon the Series B Closing, we received proceeds of $1.8 million, net of placement agent fees and other related paid and accrued costs. Given that the effective conversion price of the Series B Stock was below the closing market price of our common stock at the time of the Series B Closing, we recognized a beneficial conversion feature in the amount of $417,000. Since the Series B Stock was immediately convertible into common stock, the beneficial conversion feature was treated as a deemed dividend charged to retained earnings.

The Series B Warrants have a 5½ year term as well as a cashless exercise provision in the event there is no effective registration statement covering the common stock issuable upon exercise of the Series B Warrants, and were not exercisable for the first six months following issuance. The Series B Warrants are not subject to price anti-dilution protection. We also agreed with the Series B Investor pursuant to the Series B Purchase Agreement that, except under certain permitted circumstances, until the time that less than 7.5% of the Series B Warrants remain outstanding, neither we nor our subsidiaries shall issue, or enter into any agreement to issue, common stock or equivalents thereof at a price below the exercise price of the Series B Warrants.

Series C Convertible Preferred Stock Financing

On May 3, 2013, we entered into a securities purchase agreement (the “Series C Purchase Agreement”) with certain accredited investors (the “Series C Investors”), pursuant to which we sold and issued 1,200 shares of our newly created Series C 6% convertible preferred stock (the “Series C Stock”) to the Series C Investors at a purchase price of $1,000 per share in an initial closing that occurred on May 6, 2013 (the “Series C First Closing”) and sold and issued 1,200 additional shares of Series C Stock to the Series C Investors on June 28, 2013 at a purchase price of $1,000 per share after stockholder approval was obtained on June 27, 2013 (the “Series C Second Closing”) (combined, the “Series C Financing”). After certain offering-related costs paid, the net proceeds from the Series C Financing was approximately $2.2 million.

As a result of the Series C Second Closing, the conversion price for the Series C Stock was set to $2.85759 per share, or the equivalent of 839,870 shares of common stock issuable upon conversion of all Series C Stock. The Series C Stock was entitled to 6% annual dividends, and accrued dividends were payable semi-annually, and also on the date of conversion of any Series C Stock, in cash or, subject to certain conditions and at our election, in shares of common stock. If the dividends were paid in shares of common stock, the number of shares of common stock comprising the dividend on each share of Series C Stock was valued at a 20% discount to the average of the daily volume weighted average price for the five-day trading period immediately prior to the dividend payment date. Given that the effective conversion price of the Series C Stock was below the closing market price of our common stock at the time of both of the Series C closings, we recognized beneficial conversion features in the amount of $1.2 million, which were limited to and reduced the net proceeds allocated to the Series C Stock. Since the Series C Stock was immediately convertible into common stock, the beneficial conversion feature was treated as a deemed dividend charged to retained earnings. During the remainder of 2013, the Series C Investors converted all 2,400 shares of Series C stock into 839,864 shares of common stock.

In addition to the issuance of the Series C Stock, we issued warrants at the Series C First Closing to purchase 491,803 shares of our common stock with an exercise price of $3.77 per share and at the Series C Second Closing, we issued additional warrants to purchase 491,803 shares of our common stock with an exercise price of $3.55 per share (collectively, the “Series C Warrants”). The Series C Warrants have a 5½ year term, were not exercisable for the first six months following issuance and include a cash-less exercise provision which is only applicable if the common stock underlying the Series C Warrants is not subject to an effective registration statement or otherwise cannot be sold without restriction pursuant to Rule 144. Until all Series C Investors no longer hold Series C Warrants: (i) we may not sell any variable rate securities except for certain exempt issuances; and (ii) if we enter into a subsequent financing on more favorable terms than the Series C Financing, then the agreements between us and the Series C Investors will be amended to include such more favorable terms. In addition, until 7.5% or less of the Series C Warrants remain unexercised, we may not sell any dilutive securities, except for certain exempt issuances.

