10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2015

OR

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

For the transition period from to

Commission File Number 000-30975

TRANSGENOMIC, INC.

(Exact Name of Registrant as Specified in its Charter)

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

(402) 452-5400

(Registrant’s Telephone Number, Including Area Code)

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

Title of Each Class	Name of Each Exchange On Which Registered
Common Stock, par value $0.01 per share	The NASDAQ Capital Market

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

None

(Title of Class)

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

Yes       No      X

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

Yes       No      X

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

Yes      X         No

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

Yes X    No 

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

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

Large Accelerated Filer ¨                   Accelerated Filer ¨

Non-Accelerated Filer ¨                     Smaller Reporting Company ý

(Do not check if a smaller reporting company)

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

Yes       No  X

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based on the last reported closing price per share of Common Stock as reported on the Nasdaq Capital Market on the last business day of the registrant’s most recently completed second quarter was approximately $19.3 million.

At March 31, 2016, the registrant had 20,695,870 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Definitive Proxy Statement for its 2016 Annual Stockholders’ Meeting are incorporated by reference into Part III of this Annual Report on Form 10-K, to be filed within 120 days of the registrant’s fiscal year ended December 31, 2015.

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TRANSGENOMIC, INC.

Index to Form 10-K for the Fiscal Year Ended December 31, 2015

PART I
	Item 1.	Business	4
	Item 1A.	Risk Factors	9
	Item 1B.	Unresolved Staff Comments	14
	Item 2.	Properties	15
	Item 3.	Legal Proceedings	15
	Item 4.	Mine Safety Disclosures	15
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
	Item 6.	Selected Consolidated Financial Data	18
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	31
	Item 8.	Financial Statements and Supplementary Data
		Report of Independent Registered Public Accounting Firm	33
		Consolidated Balance Sheets as of December 31, 2015 and 2014	34
		Consolidated Statements of Operations for the Years Ended December 31, 2015 and 2014	35
		Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2015 and 2014	36
		Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2015 and 2014	37
		Consolidated Statements of Cash Flows for the Years Ended December 31, 2015 and 2014	38
		Notes to the Consolidated Financial Statements for the Years Ended December 31, 2015 and 2014	40
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	67
	Item 9A.	Controls and Procedures	67
	Item 9B.	Other Information	68
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	69
	Item 11.	Executive Compensation	69
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	69
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	69
	Item 14.	Principal Accounting Fees and Services	69
PART IV
	Item 15.	Exhibits, Financial Statement Schedules	70
SIGNATURES			75

This Annual Report on Form 10-K references the following registered trademarks which are the property of Transgenomic, Inc.: Transgenomic, WAVE, SURVEYOR, FAMILION and ScoliScore. The following trademarks are the property of Transgenomic, Inc.: Advancing Personalized Medicine, the helix logo, ProtocolWriter and Navigator. This report may also refer to trade names and trademarks of other organizations.

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PART I

FORWARD-LOOKING STATEMENTS

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

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

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

Reverse Stock Split

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

The following discussion should be read together with our financial statements and related notes contained in this Annual Report. Results for the year ended December 31, 2015 are not necessarily indicative of results that may be attained in the future.

Item 1. Our Business

Transgenomic, Inc. (“we”, “us”, “our”, the “Company” or “Transgenomic”) is a biotechnology company advancing personalized medicine for the detection and treatment of cancer and inherited diseases through our proprietary molecular technologies and clinical and research services. A key goal is to bring our Multiplexed ICE COLD-PCR (“MX-ICP”) product to the clinical market through strategic partnerships and licensing agreements, enabling the use of blood and other bodily fluids for more effective and patient-friendly diagnosis, monitoring and treatment of cancer.

MX-ICP is technology proprietary to Transgenomic. It is a reagent that improves the ability to detect genetic mutations by 100 - 400 fold over existing technologies. This technology has been validated internally on all currently available sequencing platforms, including Sanger, Next Gen Sequencing and Digital PCR. By enhancing the level of detection of genetic mutations and suppressing the normal, or wild-type DNA, several benefits are provided. It is generally understood that most current technologies are unable to consistently identify mutations that occur in less than approximately 5% of a sample. However, many mutations found at much lower levels, even as low as 0.01%, are known to be clinically relevant and can have significant consequences to a patient: both in terms of how they will respond to a given drug or treatment and how a given tumor is likely to change over time. More importantly, in our view, is the ability to significantly improve the level of detection while using blood, saliva and even urine as a source for DNA, rather than depending on painful, expensive and potentially dangerous tumor biopsies.

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We believe that this is an important advancement in patient care with respect to cancer detection, treatment and monitoring and can result in significant cost savings for the healthcare system by replacing invasive procedures with the simple collection of blood or other bodily fluids. By broadening the types of samples that can be used for testing and allowing all sequencing platforms to provide improved identification of low level mutations, MX-ICP has the potential to make testing more readily available, more patient friendly, enable genetic monitoring of disease progression, effectively guide treatment protocols, and reduce the overall cost of diagnosis and monitoring while significantly improving patient outcomes.

Historically, our operations were organized and reviewed by management along our major product lines and presented in two business segments: Laboratory Services and Genetic Assays and Platforms. Beginning with the quarter ended September 30, 2015, our operations are now organized as one business segment, our Laboratory Services segment, and during the fourth quarter of 2015, we began including a portion of our Laboratory Services segment as discontinued operations.

Our laboratory in Omaha, Nebraska is focused on providing genetic analytical services related to oncology and pharmacogenomics research services supporting Phase II and Phase III clinical trials conducted by pharmaceutical and biotechnology companies. Our laboratory employs a variety of genomic testing service technologies, including our proprietary MX-ICP technology. ICE COLD-PCR is a proprietary ultra-high sensitivity platform technology with breakthrough potential to enable wide adoption of personalized, precision medicine in cancer and other diseases. It can be run in any laboratory that contains standard PCR systems. MX-ICP enables detection of multiple known and unknown mutations from virtually any sample type, including tissue biopsies, blood, urine, saliva, cell-free DNA (“cfDNA”) and circulating tumor cells (“CTCs”) at levels greater than 1,000-fold higher than standard DNA sequencing techniques. It is easy to implement and use within existing workflows. Our laboratory in Omaha is certified under the Clinical Laboratory Improvement Amendment (“CLIA”) as a high complexity laboratory and is accredited by the College of American Pathologists.

Our consolidated balance sheets, statements of operations and statements of cash flows for all periods presented reflect our former Genetic Assays and Platforms activities and Patient Testing business as discontinued operations (See Note 3 - “Discontinued Operations”).

Business Strategy

Our primary objective is to commercialize MX-ICP for the clinical diagnostics market through strategic licensing agreements. MX-ICP facilitates the use of blood and other bodily fluids for the effective and efficient diagnosis and treatment of cancer. It does this by enhancing the level of detection of mutant DNA by 100 - 400 fold. In tumors, mutations can often be found occurring with a frequency of around 5%, which current technologies can readily identify. However, other mutations can be present at much lower frequencies. MX-ICP makes possible as low as 0.01% levels of detection of mutant DNA. We believe that MX-ICP can help dramatically improve the diagnosis and treatment/monitoring of cancer patients. Using MC-ICP-based tests, clinicians can rapidly, effectively and economically monitor a patient’s therapy and progress on an ongoing basis. We plan to commercialize this product directly, but also anticipate partnering with a significant number of life sciences companies and academic institutes to accelerate the adoption and use of the technology. We continue to collaborate with a number of major academics including the University of Pennsylvania and Melbourne University.

Our next set of objectives focuses on strengthening our existing business opportunities around MX-ICP. We continue to provide products and services to biomedical researchers, physicians, medical institutions and diagnostic and pharmaceutical companies that are tied to identifying and understanding genetic mutations and variations and their roles in disease mainly focused on cancer. Our products and services help scientists and physicians understand and predict disease and drug response mainly focused on cancer. As medical practitioners learn to correlate specific mutations and patterns of mutation with specific cancer disease states, drug responses and patient outcomes, it becomes possible to optimize a treatment regimen to a specific patient. This is known as personalized or precision medicine. 

Our internal estimates for the size of the cancer diagnostics market, based on multiple industry sources, suggests a rapidly growing market with a potential annual value of $28 billion (Piper Jaffray Report 2015), built on tissue biopsies and accounting for growth due to the potential for liquid biopsies or increased testing to monitoring cancer patients. Growth in this market has been in part fueled by the rapid adoption of Next-Generation Sequencing (“NGS”) and Digital PCR, along with an emphasis by the U.S. Food & Drug Administration (“FDA”) for better and more uniform compliance regarding Laboratory Designed Test assays and will be accelerated further by the adoption of liquid biopsies in association with the sequencing platforms. One of the main reasons for this is that there is still a need for more informative data to help guide treatment. We believe that this will only occur when there is a move to blood and liquid testing of cancer patients earlier and more regularly (monitoring) to ensure more accurate diagnoses and more targeted and effective treatments. Additionally the desire for less costly and easier sample collection will drive the adoption of blood and liquid testing. We believe that MX-ICP is at the forefront of technologies designed to accomplish this transition away from traditional tissue biopsies, analysis and monitoring and will help precision medicine to become a reality.

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Transgenomic does not intend to build the extensive infrastructure necessary to fully commercialize MX-ICP alone. While there are applications of the technology that we will sell directly, we anticipate that the majority of revenues over time will be generated through a combination of exclusive, non-exclusive or semi-exclusive licenses to partners and collaborators. Our goal is to establish the fastest time to market possible for our product and to leverage already existing infrastructure rather than depend on making significant capital expenditures or other investments of our own. Our potential partners generally fall into one of three categories:

• Laboratory instrumentation and reagents suppliers (such as: Thermo Fisher Scientific, Inc., Illumina, Inc., Bio-Rad Laboratories, Inc., Qiagen N.V. and Affymetrix, Inc.). The usefulness of MX-ICP across all platforms and its ability to detect tumor mutations in a wide range of samples make such companies natural partners for Transgenomic. We believe that MX-ICP has the potential to greatly expand the market for cancer monitoring as a complement, not as a competitor, to existing products.

• Pharmaceutical and Biotechnology companies (such as: Amgen, Inc., Novartis AG, Clovis Oncology, Inc., AstraZeneca plc, GlaxoSmithKline plc and Bristol-Myers Squibb Company). For companies developing new cancer drugs, MX-ICP has the potential to reduce the risk of clinical trials, as well as support the development of companion diagnostics to match drugs with patients.

• Clinical Laboratories (such as: Laboratory Corporation of America Holdings, Quest Diagnostics Incorporated and the many CLIA-certified laboratories including major academic centers such as Dana Fabre Cancer Institute (DFCI) Mayo, Johns Hopkins University (JHU) and MD Anderson throughout the United States). MX-ICP would allow clinical laboratories (Molecular Diagnostics Labs) to effectively compete with more specialized providers and to become full service providers as personalized, precision medicine becomes more widely adopted and improves patient care and outcomes.

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

• Developing new technologies and products internally; and

• Entering into joint-development efforts with other companies and academics.

Our strategy is to leverage the discoveries in our laboratory to create “kits” or assays or CLIA tests to distribute directly ourselves and via our strategic partnerships and licensing agreements.

We will continue to develop new applications for, and enhancements of, MX-ICP and capitalize on our expertise and intellectual properties to develop unique new applications of the MX-ICP technology for potential partnerships. We will focus on growth in our core markets via direct sales and business development activities with industry leaders across the globe.

Products

MX-ICP is our proprietary technology product with industry transforming potential. It is exclusively licensed by Transgenomic from Dana-Faber Cancer Institute. MX-ICP is a unique amplification technology that suppresses wild-type (normal) DNA and thereby enables the selective amplification of all mutations (genetic alterations) present in that region of the genome. As a result of its ultra-high sensitivity (1,000 times more sensitive than standard DNA sequencing alone), it works on almost all sample types that contain DNA, including tissue, blood, urine and saliva or sputum; it can be used on all sequencing platforms; and it is easily implemented into standard laboratory processes without significant investment of time or resources. MX-ICP has applications in all therapeutic areas, but the first and major focus at this time is the estimated expanding $28 billion market for liquid biopsies and cancer testing. The Company also believes that the current market for clinical diagnostic (MDx) use of PCR, which is estimated to be in excess of $10 billion in 2015 based on external reports, will continue to grow and is a validation of the size of market for this type of technology and product. Importantly, MX-ICP is platform agnostic and can therefore be integrated and implemented into any clinical testing, basic research or biopharmaceutical laboratory. In addition, the MX-ICP product is a simple chemical reagent that is able to be mass-produced and supplied efficiently to any end user.

Our highly specialized genetics analytical services and expertise are utilized in our CLIA-certified laboratory in Omaha, Nebraska. Our laboratory supports pharmaceutical companies in their clinical trials, primarily Phase II and Phase III trials, and has over 20 years of clinical trials development experience and its clients include many of the top 20 worldwide pharmaceuticals and biotechnology companies.

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Our expanding oncology tests are focused heavily on genetic mutations commonly associated with the major cancer types - NSCLC (lung), CRC (colorectal), breast, melanoma and prostate. We primarily test for mutations in the KRAS, NRAS, BRAF and PIK3CA genes, all associated with the most common types of cancers. The presence or absence of these mutations increasingly influences oncologists’ treatment choices for their patients. We have been focused on testing for low level mutations in colorectal cancer tissue biopsies that are targets for new therapies, and we intend to continue this and improve on it as we incorporate our MX-ICP technology products into our oncology testing menu. We also offer tests for hereditary cancer-predisposing syndromes.

Sales and Marketing

Our strategy for commercializing MX-ICP is to focus on enabling strategic technology licensing agreements with established partners in the fields of: instrumentation and reagent suppliers, biotechnology and pharmaceutical companies, and clinical laboratories.

The commercial focus is broken down into three categories:

1.Services: performing services for pharmaceuticals and biotechnology companies in order to enable them to submit their drug targets to the FDA for approval

2.Products: this includes MX-ICP kits for research use and MX-ICP CLIA Testing for oncologists in the United States

3.Licensing: strategic partnerships and likening agreements to grant companies, academics and clinical laboratories with various levels of access to MX-ICP

We see over time that the majority of our revenues will come from the later “licensing” agreements and will be of a high margin, but in the near term (first two years) revenue is expected to be generated from all three commercial areas. We are focusing on these business to business activities and using our direct staff and external consultants with significant market and domain expertise to accelerate this strategy.

Customers

We expect to expand our customer base through licensing and partnership agreements for MX-ICP with pharmaceutical and biotechnology companies and clinical laboratories.

Research and Development

We continue to invest in research and development in order to remain competitive and to take advantage of new business opportunities as they arise. We maintain a program of research and development with respect to platform technologies, such as ICE COLD-PCR, instruments, test kits and services, engaging existing and new technologies to create scientific and medical applications that will add value to patient care as well as significant commercial value. Major areas of focus include the (i) development of ICE COLD-PCR applications for ultra-high sensitivity mutation detection in any liquid (including blood, sputum and urine) and tissue samples (fresh, frozen, FNA, FFPE, etc.); (ii) development of a new strategy for mutation detection and sequence confirmation using micro-capillary electrophoresis; (iii) use of commercially-available assays and the development of custom assays for detection of somatic mutations in cancer samples using NGS and digital PCR or droplet PCR; and (iv) development of biomarker assays for the marketplace. For the years ended December 31, 2015 and 2014, our research and development expenses related to continuing operations were $1.9 million and $2.2 million, respectively.

Manufacturing

Historically, we manufactured bioconsumable products including our test kits, separation columns, liquid reagents and enzymes. The major components of our WAVE Systems were manufactured for us by a third party. We integrated our hardware and software with these third party manufactured components. Our manufacturing facilities for WAVE Systems and bioconsumables were located in Omaha, Nebraska and San Jose, California. The historical costs of operating the manufacturing facilities are included in our results for discontinued operations.

Intellectual Property

To establish and protect our proprietary technologies and products, we rely on a combination of patent, copyright, trademark and trade secret laws, license agreements’ contractual confidentiality provisions and confidentiality agreements. Our ICE COLD-PCR platform technology is protected by in-licensed patents that expire in various periods through 2031. As part of the FAMILION acquisition in 2010, we acquired exclusive rights to the FAMILION family of genetic tests for inherited disease, including the patents protecting this technology. Our FAMILION patents and acquired technology are included as part of our discontinued operations. As we expand our product offerings, we also are extending our patent development efforts to protect such product

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offerings. Established competitors, as well as companies that purchase and enforce patents and other intellectual property, may already have patents covering similar products. There is no assurance that we will be able to obtain patents covering our products, or that we will be able to obtain licenses from such companies on favorable terms or at all. However, while patents are an important element of our success, our business as a whole is not significantly dependent on any one patent.

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

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

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

Government Regulation

We are subject to a variety of federal, state and municipal environmental and safety laws based on our use of hazardous materials in both manufacturing and research and development operations. We believe that we are in material compliance with applicable environmental laws and regulations. However, if we cause contamination to the environment, intentionally or unintentionally, we could be responsible for damages related to the clean-up of such contamination or individual injury caused by such contamination. We cannot predict how changes in laws and regulations will impact how we conduct our business operations in the future or whether the costs of compliance will increase in the future.

Regulation by governmental authorities in the United States and other countries is not expected to be a significant factor in the manufacturing, labeling, distribution and marketing of our products and systems, especially when considering our partnership and licensing strategy. However, we continue to monitor and engage in dialog with the FDA and other regulatory bodies. Please see the section of this Annual Report entitled “Risk Factors” for other risks associated with regulatory requirements.

Competition

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

Employees

As of December 31, 2015 and 2014, we had employees in continuing operations focused in the following areas of operation:

	December 31,
	2015	2014
Manufacturing and Laboratory	11	16
Sales, Marketing and Administration	17	14
Research and Development	9	5
	37	35

All of our employees as of December 31, 2015 were full-time employees.

Our employees were employed in the following geographical locations:

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	December 31,
	2015	2014
United States	36	34
United Kingdom	1	1
	37	35

General Information

We were incorporated in Delaware on March 6, 1997. Our principal office is located at 12325 Emmet Street, Omaha, Nebraska 68164 (telephone: 402-452-5400). This facility houses certain administrative staff and laboratories. Our New Haven, Connecticut facility houses certain administrative operations.

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

The public may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC’s Internet website is located at http://www.sec.gov.

Executive Officers of the Registrant

Paul Kinnon. Mr. Kinnon, age 52, has served as our President and Chief Executive Officer and a Director since September 2013. On October 31, 2014, Mr. Kinnon was appointed Interim Chief Financial Officer. Mr. Kinnon has more than 20 years of global leadership experience in innovative life science and diagnostics companies. From January through August 2013, he provided consulting services to the life science sector as a Partner at Arch Global Research. During a portion of this time, Mr. Kinnon provided consulting services to us. From January 2007 to December 2012, Mr. Kinnon was President, Chief Executive Officer and a Director of ZyGEM Corporation Limited, a biotechnology company, where he transformed the company from a regional enzyme provider into a leader in integrated microfluidic technologies for forensic and clinical diagnostic applications. From May 2006 to June 2007, Mr. Kinnon was Vice President & General Manager Environmental Diagnostics (later expanded to Applied Markets) at Invitrogen Corporation (now Life Technologies), a high growth life sciences and diagnostics firm, and from October 2004 until April 2006, he was Vice President, Global Strategic Alliances at Invitrogen. Previously, Mr. Kinnon also held business, sales and marketing roles of increasing responsibility at Guava Technologies, Inc., Cellomics, Inc. and other life science companies. Mr. Kinnon earned his Bachelor of Sciences degree in Applied Chemistry at Coventry University in the United Kingdom and holds a Diploma of Marketing. A petition in bankruptcy was filed against ZyGEM Corporation Limited in April 2013.

Leon F. Richards. Mr. Richards, age 59, was appointed our Chief Accounting Officer by our Board of Directors in October 2014. Mr. Richards is an experienced corporate finance executive and certified public accountant with more than 30 years of experience building and leading financial organizations. Mr. Richards has served as our Controller since November 2012. He most recently served as Controller and Chief Accounting Officer of Baldwin Technology Company, Inc., a leading global supplier of process automation equipment for the printing and publishing industry, from May 2004 to September 2012. Mr. Richards earned his Bachelor of Business Administration and Accounting from Iona College.

Item 1A. Risk Factors.

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

We have experienced annual losses from continuing operations since inception of our operations. Our operating loss for the years ended December 31, 2015 and 2014 was $9.2 million and $10.6 million, respectively. These historical losses have been due principally to the expenses that we have incurred in order to develop and market our products, the fixed nature of our manufacturing costs and merger and acquisition costs.

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Recurring operating losses raise substantial doubt about our ability to continue as a going concern.

We have incurred substantial operating losses and have used cash in our operating activities for the past several years. As of December 31, 2015, we had negative working capital of approximately $13.7 million. During the first quarter of 2016, we received net proceeds of approximately $2.0 million from the issuance of preferred stock and warrants to purchase shares of common stock.

Our current operating plan projects improved operating results, improvement in collection rates and monetization of underutilized assets. There are no guarantees that these efforts will be successful and, if not, we may use more cash than projected and not be able to meet our current obligations through December 31, 2016. These conditions raise substantial doubt about our ability to continue as a going concern.

As with any operating plan, there are risks associated with our ability to execute it. Therefore, there can be no assurance that we will be able to satisfy our obligations, or achieve the operating improvements as contemplated by the current operating plan. If we are unable to execute this plan, we will need to find additional sources of cash not contemplated by the current operating plan and/or raise additional capital to sustain continuing operations as currently contemplated. We could seek to raise additional funds through various potential sources such as through the sale of assets or sale of debt or equity securities. However, there can be no assurance that the additional funding sources will be available to us at reasonable terms or at all. If we are unable to achieve our operating plan or obtain additional financing, our business would be jeopardized and we may not be able to continue as a going concern.

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

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

• Revenue generated by sales of our products;

• Expenses incurred in manufacturing and selling our products;

• Costs of developing new products or technologies;

• Costs associated with capital expenditures;

• The number and timing of strategic transactions; and

• Working capital requirements related to growing existing business.

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

We may need to raise additional capital in the future to fund expansion, respond to competitive pressures or acquire complementary businesses, technologies or services. Such additional financing may not be available on terms acceptable to us or at all. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution, and to the extent we engage in additional debt financing, if available, we may become subject to additional restrictive covenants that could limit our flexibility in conducting future business activities. If additional financing is not available or not available on acceptable terms, we may not be able to continue as a going concern, fund our expansion, promote our brands, take advantage of acquisition opportunities, develop or enhance services or respond to competitive pressures.

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

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

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

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

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Sales have been variable.

Our laboratory performs project-based work that changes from quarter to quarter. Therefore, comparison of the results of successive quarters may not accurately reflect trends or results for the full year due to the fact that ICP is a new product and will enable the liquid biopsy market to evolve rapidly and ensure Precision Medicine is adopted globally. We see the ICP business and revenues growing as our commercial strategy is successful and our partnerships and licensing agreements become profitable.

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

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

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

We may experience delays in processing biological samples caused by software and other errors. Any delay in processing samples could have an adverse effect on our business, financial condition and results of operations.

Our laboratories require ongoing CLIA certification.

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

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

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

Failure to comply with HIPAA could be costly.

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

Our business could be adversely impacted by health care reform.

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

We may be subject to client lawsuits.

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

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

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

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

• Changes in foreign currency exchange rates can make our products more costly in local currencies because our foreign sales are typically paid for in British Pounds or in Euros;

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

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

Our dependence on our suppliers exposes us to certain risks.

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

Our markets are very competitive.

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

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

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

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

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

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

We have licensed key components of our technologies from third parties. If these agreements were to terminate prematurely due to our breach of the terms of these licenses or we otherwise fail to maintain our rights to such technologies, we may lose the right to manufacture or sell a substantial portion of our products. In addition, we may need to obtain licenses to

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additional technologies in the future in order to keep our products competitive. If we fail to license or otherwise acquire necessary technologies, we may not be able to develop new products that we need to remain competitive.

The protection of intellectual property in foreign countries is uncertain.

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

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

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

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

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

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

At December 31, 2015, we had obligations to issue 9,963,886 shares of common stock upon exercise of outstanding stock options, warrants or conversion rights. The issuance of these securities may be dilutive to our current stockholders and

could negatively impact the market price of our common stock.

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

At December 31, 2015, we had 13,915,691 shares of common stock outstanding. The sale of a significant number of shares into the public market has the potential to cause significant downward pressure on the price of our common stock. This is particularly the case if the shares being placed into the market exceed the market’s ability to absorb the stock. This presents an opportunity for short sellers to contribute to the further decline of our stock price. If there are significant short sales of our stock, the price decline that would result from this activity will cause the share price to decline more so, which, in turn, may cause long holders of the stock to sell their shares, thereby contributing to sales of our stock in the market. In addition, the large concentration of our shares are held by a small group of stockholders which could result in increased volatility in our stock price due to the limited number of shares available in the market.

We have previously identified material weaknesses and ineffective internal controls could impact our business and financial results.

Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. In the course of auditing our financial statements as of and for the year ended December 31, 2014, our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting relating to proper timing and recognition of revenue and the elements used in our analysis and evaluation of the allowance for doubtful accounts to ensure that the allowance for doubtful accounts is reasonably stated. We remediated these material weaknesses in the year ended December 31, 2015.

Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and financial results could be harmed, we could fail to meet our financial reporting obligations and we may not be able to accurately report financial results or prevent fraud.

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

Our revolving line of credit and term loan with affiliates of Third Security, LLC, a related party, (the “Lenders”) are governed by a Loan and Security Agreement, which contains certain affirmative and negative covenants. Under the term loan, we are required to maintain a minimum liquidity ratio and achieve a minimum amount of revenue, and we also agreed not to (i) pledge or otherwise encumber our assets other than to the Lenders, (ii) enter into additional borrowings or guarantees, (iii) repurchase our capital stock, or (iv) enter into certain mergers or acquisitions without the Lenders’ consent. To secure the repayment of amounts borrowed under the revolving line of credit and term loan, we granted the Lenders a security interest in all of our assets. Failure to comply with the covenants under the loan agreement would be an event of default under the loan agreement that, if not cured or waived, would give the Lenders the right to cease making additional advances, accelerate repayment of all sums due and take action to collect the amounts owed to them, including foreclosing on their security interest, which would have a material adverse effect on our financial condition and results of operations. As of December 31, 2015, we were not in compliance with the financial covenants of the Loan and Security Agreement.

If we cannot meet the continued listing requirements of The Nasdaq Stock Market LLC (“Nasdaq”), Nasdaq may delist our shares of common stock, which would have an adverse impact on the trading volume, liquidity and market price of our common shares. 

On February 23, 2016, we received written notice (the “Notice”) from Nasdaq indicating that, based on the closing bid price of our common stock for the preceding 30 consecutive business days, we were not in compliance with the $1.00 minimum bid price requirement for continued listing on the Nasdaq Capital Market (the “Minimum Bid Price Requirement”), as set forth in Nasdaq Listing Rule 5550(a)(2). The Notice has no immediate effect on the listing of our common stock, and our common stock will continue to trade on the Nasdaq Capital Market under the symbol “TBIO” at this time. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until August 22, 2016, to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for at least ten consecutive business days during this 180 calendar day period.

If we are not in compliance with the Minimum Bid Price Requirement by August 22, 2016, Nasdaq may provide us with a second 180 calendar day period to regain compliance. To qualify for the second 180 calendar day period, we would be required to (i) meet the continued listing requirement for the Nasdaq Capital Market for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, except for the Minimum Bid Price Requirement, and (ii) notify Nasdaq of our intent to cure our noncompliance with the Minimum Bid Price, including by effecting a reverse stock split, if necessary. If we do not indicate our intent to cure the deficiency or if it does not appear to Nasdaq that it would be possible for us to cure the deficiency, we would not be eligible for the second 180 calendar day period, and our common stock would then be subject to delisting from the Nasdaq Capital Market.

If we do not regain compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that our common stock will be subject to delisting. We would then be entitled to appeal the Nasdaq Staff’s determination to a Nasdaq Listing Qualifications Panel and request a hearing.

We intend to monitor the closing bid price of our common stock and consider our available options to resolve our noncompliance with the Minimum Bid Price Requirement. No determination regarding our response to the Notice has been made at this time. There can be no assurance that we will be able to regain compliance with the Minimum Bid Price Requirement or will otherwise be in compliance with the other listing standards for the Nasdaq Capital Market. A suspension or delisting of our common stock could adversely affect our relationships with our business partners and suppliers and customers’ and potential customers’ decisions to purchase our products and services, and could have a material, adverse impact on our business and operating results. In addition, a suspension or delisting could impair our ability to raise additional capital through equity or debt financings and our ability to attract and retain employees by means of equity compensation.

In the event of a delisting or suspension, our common stock could begin trading on the over-the-counter bulletin board, or in the so-called “pink sheets.” In the event of such trading, it is likely that there would be significantly less liquidity in the trading of our common stock; decreases in institutional and other investor demand for our common stock, coverage by securities analysts, market making activity and information available concerning trading prices and volume; and fewer broker-dealers willing to execute trades in our common stock. The occurrence of any of these events could result in a further decline in the market price of our common stock and could have a material adverse effect on us.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties

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

Location	Function	Square Footage	2016 Scheduled Rent		Lease Term Expires
Omaha, Nebraska	Multi Functional (1)	18,265	$	221	July 2022
Omaha, Nebraska	Multi Functional (1)	4,410	$	42	May 2017
New Haven, Connecticut	Multi Functional (2)	22,459	$	461	June 2020

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

(2) Multi Functional facilities include functions related to manufacturing, services, sales and marketing, research and development and/or administration. Part of this facility houses functions that are included in our discontinued operations.

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

Item 3. Legal Proceedings.

We are subject to a number of claims of various amounts which arise out of the normal course of our business. In our opinion, the disposition of pending claims could have a material adverse effect on our financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

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

Market Information.    Our common stock is listed on the Nasdaq Capital Market under the symbol “TBIO”. Prior to May 9, 2014, our common stock traded on the OTCQB under the symbol “TBIO”. The following table sets forth the high and low closing prices for our common stock during each of the quarters of 2015 and 2014. The over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

	High		Low
Year Ended December 31, 2015
First Quarter	$	3.90	$	1.41
Second Quarter	$	2.63	$	1.39
Third Quarter	$	1.72	$	0.92
Fourth Quarter	$	1.36	$	0.75
Year Ended December 31, 2014
First Quarter	$	6.42	$	4.21
Second Quarter	$	4.85	$	3.10
Third Quarter	$	4.00	$	3.60
Fourth Quarter	$	3.81	$	1.52

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

Holders.    At March 31, 2016, there were 20,695,870 shares of our common stock outstanding and approximately 78 holders of record.

Dividends.   We have never declared or paid any cash dividends on our common stock and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. Dividends on our common stock will be paid only if and when declared by our Board. The Board’s ability to declare a dividend is subject to limits imposed by Delaware corporate law. Pursuant to the terms of the Loan and Security Agreement by and between us and affiliates of the Lenders, our Board also may not pay any dividends without the prior consent of the Lenders; provided that our Board may pay dividends solely in common stock without such consent. In determining whether to declare dividends, the Board may consider our financial condition, results of operations, working capital requirements, future prospects and other relevant factors.

Sales of Unregistered Securities.

Convertible Notes Private Placement:On December 31, 2014, we entered into an Unsecured Convertible Promissory Note Purchase Agreement (the “Note Purchase Agreement”) with an accredited investor (the “Investor”) pursuant to which we agreed to issue and sell to the Investor in a private placement an unsecured convertible promissory note (the “Initial Note”). We issued the Initial Note in the aggregate principal amount of $750,000 to the Investor on December 31, 2014. On January 15, 2015, we entered into the Note Purchase Agreement with seven accredited investors (the “Additional Investors” and, collectively with the Investor, the “Note Investors”) and, on January 20, 2015, issued and sold to the Additional Investors, in a private placement, notes (the “Additional Notes” and, collectively with the Initial Note, the “Notes”) in an aggregate principal amount of $925,000. Under the terms of the Notes, the outstanding principal and unpaid interest accrued is convertible into shares of our common stock as follows: (i) commencing upon the date of issuance of the applicable Note (but no earlier than January 1, 2015), the Note Investor became entitled to convert, on a one-time basis, up to 50% of the outstanding principal and unpaid interest accrued under the Note, into shares of our common stock at a conversion price equal to the lesser of (a) the average closing price of the common stock on the principal securities exchange or securities market on which our common stock is then traded (the “Market”) for the 20 consecutive trading days immediately preceding the date of conversion, and (b) $2.20 (subject to adjustment for stock splits, stock dividends, other distributions, recapitalizations and the like); and (ii) commencing February 15, 2015, the Note Investor was entitled to convert, on a one-time basis, any or all of the remaining outstanding principal and unpaid interest accrued under the

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Note, into shares of our common stock at a conversion price equal to 85% of the average closing price of our common stock on the Market for the 15 consecutive trading days immediately preceding the date of conversion.

Craig-Hallum acted as the sole placement agent for the sale and issuance of the Additional Notes. In connection with the sale and issuance of the Additional Notes, we issued to Craig-Hallum an unsecured convertible promissory note, upon the same terms and conditions as the Notes, in an aggregate principal amount equal to 5% of the proceeds received by us pursuant to the sale and issuance of the Additional Notes, or $46,250. As of the date of filing of this Annual Report, the Placement Agent Note remains outstanding.

We sold the Notes to “accredited investors,” as that term is defined in the Securities Act of 1933, as amended (the “Securities Act”), and in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act and corresponding provisions of state securities or “blue sky” laws. Each Investor represented to us that it was acquiring the Note, and would acquire the underlying shares of common stock, for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof.

The issuance of the Initial Note required the repricing and issuance of additional common stock warrants to the holders of warrants issued in connection with our February 2012 private placement. The exercise price of the 2012 warrants decreased from $10.86 per share to $10.25 per share and the number of shares issuable upon exercise of the warrants increased from 1,309,785 to 1,387,685.

The issuance of the Additional Notes required the repricing and issuance of additional common stock warrants to the holders of warrants issued in connection with our February 2012 private placement. The exercise price of the 2012 warrants decreased from $10.25 per share to $9.59 per share and the number of shares issuable upon exercise of the warrants increased from 1,387,685 to 1,483,161.

As of December 31, 2015, $1,150,000 of the aggregate principal amount of the Notes, and accrued interest thereon, has been converted into an aggregate of 783,809 shares of our common stock.

July 2015 Offering:On June 30, 2015, we entered into a Securities Purchase Agreement with certain accredited investors (the “July 2015 Investors”) pursuant to which, on July 7, 2015, we sold to the July 2015 Investors, and the July 2015 Investors purchased from us, (a) an aggregate of approximately 1.5 million shares of our common stock at a price per share of $1.42, (b) warrants (the “Series B Warrants”) to purchase up to an aggregate of 0.7 million shares of our common stock with an exercise price of $0.01 per share, and (c) warrants (the “Series A Warrants” and, together with the Series B Warrants, the “July 2015 Warrants”) to purchase up to an aggregate of 1.2 million shares of our common stock, with an exercise price of $1.66 per share (collectively, the “July 2015 Offering”). The purchase price for the Series B Warrants was $1.42 per share of our common stock subject to the Series B Warrants. Each of the July 2015 Warrants has a term of 5 and 1/2 years. The Series B Warrants are immediately exercisable. The Series A Warrants became exercisable on January 7, 2016, six months from the date of issuance. The aggregate gross proceeds to us from the July 2015 Offering were approximately $3.0 million.

Craig-Hallum Capital Group LLC (the “2015 Placement Agent”) served as the sole placement agent for the July 2015 Offering. In consideration for services rendered as the placement agent in the July 2015 Offering, we (a) paid to the 2015 Placement Agent cash commissions equal to approximately $212,783, or 7.0% of the gross proceeds received in the July 2015 Offering; (b) issued to the 2015 Placement Agent a five-year warrant to purchase up to 107,033 shares of our common stock with an exercise price of $1.66 per share and which is subject to other terms that are the same as the terms of the Series A Warrants (the “Agent Warrant”); and (c) reimbursed the 2015 Placement Agent for reasonable out-of-pocket expenses, including fees paid to the 2015 Placement Agent’s legal counsel, incurred in connection with the July 2015 Offering, which reimbursable expenses did not exceed $50,000.

The shares of common stock, the July 2015 Warrants and the Agent Warrant issued in connection with the July 2015 Offering were offered and sold in transactions exempt from registration under the Securities Act, in reliance on Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder. Each of the July 2015 Investors represented that it was an “accredited investor,” as defined in Regulation D, and was acquiring the securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof.

The July 2015 Offering required the repricing and issuance of additional common stock warrants to the holders of warrants issued in connection with our February 2012 private placement. The exercise price of these warrants decreased from $7.56 per share to $6.50 per share and the number of shares issuable upon exercise of the warrants increased from 1,881,396 to 2,188,177.

Issuer Purchases of Equity Securities.   We made no purchases of our common stock during the year ended December 31, 2015. Therefore, tabular disclosure is not presented.

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Item 6. Selected Consolidated Financial Data.

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

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

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

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

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

Transgenomic, Inc. (“we”, “us”, “our”, the “Company” or “Transgenomic”) is a biotechnology company advancing personalized medicine for the detection and treatment of cancer and inherited diseases through our proprietary molecular technologies and clinical and research services. A key goal is to bring our Multiplexed ICE COLD-PCR (“MX-ICP”) product to the clinical market through strategic partnerships and licensing agreements, enabling the use of blood and other bodily fluids for more effective and patient-friendly diagnosis, monitoring and treatment of cancer.

MX-ICP is technology proprietary to Transgenomic. It is a reagent that improves the ability to detect genetic mutations by 100 - 400 fold over existing technologies. This technology has been validated internally on all currently available sequencing platforms, including Sanger, Next Gen Sequencing and Digital PCR. By enhancing the level of detection of genetic mutations and suppressing the normal or wild-type DNA, several benefits are provided. It is generally understood that most current technologies are unable to consistently identify mutations that occur in less than approximately 5% of a sample. However, many mutations found at much lower levels, even as low as 0.01%, are known to be clinically relevant and can have significant consequences to a patient: both in terms of how they will respond to a given drug or treatment and how a given tumor is likely to change over time. More importantly, in our view, is the ability to significantly improve the level of detection while using blood, saliva and even urine as a source for DNA, rather than depending on painful, expensive and potentially dangerous tumor biopsies. We believe that this is an important advancement in patient care with respect to cancer detection, treatment and monitoring and can result in significant cost savings for the healthcare system by replacing invasive procedures with the simple collection of blood or other bodily fluids. By broadening the types of samples that can be used for testing and allowing all sequencing platforms to provide improved identification of low level mutations, MX-ICP has the potential to make testing more readily available, more patient friendly, enable genetic monitoring of disease progression, effectively guide treatment protocols, and reduce the overall cost of diagnosis and monitoring while significantly improving patient outcomes.

Historically, our operations were organized and reviewed by management along our major product lines and presented in two business segments: Laboratory Services and Genetic Assays and Platforms. Beginning with the quarter ended September 30, 2015, our operations are now organized as one business segment, our Laboratory Services segment, and during the fourth quarter of 2015, we began including a portion of our Laboratory Services segment as discontinued operations.

Our laboratory in Omaha, Nebraska is focused on providing genetic analytical services related to oncology and pharmacogenomics research services supporting Phase II and Phase III clinical trials conducted by pharmaceutical and biotechnology companies. Our laboratory employs a variety of genomic testing service technologies, including our proprietary MX-ICP technology. ICE COLD-PCR is a proprietary ultra-high sensitivity platform technology with breakthrough potential to enable wide adoption of personalized, precision medicine in cancer and other diseases. It can be run in any laboratory that contains standard PCR systems. MX-ICP enables detection of multiple known and unknown mutations from virtually any sample type, including tissue biopsies, blood, urine, saliva, cell-free DNA (“cfDNA”) and circulating tumor cells (“CTCs”) at levels greater than 1,000-fold higher than standard DNA sequencing techniques. It is easy to implement and use within existing workflows. Our

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laboratory in Omaha is certified under the Clinical Laboratory Improvement Amendment (“CLIA”) as a high complexity laboratory and is accredited by the College of American Pathologists.

The following discussion should be read together with our financial statements and related notes contained in this Annual Report. Results for the year ended December 31, 2015 are not necessarily indicative of results that may be attained in the future.

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Executive Summary

2015 Results of Continuing Operations

Net sales for the year ended December 31, 2015 of $1.7 million increased $0.4 million or 33% versus the $1.3 million reported for the year ended December 31, 2014. The increase primarily reflects an increase in sales of our contract laboratory services.

Gross profit was a negative $0.3 million for the year ended December 31, 2015 versus a negative $0.9 million for the year ended December 31, 2014. The increase in gross profit was a result of the increased sales along with decreased laboratory costs in 2015 as compared to 2014.

Operating expenses of $8.9 million for the year ended December 31, 2015 were $0.7 million lower than the comparable 2014 period. This is due to decreases in stock compensation costs and patent costs in 2015 as compared to 2014.

The loss from operations for the year ended December 31, 2015 was $9.2 million, versus $10.6 million for the comparable 2014 period, due to the increased gross profit and lower operating expenses.

We reported a net loss from continuing operations of $10.1 million in 2015 as compared to $10.8 million for the year ended December 31, 2014.

2015 Overview and Recent Highlights

We are a biotechnology company advancing personalized medicine in cardiology, oncology and inherited diseases through our revolutionary multiplexed ICE-COLD PCR^TM, or MX-ICP, technology. We also provide specialized clinical and research services to biopharmaceutical companies developing targeted therapies.

On February 27, 2015, we entered into a purchase agreement with Craig-Hallum Capital Group LLC (the “Underwriter”) pursuant to which we sold 3,573,899 shares of our common stock and corresponding warrants to purchase up to 714,780 shares of common stock. Each share of common stock was sold in combination with a warrant to purchase 0.20 of a share of common stock. The purchase price to the public for each share of common stock and accompanying warrant was $1.95. The purchase price paid by the Underwriter to us for the common stock and accompanying warrants was $1.8135. The net proceeds to us, after deducting the Underwriter’s discount and other estimated expenses, were approximately $6.2 million.

On March 11, 2015, we announced an expanded license agreement with Exiqon A/S for access to their proprietary Locked Nucleic Acid (LNA™) oligonucleotides that enhance MX-ICP’s ultra-sensitive detection of cancer mutations in tissue and liquid biopsies. The expanded license agreement provides us with worldwide access to LNA oligos for use with all of our proprietary ultra-high sensitivity mutation enrichment technologies for analysis of all cancer genes on all platforms.

On April 20, 2015, we announced that our MX-ICP technology was now available to pharmaceutical and biotechnology customers of our Biomarker Identification business unit. MX-ICP is an ultra-high sensitivity DNA amplification technology that allows the detection of multiple mutations in multiple genes from any sample, either from a tumor biopsy or from biofluids such as blood or urine.

On April 23, 2015, we announced a revised agreement with Horizon Discovery Group to incorporate their advanced human genomic reference standards in our MX-ICP kits on an original equipment manufacturer (OEM) basis, further advancing the quality and performance of MX-ICP.

On May 29, 2015, at the 2015 American Society of Clinical Oncology (ASCO) Annual Meeting, we announced the launch of our new MX-ICP CLIA mutation detection service to enable more informed diagnoses, better treatment decisions and ongoing cancer patient monitoring. The service leverages the ultra-high sensitivity of our MX-ICP technology to deliver highly accurate results from almost any type of patient sample. The first available tests are for the detection of epidermal growth factor receptor (EGFR) mutations applicable to lung and colorectal cancer. We intend to add additional detection tests on an ongoing basis.

On June 9, 2015 we announced that Mya Thomae had been named to the Board of Directors and Harjit Kullar, Ph.D., was appointed Vice President of Marketing for the Biomarker Discovery and Genetic Assays and Platforms business segments. Ms. Thomae is Regulatory Head at sequencing leader Illumina and Dr. Kullar held marketing and sales positions of increasing

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responsibility at Life Technologies and Thermo Fisher.

 On June 11, 2015 we announced that Katherine Richardson, Ph.D., Transgenomic’s Vice President of Research & Development, would deliver a keynote address at the GTBio Cancer Markers & Liquid Biopsies Conference. In her talk, Dr. Richardson highlighted how our MX-ICP technology uniquely enables use of liquid biopsies and facilitates broader adoption of precision and personalized medicine.

On June 22, 2015, we announced our plans to launch a pipeline of MX-ICP-based cancer tests during 2015, including the release of up to six new lab-based cancer tests targeting actionable mutations in melanoma, lung cancer and colorectal cancer. The tests will include single and multiple gene panel tests and are usable with liquid or tissue biopsy sample. The tests will be available for diagnostic use through our CLIA-certified laboratory.

On June 30, 2015, we entered into a Securities Purchase Agreement that raised gross proceeds of approximately $3.0 million in a private placement financing. Pursuant to the agreement, we sold an aggregate of approximately 1.5 million shares of our common stock and warrants to purchase up to an aggregate of 0.7 million shares of our common stock, in each case at a purchase price of $1.42 per share. Additionally, in accordance with the agreement, we also sold warrants to purchase up to an aggregate of 1.2 million shares of our common stock with an exercise price of $1.66 per share.

On July 1, 2015, we announced the availability of our ICEme™ Mutation Enrichment Kits to cancer researchers worldwide. The kits, which were launched on June 30, 2015, are based on our Multiplexed ICE-COLD PCR™ (“MX-ICP”) technology and they are customizable to meet researchers’ specific needs. The initial menu includes 17 clinically actionable mutations/exons for use as single mutation tests or in combination. MX-ICP is validated and available for use on all sequencing platforms.

On August 5, 2015, we announced the launch of a new pilot clinical study of our MX-ICP liquid biopsy technology. Four leading biopharmaceutical firms have joined the pilot program, which was initiated with an undisclosed market-leading oncology company earlier this year. The primary aim of the pilot study is to validate the accuracy and utility of using MX-ICP-based liquid biopsies to guide and monitor cancer clinical trials. The study will include a variety of cancers and several different sequencing platforms.

On August 10, 2015, we announced the establishment of a Clinical-Commercial Advisory Board (CCAB) for oncology applications of our MX-ICP technology. The CCAB is headed by Dr. Scott Patterson, a recognized expert in the application of genetic biomarkers to cancer drug development. Also joining as inaugural CCAB members are Dr. Bruce E. Johnson, Chief Clinical Research Officer at the Dana-Farber Cancer Institute, and molecular pathologist Professor Paul Waring of the University of Melbourne, who is a pioneer in the application of genomic technology to cancer diagnostics and drug development. Additional CCAB members are expected to be announced in the coming months.

On August 19, 2015, we announced the launch of our MX-ICP EGFR Analysis lung cancer panel that covers key actionable mutations while providing precision detection levels down to as low as 0.01%. The panel uses our MX-ICP technology. The panel adds to the mutations included in our first epidermal growth factor receptor (“EGFR”) tests launched in May 2015 adding mutations in EGFR exons 18-21 that are associated with resistance to tyrosine kinase inhibitor (“TKI”) cancer drugs and broadening the testing options available to the oncologist. Our EGFR panels address all of the known mutations that affect EGFR status and the likely efficacy of TKI drugs for the patient’s cancer.

On September 17, 2015, we announced that we had granted our first license for commercial rights to our liquid biopsy technology. We granted the exclusive license to the University of Melbourne to use our MX-ICP technology for research and clinical applications in Australia.

On November 5, 2015, we announced the launch of our new comprehensive MX-ICP Non-Small Cell Lung Cancer (“NSCLC”) Analysis panel that covers the key actionable mutations that are relevant to the targeted treatment of NSCLC, one of the most common types of cancer and the leading cause of cancer deaths in the U.S. The panel uses our MX-ICP technology that generates highly accurate results from small amounts of blood or tissue samples at precision detection levels down to as low as 0.01%. It is available for clinical diagnostic use through our CLIA laboratory.

On December 23, 2015, we announced that we were awarded a two-year Small Business Technology Transfer (STTR) grant by the US National Institutes of Health (NIH). The $1.5 million grant will fund a collaborative project with the Dana-Farber Cancer Institute to augment the multiplexing capabilities of our ICE COLD-PCR™ technology. ICE COLD-PCR was originally developed by Dana-Farber, which has licensed exclusive worldwide rights to Transgenomic.

Sale of Assets and Discontinued Operations

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On September 8, 2015, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Edge BioSystems, Inc. (“Columns Buyer”), pursuant to which we agreed to sell to Columns Buyer, and Columns Buyer agreed to purchase from us, our manufacturing, marketing and selling of high quality polymer and silica based beads and resin and chromatography columns business (collectively, the “Columns Business”). The Columns Business was part of our former segment, Genetic Assays and Platforms. Pursuant to the Asset Purchase Agreement, Columns Buyer acquired substantially all of the assets used solely in connection with the Columns Business and assumed certain liabilities of the Columns Business for a total cash purchase price of approximately $2.1 million (the “Asset Sale”), which was paid on September 8, 2015 upon the closing of the Asset Sale. During the year ended December 31, 2015, we recorded a gain on the sale of the Columns Business of $1.5 million.

On November 25, 2015, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with ADSTEC Corporation (“ADSTEC”) and ADS Biotec Inc., a wholly-owned subsidiary of ADSTEC (“ADS Biotec”), pursuant to which we sold (1) to ADSTEC our facilities located in Glasgow, Scotland and on Irvington Road in Omaha, Nebraska (together, the “Facilities”) and all of our stock, inventory and raw materials located at the Facilities (collectively, the “Inventory”), and (2) to ADS Biotec (a) all of the remaining assets relating to our Genetic Assays and Platforms business segment (the “Business”), other than the Inventory (the “Purchased Assets”), and (b) all of the ordinary shares of Transgenomic Limited, a wholly-owned subsidiary of ours (the “Shares”). The Purchase Agreement superseded the binding term sheet between us and ADSTEC, effective as of September 30, 2015, as disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 30, 2015. Pursuant to the Purchase Agreement, ADSTEC and ADS Biotec acquired the Facilities, the Inventory, the Purchased Assets and the Shares for an aggregate purchase price of approximately $300,000, and ADS Biotec assumed our financial and human resources commitments related to the Business (the “Transaction”). During the year ended December 31, 2015, we recorded a loss on the Transaction of $1.7 million.

Together, the Asset Sale and the Transaction represent the divestiture of our Genetic Assays and Platforms business resulting in a strategic shift that will have a major effect on our operations and financial results. Therefore, the divested operations of our Genetic Assays and Platforms business meet the criteria to be reported as discontinued operations.

During the fourth quarter of 2015, our Board of Directors took actions to begin the process of divesting our Patient Testing business located in New Haven, Connecticut. In March of 2016, we announced that we had suspended testing services in our Patient Testing laboratory as we review and evaluate various strategic alternatives for that business. As a result of these actions, as of December 31, 2015, our Patient Testing business meets the criteria to be reported as discontinued operations.

Results of Continuing Operations For The Years Ended December 31, 2015 and 2014.

Net Sales.

Net sales were as follows:

	Dollars in Thousands
	Year Ended December 31,				Change
	2015		2014		$		%
Total net sales	$	1,653	$	1,240	$	413	33	%

Net sales increased $0.4 million during the year ended December 31, 2015 as compared to the same period of 2014. This increase resulted from an increase in our contract laboratory services.

Costs of Goods Sold.

Costs of goods sold includes material costs for the products that we sell and substantially all other costs associated with our manufacturing facilities (primarily personnel costs, rent and depreciation) associated with the operations of our laboratories.