Series D Convertible Preferred Stock Financing

On December 20, 2013 (the “Series D Closing”), we closed an underwritten public offering (the “Series D Offering”) and issued 12,000 units of securities to investors, with each unit consisting of: (i) one share of Series D preferred stock (“Series D Stock”) convertible into shares of our common stock equal to 1,000 divided by the conversion price of $2.06, which was 72.5% of the consolidated closing bid price of our common stock on the Nasdaq Capital Market on December 16, 2013, the date we executed the underwriting agreement (“UA date”); and (ii) one warrant exercisable for 485.4369 shares of our common stock, at an exercise price per share equal to $3.12 (“Series D Warrants”), which was 110% of the consolidated closing bid price of our common stock on the Nasdaq Capital Market on the UA date. The shares of common stock underlying the Series D Stock and Series D Warrants were registered on Form S-1 (File No. 333-191221), which was declared effective by the SEC on December 16, 2013. The Series D Stock was immediately convertible and the Series D Warrants were immediately exercisable for shares of common stock and have a term of five years. In total, there were 5,825,243 shares of common stock issuable upon conversion of the Series D Stock and up to 5,825,243 shares of common stock issuable upon exercise of the Series D Warrants. The units were sold for a purchase price equal to $1,000 per unit, resulting in gross proceeds of $12 million at the Series D Closing. After certain offering-related costs paid to the underwriters and others at the closing and through June 30, 2014, net proceeds received by us were approximately $10.7 million. As of December 31, 2013, 9,799.3 shares of Series D Stock have converted into 4,756,946 shares of common stock. During the first quarter of 2014, all of the remaining Series D Stock converted into an additional 1,068,297 shares of common stock. Also as a result of the Series D Offering, the exercise price of the then-outstanding Series A Warrants automatically ratcheted down by their terms from their then exercise price of $2.86 per share to an adjusted exercise price of $2.06 per share, and the underlying shares exercisable was automatically increased by 81,910 shares. A registration statement on Form S-3 was filed in order to register these shares as per the terms of our original Series A offering documents.

Warrants

Outstanding warrants to purchase common stock are as follows:

	Shares of Common Stock
	Issuable from Warrants
	Outstanding as of
	June 30,		December 31,		Exercise
	2014		2013		Price			Expiration
Liability-classified warrants:
October 2012		-		292,817	$	2.06	(1)	March 2018
Equity-classified warrants:
December 2013		5,825,243		5,825,243	$	3.55		December 2018
June 2013		491,803		491,803	$	3.55		December 2018
May 2013		491,803		491,803	$	3.77		November 2018
March 2013		275,000		275,000	$	3.49		September 2018
October 2012		194,009		-	$	2.06	(1)	April 2018
April 2011		131,047		131,047	$	21.40		April 2016
October 2009		3,000		3,000	$	77.80		October 2014
May 2009		467		2,967	$	75.00 - $90.00		May 2014 - July 2014
May 2009		-		109,997	$	90.00		May 2014
Total		7,412,372		7,330,860
Total - all warrants		7,412,372		7,623,677

(1) Prior to the anti-dilution adjustments which occurred on March 20, 2013, June 28, 2013 and December 20, 2013, these warrants had an initial exercise price of $9.50 per share. Also, due to the Modification previously discussed, these warrants are no longer liability classified as of June 30, 2014.

Subsequent to June 30, 2014, the remaining May 2009 warrants listed above expired unexercised.

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Note 5 - Secured Promissory Note

6 Months Ended

Jun. 30, 2014

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

5. SECURED PROMISSORY NOTE

On May 20, 2014 (“Execution Date”), we executed a secured promissory note (the “Note”) with ACC Investment Ltd. in the amount of $350,000, payable in equal amortized payments over a thirty-six month period (the “Term”) from the Execution Date. The note bears an annual interest rate of 10% and is secured by certain laboratory equipment used in our microarray services business. Legal and other closing costs totaling $22,000 were capitalized with the Note and are being amortized over the Term as interest expense. As of June 30, 2014, the fair value of the Note approximated its carrying value of $312,000, net of unamortized closing costs of $21,000.