Gross Profit.

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

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	Dollars in Thousands
	Year Ended December 31,						Margin %
	2015			2014			2015		2014
Gross profit	$	(287	)	$	(935	)	(17	)%	(75	)%

Gross profit was a negative $0.3 million, or (17)% of total net sales, during the year ended December 31, 2015, compared to $0.9 million, or (75)% of total net sales, during the same period of 2014. The gross profit increase in 2015 primarily reflects the increased net sales along with decreased laboratory costs in 2015 as compared to 2014.

Operating expenses.

The following table summarizes operating expenses further described below for the years ended December 31, 2015 and 2014:

	Dollars in Thousands
	Year Ended December 31,
	2015		2014
Selling, general and administrative	$	7,055	$	7,385
Research and development	1,853		2,249
Total	$	8,908	$	9,634

Selling, General and Administrative Expenses.

Selling, general and administrative expenses consist primarily of personnel costs, marketing, travel costs, professional fees, bad debt expense and facility costs. Our selling, general and administrative costs decreased to $7.1 million during the year ended December 31, 2015 compared to $7.4 million for the same period in 2014. Included in selling, general and administrative costs, we had a $0.3 million decrease in stock compensation costs in 2015 as compared to 2014.

Research and Development Expenses.

Research and development expenses include primarily personnel costs, intellectual property legal fees, outside services and supplies and facility costs and are expensed in the period in which they are incurred. During the years ended December 31, 2015 and 2014 these costs totaled $1.9 million and $2.2 million, respectively. Research and development expenses totaled 112% and 181% of net sales during the years ended December 31, 2015 and 2014, respectively. The decrease in research and development expenses in 2015 as compared to 2014 includes a decrease in patent costs and outside services.

Other Income (Expense), net.

The following table summarizes other income (expense) for the years ended December 31, 2015 and 2014:

	Dollars in Thousands
	Year Ended December 31,
	2015			2014
Interest expense	$	(724	)	$	(665	)
Income from change in fair value of warrants	(205		)	455
Other, net	(14		)	—
Total other expense, net	$	(943	)	$	(210	)

Other expense, net for the year ended December 31, 2015 totaled $0.9 million. Other expense, net included interest expense primarily relating to our debt along with expense associated with the change in fair value of the common stock warrants. The expense associated with the common stock warrants is a non-cash item.

Other expense, net for the year ended December 31, 2014 totaled $0.2 million. Other expense, net included interest expense partially offset by the income associated with the change in fair value of the common stock warrants.

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Income Tax Expense (Benefit).

Income tax expense was zero for each of the years ended December 31, 2015 and 2014.

We continue to assess the recoverability of deferred tax assets and the related valuation allowance. To the extent we begin to generate taxable income in future periods and determine that such valuation allowance is no longer required, the tax benefit of the remaining deferred tax assets will be recognized at such time. Our net operating loss carry-forwards of $142.9 million will expire at various dates from 2018 through 2035, if not utilized. We also had state income tax loss carry-forwards of $58.8 million at December 31, 2015. These carry-forwards will also expire at various dates from 2018 to 2035 if not utilized.

Discontinued Operations For The Years Ended December 31, 2015 and 2014.

During the third quarter of 2015, we decided to divest our Genetic Assays and Platforms business, resulting in a strategic shift that will have a major effect on our operations and financial results. Therefore, the divested Genetic Assays and Platforms operations meet the criteria to be reported as discontinued operations.

During the fourth quarter of 2015, our Board of Directors took actions to begin the process of divesting our Patient Testing business located in New Haven, Connecticut. In March of 2016, we announced that we had suspended testing services in our Patient Testing laboratory as we review and evaluate various strategic alternatives for that business. As a result of these actions, as of December 31, 2015, our Patient Testing business meets the criteria to be reported as discontinued operations.

The related assets, liabilities, results of operations and cash flows for both the Genetic Assays and Platforms business and Patient Testing business are classified as assets held for sale, liabilities held for sale and discontinued operations for all periods presented.

Revenues and net income (loss) of the discontinued operations consisted of the following:

	Year ended December 31,
(in thousands)	2015			2014
Net sales	$	18,584		$	25,843
Operating loss from discontinued operations, before gain or loss on sale of business and tax	$	(23,240	)	$	(6,753	)
(Loss) Gain on sale of business	(224		)	4,114
Income tax (benefit) expense	(648		)	524
Loss from discontinued operations, net of tax	$	(22,816	)	$	(3,163	)

Liquidity and Capital Resources

Our working capital positions at December 31, 2015 and 2014 were as follows (in thousands):

	December 31,
	2015			2014		Change
Current assets (including cash and cash equivalents of $444 and $1,609 respectively)	$	3,282		$	28,566	$	(25,284	)
Current liabilities	16,981			11,986		(4,995		)
Working capital	$	(13,699	)	$	16,580	$	(30,279	)

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Convertible Notes Private Placement

We entered into an Unsecured Convertible Promissory Note Purchase Agreement (the “Note Purchase Agreement”), dated December 31, 2014, with an accredited investor (the “Initial Investor”), pursuant to which we issued and sold, on December 31, 2014, to the Initial Investor in a private placement an unsecured convertible promissory note (the “Initial Note”) in the aggregate principal amount of $750,000. The Initial Note converted in full into 502,786 shares of our common stock, in accordance with the terms of the Initial Note.

Pursuant to the terms of the Note Purchase Agreement, on January 15, 2015, we entered into the Note Purchase Agreement with seven additional accredited investors (the “Additional Investors”) and issued and sold, on January 20, 2015, to the Additional Investors in a private placement notes in an aggregate principal amount of $925,000 (the “Additional Notes” and, together with the Initial Note, the “2015 Notes”). As of December 31, 2015, $400,000 of the aggregate principal amount of the Additional Notes had been converted into an aggregate of 281,023 shares of our common stock

The 2015 Notes accrue interest at a rate of 6% per year and mature on December 31, 2016. Under the terms of each of the 2015 Notes, the outstanding principal and unpaid interest accrued is convertible into shares of our common stock as follows: (i) commencing upon the date of issuance of the 2015 Notes (but no earlier than January 1, 2015), the investor holding such 2015 Note became entitled to convert, on a one-time basis, up to 50% of the outstanding principal and unpaid interest accrued under the 2015 Note, into shares of our common stock at a conversion price equal to the lesser of (a) the average closing price of the common stock on the principal securities exchange or securities market on which our common stock is then traded (the “Market”) for the 20 consecutive trading days immediately preceding the date of conversion, and (b) $2.20 (subject to adjustment for stock splits, stock dividends, other distributions, recapitalizations and the like); and (ii) commencing February 15, 2015, the investor holding such 2015 Note is entitled to convert, on a one-time basis, any or all of the remaining outstanding principal and unpaid interest accrued under the 2015 Note, into shares of our common stock at a conversion price equal to 85% of the average closing price of our common stock on the Market for the 15 consecutive trading days immediately preceding the date of conversion.

Craig-Hallum acted as the sole placement agent for the sale and issuance of the Additional Notes. In connection with the sale and issuance of the Additional Notes, we issued to Craig-Hallum an unsecured convertible promissory note, upon the same terms and conditions as the Notes, in an aggregate principal amount equal to 5% of the proceeds received by us pursuant to the sale and issuance of the Additional Notes, or $46,250. As of the date of filing of this Annual Report, the Placement Agent Note remains outstanding.

Underwritten Public Offering

On February 27, 2015, we entered into a purchase agreement with Craig-Hallum Capital Group LLC, as the underwriter (the “Underwriter”), pursuant to which we sold 3,573,899 shares of our common stock and corresponding warrants to purchase up to 714,780 shares of our common stock. Each share of common stock was sold in combination with a warrant to purchase 0.20 of a share of our common stock. The purchase price to the public for each share of common stock and accompanying warrant was $1.95.

The purchase price paid by the Underwriter to us for each share of common stock and the accompanying warrants was $1.8135. The net proceeds, after deducting the Underwriter’s discount and other estimated expenses, were approximately $6.2 million.

2015 Private Placement

On June 30, 2015, we entered into a Securities Purchase Agreement with certain accredited investors (the “July 2015 Investors”) pursuant to which, on July 7, 2015, we sold to the July 2015 Investors, and the July 2015 Investors purchased from us, (i) an aggregate of approximately 1.5 million shares of our common stock at a price per share of $1.42, (ii) warrants (the “Series B Warrants”) to purchase up to an aggregate of 0.7 million shares of our common stock with an exercise price of $0.01 per share, and (iii) warrants (the “Series A Warrants” and, together with the Series B Warrants, the “July 2015 Warrants”) to purchase up to an aggregate of 1.2 million shares of our common stock, with an exercise price of $1.66 per share (collectively, the “July 2015 Offering”). The purchase price for the Series B Warrants was $1.42 per share of our common stock subject to the Series B Warrants. Each of the July 2015 Warrants has a term of 5 and 1/2-years. The Series B Warrants are immediately exercisable. The Series A Warrants will be exercisable beginning on January 7, 2016, six months from the date of issuance. The aggregate gross proceeds to us from the July 2015 Offering were approximately $3.0 million.

Craig-Hallum Capital Group LLC (the “2015 Placement Agent”) served as the sole placement agent for the July 2015 Offering. In consideration for services rendered as the placement agent in the July 2015 Offering, we (i) paid to the 2015 Placement Agent cash commissions equal to approximately $212,783, or 7.0% of the gross proceeds received in the July 2015 Offering; (ii) issued to the 2015 Placement Agent a five-year warrant to purchase up to 107,033 shares of our common stock with an exercise price of $1.66 per share and which is subject to other terms that are the same as the terms of the Series A Warrants; and (iii) reimbursed the 2015 Placement Agent for reasonable out-of-pocket expenses, including fees paid to the 2015 Placement Agent’s legal counsel, incurred in connection with the July 2015 Offering, which reimbursable expenses did not exceed $50,000.

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Asset Sales

On September 8, 2015, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Edge BioSystems, Inc. (“Columns Buyer”), pursuant to which we agreed to sell to Columns Buyer, and Columns Buyer agreed to purchase from us, our manufacturing, marketing and selling of high quality polymer and silica based beads and resin and chromatography columns business (collectively, the “Columns Business”). Pursuant to the Asset Purchase Agreement, Columns Buyer acquired substantially all of the assets used solely in connection with the Columns Business and assumed certain liabilities of the Columns Business for a total cash purchase price of approximately $2.1 million (the “Asset Sale”), which was paid on September 8, 2015 upon the closing of the asset sale.

On November 25, 2015, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with ADSTEC Corporation (“ADSTEC”) and ADS Biotec Inc., a wholly-owned subsidiary of ADSTEC (“ADS Biotec”), pursuant to which we sold (1) to ADSTEC our facilities located in Glasgow, Scotland and on Irvington Road in Omaha, Nebraska (together, the “Facilities”) and all of our stock, inventory and raw materials located at the Facilities (collectively, the “Inventory”), and (2) to ADS Biotec (a) all of the remaining assets relating to our Genetic Assays and Platforms business segment (the “Business”), other than the Inventory (the “Purchased Assets”), and (b) all of the ordinary shares of Transgenomic Limited, a wholly-owned subsidiary of the ours (the “Shares”). The Purchase Agreement supersedes the binding term sheet between us and ADSTEC, effective as of September 30, 2015, as disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 30, 2015.

Pursuant to the Purchase Agreement, ADSTEC and ADS Biotec acquired the Facilities, the Inventory, the Purchased Assets and the Shares for an aggregate purchase price of approximately $300,000, and ADS Biotec assumed our financial and human resources commitments related to the Business.

Conversion Agreement

On January 6, 2016, we entered into a Conversion Agreement (the “Conversion Agreement”) with the holders (the “Preferred Holders”) of all of our outstanding shares of Series A Convertible Preferred Stock (the “Series A Preferred”), and Series B Convertible Preferred Stock (the “Series B Preferred”), pursuant to which, among other things, the Preferred Holders: (1) elected to convert all of the outstanding shares of Series A Preferred and Series B Preferred into shares of our common stock in each case in accordance with the terms thereof, and (2) agreed that all accrued and unpaid dividends on the Series A Preferred and Series B Preferred would be paid by us in shares of common stock at a rate of $1.00 per share of common stock (collectively, the “Conversion”).

The outstanding shares of Series A Preferred were convertible into shares of common stock at a rate of 1-for-3, and the outstanding shares of Series B Preferred were convertible into shares of common stock at a rate of 1-for-1. Prior to the entry into the Conversion Agreement, there were 2,586,205 shares of Series A Preferred outstanding, which were converted into 862,057 shares of common stock, and 1,443,297 shares of Series B Preferred outstanding, which were converted into 1,443,297 shares of common stock, for an aggregate of 2,305,354 shares of common stock issued upon conversion of the Series A Preferred and Series B Preferred. At the time of the entry into the Conversion Agreement, there were $3,681,591.90 in accrued and unpaid dividends on the outstanding shares of Series A Preferred, which were converted, in accordance with the Conversion Agreement, into 3,681,590 shares of common stock, and $793,236.17 in accrued and unpaid dividends on the outstanding shares of Series B Preferred, which were converted, in accordance with the terms of the Conversion Agreement, into 793,235 shares of common stock, for an aggregate of 4,474,825 shares of Common Stock issued pursuant to the accrued and unpaid dividends on the Series A Preferred and Series B Preferred. Therefore, in connection with the full conversion of the Series A Preferred and Series B Preferred, plus the conversion of all accrued and unpaid dividends thereon, we issued an aggregate of 6,780,179 shares of common Stock to the Preferred Holders on January 6, 2016.

January 2016 Private Placement

On January 6, 2016, we entered into a Securities Purchase Agreement (the “A-1 Preferred Purchase Agreement”) with certain accredited investors (the “A-1 Preferred Investors”), pursuant to which, on January 8, 2016, we sold to the A-1 Preferred Investors, and the A-1 Preferred Investors purchased from us (the “A-1 Preferred Offering”), an aggregate of approximately $2.2 million of units (the “Units”) consisting of (1) an aggregate of 2,365,243 shares (the “A-1 Preferred Shares”) of our Series A-1 Convertible Preferred Stock (the “A-1 Preferred”), and (2) warrants (the “Warrants”) to purchase up to an aggregate of 1,773,929 shares of our common stock. Each Unit was sold to the A-1 Preferred Investors at a purchase price of $0.93 per Unit. The A-1 Preferred Shares are convertible into shares of common stock at an initial rate of 1-for-1, which conversion rate is subject to further adjustment as set forth in our Certificate of Designation of Series A-1 Convertible Preferred Stock, which was filed with the Secretary of State of the State of Delaware on January 8, 2016 (the “Series A-1 Certificate of Designation”). Pursuant to the terms of the Series A-1

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Certificate of Designation, the holders of the A-1 Preferred Shares will generally be entitled to that number of votes as is equal to the product obtained by multiplying: (a) the number of whole shares of common stock into which the A-1 Preferred may be converted as of the record date of such vote or consent, by (b) 0.93, rounded down to the nearest whole number. Therefore, every 1.075269 shares of A-1 Preferred will generally initially be entitled to one vote.

The Warrants are immediately exercisable, have a term of five years and have an exercise price of $1.21 per share of common stock. Each Warrant also includes both cash and cashless exercise features and an exchange feature whereby the holder of the Warrant may exchange all or any portion of the Warrant for a number of shares of Common Stock equal to the quotient obtained by dividing the “Exchange Amount” by the closing bid price of the Common Stock on the second trading day prior to the date the Warrant is exchanged (the “Exchange Right”). Under the Warrants, the “Exchange Amount” is based upon a Black Scholes option pricing model, and the aggregate Exchange Amount under all of the Warrants will be $1,436,882, subject to adjustment to the extent that the risk-free U.S. Treasury rate fluctuates between the date of issuance of the Warrants and the date the Warrants are exchanged. Each Warrant provides that the number of shares that may be issued upon exercise of the Exchange Right is limited to the number of shares that may be purchased pursuant to the terms of the Warrant, unless the Company has previously obtained stockholder approval or approval from The Nasdaq Stock Market LLC to issue any additional shares of Common Stock (the “Additional Shares”) pursuant to the Exchange Right (the “Required Approvals”). For any Exchange Right exercised more than 90 days following the issuance of the Warrants, if the Company has not obtained either of the Required Approvals, the Company will be required to pay the Warrant holder an amount in cash for any Additional Shares that it cannot issue without the Required Approvals based on the Exchange Amount.

Please see the section entitled “Contractual Obligations and Other Commitments” that follows in this Annual Report and Footnote 6 “Debt” to our accompanying consolidated financial statements for additional information regarding our outstanding debt and debt servicing obligations.

At December 31, 2015, we had cash and cash equivalents of $0.4 million. As described above, in January 2016 we received approximately $2.2 million in gross proceeds in connection with the issuance and sale of preferred stock and common stock warrants. Our current operating plan projects improved operating results, improvement in collection rates and monetization of underutilized assets. As with any operating plan, there are risks associated with our ability to execute it. Therefore, there can be no assurance that we will be able to satisfy our obligations, or achieve the operating improvements as contemplated by the current operating plan. If we are unable to execute this plan, we will need to find additional sources of cash not contemplated by the current operating plan and/or raise additional capital to sustain continuing operations as currently contemplated. We could raise additional funds through various potential sources such as through the sale of assets or sale of debt or equity securities. However, there can be no assurance that the additional funding sources will be available to us at reasonable terms or at all. If we are unable to achieve our operating plan or obtain additional financing, our business would be jeopardized and we may not be able to continue as a going concern.

Analysis of Cash Flows From Continuing Operations

The following table presents a summary of our cash flows from continuing operations:

	(amounts in thousands)
	2015			2014
Net cash provided by (used in):
Operating activities	$	(7,854	)	$	(6,169	)
Investing activities	(423		)	(175		)
Financing activities	8,991			10,070
Net increase in cash and cash equivalents, from continuing operations	$	714		$	3,726

Net Increase in Cash and Cash Equivalents. Cash and cash equivalents increased by $0.7 million and $3.7 million for the periods ended December 31, 2015 and 2014, respectively.

Cash Flows Used In Operating Activities. In 2015, cash flows used in operating activities of $7.9 million reflects the Company’s net loss from continuing operations of $10.1 million and an increase in prepaid and other current assets of $0.6 million. These were offset by an increase in accrued expenses of $1.8 million and increases in non-cash items, including stock compensation expense of $0.6 million and depreciation and amortization of $0.5 million. During 2014, the cash flows used in operating activities of $6.2 million includes our loss from operations of $10.8 million. This was partially offset by an increase in non-cash items of $1.4 million and by an increase in accounts payable and accrued expenses of $3.0 million.

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Cash Flows Used In Investing Activities. Cash flows used in investing activities totaled $0.4 million for the year ended December 31, 2015 and includes purchases of property and equipment of $0.2 million. Cash flows used in investing activities totaled $0.2 million for the year ended December 31, 2014 and includes purchases of property and equipment of $0.1 million.

Cash Flows Provided By Financing Activities. Cash flows provided by financing activities totaled $9.0 million for the year ended December 31, 2015, which included net proceeds of approximately $9.0 million from our common stock offerings during the year and $0.9 million from the issuance of unsecured convertible promissory notes in January 2015. These proceeds were partially offset by payments on our debt and capital lease obligations. Cash flows provided by financing activities for the year ended December 31, 2014 included proceeds from the issuance of Series B Convertible Preferred Stock of $6.9 million, net proceeds of $2.4 million from the October 2014 issuance of common stock and proceeds of $0.8 million from the issuance of an unsecured convertible promissory note in December 2014.

Contractual Obligations and Other Commitments

At December 31, 2015, our contractual obligations and other commitments were as follows:

	(Amounts in thousands)
	2016		2017		2018		2019		2020		After 2020		Total
Long term debt(1)	$	7,596	$	—	$	—	$	—	$	—	$	—	$	7,596
Interest(1)	510		—		—		—		—		—		510
Capital lease obligations(2)	3		1		—		—		—		—		4
Operating lease obligations(3)	727		724		711		676		680		388		3,906
Purchase obligations(4)	332		—		—		—		—		—		332
	$	9,168	$	725	$	711	$	676	$	680	$	388	$	12,348

(1) See Note 6 - "Debt" to our accompanying consolidated financial statements.

(2) See Note 7 - "Capital Leases" to our accompanying consolidated financial statements.

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

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

At December 31, 2015, we had unrecognized tax benefits of $0.1 million. A reasonable estimate of the timing related to the $0.1 million is not possible.

Off Balance Sheet Arrangements

At December 31, 2015 and 2014, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies

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

Allowance for Doubtful Accounts and Contractual Allowances.

While payment terms are generally 30 days, we have also provided extended payment terms of up to 90 days in certain cases. We operate globally and some of the international payment terms can be greater than 90 days. Accounts receivable are carried at

28

original invoice amount and shown net of allowance for doubtful accounts and contractual allowances. The estimate made for doubtful accounts is based on a review of all outstanding amounts on a quarterly basis. The estimate for contractual allowances is based on contractual terms or historical reimbursement rates and is recorded when revenue is recorded. We determine the allowance for doubtful accounts and contractual allowances by regularly evaluating individual payor receivables and considering a payor’s financial condition, credit history, reimbursement rates and current economic conditions. Accounts receivable are written off when deemed uncollectible and after all collection efforts have been exhausted. Recoveries of accounts receivable previously written off are recorded as a reduction in bad debt expense when received.

Inventories.

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

Property and Equipment.

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

Goodwill and Intangible Assets.

Intangible assets include intellectual property, patents and acquired products.

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

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

3. Acquired Products.    As part of the FAMILION acquisition and acquisition of certain intangible assets from Axial, the Company acquired technology, in process technology, trademarks/tradenames, customer relationships, covenants not to compete and third party relationships. These costs will be amortized pursuant to the straight-line method over their estimated economic life of seven to fifteen years. See Footnote 5 “Intangible Assets and Other Assets”.

Goodwill is tested for impairment annually. We perform this impairment analysis during the fourth quarter of each year or whenever events indicate that the carrying amount of goodwill may not be recoverable. We test our intangible assets for impairment when factors are present that indicate the carrying value of an intangible asset (group) may not be recoverable. Impairment occurs when the carrying value is determined to be not recoverable, thereby causing the carrying value of the goodwill or intangible asset (group) to exceed its fair value. If impaired, the asset’s carrying value is reduced to its fair value. We performed an interim testing of impairment of goodwill and long-lived assets as of September 30, 2015, due to the significant decline in the market price of our stock. As a result of this testing, we recorded impairment charges of $6.2 million related to our long-lived assets during the three months ended September 30, 2015 but determined that no impairment of goodwill was needed to be recorded. See Note 5 - “Intangibles and Other Assets” for further discussion regarding the impairment of our long-lived assets. During the fourth quarter of 2015, it was concluded that our Patient Testing business which met the criteria to be classified as held for sale and reported as discontinued operations as December 31, 2015 was impaired due to continued declines in financial performance and due to the fact that the likelihood of recoverability of the Patient Testing goodwill through sale of the Patient Testing business was remote. As a result we determined that the goodwill related to the Patient Testing business was impaired as of December 31, 2015. Goodwill impairment charges of $6.9 million were recorded during the three months ended December 31, 2015. The goodwill and impairment charges are included in the results of our discontinued operations. See Note 3 - “Discontinued Operations” for further discussion regarding the results of discontinued operations.

Common Stock Warrants.

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

29

and any changes in fair values are recorded as an adjustment to earnings. The Common Stock Warrant Liability is considered a level three financial instrument. See Footnote 13 “Fair Value” to our accompanying consolidated financial statements.

Stock Based Compensation.

All stock-based awards to date have exercise prices equal to the market price of our common stock on the date of grant and have ten-year contractual terms. Unvested awards as of December 31, 2015 had vesting periods of one or three years from date of grant. None of the stock awards outstanding at December 31, 2015 are subject to performance or market-based vesting conditions.

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

Income Taxes.

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities at each balance sheet date using tax rates expected to be in effect in the year the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent that it is more likely than not that they will not be realized. Our liability for uncertain tax positions was $0.1 million and $0.1 million as of December 31, 2015 and 2014, respectively.  We recorded less than $0.1 million of additional uncertain tax positions during each of the years ended 2015 and 2014. We recorded zero and $0.2 million for reductions in uncertain tax positions relating to statute of limitations lapse for the years ended 2015 and 2014, respectively. We had no material interest or penalties during fiscal 2015 or fiscal 2014, and we do not anticipate any such items during the next twelve months. Our policy is to record interest and penalties directly related to uncertain tax positions as income tax expense in the Consolidated Statements of Operations.

Net Sales Recognition.

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

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

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

• Collectability is reasonably assured.

In our Biomarker Identification laboratory, we perform services on a project by project basis. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year.

Net sales from Patient Testing laboratories are recognized on an individual test basis and take place when the test report is completed, reviewed and sent to the client less the reserve for insurance, Medicare and Medicaid contractual adjustments. There are no deferred net sales associated with our Patient Testing services. Adjustments to the allowances, based on actual receipts from third party payers, are reflected in the estimated contractual allowance applied prospectively. In the fourth quarter of 2015, we adjusted our contractual allowance rates to better reflect the reimbursement level we expect to achieve on Patient Testing billings. The adjustment negatively impacted our fourth quarter of 2015 Patient Testing revenues. Our Patient Testing revenues are reported as part of discontinued operations (See Note 3 - “Discontinued Operations”).

Net sales of Genetic Assays and Platforms products, reported as discontinued operations (See Note 3 - “Discontinued Operations”) are recognized in accordance with the terms of the sales arrangement. Such recognition is based on receipt of an unconditional customer order and transfer of title and risk of ownership to the customer, typically upon shipment of the product under a purchase order. Our sales terms do not provide for the right of return unless the product is damaged or defective. Net sales from certain services associated with the analytical instruments, to be performed subsequent to shipment of the products, is deferred and recognized when the services are provided. Such services, mainly limited to installation and training services that are not essential to the functionality of the instruments, typically are performed in a timely manner subsequent to shipment of the instrument. We also enter into various service contracts that cover installed instruments. These contracts cover specific time periods and net sales associated with these contracts are deferred and recognized ratably over the service period.

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

Research and Development.

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

Translation of Foreign Currency.

30

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

Comprehensive Income.

Accumulated other comprehensive income at December 31, 2015 and 2014 consisted of foreign currency translation adjustments.

Loss Per Share.

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

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. This guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to a customer. ASU No. 2014-09 will replace most existing revenue recognition guidance in generally accepted accounting principles in the U.S. when it becomes effective. In July 2015, the FASB decided to defer the effective date of this new accounting guidance by one year. As a result, ASU No. 2014-09 will be effective for us for all annual and interim reporting periods beginning after December 15, 2017 and early adoption would be permitted as of the original effective date. The new standard permits the use of either the retrospective or cumulative effect transition method. We do not expect to early adopt this guidance and we have not selected a transition method. We are currently evaluating the impact this guidance will have on our financial condition, results of operations and cash flows.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40). The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We do not expect to early adopt this guidance and do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, rather than as a deferred charge asset. ASU No. 2015-03 became effective for us on January 1, 2016. ASU No. 2015-03 is not expected to have a material impact on our financial condition, results of operations or cash flows.

In February 2016, the FASB issued an ASU, “Leases”. The new standard amends the recognition of lease assets and lease liabilities by lessees for those leases currently classified as operating leases and amends disclosure requirements associated with leasing arrangements. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently assessing the impact of the adoption of this ASU will have on our consolidated financial statements.

Impact of Inflation

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

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

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

32

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders

Transgenomic, Inc.

We have audited the accompanying consolidated balance sheets of Transgenomic, Inc. and Subsidiary (the Company) as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Transgenomic, Inc. and Subsidiary at December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Ernst & Young LLP

Hartford, Connecticut

April 14, 2016

33

TRANSGENOMIC, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

December 31, 2015 and 2014

(Dollars in thousands except per share data)

	2015			2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	444		$	1,609
Accounts receivable, net	264			466
Inventories, net	50			—
Other current assets	537			385
Assets held for sale	1,987			26,106
Total current assets	3,282			28,566
PROPERTY AND EQUIPMENT:
Equipment	5,593			5,599
Furniture, fixtures & leasehold improvements	1,565			1,566
	7,158			7,165
Less: accumulated depreciation	(6,899		)	(6,680		)
	259			485
OTHER ASSETS:
Intangibles, net	1,170			751
Other assets	105			204
	$	4,816		$	30,006
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current maturities of long term debt	$	7,596		$	462
Accounts payable	3,781			3,898
Accrued compensation	321			377
Accrued expenses	3,734			2,045
Deferred revenue	217			298
Other current liabilities	1,068			1,068
Liabilities held for sale	264			3,838
Total current liabilities	16,981			11,986
LONG TERM LIABILITIES:
Long term debt less current maturities	—			7,375
Common stock warrant liability	350			145
Other long-term liabilities	305			817
Accrued preferred stock dividend	—			3,130
Total liabilities	17,636			23,453
STOCKHOLDERS’ (DEFICIT) EQUITY:
Preferred stock, $.01 par value, 15,000,000 shares authorized, 4,029,502 shares issued and outstanding	40			40
Common stock, $.01 par value, 150,000,000 shares authorized, 13,915,691 and 8,084,471 shares issued and outstanding, respectively (1)	139			81
Additional paid-in capital (1)	200,403			189,680
Accumulated other comprehensive income	10			340
Accumulated deficit	(213,412		)	(183,588		)
Total stockholders’ (deficit) equity	(12,820		)	6,553
	$	4,816		$	30,006

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

See notes to consolidated financial statements.

34

TRANSGENOMIC, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2015 and 2014

(Dollars in thousands except per share data)

	2015			2014
NET SALES	$	1,653		$	1,240
COST OF GOODS SOLD	1,940			2,175
Gross profit	(287		)	(935		)
OPERATING EXPENSES:
Selling, general and administrative	7,055			7,385
Research and development	1,853			2,249
	8,908			9,634
OPERATING LOSS FROM CONTINUING OPERATIONS	(9,195		)	(10,569		)
OTHER INCOME (EXPENSE):
Interest expense, net	(724		)	(665		)
Warrant revaluation	(205		)	455
Other, net	(14		)	—
	(943		)	(210		)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(10,138		)	(10,779		)
INCOME TAX EXPENSE (BENEFIT)	—			—
LOSS FROM CONTINUING OPERATIONS	$	(10,138	)	$	(10,779	)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAXES	(22,816		)	(3,163		)
NET LOSS	(32,954		)	(13,942		)
PREFERRED STOCK DIVIDENDS	(1,324		)	(1,144		)
NET LOSS FROM CONTINUING OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS	$	(11,462	)	$	(11,923	)
NET LOSS FROM DISCONTINUED OPERATIONS AVAILABLE TO COMMON STOCKHOLDERS	$	(22,816	)	$	(3,163	)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS	$	(34,278	)	$	(15,086	)
BASIC AND DILUTED LOSS PER COMMON SHARE FROM CONTINUING OPERATIONS (1)	$	(0.93	)	$	(1.59	)
BASIC AND DILUTED LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS (1)	$	(1.85	)	$	(0.42	)
BASIC AND DILUTED LOSS PER COMMON SHARE (1)	$	(2.78	)	$	(2.01	)
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING (1)	12,321,739			7,493,844

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

See notes to consolidated financial statements.

35

TRANSGENOMIC, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Years Ended December 31, 2015 and 2014

(Dollars in thousands)

	2015			2014
Net Loss	$	(32,954	)	$	(13,942	)
Other Comprehensive Loss; foreign currency translation adjustment	(330		)	(50		)
Comprehensive Loss	$	(33,284	)	$	(13,992	)

See notes to consolidated financial statements.

36

TRANSGENOMIC, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Years Ended December 31, 2015 and 2014

(Dollars in thousands except share data)

	Preferred Stock			Common Stock
	Outstanding Shares	Par Value		Outstanding Shares (1)	Par Value (1)		Additional Paid-in Capital (1)		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2013	2,586,205	$	26	7,353,695	$	73	$	179,459	$	(168,502	)	$	390		$	11,446
Net loss	—	—		—	—		—		(13,942		)				(13,942		)
Foreign currency translation adjustment	—	—		—	—		—		—			(50		)	(50		)
Non-cash stock-based compensation	—	—		—	—		977		—			—			977
Private Placement, net	—	—		730,776	8		2,353		—			—			2,361
Preferred stock agreement	1,443,297	14		—	—		6,891		—			—			6,905
Dividends on preferred stock	—	—		—	—		—		(1,144		)	—			(1,144		)
Balance, December 31, 2014	4,029,502	$	40	8,084,471	$	81	$	189,680	$	(183,588	)	$	340		$	6,553
Net loss	—	—		—	—		—		(32,954		)				(32,954		)
Foreign currency translation adjustment	—	—		—	—		—		—			(330		)	(330		)
Non-cash stock-based compensation	—	—		—	—		644		—			—			644
Private Placement, net	—			5,047,411	50		8,920								8,970
Conversion of convertible promissory notes	—	—		783,809	8		1,159		—			—			1,167
Reversal of dividends on preferred stock	—	—		—	—		—		3,130			—			3,130
Balance, December 31, 2015	4,029,502	$	40	13,915,691	$	139	$	200,403	$	(213,412	)	$	10		$	(12,820	)

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

See notes to consolidated financial statements.

37

TRANSGENOMIC, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2015 and 2014

(Dollars in thousands)

	2015			2014
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss	$	(32,954	)	$	(13,942	)
Less loss from discontinued operations, net of tax	(22,816		)	(3,163		)
Loss from continuing operations	(10,138		)	(10,779		)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization	489			569
Non-cash, stock based compensation	611			939
Provision for losses on doubtful accounts	67			3
Provision for losses on inventory obsolescence	63			—
Warrant revaluation	205			(455		)
Loss on disposal of fixed assets	14			—
Deferred interest	70			330
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	133			(183		)
Inventories	(113		)	—
Prepaid expenses and other current assets	(663		)	357
Accounts payable	(365		)	1,799
Accrued expenses and other liabilities	1,773			1,251
Net cash used in continuing operations	(7,854		)	(6,169		)
Net cash used in discontinued operations	(4,524		)	(7,533		)
Net cash used in operating activities	(12,378		)	(13,702		)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchase of property and equipment	(204		)	(130		)
Change in other assets	(219		)	(45		)
Net cash used in investing activities, continuing operations	(423		)	(175		)
Net cash provided by investing activities, discontinued operations	2,210			3,800
Net cash provided by investing activities	1,787			3,625
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from note payable	923			7,190
Principal payments on capital lease obligations	(35		)	(144		)
Issuance of preferred stock, net	—			9,266
Issuance of common stock and related warrants, net	8,977			—
Principal payments on note payable	(874		)	(6,242		)
Net cash flows provided by financing activities	8,991			10,070
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH, discontinued operations	435			(10		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(1,165		)	(17		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	1,609			1,626
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	444		$	1,609
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest	$	493		$	229
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Note payable converted to Equity	1,012			—

38

See notes to consolidated financial statements.

39

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

1. BUSINESS DESCRIPTION

Business Description.

Transgenomic, Inc. (“we”, “us”, “our”, the “Company” or “Transgenomic”) is a biotechnology company advancing personalized medicine for the detection and treatment of cancer and inherited diseases through our proprietary molecular technologies and clinical and research services. A key goal is to bring our Multiplexed ICE COLD-PCR (“MX-ICP”) product to the clinical market through strategic partnerships and licensing agreements, enabling the use of blood and other bodily fluids for more effective and patient-friendly diagnosis, monitoring and treatment of cancer.

MX-ICP is technology proprietary to Transgenomic. It is a reagent that improves the ability to detect genetic mutations. This technology has been validated internally on all currently available sequencing platforms, including Sanger, Next Gen Sequencing and Digital PCR. By enhancing the level of detection of genetic mutations and suppressing the normal or wild-type DNA, several benefits are provided.

Historically, our operations were organized and reviewed by management along our major product lines and presented in two business segments: Laboratory Services and Genetic Assays and Platforms. Beginning with the quarter ended September 30, 2015, our operations are now organized as one business segment, our Laboratory Services segment, and during the fourth quarter of 2015, we began including a portion of our Laboratory Services segment as discontinued operations.

Our current Laboratory Services business consists of our laboratory in Omaha, Nebraska, which is focused on providing genetic analytical services related to Oncology and pharmacogenomics research services supporting Phase II and Phase III clinical trials conducted by pharmaceutical and biotechnology companies. Our laboratory employs a variety of genomic testing service technologies, including our proprietary MX-ICP technology. Our laboratory in Omaha is certified under the Clinical Laboratory Improvement Amendment (“CLIA”) as a high complexity laboratory and is accredited by the College of American Pathologists.

Our consolidated balance sheets, statements of operations and statements of cash flows for all periods presented reflect our former Genetic Assays and Platforms activities and Patient Testing business as discontinued operations (See Note 3 - “Discontinued Operations”).

Going Concern

The consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. The Company has incurred substantial operating losses and has used cash in its operating activities for the past few years. As of December 31, 2015, the Company had negative working capital of approximately $13.7 million. During the first quarter of 2016, the Company received net proceeds of approximately $2.0 million from the issuance of preferred stock and common stock warrants. Including the recent financing, the Company’s ability to continue as a going concern is dependent upon a combination of generating additional revenue, improving cash collections, potentially selling underutilized assets and/or product lines related to discontinued operations and, if needed, raising necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time and raises substantial doubt that the Company will be able to continue as a going concern. These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. The Company cannot be certain that additional financing will be available on acceptable terms, or at all, and its failure to raise capital when needed could limit its ability to continue its operations. 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation.

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

Risks and Uncertainties.

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

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

Use of Estimates.

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

Basis of Presentation.

The accompanying consolidated financial statements are presented in conformity with U.S. generally accepted accounting principles (“GAAP”). All amounts are presented in U.S. Dollars (“$”).Supplemental cash flows from discontinued operations are presented in Note 3 to the consolidated financial statements “Discontinued Operations.” The Company has evaluated events occurring subsequent to December 31, 2015 for potential recognition or disclosure in the consolidated financial statements and concluded there were no subsequent events that required recognition or disclosure other than those provided in Note 15 “Subsequent Events”.

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

Fair Value.

Unless otherwise specified, book value approximates fair market value. The Company’s Level 1 financial instruments include cash and cash equivalents. The Company’s Level 3 financial instruments include the common stock warrant liability, preferred stock warrant liability and conversion feature, and debt. Due to its variable interest component, debt approximates fair value.  The common stock warrant liability and Series A Convertible Preferred Stock (“Series A Preferred Stock”) warrant liability and conversion feature are recorded at fair value.  See Note 13 “Fair Value”.

Cash and Cash Equivalents and Other Current Assets.

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

Other current assets as of December 31, 2015 of $0.5 million includes prepaids of $0.2 million, unbilled receivables of $0.1 million and other receivables of $0.2 million.

Concentrations of Cash.

From time to time, we may maintain a cash position with financial institutions in amounts that exceed federally insured limits. We have not experienced any losses on such accounts as of December 31, 2015.

Accounts Receivable.

The following is a summary of activity for the allowance for doubtful accounts from continuing operations during the years ended December 31, 2015 and 2014:

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs		Ending Balance
Twelve months ended December 31, 2015	$	20	$	67	$	—	$	87
Twelve months ended December 31, 2014	$	17	$	3	$	—	$	20

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

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

Inventories.

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

The following is a summary of activity for the allowance for obsolete inventory during the years ended December 31, 2015 and 2014:

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs		Ending Balance
Twelve months ended December 31, 2015	$	—	$	63	$	—	$	63
Twelve months ended December 31, 2014	$	—	$	—	$	—	$	—

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

Property and Equipment.

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

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

Depreciation expense related to property and equipment during the years ended December 31, 2015 and 2014 was $0.2 million and $0.3 million, respectively. Included in depreciation for each of the years ended December 31, 2015 and 2014 was $0.1 million related to equipment acquired under capital leases.

We test our property and equipment for impairment when factors are present that indicate the carrying value of an asset (group) may not be recoverable. As part of our review for impairment of long-lived assets at September 30, 2015, we recorded an impairment charge of approximately $0.8 million related to property and equipment during the three months ended September 30, 2015. See Note 5 - “Intangibles Assets and Other Assets” for further discussion regarding the impairment of our long-lived assets.

Goodwill and Intangible Assets.

Intangible assets include intellectual property, patents and acquired products.

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

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

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

3. Acquired Products.    As part of the FAMILION acquisition and acquisition of certain intangible assets from Axial, the Company acquired technology, in process technology, trademarks/tradenames, customer relationships, covenants not to compete and third party relationships. These costs will be amortized pursuant to the straight-line method over their estimated economic life of seven to fifteen years. See Footnote 5 “Intangible Assets and Other Assets”.

Goodwill is tested for impairment annually. We perform this impairment analysis during the fourth quarter of each year or whenever events indicate that the carrying amount of goodwill may not be recoverable. We test our intangible assets for impairment when factors are present that indicate the carrying value of an intangible asset (group) may not be recoverable. Impairment occurs when the carrying value is determined to be not recoverable, thereby causing the carrying value of the goodwill or intangible asset (group) to exceed its fair value. If impaired, the asset’s carrying value is reduced to its fair value. We performed an interim testing of impairment of goodwill and long-lived assets as of September 30, 2015, due to the significant decline in the market price of our stock. As a result of this testing, we recorded impairment charges of $6.2 million related to our long-lived assets during the three months ended September 30, 2015 but determined that no impairment of goodwill was needed to be recorded. See Note 5 - “Intangibles and Other Assets” for further discussion regarding the impairment of our long-lived assets. During the fourth quarter of 2015, it was concluded that our Patient Testing business, which met the criteria to be classified as held for sale and reported as discontinued operations as of December 31, 2015, was impaired due to continued declines in financial performance and due to the fact that the likelihood of recoverability of the Patient Testing goodwill through sale of the Patient Testing business was remote. As a result we determined that the goodwill related to the Patient Testing business was impaired as of December 31, 2015. Goodwill impairment charges of $6.9 million were recorded during the three months ended December 31, 2015. The goodwill and impairment charges are included in the results of our discontinued operations. See Note 3 - “Discontinued Operations” for further discussion regarding the results of discontinued operations.

Common Stock Warrants.

Our issued and outstanding 2012 warrants to purchase common stock do not qualify to be treated as equity and accordingly, are recorded as a liability (“Common Stock Warrant Liability”). The Common Stock Warrant Liability was initially recorded at fair value using a Monte Carlo simulation model. We are required to present these instruments at fair value at each reporting date and any changes in fair values are recorded as an adjustment to earnings. The Common Stock Warrant Liability is considered a Level 3 financial instrument. See Note 13 - “Fair Value”.

Stock Based Compensation.

All stock-based awards to date have exercise prices equal to the market price of our common stock on the date of grant and have ten-year contractual terms. Unvested options as of December 31, 2015 had vesting periods of one or three years from the date of grant. None of the stock options outstanding at December 31, 2015 are subject to performance or market-based vesting conditions.

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

Income Taxes.

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities at each balance sheet date using tax rates expected to be in effect in the year the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent that it is more likely than not that they will not be realized. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations.

Net Sales Recognition.

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

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

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

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

• Collectability is reasonably assured.

In our Biomarker Identification laboratory, we perform services on a project by project basis. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year. At December 31, 2015 and 2014, deferred net sales associated with pharmacogenomics research projects, included in the balance sheet in deferred revenue, was $0.1 million and $0.3 million, respectively.

Net sales from Patient Testing laboratories are recognized on an individual test basis and take place when the test report is completed, reviewed and sent to the client less the reserve for insurance, Medicare and Medicaid contractual adjustments. There are no deferred net sales associated with our Patient Testing services. Adjustments to the allowances, based on actual receipts from third party payers, are reflected in the estimated contractual allowance applied prospectively. In the fourth quarter of 2015, we adjusted our contractual allowance rates to better reflect the reimbursement level we expect to achieve on Patient Testing billings. The adjustment negatively impacted our fourth quarter of 2015 Patient Testing revenues. Our Patient Testing revenues are reported as part of discontinued operations (See Note 3 - “Discontinued Operations”).

Net sales of Genetic Assays and Platforms products, reported as discontinued operations (See Note 3 - “Discontinued Operations”) are recognized in accordance with the terms of the sales arrangement. Such recognition is based on receipt of an unconditional customer order and transfer of title and risk of ownership to the customer, typically upon shipment of the product under a purchase order. Our sales terms do not provide for the right of return unless the product is damaged or defective. Net sales from certain services associated with the analytical instruments, to be performed subsequent to shipment of the products, is deferred and recognized when the services are provided. Such services, mainly limited to installation and training services that are not essential to the functionality of the instruments, typically are performed in a timely manner subsequent to shipment of the instrument. We also enter into various service contracts that cover installed instruments. These contracts cover specific time periods and net sales associated with these contracts are deferred and recognized ratably over the service period.

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

Research and Development.

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

Translation of Foreign Currency.

Our foreign subsidiary, which is included within discontinued operations uses the local currency of the country in which it is located as its functional currency. Its assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. A translation loss of $0.3 million and $0.1 million is reported in other comprehensive income on the accompanying consolidated statements of comprehensive loss as December 31, 2015 and 2014, respectively.

Loss Per Share.

Basic loss per share is calculated based on the weighted-average number of shares of common stock outstanding during each period. Diluted loss per share includes shares issuable upon exercise of outstanding stock options, warrants or conversion rights that have exercise or conversion prices below the market value of our common stock, as long as the effect is not anti-dilutive. Options, warrants and conversion rights pertaining to 9,963,886 and 6,613,572 shares of our common stock have been excluded from the computation of diluted earnings per share at December 31, 2015 and 2014, respectively. The options, warrants and conversion rights that were exercisable in 2015 and 2014 were not included because the effect would be anti-dilutive due to the net loss.

Recently Issued Accounting Pronouncements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. This guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to a customer. ASU No. 2014-09 will replace most existing revenue

44

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

recognition guidance in generally accepted accounting principles in the U.S. when it becomes effective. In July 2015, the FASB decided to defer the effective date of this new accounting guidance by one year. As a result, ASU No. 2014-09 will be effective for us for all annual and interim reporting periods beginning after December 15, 2017 and early adoption would be permitted as of the original effective date. The new standard permits the use of either the retrospective or cumulative effect transition method. We do not expect to early adopt this guidance and we have not selected a transition method. We are currently evaluating the impact this guidance will have on our financial condition, results of operations and cash flows.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40). The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We do not expect to early adopt this guidance and do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, rather than as a deferred charge asset. ASU No. 2015-03 is effective for us beginning on January 1, 2016. ASU No. 2015-03 is not expected to have a material impact on our financial condition, results of operations or cash flows.

In February 2016, the FASB issued an ASU, “Leases”. The new standard amends the recognition of lease assets and lease liabilities by lessees for those leases currently classified as operating leases and amends disclosure requirements associated with leasing arrangements. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently assessing the impact of the adoption of this ASU will have on our consolidated financial statements.

3. DISCONTINUED OPERATIONS

On September 8, 2015, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Edge BioSystems, Inc. (“Buyer”), pursuant to which we agreed to sell to Buyer, and Buyer agreed to purchase from us, our manufacturing, marketing and selling of high quality polymer and silica based beads and resin and chromatography columns business (collectively, the “Columns Business”). The Columns Business was part of our former segment, Genetic Assays and Platforms. Pursuant to the Asset Purchase Agreement, Buyer acquired substantially all of the assets used solely in connection with the Columns Business and assumed certain liabilities of the Columns Business for a total cash purchase price of approximately $2.1 million (the “Asset Sale”), which was paid on September 8, 2015 upon the closing of the Asset Sale. During the year ended December 31, 2015, we recorded a gain on the sale of the Columns Business of $1.5 million.

On November 25, 2015, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with ADSTEC Corporation (“ADSTEC”) and ADS Biotec Inc., a wholly-owned subsidiary of ADSTEC (“Buyer”), pursuant to which we sold (1) to ADSTEC our facilities located in Glasgow, Scotland and on Irvington Road in Omaha, Nebraska (together, the “Facilities”) and all of our stock, inventory and raw materials located at the Facilities (collectively, the “Inventory”), and (2) to Buyer (a) all of the remaining assets relating to our Genetic Assays and Platforms business segment (the “Business”), other than the Inventory (the “Purchased Assets”), and (b) all of the ordinary shares of Transgenomic Limited, a wholly-owned subsidiary of ours (the “Shares”). The Purchase Agreement superseded the binding term sheet between us and ADSTEC, effective as of September 30, 2015, as disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 30, 2015 (the “Term Sheet”).

Pursuant to the Purchase Agreement, ADSTEC and Buyer acquired the Facilities, the Inventory, the Purchased Assets and the Shares for an aggregate purchase price of approximately $300,000, and Buyer assumed our financial and human resources commitments related to the Business (the “Transaction”). During the year ended December 31, 2015, we recorded a loss on the Transaction of $1.7 million.

Together, the Asset Sale and the Transaction represent the divestiture of our Genetic Assays and Platforms business resulting in a strategic shift that will have a major effect on our operations and financial results. Therefore, the divested operations of our Genetic Assays and Platforms business meet the criteria to be reported as discontinued operations.

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

During the fourth quarter of 2015, our Board of Directors took actions to begin the process of divesting our Patient Testing business in New Haven, Connecticut. In March of 2016, we announced that we had suspended testing services in our Patient Testing laboratory as we review and evaluate various strategic alternatives for that business. As a result of these actions, as of December 31, 2015, our Patient Testing business meets the criteria to be reported as discontinued operations.

The related assets, liabilities, results of operations and cash flows for both the Genetic Assays and Platforms business and Patient Testing business are classified as assets held for sale, liabilities held for sale and discontinued operations for all periods presented.

Results of the discontinued operations consisted of the following:

	Years ended December 31,
(in thousands)	2015			2014
Net sales	$	18,584		$	25,843
Cost of goods sold	12,287			15,187
Gross profit	6,297			10,656
Selling, general and administrative expense	15,187			16,761
Research and development expense	408			648
Impairment of long-lived assets	13,942			—
Operating loss from discontinued operations	(23,240		)	(6,753		)
(Loss) gain on sale of business	(224		)	4,114
Loss from discontinued operations before income taxes	(23,464		)	(2,639		)
Income tax (benefit) expense	(648		)	524
Loss from discontinued operations	$	(22,816	)	$	(3,163	)

The $0.2 million of loss on sale of business for the year ended December 31, 2015 includes a $1.5 million gain on the Asset Sales in the third quarter of 2015 and a $1.7 million loss on the Transaction in the fourth quarter of 2015. The $4.1 million of gain on sale of business for the year ended December 31, 2014 is a result of the sale of our Surveyor technology, which was reported within the prior period Genetic Assays and Platforms segment results, in July 2014. We anticipate that we will complete the divestiture of the Patient Testing business during the first half of 2016.

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

Assets and liabilities of the discontinued operations are classified as assets held for sale and liabilities held for sale in the consolidated balance sheets and consisted of the following:

	Dollars in Thousands
	December 31, 2015		December 31, 2014
ASSETS
Accounts receivable, net	$	1,905	$	7,161
Inventory, net	—		3,005
Other current assets	82		806
Total current assets	1,987		10,972
Property and equipment, net	—		997
Goodwill and intangible assets	—		14,131
Other assets	—		6
Total Assets	$	1,987	$	26,106
LIABILITIES
Accounts payable	$	—	$	973
Accrued compensation	264		752
Accrued expenses	—		505
Deferred revenue	—		737
Total current liabilities	264		2,967
Other liabilities	—		871
Total Liabilities	$	264	$	3,838

The following is a summary of activity for the allowance for doubtful accounts from discontinued operations during the years ended December 31, 2015 and 2014. The allowance for doubtful accounts from discontinued operations are included in the assets held for sale in the consolidated balance sheets.

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs			Ending Balance
Twelve months ended December 31, 2015	$	7,927	$	9,447	$	(2,710	)	$	14,664
Twelve months ended December 31, 2014	$	3,821	$	6,116	$	(2,010	)	$	7,927

4.    INVENTORIES

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

	Dollars in Thousands
	December 31, 2015			December 31, 2014
Finished goods	$	—		$	—
Raw materials and work in process	113			—
Demonstration inventory	—			—
	$	113		$	—
Less allowances	(63		)	—
Total	$	50		$	—

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

5.    INTANGIBLE ASSETS AND OTHER ASSETS

We review our amortizable long-lived assets for impairment annually or whenever events indicate that the carrying amount of the asset (group) may not be recoverable. An impairment loss may be needed if the sum of the future undiscounted cash flows is less than the carrying amount of the asset (group). The amount of the loss would be determined by comparing the fair market value of the asset to the carrying amount of the asset (group).

We performed an impairment test as of September 30, 2015 due to the significant decline in the market price of our stock. As a result of this testing, we recorded impairment charges related to our long-lived assets of approximately $7.0 million during the three months ended September 30, 2015. The impairment charges include $0.8 million related to property and equipment and $6.2 million related to amortizable intangibles (see table below).

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

	Dollars in Thousands
	December 31, 2015
	Cost		Accumulated Amortization		Impairment Charge		Net Book Value
Acquired technology	$	9,009	$	4,611	$	4,398	$	—
Assay royalties	1,434		973		461		—
Third party payor relationships	367		116		251		—
Tradenames and trademarks	824		439		385		—
Customer relationships	652		130		522		—
Covenants not to compete	184		184		—		—
Patents	980		126		148		706
Intellectual property	671		207		—		464
	$	14,121	$	6,786	$	6,165	$	1,170

	Dollars in Thousands
	December 31, 2014
	Cost		Accumulated Amortization		Net Book Value		Included in assets held for sale		Included in continuing operations
Acquired technology	$	9,009	$	3,995	$	5,014	$	5,014	$	—
Assay royalties	1,434		819		615		615		—
Third party payor relationships	367		98		269		269		—
Tradenames and trademarks	824		351		473		473		—
Customer relationships	652		98		554		554		—
Covenants not to compete	184		138		46		46		—
Patents	815		87		728		157		571
Intellectual property	266		86		180		—		180
	$	13,551	$	5,672	$	7,879	$	7,128	$	751

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Years Ended December 31, 2015 and 2014

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

Amortization expense for intangible assets was $0.1 million and $0.1 million during the years ended December 31, 2015 and 2014. Amortization expense for intangible assets for each of the five succeeding fiscal years is expected to be $0.2 million, $0.1 million, $0.1 million, $0.1 million and $0.1 million for the years ended December 31, 2016, 2017, 2018 2019 and 2020, respectively.

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

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

6.         DEBT

	Dollars in Thousands
	Year Ended December 31,
	2015			2014
Revolving Line (1)	$	3,025		$	3,000
Term Loan (2)	4,000			4,087
Convertible Promissory Note (3)	571			750
Total debt	7,596			7,837
Current portion of long term debt	(7,596		)	(462		)
Long term debt, net of current maturities	$	—		$	7,375

(1) Revolving Line of Credit.Amounts advanced under the Revolving Line initially bore interest at an annual rate equal to the greater of (a) 4.25% or (b) the Wall Street Journal prime rate plus 1%. Interest is payable on a monthly basis, with the balance payable at the maturity of the Revolving Line. Under the Amendment to the Loan Agreement, which we entered into on August 2, 2013, amounts advanced under the Revolving Line bear interest at an annual rate equal to the greater of (x) 6.25% or (y) the Wall Street Journal prime rate plus 3%. The current interest rate is 6.50%. Under the Loan Agreement, we paid the Lenders an upfront fee of $20,000, and will pay the Lenders an additional commitment fee of $20,000 on each one year anniversary of March 13, 2013, the Effective Date, during the term of the Revolving Line. In addition, a fee of 0.5% per annum is payable quarterly on the unused portion of the Revolving Line. The Revolving Line matures on November 1, 2017.

(2) Term Loan. We received $4.0 million under the Term Loan on the Effective Date. Pursuant to the terms of the Loan Agreement, as amended by the Sixth Amendment (as defined in “-Revolving Line and Term Loan” below), we made a principal payment of approximately $148,000 on April 1, 2015 and were not be obligated to make monthly payments of principal to the Lenders until April 1, 2016. Pursuant to the Eighth Amendment of the Loan Agreement, the maturity date of the Loan Agreement was extended until November 1, 2017 and no principal payments on the Term Loan are due until such date. The current interest rate is 9.1%.

We paid the Lenders an upfront fee of $40,000 for the Term Loan, and will pay the Lenders an additional final payment of $120,000 at maturity or prepayment of the Term Loan. In addition, if we repay the Term Loan prior to maturity, we will pay the Lenders a prepayment penalty of 1% of the total outstanding balance under the Term Loan.

Additional Terms

The Loan Agreement contains affirmative and negative covenants. Under the Loan Agreement, we are required to maintain a minimum liquidity ratio and achieve a minimum amount of revenue, and we also agreed not to (i) pledge or otherwise encumber our assets other than to the Lenders, (ii) enter into additional borrowings or guarantees, (iii) repurchase our capital stock, or (iv) enter into certain mergers or acquisitions without the Lenders’ consent. Additionally, the Loan Agreement contains a subjective acceleration clause at the discretion of the Lenders. As of December 31, 2015, the Company was not in compliance with all financial covenants of the Loan Agreement, as amended by the Eighth Amendment. As such, all debt has been classified as current at December 31, 2015.

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

(3) Convertible Promissory Notes. The Notes accrues interest at a rate of 6% per year and mature on December 31, 2016.

50

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

Revolving Line and Term Loan.

On March 13, 2013 (the “Effective Date”), we entered into a Loan and Security Agreement with affiliates of Third Security, LLC, a related party, (the “Lenders”) for (a) a revolving line of credit (the “Revolving Line”) with borrowing availability of up to $4.0 million, subject to reduction based on our eligible accounts receivable, and (b) a term loan (the “Term Loan” and together with the Revolving Line, the “Loan Agreement”) of $4.0 million. Proceeds were used to pay off a three year senior secured promissory note payable to PGxHealth, LLC, which was entered into on December 29, 2010 in conjunction with our acquisition of the FAMILION family of genetic tests, and for general corporate and working capital purposes.

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

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

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

On March 3, 2014, we entered into a fourth amendment to the Loan Agreement (the “Fourth Amendment”). Pursuant to the terms of the Fourth Amendment, we were not required to make any principal or interest payments under the Term Loan for the period from March 1, 2014 through March 31, 2015. The interest on the debt that was deferred and not paid was capitalized as part of the Term Loan. The amount of interest that was capitalized from March 1, 2014 to March 31, 2015 was $0.4 million.

On October 22, 2014, we entered into a fifth amendment to the Loan Agreement (the “Fifth Amendment”). Pursuant to the Fifth Amendment, the parties amended certain provisions of the Loan Agreement, including reducing the minimum liquidity and revenue covenants under the Loan Agreement. The Fifth Amendment also reduced the aggregate amount that we may borrow under the Revolving Line from $4.0 million to $3.0 million.

On April 1, 2015, we entered into a sixth amendment to the Loan Agreement (the “Sixth Amendment”). Pursuant to the Sixth Amendment, among other things, (a) the Lenders waived specified events of default under the terms of the Loan Agreement, (b) commencing April 1, 2015, we began making monthly interest payments with respect to the Term Loan to the Lenders, (c) we will not be obligated to make monthly payments of principal under the Term Loan to the Lenders until April 1, 2016, (d) we made an initial prepayment of a portion of the Term Loan balance in the amount of approximately $148,000 on April 1, 2015 and will make one or more additional prepayments to the Lenders under the Loan Agreement upon the occurrence of certain events, as defined in the Loan Agreement, and (e) we are not required to comply with the minimum liquidity ratio under the terms of the Loan Agreement until the earliest to occur of a specified event, as defined in the Loan Agreement, or March 31, 2016. The Sixth Amendment also extends the time period in which we must provide certain reports and statements to the Lenders and amends the circumstances pursuant to which we may engage in certain sales or transfers of our business or property without the consent of the Lenders.

As of June 30, 2015, we were in compliance with all financial covenants of the Loan Agreement, but were not in compliance with the restrictions limiting the amount that we may borrow under the Revolving Line. Accordingly, on August 10, 2015, we received a waiver from the Lenders relating to this non-compliance and paid the Lenders an aggregate of $0.7 million, which brought us back into compliance with the terms of the Revolving Line.

On September 4, 2015, we entered into a seventh amendment to the Loan Agreement (the “Seventh Amendment”). The Seventh Amendment, among other things, (a) provided that the Lenders waived specified events of default under the terms of the Loan Agreement, (b) reduced our future minimum revenue covenants under the Loan Agreement, (c) reduced our borrowing availability under the Revolving Line to approximately $2.3 million and (d) limited our borrowing base under the Loan Agreement to the amount of the Revolving Line.

51

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

On January 6, 2016, we entered into an eighth amendment to the Loan Amendment (the “Eighth Amendment”). The Eighth Amendment, among other things, (1) provides that the Lenders will waive specified events of default under the terms of the Loan Agreement, (2) reduces our future minimum revenue covenants under the Loan Agreement, (3) extends the maturity date of the Loan Agreement until November 1, 2017, and (4) provides for the repayment of an overadvance of $750,000 previously provided by the Lenders to us pursuant to the Loan Agreement.

During the first quarter of 2016, the overadvance that existed at December 31, 2015 was repaid to the Lenders and $0.2 million was received from certain of the Lenders and another lender affiliate in connection with the equity offering made on January 6, 2015.

Convertible Promissory Notes.

On December 31, 2014, we entered into an Unsecured Convertible Promissory Note Purchase Agreement (the “Note Purchase Agreement”) with an accredited investor (the “Investor”) pursuant to which we agreed to issue and sell to the Investor in a private placement an unsecured convertible promissory note (the “Initial Note”). We issued the Initial Note in the aggregate principal amount of $750,000 to the Investor on December 31, 2014. Pursuant to the terms of the Initial Note, interest accrued at a rate of 6% per year and the Initial note was set to mature on December 31, 2016. Under the Note, the outstanding principal and unpaid interest accrued was convertible into shares of our common stock as follows: (i) commencing upon the date of issuance of the Initial Note (but no earlier than January 1, 2015), the Investor was entitled to convert, on a one-time basis, up to 50% of the outstanding principal and unpaid interest accrued under the Initial Note, into shares of our common stock at a conversion price equal to the lesser of (a) the average closing price of the common stock on the principal securities exchange or securities market on which our common stock is then traded (the “Market”) for the 20 consecutive trading days immediately preceding the date of conversion, and (b) $2.20 (subject to adjustment for stock splits, stock dividends, other distributions, recapitalizations and the like); and (ii) commencing February 15, 2015, the Investor was entitled to convert, on a one-time basis, any or all of the remaining outstanding principal and unpaid interest accrued under the Initial Note, into shares of our common stock at a conversion price equal to 85% of the average closing price of our common stock on the Market for the 15 consecutive trading days immediately preceding the date of conversion. The Initial Note has been converted in full into 502,786 shares of our common stock, in accordance with the terms of the Initial Note.

On January 15, 2015, we entered into the Note Purchase Agreement with seven accredited investors (the “Additional Investors”) and, on January 20, 2015, issued and sold to the Additional Investors, in a private placement, notes (the “Additional Notes”) in an aggregate principal amount of $925,000. The Additional Notes have the same terms and conditions as the Initial Note. As of December 31, 2015, $400,000 of the aggregate principal amount of the Additional Notes, and accrued interest thereon, has been converted into an aggregate of 281,023 shares of our common stock.

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

2016	$	7,596
Total	$	7,596

7.    CAPITAL LEASES

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

	Dollars in Thousands
	Asset Balances at
Classes of Property	December 31, 2015			December 31, 2014
Equipment	$	828		$	1,514
Less: Accumulated amortization	(725		)	(997		)
Total	$	103		$	517

52

The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2015.

Year ending December 31:

	Dollars in Thousands
2016	$	3
2017	1
Total minimum lease payments	$	4
Less: Amount representing interest	—
Present value of net minimum lease payments	$	4

The short term portion of our capital leases is included in accrued expenses and the long term portion is included in other long-term liabilities on the Balance Sheet. Included in depreciation for the years ended December 31, 2015 and 2014 was $0.2 million and $0.3 million, respectively, related to equipment acquired under capital leases.

8.    COMMITMENTS AND CONTINGENCIES

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

Rent expense under all operating leases was $0.2 million in each of 2015 and 2014. We lease certain equipment, vehicles and operating facilities under non-cancellable operating leases , some of which have escalation clauses that expire on various dates through 2022. Future minimum lease payments under non-cancellable operating leases, including non-cancellable lease associated with discontinued operations, are as follows (in thousands):

2016	$	727
2017	724
2018	711
2019	676
2020	680
thereafter	388
Total	$	3,906

At December 31, 2015, firm commitments to vendors totaled $0.3 million.

53

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

9.    INCOME TAXES

The Company’s provision for income taxes from continuing operations for the years ended December 31, 2015 and 2014 relates to income taxes in states, foreign countries and other local jurisdictions and differs from the amounts determined by applying the statutory Federal income tax rate to loss before income taxes for the following reasons:

	Dollars in Thousands
	2015			2014
Benefit at federal rate	$	(3,449	)	$	(3,665	)
Increase (decrease) resulting from:
State income taxes—net of federal benefit	(320		)	(401		)
Miscellaneous permanent differences	163			223
Liability warrants	70			(154		)
State, net operating loss expiration/true-up	(187		)	(327		)
Other—net	(119		)	2
Valuation allowance	3,842			4,322
Total income tax expense (benefit)	$	—		$	—

	Dollars in Thousands
	2015		2014
Federal:
Current	$	—	$	—
Deferred	—		—
Total Federal	$	—	$	—
State:
Current	$	—	$	—
Deferred	—		—
Total State	$	—	$	—
Foreign:
Current	$	—	$	—
Deferred	—		—
Total Foreign	$	—	$	—
Total Tax Provision	$	—	$	—

The Company’s deferred income tax asset from continuing operations at December 31, 2015 and 2014 is comprised of the following temporary differences:

54

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

	Dollars in Thousands
	2015			2014
Deferred Tax Asset:
Net operating loss carryforward	$	51,449		$	46,051
Research and development credit carryforwards	918			918
Other	585			539
	52,952			47,508
Less valuation allowance	(52,902		)	(47,406		)
Deferred Tax Asset	$	50		$	102
Deferred Tax Liability:
Property and equipment	50			102
Deferred Tax Liability	$	50		$	102
Net Deferred Asset (Liability)	$	—		$	—

At December 31, 2015, we had total unused federal tax net operating loss carryforwards of $142.9 million. The expiration dates are as follows (amounts in thousands):

2018	$	1,838
2019	8,181
2020	9,662
2021	8,228
2022	16,862
2023	16,173
2024	17,390
2025	8,153
2026	6,792
2027	3,238
2028	1,272
2029	591
2031	2,784
2032	8,358
2033	12,097
2034	7,591
2035	13,645
Total	$	142,855

Of these federal net operating loss carryforwards, $1.2 million were obtained in the acquisition of Annovis, Inc. and may be subject to certain restrictions. Remaining net operating loss carryforwards could be subject to limitations under section 382 of the Internal Revenue Code of 1986, as amended. At December 31, 2015, we had unused state tax net operating loss carryforwards of approximately $58.8 million that expire at various times beginning in 2016. At December 31, 2015, we had unused research and development credit carryforwards of $0.9 million that expire at various times between 2018 and 2028. At December 31, 2015, we had unused foreign net operating loss carryforwards relating to operations in the United Kingdom of approximately $0.9 million with an unlimited carryforward period. A valuation allowance has been provided for the net deferred tax assets, due to the cumulative losses in recent years and an inability to utilize any additional losses as carrybacks. We will continue to assess the recoverability of deferred tax assets and the related valuation allowance. To the extent we begin to generate income in future years and it is determined that such valuation allowance is no longer required, the tax benefit of the remaining deferred tax assets will be recognized at such time.

55

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

Our liability for uncertain tax positions, which was included in other long term liabilities, was $0.1 million and $0.1 million as of December 31, 2015 and 2014, respectively.  We recorded less than $0.1 million of additional uncertain tax positions during the years ended 2015 and 2014. We recorded a reduction of $0.2 million for uncertain tax positions during the year ended 2014. We recorded zero and $0.2 million for reductions in uncertain tax positions relating to statute of limitations lapse for the years ended 2015 and 2014, respectively. We had no material interest or penalties during fiscal 2015 or fiscal 2014, and we do not anticipate any such items during the next twelve months. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations. We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. We have statutes of limitation open for Federal income tax returns related to tax years 2011 through 2015. We have state income tax returns subject to examination primarily for tax years 2011 through 2015. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period. Open tax years related to foreign jurisdictions remain subject to examination. Our primary foreign jurisdiction is the United Kingdom, which has open tax years for 2011 through 2015.

During November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. We early adopted ASU 2015-17 effective December 31, 2015 on a retrospective basis. Adoption of this ASU resulted in a reclassification of our net current deferred tax asset to the net non-current deferred tax asset in our Consolidated Balance Sheet as of December 31, 2014 and 2015

10.        EMPLOYEE BENEFIT PLAN

We maintain an employee 401(k) retirement savings plan that allows for voluntary contributions into designated investment funds by eligible employees. We currently match the employee’s contributions at the rate of 100% on the first 3% of contributions and 50% on the next 2% of contributions. We may, at the discretion of our Board of Directors, make additional contributions on behalf of the Plan’s participants. Contributions to the 401(k) plan were $0.4 million and $0.4 million for the years ended December 31, 2015 and 2014, respectively.

11.    STOCKHOLDERS’ EQUITY

Common Stock.

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

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

On January 24, 2013, we entered into a Securities Purchase Agreement with certain institutional and other accredited investors pursuant to which we: (i) sold to the investors an aggregate of 1,383,333 shares of our common stock at a price per share

56

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

of $6.00 for aggregate gross proceeds of approximately $8.3 million; and (ii) issued to the investors warrants to purchase up to an aggregate of 691,656 shares of our common stock with an exercise price of $9.00 per share (the “Offering”). The warrants may be exercised, in whole or in part, at any time from January 30, 2013 until January 30, 2018 and contain both cash and “cashless exercise” features. The Third Security Investors purchased an aggregate of 500,000 shares of common stock and warrants to purchase an aggregate of 250,000 shares of common stock in the Offering on the same terms as the other investors. We used the net proceeds from the Offering for general corporate and working capital purposes.

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

The January 2013 common stock transaction required the repricing and issuance of additional common stock warrants to the holders of warrants issued in the February 2012 common stock and warrant sale. The exercise price of the warrants decreased from $15.00 per share to $12.96 per share and the number of shares issuable upon exercise of the warrants increased from 948,333 to 1,097,600.

On October 22, 2014, we entered into a Securities Purchase Agreement with certain accredited investors (the “October 2014 Investors”), pursuant to which we, in a private placement, issued and sold to the October 2014 Investors (the “2014 Private Placement”) an aggregate of 730,776 shares of our common stock at a price per share of $3.25 for an aggregate purchase price of approximately $2.375 million, and warrants to purchase up to an aggregate of 365,388 shares of our common stock with an initial exercise price of $4.00 per share that are exercisable for the period from April 22, 2015 through April 22, 2020. In connection with the 2014 Private Placement, we also issued a warrant to purchase up to an aggregate of 9,230 shares of our common stock to one advisor. The warrants issued in the 2014 Private Placement include both cash and “cashless exercise” features.

The 2014 Private Placement required the repricing and issuance of additional common stock warrants to the holders of warrants issued in the February 2012 common stock and warrant sale. The exercise price of the warrants decreased from $11.73 per share to $10.86 per share and the number of shares issuable upon exercise of the warrants increased from 1,212,665 to 1,309,785.

On December 31, 2014, we entered into the Note Purchase Agreement with the Investor pursuant to which we agreed to issue and sell the Initial note to the Investor (the “Note Private Placement”). See Note 6 “Debt-Convertible Promissory Notes” for additional information regarding the terms of the Initial note.

Pursuant to the terms of the Note Purchase Agreement, we are subject to certain registration obligations and we may be required to effect one or more other registrations to register for resale the shares of our common stock issued or issuable under the Initial Note in connection with certain “piggy-back” registration rights granted to the Investor.

The Note Private Placement required the repricing and issuance of additional common stock warrants to the holders of warrants issued in the February 2012 common stock and warrant sale. The exercise price of the 2012 warrants decreased from $10.86 per share to $10.25 per share and the number of shares issuable upon exercise of the warrants increased from 1,309,785 to 1,387,685.

On January 15, 2015, we entered into the Note Purchase Agreement with the Additional Investors and, on January 20, 2015, issued and sold to the Additional Investors, in a private placement, the Additional Notes in an aggregate principal amount of $925,000 (the “Additional Note Private Placement”). The Additional Notes have the same terms and conditions as the Initial Note.

Craig-Hallum acted as the sole placement agent for the sale and issuance of the Additional Notes. In connection with the sale and issuance of the Additional Notes, we issued to Craig-Hallum an unsecured convertible promissory note, upon the same terms and conditions as the Notes, in an aggregate principal amount equal to 5% of the proceeds received by us pursuant to the sale and issuance of the Additional Notes, or $46,250. As of the date of filing of this Annual Report, the Placement Agent Note remains outstanding.

The Additional Note Private Placement required the repricing and issuance of additional common stock warrants to the investors in our February 2012 common stock and warrant financing. The exercise price of these warrants decreased from $10.25 per share to $9.59 per share and the number of shares issuable upon exercise of the warrants increased from 1,387,685 to 1,483,161.

On February 27, 2015, we entered into a purchase agreement with Craig-Hallum Capital Group LLC (the “Underwriter”) relating to our sale and issuance of 3,573,899 shares of our common stock and corresponding warrants to purchase up to 714,780 shares of our common stock (the “2015 Offering”). Each share of common stock was sold in combination with a warrant to purchase

57

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

0.20 of a share of common stock. The purchase price to the public for each share of common stock and accompanying warrant was $1.95.

The purchase price paid by the Underwriter to us for the common stock and accompanying warrants was $1.8135. The net proceeds from the 2015 Offering, after deducting the Underwriter’s discount and other estimated 2015 Offering expenses, were approximately $6.2 million.

The accompanying warrants are exercisable immediately upon their initial issuance date at an exercise price of $2.24 per share and will expire five years from the date of issuance. The exercise price will also be subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock.

The 2015 Offering required the repricing and issuance of additional common stock warrants to the investors in our February 2012 common stock and warrant financing. The exercise price of these warrants decreased from $9.59 per share to $7.56 per share and the number of shares issuable upon exercise of the warrants increased from 1,483,161 to 1,881,396.

On June 30, 2015, we entered into a Securities Purchase Agreement with certain accredited investors (the “July 2015 Investors”) pursuant to which, on July 7, 2015, we sold to the July 2015 Investors, and the July 2015 Investors purchased from us, (a) an aggregate of approximately 1.5 million shares of our common stock at a price per share of $1.42, (b) warrants (the “Series B Warrants”) to purchase up to an aggregate of 0.7 million shares of our common stock with an exercise price of $0.01 per share, and (c) warrants (the “Series A Warrants” and, together with the Series B Warrants, the “July 2015 Warrants”) to purchase up to an aggregate of 1.2 million shares of our common stock, with an exercise price of $1.66 per share (collectively, the “July 2015 Offering”). The purchase price for the Series B Warrants was $1.42 per share of our common stock subject to the Series B Warrants. Each of the July 2015 Warrants has a term of 5 and 1/2 years. The Series B Warrants are immediately exercisable. The Series A Warrants will be exercisable beginning on January 7, 2016, six months from the date of issuance. The aggregate gross proceeds to us from the July 2015 Offering were approximately $3.0 million.

Craig-Hallum Capital Group LLC (the “2015 Placement Agent”) served as the sole placement agent for the Offering. In consideration for services rendered as the placement agent in the July 2015 Offering, we (a) paid to the 2015 Placement Agent cash commissions equal to approximately $212,783, or 7.0% of the gross proceeds received in the July 2015 Offering; (b) issued to the 2015 Placement Agent a five-year warrant to purchase up to 107,033 shares of our common stock with an exercise price of $1.66 per share and which is subject to other terms that are the same as the terms of the Series A Warrants; and (c) reimbursed the 2015 Placement Agent for reasonable out-of-pocket expenses, including fees paid to the 2015 Placement Agent’s legal counsel, incurred in connection with the July 2015 Offering, which reimbursable expenses did not exceed $50,000.

The July 2015 Offering required the repricing and issuance of additional common stock warrants to the investors in our February 2012 common stock and warrant financing. The exercise price of these warrants decreased from $7.56 per share to $6.50 per share and the number of shares issuable upon exercise of the warrants increased from 1,881,396 to 2,188,177.

Common Stock Warrants.

During the twelve months ended December 31, 2015, we issued warrants to purchase 3,466,841 shares of common stock and none of the issued warrants were exercised. Included in the warrants issued in 2015 were 800,492 warrant issued due to repricing requirements of the Private Placement and 2,666,349 warrants issued in connection with the 2015 Offering and the July 2015 Offering. During the twelve months ended December 31, 2015, warrants to purchase 431,027 shares of common stock expired. There were 664,703 common stock warrants issued during the 12 months ended December 31, 2014 and none of the issued warrants were exercised. Included in the warrants issued in 2014 were 290,085 warrants issued due to re-pricing requirements of the Private Placement. Warrants to purchase an aggregate of 5,920,799 shares of common stock were outstanding at December 31, 2015.

58

TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

Warrant Holder	Issue Year	Expiration	Underlying Shares	Exercise Price
Various Institutional Holders(1)	2012	February 2017	1,899,729	$6.50
Third Security Investors(1)	2012	February 2017	288,448	$6.50
Various Institutional Holders(2)	2013	January 2018	441,655	$9.00
Third Security Investors(2)	2013	January 2018	250,000	$9.00
Various Institutional Holders(3)	2014	April 2020	374,618	$4.00
Various Institutional Holders(4)	2015	February 2020	714,780	$2.24
Various Institutional Holders(5)	2015	December 2020	1,284,405	$1.66
Various Institutional Holders(5)	2015	December 2020	667,164	$0.01
			5,920,799

(1) These Warrants were issued in connection with the Private Placement completed in February 2012 and are classified as a liability in our financial statements. See Footnote 13 - “Fair Value”. These warrants also contain certain anti-dilution provisions that provide for an adjustment to the exercise price and number of shares issuable upon exercise of the warrant in the event that we engage in certain issuances of shares of our common stock at a price lower than the exercise price of the warrant.

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

(3) These warrants were issued in connection with the 2014 Private Placement, which was completed in October 2014.

(4) These warrants were issued in connection with the 2015 Offering, which was completed in February 2015.

(5) These warrants were issued in connection with the July 2015 Offering, which was completed in July 2015.

Preferred Stock Series A.

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

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

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

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

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

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

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

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

The Series A Preferred Stock was converted into common stock on January 6, 2016 (See Note 15 - “Subsequent Events - Conversion of Preferred Stock”).

Preferred Stock Series B.

On March 5, 2014, we entered into a Series B Convertible Preferred Stock Purchase Agreement (the “Series B Purchase Agreement”) with affiliates of Third Security, LLC (the “2014 Third Security Investors”), pursuant to which we, in a private placement, sold and issued an aggregate of 1,443,297 shares of our Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), at a price per share of $4.85 for an aggregate purchase price of approximately $7.0 million. Each share of Series B Preferred Stock issued pursuant to the Series B Purchase Agreement is initially convertible into shares of our common stock at a rate of 1-for-1, which conversion rate is subject to further adjustment as set forth in the Certificate of Designation of Series B Convertible Preferred Stock.

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

The Series B financing required the repricing and issuance of additional common stock warrants to the holders of warrants issued in the Private Placement. The exercise price of the warrants decreased from $12.96 per share to $11.73 per share and the number of shares issuable upon exercise of the warrants increased from 1,097,600 to 1,212,665.

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

The Series B Preferred Stock was converted into common stock on January 6, 2016 (See Note 15 - “Subsequent Events - Conversion of Preferred Stock”).

Preferred Stock Dividends.

We have cumulative undeclared dividends on our Series A Convertible Preferred Stock and Series B Preferred Stock (collectively “Preferred Stock”). At December 31, 2014, we had a recorded liability of $3.1 million for these undeclared dividends. Since dividends should generally not be recognized as a liability until declared, the $3.1 million liability was reversed in 2015 with an offset to accumulated deficit.

For the twelve months ended December 31, 2015 and 2014, we had cumulative undeclared dividends on our Preferred Stock of $4.4 million and $3.1 million, respectively. In accordance with the FASB’s Accounting Standards Codification Topic 260-10-45-11, “Earnings per Share”, these dividends were added to the net loss per share calculation. The accrued dividends were paid through the issuance of common stock on January 6, 2016 (See Note 15 - “Subsequent Events - Conversion of Preferred Stock”).

12.         EQUITY INCENTIVE PLAN

The Company’s 2006 Equity Incentive Plan (the “Plan”) allows the Company to make awards of various types of equity-based compensation, including stock options, dividend equivalent rights (“DERs”), stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance units, performance shares and other awards, to employees and directors of the Company. As of December 31, 2015, the Company was authorized to issue 1,666,666 shares under the Plan; provided, that no more than 1,250,000 of such shares may be used for grants of restricted stock, restricted stock units, performance units, performance shares and other awards.

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

For the years ended December 31, 2015 and 2014, we recorded compensation expense of $0.6 million and $0.9 million, respectively within selling, general and administrative expense. As of December 31, 2015, there was $0.4 million of unrecognized compensation expense related to unvested stock awards, which is expected to be recognized over a weighted average period of approximately 1.3 years.

The fair value of the options and SARs granted during 2015 was estimated on their respective grant dates using the Black-Scholes option pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 1.32% to 1.91%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of four to six years, based on historical exercise activity; and volatility of 83% to 86% for grants made during the year ended December 31, 2015 based on the historical volatility of our stock over a time that is consistent with the expected life of the option.

The fair value of the options granted during 2014 was estimated on their respective grant dates using the Black-Scholes option-pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 1.50% to 1.74%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of four to five years, based on historical exercise activity; and volatility of 82% to 105% for grants made during the year ended December 31, 2014 based on the historical volatility of our stock over a time that is consistent with the expected life of the option.

The weighted average grant date fair value per share of options granted during the years ended December 31, 2015 and 2014 was $0.96 and $3.51 respectively.

Stock Options.

The following table summarizes stock option activity under the Plan during the year ended December 31, 2015:

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

	Number of Options		Weighted Average Exercise Price
Outstanding at January 1, 2015	685,984		$	6.56
Granted	665,560		1.50
Forfeited	(154,189	)	4.72
Expired	(89,561	)	10.57
Outstanding at December 31, 2015	1,107,794		$	3.45
Exercisable at December 31, 2015	417,968		$	5.28

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

As of December 31, 2015, 945,685 outstanding options were vested or expected to vest. The weighted average exercise price of these options was $3.45 and the aggregate intrinsic value was zero with a remaining weighted average contractual life of 8.5 years.

As of December 31, 2015, 417,968 options were exercisable with a weighted average exercise price of $5.28 and an aggregate intrinsic value of zero. The weighted average contractual life of these options was 7.8 years.

No options were exercised in 2015 or 2014.

The total fair value of awards that vested during 2015 and 2014 was $0.8 million and $0.6 million, respectively.

Stock Appreciation Rights (“SARs”).

The following table summarizes SARs activity under the Plan during the year ended December 31, 2015:

	Number of SARs	Weighted Average Exercise Price
Outstanding at January 1, 2015	98,333	$	4.14
Granted	—	—
Forfeited	—	—
Expired	—	—
Outstanding at December 31, 2015	98,333	$	4.14
Exercisable at December 31, 2015	68,220	$	4.23

All SARs outstanding were issued to officers.

As of December 31, 2015, 98,333 outstanding SARs shares were vested or expected to vest. The weighted average exercise price of these options was $4.14 and the aggregate intrinsic value was zero with a remaining weighted average contractual life of 7.9 years.

As of December 31, 2015, 68,220 SARs shares were exercisable and no SARs shares were exercised in 2015 or 2014. At December 31, 2015, a liability of less than $0.1 million was recorded in accrued expenses.

13.    FAIR VALUE

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

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

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

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

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

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

Debt

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

Common Stock Warrant Liability

Certain of our issued and outstanding warrants to purchase common stock do not qualify to be treated as equity, and accordingly are recorded as a liability. The Common Stock Warrant Liability represents the fair value of the 2.2 million warrants issued in February 2012 (as adjusted pursuant to the terms of the 2012 warrants). We are required to record these instruments at fair value at each reporting date and changes are recorded as a non-cash adjustment to earnings. The gains or losses included in earnings are reported in other income (expense) in our Statement of Operations. Management does not believe that this liability will be settled by a use of cash.

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

Static Business Inputs include: Our equity value, which was estimated using our stock price of $1.07 as of December 31, 2015; the amount of the down-round financing, the timing of the down-round financing, the expected exercise period of 1.11 years from the valuation date and the fact that no other potential fundamental transactions are expected during the term of the common stock warrants.

Static Technical Inputs include: volatility of 104% based on implied and historical rates over the expected term and the risk-free interest rate of 0.69% based on the 1-year U.S. Treasury yield.

Simulated Business Inputs include: the probability of down-round financing, which was estimated to be 100% for simulated equity values below the down-round financing cut-off point.

Simulated Technical Inputs include: our equity value in periods 1-10 follows a geometric Brownian motion and is simulated over 10 independent six-month periods; a down-round financing event was randomly simulated in an iteration based on the 100% discrete probability of a down-round financing for those iterations where our simulated equity value at the expected timing of down-round financing was below the down-round financing cut-off point.

During the year ended December 31, 2015, the changes in the fair value of the liability measured using significant unobservable inputs (Level 3) was comprised of the following:

	Dollars in Thousands
	For the Year Ended
	December 31, 2015
Balance at December 31, 2014	$	145
Total gains or losses:
Recognized in earnings	205
Balance at December 31, 2015	$	350

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

14.    OPERATING SEGMENT AND GEOGRAPHIC INFORMATION

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

We have one operating segment as of December 31, 2015, Laboratory Services. Our revenues from continuing operations are primarily generated from pharmacogenomics research services supporting Phase II and Phase III clinical trials conducted by pharmaceutical and biotechnology companies.

Based on location of end customers, all of our revenues from continuing operations are attributed to the United States. All of our long-lived assets are also located within the United States.

15.    SUBSEQUENT EVENTS

Conversion of Preferred Stock

On January 6, 2016, the Company entered into a Conversion Agreement (the “Conversion Agreement”) with the holders (the “Preferred Holders”) of all of the Company’s outstanding shares of Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred”), and Series B Convertible Preferred Stock, par value $0.01 per share (the “Series B Preferred”), pursuant to which, among other things, the Preferred Holders: (1) elected to convert all of the outstanding shares of Series A Preferred and Series B Preferred into shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), in each case in accordance with the terms thereof, and (2) agreed that all accrued and unpaid dividends on the Series A Preferred and Series B Preferred would be paid by the Company in shares of Common Stock at a rate of $1.00 per share of Common Stock (collectively, the “Conversion”).

The outstanding shares of Series A Preferred were convertible into shares of Common Stock at a rate of 1-for-3, and the outstanding shares of Series B Preferred were convertible into shares of Common Stock at a rate of 1-for-1. Prior to the entry into the Conversion Agreement, there were 2,586,205 shares of Series A Preferred outstanding, which were converted into 862,057 shares of Common Stock, and 1,443,297 shares of Series B Preferred outstanding, which were converted into 1,443,297 shares of Common Stock, for an aggregate of 2,305,354 shares of Common Stock issued upon conversion of the Series A Preferred and Series B Preferred (the “Conversion Shares”). At the time of the entry into the Conversion Agreement, there were $3,681,591.90 in accrued and unpaid dividends on the outstanding shares of Series A Preferred, which were converted, in accordance with the Conversion Agreement, into 3,681,590 shares of Common Stock, and $793,236.17 in accrued and unpaid dividends on the outstanding shares of Series B Preferred, which were converted, in accordance with the terms of the Conversion Agreement, into 793,235 shares of Common Stock, for an aggregate of 4,474,825 shares of Common Stock issued pursuant to the accrued and unpaid dividends on the Series A Preferred and Series B Preferred (the “Dividend Shares”). Therefore, in connection with the full conversion of the Series A Preferred and Series B Preferred, plus the conversion of all accrued and unpaid dividends thereon, the Company issued an aggregate of 6,780,179 shares of Common Stock to the Preferred Holders on January 6, 2016.

Following the conversion of the shares of Series A Preferred and Series B Preferred into common stock, no shares of Series A Preferred or Series B Preferred remain outstanding.

Amended Loan and Security Agreement

On January 6, 2016, the Company entered into an eight amendment the Loan Amendment. The eight amendment, among other things, (1) provides that the Lenders will waive specified events of default under the terms of the Loan Agreement, (2) reduces the Company’s future minimum revenue covenants under the Loan Agreement, (3) extends the maturity date of the Loan Agreement until November 1, 2017, and (4) provides for the repayment of an overadvance of $750,000 previously provided by the Lenders to the Company pursuant to the Loan Agreement.

During the first quarter of 2016, the overadvance that existed at December 31, 2015 was repaid to the Lenders and $0.2 million was received from certain of the Lenders and another lender affiliate in connection with the equity offering made on January 6, 2015.

Issuance of Preferred Stock and Common Stock Warrants

On January 6, 2016, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which, on January 8, 2016, the Company sold to the Investors, and the Investors purchased from the Company (the “Offering”), an aggregate of approximately $2.2 million of units (the “Units”) consisting of (1) an aggregate of 2,365,243 shares (the “A-1 Preferred Shares”) of Series A-1 Convertible Preferred Stock, par value $0.01 per share, of the Company (the “A-1 Preferred”), and (2) warrants (the “Warrants”) to purchase up to an aggregate of 1,773,929 shares

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

of common stock, par value $0.01 per share, of the Company (the “Common Stock”). Each Unit was sold to the Investors at a purchase price of $0.93 per Unit. The A-1 Preferred Shares are convertible into shares of Common Stock at an initial rate of 1-for-1, which conversion rate is subject to further adjustment as set forth in the Company’s Certificate of Designation of Series A-1 Convertible Preferred Stock, which was filed with the Secretary of State of the State of Delaware on January 8, 2016 (the “Series A-1 Certificate of Designation”). Pursuant to the terms of the Series A-1 Certificate of Designation, the holders of the A-1 Preferred Shares will generally be entitled to that number of votes as is equal to the product obtained by multiplying: (a) the number of whole shares of Common Stock into which the A-1 Preferred may be converted as of the record date of such vote or consent, by (b) 0.93, rounded down to the nearest whole number. Therefore, every 1.075269 shares of A-1 Preferred will generally initially be entitled to one vote.

The Warrants are immediately exercisable, have a term of five years and have an exercise price of $1.21 per share of Common Stock. Each Warrant includes both cash and “cashless exercise” features and an exchange feature whereby the holder of the Warrant may exchange (the “Exchange Right”) all or any portion of the Warrant for a number of shares of Common Stock equal to the quotient obtained by dividing the “Exchange Amount” by the closing bid price of the Common Stock on the second trading day prior to the date the Warrant is exchanged (the “Exchange Price”). Under the Warrants, the “Exchange Amount” is based upon a Black Scholes option pricing model, and the aggregate Exchange Amount under all of the Warrants will be $1,436,882, subject to adjustment to the extent that the risk-free U.S. Treasury rate fluctuates between the date of issuance of the Warrants and the date the Warrants are exchanged. Each Warrant provides that the number of shares that may be issued upon exercise of the Exchange Right is limited to the number of shares that may be purchased pursuant to the terms of the Warrant, unless the Company has previously obtained stockholder approval or approval from The Nasdaq Stock Market LLC to issue any additional shares of Common Stock (the “Additional Shares”) pursuant to the Exchange Right (the “Required Approvals”). For any Exchange Right exercised more than 90 days following the issuance of the Warrants, if the Company has not obtained either of the Required Approvals, the Company will be required to pay the Warrant holder an amount in cash for any Additional Shares that it cannot issue without the Required Approvals based on the Exchange Amount.

The Warrants further provide that, to the extent the closing bid price of the Common Stock on the second trading day prior to the date the Warrant is exchanged is less than $0.50, the Exchange Price will be deemed to be equal to $0.50, and, in addition to issuing shares of Common Stock based on this Exchange Price, the Company will be required to pay to the Warrant holder an amount in cash equal to the product obtained by multiplying (a) $0.50 minus the closing bid price of the Common Stock on the second trading day prior to the date the Warrant is exchanged, by (b) the aggregate number of shares of Common Stock issued to the Warrant holder by the Company in such exchange at an Exchange Price equal to $0.50. Therefore, if the Required Approvals are obtained, based on the Exchange Amount of $1,436,882 (which, as noted above, is subject to adjustment to the extent that the risk-free U.S. Treasury rate fluctuates between the date of the issuance of the Warrants and the date the Warrants are exchanged), the maximum number of shares of Common Stock issuable pursuant to the Exchange Right in the Warrants will be 2,873,765. In addition, if, for example, assuming an Exchange Amount of $1,436,882, the closing bid price of the Common Stock on the second trading day prior to the date the Warrants are exchanged is $0.25, the Company would be required to pay to the Warrant holders cash in an aggregate amount of $718,441 in addition to issuing the Warrant holders 2,873,765 shares.

In accordance with the terms of the Purchase Agreement, the Company amended that certain Series A Warrant to purchase up to an aggregate of 1,161,972 shares of Common Stock previously issued by the Company to an affiliate of one of the Investors on July 7, 2015 (the “Original Warrant”), as previously reported by the Company on its Amendment No. 1 to Current Report on Form 8-K/A, filed with the Securities and Exchange Commission (the “SEC”) on July 7, 2015 (as so amended, the “Amended Warrant”). The Amended Warrant amends the Original Warrant to provide that the Amended Warrant is subject to the same terms and conditions as the Warrants and, therefore, includes both cash and “cashless exercise” features and an Exchange Right whereby the number of shares issuable pursuant to the Exchange Right is equal to the “Amended Warrant Exchange Amount”, which is based on a Black Scholes option pricing model, and will be $941,197, subject to adjustment to the extent that the risk-free U.S. treasury rate fluctuates between the date of issuance of the Amended Warrant and the date the Amended Warrant is exchanged. The Amended Warrant is exercisable for up to 1,161,972 shares of Common Stock in the event the Company has obtained either of the Required Approvals with respect to the Amended Warrant. In the event the Amended Warrant holder exercises the Amended Warrant more than 90 days following the issuance of the Amended Warrant, if the Company has not obtained either of the Required Approvals, the Company will be required to pay the Amended Warrant holder an amount in cash for the shares of Common Stock that the Company cannot issue under the Amended Warrant pursuant to such exercise without the Required Approvals based on the Amended Warrant Exchange Amount.

The Amended Warrant also provides that, to the extent the closing bid price of the Common Stock on the second trading day prior to the date the Amended Warrant is exchanged is less than $0.50, the Exchange Price will be deemed to be equal to $0.50, and, in addition to issuing shares of Common Stock based on this Exchange Price (assuming receipt of the Required Approvals), the Company will be required to pay to the Amended Warrant holder an amount in cash equal to the product obtained by multiplying (a) $0.50 minus the closing bid price of the Common Stock on the second trading day prior to the date the Amended Warrant is

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TRANSGENOMIC, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2015 and 2014

exchanged, by (b) the aggregate number of shares of Common Stock issued to the Amended Warrant holder by the Company in such exchange at an Exchange Price equal to $0.50. Therefore, if the Required Approvals are obtained, based on the Amended Warrant Exchange Amount of $941,197 (which, as noted above, is subject to adjustment to the extent that the risk-free U.S. Treasury rate fluctuates between the issuance of the Amended Warrant and the date the Amended Warrant is exchanged), the maximum number of shares of Common Stock issuable pursuant to the Exchange Right in the Amended Warrant will be 1,882,395. In addition, if, for example, assuming an Amended Warrant Exchange Amount of $941,197, the closing bid price of the Common Stock on the second trading day prior to the date the Amended Warrant is exchanged is $0.25, the Company would be required to pay to the Amended Warrant holder cash in an aggregate amount of $470,599 in addition to issuing the Amended Warrant holder 1,882,395 shares.

In connection with entering into the Securities Purchase Agreement, the Company also entered into a Registration Rights Agreement, dated January 8, 2016, with the Investors. The Registration Rights Agreement requires that the Company file with the SEC a registration statement to register for resale the shares of Common Stock issuable upon conversion of the A-1 Preferred Shares (the “A-1 Preferred Conversion Shares”) and the shares of Common Stock issuable upon exercise of the Warrants and the Amended Warrant (collectively, the “Warrant Shares”) by January 23, 2016.

Craig-Hallum Capital Group LLC (the “Placement Agent”) served as the sole placement agent for the Offering. In consideration for services rendered as the Placement Agent in the Offering, the Company (1) paid to the Placement Agent cash commissions equal to approximately $140,000, or 7.0% of the gross proceeds received in the Offering, excluding any proceeds received from Third Security, LLC or any of its affiliates; (2) issued to the Placement Agent, for a price of $50, a five-year warrant to purchase up to 107,527 shares of Common Stock at an exercise price of $1.21 per share (the “Agent Warrant”), which is subject to the same terms as the Warrants except that the Agent Warrant is not exercisable until July 8, 2016 and does not contain the Exchange Right; and (3) reimbursed the Placement Agent for reasonable out-of-pocket expenses, including fees paid to the Placement Agent’s legal counsel, incurred in connection with the Offering, which reimbursable expenses did not exceed $50,000.

66

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

None.

Item 9A. Controls and Procedures.

(a)         Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report, management performed, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to management including our Chief Executive Officer and our Interim Chief Financial Officer, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and no evaluation of controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation, the Chief Executive Officer and Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2015.

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

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

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

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

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

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

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

Management has conducted, with the participation of our Chief Executive Officer and our Interim Chief Financial Officer, an assessment, including testing of the effectiveness, of our internal control over financial reporting as defined in Rule 13(a)-15(f) under the Exchange Act as of December 31, 2014. Management’s assessment of internal control over financial reporting was conducted using the criteria in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on that assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2015.

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

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(c)         Changes in internal control over financial reporting

During the period ended December 31, 2015, we completed our remediation efforts related to our controls over proper timing and recognition of revenue and controls related to the elements used in our analysis and evaluation of the allowance for doubtful accounts. As a result of the completed remediation efforts noted below, there were improvements in internal control over financial reporting during the fiscal year 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. There were no other changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Remediation Efforts to Address Material Weaknesses

In our Annual Report on Form 10-K for the year ended December 31, 2014, management identified the following two material weaknesses in our internal control over financial reporting in our Patient Testing business operations in New Haven, Connecticut. The ineffectiveness of the control environment did not result in an adjustment to the financial statements or a restatement of prior year financial statements:

• Design and Maintenance of Controls Surrounding Revenue Recognition. The Company did not design and maintain effective controls over proper timing and recognition of revenue. The Company’s procedures and controls were not adequately designed to ensure that revenues were timely identified and measured to ensure that revenue was recorded correctly within the appropriate period.

• Design and Maintenance of Controls Surrounding Determination of Allowance for Doubtful Accounts. The Company did not design and maintain effective controls over the elements used in its analysis and evaluation of the allowance for doubtful accounts to ensure that the allowance for doubtful was reasonably stated.

A material weakness is a control deficiency, or combination of control deficiencies, that result in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

In response to the material weaknesses, management developed remediation plans to address the control deficiencies identified in 2014. We implemented the following remediation actions during 2015:

Design and Maintenance of Controls Surrounding Revenue Recognition.

• Effective for the quarter ending March 31, 2015, additional review and reconciliation steps were added to the Lab revenue recognition process to ensure that revenue is appropriately recognized in the proper period. The review and reconciliation process was enhanced to include, among other steps, (i) a reconciliation of proof of delivery (fax confirmation) for invoiced and unbilled reports (ii) a review of error processing queues.

• Effective for the Quarter ended September 30, 2015 we added the following control procedures.

(i) A “dump” file from Uniflow, the “ Uniflow Report” was generated which included all fax confirmed tests for the month,

(ii) The Uniflow Report was used to verify items on the Xifin End Of Month billed report and;

(iii) Items from the Uniflow Report not found on the Xifin End of Month were used to created the unbilled revenue file for the month.

• An additional control procedure was put in place in the fourth quarter to ensure that items recognized as unbilled used the proper pricing table and that unbilled items when billed would reflect the same pricing.

Design and Maintenance of Controls Surrounding Determination of Allowance for Doubtful Accounts.

• Effective for the fiscal year ending December 31, 2015, additional review and reconciliation steps were added to the allowance for doubtful account process. The review and reconciliation included, among other steps, (i) a review of the payor and client accounts receivable aging (ii) review of write offs, (iii) a review of current and historical payment trends, (iv) a review of actual cash collections and a hindsight analysis.

Management has determined that the remediation actions discussed above were effectively designed and demonstrated effective operation for a sufficient period of time the enable us to conclude that the 2014 material weaknesses have been remediated as of December 31, 2015.

Item 9B. Other Information.

None.

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Part III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated by reference to the information set forth in the sections titled “Board of Directors and Committees”, “Section 16(a) Beneficial Ownership Reporting Compliance”, “Code of Business Conduct and Ethics”, “Corporate Governance - Committees of our Board of Directors”, “Corporate Governance - Audit Committee” and “Corporate Governance - Compensation Committee” in our definitive proxy statement to be filed with the Securities and Exchange Commission (the “SEC”) in connection with the annual meeting of stockholders to be held in 2016 (the “2016 Proxy Statement”). The information required by this item related to the executive officers can be found in the section captioned “Executive Officers of the Registrant” under Part I, “Item 1. Our Business” of this Annual Report on Form 10-K, and is also incorporated herein by reference.    

Item 11. Executive Compensation.

The information required by this item is incorporated by reference to the information set forth in the sections titled “2015 Executive Compensation” and “Director Compensation” in the 2016 Proxy Statement.

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

The information required by this item is incorporated by reference to the information set forth in the sections titled “Beneficial Ownership of Common Stock”, “Beneficial Ownership of Preferred Stock” and “Equity Compensation Plan Information” in the 2016 Proxy Statement.

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

The information required by this item is incorporated by reference to the information set forth in the sections titled “Review and Approval of Related Person Transactions” and “Director Independence” in the 2016 Proxy Statement.

Item 14. Principal Accounting Fees and Services.

The information required by this item is incorporated by reference to the information set forth in the section titled “Independent Registered Public Accounting Firm” in the 2016 Proxy Statement.

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Part IV

Item 15. Exhibits, Financial Statement Schedules.

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

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

Report of Independent Registered Public Accounting Firm.

Consolidated Balance Sheets of the Registrant and Subsidiary as of December 31, 2015 and 2014.