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Note 3 - Cash and Short-Term Investments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Cash and Cash Equivalents [Abstract]
Cash, Cash Equivalents, and Short-term Investments	$ 10,102	$ 14,040

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Note 1 - Overview and Background (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Disclosure Text Block [Abstract]
Cash, Cash Equivalents, and Short-term Investments	$ 10,102	$ 14,040

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Note 2 - Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Cost of services	$	5	$	2	$	9	$	3
Research and development		-		-		-		-
Sales and marketing		19		2		30		5
General and administrative		165		103		227		171
Total non-cash stock compensation	$	189	$	107	$	266	$	179

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Common stock options		695,989		625,769		695,989		625,769
Restricted stock units		380,220		-		380,220		-
Common stock warrants		7,412,372		2,010,222		7,412,372		2,010,222
Series B preferred stock convertible into common stock		-		117,232		-		117,232
Series C preferred stock convertible into common stock		-		839,870		-		839,870
Excluded potentially dilutive securities		8,488,581		3,593,093		8,488,581		3,593,093

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Note 7 - Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

7. COMMITMENTS AND CONTINGENCIES

Executive Severance

We provide certain severance benefits such that if an executive officer of CombiMatrix Corporation is terminated for other than cause, death or disability, the executive will receive payments equal to three months’ base salary plus medical and dental benefits. In addition, we have implemented a Restated Executive Change of Control Severance Plan (the “Severance Plan”) that affects certain of our senior management-level employees who are classified as “Section 16 Officers” of the Company.  Pursuant to the Severance Plan, if a participating employee is involuntarily terminated (other than for death, disability or for cause) or resigns for “good reason” (as defined in the Severance Plan) during the two-year period following a “change of control” (as defined in the Severance Plan) of the Company, then, subject to execution of a release of claims against the Company, the employee will be entitled to receive: (i) one-half times annual base salary; (ii) immediate vesting of outstanding compensatory equity awards; and (iii) payment of COBRA premiums for the participating employee and eligible dependents for a pre-determined period of time.  Payment of benefits under the Severance Plan will be limited by provisions contained in Section 409A of the U.S. Internal Revenue Code.  The Severance Plan is administered by a plan administrator, which initially is the Compensation Committee of the Board of Directors.  In order to participate in the Severance Plan, an eligible employee must waive any prior retention or severance agreements.

Litigation

In 2002, we entered into a settlement agreement with Nanogen, Inc. (“Nanogen”) to settle all pending litigation between the parties. Pursuant to the terms of the settlement agreement, we agreed to make quarterly payments to Nanogen equal to 12.5% of total sales of products developed by us and our affiliates based on the patents that had been in dispute in the litigation, up to an annual maximum amount of $1.5 million. The minimum quarterly payments under the settlement agreement are $25,000 per quarter until the patents expire in 2018. Royalty expenses recognized under the agreement were $25,000 and $50,000 for the three and six months ended June 30, 2014 and 2013, respectively, and are included in patent amortization and royalties in the accompanying consolidated statements of operations.

On February 14, 2011, Relator Michael Strathmann (“Strathmann”) served us with a complaint (“the Complaint”) filed in the Superior Court of the State of California for the County of Orange. The Complaint alleges we and our former parent Acacia Research Corporation submitted false and fraudulent insurance claims to National Union Fire Insurance Company under the Directors and Officers Policy issued to Acacia, in connection with a prior lawsuit that was settled with Nanogen, Inc., thereby allegedly violating the California Insurance Fraud Prevention Act, and seeks penalties and unspecified treble damages. On May 4, 2011, the Superior Court dismissed the Complaint by ordering that it be stricken for violation of the California Anti-SLAPP statute, which prevents plaintiffs from filing abusive lawsuits against public policy. On June 15, 2011, Strathmann filed a Notice of Appeal with the California Court of Appeals, appealing the granting of the Motion to Strike. On October 24, 2012, the California Court of Appeals reversed the Superior Court's dismissal, finding that the anti-SLAPP statute was not applicable and remanding the case to the Superior Court. Strathmann filed an Amended Complaint, and we and Acacia filed our Answer to that pleading. Discovery has commenced and concluded. We and Acacia filed a motion for summary judgment to dismiss many, if not all, of the claims on the grounds of, among other things, lack of merit, inapplicability of the Insurance Fraud Prevention Act to tenders of defense under third party policies, statute of limitations, jurisdiction and standing. On April 30, 2014, the court denied the motion, finding there were certain “triable issues of fact.” As a result, trial before the court commenced on June 9, 2014 and has continued through the date of this filing, though the trial is expected to conclude later in August. We continue to vigorously pursue the full defenses of this matter. Nevertheless, there can be no assurance we will be ultimately successful.