Consolidated Statements of Operations of the Registrant and Subsidiary for the years ended December 31, 2015 and 2014.

Consolidated Statements of Comprehensive Loss of the Registrant and Subsidiary for the years ended December 31, 2015 and 2014.

Consolidated Statements of Stockholders’ Equity (Deficit) of the Registrant and Subsidiary for the years ended December 31, 2015 and 2014.

Consolidated Statements of Cash Flows of the Registrant and Subsidiary for the years ended December 31, 2015 and 2014.

Notes to Consolidated Financial Statements of the Registrant and Subsidiary.

2 Financial Statement Schedules.

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

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

†2.1	Asset Purchase Agreement among the Registrant, Scoli Acquisition Sub, Inc. and Axial Biotech, Inc. dated August 27, 2012 (incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 8, 2012).
3.1	Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2005).
3.2	Certificate of Amendment of Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on May 29, 2012).
3.3	Certificate of Amendment of Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on January 28, 2014).
3.4	Certificate of Amendment of Certificate of Designation of Series A Convertible Preferred Stock of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on March 6, 2014).
3.5	Certificate of Designation of Series B Convertible Preferred Stock of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on March 6, 2014).
3.6	Certificate of Designation of Series A-1 Convertible Preferred Stock of Transgenomic, Inc., as filed with the Secretary of State of the State of Delaware on January 8, 2016 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on January 11, 2016 at 7:33 a.m. Eastern Time).

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3.7	Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3(ii) to the Registrant’s Current Report on Form 8-K filed on May 25, 2007).
4.1	Form of Certificate of the Registrant’s Common Stock (incorporated by reference to Exhibit 4 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).
4.2	Form of Warrant issued by the Registrant to the Third Security Entities on February 7, 2012 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 7, 2012).
4.3	Form of Warrant issued by the Registrant to the Investors on February 7, 2012 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 7, 2012).
4.4	Form of Registration Rights Agreement entered into by and among the Registrant, the Third Security Entities and the Investors dated February 2, 2012 (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on February 7, 2012).
4.5	Registration Rights Agreement, entered into by and among the Registrant and the Investors, dated January 24, 2013 (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K/A filed on January 31, 2013).
4.6	Form of Warrant issued by the Registrant to the Investors on January 30, 2013 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K/A filed on January 31, 2013).
4.7	Registration Rights Agreement, dated as of March 5, 2014, by and among the Registrant, Third Security Senior Staff 2008 LLC, Third Security Staff 2014 LLC and Third Security Incentive 2010 LLC (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on March 6, 2014).
4.8	Securities Purchase Agreement, dated as of October 22, 2014, by and among Transgenomic, Inc. and the Investors (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on October 22, 2014).
4.9	Form of Warrant issued by Transgenomic, Inc. to the Investors and the advisor on October 22, 2014 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on October 22, 2014).
4.10	Unsecured Convertible Promissory Note Purchase Agreement, dated as of December 31, 2014, by and among Transgenomic, Inc. and the Investors (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 7, 2015).
4.11	Form of Unsecured Convertible Promissory Note issued by Transgenomic, Inc. to the Investor pursuant to the Unsecured Convertible Promissory Note Purchase Agreement, dated as of December 31, 2014 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on January 7, 2015).
4.12	Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on February 27, 2015).
4.13	Registration Rights Agreement, dated June 30, 2015, by and among Transgenomic, Inc. and the Investors (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K/A filed on July 7, 2015).
4.14	Form of Series B Warrant to Purchase Common Stock issued by Transgenomic, Inc. to an Investor on July 7, 2015 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K/A filed on July 7, 2015).
4.15	Form of Series A Warrant to Purchase Common Stock issued by Transgenomic, Inc. to Investors on July 7, 2015 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K/A filed on July 7, 2015).
4.16	Form of Warrant to Purchase Common Stock issued by Transgenomic, Inc. to the Placement Agent on July 7, 2015 (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K/A filed on July 7, 2015).
4.17	Registration Rights Agreement, by and among Transgenomic, Inc. and the Investors, dated January 8, 2016 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on January 11, 2016 at 7:33 a.m. Eastern Time).

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4.18	Form of Warrant, issued by Transgenomic, Inc. to the Investors on January 8, 2016 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on January 11, 2016 at 7:33 a.m. Eastern Time).
4.19	Form of Amended Warrant, issued by Transgenomic, Inc. to an affiliate of an Investor on January 8, 2016 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on January 11, 2016 at 7:33 a.m. Eastern Time).
4.20	Form of Warrant, issued by Transgenomic, Inc. to the Placement Agent on January 8, 2016 (incorporated by reference to Exhibit 4.4 to the Registrant’s Current Report on Form 8-K filed on January 11, 2016 at 7:33 a.m. Eastern Time).
*10.1	The Registrant’s 2006 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 28, 2014).
*10.2	1999 UK Approved Stock Option Sub Plan of the Registrant (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).
10.3	License Agreement, dated August 20, 1997, between the Registrant and Leland Stanford Junior University (incorporated by reference to Exhibit 10.15 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).
10.4	License Agreement, dated December 1, 1989, between Cruachem Holdings Limited (a wholly owned subsidiary of the Registrant) and Millipore Corporation (incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K filed on March 25, 2002).
10.5	Sublicense Agreement, dated October 1, 1991, between Cruachem Holdings Limited (a wholly owned subsidiary of the Registrant) and Applied Biosystems, Inc. (incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K filed on March 25, 2002).
10.6	Missives, dated May 17, 2002, between Cruachem Limited (a wholly-owned subsidiary of the Registrant) and Robinson Nugent (Scotland) Limited (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 14, 2002).
10.7	License Amendment Agreement, dated June 2, 2003, by and between Geron Corporation and the Registrant (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on August 12, 2003).
10.8	Supply Agreement, dated January 1, 2000, between the Registrant and Hitachi Instruments (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).
10.9	License Agreement between the Registrant and the Dana-Farber Cancer Institute dated October 8, 2009 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 5, 2009).
10.10	Securities Purchase Agreement, entered into by and among the Registrant and the Investors, dated January 24, 2013 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K/A filed on January 31, 2013).
10.11	Forbearance Agreement, dated February 7, 2013, by and between the Registrant and Dogwood Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 8, 2013).
10.12	Loan and Security Agreement among the Registrant, Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, dated March 13, 2013 (incorporated by reference to Exhibit 10.39 to the Registrant’s Annual Report on Form 10-K filed on March 14, 2013).
10.13	First Amendment to Loan and Security Agreement among the Registrant, Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, dated August 2, 2013 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 6, 2013).
*10.14	Employment Agreement between the Registrant and Paul Kinnon, effective September 30, 2013 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 30, 2013).

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*10.15	Offer Letter, dated November 6, 2012, by and between Transgenomic, Inc. and Leon Richards (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 3, 2015).
*10.16	Amendment No. 1 to Offer Letter, dated June 2, 2015, by and between Transgenomic, Inc. and Leon Richards (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on June 3, 2015).
*10.17	Form of Incentive Stock Option Agreement between the Registrant and Paul Kinnon, effective September 30, 2013 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2014).
*10.18	Form of Stock Appreciation Rights Agreement between the Registrant and Paul Kinnon, effective September 30, 2013 (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2014).
*10.19	Form of Stock Appreciation Rights Agreement under the 2006 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on September 30, 2013).
10.20	Second Amendment to Loan and Security Agreement among the Registrant, Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, effective October 31, 2013 (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q filed on November 14, 2014).
10.21	Limited Waiver and Third Amendment to Loan and Security Agreement among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, dated January 27, 2014 (incorporated by reference to Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K filed on March 27, 2014).
10.22	Fourth Amendment to Loan and Security Agreement among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, dated March 3, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 6, 2014).
10.23	Series B Convertible Preferred Stock Purchase Agreement, dated as of March 5, 2014, by and among Transgenomic, Inc. and Third Security Senior Staff 2008 LLC, Third Security Staff 2014 LLC and Third Security Incentive 2010 LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on March 6, 2014).
+10.24	Collaboration Agreement, dated as of October 9, 2013, by and between the Registrant and PDI, Inc. (incorporated by reference to Exhibit 10.24 to the Registrant’s Annual Report on Form 10-K/A filed on September 5, 2014).
+10.25	Surveyor Kit Patent, Technology, and Inventory Purchase Agreement, dated as of July 1, 2014, by and between the Registrant and Integrated DNA Technologies, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 12, 2014).
10.26	Limited Waiver and Fifth Amendment to Loan and Security Agreement among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, dated October 22, 2014 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 22, 2014).
10.27	Unsecured Convertible Promissory Note Purchase Agreement, dated as of December 31, 2014, by and between Transgenomic, Inc. and the Investor (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 7, 2015).
10.28	Purchase Agreement by and between the Registrant and Craig-Hallum Capital Group LLC, dated February 27, 2015 (incorporated by reference to Exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed on February 27, 2015).
10.29	Limited Waiver and Sixth Amendment to Loan and Security Agreement by and among the Registrant, Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, dated April 1, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on April 2, 2015).
10.30	Securities Purchase Agreement, by and among Transgenomic, Inc. and the Investors, dated June 30, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Amendment No. 1 to Current Report on Form 8-K/A filed on July 7, 2015).

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10.31	Limited Waiver and Seventh Amendment to Loan and Security Agreement (Term Loan and Revolving Loan), by and among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the other lenders party thereto, dated as of September 4, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 16, 2015).
10.32	Asset Purchase Agreement, by and between Transgenomic, Inc. and Edge BioSystems, Inc., dated September 8, 2015 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on November 16, 2015).
10.33	Confidential and Binding Term Sheet, by and between Transgenomic, Inc. and ADSTEC Corporation, effective as of September 30, 2015 (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed on November 16, 2015).
10.34	Asset Purchase Agreement, by and between Transgenomic, Inc., ADSTEC Corporation and ADS Biotec Inc., dated November 25, 2015.
10.35	Conversion Agreement, dated January 6, 2016, by and among Transgenomic, Inc. and affiliates of Third Security, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on January 11, 2016 at 7:30 a.m. Eastern Time).
10.36	Limited Waiver and Eighth Amendment to Loan and Security Agreement (Term Loan and Revolving Loan), by and among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, as administrative agent and a lender, and the lenders party thereto, dated January 6, 2016 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on January 11, 2016 at 7:30 a.m. Eastern Time).
12.1	Statement Regarding the Computation of Ratio of Earnings to Fixed Charges and Preferred Share Dividends for the Years Ended December 31, 2011, 2012, 2013, 2014 and 2015.
21	Subsidiaries of the Registrant.
23	Consent of Independent Registered Public Accounting Firm
24	Powers of Attorney (included on signature page hereto).
31	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
**32	Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
†	Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this agreement have been omitted. The Registrant agrees to furnish supplementally a copy of any omitted schedule to the SEC upon request.
*	Denotes exhibit that constitutes a management contract, or compensatory plan or arrangement.
**	These certifications are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates it by reference.
+	Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 14 day of April 2016.

TRANSGENOMIC, INC.
By:	/s/ PAUL KINNON
	Paul Kinnon, President, Chief Executive Officer and Interim Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints, jointly and severally, Paul Kinnon and Leon Richards, and each of them acting individually, as his attorney-in-fact, each with full power of substitution and resubstitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. 

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

Signature	Title	Date
/s/ PAUL KINNON Paul Kinnon	Director, President, Chief Executive Officer and Interim Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)	April 14, 2016
/s/ LEON RICHARDS Leon Richards	Chief Accounting Officer (Principal Accounting Officer)	April 14, 2016
/s/ ROBERT M. PATZIG Robert M. Patzig	Director	April 14, 2016
/s/ DOIT L. KOPPLER II Doit L. Koppler II	Director	April 14, 2016
/s/ MICHAEL A. LUTHER Michael A. Luther	Director	April 14, 2016
/s/ MYA THOMAE Mya Thomae	Director	April 14, 2016

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EX-10.34

Exhibit 10.34

______________________________________________________________________________ASSET PURCHASE AGREEMENTby and amongTRANSGENOMIC, INC.,

ADS BIOTEC INC. andADSTEC CORPORATIONDated as of November 25, 2015
______________________________________________________________________________

PURCHASE AND SALE OF PURCHASED ASSETS AND INVENTORY 1

1.1Sale and Purchase of Assets and Liabilities    1

1.2Liabilities    3

1.3Closing Transactions    4

1.4Allocation of the Purchase Price    5

1.5Nonassignable Contracts    5

CONDITIONS TO CLOSING 6

2.1Conditions to Buyer’s Obligations    6

2.2Conditions to Seller’s Obligations    7

REPRESENTATIONS AND WARRANTIES OF SELLER 8

3.1Organization and Corporate Power    8

3.2Subsidiaries    8

3.3Authorization; No Breach    8

3.4Consents    9

3.5Customers and Suppliers    9

3.6No Material Adverse Effect    9

3.7Absence of Certain Developments    9

3.8Property    10

3.9Purchased Assets    10

3.10Tax Matters    10

3.11Contracts and Commitments    11

3.12Intellectual Property    12

3.13Litigation    13

3.14Brokerage    13

3.15Employees    13

3.16Related Party Transactions    14

3.17Employee Benefit Plans    14

3.18Compliance with Laws; Permits; Certain Operations    15

3.19Environmental and Safety Matters    15

3.20Absence of Undisclosed Liabilities    16

3.21Financial Information    16

3.22Accounts Receivable    16

3.23Insurance    16

3.24Disclosure    17

REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT 17

4.1Organization and Power    17

4.2Authorization; No Breach    17

4.3Consents    18

4.4Brokerage    18

4.5Litigation    18

4.6Business Employees    18

4.7No Reliance    18

INDEMNIFICATION 18

5.1Survivability; Limitation on Liability    18

5.2Indemnification by Seller    19

5.3Indemnification by Buyer    19

5.4Indemnification Procedure    19

5.5Certain Limitations    20

ADDITIONAL AGREEMENTS 20

6.1Reimbursement    20

6.2Expenses    21

6.3Further Assurances    21

6.4Sales and Transfer Taxes    22

6.5Noncompetition; Nonsolicitation    22

6.6Business Employees    23

6.7Payment of Accounts Receivable    23

6.8Acknowledgment by Buyer and Parent    23

DEFINITIONS 24

7.1Definitions    24

MISCELLANEOUS 28

8.1Amendment and Waiver    28

8.2Knowledge Defined    28

8.3Notices    28

8.4Assignment    29

8.5Severability    29

8.6Captions and Headings    29

8.7Entire Agreement    29

8.8Counterparts    29

8.9Governing Law    29

8.10English Law    29

8.11Waiver of Jury Trial    30

8.12No Strict Construction    30

8.13Equitable Remedies    30

8.14No Third-Party Beneficiaries    30

8.15Bulk Transfer Laws    30

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this “Agreement”) is effective as of November 25, 2015, by and among TRANSGENOMIC, INC., a Delaware corporation (“Seller”), ADS BIOTEC INC., a Delaware corporation and a wholly-owned subsidiary of Parent (“Buyer”), and ADSTEC CORPORATION, a corporation organized under the laws of Japan (“Parent”). Each of Seller, Buyer and Parent may be referred to herein as a “Party” and collectively, as the “Parties.” Except as otherwise provided herein, capitalized terms used herein have the meanings set forth in Article VII hereof.

WHEREAS, Seller is engaged in the GAP Business;

WHEREAS, Buyer and Parent desire to acquire, and Seller desires to sell, certain assets of the GAP Business necessary for Buyer and Parent to continue the GAP Business upon the Closing, except as set forth herein, and to satisfy Seller’s obligations under the Contracts to be transferred to Buyer as set forth herein from and after the Closing Date, and Buyer desires to assume, and Seller desires to assign, certain liabilities of the GAP Business; and

WHEREAS, the Board of Directors of Seller, Buyer and Parent have each approved this Agreement, the transactions contemplated hereby, and the documents implementing all of same.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

Article IPURCHASE AND SALE OF PURCHASED ASSETS AND INVENTORY

1.1Sale and Purchase of Assets and Liabilities    .

(a)Purchased Assets, Inventory and TL Shares. Upon the terms and subject to the conditions of this Agreement, at the Closing:

i.Buyer shall purchase from Seller, and Seller shall, and shall cause its respective Affiliates to, sell, assign, transfer, convey and deliver to Buyer and its designees, all of Seller’s and its Affiliates’ (other than Transgenomic Limited’s) right, title and interest in, under and to all of the property, rights, assets, Contracts and claims of the GAP Business and all other tangible and intangible assets necessary to operate, or actually used in the operation of, the conduct of the GAP Business, including: (A) those assets set forth on SCHEDULE 1.1(A)(I), except for the Inventory which shall be purchased by the Parent as set forth in Section 1.1(a)(ii), but not including the Excluded Assets, and (B) the TL Shares together with all rights and advantages accruing to the TL Shares (collectively, the “PurchasedAssets”), in each case, free and clear of all Liens, other than Permitted Liens; and

ii.Parent shall purchase from Seller, and Seller shall assign, transfer, convey and deliver to Parent and its designees, all of Seller’s and its Affiliates’ right, title and interest in, under and to all of Seller’s facilities located at Block 26, Unit 72, Hillington Park in Glasgow, Scotland (the “Glasgow Facility”) and at 7409 Irvington Road, Seaton Industrial Park in Omaha, Nebraska (the “Irvington Facility” and, together with the Glasgow Facility, the “Facilities”), including the stock, inventory and raw materials in the Facilities, in each case as set forth on SCHEDULE 1.1(A)(II) (collectively, the “Inventory”), free and clear of all Liens, other than Permitted Liens.

(b)Excluded Assets. Notwithstanding the foregoing, the properties, rights, interests, assets, contracts and claims of the Seller and its Affiliates (other than Transgenomic Limited) listed below (collectively, the “Excluded Assets”) are expressly excluded from the purchase and sale contemplated by this Agreement and, as such, are not included in the Purchased Assets or the Inventory:

i.all of the properties, assets, rights and interests of the Seller and its Affiliates (other than Transgenomic Limited) that are not necessary to operate, or actually used in the operation of, the conduct of the GAP Business;

ii.the properties, assets, rights and interests set forth on SCHEDULE 1.1(B);

iii.the equity interests of any Affiliate of Seller (other than Transgenomic Limited) owned by Seller or any of its Affiliates;

iv.all accrued or earned revenue (including pre-paids) under any Contract relating to the GAP Business prior to the Closing Date;

v.any advanced payments made to Seller or its Affiliates (other than Transgenomic Limited) and attributable to the GAP Business for services or products to be provided by Seller or any of its Affiliates (other than Transgenomic Limited), whether before or after the Closing;

vi.all cash or cash equivalents and marketable equity securities of Seller;

vii.Seller’s corporate charter and all qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books, stock transfer books and blank stock certificates and other documents relating to the organization, maintenance and existence of Seller as a corporation;

i.all insurance policies and associated prepayments, rights of recovery, reserves and deposits, in each case to the extent related to the Excluded Assets or the Excluded Liabilities;

ii.all claims, refunds, credits, causes of action, choses in action, rights of recovery and rights of setoff and all rights to receive mail and communications, in each case to the extent related to the Excluded Assets or the Excluded Liabilities or Tax refunds relating to pre-Closing periods;

iii.all stock, inventory and raw materials relating to the Seller’s (A) Surveyor product line, (B) Multiplexed ICE COLD-PCR technology, (C) ICE COLD-PCR technology, and (D) Patient Testing business unit;

iv.all obligations, rights and interests of Seller and its Affiliates (including Transgenomic Limited) under: (A) that certain Exclusive Distribution Agreement, dated July 26, 2011, by and between Transgenomic Limited and A. Menarini Diagnostics S.r.l., and (B) that certain Quality Agreement, dated October 10, 2012, by and between Seller and A. Menarini Diagnostics S.r.l.; and

v.all obligations, rights and interests of Seller under this Agreement.

1.2Liabilities    .

(a)Assumed Liabilities. Upon the terms and subject to the conditions of this Agreement, in addition to the Purchased Assets Purchase Price and as additional consideration for the Purchased Assets, Buyer shall assume as of the Closing and shall pay, discharge or perform when due only the following debts, obligations or liabilities of Seller and its Affiliates (other than Transgenomic Limited) (the “Assumed Liabilities”):

(i)all liabilities with respect to accounts payable incurred in the ordinary course of the GAP Business and aged 0 to 60 days prior to the Closing Date as set forth on SCHEDULE 1.2, excluding, for the avoidance of doubt, (i) any liabilities associated with Seller’s WAVE® System and (ii) any liabilities associated with Seller’s chromatography columns segment of the GAP Business;

(ii)all liabilities and obligations arising from and after the Closing Date under the Contracts which are Purchased Assets (but not any liabilities or obligations arising out of or in connection with any failure to pay, violation or breach of such Contracts occurring on or prior to the Closing Date);

(iii)accrued compensation and accrued but unused vacation with respect to the employees primarily employed in the conduct of the GAP Business and listed on SCHEDULE 3.15 (the “Business Employees”); and

(iv)the Reimbursement Amount (as defined below).

(b)Excluded Liabilities. Neither Buyer nor Parent shall assume, be deemed to assume, take subject to, or in any way become liable for, any liabilities of Seller and its Affiliates (other than Transgenomic Limited), whether arising prior to or after the Closing Date, which are not Assumed Liabilities, including, but not limited to, the following (collectively, the “Excluded Liabilities”):

(i)all liabilities arising from or attributable to any assets, properties or Contracts that are not included in the Purchased Assets;

(ii)any breaches of any Contracts which are included in the Purchased Assets on or prior to the Execution Date or any payments or amounts due under any such Contracts unless expressly included as Assumed Liabilities;

(iii)all liabilities associated with Seller’s WAVE® platform;

(iv)all liabilities associated with Seller’s chromatography columns segment of the GAP Business;

(v)any loans, other indebtedness, or accounts payable, other than any accounts payable that are expressly assumed pursuant to this Agreement;

(vi)liabilities arising out of accidents, misconduct, acts of negligence or breaches of fiduciary duty by Seller occurring on or prior to the Execution Date;

(vii)any legal proceeding initiated at any time, to the extent related to any action or omission on the part of Seller on or prior to the Execution Date, including any liability for (i) infringement or misappropriation of any rights related to Intellectual Property; (ii) breach of product warranties or of contract; (iii) injury, death, property damage or losses caused by products manufactured or sold by Seller, or (iv) violations of law;

(viii)all liabilities related to bulk sales laws;

(ix)Seller’s performance of this Agreement and the transactions contemplated hereby including all broker, finders’, counsel and accounting fees; and

(x)any pre-Closing Tax liabilities of Seller.

1.3Closing Transactions    .

(a)The Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place via the electronic exchange of documents and signatures and shall be effective as of 8:00 a.m. (Central Time) on October 1, 2015. The date and time of the Closing are referred to herein as the “Closing Date”.

(b)Closing Deliveries. Subject to the conditions set forth in this Agreement, at the Closing (or such other time and date agreed to by Seller and Buyer):

(i)in exchange for the Purchased Assets being sold to it (other than the TL Shares, which shall be purchased by Buyer pursuant to Section 1.3(b)(v) below) , Buyer shall pay to Seller, by wire transfer of immediately available funds to the account designated by Seller, an amount equal to US$1.00 (the “Purchased Assets Purchase Price”);

(ii)in exchange for the Inventory being sold to it, Parent shall pay to Seller, by wire transfer of immediately available funds to the account designated by Seller, an amount equal to US$300,000.00 (the “Inventory Purchase Price” and, together with the Purchased Assets Purchase Price and the Share Purchase Price, the “Purchase Price”);

(iii)Seller shall convey all of the Purchased Assets and Inventory to Buyer and Parent, respectively, as set forth in the Assignment Documents, and shall deliver to Buyer and Parent such appropriately executed instruments of sale, transfer, assignment and conveyance (in the forms reasonably acceptable to Buyer and Parent) which are reasonably necessary to effect transfer to (A) Buyer of good title to the Purchased Assets including, but not limited to, a duly executed transfer in favor of Buyer in respect of the TL Shares together with the certificate for the TL Shares or an indemnity in the usual form in relation thereto, and (B) Parent of good title to the Inventory, in each case free and clear of all Liens, other than Permitted Liens (collectively, the “Assignment Documents”);

(iv)Buyer shall assume the Assumed Liabilities by delivery of appropriately executed instruments of assumption to Seller (in the forms reasonably acceptable to Seller) that are reasonably necessary to effect the assumption by Buyer of the Assumed Liabilities (the “Assumption Documents”); and

(v)Buyer and Seller shall each comply with their respective obligations underSCHEDULE 2and subject to Seller’s compliance with Part 3 of Schedule 2 , in exchange for the TL Shares being sold to it, Buyer shall pay to Seller, by wire transfer of immediately available funds to the account designated by Seller, the purchase price for the TL Shares being an amount equal to US$1.00 (the “Share Purchase Price”) and such payment shall be a good and valid discharge of Buyer’s obligation to pay the Share Purchase Price.

1.4Allocation of the Purchase Price    . Seller shall determine the fair market value of the Purchased Assets and the Inventory with the consent of Buyer and Parent, respectively (which shall not be unreasonably withheld, conditioned or delayed). For tax purposes, (a) the Purchased Assets Purchase Price, the Share Purchase Price and the Assumed Liabilities shall be allocated among the Purchased Assets consistent with the fair market values thereof set forth on SCHEDULE 1.4(A) and in accordance with Section 1060 of the Code, and (b) the Inventory Purchase Price shall be allocated among the Inventory consistent with the fair market values thereof set forth on SCHEDULE 1.4(B) and in accordance with Section 1060 of the Code. None of Buyer, Parent or Seller, or any of their respective Affiliates, shall take any position in any income tax return or income tax audit which is inconsistent with SCHEDULE 1.4(A) or SCHEDULE 1.4(B) unless required to do so by Applicable Law. Buyer, Parent and Seller shall exchange drafts of any information returns required by Section 1060 of the Code, and any similar state statute that is applicable, at least 45 days prior to filing such returns and shall discuss in good faith any modification suggested by the receiving Party.

1.5Nonassignable Contracts    . To the extent that the assignment under this Agreement by Seller to Buyer of any Contract is not permitted or is not permitted without the consent of any other party to such Contract, this Agreement shall not be deemed to constitute an assignment of any such Contract if such consent is not given or if such assignment otherwise would constitute a breach of, or cause a loss of contractual benefits under, any such Contract, and Buyer shall assume no obligations or liabilities under any such Contract. Seller shall use commercially reasonable efforts to advise Buyer promptly in writing with respect to any Contract which Seller knows will or may not be assigned to Buyer under this Agreement. In the event that any such consent is not obtained or such assignment is not permitted irrespective of consent and the Closing is consummated, Seller shall cooperate with Buyer following the Closing Date in any commercially reasonable arrangement (a “Contract Arrangement”) designed to provide Buyer with the rights and benefits (subject to the obligations) under any such Contract, including enforcement for the benefit of Buyer of any and all rights of Seller against any other party arising out of any breach or cancellation of any such Contract by such other party and, if requested by Buyer, acting as an agent on behalf of Buyer or as Buyer shall otherwise reasonably require; provided that Seller shall not be obligated to expend any funds in connection with such cooperation. In addition, Buyer shall perform Seller’s obligations under any such Contract and indemnify Seller for any and all Losses arising out of its failure to do so and, in the event it fails to perform such obligations, Seller’s obligations under this Agreement to cooperate with Buyer under, in or otherwise with respect to, any Contract Arrangement shall terminate.

ARTICLE IICONDITIONS TO CLOSING

2.1Conditions to Buyer’s Obligations    . Each of the following conditions has been satisfied by Seller, or waived by Buyer and Parent:

(c)Buyer and Parent have received copies of all releases from third parties of any and all Liens (other than Permitted Liens) relating to the Purchased Assets and the Inventory;

(d)Seller has received or obtained and made available to Buyer and Parent copies of all third party and governmental consents, approvals or waivers relating to the items identified on SCHEDULE 3.4;

(e)no suit, action or other proceeding, or injunction or final judgment, order or decree relating thereto, is pending or threatened in writing before any court or arbitrator or any governmental or regulatory body or authority in which it is sought to restrain or prohibit or to obtain damages or other relief (including rescission) in connection with the transactions contemplated by this Agreement; and

(f)Seller has delivered to Buyer and Parent all of the following:

(i)all books, records and other materials related to the GAP Business, if not already located at the Leased Real Property (provided that Seller may keep a copy of such books, records and other materials);

(ii)the Assignment Documents, executed by a duly authorized officer of Seller;

(iii)the Manufacturing Services Agreement, to be entered into by and between Seller and Buyer (the “Manufacturing Services Agreement”), executed by a duly authorized officer of Seller;

(iv)the Transition Services Agreement, to be entered into by and between Seller and Buyer (the “Transition Services Agreement”), executed by a duly authorized officer of Seller;

(i)all such agreements, instruments, certificates or other documents as required pursuant to SCHEDULE 2, including Part 3 thereof;

(ii)certificates from the Secretaries of State of the States of Delaware and Nebraska as to Seller’s good standing and payment of all applicable franchise Taxes;

(iii)a certificate of the Secretary or Assistant Secretary (or equivalent officer) of Seller certifying that (i) attached thereto are true and complete copies of all resolutions duly adopted by the Board of Directors of Seller authorizing the execution, delivery and performance of this Agreement and the Transaction Documents and the consummation of the transactions contemplated hereby and thereby, and (ii) identifying the name and title and bearing the signatures of the officers of Seller authorized to execute this Agreement and the Transaction Documents; and

(iv)such Transaction Documents or instruments as are reasonably required to be delivered in order to effect the transactions contemplated by this Agreement, executed by a duly authorized officer of Seller.

2.2Conditions to Seller’s Obligations    . Each of the following conditions has been satisfied or waived by Seller:

(c)no suit, action or other proceeding, or injunction or final judgment, order or decree relating thereto, is pending or threatened in writing before any court or arbitrator or any governmental or regulatory body or authority in which it is sought to restrain or prohibit or to obtain damages or other relief (including rescission) in connection with the transactions contemplated by this Agreement; and

(d)Buyer and Parent have delivered to Seller:

(i)the Assumption Documents, executed by a duly authorized officer of Buyer or Parent, as applicable;

(ii)the Purchased Assets Purchase Price, the Inventory Purchase Price and the Share Purchase Price, as set forth in Section 1.3(b)(i), Section 1.3(b)(ii) and Section 1.3(b)(v), as applicable;

(iii)the Manufacturing Services Agreement, executed by a duly authorized officer of Buyer;

(iv)the Transition Services Agreement, executed by a duly authorized officer of Buyer; and

(v)such Transaction Documents or instruments as are reasonably required to be delivered in order to effect the transactions contemplated by this Agreement, executed by a duly authorized officer of Buyer or Parent, as applicable.

ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF SELLER

As a material inducement to Buyer and Parent to enter into this Agreement and to consummate the transactions contemplated by this Agreement, Seller hereby represents and warrants to each of Buyer and Parent (i) the warranties set forth in Part 4 of SCHEDULE 2 and (ii) the following, in each case except as expressly set forth in the disclosure schedule, arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this Article III or Part 4 of SCHEDULE 2 (as applicable), delivered by Seller to Buyer and Parent on or before the date of this Agreement (the “Disclosure Schedule”):

3.1Organization and Corporate Power    . Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Seller, with respect to the GAP Business, has obtained and currently maintains all qualifications to do business as a foreign corporation in all other jurisdictions in which the character of Seller’s properties or the nature of Seller’s activities require it to be so qualified, except where failure to do so would not materially and adversely affect Seller, the Purchased Assets or the Inventory. Seller has all requisite corporate power and authority (i) to own, lease, operate and sell or transfer the Purchased Assets and the Inventory, (ii) to execute and deliver this Agreement and each Transaction Document to which it is a party, (iii) to perform its obligations and consummate the transactions contemplated hereunder and under the Transaction Documents, and (iv) to carry on the GAP Business in the manner as it is now being conducted.

3.2Subsidiaries    . All subsidiaries of Seller, direct and indirect, are set forth on SCHEDULE 3.2. Except for Transgenomic Limited, none of the subsidiaries listed on SCHEDULE 3.2 are operating subsidiaries or have any contracts, rights or other assets of any kind relating to the GAP Business.

3.3Authorization; No Breach    .

(a)This Agreement and the other agreements, instruments and certificates contemplated by this Agreement (collectively, the “Transaction Documents”) have been duly authorized, executed and delivered by Seller, and this Agreement and the Transaction Documents to which Seller is a party constitute the valid and binding obligations of Seller, enforceable in accordance with their respective terms (subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity).

(b)Except as set forth on SCHEDULE 3.3(B) or except as would not materially and adversely affect Seller, the Purchased Assets or the Inventory, the execution, delivery and performance of this Agreement and the Transaction Documents by Seller and the consummation of the transactions contemplated by this Agreement and thereby do not and shall not: (i) (A) conflict with or result in any breach of any of the provisions of, (B) constitute a default or give rise to any payment or other penalty under, (C) result in a violation of, or (D) give any third party the right to terminate or modify or to accelerate any obligation under, the provisions of Seller’s certificate of incorporation or bylaws or any indenture, mortgage, lease, loan agreement or material Contract, understanding, commitment, instrument or other agreement by which Seller is bound and which, with respect to any material Contract, is a Purchased Asset, or any Applicable Law to which Seller, the Purchased Assets or the Inventory are subject; or (ii) violate any order, writ, injunction, decree, statute, rule or regulation of any Person or any law applicable to Seller, the GAP Business, the Facilities, the Inventory or any of the Purchased Assets.

3.4Consents    . Except as set forth on SCHEDULE 3.4, neither Seller nor any of its Subsidiaries or Affiliates is required to give any notice to or obtain any consent, order, approval or authorization from, or notice to, or declaration, filing, application, qualification or registration with, any Person in connection with the execution and delivery of this Agreement or the other Transaction Documents or the consummation or performance of any of the transactions contemplated by this Agreement or by the Transaction Documents.

3.5Customers and Suppliers    . SCHEDULE 3.5 lists the ten largest customers of the GAP Business on the basis of revenues from goods sold for the six-month period ended June 30, 2015, and lists the ten largest suppliers of the GAP Business on the basis of cost of goods or services purchased for the six-month period ended June 30, 2015. Except as disclosed on SCHEDULE 3.5, no such customer or supplier has ceased or materially reduced, or, to Seller’s knowledge, has threatened in writing to cease or materially reduce, its purchases from, or sale or provision of products or services to, the GAP Business, except for normal fluctuations in the ordinary course of business.

3.6No Material Adverse Effect    . Since June 30, 2015, there has been no change, event or development that has had or would reasonably be expected to have a material adverse effect on the GAP Business, the Purchased Assets or the Inventory.

3.7Absence of Certain Developments    . Except as set forth on SCHEDULE 3.7, since June 30, 2015, Seller:

(a)has conducted the GAP Business and the operations and activities of the Facilities in the ordinary course;

(b)has not accelerated, terminated, modified or cancelled any material Contract which is a Purchased Asset;

(c)has not mortgaged, pledged or subjected the Purchased Assets or the Inventory to any Lien, except for Permitted Liens;

(d)has not sold, leased, assigned or transferred any of its material tangible assets with respect to the GAP Business or canceled without fair consideration any debts or claims owing to or held by it with respect to the GAP Business, in each case except in the ordinary course of business;

(e)has not suffered any material damage, destruction, theft or casualty loss to its tangible assets, whether or not covered by insurance, with respect to the GAP Business; or

(f)has not committed or agreed in writing to do any of the foregoing as described in clauses (b) through (e).

3.8Property    .

(a) Seller does not own any real property primarily used in connection with the GAP Business.

(b)The leases and subleases (collectively, the “Leases”) described on SCHEDULE 3.8(B) constitute all material real property leased by Seller and primarily used in connection with the GAP Business (collectively, the “Leased Real Property”). Seller has made available to Buyer complete and accurate copies (including amendments) of each of the Leases described on SCHEDULE 3.8(B). With respect to each Lease listed on SCHEDULE 3.8(B): (i) neither Seller, nor to Seller’s knowledge, any other party to the Lease has repudiated any provision thereof; (ii) there are no material disputes, oral agreements or forbearance programs in effect as to the Lease; (iii) Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the Lease; and (iv) Seller enjoys peaceful and undisturbed possession of the Facilities, and the Facilities are not subject to any Liens, encroachments, building or use restrictions, exceptions, reservations, or limitations, other than Permitted Liens. Neither Seller nor, to Seller’s knowledge, any other party to any Lease is in default in any material respect under any of such Leases.

(c)Seller has good and marketable title to all tangible personal property included in the Purchased Assets and the Inventory, and all of the Purchased Assets and the Inventory are free and clear of all Liens, other than Permitted Liens.

3.9Purchased Assets and Inventory    .

(a)Seller owns good and marketable title to or has a valid leasehold interest in, all of the Purchased Assets and the Inventory, free and clear of all Liens, except for Permitted Liens. Upon the Closing, Buyer will have good and marketable title, or a valid leasehold interest in, all of the Purchased Assets and the Inventory, free and clear of all Liens other than Permitted Liens.

(b)The Purchased Assets and the Inventory include all of the assets, whether tangible or intangible, real or personal, that are necessary to permit Buyer (i) to utilize the assets of the GAP Business as currently utilized by Seller, and (ii) to conduct the GAP Business as currently conducted by Seller, free and clear of all Liens, except for Permitted Liens.

3.10Tax Matters    . Except as set forth on SCHEDULE 3.10:

(a)Seller has timely filed all federal, state, local and foreign income, information and other Tax Returns which are required to be filed with respect to the GAP Business or its activities, properties or employees;

(b)all such Tax Returns are true, complete and accurate in all material respects and such filings accurately reflect the Tax liabilities of Seller in all material respects;

(c)all Taxes, assessments and other governmental charges imposed upon Seller with respect to the GAP Business, or upon any of the assets, income or compensation to the Business Employees, have been timely paid or, if not yet payable, will be timely paid and are adequately accrued in all material respects on Seller’s books and records; and

(d)there are no proposed material Tax deficiencies, assessments or adjustments with respect to the GAP Business or any assets or operations of Seller with respect to the GAP Business.

(e)For the avoidance of doubt, none of the representations and warranties set out in this Section 3.10 is given in respect of Transgenomic Limited.

3.1Contracts and Commitments    .

(a)SCHEDULE 3.11 lists each of the following Contracts (x) by which any of the Purchased Assets, the Inventory or the Facilities are bound or affected, or (y) to which Seller is a party or by which it is bound in connection with the GAP Business, the Purchased Assets or the Inventory:

(i)all Contracts involving aggregate consideration in excess of US$50,000 or requiring performance by any party more than one year from the Execution Date, which, in each case, cannot be cancelled without penalty or without more than 180 days’ notice;

(ii)all Contracts that relate to the sale of any of the Purchased Assets or the Inventory, other than in the ordinary course of business, for consideration in excess of US$50,000;

(iii)all Contracts that relate to the acquisition of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise), in each case involving amounts in excess of US$50,000;

(iv)except for agreements relating to trade receivables, all Contracts relating to Indebtedness (including, without limitation, guarantees), in each case having an outstanding principal amount in excess of US$50,000;

(v)any Contract or other document that limits the freedom of Seller or any Affiliate of Seller to compete in any line of business similar to the GAP Business or to own, operate, sell, transfer, pledge or otherwise dispose of or encumber any asset;

(vi)any partnership, joint venture or other similar Contract;

(vii)any agency, dealer, sales representative or other similar agreement;

(viii)all Contracts between or among Seller on the one hand and any Affiliate of Seller on the other hand; and

(ix)all collective bargaining agreements or Contracts with any labor organization, union or association with respect to the Business Employees.

(b)With respect to Seller’s obligations thereunder, all of the Contracts set forth on SCHEDULE 3.11 are valid and binding obligations of Seller, enforceable in accordance with their respective terms (subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity). Except as specifically set forth on SCHEDULE 3.11, (i) to Seller’s knowledge, no Contract or commitment disclosed on SCHEDULE 3.11 has been breached in any material respect by the other party thereto, or cancelled by the other party thereto, and (ii) Seller has performed all material obligations under the contracts listed on SCHEDULE 3.11 required to be performed by Seller as of the Execution Date and no event has occurred which, with notice or lapse of time or both, would constitute such a material breach or default by Seller.

(c)Seller has made available to Buyer a true and correct copy of all written Contracts which are referred to on SCHEDULE 3.11, together with all amendments, exhibits, attachments, waivers or other changes thereto.

3.2Intellectual Property    . SCHEDULE 3.12 sets forth a complete and correct list of all of the following that are owned or used by Seller and are used in the GAP Business: patented or registered Intellectual Property and pending patent applications and other applications for registration of Intellectual Property; all material unregistered trademarks, service marks, trade names, corporate names, logos, slogans and Internet domain names; all material unregistered copyrights; computer software (other than commercially-available, off-the-shelf software purchased or licensed for a total cost of less than US$10,000) and all Contracts, licenses or similar agreements or arrangements to which Seller is a party, either as licensee or licensor, for the Intellectual Property (excluding licenses for unmodified, commercially-available, off-the-shelf software purchased or licensed for a total cost of less than US$10,000).

(a)Except as set forth on SCHEDULE 3.12 or except as would not materially and adversely affect Seller, the Purchased Assets, the Facilities or the Inventory:

(i)Seller owns or has the valid and enforceable right to use all Intellectual Property;

(ii)all Contracts, licenses or similar agreements or arrangements to which Seller is a party, either as licensee or licensor, for the Intellectual Property listed on SCHEDULE 3.12 are in full force and effect and there is no default thereunder by Seller, nor, to the knowledge of Seller, any counterparty to any such Contract, license, agreement or arrangement;

(iii)to Seller’s knowledge, no Person is infringing, misappropriating or otherwise violating any Intellectual Property related to the GAP Business; and

(iv)to Seller’s knowledge, the conduct of the GAP Business as currently conducted does not infringe, misappropriate or otherwise violate the Intellectual Property of any Person.

(b)Seller has obtained an assignment of all Intellectual Property listed on SCHEDULE 3.12 owned by Seller and which is material to the operation of the GAP Business from the inventors. Except as listed on SCHEDULE 3.12, no present or former employee or consultant of Seller, and no other Person, owns or has a proprietary, financial or other interest, direct or indirect, in whole or in part, in any Intellectual Property owned by Seller which is material to the operation of the GAP Business.

(c)The Intellectual Property listed on SCHEDULE 3.12 constitutes all Intellectual Property needed to conduct the GAP Business as currently conducted by Seller.

(d)Notwithstanding anything to the contrary in this Agreement, this Section 3.12 constitutes the sole representation and warranty of Seller under this Agreement with respect to any actual or alleged infringement, misappropriation or other violation by Seller of any Intellectual Property of any other Person.

3.3Litigation    . Except as set forth on SCHEDULE 3.13, there are no:

(a)actions, suits, claims, investigations or other legal proceedings pending or, to Seller’s knowledge, threatened in writing against or by Seller relating to or affecting the GAP Business, the Purchased Assets, the Inventory, the Facilities or the Assumed Liabilities; or

(b)outstanding governmental orders, nor are there any unsatisfied judgments, penalties or awards against or affecting the GAP Business, the Purchased Assets or the Inventory.

3.4Brokerage    . Except as set forth on SCHEDULE 3.14, there are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Seller.

3.5Employees    . SCHEDULE 3.15 sets forth a list of the names, classification, and current compensation levels (including bonus opportunities and commission rates) of each of the Business Employees as of the Closing Date. To Seller’s knowledge, no key executive officer or group of Business Employees has any plans to terminate their employment. Except as set forth on SCHEDULE 3.15 or otherwise required by local law, (i) all Business Employees are “at will” and may be terminated at the discretion of Seller, at any time and for any reason or no reason and without any Liability with respect to any form of severance or similar payment; and (ii) Seller has no oral agreements with any of the Business Employees. Seller has complied in all material respects with all Applicable Laws relating to the employment of the Business Employees, including, without limitation, provisions thereof relating to wages, hours, equal opportunity, collective bargaining and the payment of social security and other Taxes relating to the GAP Business. There are no written claims, actions, proceedings or investigations pending or, to Seller’s knowledge, threatened in writing against Seller with respect to or by any current or former Business Employee. Seller has not experienced any strikes, grievances, unfair labor practices claims, collective bargaining disputes or other labor relations problems. To Seller’s knowledge, no organizational effort presently has been made or threatened by or on behalf of any labor union with respect to the Business Employees.

3.6Related Party Transactions    . Except as set forth on SCHEDULE 3.16 or in Seller’s reports, schedules, forms, statements and other documents filed by it under the Securities Exchange Act of 1934, as amended, including pursuant to Section 13(a) or 15(d) thereof, for the 12 months preceding the Execution Date, no officer, director, employee, stockholder or Affiliate of Seller or any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns at least a 10% beneficial interest, is a party to any contract or agreement with Seller or has any interest in any Purchased Asset or in the Inventory, except for agreements disclosed on SCHEDULE 3.11 or SCHEDULE 3.17.

3.7Employee Benefit Plans    .

(g)Except as set forth on SCHEDULE 3.17, Seller does not have any employee benefit plans (each, a “Benefit Plan” and collectively, “Benefit Plans”), profit-sharing, deferred compensation, bonus, commission, stock option, stock purchase, vacation pay, holiday pay, pension, retirement plans, medical or other compensation or benefit arrangements maintained or contributed to or required to be contributed to by Seller with respect to the GAP Business for the benefit of the Business Employees (or former Business Employees) and/or their beneficiaries.

(h)Seller made available to Buyer true and complete copies of all documents pertaining to those items set forth on SCHEDULE 3.17. Seller does not maintain, or contribute to, any Benefit Plans other than those set forth on SCHEDULE 3.17.

(i)Each Benefit Plan has been administered and operated in compliance with its terms and with all Applicable Laws in all material respects, including the applicable provisions of ERISA and the Code, and there is no existing circumstance that is reasonably expected to cause any failure of such compliance. Each Benefit Plan that is intended to be “qualified” under Section 401 of the Code is the subject of an unrevoked favorable determination letter from the IRS and there is no existing circumstance and nothing has occurred since the date thereof that would reasonably be expected to adversely affect the qualified status of any such Benefit Plan. All contributions, premiums and other payments required to be made with respect to any Benefit Plan have been timely made, accrued or reserved for, except as would not be expected to result in a material liability.

(j)Seller has not, with respect to any Benefit Plan, engaged in or been a party to any non-exempt “prohibited transaction,” as such term is defined in Section 4975 of the Code or Section 406 of ERISA (93 P.L. 406), which could reasonably be expected to result in the imposition of a material penalty assessed pursuant to Section 502(i) of ERISA (93 P.L. 406) or a material tax imposed by Section 4975 of the Code.

(k)There are no material lawsuits, actions, proceedings or claims pending or, to the knowledge of Seller, threatened on behalf of or against any Benefit Plan, the assets of any trust under any Benefit Plan, or the plan sponsor, plan administrator or any fiduciary or any Benefit Plan, other than routine claims for benefits that have been or are being handled through an administrative claims procedure.

(l)Each Benefit Plan that is subject to Section 409A of the Code has been operated and administered in material compliance with Section 409A of the Code. There is no contract, agreement, plan or arrangement to which Seller is a party or by which it is bound to compensate any current or former employee or other disqualified individual for excise taxes which may be required pursuant to Section 4999 of the Code or any Taxes required by Section 409A of the Code.

(m)The execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement (either alone or in conjunction with any other event) will not:

(i)result in any material payment or benefit becoming due or payable, or required to be provided, to any director, employee, consultant or independent contractor of Seller, or cause or create any right to the forgiveness of indebtedness owed by any employee to Seller;

(ii)materially increase the amount of, or accelerate the time of payment of, any benefit or compensation payable under any Benefit Plan or other employment arrangement, or result in the payment of any amount that would not be deductible by reason of Section 280G of the Code; or

(iii)result in any violation or breach of or default under, or limit the ability of Seller to amend, modify or terminate, any Benefit Plan or other employee benefit agreement.

3.8Compliance with Laws; Permits; Certain Operations    . Except as set forth on SCHEDULE 3.18:

(d)Except as would not materially and adversely affect Seller, the Purchased Assets, the Facilities or the Inventory, Seller has complied in all respects with all Applicable Laws relating to the operation of the GAP Business or the ownership and use of the Purchased Assets and the Inventory, and no written notices have been received by, and no claims have been filed against, Seller alleging a violation of any such Applicable Laws; and

(e)Seller holds all material permits, licenses, certificates, accreditations or other authorizations of foreign, federal, state and local governmental agencies (the “Permits”) required for the conduct of the GAP Business, and Seller is in compliance in all material respects with all terms and conditions of any such required permits, licenses, accreditations and authorizations. All Permits held by Seller that are required for the conduct of the GAP Business, as currently conducted, are listed on SCHEDULE 3.18.

3.9Environmental and Safety Matters    . Seller is in compliance in all material respects with, and Seller has no material liability under, any Applicable Law relating to the release, storage, generation, use, manufacture, treatment, deposit or disposal of any hazardous or toxic substance, material or waste (“Environmental Laws”) relating to the GAP Business. There are no consent decrees, consent orders, judgments, judicial administrative orders or Liens against Seller relating to Environmental Laws which regulate, obligate or bind the Purchased Assets, the Inventory, the GAP Business or, with respect to the Purchased Assets, the Inventory or the GAP Business, Seller. There are no written existing or pending or, to Seller’s knowledge, threatened claims, suits, orders, actions, lawsuits, legal proceedings or other proceedings based on, and neither Seller nor, to Seller’s knowledge, any of its officers or directors has directly or indirectly received any formal or informal written notice of any claims relating to, Environmental Laws against the Purchased Assets, the Inventory, the GAP Business or, with respect to the Purchased Assets, the Inventory or the GAP Business, Seller, or any Person or entity whose liability for any claims Seller has assumed or retained either contractually or by operation of law arising under Environmental Laws. There has been no storage or release by Seller of any hazardous or toxic substance material or waste in violation of Environmental Laws at either the Glasgow Facility or the Irvington Facility in connection with the GAP Business during the period of such ownership, operation or tenancy.

3.1Absence of Undisclosed Liabilities    . Except as set forth on SCHEDULE 3.20, the GAP Business, the Purchased Assets and the Inventory are not subject to any liability other than liabilities: (i) reflected in the Seller SEC Documents; (ii) reflected in the Financial Statements; (iii) pursuant to the Contracts which are Purchased Assets; (iv) incurred in the ordinary course of business since June 30, 2015; or (v) that would not have, or would not reasonably be expected to have, a material adverse effect on the GAP Business, the Purchased Assets or the Inventory.

3.2Financial Information. SCHEDULE 3.21 sets forth an unaudited balance sheet and statement of income for the GAP Business as of, and for the nine (9) months ended September 30, 2015 (collectively, the “Financial Statements”). The Financial Statements: (x) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (subject to year-end adjustments and to the absence of footnotes); (y) present fairly in all material respects the financial condition of the GAP Business as of such dates and the results of operations of the GAP Business for such periods; and (z) are consistent with the books and records maintained by Seller with respect to the GAP Business.

3.3Accounts Receivable    . The accounts receivable of Seller included in the Purchased Assets, which are listed on SCHEDULE 1.1(A)(I), arose from bona fide transactions in the ordinary course of business. To Seller’s knowledge, the debtors to which such accounts receivable relate are not in nor subject to a bankruptcy or insolvency proceeding and none of such receivables have been made subject to an assignment for the benefit of creditors. Seller has not received written notice of any, and to Seller’s knowledge there are no, counterclaims or setoffs against or disputes regarding such accounts receivable.

3.4Insurance    . Seller and its Subsidiaries have been at all times since January 1, 2014 and are currently a party to, or the named insured or beneficiary of coverage under, comprehensive general liability insurance policies that are occurrence-based (rather than claims-made) policies and that are in full force and effect through the Closing.

3.5Lack of Market for Purchased Assets and Inventory. Prior to entering into this Agreement, Seller commenced a strategic review of the GAP Business and contacted third parties regarding a potential transaction involving the GAP Business.

3.6Disclosure. To the knowledge of Seller, neither this Agreement nor any other Transaction Document furnished to Buyer by Seller contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading, and the representation and warranties contained in this Article III are true and correct in all material respects on and as of the Closing Date as though made on that date (except with respect to such representations and warranties that address matters only as of a particular date, which are true and correct as of such particular date).

ARTICLE IVREPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT

As an inducement to Seller to enter into this Agreement and to consummate the transactions contemplated by this Agreement, each of Buyer and Parent hereby represents and warrants to Seller as follows:

4.1Organization and Power    . Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Parent is a corporation duly organized, validly existing and in good standing under the laws of Japan. Each of Buyer and Parent has all requisite corporate power and authority (i) to execute and deliver this Agreement and each Transaction Document to which it is a party, and (ii) to perform its obligations and consummate the transactions contemplated hereunder and under the Transaction Documents.

4.2Authorization; No Breach    .

(c)This Agreement and the Transaction Documents have been duly authorized, executed and delivered by each of Buyer and Parent, and this Agreement and the Transaction Documents to which Buyer or Parent, as applicable, is a party constitute the valid and binding obligations of Buyer and Parent, respectively, enforceable in accordance with their respective terms (subject to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors’ rights and to general principles of equity).

(d)Except as would not materially and adversely affect Buyer or Parent, the execution, delivery and performance of this Agreement and the Transaction Documents by Buyer or Parent, as applicable, and the consummation of the transactions contemplated by this Agreement and thereby do not and shall not (i) (A) conflict with or result in any breach of any of the provisions of, (B) constitute a default or give rise to any payment or other penalty under, (C) result in a violation of, (D) give any third party the right to terminate or modify or to accelerate any obligation under, or (E) require any authorization, consent, approval, exemption or other action by or notice to or filing with any court or other governmental body, under the provisions of Buyer’s certificate of incorporation or Parent’s articles of incorporation, as applicable, or any indenture, mortgage, lease, loan agreement or material Contract, understanding, commitment, instrument or other agreement by which Buyer or Parent, as applicable, is bound, or any law, statute, rule or regulation to which Buyer or Parent, as applicable, is subject, or (ii) violate any order, writ, injunction, decree, statute, rule or regulation of any Person or any law applicable to Buyer or Parent.

4.3Consents    . None of Buyer, Parent or any of their Subsidiaries or Affiliates is required to give any notice to or obtain any consent, order, approval or authorization from, or notice to, or declaration, filing application, qualification or registration with, any Person in connection with the execution and delivery of this Agreement or the other Transaction Documents or the consummation or performance of any of the transactions contemplated by this Agreement or thereby.

4.4Brokerage    . Except with respect to commissions and other fees to be paid to Mitsubishi UFJ Research and Consulting Co., Ltd., there are no claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of Buyer or Parent.

4.5Litigation    . There are no material actions, suits, proceedings, orders or investigations pending or, to Buyer’s or Parent’s knowledge, threatened in writing against Buyer or Parent or their Subsidiaries at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, which would adversely affect Buyer’s or Parent’s performance under this Agreement or any of the Transaction Documents or the consummation of the transactions contemplated by this Agreement or thereby.

4.6Business Employees. Buyer has offered employment to each of the Business Employees, in each case on terms no less favorable to the Business Employee than those currently provided by Seller, subject to the consummation of the transactions contemplated by this Agreement, which provided for employment with Buyer to commence on the day following the Execution Date.

4.7No Reliance. Buyer hereby acknowledges that, in connection with the transactions contemplated by this Agreement (including in making its determination to proceed with such transactions), Buyer has not relied upon any representation or warranty, whether oral or written, express or implied, by Seller or any of its Affiliates or any of their respective officers, directors, managers, owners or representatives, except for the representations and warranties of Seller specifically and expressly set forth in Article III and Part 4 of SCHEDULE 2.

ARTICLE VINDEMNIFICATION

5.1Survivability; Limitation on Liability    . The representations and warranties contained in Article III and Article IV of this Agreement shall survive until the date that is eighteen (18) months after the Closing, except for those representations and warranties contained in Sections 3.1, 3.3(a), 3.9, 4.1, 4.2(a) and 4.4 which shall survive indefinitely, and Sections 3.10, 3.12, 3.17 and 3.19, which shall survive until the thirtieth (30^th) day after the expiration of the statute of limitations that would be applicable to any claim brought by a third party or governmental entity, at which time such representations and warranties will lapse and Buyer and Parent or Seller, as applicable, shall not be entitled to make any claim (other than for fraud) against Seller or Buyer and Parent, as applicable, thereunder.

5.2Indemnification by Seller    . Seller shall indemnify, defend and hold harmless Buyer, Parent and their officers, directors, employees and agents and their successors and permitted assigns (each, a “Buyer Indemnified Party” and collectively, the “Buyer Indemnified Parties”) from and against all Losses that any Buyer Indemnified Party may at any time suffer or incur, or become subject to, as a result of or in connection with (a) any product liability claims arising out of the operation of the GAP Business by Seller prior to the Execution Date, (b) Seller’s (including by its officers, directors, employees or agents) breach of Applicable Law or fraud, (c) Seller’s breach of the representations and warranties included in Article III of this Agreement or in any Transaction Document, (d) Seller’s (including by its officers, directors, employees or agents) willful misconduct, (e) Seller’s failure to perform any of its covenants or agreements contained in this Agreement or any Transaction Document, or (f) the Excluded Assets or the Excluded Liabilities. In addition, Seller shall also be responsible for such indemnification obligations to the Buyer Indemnified Parties as are set forth in Part I of SCHEDULE 2, subject to the terms, conditions and limitations thereof.

5.3Indemnification by Buyer and Parent    . Each of Buyer and Parent shall, jointly and severally, indemnify, defend and hold harmless Seller and its officers, directors, employees and agents and their successors and permitted assigns (each, a “Seller Indemnified Party” and collectively, the “Seller Indemnified Parties”) from and against all Losses that any Seller Indemnified Party may at any time suffer or incur, or become subject to, as a result of or in connection with (a) the conduct of the GAP Business by Buyer or Parent on or after the Execution Date, including, without limitation, any product liability claims or claims arising out of the tortious conduct of Buyer, Parent or their officers, directors, employees or agents, (b) Buyer’s or Parent’s (including by their officers, directors, employees or agents) breach of Applicable Law or fraud, (c) Buyer’s or Parent’s breach of the representations and warranties included in Article IV of this Agreement or in any Transaction Document, (d) Buyer’s or Parent’s (including by their officers, directors, employees or agents) willful misconduct, (e) Buyer’s or Parent’s failure to perform any of its covenants or agreements contained in this Agreement or any Transaction Document, (f) the Assumed Liabilities, or (g) brokerage commissions, finders’ fees or similar compensation payable by Parent or Buyer to Mitsubishi UFJ Research and Consulting Co., Ltd.

5.4Indemnification Procedure    . The indemnified Party shall promptly notify the indemnifying Party in writing of any claim, suit or proceeding for which the indemnified Party is seeking indemnification under this Agreement (each, an “Action”) and shall cooperate with the indemnifying Party at the indemnifying Party’s sole cost and expense. The indemnifying Party shall immediately take control of the defense and investigation of the Action and shall diligently defend against the Action on behalf of the indemnified Party and shall employ counsel reasonably acceptable to the indemnified Party to handle and defend the same, at the indemnifying Party’s sole cost and expense. The indemnifying Party shall not settle any Action in a manner that adversely affects the rights of any indemnified Party without the indemnified Party’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed. The indemnified Party’s failure to perform any obligations under this Article V shall not relieve the indemnifying Party of its obligation under this Article Vexcept to the extent that the indemnifying Party can demonstrate that it has been materially prejudiced as a result of the failure of the indemnified Party to cooperate. The indemnified Party may participate in and observe the proceedings at its own cost and expense with counsel of its own choosing.

5.5Certain Limitations    . The aggregate amount of all Losses for which an indemnifying Party shall be liable pursuant to Section 5.2(c) or Section 5.3(c), except in the case of the indemnifying Party’s fraud or willful misconduct, shall not exceed US$300,000 (the “US Indemnity Cap”). For the avoidance of doubt, the US Indemnity Cap shall not apply to any Claims, any indemnities under clause 6 of Part 1 of Schedule 2, and any claims under the Tax Covenant (each such term having the meaning set forth in SCHEDULE 2), which shall be governed by SCHEDULE 2. One or more claims will not enlarge this limit; provided that this limitation shall not apply to any representations and warranties made in Sections 3.1, 3.3(a), 3.9, 3.10, 3.12, 3.17 and 3.19, and Sections 4.1, 4.2(a) and 4.4.

ARTICLE VIADDITIONAL AGREEMENTS

6.1Reimbursement    .

(a)No later than 30 days following the Execution Date, Seller shall deliver to Parent a schedule (the “Reimbursement Schedule”) setting forth the aggregate amount of all fees, costs and expenses paid by Seller to operate the GAP Business and the Facilities in the ordinary course and to maintain the GAP Business, the Facilities, the Purchased Assets and the Inventory, including, without limitation, payroll and benefits to the Business Employees, any travel and other advances made to the Business Employees, rent and other fees and costs associated with the Facilities, for the period beginning on October 1, 2015 and ending upon the Closing (the “Reimbursement Amount”). The payment of the Reimbursement Amount by Parent as provided in this Section shall be subject to reasonable supporting documentation with respect to all fees, costs and expenses included on the Reimbursement Schedule, which documentation shall be provided to Parent. No later than 15 days following the receipt of the Reimbursement Schedule by Parent (the “Reimbursement Due Date”), Parent shall pay to Seller the portions of the Reimbursement Amount which are not disputed by Parent pursuant to Section 6.1(b) below by check or wire transfer of immediately available funds. For the avoidance of doubt, the forgiveness of debt contemplated by that certain letter agreement, by and among Seller, Parent and Transgenomic Limited (in the agreed form), dated the same date as this Agreement, shall not reduce or otherwise affect the Reimbursement Amount.

(b)If within five days following delivery of the Reimbursement Schedule and the calculation of the Reimbursement Amount, Parent has not given Seller written notice of its objection as to any item on the Reimbursement Schedule or the calculation of the Reimbursement Amount (which notice shall state in reasonable detail the basis of Parent’s objection, which such objection must be reasonable and made in good faith (the “Dispute Notice”)), then the Reimbursement Amount calculated by Seller shall be binding and conclusive on the parties.

(c)    Notwithstanding if Parent duly delivers a Dispute Notice to Seller, Parent shall pay to Seller on the Reimbursement Due Date all portions of the Reimbursement Amount due and owing which are not included in the Dispute Notice.

(d)    If Parent duly delivers a Dispute Notice to Seller, and if Parent and Seller fail to resolve the issues set forth in the Dispute Notice within ten days of Seller’s receipt of Parent’s Dispute Notice (the “Reimbursement Resolution Period”), Parent and Seller shall submit the issues remaining in dispute to an independent certified public accounting firm of nationally recognized standing selected by the mutual agreement of the parties (who has not been engaged by either Seller, Parent or Buyer or any of their Affiliates to provide services in any other capacity at any time during the three-year period prior to such selection) (the “Independent Accountants”) for resolution. If issues are submitted to the Independent Accountants for resolution, (i) Parent and Seller shall furnish or cause to be furnished to the Independent Accountants such work papers and other documents and information relating to the disputed issues as the Independent Accountants may request and are available to that party or its agents and shall be afforded the opportunity to present to the Independent Accountants any material relating to the disputed issues and to discuss the issues with the Independent Accountants; and (ii) the final determination by the Independent Accountants, as set forth in a notice to be delivered to both Parent and Seller within 30 days of the submission to the Independent Accountants of the issues remaining in dispute, shall be final, binding and conclusive on, and non-appealable by, the parties and shall be used in the calculation of the Reimbursement Amount. The Independent Accountants shall address only those matters in the Dispute Notice. The fees and expenses of the Independent Accountants will be allocated between Parent and Seller based upon the percentage which the portion of the disputed amount not awarded to each party bears to the amount actually disputed by such party, as determined by the Independent Accountants.

(e)    For all portions of the Reimbursement Amount that are not paid when due on the Reimbursement Due Date and which are (i) not disputed by Parent in the Dispute Notice, (ii) agreed to be paid by Parent through discussions with Seller during the Reimbursement Resolution Period, and (iii) determined by the Independent Accountants in accordance with Section 6.1(d) to have been valid portions of the Reimbursement Amount due and owing by Parent to Seller in accordance with Section 6.1(a), Parent will pay interest on all such unpaid portions of the Reimbursement Amount at a rate of 3.0% per month (or such lesser maximum amount that is permitted to be paid by applicable law) to Seller, accruing daily from the Reimbursement Due Date, until the full Reimbursement Amount, plus all accrued interest thereon, is paid in full.

6.2Expenses    . Except as provided in Section 6.1 and as otherwise specifically provided for herein, the Parties shall pay all of their own respective fees, costs and expenses (including fees, costs and expenses of legal counsel, investment bankers, brokers and other representatives and consultants) incurred in connection with the negotiation of this Agreement, the performance of their obligations under this Agreement and the consummation of the transactions contemplated by this Agreement.

6.3Further Assurances    . Seller, Buyer and Parent shall execute and deliver such further instruments of conveyance and transfer and take such additional actions (provided that neither party shall be required to expend any material funds) as the other Party may reasonably request to effect, consummate, confirm or evidence the transfer to Buyer of the Purchased Assets and to Parent of the Inventory, the assumption by Buyer of the Assumed Liabilities and the conduct by Buyer of the GAP Business (including with respect to obtaining and maintaining all licenses, permits, authorizations, accreditations and consents necessary in connection therewith). Without limiting the generality of the foregoing, Seller, Buyer and Parent agree to cooperate with each other and to provide each other with all information and documentation reasonably necessary to permit the preparation and filing of all federal, state, local and other Tax Returns with respect to the GAP Business.

6.4Sales and Transfer Taxes    . Buyer and Parent shall bear and pay after the Closing as they become due and payable, any Taxes, including sales taxes, transfer taxes, documentary charges, recording fees or similar taxes, or governmental charges or fees, that may become due and payable in connection with the transfer of the Purchased Assets to Buyer or the transfer of the Inventory to Parent or in connection with any other transaction contemplated by this Agreement.

6.5Noncompetition; Nonsolicitation    .

(f)For a period of three years commencing on the Closing Date (the “Restricted Period”), Seller shall not, and shall not permit any of its Affiliates to, directly or indirectly, (i) engage in or assist others in engaging in the GAP Business in the United States or in Europe; (ii) have an interest in any Person that engages directly or indirectly in the GAP Business in the United States or in Europe in any capacity, including as a partner, shareholder, member, employee, principal, agent, trustee or consultant; or (iii) cause, induce or encourage any material actual or prospective client, customer, supplier or licensor of the GAP Business (including any existing or former client or customer of Seller and any Person that becomes a client or customer of the GAP Business after the Closing), or any other Person who has a material business relationship with the GAP Business, to terminate or modify any such actual or prospective relationship. Notwithstanding the foregoing, Seller may own, directly or indirectly, solely as an investment, securities of any Person traded on any national securities exchange if Seller is not a controlling Person of, or a member of a group which controls, such Person and does not, directly or indirectly, own 5% or more of any class of securities of such Person.

(g)During the Restricted Period, Seller shall not, and shall not permit any of its Affiliates to, directly or indirectly, hire or solicit any person who is offered employment by Buyer pursuant to Section 4.6 or is or was employed in the GAP Business during the Restricted Period, or encourage any such employee to leave such employment or hire any such employee who has left such employment, except pursuant to a general solicitation which is not directed specifically to any such employees; provided, that nothing in this Section 6.5(b) shall prevent Seller or any of its Affiliates from hiring (i) any employee whose employment has been terminated by Buyer or (ii) after 180 days from the date of termination of employment, any employee whose employment has been terminated by the employee.

(h)Seller acknowledges that a breach or threatened breach of this Section 6.5 would give rise to irreparable harm to Buyer, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by Seller of any such obligations, Buyer shall, in addition to any and all other rights and remedies that may be available to it in respect of such breach, be entitled to seek equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction (without any requirement to post bond).

(i)Seller acknowledges that the restrictions contained in this Section 6.5 are reasonable and necessary to protect the legitimate interests of Buyer and constitute a material inducement to Buyer to enter into this Agreement and consummate the transactions contemplated by this Agreement. In the event that any covenant contained in this Section 6.5 should ever be adjudicated to exceed the time, geographic, product or service or other limitations permitted by Applicable Law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other limitations permitted by Applicable Law. The covenants contained in this Section 6.5 and each provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.

6.6Business Employees    . In the event any Business Employee does not accept employment with Buyer or Parent effective as of the Execution Date (each such Business Employee, a “Former Business Employee”), none of Buyer, Parent or any Affiliate of either of the foregoing shall solicit, hire, or retain the services of, any Former Business Employee during the six-month period immediately following the Execution Date without Seller’s prior written consent.

6.7Payments of Accounts Receivable. All payments of accounts receivable of Seller included in the Purchased Assets, which are listed on SCHEDULE 1.1(A)(1), which have been or will be received by Seller on or after the Closing Date from any third party in the name of or to Seller in connection with or arising out of the GAP Business, shall be held by Seller in trust for the benefit of Buyer, and within five (5) business days after receipt by Seller of any such payment, Seller shall pay over to Buyer the aggregate amount of each such payment, endorsed where necessary, together with all corresponding notes, documentation and information received in connection therewith. From and after the Closing Date, if Buyer or Parent receives or collects any accounts receivable, notes receivable or other receivables of Seller that are not included in the Purchased Assets, within five (5) business days after receipt by Buyer or Parent, as applicable, of any such payment, Buyer or Parent, as applicable, shall pay over to Seller the aggregate amount of each such payment, endorsed where necessary, together with all corresponding notes, documentation and information received in connection therewith.

6.8Acknowledgment by Buyer and Parent    . Each of Buyer and Parent acknowledges that it has conducted to its satisfaction an independent investigation and verification of the financial condition, results of operations, assets, liabilities, properties and projected operations of Seller and, in making its determination to proceed with the transactions contemplated by this Agreement, each has relied on the results of its own independent investigation and verification and the representations and warranties of Seller expressly and specifically set forth in this Agreement, including the Disclosure Schedule. SUCH REPRESENTATIONS AND WARRANTIES BY SELLER CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF SELLER TO BUYER AND PARENT IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND EACH OF BUYER AND PARENT UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED (INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF SELLER) ARE SPECIFICALLY DISCLAIMED BY SELLER.

ARTICLE VIIDEFINITIONS

7.1Definitions    . Whenever used in this Agreement, the following terms and phrases have the following respective meanings:

“Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such particular Person. For the purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, contract or otherwise.

“Agreement” has the meaning set forth in the Preamble of this Agreement.

“Applicable Law” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, award, decree, other requirement or rule of law of any federal, state, local or foreign government or political subdivision thereof, or any arbitrator, court or tribunal of competent jurisdiction.

“Assignment Documents” has the meaning set forth in Section 1.3(b)(iii).

“Assumed Liabilities” has the meaning set forth in Section 1.2(a).

“Assumption Documents” has the meaning set forth in Section 1.3(b)(iv).

“Benefit Plan” has the meaning set forth in Section 3.17(a).

“Business Employees” has the meaning set forth in Section 1.2(a)(iii).

“Buyer” has the meaning set forth in the Preamble of this Agreement.

“Buyer Indemnified Party” has the meaning set forth in Section 5.2.

“Closing” has the meaning set forth in Section 1.3(a).

“Closing Date” has the meaning set forth in Section 1.3(a).

“Code” means the Internal Revenue Code of 1986, as amended.

“Contract Arrangement” has the meaning set forth in Section 1.5.

“Contracts” means, with respect to any Person, any legally binding written contracts, leases, licenses, supply and distribution agreements, sales and purchase agreements and orders, confidentiality agreements, insurance policies, deeds, mortgages, guaranties, indentures, undertakings, arrangements or understandings and contracts and other commitments, documents and agreements and business arrangements.

“Disclosure Schedule” has the meaning set forth in the Preamble to Article III.

“Dispute Notice” has the meaning set forth in Section 6.1(b).

“Environmental Laws” has the meaning set forth in Section 3.19.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

“Excluded Assets” has the meaning set forth in Section 1.1(b).

“Excluded Liabilities” has the meaning set forth in Section 1.2(b).

“Execution Date” means November 25, 2015.

“Facilities” has the meaning set forth in Section 1.1(a)(ii).

“Former Business Employee” has the meaning set forth in Section 6.6.

“GAP Business” means the business of selling, distributing, assembling, manufacturing, delivering and servicing mutation detection equipment and its associated reagents for genetic variation detection in both molecular genetic research and molecular diagnostics, including with respect to the selling, distributing, assembling, manufacturing, delivering and servicing, as applicable, sample preparation equipment, instruments and running reagents for HPLC nucleic acid fragment analysis and purification, as conducted by Seller and its Affiliates (including Transgenomic Limited). For the avoidance of doubt, the GAP Business specifically excludes the chromatography columns segment of Seller’s business, which is unrelated to nucleic acid fragment analysis and purification.

“Glasgow Facility” has the meaning set forth in Section 1.1(a)(ii).

“Indebtedness” means, without duplication, all obligations of Seller for borrowed money and any accrued interest, prepayment premiums or penalties related thereto.

“Independent Accountants” has the meaning set forth in Section 6.1(d).

“Intellectual Property” means (a) foreign and domestic patents and patent applications and inventions, (b) Internet domain names, trademarks, service marks, trade dress, trade names, logos and corporate or company names (both foreign and domestic) and registrations and applications for registration thereof together with all of the goodwill associated therewith, (c) registered copyrights and copyrightable works (both foreign and domestic) and registrations and applications for registration thereof, (d) computer software, data, data bases and documentation thereof, including rights to third party software used in the Business (excluding “shrink wrap” software and other software that can generally be purchased commercially for less than US$10,000 per user), and (e) trade secrets and other confidential information (including ideas, formulas, inventions (whether patentable or unpatentable and whether or not reduced to practice), know how, processes and techniques, financial and marketing plans and customer and supplier lists and information).

“Inventory” has the meaning set forth in Section 1.1(a)(ii).

“Inventory Purchase Price” has the meaning set forth in Section 1.3(b)(ii).

“Irvington Facility” has the meaning set forth in Section 1.1(a)(ii).

“Leased Real Property” has the meaning set forth in Section 3.8(b).

“Leases” has the meaning set forth in Section 3.8(b).

“Liens” means, with respect to any property or asset, all pledges, liens, mortgages, charges, encumbrances, hypothecations, options, rights of first refusal, rights of first offer and security interests of any kind or nature whatsoever.

“Losses” means actual out-of-pocket losses, damages, liabilities, costs or expenses, including reasonable attorneys’ fees; provided that Losses shall not include any consequential, special, indirect or punitive damages, including loss of future revenue or income, diminution of value, loss measured by any multiple or loss of business reputation or opportunity relating to a breach or alleged breach of this Agreement.

“Manufacturing Services Agreement” has the meaning set forth in Section 2.1(d)(iii).

“Party” or “Parties” has the meaning set forth in the Preamble of this Agreement.

“Permits” has the meaning set forth in Section 3.18(a).

“Permitted Liens” means (a) Liens for taxes or governmental assessments, charges or claims the payment of which is not yet due; (b) statutes, liens of landlords and liens of carriers, warehousemen, mechanics, materialsmen and other similar Persons; (c) all exceptions, restrictions, easements and rights of way relating to the Leased Real Property; (d) Liens incurred in the ordinary course of business; and (e) Liens created by or on behalf of Buyer or Parent.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

“Purchase Price” has the meaning set forth in Section 1.3(b)(ii).

“Purchased Assets” has the meaning set forth in Section 1.1(a).

“Purchased Assets Purchase Price” has the meaning set forth in Section 1.3(b)(i).

“Reimbursement Amount” has the meaning set forth in Section 6.1(a).

“Reimbursement Due Date” has the meaning set forth in Section 6.1(a).

“Reimbursement Resolution Period” has the meaning set forth in Section 6.1(d).

“Reimbursement Schedule” has the meaning set forth in Section 6.1(a).

“Restricted Period” has the meaning set forth in Section 6.15(a).

“Share Purchase Price” has the meaning set forth in Section 1.3(b)(v).

“Seller” has the meaning set forth in the Preamble of this Agreement.

“Seller Indemnified Party” has the meaning set forth in Section 5.3.

“Seller SEC Documents” means, shall mean all reports, schedules, forms, statements, prospectuses, registration statements, certifications and other documents required to be filed with or furnished to the United States Securities and Exchange Commission by Seller or its officers since December 31, 2014, together with any exhibits and schedules thereto and other information incorporated therein.

“Subsidiary” means, with respect to any Person, any other Person (a) of which the initial Person directly or indirectly owns or controls more than 50% of the voting equity interests or has the power to elect or direct the election of a majority of the members of the governing body of such Person, or (b) which is required to be consolidated with such Person under United States generally accepted accounting principles.

“Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add on minimum, sales, use, transfer, real property gains, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, special assessment, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, including any interest, penalties or additions to tax or additional amounts in respect of the foregoing.

“Tax Return” means any return, report, information return or other document (including schedules or any related or supporting information) filed or required to be filed with any governmental entity or other authority in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax.

“TL Shares” means the 651,617 ordinary shares of £1 each in the capital of Transgenomic Limited.

“Transaction Documents” has the meaning set forth in Section 3.3(a).

“Transgenomic Limited” means Transgenomic Limited, a company registered under the laws of England and Wales (Company no. 3257373).

“Transition Services Agreement” has the meaning set forth in Section 2.1(d)(iv).

ARTICLE VIIIMISCELLANEOUS

8.1Amendment and Waiver    . This Agreement may be amended, or any provision of this Agreement may be waived, so long as any such amendment or waiver is set forth in a writing executed by Buyer and Parent, on the one hand, and Seller, on the other hand. No course of dealing between or among the Parties shall be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any Party under or by reason of this Agreement.

8.2Knowledge Defined    . For purposes of this Agreement, the term “to Seller’s knowledge” or words of similar meaning as used herein shall mean the actual knowledge of Paul Kinnon, David Hild and Ben Nouri, after reasonable investigation.

8.3Notices    . All notices and other communications under or in connection with this Agreement shall be in writing and shall be deemed given (a) if delivered personally, upon delivery, (b) if delivered by registered or certified mail (return receipt requested), upon the earlier of actual delivery or three days after being mailed, or (c) if given by facsimile, upon confirmation of transmission by facsimile, in each case to the parties at the following addresses:

Notices to Seller:

Transgenomic, Inc.12325 Emmet StreetOmaha, Nebraska 68164Attn: Chief Executive OfficerFacsimile: (402) 452-5401

with a copy to (which shall not constitute notice to Seller):

Paul Hastings LLP1117 S. California AvenuePalo Alto, California 94304Attention: Jeffrey T. Hartlin, Esq.Facsimile: (650) 320-1904

Notices to Buyer or Parent:

ADSTEC Corporation568-1-1 Innai-cho    
Funabashi-city

Chiba 273-0025, JapanAttn:     Tsutomu Kojima

with a copy to (which shall not constitute notice to Buyer or Parent):

Masuda, Funai, Eifert & Mitchell, Ltd.
203 N. LaSalle St., Suite 2500Chicago, Illinois 60601
Attn:     George Kobayashi, Esq.Facsimile: 312.245.7467

8.4Assignment    . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns, except that neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated by Buyer or Parent without the prior written consent of Seller.

8.5Severability    . Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement is held to be prohibited by or invalid under Applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Agreement.

8.6Captions and Headings    . The captions and headings used in this Agreement are for convenience of reference only and do not constitute a part of this Agreement and shall not be deemed to limit, characterize or in any way affect any provision of this Agreement, and all provisions of this Agreement shall be enforced and construed as if no caption or heading had been used in this Agreement.

8.7Entire Agreement    . This Agreement, including the schedules attached to this Agreement and other documents referred to herein, and the confidentiality provisions of the mutual confidential nondisclosure agreement signed by Parent and Seller on December 17, 2004, contain the entire understanding of the Parties with respect of their subject matter and supersede all prior and contemporaneous agreements and understandings, oral and written, between the Parties with respect to such subject matter.

8.8Counterparts    . This Agreement may be executed in one or more counterparts, including electronically transmitted counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but one and the same Agreement.

8.9Governing Law    . Subject to Section 8.10 below, the law of the State of Nebraska shall govern all questions concerning the construction, validity, interpretation and enforceability of this Agreement and the schedules to this Agreement, and the performance of the obligations imposed by this Agreement, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Nebraska or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Nebraska.

8.10English Law. Notwithstanding Section 8.9, SCHEDULE 2 and any dispute or claim arising out of or in connection with it or its subject matter (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of England and Wales. Each party irrevocably agrees that the courts of England and Wales shall have non-exclusive jurisdiction to settle any dispute or claim arising out of or in connection with SCHEDULE 2 or its subject matter (including non-contractual disputes or claims).

8.11Waiver of Jury Trial    . EACH OF THE PARTIES WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION BASED ON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, VERBAL OR WRITTEN STATEMENT OR ACTION OF ANY PARTY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH OF THE PARTIES HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT THE PARTIES MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS EVIDENCE OF THE CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

8.12No Strict Construction    . The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their collective mutual intent, and no rule of strict construction shall be applied against any Person. The term “including” as used herein shall be by way of example and shall not be deemed to constitute a limitation of any term or provision contained herein.

8.13Equitable Remedies    . Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity.

8.14No Third-Party Beneficiaries    . With the exception of the rights afforded in paragraph 3.7 to Schedule 2, this Agreement is for the sole benefit of the Parties and their permitted assigns, and nothing herein expressed or implied shall give or be construed to give any Person (other than the Parties and such assigns) any legal or equitable rights under this Agreement including, but not limited to, the Contracts (Rights of Third Parties) Act 1999. Notwithstanding the aforementioned, any Officer may enforce paragraph 3.7 to SCHEDULE 2.

8.15Bulk Transfer Laws    . Each of Buyer and Parent hereby waives compliance by Seller with the provisions of any so-called bulk transfer laws of any jurisdiction in connection with the sale of the Purchased Assets to Buyer and the sale of the Inventory to Parent.

* * * * *

IN WITNESS WHEREOF, the Parties have executed this Asset Purchase Agreement as of the date first written above.

BUYER:

ADS BIOTEC INC.,a Delaware corporationBy: /s/ Tsutomu Kojima        Name: Tsutomu Kojima         Title: Chairman            

PARENT:

ADSTEC CORPORATION,
a Japanese corporationBy: /s/ Tsutomu Kojima        Name: Tsutomu Kojima        
Title: CEO and President        

SELLER:TRANSGENOMIC, INC.,a Delaware corporationBy: /s/ Paul Kinnon            Name: Paul Kinnon            Title: President and CEO        

SCHEDULE 2

PART 1

1. Interpretation

All capitalised terms not otherwise defined in this Part shall have the meaning ascribed to the same in the Agreement. The definitions and rules of interpretation in this paragraph apply in this Schedule.

"Accounts"	the audited financial statements of Transgenomic Limited as at and to the Accounts Date, including the balance sheet, profit and loss account (together with the notes on them), the cash flow statement and the auditor's and directors' reports;
"Accounts Date"	31 December 2014;
"Business"	the business carried on by Transgenomic Limited or any party of it;
"Business Day"	a day other than a Saturday, Sunday or public holiday in England when banks in London are open for business;
"Claim"	a claim for breach of any of the Warranties;
"Closing"	completion of the sale and purchase of the TL Shares in accordance with the Agreement and this Schedule;
"Director"	each person who is a director or shadow director of Transgenomic Limited, as set out in Part 2 of this Schedule;
"Disclosed"	fairly disclosed (with sufficient details to identify the nature and scope of the matter disclosed) in or under the Disclosure Schedule;
"Employee"	any person employed by Transgenomic Limited under a contract of employment;
“Employment Termination Costs”	;
"Encumbrance"	any interest or equity of any person (including any right to acquire, option or right of pre-emption) or any mortgage, charge, pledge, lien, assignment, hypothecation, security interest, title retention or any other security agreement or arrangement;
"Management Accounts"	means the unaudited balance sheet as at 30 September 2015 and the unaudited profit and loss account of Transgenomic Limited (including any notes thereon) for the period of 9 months ended 30 September 2015;
"Tax Warranties"	the warranties and representations set out in Part B of Part 4 of this Schedule;
"Tax Covenant"	the tax covenant set out in Part 5 of this Schedule;
"Warranties"	the warranties and representations given pursuant to paragraph 3 and set out in Part 4 of this Schedule;
"Worker"	any person who personally performs work for Transgenomic Limited but who is not in business on their own account or in a client/customer relationship.

2. SALE AND PURCHASE

2.1The Seller shall sell and the Buyer shall buy, with effect from Closing, the TL Shares with full title guarantee, free from all Encumbrances and together with all rights attached or accruing to them.

2.2The TL Shares shall be sold with all rights that attach, or may in the future attach, to them (including, in particular, the right to receive all dividends and distributions declared, made or paid on or after the date of the Agreement).

2.3The Buyer is not obliged to complete the purchase of any of the TL Shares unless the purchase of all the TL Shares is completed simultaneously.

3. WARRANTIES

3.1The Seller warrants and represents to the Buyer that each Warranty is true and not misleading on the date of the Agreement except as Disclosed.

3.2Without prejudice to the right of the Buyer to claim on any other basis or take advantage of any other remedies available to it, if any Warranty proves to be untrue or misleading, the Seller shall pay to the Buyer on demand:

(i) the amount necessary to put Transgenomic Limited into the position it would have been in if the Warranty had not been untrue or misleading; and

(ii) all costs and expenses (including, without limitation, damages, legal and other professional fees and costs, penalties, expenses but excluding consequential losses) properly incurred by the Buyer or Transgenomic Limited as a result of the Warranty being untrue or misleading; and

(iii) any amount necessary to ensure that, after any Taxation of a payment made in accordance with paragraph 3.2(i) or paragraph 3.2(ii), the Buyer is left with the same amount it would have had if the payment was not subject to Taxation.

3.3The Buyer is not entitled to recover damages or otherwise obtain payment, reimbursement or restitution more than once in respect of the same loss twice.

3.4Warranties qualified by the expression so far as the Seller is aware or so far as Trangsgenomic Limited is aware (or any similar expression) are deemed to be given to the best of the information and belief of the Seller or Transgenomic Limited (as applicable), after it has made all reasonable and careful enquiries of (i) Ernst & Young LLP (financial advisers to Transgenomic Limited) (ii) Paul Hastings LLP (legal adviser to Transgenomic Limited) (iii) Paul Kinnon, Leon Richards and Susan Bowie. This paragraph 3.3 applies to this Schedule only.

3.5Each of the Warranties is separate and, unless specifically provided, is not limited by reference to any other Warranty or anything in this Schedule.

3.6With the exception (i) of matters Disclosed; and (ii) information the Buyer has actual knowledge of in sufficient detail to identify the scope and nature of the matter in the context of the business of Transgenomic Limited, no information of which the Buyer and/or its agents and/or advisors has knowledge (actual, constructive or imputed knowledge) or which could have been discovered (whether by investigation made by the Buyer or made on its behalf) shall prejudice or prevent any Claim or reduce any amount recoverable thereunder.

3.7The Seller agrees that any information supplied by Transgenomic Limited or by or on behalf of any of the employees, directors, agents or officers of Transgenomic Limited (“Officers”) to the Seller or its advisers in connection with the Warranties, the information Disclosed in the Disclosure Schedule or otherwise shall not constitute a warranty, representation or guarantee as to the accuracy of such information in favour of the Seller, and the Seller hereby undertakes to the Buyer and to Transgenomic Limited and each Officer that it waives any and all claims which it might otherwise have against any of them in respect of such claims.

3.8The only Warranties given in respect of Taxation are the Tax Warranties.

4.LIMITATIONS ON CLAIMS

4.1The Seller shall not be liable for a Claim or a claim under the Tax Covenant unless notice in writing of the Claim or the claim under the Tax Covenant, summarising the nature of the Claim or the claim under the Tax Covenant (in so far as it is known to the Buyer) and, as far as is reasonably practicable, the amount claimed, has been given by or on behalf of the Buyer to the Seller:

(i)    in the case of a claim made under the Warranties in Part B of Part 4 of this Schedule, on or before the seventh anniversary of Closing; or

(ii)    in the case of a claim under the Tax Covenant, within the period specified in paragraph 5.1 of the Tax Covenant; or

(iii)    in any other case, on or before the second anniversary of Closing.

4.2There shall be disregarded for all purposes any Claim in respect of which the amount which the Buyer would otherwise (but for the provisions of this Paragraph 4.2) be entitled to recover would be less than US$50,000 provided however that multiple claims arising out of the same or similar underlying cause may be aggregated for the purposes of determining whether this US$50,000 de minimis has been exceeded.

4.3The aggregate liability of the Seller in respect of all and any Claims and all and, any claims under the Tax Covenant shall be limited to and shall in no event exceed an amount equal to US$300,000.

4.4The Seller shall not be liable in respect of any Claim based upon a liability which is contingent or unquantifiable unless, and to the extent that until such contingent liability becomes an actual liability or such unquantifiable liability becomes quantifiable, provided that this Paragraph 4.5 shall not operate to avoid a Claim made in respect of a contingent or unquantifiable liability which is notified to the Seller within the applicable time limit specified in Paragraph 4.1 above to the extent that the contingent or unquantifiable liability subsequently becomes an actual or quantifiable liability (as the case may be).

4.5The Seller shall not be liable in respect of any Claim to the extent that the facts or circumstances giving rise to such Claim are capable of remedy and are remedied or otherwise compensated by or at the expense of the Seller within 20 Business Days of the date on which notice of such Claim is given pursuant to Paragraph 4.2 above. The Buyer shall (at the Seller’s expense and subject to being indemnified to the Buyer’s satisfaction in respect of any cost, loss or liability incurred on so complying) comply with all reasonable written requests made by the Sellers during that 20 Business Day period for the purposes of so remedying any such breach or preventing any such loss.

4.6If the Buyer becomes aware of any claim, action or demand made against Transgenomic Limited by a third party (a "Third Party Claim") which may give rise to a Claim the Buyer shall:

(i) not make any admission of liability, agreement or compromise with any person, body or authority in relation to that Third Party Claim without the prior written consent of the Seller (such consent not to be unreasonably withheld, delayed or conditioned) provided that nothing in this paragraph shall prevent the Buyer from agreeing (or permitting to be agreed) any compromise or settlement, or from making any payment in respect of a Third Party Claim if the Buyer (acting reasonable) considers that a failure to do so will be materially prejudicial to its interests or those of Transgenomic Limited or otherwise change the goodwill of its business or that of Transgenomic Limited in any material respect;

(ii) as soon as practicable, notify the Seller giving reasonable details, so far as are known to the Buyer, of the relevant facts and circumstances relating to the Third Party Claim; and

(iii) keep the Seller reasonably informed of all material developments in relation to the Third Party Claim within its knowledge and consult with the Seller with regard to any actual or proposed developments relating to the matter in question save where to do so would or might reasonably breach or endanger the legal privilege of the Buyer in any such documents or records or any obligations of confidentiality owed to a third party.

4.7If the Seller pays to the Buyer an amount in respect of a Claim and the Buyer or Transgenomic Limited subsequently recovers from another person an amount which is referable to the matter giving rise to that Claim, the Buyer shall as soon as practicable repay to the Seller the amount so received or recovered (less the reasonable costs incurred by Transgenomic Limited or the Buyer in recovering such amount), up to the amount which has been paid by the Seller in respect of such Claim.

4.8Notwithstanding any other provision of this Agreement, the Buyer shall be obliged to mitigate any loss or damage which it may suffer or incur as a consequence of a matter giving rise to any breach of any Warranty, Claim or other claim under this Agreement.

4.9Nothing in this paragraph 4 applies to exclude or limit the liability of the Seller to the extent that a Claim or a claim under the Tax Covenant arises or is delayed as a result of fraud or fraudulent non-disclosure by the Seller, its agents or advisers.

5.TAX COVENANT

The provisions of Part 5 apply in this Schedule in respect of Tax.

6.INDEMNITY

The Seller shall indemnify the Buyer and Transgenomic Limited against:

(a)all Employment Termination Costs arising out of the termination of any of the Employee’s employment by reason of redundancy within the six month period following Closing; and

(b)all liabilities, costs, expenses, damages and losses suffered or incurred by Transgenomic Limited arising out of or in connection with:

(i)any claim against Transgenomic Limited by Menarini Diagnostics s.r.l or its Affiliates;

(ii)in respect of the “Trattamento di Fine Rapporto” shown as an accrual in the Accounts for Marco Sbalzarini, up to an aggregate amount of €35,487,08 and for Paolo Zaccagna, up to an aggregate amount of €25,110,80;

(iii)the cessation of the operation of Transgenomic Limited’s business at, and the closure of, Transgenomic Limited’s branch office in France;

(iv)the employment by Transgenomic Limited of Philip Eastlake and the termination of such employment; and

(v)any Liability for Tax (as defined in Part 5 of Schedule 2) arising out of the write off by Transgenomic, Inc. of all debts owed to it by Transgenomic Limited pursuant to a letter agreement, by and among Transgenomic, Inc., Parent and Transgenomic Limited (in the agreed form), dated the same date as this Agreement.

7.FURTHER ASSURANCE

The Seller shall (at its own expense) promptly execute and deliver such documents, perform such acts and do such things as the Buyer may reasonably require from time to time for the purpose of giving full effect to this Schedule 2.

PART 2 - PARTICULARS OF TRANSGENOMIC LIMITED

Company Name:	Transgenomic Limited
Company Number:	3257373
Date of Incorporation:	1 October 1996
Jurisdiction of incorporation:	England & Wales
Type of company:	Private company limited by shares
Registered Office:	DWF LLP 1 Scott Place 2 Hardman Street Manchester, M3 3AA United Kingdom
Directors:	Paul Kinnon Philip Benjamin Eastlake Susan Elizabeth Bowie
Secretary:	Philip Benjamin Eastlake
Issued Share Capital:	Amount: £651,617 Divided into: 651,617 ordinary shares of £1 each
Shareholders:	Transgenomic, Inc. (651,617 ordinary shares of £1 each)
Charges:	Type	Created	Persons entitled		Short particulars
	Debenture	15 January 2009	Royal Bank of Scotland PLC		Fixed and floating charge over the undertaking and all Glasgow Facility and assets present and future, including goodwill, uncalled capital, buildings, fixtures, fixed plant & machinery.
	Rent deposit deed	28 September 1998	C.H.Q. Limited		Transgenomic Limited charges all its interest in the rent deposit to the mortgagee as security for the performance of its obligations in a lease dated 28 September 1998.
Accounting Reference Date:	31 December
Date of Latest Annual Return:	1 October 2015
Auditors:	Ernst & Young LLP
Previous Names (and dates of changes):	Previous name			Date of change
	CETAC Technologies Limited			27 April 1998
	COBCO (204) Limited			23 December 1996

- PART 3 -COMPLETION

1.At Closing, the Seller shall deliver to the Buyer:

1.1a transfer of the TL Shares, in agreed form, executed by the Seller in favour of the Buyer or such person as it may direct;

1.2the share certificates for the TL Shares or any indemnity, in agreed form, for any lost certificates;

1.3the statutory registers and minute books (duly written up to the time of Closing), the common seal (if any), certificate of incorporation and any certificates of incorporation on change of name relating to Transgenomic Limited;

1.4the written resignation, in agreed form and executed as a deed, of all the Directors of Transgenomic Limited (other than Susan Bowie) and the secretary of Transgenomic Limited from their respective offices and employment with Transgenomic Limited;

1.5a duly executed resignation letter, in the agreed form, relating to the employment of Philip Eastlake

1.6an irrevocable power of attorney, in agreed form, given by the Seller in favour of the Buyer to enable the attorney (or its proxies) to exercise all voting and other rights attaching to the TL Shares before the transfer of the TL Shares is registered in the register of members of Transgenomic Limited;

1.7the duly executed forms necessary to amend (as the Buyer shall direct) the mandates given by TransgenomicLimited to its bankers;

1.8all Companies House web filing service details for Transgenomic Limited, including the relevant sign in e-mail address, security code and company authentication code;

1.9the written resignation of the auditor of Transgenomic Limited, including the statement required by section 519 of the Companies Act 2006;

1.10all title deeds and other documents relating to the Glasgow Facility; and

1.11bank statements for each of Transgenomic Limited's bank accounts, showing the balances at the close of business on the Business Day before Closing

2.The Seller shall cause a board meeting of Transgenomic Limited to be held at Closing at which the matters set out in the agreed form closing board minutes shall take place.

- PART 4 -

WARRANTIES

Part A - General warranties

1.SHARES IN TRANSGENOMIC LIMITED

1.12The TL Shares constitute the whole of the allotted and issued share capital of Transgenomic Limited and are fully paid, or credited as fully paid.

1.13The Seller is the sole legal and beneficial owner of the TL Shares and is entitled to transfer the legal and beneficial title to the TL Shares to the Buyer free from all Encumbrances, without the consent of any other person.

1.14No person has any right to require at any time the transfer, creation, issue or allotment of any share, loan capital or other securities of Transgenomic Limited (or any rights or interest in them), and no person has agreed to confer or has claimed any such right.

1.15No Encumbrance has been granted to any person or otherwise exists affecting the TL Shares or any unissued shares, debentures or other unissued securities of Transgenomic Limited, and no commitment to create any such Encumbrance has been given, nor has any person claimed any such rights.

1.16Transgenomic Limited:

1.16.1does not own, and has not agreed to acquire, any shares, loan capital or any other securities or interest in any company;

1.16.2does not have and has not, at any time, had any subsidiaries or subsidiary undertakings (within the meaning of section 1162 of the Companies Act 2006);

1.16.3is not, and has not agreed to become, a member of any partnership or other unincorporated association, joint venture or consortium (other than recognised trade associations); and

1.16.4has no branch or permanent establishment outside of the United Kingdom.

1.17Transgenomic Limited has not purchased, redeemed, reduced, repaid or forfeited any of its share capital.

2.CONSTITUTIONAL AND CORPORATE DOCUMENTS

2.4A copy of the memorandum and articles of association of Transgenomic Limited are in the Disclosure Schedule.

2.5All returns, particulars, resolutions and other documents that Transgenomic Limited is required by law to file with, or deliver to, any authority have been correctly made up and duly filed or delivered.

2.6All deeds and documents belonging to Transgenomic Limited (or to which it is a party) which are material to Transgenomic Limited in the context of the Business as a whole and are in the possession or under the control of Transgenomic Limited.

2.7All accounting, financial and other records of Transgenomic Limited (including its statutory books and registers):

2.7.1have been properly prepared and maintained;

2.7.2constitute an accurate record of all matters required by law to appear in them, and comply with any applicable requirements of the Companies Act 2006;

2.7.3do not contain any material inaccuracies or discrepancies; and

2.7.4are in the possession of Transgenomic Limited.

3.INFORMATION

3.9The particulars set out in Part 2 of this Schedule 2 are true, accurate and complete.

3.10All information contained in the Disclosure Schedule is true, accurate and complete.

4.COMPLIANCE AND CONSENTS

4.10Transgenomic Limited has at all times conducted its business in all material respects in accordance with, and has acted in compliance with in all material respects, all applicable laws and regulations.

4.11Transgenomic Limited holds all licences, consents, permits and authorities necessary to carry on the Business in the places and in the manner in which it is carried on at Closing ("Consents").

4.12Each of the Consents is valid and subsisting, Transgenomic Limited is not in breach of the terms or conditions of the Consents (or any of them) and, so far as Transgenomic Limited is aware, there is no reason why any of the Consents may be revoked or suspended (in whole or in part) or may not be renewed on the same terms.

5.INSURANCE

5.1Transgenomic Limited maintains, and has at all material times maintained, adequate insurance to cover against all losses, liabilities and risks that are normally insured against by a person carrying on the same type of business as the Business.

5.2The policies of insurance maintained by or on behalf of Transgenomic Limited ("Policies") are in full force and effect, all premiums due on them have been paid and all other conditions of the Policies have been performed and observed. Transgenomic Limited has not done, or omitted to do, anything that may result in an increase in the premium payable for any of the Policies, or affect the renewal of any of the Policies.

5.3There are no outstanding claims under, or in respect of the validity of, any of the Policies and, so far as the Seller is aware, there are no circumstances likely to give rise to a claim under any of the Policies.

5.4Copies of each of the Policies are in the Disclosure Schedule.

6.DISPUTES AND INVESTIGATIONS

6.1Neither Transgenomic Limited, nor any of its Directors nor any person for whose acts Transgenomic Limited may be vicariously liable, is engaged or involved in any of the following matters (such matters being referred to in this paragraph 6 as "Proceedings"):

6.1.1any litigation, administrative, arbitration or other proceedings, claims, actions or hearings (except for debt collection in the normal course of business); or

6.1.2any dispute with or, investigation, inquiry or enforcement proceedings by, any governmental, regulatory or similar body.

6.2So far as Transgenomic Limited is aware, no Proceedings have been threatened or are pending by or against Transgenomic Limited, any Director or any person for whose acts Transgenomic Limited may be vicariously liable, and, so far as Transgenomic Limited is aware, there are no circumstances likely to give rise to any such Proceedings.

6.3Transgenomic Limited is not affected by any existing or pending judgment, order, decision or ruling of any court, tribunal or governmental, regulatory or similar body, nor has it given any undertaking in connection with any Proceedings.

6.4Neither the Seller, nor any of the Seller's Affiliates, has a claim of any nature against Transgenomic Limited, nor has it assigned to any person the benefit of any such claim.

7.CONTRACTS AND TRADING

7.1The Disclosure Schedule contains full particulars of all subsisting contracts, agreements, arrangements, understandings or commitments to which Transgenomic Limited is a party and which are material to Transgenomic Limited in the context of the Business as whole (“Material Agreements”).

7.2Except for any Material Agreement that is not being transferred pursuant to the Agreement, Transgenomic Limited is not a party to any Material Agreement which is of an unusual or exceptional nature in the context of the ordinary course of the Business, or not on arm's-length terms.

7.3No party is in default of any Material Agreements, so far as Transgenomic Limited is aware, no such default has been threatened, and there are no facts or circumstances likely to give rise to any such default. No notice of termination of any such agreement has been received or served by Transgenomic Limited, and, so far as Transgenomic Limited is aware, there are no grounds for the termination, rescission, repudiation or a material change in the terms of any such Material Agreement.

7.4There is no outstanding indebtedness or other liability (actual or contingent) and no outstanding contract, commitment or arrangement between Transgenomic Limited and either the Seller (or any other member of the Seller's Affiliates) or a director of Seller's Affiliates (or any person connected with any such director (within the meaning of section 1122 of the CTA 2010)).