From time to time, we are subject to other claims and legal actions that arise in the ordinary course of business. We believe that the ultimate liability with respect to these claims and legal actions, if any, will not have a material effect on our financial position, results of operations or cash flows. Any legal costs resulting from claims or legal actions are expensed as incurred.

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Accounting Policies, by Policy (Policies)

6 Months Ended

Jun. 30, 2014

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation. The accompanying consolidated financial statements include the accounts of the Company and our wholly owned and majority-owned subsidiaries. Investments for which we possess the power to direct or cause the direction of the management and policies, either through majority ownership or other means, are accounted for under the consolidation method. Material intercompany transactions and balances have been eliminated in consolidation. Investments in companies in which we maintain an ownership interest of 20% to 50% or exercise significant influence over operating and financial policies are accounted for under the equity method. The cost method is used where we maintain ownership interests of less than 20% and do not exercise significant influence over the investee.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition. We recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been performed, (iii) amounts are fixed or determinable and (iv) collectability of amounts is reasonably assured.

Service revenues from providing diagnostic tests are recognized when the testing process is complete and test results are reported to the ordering physician or clinic. These diagnostic services are billed to various payors, including commercial insurance companies, healthcare institutions, government payors including Medicare and Medicaid, and individuals. We report revenues from contracted payors based on a contractual rate, or in the case of Medicare and Medicaid, published fee schedules for our tests. We report revenues from non-contracted payors based on the amounts expected to be collected. The differences between the amounts billed and the amounts expected to be collected from non-contracted payors are recorded as contractual allowances to arrive at net recognized revenues. The expected revenues from non-contracted payors are based on the historical collection experience of each payor or payor group, as appropriate. In each reporting period, we review our historical collection experience for non-contracted payors and adjust our expected revenues for current and subsequent periods accordingly. We also recognize additional revenue from actual cash payments that exceed amounts initially recognized, in the period the payments are received. For the three and six months ended June 30, 2014 and 2013, net positive revenue adjustments were $121,000, $265,000, $67,000 and $268,000, respectively. Because a substantial portion of our revenues is from non-contracted third-party payors, it is likely that we will be required to make adjustments to accounting estimates with respect to contractual allowances in the future, which may positively or adversely affect our results of operations. In all cases described above, we report revenues net of any applicable statutory taxes collected from customers, as applicable.

Clinical trials support services revenue is recognized when the related support services have been delivered to and accepted by the customer. Royalty revenue is recognized in the period when earned.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash Equivalents and Short-Term Investments. We consider all highly liquid investments purchased with original maturities of three months or less when purchased to be cash equivalents. Short-term investments consist of fixed income investments with maturities between three and 12 months and other highly liquid investments that can be readily purchased or sold using established markets. These investments are classified as available-for-sale and are reported at fair value on the Company’s consolidated balance sheet. Unrealized holding gains and losses are reported within comprehensive loss in the consolidated statement of comprehensive loss. Fair value is based on available market information including quoted market prices, broker or dealer quotations or other observable inputs. If a decline in the fair value of a short-term investment below our cost basis is determined to be other than temporary, such investment is written down to its estimated fair value as a new cost basis and the amount of the write-down is included in earnings as an impairment charge. To-date, no permanent impairment charges have been realized or recorded.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements. We measure fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. We utilize a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

●     Level 1:     Observable market inputs such as quoted prices in active markets;

●     Level 2:      Observable market inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

●     Level 3:     Unobservable inputs where there is little or no market data, which require the reporting entity to develop its own assumptions.

We classify our cash equivalents within the fair value hierarchy as Level 1 as these assets are valued using quoted prices in active markets for identical assets at the measurement date. We classify short-term investments within the fair value hierarchy as Level 2, primarily utilizing broker quotes in a non-active market for valuation of these investments. Financial instruments that contain valuation inputs that are not readily determinable from active markets or from similar securities trading in active markets, such as derivative financial instruments, are classified within the fair value hierarchy as Level 3.

Derivatives, Policy [Policy Text Block]

Derivative Financial Instruments. We evaluate financial instruments for freestanding or embedded derivatives. Derivative instruments that do not qualify for permanent equity classification are recorded as liabilities at fair value, with changes in value recognized as other income (expense) in the consolidated statements of operations in the period of change. Derivative liabilities are categorized as either short-term or long-term based upon management’s estimates as to when the derivative instrument may be realized or based upon the holder’s ability to realize the instrument.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentration of Credit Risks. Cash and cash equivalents are invested in deposits with certain financial institutions and may, at times, exceed federally insured limits. We have not experienced any significant losses on our deposits of cash and cash equivalents. We do not believe that we are exposed to significant credit risk on cash and cash equivalents or on our short-term investments. Accounts receivable from two separate commercial insurance carriers of $355,000 and $224,000, respectively, each exceeded 10% of our total accounts receivable balance as of June 30, 2014.

Substantially all of the components and raw materials used in providing our testing services, including array slides and reagents, are currently provided to us from a limited number of sources or in some cases from a single source. Although we believe that alternative sources for those components and raw materials are available, any supply interruption in a sole-sourced component or raw material might result in up to a several-month production delay and materially harm our ability to provide testing services until a new source of supply, if any, could be located and qualified.

Receivables, Policy [Policy Text Block]

Accounts Receivable and Allowance for Doubtful Accounts. Accounts receivable are stated at principal amounts and are primarily comprised of amounts contractually due from customers for services performed. An allowance for doubtful accounts is recorded for estimated uncollectible amounts due from various payor groups such as commercial insurance companies, healthcare institutions, government payors and individuals. The process for estimating the allowance for doubtful accounts involves significant assumptions and judgments. Specifically, the allowance for doubtful accounts is adjusted periodically and is principally based upon specific identification of past due or disputed accounts. We also review the age of receivables by payor class to assess our allowance at each period end. The payment realization cycle for certain governmental and commercial insurance payors can be lengthy, involving denial, appeal and adjudication processes, and is subject to periodic adjustments that may be significant. Accounts receivable are periodically written off when identified as uncollectible and deducted from the allowance for doubtful accounts after appropriate collection efforts have been exhausted. Additions to the allowance for doubtful accounts are charged to bad debt expense as a component of general and administrative expenses in the consolidated statements of operations. Collection of governmental, private health insurer, and client receivables are generally a function of providing complete and correct billing information to the insurers and clients within the filing deadlines required by each payor. Collection of receivables due from patients and clients is generally subject to increased credit risk due to credit-worthiness or inability to pay.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation. The compensation cost for all employee stock-based awards is measured at the grant date, based on the fair value of the award, and is recognized as an expense, on a straight-line basis, over the employee’s requisite service period (generally the vesting period of the equity award) which is generally four years. The fair value of each stock option award is estimated on the date of grant using a Black-Scholes option valuation model. The fair value of each restricted stock unit (“RSU”) award is based on the number of shares granted and the quoted price of our common stock on the date of grant. Stock-based compensation expense is recognized only for those awards that are expected to vest using an estimated forfeiture rate. We estimate pre-vesting option forfeitures at the time of grant and reflect the impact of estimated pre-vesting option forfeitures in compensation expense recognized. Stock-based compensation expense for all periods presented attributable to our functional expense categories from stock option and RSU awards vesting during the periods presented were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Cost of services	$	5	$	2	$	9	$	3
Research and development		-		-		-		-
Sales and marketing		19		2		30		5
General and administrative		165		103		227		171
Total non-cash stock compensation	$	189	$	107	$	266	$	179

Earnings Per Share, Policy [Policy Text Block]

Net Loss Per Share. Basic and diluted net loss per share has been computed by dividing the net loss by the weighted average number of common shares issued and outstanding during the periods presented. Options and warrants to purchase common stock as well as preferred stock convertible into shares of common stock are anti-dilutive and therefore are not included in the determination of the diluted net loss per share. The following table reflects the excluded dilutive securities:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Common stock options		695,989		625,769		695,989		625,769
Restricted stock units		380,220		-		380,220		-
Common stock warrants		7,412,372		2,010,222		7,412,372		2,010,222
Series B preferred stock convertible into common stock		-		117,232		-		117,232
Series C preferred stock convertible into common stock		-		839,870		-		839,870
Excluded potentially dilutive securities		8,488,581		3,593,093		8,488,581		3,593,093