8.EFFECT OF SALE OF THE TL SHARES

8.1So far as Transgenomic Limited is aware, the acquisition of the TL Shares by the Buyer will not:

8.1.5relieve any person of any material obligation to Transgenomic Limited, or enable any person to determine any such obligation, or any material right or benefit enjoyed by Transgenomic Limited; or

8.1.6result in any customer, client or supplier who is material to Transgenomic Limited in the context of the Business as whole, reducing its business, or changing the terms on which it deals, with Transgenomic Limited; or

8.1.7result in the loss of, or any default under, any Consent (as defined in paragraph 4.2 of Part 1 of this Schedule); or

8.1.8so far as the Seller is aware, result in any officer or senior employee leaving Transgenomic Limited.

9.FINANCE AND GUARANTEES

9.1The Disclosure Schedule contains full particulars of all money borrowed by Transgenomic Limited and all financial facilities currently outstanding or available to Transgenomic Limited, including copies of all related documentation.

9.2No Encumbrance over any of the assets of Transgenomic Limited is now enforceable, and, so far as Transgenomic is aware, there are no circumstances likely to give rise to any such enforcement.

9.3Transgenomic Limited has not factored or discounted any of its debts, or engaged in financing of a type that would not need to be shown or reflected in the Accounts.

9.4No Encumbrance, guarantee, indemnity or other similar arrangement has been entered into, given or agreed to be given by Transgenomic Limited in respect of any indebtedness or other obligations of any third party.

9.5Transgenomic Limited has no outstanding loan capital, nor has it lent any money that has not been repaid, and there are no debts owing to Transgenomic Limited other than debts that have arisen in the normal course of the Business.

9.6The debts owing to Transgenomic Limited as reflected in the Accounts (and all debts subsequently recorded in its books since the Accounts Date) have been realised, or, where they remain outstanding the Seller is not aware of any reason why they will not within two months after Closing realise in cash their full amount, and none of those debts has been outstanding for more than two months.

9.7Full details of all creditors and debtors of Transgenomic Limited, including the amount due and the due date for payment, is in the Disclosure Schedule.

9.8No insolvency event has occurred in relation to Transgenomic Limited or the Seller.

9.9No guarantee, bond, indemnity, securities or Encumbrances have been given by Transgenomic Limited in respect of any indebtedness, liabilities or oglibations of the Seller or any person connected with the Seller.

10.ACCOUNTS

10.1The Accounts:

10.1.1show a true and fair view of the state of affairs of Transgenomic Limited as at the Accounts Date, and of the profit or loss of Transgenomic Limited for the accounting period ended on the Accounts Date;

10.1.2have been properly prepared in accordance with generally accepted accounting principles applied in the UK;

10.1.3comply with the requirements of the Companies Act 2006 and all other applicable law and regulations in the UK; and

10.1.4(save as the Accounts expressly disclose) are not affected by any extraordinary, exceptional or non-recurring items.

10.2The Management Accounts have been prepared on a basis consistent with that employed in preparing the Accounts and fairly represent the assets and liabilities and the profits and losses of Transgenomic Limited as at and to the date for which they have been prepared.

10.3A copy of each of the Accounts and the Management Accounts are in the Disclosure Schedule.

11.CHANGES SINCE THE ACCOUNTS DATE

11.1Since the Accounts Date:

11.1.1Transgenomic Limited has conducted the Business in the normal course and as a going concern;

11.1.2there has been no material adverse change in the turnover, financial position or prospects of Transgenomic Limited;

11.1.3no dividend or other distribution of profits or assets has been, or agreed to be declared, made or paid by Transgenomic Limited;

11.1.4Transgenomic Limited has not borrowed or raised any money or taken or given any form of financial security, nor has it incurred or committed to any capital expenditure, or acquired or disposed of any individual item, in either case in excess of £1,000; and

11.1.5Transgenomic Limited has paid its creditors within the applicable periods agreed with the relevant creditor and there are no amounts owing by Transgenomic Limited which have been outstanding for more than 60 days.

12.ASSETS

12.1The assets included in the Accounts, together with any assets acquired by Transgenomic Limited since the Accounts Date (except for those disposed of since the Accounts Date in the normal course of business) and all other assets used by Transgenomic Limited in connection with the Business are:

12.1.1legally and beneficially owned by Transgenomic Limited, free from Encumbrance or any other third party right, and Transgenomic Limited has good and marketable title to such assets; and

12.1.2in the possession and control of Transgenomic Limited.

12.2The plant, machinery, vehicles, office and other equipment used by Transgenomic Limited in connection with the Business are in good working order, have been regularly and properly maintained and are capable of doing the work for which they were designed.

12.3Each element of the computer hardware, databases and software owned, used, leased or licensed by Transgenomic Limited in relation to the Business ("IT System"):

12.3.1is functioning properly and in accordance with all applicable specifications;

12.3.2is not defective in any respect and contains no software virus or other malware; and

12.3.3has sufficient capacity, scalability and performance to meet the current and the foreseeable peak volume requirements of the Business as carried on at Closing.

12.4Transgenomic Limited has obtained all rights from third parties that are necessary to enable it to make and continue to make exclusive and unrestricted use of the IT System for the purposes of the Business.

12.5The assets owned by Transgenomic Limited comprise all the assets necessary for the continuation of the Business as it is carried on at Closing, and such assets are not shared with any other person.

12.6A copy of Transgenomic Limited’s fixed asset register as at the Closing Date is in the Disclosure Schedule.

13.EMPLOYMENT

13.1The Disclosure Schedule includes anonymised particulars of each Employee and Worker, and the principal terms of their respective contracts with Transgenomic Limited.

13.2The Disclosure Schedule includes anonymised details of all persons who are not Workers and who are providing services to Transgenomic Limited under an agreement which is not a contract of employment with Transgenomic Limited (including consultants and secondees), and full particulars of the terms on which such persons provide their services.

13.3The Disclosure Schedule includes anonymised details of all Employees and Workers who are on secondment, maternity, paternity, adoption or other leave or absent due to ill-health or for any other reason.

13.4No offer of employment or engagement has been made by Transgenomic Limited which is outstanding for acceptance, or which has been accepted but not yet commenced.

13.5No notice to terminate the contract of employment of any Employee or Worker is pending, outstanding or threatened, and, so far as Transgenomic Limited is aware, there are no circumstances likely to give rise to such notice.

13.6Transgenomic Limited is not a party to, bound by or proposing to introduce in respect of any of its current or former directors, Employees or Workers, any redundancy payment scheme (in addition to statutory redundancy pay), or any incentive arrangement or scheme (including, without limitation, any share option or share award plan, commission, profit sharing or bonus scheme).

13.7Transgenomic Limited has not incurred any actual or contingent liability in connection with the termination of employment of any Employee, or for failing to comply with any order for the reinstatement or re-engagement of any Employee.

13.8Transgenomic Limited has not made or provided, or agreed to make or provide, any payment or benefit to any of its present or former directors, Employees or Workers (or their dependants) in connection with the actual or proposed termination or suspension of employment or variation of an employment contract.

13.9There are no sums owing to or from any current or former Employee or Worker other than reimbursement of expenses, wages for the current salary period and holiday pay for the current holiday year.

13.10Transgenomic Limited has not offered, promised or agreed to any future variation in the contract of any Employee or Workers, identifying which applies to which individual.

13.11The Disclosure Schedule includes copies of all current contracts, handbooks and policies which apply to the Employees and Workers.

13.12Transgenomic Limited has not entered into any agreement or arrangement with any trade union, employee representative or body of employees or their representatives (whether binding or not).

13.13Transgenomic Limited has performed all material obligations and duties it is required to perform in respect of each Employee and Worker, whether or not legally binding and whether arising under contract, statute, at common law or in equity or under any treaties or laws of the European Union or otherwise.

14.RETIREMENT BENEFITS

14.1Save for the auto-enrolment obligations detailed in paragraph 14.2, Transgenomic Limited does not have (nor may it have) any obligation (whether or not legally binding) to provide or contribute towards pension, lump sum, death, ill-health, disability or accident benefits ("Relevant Benefits") in respect of its current or former officers or employees ("Pensionable Employees") and no proposal or announcement has been made to any employee or officer of Transgenomic Limited about the introduction, continuance, increase or improvement of, or the payment of a contribution towards, any Relevant Benefits.

14.2Transgenomic Limited has complied in all material respects with its automatic enrolment obligations as required by the Pensions Act 2008 and associated legislation. Details of this compliance are set out in the Disclosure Schedule, including (but not limited to) any documents relating to Transgenomic Limited's staging date, copies of any correspondence between Transgenomic Limited and the Pensions Regulator regarding auto-enrolment, copies of any records kept in accordance with regulations 5 to 8 of the Employers’ Duties (Registration and Compliance) Regulations 2010 in respect of the Employees and details of any Employees who have opted out and copies of any opt-out letters in respect of those Employees to the extent relevant.

14.3So far as Transgenomic Limited is aware, no notices, fines, or other sanctions have been issued by the Pensions Regulator and no instances of non-compliance with the automatic enrolment obligations have been notified to the Pension Regulator in respect of Transgenomic Limited.

14.4So far as Transgenomic Limited is aware, Transgenomic Limited has not discriminated against any Pensionable Employee on any grounds in providing any Relevant Benefits.

14.5No claims or complaints have been made or, so far as Transgenomic Limited is aware, are pending or threatened in respect of the provision of (or failure to provide) any Relevant Benefits by Transgenomic Limited in relation to any of the Pensionable Employees and, so far as Transgenomic Limited is aware, there is no fact or circumstance likely to give rise to such claims or complaints.

15.GLASGOW FACILITY

15.1The Glasgow Facility is the only land and buildings owned, used or occupied by Transgenomic Limited, and Transgenomic Limited has no right of ownership, right to use, option, right of first refusal or contractual obligation to purchase, or any other legal or equitable right affecting any land and buildings, other than the Glasgow Facility.

15.2Transgenomic Limited has no liability (whether actual or contingent) in respect of any land or buildings other than the Glasgow Facility, nor has it given any guarantee or indemnity for any liability relating to any land or buildings other than the Glasgow Facility.

15.3A copy of the lease relating to the Glasgow Facility is in the Disclosure Schedule.

Part B - Tax Warranties

1.    GENERAL

1.1    All notices, returns (including any land transaction returns), reports, accounts, computations, statements, assessments, claims, disclaimers, elections and registrations and any other necessary information which have, or should have, been submitted by Transgenomic Limited to any Tax Authority for the purposes of Tax have been made on a proper basis, were submitted within applicable time limits and were accurate and complete in all material respects. None of the above is, or so far as the Seller is aware is likely to be, the subject of any material dispute with any Tax Authority.

1.2    All Tax (whether of the UK or elsewhere), for which Transgenomic Limited has been liable to account, has been duly paid (insofar as such Tax ought to have been paid) and no penalties, fines, surcharges or interest have been incurred.

1.3    Transgenomic Limited maintains complete and accurate records, invoices and other information in relation to Tax, that meet all legal requirements and enable the tax liabilities of Transgenomic Limited to be calculated accurately in all material respects.

1.4    All Tax and national insurance contributions deductible under the PAYE system and/or any other UK tax legislation have, so far as required to be deducted, been deducted from all payments made (or treated as made) by Transgenomic Limited. All amounts so deducted and due to be paid to the relevant Tax Authority on or before the date of the Agreement have been so paid.

1.5    The Disclosure Schedule contains details of any payments or loans made to, any assets made available or transferred to, or any assets earmarked, however informally, for the benefit of, any employee or former employee (or anyone linked with such employee or former employee) of Transgenomic Limited by an employee benefit trust or another third party, falling within the provisions of Part 7A to the Income Tax (Earnings and Pensions) Act 2003 and details of any trust or arrangement capable of conferring such a benefit.

1.6    The Disclosure Schedule contains details of all concessions, agreements and arrangements that Transgenomic Limited has entered into with a Tax Authority.

1.7    Transgenomic Limited is not, nor so far as the Seller is aware will it become, liable to make to any person (including any Tax Authority) any payment in respect of any liability to Tax which is primarily or directly chargeable against, or attributable to, any other person.

1.8    The Accounts make full provision or reserve within generally accepted accounting principles for all Tax for which Transgenomic Limited is accountable at that date. Proper provision has been made and shown in the Accounts for deferred tax in accordance with generally accepted accounting principles.

1.9    So far as the Seller is aware, no officer or employee of Transgenomic Limited has ever held any shares in the capital of Transgenomic Limited.

2.    CHARGEABLE GAINS

2.1    The book value shown in, or adopted for the purposes of, the Accounts as the value of each of the assets of Transgenomic Limited, on the disposal of which a chargeable gain or allowable loss could arise, does not exceed the amount which on a disposal of such asset at the date of the Agreement would be deductible, in each case, disregarding any statutory right to claim any allowance or relief other than amounts deductible under section 38 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992).

3.    CAPITAL ALLOWANCES

4.1    Transgenomic Limited has not claimed first year tax credits within the meaning of Schedule A1 of the Capital Allowances Act 2001 (CAA 2001), business renovation allowances under Part 3A of CAA 2001, flat conversion allowances under Part 4A of CAA 2001 or owned at the Accounts Date any asset which, if disposed of at the date of the Agreement for consideration equal to its not book value as included in the Accounts, would give rise to a balancing charge or clawback of allowances.

5.    DISTRIBUTIONS AND OTHER PAYMENTS

5.1    No distribution or deemed distribution, within the meaning of section 1000 or sections 1022-1027 of CTA 2010, has been made (or will be deemed to have been made) by Transgenomic Limited, except dividends shown in its audited accounts, and Transgenomic Limited is not bound to make any such distribution.

5.2    Transgenomic Limited has not, within the period of seven years preceding the date of the Agreement, been engaged in, nor been a party to, any of the transactions set out in Chapter 5 of Part 23 of CTA 2010 (demergers).

6.    LOAN RELATIONSHIPS

6.1    All financing costs, including interest, discounts and premiums payable by Transgenomic Limited in respect of its loan relationships within the meaning of section 302 of CTA 2009 are eligible to be brought into account by Transgenomic Limited as a debit for the purposes of Part 5 of CTA 2009 at the time, and to the extent that such debits are recognised in the statutory accounts of Transgenomic Limited.

7.    CLOSE COMPANIES

7.1    Any loans or advances made, or agreed to be made, by Transgenomic Limited within sections 455, 459 and 460 of CTA 2010 have been disclosed in the Disclosure Schedule. Transgenomic Limited has not released or written off, or agreed to release or write off, the whole or any part of any such loans or advances.

8.    GROUP MATTERS

8.1    Transgenomic Limited is not and has never been a member of a group of companies for Tax purposes.

9.    INTANGIBLE ASSETS

9.1    The Disclosure Schedule sets out the amount of expenditure, as reduced by any claim under section 791 of CTA 2009, on each of the intangible fixed assets, as defined in section 713 of CTA 2009, of Transgenomic Limited and the Subsidiaries and provides the basis on which any debit relating to that expenditure has been taken into account in the Accounts or, in relation to expenditure incurred since the Accounts Date, will be available to Transgenomic Limited. No circumstances have arisen since the Accounts Date by reason of which that basis might change.

9.2    Transgenomic Limited does not hold nor has it held any right to which Part 8A of CTA 2010 applies or an exclusive licence in respect of such right within section 357BA of CTA 2010.

10.    COMPANY RESIDENCE AND OVERSEAS INTERESTS

10.1    Transgenomic Limited has, throughout the past seven years, been resident in the UK for corporation tax purposes and has not, at any time in the past seven years, been treated as resident in any other jurisdiction for the purposes of any double taxation arrangements having effect under section 18 of CTA 2009 or for any other tax purposes.

10.2    Transgenomic Limited does not hold, nor within the last seven years has it held, shares in a company which is not resident in the UK, a material interest in an offshore fund, or a permanent establishment outside the UK.

11.    TRANSFER PRICING

11.1    All transactions or arrangements made by Transgenomic Limited have been made on arm's length terms and the processes by which prices and terms have been arrived at have, in each case, been fully documented. No notice, enquiry or adjustment has been made by any Tax Authority in connection with any such transactions or arrangements.

12.    ANTI-AVOIDANCE

12.1    Transgenomic Limited has not been a party to, nor so far as the Seller is aware has it been otherwise been involved in, any transaction, scheme or arrangement designed wholly or mainly or containing steps or stages having no commercial purpose and designed wholly or mainly for the purpose of avoiding or deferring Tax or reducing a liability to Tax or amounts to be accounted for under PAYE.

13.    INHERITANCE TAX

13.1    No asset owned by Transgenomic Limited, nor the TL Shares, is subject to any Inland Revenue charge as mentioned in sections 237 and 238 of IHTA 1984 or is liable to be subject to any sale, mortgage or charge by virtue of section 212(1) of IHTA 1984.

14.    VALUE ADDED TAX

14.1    Transgenomic Limited is a taxable person and registered for the purposes of VAT with quarterly prescribed accounting periods.

14.2    Transgenomic Limited is not nor has it been in the period of six years ending with the date of Closing, a member of a group of companies for the purposes of section 43 of VATA 1994.

14.3    All supplies made by Transgenomic Limited are taxable supplies. Transgenomic Limited has not been, nor so far as the Seller is aware will it be, denied full credit for all input tax paid or suffered by it.

14.4    Transgenomic Limited does not own any assets which are capital items subject to the capital goods scheme under Part XV of the VAT Regulations 1995, nor has exercised any option to tax under Part 1 of Schedule 10 to the VATA 1994

15.    STAMP DUTY, STAMP DUTY LAND TAX AND STAMP DUTY RESERVE TAX

15.1    Any document that may be necessary or desirable in proving the title of Transgenomic Limited to any asset which is owned by Transgenomic Limited at the date of the Agreement, is duly stamped for stamp duty purposes. No such documents which are outside the UK would attract stamp duty if they were brought into the UK.

15.2    Neither entering into the Agreement nor Closing will result in the withdrawal of a stamp duty or stamp duty land tax relief granted on or before Closing which will affect Transgenomic Limited.

15.3    The Disclosure Schedule sets out full and accurate details of any chargeable interest (as defined under section 48 of the Finance Act 2003) acquired or held by Transgenomic Limited before the date of the Agreement in respect of which the Seller is aware, or ought reasonably to be aware, that an additional land transaction return will be required to be filed with a Tax Authority and/or a payment of stamp duty land tax made on or after the date of the Agreement.

- PART 5 -

TAX COVENANT

1.    INTERPRETATION

The following definitions and rules of interpretation apply in this Tax Covenant.

Definitions:

"Accounting Period"    any period by reference to which any income, profits or gains or any other amounts relevant for the purposes of Tax are measured or determined;

“Accounts Relief” means (a) any Relief (including the right to a repayment of Tax shown as an asset in the Accounts; and (b) any Relief taken into account in computing (and so reducing or eliminating) any provision for deferred Tax in the Accounts;

"Buyer's Relief"    means: (a) any Accounts Relief; (b) any relief arising to Transgenomic Limited in connection with any Event occurring after Closing; and (c) any relief, whenever arising, of the Buyer or any member of the Buyer's Tax Group other than Transgenomic Limited;

"Buyer's Tax Group"    the Buyer and any other company or companies that are from time to time treated as members of the same Group as, or otherwise connected or associated in any way with, the Buyer for any Tax purpose (excluding for periods on or before Closing Transgenomic Limited);

"Event"    includes (without limitation), the expiry of a period of time, Transgenomic Limited becoming or ceasing to be associated with any other person for any Tax purpose or ceasing to be or becoming resident in any country for any Tax purpose, the death, winding up or dissolution of any person, the earning, receipt or accrual for any Tax purpose of any income, profit or gains, the incurring of any loss or expenditure, and any transaction (including the execution and completion of this Schedule), event, act or omission whatsoever, and any reference to an Event occurring on or before a particular date shall include Events that, for Tax purposes, are deemed to have, or are treated or regarded as having, occurred on or before that date;

“Group”    in relation to a company, that company, any subsidiary or any holding company from time to time of that company, and any subsidiary from time to time of a holding company of that company. Each company in a Group is a "member of the Group";

"Liability for Tax"    

(a) any liability of Transgenomic Limited to make an actual payment of Tax whether or not the same is primarily payable by Transgenomic Limited and whether or not Transgenomic Limited has, or may have, any right of reimbursement against any other person, in which case, the amount of the Liability for Tax will be the amount of the actual payment;

(b) the loss of or failure to obtain, for any reason, any Accounts Relief, in which case, the amount of the Liability for Tax will be the amount of the repayment;

(c)    the use or setting off of any Buyer's Relief in circumstances where, but for such set off or use, Transgenomic Limited would have had a liability to make a payment of or in respect of Tax for which the Buyer would have been able to make a claim against the Seller under this Tax Covenant, in which case, the amount of the Liability for Tax will be the amount of Tax for which the Seller would have been liable but for the setting off or use.

"Relief"    includes any loss, relief, allowance, credit, exemption or set off for Tax or any deduction in computing income, profits or gains for the purposes of Tax and any right to a repayment of Tax (including any repayment supplement or interest in respect of it) or to a payment in respect of Tax;

"Tax" and “Taxation”    all forms of tax and statutory, governmental, state, federal, provincial, local, government or municipal charges, duties, imposts, contributions, levies, withholdings or liabilities wherever chargeable and whether of the UK or any other jurisdiction (including, for the avoidance of doubt, National Insurance contributions in the UK and corresponding obligations elsewhere) and any penalty, fine, surcharge, interest, charges or costs relating to it (including interest and penalties arising from the failure of Transgenomic Limited to make adequate instalment payments under the Corporation Tax (Instalments Payments) Regulations 1998 (SI 1998/3175) in any period ending on or before Closing);

"Tax Claim"    any assessment, notice, demand, letter or other document issued or action taken by or on behalf of any Tax Authority, self-assessment or other occurrence from which it appears that Transgenomic Limited or the Buyer is or may be subject to a Liability for Tax;

"Tax Authority"    any authority, body or official competent to impose, assess or collect Tax in the UK or elsewhere.

1.1    References to gross receipts, income, profits or gains earned, accrued or received shall include any gross receipts, income, profits or gains deemed, for any Tax purpose, to have been or treated or regarded as earned, accrued or received.

1.2    Any stamp duty charged on any document (or in the case of a document that is outside the UK, any stamp duty that would be charged on the document if it were brought into the UK) that is necessary to establish the title of Transgenomic Limited to any asset, and any interest, fine or penalty relating to the stamp duty, shall be deemed to be a liability of Transgenomic Limited to make an actual payment of Tax because of an Event arising on the last day on which it would have been necessary to pay the stamp duty to avoid any liability to interest or penalties arising on it.

2.    COVENANT

2.1    Subject to the provisions of this Tax Covenant, the Seller covenants to pay to the Buyer an amount equal to any:

2.1.1    Liability for Tax resulting from, or by reference to, any Event occurring on or before Closing or in respect of any gross receipts, income, profits or gains earned, accrued or received by Transgenomic Limited on or before Closing, whether or not that liability was discharged on or before Closing;

2.1.2    Liability for Tax which arises solely due to the relationship for Tax purposes before Closing of Transgenomic Limited with any person other than a member of the Buyer's Tax Group, whether arising before or after Closing;

2.1.3    Liability for Tax that arises due to any Event that occurs after Closing under a legally binding obligation (whether or not conditional but excluding the entry into of this Agreement and any document to be entered between Buyer and Seller as referred to in this Agreement) entered into by Transgenomic Limited on or before Closing otherwise than in the ordinary course of business;

2.1.5    Liability for Tax under Part 7A of ITEPA 2003, whether arising before or after Completion, including any liability arising as a consequence of any payments or loan made to, any assets made available or transferred to, or any assets earmarked (however informally) for the benefit of any employee or former employee of Transgenomic Limited, or for the benefit of any relevant person, by an employee benefit trust (EBT) or another third party where the arrangement giving rise to the charge was entered into at a time when the third party was acting on the instructions of, or for the benefit of, the Seller or an associate of any of the Seller.

2.1.6    Liability for Tax being a liability for inheritance tax that:

2.1.6.1    is a liability of Transgenomic Limited and arises because of a transfer of value occurring (or being deemed to occur) on or before Closing (whether or not in conjunction with the death of any person whenever it happens);

2.1.6.2    gives rise at Closing to a charge on, or a power to sell, mortgage or charge, any of the TL Shares or assets of Transgenomic Limited; or

2.1.6.3    gives rise after Closing to a charge on, or a power to sell, mortgage or charge, any of the TL Shares or assets of Transgenomic Limited because of the death of any person within seven years of a transfer of value that occurred before Closing;

and in determining for the purposes of this paragraph 2.1.5 whether a charge on, or power to sell, mortgage or charge any of the shares or assets of Transgenomic Limited exists at any time, the fact that the inheritance tax is not yet payable, or may be paid by instalments, shall be disregarded, and the inheritance tax shall be treated as becoming due, and a charge or power to sell, mortgage or charge as arising, on the date of the transfer of value or other date or event on or in respect of which it becomes payable or arises, and the provisions of section 213 of the IHTA 1984 shall not apply;

2.1.7     liability of Transgenomic Limited to make a payment or repayment under any indemnity, covenant, warranty, mortgage, guarantee or charge entered into (or created) outside the ordinary course of Transgenomic Limited's business on or before Closing of a sum equivalent to (or by calculated by reference to) another person's Liability for Tax;

2.1.8    costs and expenses (including legal costs on a full indemnity basis), reasonably and properly incurred by the Buyer, Transgenomic Limited or any member of the Buyer's Tax Group in connection with any successful Tax Claim or successfully taking or defending any action under this Schedule.

3.    PAYMENT DATE AND INTEREST

3.1    Payment by the Seller in respect of any liability under this Schedule must be made in cleared and immediately available funds on:

3.1.1    in the case of a Liability for Tax that involves an actual payment of or in respect of Tax, the later of seven Business Days before the due date for payment and seven Business Days after the date on which the Buyer serves notice on the Seller requesting payment;

3.1.2    in a case that falls within paragraph (c) of the definition of Liability for Tax, the date on which the Tax saved by Transgenomic Limited is or would have been required to be paid to the relevant Tax Authority; or

3.1.3    in any other case, seven Business Days following the date on which the Buyer serves notice on the Seller requesting payment.

3.2    If any amount due from the Seller under this Tax Covenant is not paid on the date specified in paragraph 3.1, then, except to the extent that the Seller's liability under paragraph 2 includes interest and penalties to compensate the Buyer for the late payment, the amount due shall bear interest (to accrue on a daily basis before and after any judgment) at the rate of 4% a year over the base rate from time to time of The Bank of England or (in the absence of that) at any similar rate as the Buyer shall select from the day following the due date up to, and including, the day of actual payment of those sums.

4.    EXCLUSIONS

4.1    The covenant contained in paragraph 2 above shall not cover any Liability for Tax to the extent that:

4.1.1    specific provision or reserve (other than a provision for deferred tax) for the liability is made in, or the liability was otherwise taken into account in the preparation of, the Accounts;

4.1.2    the Liability for Tax was paid on or before Accounts Date and the Accounts reflected that payment;

4.1.3    it arises as a result of a transaction in the ordinary course of business of Transgenomic Limited between the Accounts Date and Closing;

4.1.4    it arises or is increased only as a result of any change in the law or rates of Tax (other than a change targeted specifically at countering a tax avoidance scheme) coming into force after Closing or the withdrawal of any extra-statutory concession previously made by a Tax Authority (whether or not the change is retrospective in whole or in part) provided that this paragraph 4.1.4 will not apply to any payment under paragraph 9;

4.1.5    the Buyer is compensated for the Liability for Tax under any other provision of this Agreement;

4.1.6    it would not have arisen but for an act, transaction or omission of Transgenomic Limited or the Buyer or any member of the Buyer's Tax Group after Closing which Transgenomic Limited or the Buyer was aware or ought to be aware would give rise to the Liability for Tax in question, except that this exclusion shall not apply where any such act, transaction or omission:

(a)        is undertaken under a legally binding obligation entered into by Transgenomic Limited on or before Closing; or

(b)        is carried out at the written request of the Seller; or

(c)        is carried out or effected by Transgenomic Limited in the ordinary course of business of Transgenomic Limited as carried on at Closing, provided that for this purpose the following shall be deemed not to be in the ordinary course of business if they otherwise would be (with the effect that the exclusion contained in this paragraph 4.1.6 shall apply subject to any other exclusion in sub-paragraphs 4.1.6 (a), (b), (d) or (e):

(i) any disposal (or deemed disposal for any Tax purpose) of assets other than trading stock by Transgenomic Limited;

(ii) any change in the use of an asset by Transgenomic Limited;

(d)    is undertaken or imposed on Transgenomic Limited by any legislation which was in force on or before Closing;or

(e)    is undertaken to avoid or mitigate a penalty imposable by any legislation which was in force on or before Closing; or

4.1.7    the liability arises as a result of a change after Closing in the length of any Accounting Period of Transgenomic Limited, or a change after Closing in any accounting policy or Tax reporting practice of Transgenomic Limited (other than a change which is necessary in order to comply with the law or generally accepted accounting principles applicable to Transgenomic Limited at Closing); or

4.1.8    such liability is in respect of interest and penalties (or other time-geared Tax liabilities) and arises as a result of Transgenomic Limited failing to submit the returns and computations required to be made by them or not submitting such returns and computations within the appropriate time limits or submitting such returns and computations otherwise than on a proper basis, in each case after Closing; or

4.1.9    the liability arises solely as a result of the failure of the Purchaser to comply with any of its obligations contained in this Schedule; or

4.1.10 any Relief other than a Buyer's Relief is available, or is for no consideration made available by the Seller, to Transgenomic Limited to set against or otherwise reduce or eliminate the liability (and so that (i) for this purpose any Relief arising in respect of an Accounting Period falling partly before and partly after Closing shall be apportioned on a time basis, unless some other basis is more reasonable, (ii) any Relief that is so available in relation to more than one Liability to Tax to which paragraph 2 of this Part of this Schedule applies shall be deemed, so far as possible, to be used in such a way as to reduce to the maximum extent possible the Seller’s total liability hereunder and (iii) the Seller may at its expense require the auditors for the time being of Transgenomic Limited to certify the extent to which Transgenomic Limited has any Reliefs available to which this paragraph may apply); or

4.1.11    the liability would not have arisen but for the failure or omission on the part of Transgenomic Limited after Closing otherwise than at the direction of the Seller to make any such valid claim, election, surrender or disclaimer, or to give any such notice or consent or to do any other such thing, as the Seller may require in respect of periods or matters for which the Seller is liable under this Part 5 of this Schedule in circumstances where: (a) the making, giving or doing of which was taken into account in the preparation of the Accounts and (b) the need to make, give or do the same and the time limit for doing the same is specifically notified to the Buyer in reasonable time before such claim, election, surrender or disclaimer was to be made; or

4.1.12    the liability is a Liability to Tax comprising interest or penalties, in so far as attributable to the unreasonable delay or default of Transgenomic Limited or the Buyer or any other member of the Buyer's Tax Group after Closing in accounting for amounts received by the Buyer pursuant to a successful claim under this Schedule or for breach of the Tax Warranties to the appropriate Tax Authority.

5.    LIMITATIONS

5.1    The liability of the Seller under paragraph 2 will terminate on:

5.1.1    the 21st anniversary of Closing, for any claim under paragraph 2 for a liability arising from a loss of Tax caused fraudulently or deliberately by Transgenomic Limited or any related person; or

5.1.2    the seventh anniversary of Closing (in any other case)

except for any claim under paragraph 2 of which written notice is given to the Seller before that relevant date containing, to the extent reasonably practicable, a description of that claim and the estimated total amount of the claim.

6.    RECOVERY FROM THIRD PARTIES

6.1    Where the Seller has paid an amount under paragraph 2 for any Liability for Tax and the Buyer or Transgenomic Limited or any other member in the Buyer's Tax Group is or become entitled to recovers from some other person (including a Tax Authority but not the Buyer or Transgenomic Limited or any other member in the Buyer's Tax Group), any amount for any Liability for Tax, the Buyer shall or shall procure that Transgenomic Limited shall:

6.1.1    notify the Seller of its entitlement as soon as reasonably practicable; and

6.1.2    if required by the Seller and, subject to the Buyer and Transgenomic Limited being indemnified and secured by the Seller against any Tax that may be suffered on receipt of that amount and any costs and expenses incurred in recovering that amount, take, or procure that Transgenomic Limited takes, all reasonable steps to enforce that recovery against the person in question (keeping the Seller fully informed of the progress of any action taken provided that Transgenomic Limited shall not be required to take any action under the paragraph 6.1 that, in the Buyer’s reasonable opinion, is likely to harm its, Transgenomic Limited’s or any member of the Buyer’s Tax Group’s commercial or employment relationship (potential or actual) with that or any other person other than a Tax Authority or the professional advisers or auditors of Transgenomic Limited).

6.2     If the Buyer or Transgenomic Limited recovers any amount referred to in paragraph 6.1, the Buyer shall account to the Seller for the lesser of:

6.2.1    any amount recovered (including any related interest or related repayment supplement) less any Tax suffered in respect of that amount and any costs and expenses incurred in recovering that amount; and

6.2.2    the amount paid by the Seller under paragraph 2 in respect of the Liability for Tax in question.

7.    CORPORATION TAX RETURNS

7.1    Subject to paragraphs 7.2 and 7.5, the Buyer will procure that Transgenomic Limited keeps the Seller fully informed of its Tax affairs for any accounting period ended on or before Closing for which final agreement with the relevant Tax Authority of the amount of Tax due from Transgenomic Limited has not been reached or in relation to any Accounting Period in respect of which the Seller may be liable to the Buyer under paragraph 2. The Buyer will not submit any substantive correspondence or submit or agree any return or computation for any such period to any Tax Authority without giving the Seller a reasonable opportunity to comment and taking account of the Seller's reasonable representations. The Buyer will procure that Transgenomic Limited will not amend or withdraw any return or computation or any claim, election, surrender or consent made by it for its accounting periods ended on or before Closing without giving the Seller a reasonable opportunity to comment and taking account of the Seller's reasonable representations.

7.2    The Seller or its duly authorised agents or advisers shall, at the cost of the Seller, prepare and submit the corporation tax computations and returns of Transgenomic Limited for its Accounting Period ending 31 December 2015 (“2015 Tax Documents”).

7.3    The Seller shall deliver to the Buyer for comments, at least 45 Business Days prior to the last date on which the 2015 Tax Documents must be submitted without incurring any interest or penalty, the 2015 Tax Documents which it intends to submit to the Tax Authority before submission to the Tax Authority and subject to this Clause 7 shall take account of the reasonable comments of the Buyer and make such amendments to the 2015 Tax Documents as the Buyer may reasonably require in writing within 30 Business Days of the date of delivery of the 2015 Tax Documents.

7.4    Subject to paragraphs 7.3 and 7.5, the Buyer shall procure that:

(a)    Transgenomic Limited properly authorises and signs the 2015 Tax Documents and makes and signs or otherwise enters into all such elections, surrenders and claims and withdraws or disclaims such elections, surrenders and claims and gives such notices and signs such other documents as the Seller shall reasonably require in relation to the 2015 Tax Documents;

(b)    Transgenomic Limited provides to the Seller, at the cost of the Seller, such information and assistance, including without limitation such access to its books, accounts and records which may reasonably be required to prepare, submit, negotiate and agree the 2015 Tax Documents; and

(c)    any correspondence which relates to the 2015 Tax Documents shall, if received by the Buyer or Transgenomic Limited or their agents or advisers, be copied to the Seller as soon as is reasonably practicable.

7.5    The Buyer shall be under no obligation to take the comments of the Seller under paragraph 7.1 into account or to procure the authorisation, signing or submission to a Tax Authority of any 2015 Tax Document delivered to it under paragraphs 7.2 to 7.4  which it considers, in its reasonable opinion, is false, misleading, incomplete or inaccurate in any material respect or would otherwise adversely affect the business or Tax affairs of the Buyer, any member of the Buyer’s Tax Group or Transgenomic Limited.

8.    CONDUCT OF TAX CLAIMS

8.1    If the Buyer or Transgenomic Limited become aware of any claim for Tax which gives or may give rise to a Tax Claim, the Buyer shall, or shall procure that Transgenomic Limited shall, as soon as reasonably practicable give written notice of the Tax Claim to the Seller.

8.2    If the Seller in writing reasonably requires, the Buyer shall, or shall procure that Transgenomic Limited shall, at the Seller's expense, supply the Seller with such available and relevant details, documentation, correspondence and information and shall take such action as the Seller may reasonably request in writing to negotiate, avoid, dispute, resist, compromise, defend or appeal against the Tax Claim and any adjudication, assessment or ruling in respect of the Tax Claim provided that the Seller shall first indemnify and secure the Buyer and Transgenomic Limited against all losses, costs, interest, damages and expenses and any further liability to Tax which may be incurred in relation to the same.

8.3    The Seller shall have the right to have any action mentioned in Paragraph 8.2 conducted by its nominated professional advisers provided that the appointment of such professional advisers shall be subject to the approval of the Buyer (such approval not to be unreasonably withheld or delayed and shall be deemed to be given in the event that the Buyer does not within 7 days of request give a fully reasoned, written response to a request for approval by the Seller). For the avoidance of doubt, the Seller shall not be entitled to requested that the conduct of any Tax Claim is delegated to it or any other person.

8.4    The Buyer shall keep the Seller fully informed of the progress in settling the relevant Claim for Tax and shall, as soon as reasonably practicable, forward, or procure to be forwarded to the Seller, copies of all material correspondence pertaining to it.

8.5    Subject to paragraphs 8.6 and 8.7, the Buyer shall not, and shall procure that Transgenomic Limited shall not, agree to the settlement or compromise of any Tax Claim or any proposal for the same or make any admission of liability in respect of a Tax Claim without the prior approval of the Seller in writing unless such approval is unreasonably withheld or delayed.

8.6    Neither the Buyer nor Transgenomic Limited shall be obliged to take any action under Paragraph 8.2:

8.6.1    which involves an appeal that cannot be made without an amount of Tax being paid to the relevant Tax Authority unless the Seller first pays such amount to the Buyer;

8.6.2    which involves an appeal against any Tax Assessment beyond the first relevant appellate body unless Tax counsel of at least 10 years' call advises in writing that the chances of such appeal succeeding are greater than the chances of it failing;

8.7    The Buyer and Transgenomic Limited shall be free without reference to the Seller to deal in their absolute discretion (but acting in good faith) with any notice, demand, assessment, letter or other document issued or action taken by or on behalf of a Tax Authority from which it appears that there is or may be a Tax Claim (the "Tax Assessment") if:

8.7.1    the Seller confirms in writing that it accepts the Tax Assessment;

8.7.2    the Seller has not within 10 Business Days of receipt of a notice of a Tax Assessment under Paragraph 7.1 requested that the Buyer or Transgenomic Limited take any action pursuant to Paragraph 7.2;

8.7.3    the time limit for the next or final appeal or judicial review in respect of the Tax Assessment has expired; or

8.7.4    the Tax Assessment involves written allegations made by any Tax Authority of any fraud on the part of Transgenomic Limited before Completion.

9.    OVER-PROVISIONS AND CORRESPONDING BENEFIT

9.1    If:

9.1.1    any provision for Tax (other than deferred tax) in the Accounts proves to be an over-provision; or

9.1.2    the amount by which any right to repayment of Tax which has been treated as an asset in the Accounts proves to have been under-stated; or

9.1.3    a payment by the Seller in respect of any Liability for Taxation under a Tax Claim or the matter giving rise to the Liability for Taxation in question results in Transgenomic Limited or the Buyer receiving any Tax Relief (other than a Buyer's Tax Relief) which is utilised (including by way of repayment of Tax) but was not taken into account in calculating the quantum of the Seller's liability under the Tax Claim ("Corresponding Relief"),

then an amount equal to such over-provision, under-stated right to repayment of Tax, or the Tax saved by the Corresponding Relief at the date such Corresponding Relief is utilised ("Relevant Amount"), shall be dealt with in accordance with Paragraph 9.2.

9.2    The Relevant Amount:

9.2.1    shall first be set off against any payment then due from the Seller under a Tax Claim;

9.2.2    to the extent there is an excess of the Relevant Amount after any application of the same under Paragraph 9.2.1, a refund shall be made to the Seller of any previous payment or payments made by the Seller under a Tax Claim and not previously refunded (whether under this Paragraph 9.2.2 or otherwise) up to the amount of such excess; and

9.2.3    to the extent that the excess referred to in Paragraph 9.2.2 is not exhausted under that sub-Paragraph, the remainder of that excess shall be carried forward and set off against any future payment or payments which become due from the Seller under a Tax Claim.

9.3    If the Buyer or Transgenomic Limited become aware of any circumstances which shall or may give rise to the application of this Paragraph 9, the Buyer shall or shall procure that Transgenomic Limited shall as soon as reasonably practicable give written notice of the same to the Seller.

9.4    The Seller may at its own cost require the auditors of Transgenomic Limited for the time being to certify the existence and quantum of any Relevant Amount and the date on which the Corresponding Relief is utilised and, in the absence of manifest error, their decision shall be final and binding. The Buyer shall at the Seller's cost use all reasonable endeavours to procure the assistance of the auditors in giving such certificate.

10.    GROSSING UP

10.1    All amounts due under this Tax Covenant shall be paid by the Seller to the Buyer in full without any set-off, counterclaim, deduction or withholding (other than any deduction or withholding of tax required by law). If any deductions or withholdings are required by law to be made from any of the sums payable under this Tax Covenant, the Seller shall pay to the Buyer any sum as will, after the deduction or withholding is made, leave the Buyer with the same amount as it would have been entitled to receive without that deduction or withholding.

10.2    If the Buyer incurs, or would have incurred, but for the use of a Relief, a Tax liability which results from, or is calculated by reference to, any sum paid under this Tax Covenant, the amount payable will be increased by any amount that will ensure that, after payment of the Tax liability, the Buyer is left with a net sum equal to the sum it would have received had no such Tax liability arisen.

11.    GENERAL

All payments made by the Seller to the Buyer or by the Buyer to the Seller in accordance with this Tax Covenant will be treated, to the extent possible, as an adjustment to the Share Purchase Price for the TL Shares.

EX-12.1

Exhibit 12.1

STATEMENT REGARDING THE COMPUTATION OF RATIOS

Our earnings are inadequate to cover combined fixed charges and preference dividends. The following table sets forth the dollar amount of the coverage deficiency (in thousands) for the periods indicated.

	Year Ended December 31,
	2011			2012			2013			2014			2015
Loss before income taxes	$	(9,737	)	$	(8,181	)	$	(16,041	)	$	(13,418	)	$	(33,601	)
Add fixed charges:
Interest expense	959			894			588			597			657
Amortization of costs related to indebtedness	—			—			56			69			69
Estimated interest factor in rent	295			325			345			324			262
Earnings (loss)	$	(8,483	)	$	(6,962	)	$	(15,052	)	$	(12,428	)	$	(32,613	)
Fixed charges and preference dividends:
Interest expense	959			894			588			597			657
Amortization of costs related to indebtedness	—			—			56			69			69
Estimated interest factor in rent	295			325			345			324			262
Total fixed charges	1,254			1,219			989			990			988
Add:
Preferred stock dividends	1,010			660			726			1,144			1,324
Combined fixed charges and preferred stock dividends	$	2,264		$	1,879		$	1,715		$	2,134		$	2,312
Ratio of earnings(loss) to fixed charges	—			—			—			—			—
Ratio of earnings(loss) to combined fixed charges and preferred stock dividends	—			—			—			—			—
Deficiency of earnings available to cover fixed charges	$	9,737		$	8,181		$	16,041		$	13,418		$	33,601
Deficiency of earnings available to cover combined fixed charges and preference dividends	$	10,747		$	8,841		$	16,767		$	14,562		$	34,925

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

LEGAL NAME	JURISDICTION OF ORGANIZATION
Transgenomic Japan, Inc.	Delaware
Annovis, Inc.	Delaware

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 No’s 333-41714, 333-69334, 333-139999, 333-196712 and Form S-3 No's 333-200313, 333-201907, 333-205793, 333-209111 and 333-209112) of Transgenomic, Inc. of our report dated April 14, 2016, with respect to the consolidated financial statements of Transgenomic, Inc. and Subsidiary included in this Annual Report (Form 10-K) for the year ended December 31, 2015.

/s/ Ernst & Young LLP

Hartford, Connecticut

April 14, 2016

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

I, Paul Kinnon, certify that:

1. I have reviewed this annual report on Form 10-K of Transgenomic, Inc. (the Registrant);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and I have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiary, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused internal control over financial reporting to be designed under my 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 my 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. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting.

/s/ PAUL KINNON

Paul Kinnon

President, Chief Executive Officer and Interim Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

Date: April 14, 2016

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Annual Report on Form 10-K of Transgenomic, Inc. for the period ended December 31, 2015, I, Paul Kinnon, Chief Executive Officer and Interim Chief Financial Officer of Transgenomic, Inc., hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge, that:

(1) Such Annual Report on Form 10-K of Transgenomic, Inc. for the period ended December 31, 2015, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in such Annual Report on Form 10-K of Transgenomic, Inc. for the period ended December 31, 2015, fairly presents, in all material respects, the financial condition and results of operations of Transgenomic, Inc.

/s/ PAUL KINNON

Paul Kinnon

President, Chief Executive Officer and Interim Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

Date: April 14, 2016

A signed original of the certification required by Section 906 has been provided to Transgenomic, Inc. and will be retained by Transgenomic, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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DOCUMENT AND ENTITY INFORMATION - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Mar. 31, 2016	Jun. 30, 2015
Entity Information [Line Items]
Entity Registrant Name	TRANSGENOMIC INC
Entity Central Index Key	0001043961
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Document Type	10-K
Document Period End Date	Dec. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Common Stock, Shares Outstanding		20,695,870
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Public Float			$ 19.3

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Dec. 31, 2015	Dec. 31, 2014
CURRENT ASSETS:
Cash and cash equivalents		$ 444	$ 1,609
Accounts receivable, net		264	466
Inventories, net		50	0
Other current assets		537	385
Assets held for sale		1,987	26,106
Total current assets		3,282	28,566
PROPERTY AND EQUIPMENT:
Equipment		5,593	5,599
Furniture, fixtures & leasehold improvements		1,565	1,566
Property, plant and equipment, gross		7,158	7,165
Less: accumulated depreciation		(6,899)	(6,680)
Property, plant and equipment, net		259	485
OTHER ASSETS:
Intangibles, net		1,170	751
Other assets		105	204
Assets		4,816	30,006
CURRENT LIABILITIES:
Current maturities of long term debt		7,596	462
Accounts payable		3,781	3,898
Accrued compensation		321	377
Accrued expenses		3,734	2,045
Deferred revenue		217	298
Other current liabilities		1,068	1,068
Liabilities held for sale		264	3,838
Total current liabilities		16,981	11,986
LONG TERM LIABILITIES:
Long term debt less current maturities		0	7,375
Common stock warrant liability		350	145
Other long-term liabilities		305	817
Accrued preferred stock dividend		0	3,130
Total liabilities		17,636	23,453
STOCKHOLDERS’ (DEFICIT) EQUITY:
Preferred stock, $.01 par value, 15,000,000 shares authorized, 4,029,502 shares issued and outstanding		40	40
Common stock, $.01 par value, 150,000,000 shares authorized, 13,915,691 and 8,084,471 shares issued and outstanding, respectively	[1]	139	81
Additional paid-in capital	[1]	200,403	189,680
Accumulated other comprehensive income		10	340
Accumulated deficit		(213,412)	(183,588)
Total stockholders’ (deficit) equity		(12,820)	6,553
Liabilities and equity		$ 4,816	$ 30,006

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

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CONSOLIDATED BALANCE SHEETS PARENTHETICALS		Dec. 31, 2015 $ / shares shares	Dec. 31, 2014 $ / shares shares
STOCKHOLDERS’ (DEFICIT) EQUITY:
Preferred stock, par value (in usd per share) | $ / shares		$ 0.01	$ 0.01
Preferred stock, shares authorized		15,000,000	15,000,000
Preferred stock, shares issued		4,029,502	4,029,502
Preferred stock, shares outstanding		4,029,502	4,029,502
Common stock, par value (in usd per share) | $ / shares	[1]	$ 0.01	$ 0.01
Common stock, shares authorized	[1]	150,000,000	100,000,000
Common stock, shares issued	[1]	13,915,691	8,084,471
Common stock, shares outstanding	[1]	13,915,691	8,084,471

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

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CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2015	Dec. 31, 2014
NET SALES		$ 1,653	$ 1,240
COST OF GOODS SOLD		1,940	2,175
Gross profit		(287)	(935)
OPERATING EXPENSES:
Selling, general and administrative		7,055	7,385
Research and development		1,853	2,249
Operating Expenses		8,908	9,634
OPERATING LOSS FROM CONTINUING OPERATIONS		(9,195)	(10,569)
OTHER INCOME (EXPENSE):
Interest expense, net		(724)	(665)
Warrant revaluation		(205)	455
Other, net		(14)	0
Other Income (Expense)		(943)	(210)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(10,138)	(10,779)
INCOME TAX EXPENSE (BENEFIT)		0	0
LOSS FROM CONTINUING OPERATIONS		(10,138)	(10,779)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAXES		(22,816)	(3,163)
NET LOSS		(32,954)	(13,942)
PREFERRED STOCK DIVIDENDS		(1,324)	(1,144)
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS		$ (34,278)	$ (15,086)
BASIC AND DILUTED LOSS PER COMMON SHARE (IN USD PER SHARE)	[1]	$ (2.78)	$ (2.01)
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING	[1]	12,321,739	7,493,844
Included in continuing operations
OTHER INCOME (EXPENSE):
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS		$ (11,462)	$ (11,923)
BASIC AND DILUTED LOSS PER COMMON SHARE (IN USD PER SHARE)	[1]	$ (0.93)	$ (1.59)
Included in assets held for sale
OTHER INCOME (EXPENSE):
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS		$ (22,816)	$ (3,163)
BASIC AND DILUTED LOSS PER COMMON SHARE (IN USD PER SHARE)	[1]	$ (1.85)	$ (0.42)

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

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CONSOLIDATED STATEMENTS OF OPERATIONS PARENTHETICALS	Jan. 27, 2014
Income Statement [Abstract]
Common stock reverse stock split, conversion ratio	0.0833

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Statement of Comprehensive Income [Abstract]
Net Loss	$ (32,954)	$ (13,942)
Other Comprehensive Loss; foreign currency translation adjustment	(330)	(50)
Comprehensive Loss	$ (33,284)	$ (13,992)

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands		Total	Preferred Stock	Common Stock		Additional Paid-in Capital	[1]	Accumulated Deficit	Accumulated Other Comprehensive Income (Loss)
Balance, shares at Dec. 31, 2013			2,586,205	7,353,695	[1]
Balance at Dec. 31, 2013		$ 11,446	$ 26	$ 73	[1]	$ 179,459		$ (168,502)	$ 390
Increase (Decrease) in Stockholders' Equity
Net loss		(13,942)						(13,942)
Foreign currency translation adjustment		(50)							(50)
Non-cash stock-based compensation		977				977
Private placement, net, shares	[1]			730,776
Private placement, net		2,361		$ 8	[1]	2,353
Preferred stock agreement		6,905				6,891
Dividends on preferred stock		(1,144)						(1,144)
Balance, shares at Dec. 31, 2014			4,029,502	8,084,471	[1]
Balance at Dec. 31, 2014		6,553	$ 40	$ 81	[1]	189,680		(183,588)	340
Increase (Decrease) in Stockholders' Equity
Net loss		(32,954)						(32,954)
Foreign currency translation adjustment		(330)							(330)
Non-cash stock-based compensation		644				644
Private placement, net, shares	[1]			5,047,411
Private placement, net		8,970		$ 50	[1]	8,920
Preferred stock agreement, shares			1,443,297
Preferred stock agreement			$ 14
Conversion of convertible promissory notes, shares	[1]			783,809
Conversion of convertible promissory notes		1,167		$ 8	[1]	1,159
Reversal of dividends on preferred stock		3,130						3,130
Balance, shares at Dec. 31, 2015			4,029,502	13,915,691	[1]
Balance at Dec. 31, 2015		$ (12,820)	$ 40	$ 139	[1]	$ 200,403		$ (213,412)	$ 10

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

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY PARENTHETICALS	Jan. 27, 2014
Statement of Stockholders' Equity [Abstract]
Common stock reverse stock split, conversion ratio	0.0833

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
CASH FLOWS USED IN OPERATING ACTIVITIES:
NET LOSS	$ (32,954)	$ (13,942)
Less loss from discontinued operations, net of tax	(22,816)	(3,163)
Loss from continuing operations	(10,138)	(10,779)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation and amortization	489	569
Non-cash, stock based compensation	611	939
Provision for losses on doubtful accounts	67	3
Provision	63	0
Warrant revaluation	205	(455)
Loss on disposal of fixed assets	14	0
Deferred interest	70	330
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	133	(183)
Inventories	(113)	0
Prepaid expenses and other current assets	(663)	357
Accounts payable	(365)	1,799
Accrued expenses and other liabilities	1,773	1,251
Net cash used in continuing operations	(7,854)	(6,169)
Net cash used in discontinued operations	(4,524)	(7,533)
Net cash used in operating activities	(12,378)	(13,702)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchase of property and equipment	(204)	(130)
Change in other assets	(219)	(45)
Net cash used in investing activities, continuing operations	(423)	(175)
Net cash provided by investing activities, discontinued operations	2,210	3,800
Net cash used in investing activities, continuing operations	1,787	3,625
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Proceeds from note payable	923	7,190
Principal payments on capital lease obligations	(35)	(144)
Issuance of preferred stock, net	0	9,266
Issuance of common stock and related warrants, net	8,977	0
Principal payments on note payable	(874)	(6,242)
Net cash flows provided by financing activities	8,991	10,070
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH, discontinued operations	435	(10)
NET CHANGE IN CASH AND CASH EQUIVALENTS	(1,165)	(17)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	1,609	1,626
CASH AND CASH EQUIVALENTS AT END OF PERIOD	444	1,609
Cash paid during the period for:
Interest	493	229
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION
Note payable converted to Equity	$ 1,012	$ 0

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BUSINESS DESCRIPTION

12 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BUSINESS DESCRIPTION

BUSINESS DESCRIPTION

Business Description.

Transgenomic, Inc. (“we”, “us”, “our”, the “Company” or “Transgenomic”) is a biotechnology company advancing personalized medicine for the detection and treatment of cancer and inherited diseases through our proprietary molecular technologies and clinical and research services. A key goal is to bring our Multiplexed ICE COLD-PCR (“MX-ICP”) product to the clinical market through strategic partnerships and licensing agreements, enabling the use of blood and other bodily fluids for more effective and patient-friendly diagnosis, monitoring and treatment of cancer.

MX-ICP is technology proprietary to Transgenomic. It is a reagent that improves the ability to detect genetic mutations. This technology has been validated internally on all currently available sequencing platforms, including Sanger, Next Gen Sequencing and Digital PCR. By enhancing the level of detection of genetic mutations and suppressing the normal or wild-type DNA, several benefits are provided.

Historically, our operations were organized and reviewed by management along our major product lines and presented in two business segments: Laboratory Services and Genetic Assays and Platforms. Beginning with the quarter ended September 30, 2015, our operations are now organized as one business segment, our Laboratory Services segment, and during the fourth quarter of 2015, we began including a portion of our Laboratory Services segment as discontinued operations.

Our current Laboratory Services business consists of our laboratory in Omaha, Nebraska, which is focused on providing genetic analytical services related to Oncology and pharmacogenomics research services supporting Phase II and Phase III clinical trials conducted by pharmaceutical and biotechnology companies. Our laboratory employs a variety of genomic testing service technologies, including our proprietary MX-ICP technology. Our laboratory in Omaha is certified under the Clinical Laboratory Improvement Amendment (“CLIA”) as a high complexity laboratory and is accredited by the College of American Pathologists.

Our consolidated balance sheets, statements of operations and statements of cash flows for all periods presented reflect our former Genetic Assays and Platforms activities and Patient Testing business as discontinued operations (See Note 3 - “Discontinued Operations”).

Going Concern

The consolidated financial statements have been prepared using accounting principles generally accepted in the United States of America applicable for a going concern which assumes that the Company will realize its assets and discharge its liabilities in the ordinary course of business. The Company has incurred substantial operating losses and has used cash in its operating activities for the past few years. As of December 31, 2015, the Company had negative working capital of approximately $13.7 million. During the first quarter of 2016, the Company received net proceeds of approximately $2.0 million from the issuance of preferred stock and common stock warrants. Including the recent financing, the Company’s ability to continue as a going concern is dependent upon a combination of generating additional revenue, improving cash collections, potentially selling underutilized assets and/or product lines related to discontinued operations and, if needed, raising necessary financing to meet its obligations and pay its liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time and raises substantial doubt that the Company will be able to continue as a going concern. These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. The Company cannot be certain that additional financing will be available on acceptable terms, or at all, and its failure to raise capital when needed could limit its ability to continue its operations.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation.

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

Risks and Uncertainties.

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

Use of Estimates.

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

Basis of Presentation.

The accompanying consolidated financial statements are presented in conformity with U.S. generally accepted accounting principles (“GAAP”). All amounts are presented in U.S. Dollars (“$”).Supplemental cash flows from discontinued operations are presented in Note 3 to the consolidated financial statements “Discontinued Operations.” The Company has evaluated events occurring subsequent to December 31, 2015 for potential recognition or disclosure in the consolidated financial statements and concluded there were no subsequent events that required recognition or disclosure other than those provided in Note 15 “Subsequent Events”.

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

Fair Value.

Unless otherwise specified, book value approximates fair market value. The Company’s Level 1 financial instruments include cash and cash equivalents. The Company’s Level 3 financial instruments include the common stock warrant liability, preferred stock warrant liability and conversion feature, and debt. Due to its variable interest component, debt approximates fair value.  The common stock warrant liability and Series A Convertible Preferred Stock (“Series A Preferred Stock”) warrant liability and conversion feature are recorded at fair value.  See Note 13 “Fair Value”.

Cash and Cash Equivalents and Other Current Assets.

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

Other current assets as of December 31, 2015 of $0.5 million includes prepaids of $0.2 million, unbilled receivables of $0.1 million and other receivables of $0.2 million.

Concentrations of Cash.

From time to time, we may maintain a cash position with financial institutions in amounts that exceed federally insured limits. We have not experienced any losses on such accounts as of December 31, 2015.

Accounts Receivable.

The following is a summary of activity for the allowance for doubtful accounts from continuing operations during the years ended December 31, 2015 and 2014:

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs		Ending Balance
Twelve months ended December 31, 2015	$	20	$	67	$	—	$	87
Twelve months ended December 31, 2014	$	17	$	3	$	—	$	20

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

Inventories.

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

The following is a summary of activity for the allowance for obsolete inventory during the years ended December 31, 2015 and 2014:

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs		Ending Balance
Twelve months ended December 31, 2015	$	—	$	63	$	—	$	63
Twelve months ended December 31, 2014	$	—	$	—	$	—	$	—

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

Property and Equipment.

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

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

Depreciation expense related to property and equipment during the years ended December 31, 2015 and 2014 was $0.2 million and $0.3 million, respectively. Included in depreciation for each of the years ended December 31, 2015 and 2014 was $0.1 million related to equipment acquired under capital leases.

We test our property and equipment for impairment when factors are present that indicate the carrying value of an asset (group) may not be recoverable. As part of our review for impairment of long-lived assets at September 30, 2015, we recorded an impairment charge of approximately $0.8 million related to property and equipment during the three months ended September 30, 2015. See Note 5 - “Intangibles Assets and Other Assets” for further discussion regarding the impairment of our long-lived assets.

Goodwill and Intangible Assets.

Intangible assets include intellectual property, patents and acquired products.

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

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

3. Acquired Products.    As part of the FAMILION acquisition and acquisition of certain intangible assets from Axial, the Company acquired technology, in process technology, trademarks/tradenames, customer relationships, covenants not to compete and third party relationships. These costs will be amortized pursuant to the straight-line method over their estimated economic life of seven to fifteen years. See Footnote 5 “Intangible Assets and Other Assets”.

Goodwill is tested for impairment annually. We perform this impairment analysis during the fourth quarter of each year or whenever events indicate that the carrying amount of goodwill may not be recoverable. We test our intangible assets for impairment when factors are present that indicate the carrying value of an intangible asset (group) may not be recoverable. Impairment occurs when the carrying value is determined to be not recoverable, thereby causing the carrying value of the goodwill or intangible asset (group) to exceed its fair value. If impaired, the asset’s carrying value is reduced to its fair value. We performed an interim testing of impairment of goodwill and long-lived assets as of September 30, 2015, due to the significant decline in the market price of our stock. As a result of this testing, we recorded impairment charges of $6.2 million related to our long-lived assets during the three months ended September 30, 2015 but determined that no impairment of goodwill was needed to be recorded. See Note 5 - “Intangibles and Other Assets” for further discussion regarding the impairment of our long-lived assets. During the fourth quarter of 2015, it was concluded that our Patient Testing business, which met the criteria to be classified as held for sale and reported as discontinued operations as of December 31, 2015, was impaired due to continued declines in financial performance and due to the fact that the likelihood of recoverability of the Patient Testing goodwill through sale of the Patient Testing business was remote. As a result we determined that the goodwill related to the Patient Testing business was impaired as of December 31, 2015. Goodwill impairment charges of $6.9 million were recorded during the three months ended December 31, 2015. The goodwill and impairment charges are included in the results of our discontinued operations. See Note 3 - “Discontinued Operations” for further discussion regarding the results of discontinued operations.

Common Stock Warrants.

Our issued and outstanding 2012 warrants to purchase common stock do not qualify to be treated as equity and accordingly, are recorded as a liability (“Common Stock Warrant Liability”). The Common Stock Warrant Liability was initially recorded at fair value using a Monte Carlo simulation model. We are required to present these instruments at fair value at each reporting date and any changes in fair values are recorded as an adjustment to earnings. The Common Stock Warrant Liability is considered a Level 3 financial instrument. See Note 13 - “Fair Value”.

Stock Based Compensation.

All stock-based awards to date have exercise prices equal to the market price of our common stock on the date of grant and have ten-year contractual terms. Unvested options as of December 31, 2015 had vesting periods of one or three years from the date of grant. None of the stock options outstanding at December 31, 2015 are subject to performance or market-based vesting conditions.

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

Income Taxes.

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities at each balance sheet date using tax rates expected to be in effect in the year the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent that it is more likely than not that they will not be realized. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations.

Net Sales Recognition.

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

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

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

• Collectability is reasonably assured.

In our Biomarker Identification laboratory, we perform services on a project by project basis. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year. At December 31, 2015 and 2014, deferred net sales associated with pharmacogenomics research projects, included in the balance sheet in deferred revenue, was $0.1 million and $0.3 million, respectively.

Net sales from Patient Testing laboratories are recognized on an individual test basis and take place when the test report is completed, reviewed and sent to the client less the reserve for insurance, Medicare and Medicaid contractual adjustments. There are no deferred net sales associated with our Patient Testing services. Adjustments to the allowances, based on actual receipts from third party payers, are reflected in the estimated contractual allowance applied prospectively. In the fourth quarter of 2015, we adjusted our contractual allowance rates to better reflect the reimbursement level we expect to achieve on Patient Testing billings. The adjustment negatively impacted our fourth quarter of 2015 Patient Testing revenues. Our Patient Testing revenues are reported as part of discontinued operations (See Note 3 - “Discontinued Operations”).

Net sales of Genetic Assays and Platforms products, reported as discontinued operations (See Note 3 - “Discontinued Operations”) are recognized in accordance with the terms of the sales arrangement. Such recognition is based on receipt of an unconditional customer order and transfer of title and risk of ownership to the customer, typically upon shipment of the product under a purchase order. Our sales terms do not provide for the right of return unless the product is damaged or defective. Net sales from certain services associated with the analytical instruments, to be performed subsequent to shipment of the products, is deferred and recognized when the services are provided. Such services, mainly limited to installation and training services that are not essential to the functionality of the instruments, typically are performed in a timely manner subsequent to shipment of the instrument. We also enter into various service contracts that cover installed instruments. These contracts cover specific time periods and net sales associated with these contracts are deferred and recognized ratably over the service period.

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

Research and Development.

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

Translation of Foreign Currency.

Our foreign subsidiary, which is included within discontinued operations uses the local currency of the country in which it is located as its functional currency. Its assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. A translation loss of $0.3 million and $0.1 million is reported in other comprehensive income on the accompanying consolidated statements of comprehensive loss as December 31, 2015 and 2014, respectively.

Loss Per Share.

Basic loss per share is calculated based on the weighted-average number of shares of common stock outstanding during each period. Diluted loss per share includes shares issuable upon exercise of outstanding stock options, warrants or conversion rights that have exercise or conversion prices below the market value of our common stock, as long as the effect is not anti-dilutive. Options, warrants and conversion rights pertaining to 9,963,886 and 6,613,572 shares of our common stock have been excluded from the computation of diluted earnings per share at December 31, 2015 and 2014, respectively. The options, warrants and conversion rights that were exercisable in 2015 and 2014 were not included because the effect would be anti-dilutive due to the net loss.

Recently Issued Accounting Pronouncements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. This guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to a customer. ASU No. 2014-09 will replace most existing revenue recognition guidance in generally accepted accounting principles in the U.S. when it becomes effective. In July 2015, the FASB decided to defer the effective date of this new accounting guidance by one year. As a result, ASU No. 2014-09 will be effective for us for all annual and interim reporting periods beginning after December 15, 2017 and early adoption would be permitted as of the original effective date. The new standard permits the use of either the retrospective or cumulative effect transition method. We do not expect to early adopt this guidance and we have not selected a transition method. We are currently evaluating the impact this guidance will have on our financial condition, results of operations and cash flows.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40). The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We do not expect to early adopt this guidance and do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, rather than as a deferred charge asset. ASU No. 2015-03 is effective for us beginning on January 1, 2016. ASU No. 2015-03 is not expected to have a material impact on our financial condition, results of operations or cash flows.

In February 2016, the FASB issued an ASU, “Leases”. The new standard amends the recognition of lease assets and lease liabilities by lessees for those leases currently classified as operating leases and amends disclosure requirements associated with leasing arrangements. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently assessing the impact of the adoption of this ASU will have on our consolidated financial statements.

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DISCONTINUED OPERATIONS

12 Months Ended

Dec. 31, 2015

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

DISCONTINUED OPERATIONS

On September 8, 2015, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Edge BioSystems, Inc. (“Buyer”), pursuant to which we agreed to sell to Buyer, and Buyer agreed to purchase from us, our manufacturing, marketing and selling of high quality polymer and silica based beads and resin and chromatography columns business (collectively, the “Columns Business”). The Columns Business was part of our former segment, Genetic Assays and Platforms. Pursuant to the Asset Purchase Agreement, Buyer acquired substantially all of the assets used solely in connection with the Columns Business and assumed certain liabilities of the Columns Business for a total cash purchase price of approximately $2.1 million (the “Asset Sale”), which was paid on September 8, 2015 upon the closing of the Asset Sale. During the year ended December 31, 2015, we recorded a gain on the sale of the Columns Business of $1.5 million.

On November 25, 2015, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with ADSTEC Corporation (“ADSTEC”) and ADS Biotec Inc., a wholly-owned subsidiary of ADSTEC (“Buyer”), pursuant to which we sold (1) to ADSTEC our facilities located in Glasgow, Scotland and on Irvington Road in Omaha, Nebraska (together, the “Facilities”) and all of our stock, inventory and raw materials located at the Facilities (collectively, the “Inventory”), and (2) to Buyer (a) all of the remaining assets relating to our Genetic Assays and Platforms business segment (the “Business”), other than the Inventory (the “Purchased Assets”), and (b) all of the ordinary shares of Transgenomic Limited, a wholly-owned subsidiary of ours (the “Shares”). The Purchase Agreement superseded the binding term sheet between us and ADSTEC, effective as of September 30, 2015, as disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 30, 2015 (the “Term Sheet”).

Pursuant to the Purchase Agreement, ADSTEC and Buyer acquired the Facilities, the Inventory, the Purchased Assets and the Shares for an aggregate purchase price of approximately $300,000, and Buyer assumed our financial and human resources commitments related to the Business (the “Transaction”). During the year ended December 31, 2015, we recorded a loss on the Transaction of $1.7 million.

Together, the Asset Sale and the Transaction represent the divestiture of our Genetic Assays and Platforms business resulting in a strategic shift that will have a major effect on our operations and financial results. Therefore, the divested operations of our Genetic Assays and Platforms business meet the criteria to be reported as discontinued operations.

During the fourth quarter of 2015, our Board of Directors took actions to begin the process of divesting our Patient Testing business in New Haven, Connecticut. In March of 2016, we announced that we had suspended testing services in our Patient Testing laboratory as we review and evaluate various strategic alternatives for that business. As a result of these actions, as of December 31, 2015, our Patient Testing business meets the criteria to be reported as discontinued operations.

The related assets, liabilities, results of operations and cash flows for both the Genetic Assays and Platforms business and Patient Testing business are classified as assets held for sale, liabilities held for sale and discontinued operations for all periods presented.

Results of the discontinued operations consisted of the following:

	Years ended December 31,
(in thousands)	2015			2014
Net sales	$	18,584		$	25,843
Cost of goods sold	12,287			15,187
Gross profit	6,297			10,656
Selling, general and administrative expense	15,187			16,761
Research and development expense	408			648
Impairment of long-lived assets	13,942			—
Operating loss from discontinued operations	(23,240		)	(6,753		)
(Loss) gain on sale of business	(224		)	4,114
Loss from discontinued operations before income taxes	(23,464		)	(2,639		)
Income tax (benefit) expense	(648		)	524
Loss from discontinued operations	$	(22,816	)	$	(3,163	)

The $0.2 million of loss on sale of business for the year ended December 31, 2015 includes a $1.5 million gain on the Asset Sales in the third quarter of 2015 and a $1.7 million loss on the Transaction in the fourth quarter of 2015. The $4.1 million of gain on sale of business for the year ended December 31, 2014 is a result of the sale of our Surveyor technology, which was reported within the prior period Genetic Assays and Platforms segment results, in July 2014. We anticipate that we will complete the divestiture of the Patient Testing business during the first half of 2016.

Assets and liabilities of the discontinued operations are classified as assets held for sale and liabilities held for sale in the consolidated balance sheets and consisted of the following:

	Dollars in Thousands
	December 31, 2015		December 31, 2014
ASSETS
Accounts receivable, net	$	1,905	$	7,161
Inventory, net	—		3,005
Other current assets	82		806
Total current assets	1,987		10,972
Property and equipment, net	—		997
Goodwill and intangible assets	—		14,131
Other assets	—		6
Total Assets	$	1,987	$	26,106
LIABILITIES
Accounts payable	$	—	$	973
Accrued compensation	264		752
Accrued expenses	—		505
Deferred revenue	—		737
Total current liabilities	264		2,967
Other liabilities	—		871
Total Liabilities	$	264	$	3,838

The following is a summary of activity for the allowance for doubtful accounts from discontinued operations during the years ended December 31, 2015 and 2014. The allowance for doubtful accounts from discontinued operations are included in the assets held for sale in the consolidated balance sheets.

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs			Ending Balance
Twelve months ended December 31, 2015	$	7,927	$	9,447	$	(2,710	)	$	14,664
Twelve months ended December 31, 2014	$	3,821	$	6,116	$	(2,010	)	$	7,927

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INVENTORIES

12 Months Ended

Dec. 31, 2015

Inventory Disclosure [Abstract]

INVENTORIES

INVENTORIES

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

	Dollars in Thousands
	December 31, 2015			December 31, 2014
Finished goods	$	—		$	—
Raw materials and work in process	113			—
Demonstration inventory	—			—
	$	113		$	—
Less allowances	(63		)	—
Total	$	50		$	—

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INTANGIBLE ASSETS AND OTHER ASSETS

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS AND OTHER ASSETS

INTANGIBLE ASSETS AND OTHER ASSETS

We review our amortizable long-lived assets for impairment annually or whenever events indicate that the carrying amount of the asset (group) may not be recoverable. An impairment loss may be needed if the sum of the future undiscounted cash flows is less than the carrying amount of the asset (group). The amount of the loss would be determined by comparing the fair market value of the asset to the carrying amount of the asset (group).

We performed an impairment test as of September 30, 2015 due to the significant decline in the market price of our stock. As a result of this testing, we recorded impairment charges related to our long-lived assets of approximately $7.0 million during the three months ended September 30, 2015. The impairment charges include $0.8 million related to property and equipment and $6.2 million related to amortizable intangibles (see table below).

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

	Dollars in Thousands
	December 31, 2015
	Cost		Accumulated Amortization		Impairment Charge		Net Book Value
Acquired technology	$	9,009	$	4,611	$	4,398	$	—
Assay royalties	1,434		973		461		—
Third party payor relationships	367		116		251		—
Tradenames and trademarks	824		439		385		—
Customer relationships	652		130		522		—
Covenants not to compete	184		184		—		—
Patents	980		126		148		706
Intellectual property	671		207		—		464
	$	14,121	$	6,786	$	6,165	$	1,170

	Dollars in Thousands
	December 31, 2014
	Cost		Accumulated Amortization		Net Book Value		Included in assets held for sale		Included in continuing operations
Acquired technology	$	9,009	$	3,995	$	5,014	$	5,014	$	—
Assay royalties	1,434		819		615		615		—
Third party payor relationships	367		98		269		269		—
Tradenames and trademarks	824		351		473		473		—
Customer relationships	652		98		554		554		—
Covenants not to compete	184		138		46		46		—
Patents	815		87		728		157		571
Intellectual property	266		86		180		—		180
	$	13,551	$	5,672	$	7,879	$	7,128	$	751

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

Amortization expense for intangible assets was $0.1 million and $0.1 million during the years ended December 31, 2015 and 2014. Amortization expense for intangible assets for each of the five succeeding fiscal years is expected to be $0.2 million, $0.1 million, $0.1 million, $0.1 million and $0.1 million for the years ended December 31, 2016, 2017, 2018 2019 and 2020, respectively.

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

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DEBT

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

DEBT

DEBT

	Dollars in Thousands
	Year Ended December 31,
	2015			2014
Revolving Line (1)	$	3,025		$	3,000
Term Loan (2)	4,000			4,087
Convertible Promissory Note (3)	571			750
Total debt	7,596			7,837
Current portion of long term debt	(7,596		)	(462		)
Long term debt, net of current maturities	$	—		$	7,375

(1) Revolving Line of Credit.Amounts advanced under the Revolving Line initially bore interest at an annual rate equal to the greater of (a) 4.25% or (b) the Wall Street Journal prime rate plus 1%. Interest is payable on a monthly basis, with the balance payable at the maturity of the Revolving Line. Under the Amendment to the Loan Agreement, which we entered into on August 2, 2013, amounts advanced under the Revolving Line bear interest at an annual rate equal to the greater of (x) 6.25% or (y) the Wall Street Journal prime rate plus 3%. The current interest rate is 6.50%. Under the Loan Agreement, we paid the Lenders an upfront fee of $20,000, and will pay the Lenders an additional commitment fee of $20,000 on each one year anniversary of March 13, 2013, the Effective Date, during the term of the Revolving Line. In addition, a fee of 0.5% per annum is payable quarterly on the unused portion of the Revolving Line. The Revolving Line matures on November 1, 2017.

(2) Term Loan. We received $4.0 million under the Term Loan on the Effective Date. Pursuant to the terms of the Loan Agreement, as amended by the Sixth Amendment (as defined in “-Revolving Line and Term Loan” below), we made a principal payment of approximately $148,000 on April 1, 2015 and were not be obligated to make monthly payments of principal to the Lenders until April 1, 2016. Pursuant to the Eighth Amendment of the Loan Agreement, the maturity date of the Loan Agreement was extended until November 1, 2017 and no principal payments on the Term Loan are due until such date. The current interest rate is 9.1%.

We paid the Lenders an upfront fee of $40,000 for the Term Loan, and will pay the Lenders an additional final payment of $120,000 at maturity or prepayment of the Term Loan. In addition, if we repay the Term Loan prior to maturity, we will pay the Lenders a prepayment penalty of 1% of the total outstanding balance under the Term Loan.

Additional Terms

The Loan Agreement contains affirmative and negative covenants. Under the Loan Agreement, we are required to maintain a minimum liquidity ratio and achieve a minimum amount of revenue, and we also agreed not to (i) pledge or otherwise encumber our assets other than to the Lenders, (ii) enter into additional borrowings or guarantees, (iii) repurchase our capital stock, or (iv) enter into certain mergers or acquisitions without the Lenders’ consent. Additionally, the Loan Agreement contains a subjective acceleration clause at the discretion of the Lenders. As of December 31, 2015, the Company was not in compliance with all financial covenants of the Loan Agreement, as amended by the Eighth Amendment. As such, all debt has been classified as current at December 31, 2015.

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

(3) Convertible Promissory Notes. The Notes accrues interest at a rate of 6% per year and mature on December 31, 2016.

Revolving Line and Term Loan.

On March 13, 2013 (the “Effective Date”), we entered into a Loan and Security Agreement with affiliates of Third Security, LLC, a related party, (the “Lenders”) for (a) a revolving line of credit (the “Revolving Line”) with borrowing availability of up to $4.0 million, subject to reduction based on our eligible accounts receivable, and (b) a term loan (the “Term Loan” and together with the Revolving Line, the “Loan Agreement”) of $4.0 million. Proceeds were used to pay off a three year senior secured promissory note payable to PGxHealth, LLC, which was entered into on December 29, 2010 in conjunction with our acquisition of the FAMILION family of genetic tests, and for general corporate and working capital purposes.

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

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

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

On March 3, 2014, we entered into a fourth amendment to the Loan Agreement (the “Fourth Amendment”). Pursuant to the terms of the Fourth Amendment, we were not required to make any principal or interest payments under the Term Loan for the period from March 1, 2014 through March 31, 2015. The interest on the debt that was deferred and not paid was capitalized as part of the Term Loan. The amount of interest that was capitalized from March 1, 2014 to March 31, 2015 was $0.4 million.

On October 22, 2014, we entered into a fifth amendment to the Loan Agreement (the “Fifth Amendment”). Pursuant to the Fifth Amendment, the parties amended certain provisions of the Loan Agreement, including reducing the minimum liquidity and revenue covenants under the Loan Agreement. The Fifth Amendment also reduced the aggregate amount that we may borrow under the Revolving Line from $4.0 million to $3.0 million.

On April 1, 2015, we entered into a sixth amendment to the Loan Agreement (the “Sixth Amendment”). Pursuant to the Sixth Amendment, among other things, (a) the Lenders waived specified events of default under the terms of the Loan Agreement, (b) commencing April 1, 2015, we began making monthly interest payments with respect to the Term Loan to the Lenders, (c) we will not be obligated to make monthly payments of principal under the Term Loan to the Lenders until April 1, 2016, (d) we made an initial prepayment of a portion of the Term Loan balance in the amount of approximately $148,000 on April 1, 2015 and will make one or more additional prepayments to the Lenders under the Loan Agreement upon the occurrence of certain events, as defined in the Loan Agreement, and (e) we are not required to comply with the minimum liquidity ratio under the terms of the Loan Agreement until the earliest to occur of a specified event, as defined in the Loan Agreement, or March 31, 2016. The Sixth Amendment also extends the time period in which we must provide certain reports and statements to the Lenders and amends the circumstances pursuant to which we may engage in certain sales or transfers of our business or property without the consent of the Lenders.

As of June 30, 2015, we were in compliance with all financial covenants of the Loan Agreement, but were not in compliance with the restrictions limiting the amount that we may borrow under the Revolving Line. Accordingly, on August 10, 2015, we received a waiver from the Lenders relating to this non-compliance and paid the Lenders an aggregate of $0.7 million, which brought us back into compliance with the terms of the Revolving Line.

On September 4, 2015, we entered into a seventh amendment to the Loan Agreement (the “Seventh Amendment”). The Seventh Amendment, among other things, (a) provided that the Lenders waived specified events of default under the terms of the Loan Agreement, (b) reduced our future minimum revenue covenants under the Loan Agreement, (c) reduced our borrowing availability under the Revolving Line to approximately $2.3 million and (d) limited our borrowing base under the Loan Agreement to the amount of the Revolving Line.

On January 6, 2016, we entered into an eighth amendment to the Loan Amendment (the “Eighth Amendment”). The Eighth Amendment, among other things, (1) provides that the Lenders will waive specified events of default under the terms of the Loan Agreement, (2) reduces our future minimum revenue covenants under the Loan Agreement, (3) extends the maturity date of the Loan Agreement until November 1, 2017, and (4) provides for the repayment of an overadvance of $750,000 previously provided by the Lenders to us pursuant to the Loan Agreement.

During the first quarter of 2016, the overadvance that existed at December 31, 2015 was repaid to the Lenders and $0.2 million was received from certain of the Lenders and another lender affiliate in connection with the equity offering made on January 6, 2015.

Convertible Promissory Notes.

On December 31, 2014, we entered into an Unsecured Convertible Promissory Note Purchase Agreement (the “Note Purchase Agreement”) with an accredited investor (the “Investor”) pursuant to which we agreed to issue and sell to the Investor in a private placement an unsecured convertible promissory note (the “Initial Note”). We issued the Initial Note in the aggregate principal amount of $750,000 to the Investor on December 31, 2014. Pursuant to the terms of the Initial Note, interest accrued at a rate of 6% per year and the Initial note was set to mature on December 31, 2016. Under the Note, the outstanding principal and unpaid interest accrued was convertible into shares of our common stock as follows: (i) commencing upon the date of issuance of the Initial Note (but no earlier than January 1, 2015), the Investor was entitled to convert, on a one-time basis, up to 50% of the outstanding principal and unpaid interest accrued under the Initial Note, into shares of our common stock at a conversion price equal to the lesser of (a) the average closing price of the common stock on the principal securities exchange or securities market on which our common stock is then traded (the “Market”) for the 20 consecutive trading days immediately preceding the date of conversion, and (b) $2.20 (subject to adjustment for stock splits, stock dividends, other distributions, recapitalizations and the like); and (ii) commencing February 15, 2015, the Investor was entitled to convert, on a one-time basis, any or all of the remaining outstanding principal and unpaid interest accrued under the Initial Note, into shares of our common stock at a conversion price equal to 85% of the average closing price of our common stock on the Market for the 15 consecutive trading days immediately preceding the date of conversion. The Initial Note has been converted in full into 502,786 shares of our common stock, in accordance with the terms of the Initial Note.

On January 15, 2015, we entered into the Note Purchase Agreement with seven accredited investors (the “Additional Investors”) and, on January 20, 2015, issued and sold to the Additional Investors, in a private placement, notes (the “Additional Notes”) in an aggregate principal amount of $925,000. The Additional Notes have the same terms and conditions as the Initial Note. As of December 31, 2015, $400,000 of the aggregate principal amount of the Additional Notes, and accrued interest thereon, has been converted into an aggregate of 281,023 shares of our common stock.

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

2016	$	7,596
Total	$	7,596

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CAPITAL LEASES

12 Months Ended

Dec. 31, 2015

Leases [Abstract]

CAPITAL LEASES

CAPITAL LEASES

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

	Dollars in Thousands
	Asset Balances at
Classes of Property	December 31, 2015			December 31, 2014
Equipment	$	828		$	1,514
Less: Accumulated amortization	(725		)	(997		)
Total	$	103		$	517

The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2015.

Year ending December 31:

	Dollars in Thousands
2016	$	3
2017	1
Total minimum lease payments	$	4
Less: Amount representing interest	—
Present value of net minimum lease payments	$	4

The short term portion of our capital leases is included in accrued expenses and the long term portion is included in other long-term liabilities on the Balance Sheet. Included in depreciation for the years ended December 31, 2015 and 2014 was $0.2 million and $0.3 million, respectively, related to equipment acquired under capital leases.

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

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

Rent expense under all operating leases was $0.2 million in each of 2015 and 2014. We lease certain equipment, vehicles and operating facilities under non-cancellable operating leases , some of which have escalation clauses that expire on various dates through 2022. Future minimum lease payments under non-cancellable operating leases, including non-cancellable lease associated with discontinued operations, are as follows (in thousands):

2016	$	727
2017	724
2018	711
2019	676
2020	680
thereafter	388
Total	$	3,906

At December 31, 2015, firm commitments to vendors totaled $0.3 million.

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INCOME TAXES

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The Company’s provision for income taxes from continuing operations for the years ended December 31, 2015 and 2014 relates to income taxes in states, foreign countries and other local jurisdictions and differs from the amounts determined by applying the statutory Federal income tax rate to loss before income taxes for the following reasons:

	Dollars in Thousands
	2015			2014
Benefit at federal rate	$	(3,449	)	$	(3,665	)
Increase (decrease) resulting from:
State income taxes—net of federal benefit	(320		)	(401		)
Miscellaneous permanent differences	163			223
Liability warrants	70			(154		)
State, net operating loss expiration/true-up	(187		)	(327		)
Other—net	(119		)	2
Valuation allowance	3,842			4,322
Total income tax expense (benefit)	$	—		$	—

	Dollars in Thousands
	2015		2014
Federal:
Current	$	—	$	—
Deferred	—		—
Total Federal	$	—	$	—
State:
Current	$	—	$	—
Deferred	—		—
Total State	$	—	$	—
Foreign:
Current	$	—	$	—
Deferred	—		—
Total Foreign	$	—	$	—
Total Tax Provision	$	—	$	—

The Company’s deferred income tax asset from continuing operations at December 31, 2015 and 2014 is comprised of the following temporary differences:

	Dollars in Thousands
	2015			2014
Deferred Tax Asset:
Net operating loss carryforward	$	51,449		$	46,051
Research and development credit carryforwards	918			918
Other	585			539
	52,952			47,508
Less valuation allowance	(52,902		)	(47,406		)
Deferred Tax Asset	$	50		$	102
Deferred Tax Liability:
Property and equipment	50			102
Deferred Tax Liability	$	50		$	102
Net Deferred Asset (Liability)	$	—		$	—

At December 31, 2015, we had total unused federal tax net operating loss carryforwards of $142.9 million. The expiration dates are as follows (amounts in thousands):

2018	$	1,838
2019	8,181
2020	9,662
2021	8,228
2022	16,862
2023	16,173
2024	17,390
2025	8,153
2026	6,792
2027	3,238
2028	1,272
2029	591
2031	2,784
2032	8,358
2033	12,097
2034	7,591
2035	13,645
Total	$	142,855

Of these federal net operating loss carryforwards, $1.2 million were obtained in the acquisition of Annovis, Inc. and may be subject to certain restrictions. Remaining net operating loss carryforwards could be subject to limitations under section 382 of the Internal Revenue Code of 1986, as amended. At December 31, 2015, we had unused state tax net operating loss carryforwards of approximately $58.8 million that expire at various times beginning in 2016. At December 31, 2015, we had unused research and development credit carryforwards of $0.9 million that expire at various times between 2018 and 2028. At December 31, 2015, we had unused foreign net operating loss carryforwards relating to operations in the United Kingdom of approximately $0.9 million with an unlimited carryforward period. A valuation allowance has been provided for the net deferred tax assets, due to the cumulative losses in recent years and an inability to utilize any additional losses as carrybacks. We will continue to assess the recoverability of deferred tax assets and the related valuation allowance. To the extent we begin to generate income in future years and it is determined that such valuation allowance is no longer required, the tax benefit of the remaining deferred tax assets will be recognized at such time.

Our liability for uncertain tax positions, which was included in other long term liabilities, was $0.1 million and $0.1 million as of December 31, 2015 and 2014, respectively.  We recorded less than $0.1 million of additional uncertain tax positions during the years ended 2015 and 2014. We recorded a reduction of $0.2 million for uncertain tax positions during the year ended 2014. We recorded zero and $0.2 million for reductions in uncertain tax positions relating to statute of limitations lapse for the years ended 2015 and 2014, respectively. We had no material interest or penalties during fiscal 2015 or fiscal 2014, and we do not anticipate any such items during the next twelve months. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations. We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. We have statutes of limitation open for Federal income tax returns related to tax years 2011 through 2015. We have state income tax returns subject to examination primarily for tax years 2011 through 2015. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period. Open tax years related to foreign jurisdictions remain subject to examination. Our primary foreign jurisdiction is the United Kingdom, which has open tax years for 2011 through 2015.

During November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. We early adopted ASU 2015-17 effective December 31, 2015 on a retrospective basis. Adoption of this ASU resulted in a reclassification of our net current deferred tax asset to the net non-current deferred tax asset in our Consolidated Balance Sheet as of December 31, 2014 and 2015

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EMPLOYEE BENEFIT PLAN

12 Months Ended

Dec. 31, 2015

Compensation and Retirement Disclosure [Abstract]

EMPLOYEE BENEFIT PLAN

EMPLOYEE BENEFIT PLAN

We maintain an employee 401(k) retirement savings plan that allows for voluntary contributions into designated investment funds by eligible employees. We currently match the employee’s contributions at the rate of 100% on the first 3% of contributions and 50% on the next 2% of contributions. We may, at the discretion of our Board of Directors, make additional contributions on behalf of the Plan’s participants. Contributions to the 401(k) plan were $0.4 million and $0.4 million for the years ended December 31, 2015 and 2014, respectively.

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STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2015

Stockholders' Equity Note [Abstract]

STOCKHOLDERS’ EQUITY

STOCKHOLDERS’ EQUITY

Common Stock.

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

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

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

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

The January 2013 common stock transaction required the repricing and issuance of additional common stock warrants to the holders of warrants issued in the February 2012 common stock and warrant sale. The exercise price of the warrants decreased from $15.00 per share to $12.96 per share and the number of shares issuable upon exercise of the warrants increased from 948,333 to 1,097,600.

On October 22, 2014, we entered into a Securities Purchase Agreement with certain accredited investors (the “October 2014 Investors”), pursuant to which we, in a private placement, issued and sold to the October 2014 Investors (the “2014 Private Placement”) an aggregate of 730,776 shares of our common stock at a price per share of $3.25 for an aggregate purchase price of approximately $2.375 million, and warrants to purchase up to an aggregate of 365,388 shares of our common stock with an initial exercise price of $4.00 per share that are exercisable for the period from April 22, 2015 through April 22, 2020. In connection with the 2014 Private Placement, we also issued a warrant to purchase up to an aggregate of 9,230 shares of our common stock to one advisor. The warrants issued in the 2014 Private Placement include both cash and “cashless exercise” features.

The 2014 Private Placement required the repricing and issuance of additional common stock warrants to the holders of warrants issued in the February 2012 common stock and warrant sale. The exercise price of the warrants decreased from $11.73 per share to $10.86 per share and the number of shares issuable upon exercise of the warrants increased from 1,212,665 to 1,309,785.

On December 31, 2014, we entered into the Note Purchase Agreement with the Investor pursuant to which we agreed to issue and sell the Initial note to the Investor (the “Note Private Placement”). See Note 6 “Debt-Convertible Promissory Notes” for additional information regarding the terms of the Initial note.

Pursuant to the terms of the Note Purchase Agreement, we are subject to certain registration obligations and we may be required to effect one or more other registrations to register for resale the shares of our common stock issued or issuable under the Initial Note in connection with certain “piggy-back” registration rights granted to the Investor.

The Note Private Placement required the repricing and issuance of additional common stock warrants to the holders of warrants issued in the February 2012 common stock and warrant sale. The exercise price of the 2012 warrants decreased from $10.86 per share to $10.25 per share and the number of shares issuable upon exercise of the warrants increased from 1,309,785 to 1,387,685.

On January 15, 2015, we entered into the Note Purchase Agreement with the Additional Investors and, on January 20, 2015, issued and sold to the Additional Investors, in a private placement, the Additional Notes in an aggregate principal amount of $925,000 (the “Additional Note Private Placement”). The Additional Notes have the same terms and conditions as the Initial Note.

Craig-Hallum acted as the sole placement agent for the sale and issuance of the Additional Notes. In connection with the sale and issuance of the Additional Notes, we issued to Craig-Hallum an unsecured convertible promissory note, upon the same terms and conditions as the Notes, in an aggregate principal amount equal to 5% of the proceeds received by us pursuant to the sale and issuance of the Additional Notes, or $46,250. As of the date of filing of this Annual Report, the Placement Agent Note remains outstanding.

The Additional Note Private Placement required the repricing and issuance of additional common stock warrants to the investors in our February 2012 common stock and warrant financing. The exercise price of these warrants decreased from $10.25 per share to $9.59 per share and the number of shares issuable upon exercise of the warrants increased from 1,387,685 to 1,483,161.

On February 27, 2015, we entered into a purchase agreement with Craig-Hallum Capital Group LLC (the “Underwriter”) relating to our sale and issuance of 3,573,899 shares of our common stock and corresponding warrants to purchase up to 714,780 shares of our common stock (the “2015 Offering”). Each share of common stock was sold in combination with a warrant to purchase 0.20 of a share of common stock. The purchase price to the public for each share of common stock and accompanying warrant was $1.95.

The purchase price paid by the Underwriter to us for the common stock and accompanying warrants was $1.8135. The net proceeds from the 2015 Offering, after deducting the Underwriter’s discount and other estimated 2015 Offering expenses, were approximately $6.2 million.

The accompanying warrants are exercisable immediately upon their initial issuance date at an exercise price of $2.24 per share and will expire five years from the date of issuance. The exercise price will also be subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock.

The 2015 Offering required the repricing and issuance of additional common stock warrants to the investors in our February 2012 common stock and warrant financing. The exercise price of these warrants decreased from $9.59 per share to $7.56 per share and the number of shares issuable upon exercise of the warrants increased from 1,483,161 to 1,881,396.

On June 30, 2015, we entered into a Securities Purchase Agreement with certain accredited investors (the “July 2015 Investors”) pursuant to which, on July 7, 2015, we sold to the July 2015 Investors, and the July 2015 Investors purchased from us, (a) an aggregate of approximately 1.5 million shares of our common stock at a price per share of $1.42, (b) warrants (the “Series B Warrants”) to purchase up to an aggregate of 0.7 million shares of our common stock with an exercise price of $0.01 per share, and (c) warrants (the “Series A Warrants” and, together with the Series B Warrants, the “July 2015 Warrants”) to purchase up to an aggregate of 1.2 million shares of our common stock, with an exercise price of $1.66 per share (collectively, the “July 2015 Offering”). The purchase price for the Series B Warrants was $1.42 per share of our common stock subject to the Series B Warrants. Each of the July 2015 Warrants has a term of 5 and 1/2 years. The Series B Warrants are immediately exercisable. The Series A Warrants will be exercisable beginning on January 7, 2016, six months from the date of issuance. The aggregate gross proceeds to us from the July 2015 Offering were approximately $3.0 million.

Craig-Hallum Capital Group LLC (the “2015 Placement Agent”) served as the sole placement agent for the Offering. In consideration for services rendered as the placement agent in the July 2015 Offering, we (a) paid to the 2015 Placement Agent cash commissions equal to approximately $212,783, or 7.0% of the gross proceeds received in the July 2015 Offering; (b) issued to the 2015 Placement Agent a five-year warrant to purchase up to 107,033 shares of our common stock with an exercise price of $1.66 per share and which is subject to other terms that are the same as the terms of the Series A Warrants; and (c) reimbursed the 2015 Placement Agent for reasonable out-of-pocket expenses, including fees paid to the 2015 Placement Agent’s legal counsel, incurred in connection with the July 2015 Offering, which reimbursable expenses did not exceed $50,000.

The July 2015 Offering required the repricing and issuance of additional common stock warrants to the investors in our February 2012 common stock and warrant financing. The exercise price of these warrants decreased from $7.56 per share to $6.50 per share and the number of shares issuable upon exercise of the warrants increased from 1,881,396 to 2,188,177.

Common Stock Warrants.

During the twelve months ended December 31, 2015, we issued warrants to purchase 3,466,841 shares of common stock and none of the issued warrants were exercised. Included in the warrants issued in 2015 were 800,492 warrant issued due to repricing requirements of the Private Placement and 2,666,349 warrants issued in connection with the 2015 Offering and the July 2015 Offering. During the twelve months ended December 31, 2015, warrants to purchase 431,027 shares of common stock expired. There were 664,703 common stock warrants issued during the 12 months ended December 31, 2014 and none of the issued warrants were exercised. Included in the warrants issued in 2014 were 290,085 warrants issued due to re-pricing requirements of the Private Placement. Warrants to purchase an aggregate of 5,920,799 shares of common stock were outstanding at December 31, 2015.

Warrant Holder	Issue Year	Expiration	Underlying Shares	Exercise Price
Various Institutional Holders(1)	2012	February 2017	1,899,729	$6.50
Third Security Investors(1)	2012	February 2017	288,448	$6.50
Various Institutional Holders(2)	2013	January 2018	441,655	$9.00
Third Security Investors(2)	2013	January 2018	250,000	$9.00
Various Institutional Holders(3)	2014	April 2020	374,618	$4.00
Various Institutional Holders(4)	2015	February 2020	714,780	$2.24
Various Institutional Holders(5)	2015	December 2020	1,284,405	$1.66
Various Institutional Holders(5)	2015	December 2020	667,164	$0.01
			5,920,799

(1) These Warrants were issued in connection with the Private Placement completed in February 2012 and are classified as a liability in our financial statements. See Footnote 13 - “Fair Value”. These warrants also contain certain anti-dilution provisions that provide for an adjustment to the exercise price and number of shares issuable upon exercise of the warrant in the event that we engage in certain issuances of shares of our common stock at a price lower than the exercise price of the warrant.

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

(3) These warrants were issued in connection with the 2014 Private Placement, which was completed in October 2014.

(4) These warrants were issued in connection with the 2015 Offering, which was completed in February 2015.

(5) These warrants were issued in connection with the July 2015 Offering, which was completed in July 2015.

Preferred Stock Series A.

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

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

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

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

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

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

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

The Series A Preferred Stock was converted into common stock on January 6, 2016 (See Note 15 - “Subsequent Events - Conversion of Preferred Stock”).

Preferred Stock Series B.

On March 5, 2014, we entered into a Series B Convertible Preferred Stock Purchase Agreement (the “Series B Purchase Agreement”) with affiliates of Third Security, LLC (the “2014 Third Security Investors”), pursuant to which we, in a private placement, sold and issued an aggregate of 1,443,297 shares of our Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), at a price per share of $4.85 for an aggregate purchase price of approximately $7.0 million. Each share of Series B Preferred Stock issued pursuant to the Series B Purchase Agreement is initially convertible into shares of our common stock at a rate of 1-for-1, which conversion rate is subject to further adjustment as set forth in the Certificate of Designation of Series B Convertible Preferred Stock.

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

The Series B financing required the repricing and issuance of additional common stock warrants to the holders of warrants issued in the Private Placement. The exercise price of the warrants decreased from $12.96 per share to $11.73 per share and the number of shares issuable upon exercise of the warrants increased from 1,097,600 to 1,212,665.

The Series B Preferred Stock was converted into common stock on January 6, 2016 (See Note 15 - “Subsequent Events - Conversion of Preferred Stock”).

Preferred Stock Dividends.

We have cumulative undeclared dividends on our Series A Convertible Preferred Stock and Series B Preferred Stock (collectively “Preferred Stock”). At December 31, 2014, we had a recorded liability of $3.1 million for these undeclared dividends. Since dividends should generally not be recognized as a liability until declared, the $3.1 million liability was reversed in 2015 with an offset to accumulated deficit.

For the twelve months ended December 31, 2015 and 2014, we had cumulative undeclared dividends on our Preferred Stock of $4.4 million and $3.1 million, respectively. In accordance with the FASB’s Accounting Standards Codification Topic 260-10-45-11, “Earnings per Share”, these dividends were added to the net loss per share calculation. The accrued dividends were paid through the issuance of common stock on January 6, 2016 (See Note 15 - “Subsequent Events - Conversion of Preferred Stock”).

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EQUITY INCENTIVE PLAN

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

EQUITY INCENTIVE PLAN

EQUITY INCENTIVE PLAN

The Company’s 2006 Equity Incentive Plan (the “Plan”) allows the Company to make awards of various types of equity-based compensation, including stock options, dividend equivalent rights (“DERs”), stock appreciation rights (“SARs”), restricted stock, restricted stock units, performance units, performance shares and other awards, to employees and directors of the Company. As of December 31, 2015, the Company was authorized to issue 1,666,666 shares under the Plan; provided, that no more than 1,250,000 of such shares may be used for grants of restricted stock, restricted stock units, performance units, performance shares and other awards.

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

For the years ended December 31, 2015 and 2014, we recorded compensation expense of $0.6 million and $0.9 million, respectively within selling, general and administrative expense. As of December 31, 2015, there was $0.4 million of unrecognized compensation expense related to unvested stock awards, which is expected to be recognized over a weighted average period of approximately 1.3 years.

The fair value of the options and SARs granted during 2015 was estimated on their respective grant dates using the Black-Scholes option pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 1.32% to 1.91%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of four to six years, based on historical exercise activity; and volatility of 83% to 86% for grants made during the year ended December 31, 2015 based on the historical volatility of our stock over a time that is consistent with the expected life of the option.

The fair value of the options granted during 2014 was estimated on their respective grant dates using the Black-Scholes option-pricing model. The Black-Scholes model was used with the following assumptions: risk-free interest rates of 1.50% to 1.74%, based on the U.S. Treasury yield in effect at the time of grant; dividend yields of zero percent; expected lives of four to five years, based on historical exercise activity; and volatility of 82% to 105% for grants made during the year ended December 31, 2014 based on the historical volatility of our stock over a time that is consistent with the expected life of the option.

The weighted average grant date fair value per share of options granted during the years ended December 31, 2015 and 2014 was $0.96 and $3.51 respectively.

Stock Options.

The following table summarizes stock option activity under the Plan during the year ended December 31, 2015:

	Number of Options		Weighted Average Exercise Price
Outstanding at January 1, 2015	685,984		$	6.56
Granted	665,560		1.50
Forfeited	(154,189	)	4.72
Expired	(89,561	)	10.57
Outstanding at December 31, 2015	1,107,794		$	3.45
Exercisable at December 31, 2015	417,968		$	5.28

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

As of December 31, 2015, 945,685 outstanding options were vested or expected to vest. The weighted average exercise price of these options was $3.45 and the aggregate intrinsic value was zero with a remaining weighted average contractual life of 8.5 years.

As of December 31, 2015, 417,968 options were exercisable with a weighted average exercise price of $5.28 and an aggregate intrinsic value of zero. The weighted average contractual life of these options was 7.8 years.

No options were exercised in 2015 or 2014.

The total fair value of awards that vested during 2015 and 2014 was $0.8 million and $0.6 million, respectively.

Stock Appreciation Rights (“SARs”).

The following table summarizes SARs activity under the Plan during the year ended December 31, 2015:

	Number of SARs	Weighted Average Exercise Price
Outstanding at January 1, 2015	98,333	$	4.14
Granted	—	—
Forfeited	—	—
Expired	—	—
Outstanding at December 31, 2015	98,333	$	4.14
Exercisable at December 31, 2015	68,220	$	4.23

All SARs outstanding were issued to officers.