Segment Reporting, Policy [Policy Text Block]

Segments. We have determined that we operate in one segment for financial reporting purposes.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (“FASB”) issued new accounting guidance regarding revenue recognition, which when effective will supersede existing revenue recognition requirements and will eliminate most industry-specific guidance from generally accepted accounting principles. The core principle of the new guidance is to require an entity to recognize as revenue the amount that reflects the consideration to which it expects to be entitled in exchange for goods or services as it transfers control to its customers. The new guidance requires additional disclosures including those that are qualitative and quantitative disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. An entity can apply the new guidance retrospectively to each prior reporting period presented (i.e., the full retrospective method) or retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application in retained earnings. The new guidance becomes effective and will be adopted in the first quarter of fiscal year 2017 with early adoption not permitted. We are currently evaluating the appropriate transition method and any further impact of this guidance on our consolidated financial statements and related disclosures.

In April 2014, the FASB amended guidance to clarify the accounting for disposals of groups of assets and business units. The amendments alter the definition of a discontinued operation to cover only asset disposals that are a strategic shift with a major effect on an entity's operations and finances. The changes should be applied in fiscal years that start on December 15, 2014, or later, but the changes can be applied ahead of the effective date for asset disposals that have not been reported in a set of financial statements. We do not believe adoption of this guidance will have a material impact on our consolidated financial statements or related disclosures.

In July 2013, the FASB issued guidance on the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Under this guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit that exists at the reporting date, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if certain criteria are met. This guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2013 with early adoption permitted. The adoption of this guidance did not have a material impact on our consolidated financial statements or related disclosures.

In February 2013, the FASB amended its guidance to require an entity to present the effect of certain significant reclassifications out of accumulated other comprehensive income or loss on the respective line items in net income or loss. The new accounting guidance does not change the items that must be reported in other comprehensive income or loss or when an item of other comprehensive income or loss must be reclassified to net income or loss. The guidance is effective prospectively for fiscal years beginning after December 15, 2012 and we were required to adopt these new provisions during the first quarter of 2013. As the guidance requires additional presentation only, there was no impact to our consolidated financial statements or related disclosures.

Reclassification, Policy [Policy Text Block]

Reclassifications. Certain prior period amounts have been reclassified to conform to the current period presentation. We reclassified $392,000 and $1.0 million of the derivative warrant gain originally reported for the three and six months ended June 30, 2013, respectively, to additional paid-in capital for the estimated fair value of warrants exercised during these periods.  As a result of these reclassifications, the net loss and the net loss attributable to common stockholders for the three and six months ended June 30, 2013 reported herein have been increased by these amounts.  These reclassifications had no impact on total stockholders’ equity nor any other balance sheet components as of March 31, 2013 or June 30, 2013, and had no impact on total revenues, total operating expenses, and the operating loss reported for the three and six months ended June 30, 2013.

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Note 3 - Cash and Short-Term Investments (Tables)

6 Months Ended

Jun. 30, 2014

Cash and Cash Equivalents [Abstract]

Cash, Cash Equivalents and Investments [Table Text Block]

	As of June 30, 2014									As of December 31, 2013
			Unrealized					Fair				Unrealized					Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
Cash and money market securities	$	3,333	$	-	$	-		$	3,333	$	11,290	$	-	$	-		$	11,290
Government bonds		751		-		-			751		-		-		-			-
Corporate bonds		1,788		-		-			1,788		-		-		-			-
Certificates of deposit		4,230		-		(4	)		4,226		2,750		-		(4	)		2,746
	$	10,102	$	-	$	(4	)	$	10,098	$	14,040	$	-	$	(4	)	$	14,036
Included in cash and cash equivalents	$	3,333	$	-	$	-		$	3,333	$	12,290	$	-	$	(1	)	$	12,289
Included in short-term investments		6,769		-		(4	)		6,765		1,750		-		(3	)		1,747
	$	10,102	$	-	$	(4	)	$	10,098	$	14,040	$	-	$	(4	)	$	14,036

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Note 2 - Summary of Significant Accounting Policies (Details) - Stock-Based Compensation by Functional Expense Categories (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation	$ 189	$ 107	$ 266	$ 179
Cost of Sales [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation	5	2	9	3
Selling and Marketing Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation	19	2	30	5
General and Administrative Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Stock-based compensation	$ 165	$ 103	$ 227	$ 171

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Note 4 - Fair Value Measurements (Details) - Financial Liabilities Measured at Fair Value on a Recurring Basis Using Level 3 Inputs (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Financial Liabilities Measured at Fair Value on a Recurring Basis Using Level 3 Inputs [Abstract]
Balance	$ 568
Changes in fair value	(152)
Reclassifications	$ (416)

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Consolidated Statements of Comprehensive Loss (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net loss	$ (2,579)	$ (513)	$ (4,575)	$ (1,199)
Unrealized gain on available-for-sale investments	5
Total comprehensive loss	$ (2,574)	$ (513)	$ (4,575)	$ (1,199)

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Note 4 - Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

4. FAIR VALUE MEASUREMENTS

The following table summarizes, for each major category of financial assets measured on a recurring basis, the respective fair value at June 30, 2014 and December 31, 2013 and the classification by level of input within the fair value hierarchy defined above (in thousands):

			Fair Value Measurements
June 30, 2014	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	2,224	$	2,224	$	-	$	-
Short-term investments		6,765		2,539		4,226		-
Cash equivalents	$	8,989	$	4,763	$	4,226	$	-

			Fair Value Measurements
December 31, 2013	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	8,263	$	7,264	$	999	$	-
Short-term investments		1,747		-		1,747		-
Cash equivalents	$	10,010	$	7,264	$	2,746	$	-
Liabilities:
Derivative warrant liability	$	568	$	-	$	-	$	568

The following table is a reconciliation of financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the six months ended June 30, 2014 (in thousands):

	Derivative
	Warrant
	Liability
Balance, December 31, 2013	$	568
Changes in fair value		(152	)
Reclassifications		(416	)
Balance, June 30, 2014	$	-

The fair value of the derivative warrant liability is based on Level 3 inputs. For this liability, we developed our own assumptions that do not have observable inputs or available market data to support the fair value recorded. See Note 6 for further discussion of the derivative warrant liability and for the June 2014 modifications, which resulted in permanent equity classification of the warrant liability as of June 30, 2014.

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Note 5 - Secured Promissory Note (Details) (USD $)	3 Months Ended
	Jun. 30, 2014
Note 5 - Secured Promissory Note (Details) [Line Items]
Secured Debt	$ 312,000
Secured Debt [Member]
Note 5 - Secured Promissory Note (Details) [Line Items]
Debt Instrument, Face Amount	350,000
Debt Instrument, Term	36 months
Debt Instrument, Interest Rate, Stated Percentage	10.00%
Debt Issuance Cost	22,000
Deferred Finance Costs, Net	$ 21,000

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Note 2 - Summary of Significant Accounting Policies (Details) (USD $)	3 Months Ended		6 Months Ended				6 Months Ended		12 Months Ended	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 From Commercial Insurance Carrier 1 [Member] Customer Concentration Risk [Member]	Jun. 30, 2014 From Commercial Insurance Carrier 2 [Member] Customer Concentration Risk [Member]	Jun. 30, 2014 Restricted Stock Units (RSUs) [Member]	Jun. 30, 2013 Derivative Warrant Gain to APIC [Member]	Dec. 31, 2013 Derivative Warrant Gain to APIC [Member]	Jun. 30, 2014 Accounts Receivable [Member] Customer Concentration Risk [Member]	Jun. 30, 2014 Minimum [Member]	Jun. 30, 2014 Maximum [Member]
Note 2 - Summary of Significant Accounting Policies (Details) [Line Items]
Equity Method Investment, Ownership Percentage											20.00%	50.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	20.00%		20.00%
Net Revenue Adjustments	$ 121,000	$ 265,000	$ 67,000	$ 268,000
Fair Value, Concentration of Risk, Accounts Receivable					355,000	224,000
Concentration Risk, Percentage										10.00%
Number of Reportable Segments							1
Prior Period Reclassification Adjustment								$ 1,000,000	$ 392,000