As of December 31, 2015, 98,333 outstanding SARs shares were vested or expected to vest. The weighted average exercise price of these options was $4.14 and the aggregate intrinsic value was zero with a remaining weighted average contractual life of 7.9 years.

As of December 31, 2015, 68,220 SARs shares were exercisable and no SARs shares were exercised in 2015 or 2014. At December 31, 2015, a liability of less than $0.1 million was recorded in accrued expenses.

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FAIR VALUE

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

FAIR VALUE

FAIR VALUE

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

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

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

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

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

Debt

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

Common Stock Warrant Liability

Certain of our issued and outstanding warrants to purchase common stock do not qualify to be treated as equity, and accordingly are recorded as a liability. The Common Stock Warrant Liability represents the fair value of the 2.2 million warrants issued in February 2012 (as adjusted pursuant to the terms of the 2012 warrants). We are required to record these instruments at fair value at each reporting date and changes are recorded as a non-cash adjustment to earnings. The gains or losses included in earnings are reported in other income (expense) in our Statement of Operations. Management does not believe that this liability will be settled by a use of cash.

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

Static Business Inputs include: Our equity value, which was estimated using our stock price of $1.07 as of December 31, 2015; the amount of the down-round financing, the timing of the down-round financing, the expected exercise period of 1.11 years from the valuation date and the fact that no other potential fundamental transactions are expected during the term of the common stock warrants.

Static Technical Inputs include: volatility of 104% based on implied and historical rates over the expected term and the risk-free interest rate of 0.69% based on the 1-year U.S. Treasury yield.

Simulated Business Inputs include: the probability of down-round financing, which was estimated to be 100% for simulated equity values below the down-round financing cut-off point.

Simulated Technical Inputs include: our equity value in periods 1-10 follows a geometric Brownian motion and is simulated over 10 independent six-month periods; a down-round financing event was randomly simulated in an iteration based on the 100% discrete probability of a down-round financing for those iterations where our simulated equity value at the expected timing of down-round financing was below the down-round financing cut-off point.

During the year ended December 31, 2015, the changes in the fair value of the liability measured using significant unobservable inputs (Level 3) was comprised of the following:

	Dollars in Thousands
	For the Year Ended
	December 31, 2015
Balance at December 31, 2014	$	145
Total gains or losses:
Recognized in earnings	205
Balance at December 31, 2015	$	350

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

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OPERATING SEGMENT AND GEOGRAPHIC INFORMATION

12 Months Ended

Dec. 31, 2015

Segment Reporting [Abstract]

OPERATING SEGMENT AND GEOGRAPHIC INFORMATION

OPERATING SEGMENT AND GEOGRAPHIC INFORMATION

We have one operating segment as of December 31, 2015, Laboratory Services. Our revenues from continuing operations are primarily generated from pharmacogenomics research services supporting Phase II and Phase III clinical trials conducted by pharmaceutical and biotechnology companies.

Based on location of end customers, all of our revenues from continuing operations are attributed to the United States. All of our long-lived assets are also located within the United States.

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SUBSEQUENT EVENTS

12 Months Ended

Dec. 31, 2015

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

Conversion of Preferred Stock

On January 6, 2016, the Company entered into a Conversion Agreement (the “Conversion Agreement”) with the holders (the “Preferred Holders”) of all of the Company’s outstanding shares of Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred”), and Series B Convertible Preferred Stock, par value $0.01 per share (the “Series B Preferred”), pursuant to which, among other things, the Preferred Holders: (1) elected to convert all of the outstanding shares of Series A Preferred and Series B Preferred into shares of the Company’s common stock, par value $0.01 per share (“Common Stock”), in each case in accordance with the terms thereof, and (2) agreed that all accrued and unpaid dividends on the Series A Preferred and Series B Preferred would be paid by the Company in shares of Common Stock at a rate of $1.00 per share of Common Stock (collectively, the “Conversion”).

The outstanding shares of Series A Preferred were convertible into shares of Common Stock at a rate of 1-for-3, and the outstanding shares of Series B Preferred were convertible into shares of Common Stock at a rate of 1-for-1. Prior to the entry into the Conversion Agreement, there were 2,586,205 shares of Series A Preferred outstanding, which were converted into 862,057 shares of Common Stock, and 1,443,297 shares of Series B Preferred outstanding, which were converted into 1,443,297 shares of Common Stock, for an aggregate of 2,305,354 shares of Common Stock issued upon conversion of the Series A Preferred and Series B Preferred (the “Conversion Shares”). At the time of the entry into the Conversion Agreement, there were $3,681,591.90 in accrued and unpaid dividends on the outstanding shares of Series A Preferred, which were converted, in accordance with the Conversion Agreement, into 3,681,590 shares of Common Stock, and $793,236.17 in accrued and unpaid dividends on the outstanding shares of Series B Preferred, which were converted, in accordance with the terms of the Conversion Agreement, into 793,235 shares of Common Stock, for an aggregate of 4,474,825 shares of Common Stock issued pursuant to the accrued and unpaid dividends on the Series A Preferred and Series B Preferred (the “Dividend Shares”). Therefore, in connection with the full conversion of the Series A Preferred and Series B Preferred, plus the conversion of all accrued and unpaid dividends thereon, the Company issued an aggregate of 6,780,179 shares of Common Stock to the Preferred Holders on January 6, 2016.

Following the conversion of the shares of Series A Preferred and Series B Preferred into common stock, no shares of Series A Preferred or Series B Preferred remain outstanding.

Amended Loan and Security Agreement

On January 6, 2016, the Company entered into an eight amendment the Loan Amendment. The eight amendment, among other things, (1) provides that the Lenders will waive specified events of default under the terms of the Loan Agreement, (2) reduces the Company’s future minimum revenue covenants under the Loan Agreement, (3) extends the maturity date of the Loan Agreement until November 1, 2017, and (4) provides for the repayment of an overadvance of $750,000 previously provided by the Lenders to the Company pursuant to the Loan Agreement.

During the first quarter of 2016, the overadvance that existed at December 31, 2015 was repaid to the Lenders and $0.2 million was received from certain of the Lenders and another lender affiliate in connection with the equity offering made on January 6, 2015.

Issuance of Preferred Stock and Common Stock Warrants

On January 6, 2016, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which, on January 8, 2016, the Company sold to the Investors, and the Investors purchased from the Company (the “Offering”), an aggregate of approximately $2.2 million of units (the “Units”) consisting of (1) an aggregate of 2,365,243 shares (the “A-1 Preferred Shares”) of Series A-1 Convertible Preferred Stock, par value $0.01 per share, of the Company (the “A-1 Preferred”), and (2) warrants (the “Warrants”) to purchase up to an aggregate of 1,773,929 shares of common stock, par value $0.01 per share, of the Company (the “Common Stock”). Each Unit was sold to the Investors at a purchase price of $0.93 per Unit. The A-1 Preferred Shares are convertible into shares of Common Stock at an initial rate of 1-for-1, which conversion rate is subject to further adjustment as set forth in the Company’s Certificate of Designation of Series A-1 Convertible Preferred Stock, which was filed with the Secretary of State of the State of Delaware on January 8, 2016 (the “Series A-1 Certificate of Designation”). Pursuant to the terms of the Series A-1 Certificate of Designation, the holders of the A-1 Preferred Shares will generally be entitled to that number of votes as is equal to the product obtained by multiplying: (a) the number of whole shares of Common Stock into which the A-1 Preferred may be converted as of the record date of such vote or consent, by (b) 0.93, rounded down to the nearest whole number. Therefore, every 1.075269 shares of A-1 Preferred will generally initially be entitled to one vote.

The Warrants are immediately exercisable, have a term of five years and have an exercise price of $1.21 per share of Common Stock. Each Warrant includes both cash and “cashless exercise” features and an exchange feature whereby the holder of the Warrant may exchange (the “Exchange Right”) all or any portion of the Warrant for a number of shares of Common Stock equal to the quotient obtained by dividing the “Exchange Amount” by the closing bid price of the Common Stock on the second trading day prior to the date the Warrant is exchanged (the “Exchange Price”). Under the Warrants, the “Exchange Amount” is based upon a Black Scholes option pricing model, and the aggregate Exchange Amount under all of the Warrants will be $1,436,882, subject to adjustment to the extent that the risk-free U.S. Treasury rate fluctuates between the date of issuance of the Warrants and the date the Warrants are exchanged. Each Warrant provides that the number of shares that may be issued upon exercise of the Exchange Right is limited to the number of shares that may be purchased pursuant to the terms of the Warrant, unless the Company has previously obtained stockholder approval or approval from The Nasdaq Stock Market LLC to issue any additional shares of Common Stock (the “Additional Shares”) pursuant to the Exchange Right (the “Required Approvals”). For any Exchange Right exercised more than 90 days following the issuance of the Warrants, if the Company has not obtained either of the Required Approvals, the Company will be required to pay the Warrant holder an amount in cash for any Additional Shares that it cannot issue without the Required Approvals based on the Exchange Amount.

The Warrants further provide that, to the extent the closing bid price of the Common Stock on the second trading day prior to the date the Warrant is exchanged is less than $0.50, the Exchange Price will be deemed to be equal to $0.50, and, in addition to issuing shares of Common Stock based on this Exchange Price, the Company will be required to pay to the Warrant holder an amount in cash equal to the product obtained by multiplying (a) $0.50 minus the closing bid price of the Common Stock on the second trading day prior to the date the Warrant is exchanged, by (b) the aggregate number of shares of Common Stock issued to the Warrant holder by the Company in such exchange at an Exchange Price equal to $0.50. Therefore, if the Required Approvals are obtained, based on the Exchange Amount of $1,436,882 (which, as noted above, is subject to adjustment to the extent that the risk-free U.S. Treasury rate fluctuates between the date of the issuance of the Warrants and the date the Warrants are exchanged), the maximum number of shares of Common Stock issuable pursuant to the Exchange Right in the Warrants will be 2,873,765. In addition, if, for example, assuming an Exchange Amount of $1,436,882, the closing bid price of the Common Stock on the second trading day prior to the date the Warrants are exchanged is $0.25, the Company would be required to pay to the Warrant holders cash in an aggregate amount of $718,441 in addition to issuing the Warrant holders 2,873,765 shares.

In accordance with the terms of the Purchase Agreement, the Company amended that certain Series A Warrant to purchase up to an aggregate of 1,161,972 shares of Common Stock previously issued by the Company to an affiliate of one of the Investors on July 7, 2015 (the “Original Warrant”), as previously reported by the Company on its Amendment No. 1 to Current Report on Form 8-K/A, filed with the Securities and Exchange Commission (the “SEC”) on July 7, 2015 (as so amended, the “Amended Warrant”). The Amended Warrant amends the Original Warrant to provide that the Amended Warrant is subject to the same terms and conditions as the Warrants and, therefore, includes both cash and “cashless exercise” features and an Exchange Right whereby the number of shares issuable pursuant to the Exchange Right is equal to the “Amended Warrant Exchange Amount”, which is based on a Black Scholes option pricing model, and will be $941,197, subject to adjustment to the extent that the risk-free U.S. treasury rate fluctuates between the date of issuance of the Amended Warrant and the date the Amended Warrant is exchanged. The Amended Warrant is exercisable for up to 1,161,972 shares of Common Stock in the event the Company has obtained either of the Required Approvals with respect to the Amended Warrant. In the event the Amended Warrant holder exercises the Amended Warrant more than 90 days following the issuance of the Amended Warrant, if the Company has not obtained either of the Required Approvals, the Company will be required to pay the Amended Warrant holder an amount in cash for the shares of Common Stock that the Company cannot issue under the Amended Warrant pursuant to such exercise without the Required Approvals based on the Amended Warrant Exchange Amount.

The Amended Warrant also provides that, to the extent the closing bid price of the Common Stock on the second trading day prior to the date the Amended Warrant is exchanged is less than $0.50, the Exchange Price will be deemed to be equal to $0.50, and, in addition to issuing shares of Common Stock based on this Exchange Price (assuming receipt of the Required Approvals), the Company will be required to pay to the Amended Warrant holder an amount in cash equal to the product obtained by multiplying (a) $0.50 minus the closing bid price of the Common Stock on the second trading day prior to the date the Amended Warrant is exchanged, by (b) the aggregate number of shares of Common Stock issued to the Amended Warrant holder by the Company in such exchange at an Exchange Price equal to $0.50. Therefore, if the Required Approvals are obtained, based on the Amended Warrant Exchange Amount of $941,197 (which, as noted above, is subject to adjustment to the extent that the risk-free U.S. Treasury rate fluctuates between the issuance of the Amended Warrant and the date the Amended Warrant is exchanged), the maximum number of shares of Common Stock issuable pursuant to the Exchange Right in the Amended Warrant will be 1,882,395. In addition, if, for example, assuming an Amended Warrant Exchange Amount of $941,197, the closing bid price of the Common Stock on the second trading day prior to the date the Amended Warrant is exchanged is $0.25, the Company would be required to pay to the Amended Warrant holder cash in an aggregate amount of $470,599 in addition to issuing the Amended Warrant holder 1,882,395 shares.

In connection with entering into the Securities Purchase Agreement, the Company also entered into a Registration Rights Agreement, dated January 8, 2016, with the Investors. The Registration Rights Agreement requires that the Company file with the SEC a registration statement to register for resale the shares of Common Stock issuable upon conversion of the A-1 Preferred Shares (the “A-1 Preferred Conversion Shares”) and the shares of Common Stock issuable upon exercise of the Warrants and the Amended Warrant (collectively, the “Warrant Shares”) by January 23, 2016.

Craig-Hallum Capital Group LLC (the “Placement Agent”) served as the sole placement agent for the Offering. In consideration for services rendered as the Placement Agent in the Offering, the Company (1) paid to the Placement Agent cash commissions equal to approximately $140,000, or 7.0% of the gross proceeds received in the Offering, excluding any proceeds received from Third Security, LLC or any of its affiliates; (2) issued to the Placement Agent, for a price of $50, a five-year warrant to purchase up to 107,527 shares of Common Stock at an exercise price of $1.21 per share (the “Agent Warrant”), which is subject to the same terms as the Warrants except that the Agent Warrant is not exercisable until July 8, 2016 and does not contain the Exchange Right; and (3) reimbursed the Placement Agent for reasonable out-of-pocket expenses, including fees paid to the Placement Agent’s legal counsel, incurred in connection with the Offering, which reimbursable expenses did not exceed $50,000.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Principles of Consolidation

Principles of Consolidation.

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

Risks and Uncertainties

Risks and Uncertainties.

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

Use of Estimates

Use of Estimates.

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

Basis of Presentation

Basis of Presentation.

The accompanying consolidated financial statements are presented in conformity with U.S. generally accepted accounting principles (“GAAP”). All amounts are presented in U.S. Dollars (“$”).Supplemental cash flows from discontinued operations are presented in Note 3 to the consolidated financial statements “Discontinued Operations.” The Company has evaluated events occurring subsequent to December 31, 2015 for potential recognition or disclosure in the consolidated financial statements and concluded there were no subsequent events that required recognition or disclosure other than those provided in Note 15 “Subsequent Events”.

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

Fair Value

Fair Value.

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

Cash and Cash Equivalents

Cash and Cash Equivalents and Other Current Assets.

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

Concentrations of Cash

Concentrations of Cash.

From time to time, we may maintain a cash position with financial institutions in amounts that exceed federally insured limits.

Accounts Receivable

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

Inventories

Inventories.

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

Inventory Obsolescence

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

Property and Equipment

Property and Equipment.

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

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

Goodwill and Intangible Assets

Goodwill and Intangible Assets.

Intangible assets include intellectual property, patents and acquired products.

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

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

3. Acquired Products.    As part of the FAMILION acquisition and acquisition of certain intangible assets from Axial, the Company acquired technology, in process technology, trademarks/tradenames, customer relationships, covenants not to compete and third party relationships. These costs will be amortized pursuant to the straight-line method over their estimated economic life of seven to fifteen years. See Footnote 5 “Intangible Assets and Other Assets”.

Goodwill is tested for impairment annually. We perform this impairment analysis during the fourth quarter of each year or whenever events indicate that the carrying amount of goodwill may not be recoverable. We test our intangible assets for impairment when factors are present that indicate the carrying value of an intangible asset (group) may not be recoverable. Impairment occurs when the carrying value is determined to be not recoverable, thereby causing the carrying value of the goodwill or intangible asset (group) to exceed its fair value. If impaired, the asset’s carrying value is reduced to its fair value.

Common Stock Warrants

Common Stock Warrants.

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

Stock Based Compensation

Stock Based Compensation.

All stock-based awards to date have exercise prices equal to the market price of our common stock on the date of grant and have ten-year contractual terms. Unvested options as of December 31, 2015 had vesting periods of one or three years from the date of grant. None of the stock options outstanding at December 31, 2015 are subject to performance or market-based vesting conditions.

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

Income Taxes

Income Taxes.

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities at each balance sheet date using tax rates expected to be in effect in the year the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent that it is more likely than not that they will not be realized. Our policy is to record interest and penalties directly related to income taxes as income tax expense in the Consolidated Statements of Operations.

Net Sales Recognition

Net Sales Recognition.

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

• Persuasive evidence of an arrangement exists;

• Delivery has occurred or services have been rendered;

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

• Collectability is reasonably assured.

In our Biomarker Identification laboratory, we perform services on a project by project basis. When we receive payment in advance, we recognize revenue when we deliver the service. These projects typically do not extend beyond one year. At December 31, 2015 and 2014, deferred net sales associated with pharmacogenomics research projects, included in the balance sheet in deferred revenue, was $0.1 million and $0.3 million, respectively.

Net sales from Patient Testing laboratories are recognized on an individual test basis and take place when the test report is completed, reviewed and sent to the client less the reserve for insurance, Medicare and Medicaid contractual adjustments. There are no deferred net sales associated with our Patient Testing services. Adjustments to the allowances, based on actual receipts from third party payers, are reflected in the estimated contractual allowance applied prospectively. In the fourth quarter of 2015, we adjusted our contractual allowance rates to better reflect the reimbursement level we expect to achieve on Patient Testing billings. The adjustment negatively impacted our fourth quarter of 2015 Patient Testing revenues. Our Patient Testing revenues are reported as part of discontinued operations (See Note 3 - “Discontinued Operations”).

Net sales of Genetic Assays and Platforms products, reported as discontinued operations (See Note 3 - “Discontinued Operations”) are recognized in accordance with the terms of the sales arrangement. Such recognition is based on receipt of an unconditional customer order and transfer of title and risk of ownership to the customer, typically upon shipment of the product under a purchase order. Our sales terms do not provide for the right of return unless the product is damaged or defective. Net sales from certain services associated with the analytical instruments, to be performed subsequent to shipment of the products, is deferred and recognized when the services are provided. Such services, mainly limited to installation and training services that are not essential to the functionality of the instruments, typically are performed in a timely manner subsequent to shipment of the instrument. We also enter into various service contracts that cover installed instruments. These contracts cover specific time periods and net sales associated with these contracts are deferred and recognized ratably over the service period.

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

Research and Development

Research and Development.

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

Translation of Foreign Currency

Translation of Foreign Currency.

Our foreign subsidiary, which is included within discontinued operations uses the local currency of the country in which it is located as its functional currency. Its assets and liabilities are translated into U.S. dollars at the exchange rates in effect at the balance sheet date.

Loss Per Share

Loss Per Share.

Basic loss per share is calculated based on the weighted-average number of shares of common stock outstanding during each period. Diluted loss per share includes shares issuable upon exercise of outstanding stock options, warrants or conversion rights that have exercise or conversion prices below the market value of our common stock, as long as the effect is not anti-dilutive.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. This guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to a customer. ASU No. 2014-09 will replace most existing revenue recognition guidance in generally accepted accounting principles in the U.S. when it becomes effective. In July 2015, the FASB decided to defer the effective date of this new accounting guidance by one year. As a result, ASU No. 2014-09 will be effective for us for all annual and interim reporting periods beginning after December 15, 2017 and early adoption would be permitted as of the original effective date. The new standard permits the use of either the retrospective or cumulative effect transition method. We do not expect to early adopt this guidance and we have not selected a transition method. We are currently evaluating the impact this guidance will have on our financial condition, results of operations and cash flows.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40). The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We do not expect to early adopt this guidance and do not believe that the adoption of this guidance will have a material impact on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, rather than as a deferred charge asset. ASU No. 2015-03 is effective for us beginning on January 1, 2016. ASU No. 2015-03 is not expected to have a material impact on our financial condition, results of operations or cash flows.

In February 2016, the FASB issued an ASU, “Leases”. The new standard amends the recognition of lease assets and lease liabilities by lessees for those leases currently classified as operating leases and amends disclosure requirements associated with leasing arrangements. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently assessing the impact of the adoption of this ASU will have on our consolidated financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Allowance for doubtful accounts rollforward

The following is a summary of activity for the allowance for doubtful accounts from continuing operations during the years ended December 31, 2015 and 2014:

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs		Ending Balance
Twelve months ended December 31, 2015	$	20	$	67	$	—	$	87
Twelve months ended December 31, 2014	$	17	$	3	$	—	$	20

Allowance for obsolete inventory rollforward

The following is a summary of activity for the allowance for obsolete inventory during the years ended December 31, 2015 and 2014:

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs		Ending Balance
Twelve months ended December 31, 2015	$	—	$	63	$	—	$	63
Twelve months ended December 31, 2014	$	—	$	—	$	—	$	—

Schedule of property and equipment, useful lives

Depreciation is computed by the straight-line method over the estimated useful lives of the related assets as follows:

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

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DISCONTINUED OPERATIONS (Tables)

12 Months Ended

Dec. 31, 2015

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations

Assets and liabilities of the discontinued operations are classified as assets held for sale and liabilities held for sale in the consolidated balance sheets and consisted of the following:

	Dollars in Thousands
	December 31, 2015		December 31, 2014
ASSETS
Accounts receivable, net	$	1,905	$	7,161
Inventory, net	—		3,005
Other current assets	82		806
Total current assets	1,987		10,972
Property and equipment, net	—		997
Goodwill and intangible assets	—		14,131
Other assets	—		6
Total Assets	$	1,987	$	26,106
LIABILITIES
Accounts payable	$	—	$	973
Accrued compensation	264		752
Accrued expenses	—		505
Deferred revenue	—		737
Total current liabilities	264		2,967
Other liabilities	—		871
Total Liabilities	$	264	$	3,838

The following is a summary of activity for the allowance for doubtful accounts from discontinued operations during the years ended December 31, 2015 and 2014. The allowance for doubtful accounts from discontinued operations are included in the assets held for sale in the consolidated balance sheets.

	Dollars in Thousands
	Beginning Balance		Provision		Write Offs			Ending Balance
Twelve months ended December 31, 2015	$	7,927	$	9,447	$	(2,710	)	$	14,664
Twelve months ended December 31, 2014	$	3,821	$	6,116	$	(2,010	)	$	7,927

Results of the discontinued operations consisted of the following:

	Years ended December 31,
(in thousands)	2015			2014
Net sales	$	18,584		$	25,843
Cost of goods sold	12,287			15,187
Gross profit	6,297			10,656
Selling, general and administrative expense	15,187			16,761
Research and development expense	408			648
Impairment of long-lived assets	13,942			—
Operating loss from discontinued operations	(23,240		)	(6,753		)
(Loss) gain on sale of business	(224		)	4,114
Loss from discontinued operations before income taxes	(23,464		)	(2,639		)
Income tax (benefit) expense	(648		)	524
Loss from discontinued operations	$	(22,816	)	$	(3,163	)

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INVENTORIES (Tables)

12 Months Ended

Dec. 31, 2015

Inventory Disclosure [Abstract]

Inventories

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

	Dollars in Thousands
	December 31, 2015			December 31, 2014
Finished goods	$	—		$	—
Raw materials and work in process	113			—
Demonstration inventory	—			—
	$	113		$	—
Less allowances	(63		)	—
Total	$	50		$	—

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INTANGIBLE ASSETS AND OTHER ASSETS (Tables)

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Indefinite-Lived and Finite-Lived Intangible Assets

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

	Dollars in Thousands
	December 31, 2015
	Cost		Accumulated Amortization		Impairment Charge		Net Book Value
Acquired technology	$	9,009	$	4,611	$	4,398	$	—
Assay royalties	1,434		973		461		—
Third party payor relationships	367		116		251		—
Tradenames and trademarks	824		439		385		—
Customer relationships	652		130		522		—
Covenants not to compete	184		184		—		—
Patents	980		126		148		706
Intellectual property	671		207		—		464
	$	14,121	$	6,786	$	6,165	$	1,170

	Dollars in Thousands
	December 31, 2014
	Cost		Accumulated Amortization		Net Book Value		Included in assets held for sale		Included in continuing operations
Acquired technology	$	9,009	$	3,995	$	5,014	$	5,014	$	—
Assay royalties	1,434		819		615		615		—
Third party payor relationships	367		98		269		269		—
Tradenames and trademarks	824		351		473		473		—
Customer relationships	652		98		554		554		—
Covenants not to compete	184		138		46		46		—
Patents	815		87		728		157		571
Intellectual property	266		86		180		—		180
	$	13,551	$	5,672	$	7,879	$	7,128	$	751

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

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DEBT (Tables)

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Schedule of Debt

	Dollars in Thousands
	Year Ended December 31,
	2015			2014
Revolving Line (1)	$	3,025		$	3,000
Term Loan (2)	4,000			4,087
Convertible Promissory Note (3)	571			750
Total debt	7,596			7,837
Current portion of long term debt	(7,596		)	(462		)
Long term debt, net of current maturities	$	—		$	7,375

(1) Revolving Line of Credit.Amounts advanced under the Revolving Line initially bore interest at an annual rate equal to the greater of (a) 4.25% or (b) the Wall Street Journal prime rate plus 1%. Interest is payable on a monthly basis, with the balance payable at the maturity of the Revolving Line. Under the Amendment to the Loan Agreement, which we entered into on August 2, 2013, amounts advanced under the Revolving Line bear interest at an annual rate equal to the greater of (x) 6.25% or (y) the Wall Street Journal prime rate plus 3%. The current interest rate is 6.50%. Under the Loan Agreement, we paid the Lenders an upfront fee of $20,000, and will pay the Lenders an additional commitment fee of $20,000 on each one year anniversary of March 13, 2013, the Effective Date, during the term of the Revolving Line. In addition, a fee of 0.5% per annum is payable quarterly on the unused portion of the Revolving Line. The Revolving Line matures on November 1, 2017.

(2) Term Loan. We received $4.0 million under the Term Loan on the Effective Date. Pursuant to the terms of the Loan Agreement, as amended by the Sixth Amendment (as defined in “-Revolving Line and Term Loan” below), we made a principal payment of approximately $148,000 on April 1, 2015 and were not be obligated to make monthly payments of principal to the Lenders until April 1, 2016. Pursuant to the Eighth Amendment of the Loan Agreement, the maturity date of the Loan Agreement was extended until November 1, 2017 and no principal payments on the Term Loan are due until such date. The current interest rate is 9.1%.

We paid the Lenders an upfront fee of $40,000 for the Term Loan, and will pay the Lenders an additional final payment of $120,000 at maturity or prepayment of the Term Loan. In addition, if we repay the Term Loan prior to maturity, we will pay the Lenders a prepayment penalty of 1% of the total outstanding balance under the Term Loan.

Additional Terms

The Loan Agreement contains affirmative and negative covenants. Under the Loan Agreement, we are required to maintain a minimum liquidity ratio and achieve a minimum amount of revenue, and we also agreed not to (i) pledge or otherwise encumber our assets other than to the Lenders, (ii) enter into additional borrowings or guarantees, (iii) repurchase our capital stock, or (iv) enter into certain mergers or acquisitions without the Lenders’ consent. Additionally, the Loan Agreement contains a subjective acceleration clause at the discretion of the Lenders. As of December 31, 2015, the Company was not in compliance with all financial covenants of the Loan Agreement, as amended by the Eighth Amendment. As such, all debt has been classified as current at December 31, 2015.

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

(3) Convertible Promissory Notes. The Notes accrues interest at a rate of 6% per year and mature on December 31, 2016.

Schedule of Maturities of Long-term Debt

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

2016	$	7,596
Total	$	7,596

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CAPITAL LEASES (Tables)

12 Months Ended

Dec. 31, 2015

Leases [Abstract]

Schedule of Capital Leased Assets

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

	Dollars in Thousands
	Asset Balances at
Classes of Property	December 31, 2015			December 31, 2014
Equipment	$	828		$	1,514
Less: Accumulated amortization	(725		)	(997		)
Total	$	103		$	517

Schedule of Future Minimum Lease Payments for Capital Leases

The following is a schedule by years of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2015.

Year ending December 31:

	Dollars in Thousands
2016	$	3
2017	1
Total minimum lease payments	$	4
Less: Amount representing interest	—
Present value of net minimum lease payments	$	4

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COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Future minimum lease payments under non-cancellable operating leases, including non-cancellable lease associated with discontinued operations, are as follows (in thousands):

2016	$	727
2017	724
2018	711
2019	676
2020	680
thereafter	388
Total	$	3,906

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate Reconciliation

The Company’s provision for income taxes from continuing operations for the years ended December 31, 2015 and 2014 relates to income taxes in states, foreign countries and other local jurisdictions and differs from the amounts determined by applying the statutory Federal income tax rate to loss before income taxes for the following reasons:

	Dollars in Thousands
	2015			2014
Benefit at federal rate	$	(3,449	)	$	(3,665	)
Increase (decrease) resulting from:
State income taxes—net of federal benefit	(320		)	(401		)
Miscellaneous permanent differences	163			223
Liability warrants	70			(154		)
State, net operating loss expiration/true-up	(187		)	(327		)
Other—net	(119		)	2
Valuation allowance	3,842			4,322
Total income tax expense (benefit)	$	—		$	—

Schedule of Components of Income Tax Expense (Benefit)

	Dollars in Thousands
	2015		2014
Federal:
Current	$	—	$	—
Deferred	—		—
Total Federal	$	—	$	—
State:
Current	$	—	$	—
Deferred	—		—
Total State	$	—	$	—
Foreign:
Current	$	—	$	—
Deferred	—		—
Total Foreign	$	—	$	—
Total Tax Provision	$	—	$	—

Schedule of Deferred Tax Assets and Liabilities

The Company’s deferred income tax asset from continuing operations at December 31, 2015 and 2014 is comprised of the following temporary differences:

	Dollars in Thousands
	2015			2014
Deferred Tax Asset:
Net operating loss carryforward	$	51,449		$	46,051
Research and development credit carryforwards	918			918
Other	585			539
	52,952			47,508
Less valuation allowance	(52,902		)	(47,406		)
Deferred Tax Asset	$	50		$	102
Deferred Tax Liability:
Property and equipment	50			102
Deferred Tax Liability	$	50		$	102
Net Deferred Asset (Liability)	$	—		$	—

Summary of Operating Loss Carryforwards

At December 31, 2015, we had total unused federal tax net operating loss carryforwards of $142.9 million. The expiration dates are as follows (amounts in thousands):

2018	$	1,838
2019	8,181
2020	9,662
2021	8,228
2022	16,862
2023	16,173
2024	17,390
2025	8,153
2026	6,792
2027	3,238
2028	1,272
2029	591
2031	2,784
2032	8,358
2033	12,097
2034	7,591
2035	13,645
Total	$	142,855

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STOCKHOLDERS' EQUITY (Tables)

12 Months Ended

Dec. 31, 2015

Stockholders' Equity Note [Abstract]

Schedule of Stockholders' Equity Note, Warrants or Rights

Warrant Holder	Issue Year	Expiration	Underlying Shares	Exercise Price
Various Institutional Holders(1)	2012	February 2017	1,899,729	$6.50
Third Security Investors(1)	2012	February 2017	288,448	$6.50
Various Institutional Holders(2)	2013	January 2018	441,655	$9.00
Third Security Investors(2)	2013	January 2018	250,000	$9.00
Various Institutional Holders(3)	2014	April 2020	374,618	$4.00
Various Institutional Holders(4)	2015	February 2020	714,780	$2.24
Various Institutional Holders(5)	2015	December 2020	1,284,405	$1.66
Various Institutional Holders(5)	2015	December 2020	667,164	$0.01
			5,920,799

(1) These Warrants were issued in connection with the Private Placement completed in February 2012 and are classified as a liability in our financial statements. See Footnote 13 - “Fair Value”. These warrants also contain certain anti-dilution provisions that provide for an adjustment to the exercise price and number of shares issuable upon exercise of the warrant in the event that we engage in certain issuances of shares of our common stock at a price lower than the exercise price of the warrant.

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

(3) These warrants were issued in connection with the 2014 Private Placement, which was completed in October 2014.

(4) These warrants were issued in connection with the 2015 Offering, which was completed in February 2015.

(5) These warrants were issued in connection with the July 2015 Offering, which was completed in July 2015.

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EQUITY INCENTIVE PLAN (Tables)

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity

The following table summarizes stock option activity under the Plan during the year ended December 31, 2015:

	Number of Options		Weighted Average Exercise Price
Outstanding at January 1, 2015	685,984		$	6.56
Granted	665,560		1.50
Forfeited	(154,189	)	4.72
Expired	(89,561	)	10.57
Outstanding at December 31, 2015	1,107,794		$	3.45
Exercisable at December 31, 2015	417,968		$	5.28

Schedule of Other Share-based Compensation, Activity

The following table summarizes SARs activity under the Plan during the year ended December 31, 2015:

	Number of SARs	Weighted Average Exercise Price
Outstanding at January 1, 2015	98,333	$	4.14
Granted	—	—
Forfeited	—	—
Expired	—	—
Outstanding at December 31, 2015	98,333	$	4.14
Exercisable at December 31, 2015	68,220	$	4.23

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FAIR VALUE (Tables)

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

During the year ended December 31, 2015, the changes in the fair value of the liability measured using significant unobservable inputs (Level 3) was comprised of the following:

	Dollars in Thousands
	For the Year Ended
	December 31, 2015
Balance at December 31, 2014	$	145
Total gains or losses:
Recognized in earnings	205
Balance at December 31, 2015	$	350

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BUSINESS DESCRIPTION (Details) $ in Millions		3 Months Ended	9 Months Ended	12 Months Ended
	Dec. 29, 2010 USD ($)	Mar. 31, 2016 USD ($)	Sep. 29, 2015 operating_segments	Dec. 31, 2015 USD ($) operating_segments
Subsequent Event [Line Items]
Proceeds from issuance of common stock and convertible notes	$ 6.0
Number of operating segments | operating_segments			2	1
Working capital				$ 13.7
Subsequent Event
Subsequent Event [Line Items]
Proceeds from issuance of common stock and convertible notes		$ 2.0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Accounts Receivable) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Allowance for Doubtful Accounts Receivable [Roll Forward]
Beginning Balance	$ 20	$ 17
Provision	67	3
Write Offs	0	0
Ending Balance	$ 87	$ 20
Accounts receivable, general payment terms	30 days
Accounts receivable, domestic extended payment terms	90 days
Accounts receivable, international extended payment terms greater than	90 days

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Inventories) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Obsolete Inventory [Roll Forward]
Beginning Balance	$ 0	$ 0
Provision	63	0
Write Offs	0	0
Ending Balance	$ 63	$ 0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Property, Plant and Equipment) (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Line Items]
Depreciation expense		$ 0.2	$ 0.3
Depreciation expense, capital leases		$ 0.1	$ 0.1
Impairment charge related to property and equipment	$ 0.8
Leasehold improvements | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives		1 year
Leasehold improvements | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives		10 years
Furniture and fixtures | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives		3 years
Furniture and fixtures | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives		7 years
Production equipment | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives		3 years
Production equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives		7 years
Computer equipment | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives		3 years
Computer equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives		7 years
Research and development equipment | Minimum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives		2 years
Research and development equipment | Maximum
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives		7 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Accounting Policies) (Details) $ / shares in Units, $ in Thousands			3 Months Ended	12 Months Ended
		Jan. 27, 2014 $ / shares	Dec. 31, 2015 USD ($) $ / shares	Dec. 31, 2015 USD ($) $ / shares shares	Dec. 31, 2014 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, par value (in usd per share) | $ / shares	[1]	$ 0.01	$ 0.01	$ 0.01	$ 0.01
Common stock reverse stock split, conversion ratio		0.0833
Other current assets			$ 537	$ 537	$ 385
Prepaid expense			200	200
Unbilled receivables			100	100
Other receivables			200	200
Impairment of intangibles				$ 6,200
Impairment of goodwill			6,900
Equity awards, contractual term				10 years
Deferred revenue			217	$ 217	298
Foreign currency translation adjustment				$ (330)	$ (50)
Options, warrants and conversion rights, common stock callable and antidilutive (in shares) | shares				9,963,886	6,613,572
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity awards, vesting period				1 year
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Equity awards, vesting period				3 years
Familion | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Estimated economic life				7 years
Familion | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Estimated economic life				15 years
Pharmacogenomic services
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Deferred revenue			$ 100	$ 100	$ 300

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

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DISCONTINUED OPERATIONS (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014	Nov. 25, 2015	Sep. 08, 2015
Included in assets held for sale | Genetic Assays and Platforms and Patient Testing
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
(Loss) gain on sale of business			$ (224)	$ 4,114
Edge BioSystems, Inc | Genetic Assays And Platforms Business
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Consideration received on assets disposal						$ 2,100
(Loss) gain on sale of business			1,500
Edge BioSystems, Inc | Included in assets held for sale | Genetic Assays And Platforms Business
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
(Loss) gain on sale of business		$ 1,500
ADSTEC Corporation | Genetic Assays And Platforms Business
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Consideration received on assets disposal					$ 300
(Loss) gain on sale of business			$ (1,700)
ADSTEC Corporation | Included in assets held for sale | Genetic Assays And Platforms Business
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
(Loss) gain on sale of business	$ (1,700)

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DISCONTINUED OPERATIONS (Revenues and Net Income (Loss)) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Loss from discontinued operations	$ (22,816)	$ (3,163)
Genetic Assays and Platforms and Patient Testing | Included in assets held for sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net sales	18,584	25,843
Cost of goods sold	12,287	15,187
Gross profit	6,297	10,656
Selling, general and administrative expense	15,187	16,761
Research and development expense	408	648
Impairment of long-lived assets	13,942	0
Operating loss from discontinued operations	(23,240)	(6,753)
(Loss) gain on sale of business	(224)	4,114
Loss from discontinued operations before income taxes	(23,464)	(2,639)
Income tax (benefit) expense	(648)	524
Loss from discontinued operations	$ (22,816)	$ (3,163)

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DISCONTINUED OPERATIONS (Assets and Liabilities of the Discontinued Operations) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total current assets	$ 1,987	$ 26,106
Total current liabilities	264	3,838
Genetic Assays and Platforms and Patient Testing | Included in assets held for sale
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Accounts receivable, net	1,905	7,161
Inventory, net	0	3,005
Other current assets	82	806
Total current assets	1,987	10,972
Property and equipment, net	0	997
Goodwill and intangible assets	0	14,131
Other assets	0	6
Total Assets	1,987	26,106
Accounts payable	0	973
Accrued compensation	264	752
Accrued expenses	0	505
Deferred revenue	0	737
Total current liabilities	264	2,967
Other liabilities	0	871
Total Liabilities	$ 264	$ 3,838

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DISCONTINUED OPERATIONS (Allowance for Doubtful Accounts) (Details) - Genetic Assays and Platforms and Patient Testing - Included in assets held for sale - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Allowance for doubtful accounts, beginning balance	$ 7,927	$ 3,821
Provision	9,447	6,116
Write Offs	(2,710)	(2,010)
Allowance for doubtful accounts, ending balance	$ 14,664	$ 7,927

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INVENTORIES (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Inventory Disclosure [Abstract]
Finished goods	$ 0	$ 0
Raw materials and work in process	113	0
Demonstration inventory	0	0
Inventory, gross	113	0
Less allowances	(63)	0	$ 0
Total	$ 50	$ 0

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INTANGIBLE ASSETS AND OTHER ASSETS (Goodwill and Intangible Assets Disclosure) (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014
Acquired Finite-Lived Intangible Assets [Line Items]
Impairment of long-lived assets	$ 7,000
Impairment charge related to property and equipment	800
Impairment of intangible assets	$ 6,200
Finite-Lived Intangible Assets, Net [Abstract]
Cost		$ 14,121	$ 13,551
Accumulated Amortization		6,786	5,672
Impairment Charge		6,165
Net Book Value		1,170	7,879
Amortization expense		100	100
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
Amortization expense, 2016		200
Amortization expense, 2017		100
Amortization expense, 2018		100
Amortization expense, 2019		100
Amortization expense, 2020		100
Acquired technology
Finite-Lived Intangible Assets, Net [Abstract]
Cost		9,009	9,009
Accumulated Amortization		4,611	3,995
Impairment Charge		4,398
Net Book Value		$ 0	5,014
Acquired technology | Minimum
Finite-Lived Intangible Assets, Net [Abstract]
Estimated Useful Life		7 years
Acquired technology | Maximum
Finite-Lived Intangible Assets, Net [Abstract]
Estimated Useful Life		10 years
Assay royalties
Finite-Lived Intangible Assets, Net [Abstract]
Cost		$ 1,434	1,434
Accumulated Amortization		973	819
Impairment Charge		461
Net Book Value		$ 0	615
Estimated Useful Life		7 years
Third party payor relationships
Finite-Lived Intangible Assets, Net [Abstract]
Cost		$ 367	367
Accumulated Amortization		116	98
Impairment Charge		251
Net Book Value		$ 0	269
Estimated Useful Life		15 years
Tradenames and trademarks
Finite-Lived Intangible Assets, Net [Abstract]
Cost		$ 824	824
Accumulated Amortization		439	351
Impairment Charge		385
Net Book Value		$ 0	473
Estimated Useful Life		7 years
Customer relationships
Finite-Lived Intangible Assets, Net [Abstract]
Cost		$ 652	652
Accumulated Amortization		130	98
Impairment Charge		522
Net Book Value		$ 0	554
Estimated Useful Life		15 years
Covenants not to compete
Finite-Lived Intangible Assets, Net [Abstract]
Cost		$ 184	184
Accumulated Amortization		184	138
Impairment Charge		0
Net Book Value		$ 0	46
Estimated Useful Life		3 years
Patents
Finite-Lived Intangible Assets, Net [Abstract]
Cost		$ 980	815
Accumulated Amortization		126	87
Impairment Charge		148
Net Book Value		706	728
Intellectual property
Finite-Lived Intangible Assets, Net [Abstract]
Cost		671	266
Accumulated Amortization		207	86
Impairment Charge		0
Net Book Value		$ 464	180
Estimated Useful Life		7 years
Included in assets held for sale
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			7,128
Included in assets held for sale | Acquired technology
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			5,014
Included in assets held for sale | Assay royalties
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			615
Included in assets held for sale | Third party payor relationships
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			269
Included in assets held for sale | Tradenames and trademarks
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			473
Included in assets held for sale | Customer relationships
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			554
Included in assets held for sale | Covenants not to compete
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			46
Included in assets held for sale | Patents
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			157
Included in assets held for sale | Intellectual property
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			0
Included in continuing operations
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			751
Included in continuing operations | Acquired technology
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			0
Included in continuing operations | Assay royalties
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			0
Included in continuing operations | Third party payor relationships
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			0
Included in continuing operations | Tradenames and trademarks
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			0
Included in continuing operations | Customer relationships
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			0
Included in continuing operations | Covenants not to compete
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			0
Included in continuing operations | Patents
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			571
Included in continuing operations | Intellectual property
Finite-Lived Intangible Assets, Net [Abstract]
Net Book Value			$ 180

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DEBT (Narrative) (Details) - USD ($)			3 Months Ended	12 Months Ended
	Aug. 10, 2015	Dec. 31, 2014	Mar. 31, 2016	Dec. 31, 2015	Mar. 01, 2015	Dec. 31, 2014	Sep. 04, 2015	Apr. 01, 2015	Mar. 31, 2015	Jan. 20, 2015	Oct. 22, 2014	Oct. 21, 2014	Aug. 02, 2013	Mar. 13, 2013
Debt Instrument [Line Items]
Initial prepayment of portion of the loan balance									$ 148,000
Promissory note converted				$ 1,012,000		$ 0
Line of Credit | Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, current borrowing capacity							$ 2,300,000				$ 3,000,000	$ 4,000,000
Repayments of Long-term Lines of Credit	$ 700,000
Debt instrument, interest rate, stated percentage													6.25%	4.25%
Line of Credit | Revolving Credit Facility | Third Security LLC And Affiliates
Debt Instrument [Line Items]
Line of credit facility, current borrowing capacity														$ 4,000,000
Term Loan
Debt Instrument [Line Items]
Capitalized interest costs					$ 400,000
Initial prepayment of portion of the loan balance								$ 148,000
Term Loan | Third Security LLC And Affiliates
Debt Instrument [Line Items]
Debt instrument, face amount														$ 4,000,000
Convertible Promissory Note
Debt Instrument [Line Items]
Debt instrument, face amount		$ 750,000		$ 750,000		$ 750,000
Debt instrument, interest rate, stated percentage				6.00%
Debt conversion, shares issued				502,786
Convertible Promissory Note | Subsequent Event
Debt Instrument [Line Items]
Promissory note converted			$ 200,000
Convertible Promissory Note | Issuance Date
Debt Instrument [Line Items]
Percentage of debt that can be converted into shares of common stock		50.00%
Threshold consecutive trading days		20 days
Conversion price (in usd per share)				$ 2.20
Convertible Promissory Note | February 15, 2015
Debt Instrument [Line Items]
Threshold consecutive trading days		15 days
Conversion price, percentage of average closing price of common stock on the market		85.00%
Additional Note Private Placement | Convertible Promissory Note
Debt Instrument [Line Items]
Debt instrument, face amount										$ 925,000
Promissory note converted				$ 400,000
Debt conversion, shares issued				281,023

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DEBT (Summary) (Details) - USD ($) $ in Thousands	Aug. 02, 2013	Mar. 13, 2013	Dec. 31, 2015	Apr. 01, 2015	Mar. 31, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Total debt			$ 7,596			$ 7,837
Current portion of long term debt			(7,596)			(462)
Long term debt, net of current maturities			0			7,375
Initial prepayment of portion of the loan balance					$ 148
Line of Credit | Revolving Line
Debt Instrument [Line Items]
Total debt			$ 3,025			3,000
Debt instrument, interest rate, stated percentage	6.25%	4.25%
Debt instrument, interest rate, effective percentage			6.50%
Line of credit facility, upfront fee		$ 20
Line of credit facility, commitment fee amount		$ 20
Line of credit facility, unused capacity, commitment fee percentage		0.50%
Term Loan
Debt Instrument [Line Items]
Total debt			$ 4,000			4,087
Proceeds from issuance of long-term debt		$ 4,000
Initial prepayment of portion of the loan balance				$ 148
Long-term debt, percentage bearing variable interest, percentage rate			9.10%
Debt instrument, upfront fee		40
Debt instrument, future debt extinguishment costs		$ 120
Debt instrument, debt default, interest rate, stated percentage increase		5.00%
Convertible Promissory Note
Debt Instrument [Line Items]
Total debt			$ 571			$ 750
Debt instrument, interest rate, stated percentage			6.00%
Wall Street Journal Prime Rate | Line of Credit | Revolving Line
Debt Instrument [Line Items]
Debt instrument, basis spread on variable rate	3.00%	1.00%
Prepayment between one and two years after the effective date | Term Loan
Debt Instrument [Line Items]
Debt instrument, prepayment penalty percent		1.00%

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DEBT (Maturities) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Debt Disclosure [Abstract]
2016	$ 7,596
Total debt	$ 7,596	$ 7,837

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CAPITAL LEASES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2016	$ 3
2017	1
Total minimum lease payments	4
Less: Amount representing interest	0
Present value of net minimum lease payments	4
Depreciation expense (less than .3 million in 2012)	200	$ 300
Equipment
Capital Leased Assets [Line Items]
Equipment	828	1,514
Less: Accumulated amortization	(725)	(997)
Total	103	517
Capital Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Depreciation expense (less than .3 million in 2012)	$ 200	$ 300

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COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2016	$ 727
2017	724
2018	711
2019	676
2020	680
thereafter	388
Total	3,906
Operating leases, rent expense	200	$ 200
Firm commitments to vendors	$ 300

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INCOME TAXES (Effective Income Tax Reconciliation) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Benefit at federal rate	$ (3,449)	$ (3,665)
State income taxes—net of federal benefit	(320)	(401)
Miscellaneous permanent differences	163	223
Liability warrants	70	(154)
State, net operating loss expiration/true-up	(187)	(327)
Other—net	(119)	2
Valuation allowance	3,842	4,322
Total income tax expense (benefit)	$ 0	$ 0

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INCOME TAXES (Components of Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Federal:
Current	$ 0	$ 0
Deferred	0	0
Total Federal	0	0
State:
Current	0	0
Deferred	0	0
Total State	0	0
Foreign:
Current	0	0
Deferred	0	0
Total Foreign	0	0
Total income tax expense (benefit)	$ 0	$ 0

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INCOME TAXES (Deferred Tax Assets and Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2015	Dec. 31, 2014
Deferred Tax Asset:
Net operating loss carryforward	$ 51,449	$ 46,051
Research and development credit carryforwards	918	918
Other	585	539
Deferred Tax Assets, Gross	52,952	47,508
Less valuation allowance	(52,902)	(47,406)
Deferred Tax Asset	50	102
Deferred Tax Liability:
Property and equipment	50	102
Deferred Tax Liability	50	102
Net Deferred Asset (Liability)	$ 0	$ 0

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INCOME TAXES (Summary of Operating Loss Carryforwards) (Details) $ in Thousands	Dec. 31, 2015 USD ($)
Income Tax Disclosure [Abstract]
2018	$ 1,838
2019	8,181
2020	9,662
2021	8,228
2022	16,862
2023	16,173
2024	17,390
2025	8,153
2026	6,792
2027	3,238
2028	1,272
2029	591
2031	2,784
2032	8,358
2033	12,097
2034	7,591
2035	13,645
Operating loss carryforwards	$ 142,855

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INCOME TAXES (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Income Taxes [Line Items]
Operating loss carryforwards	$ 142,855,000
Increase in uncertain tax positions during the period	100,000	$ 100,000
Reduction in uncertain tax positions during the period	(200,000)
Reduction in uncertain tax positions relating to lapse of statute of limitations	0	200,000
Other Long-term Liabilities
Income Taxes [Line Items]
Liability for uncertain tax positions, noncurrent	100,000	$ 100,000
Research and Development Credit Carryforward
Income Taxes [Line Items]
Tax credit carryforward	900,000
Federal | Annovis, Inc.
Income Taxes [Line Items]
Operating loss carryforwards	1,200,000
State
Income Taxes [Line Items]
Operating loss carryforwards	58,800,000
Foreign
Income Taxes [Line Items]
Operating loss carryforwards	$ 900,000

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EMPLOYEE BENEFIT PLAN (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Compensation and Retirement Disclosure [Abstract]
Defined contribution plan, employer matching contribution, percent, first 3% of contributions	100.00%
Defined contribution plan, employer matching contribution, percent of employee's gross pay, first contributions	3.00%
Defined contribution plan, employer matching contribution, percent, next 2% of contributions	50.00%
Defined contribution plan, employer matching contribution, percent of employee's gross pay, next contributions	2.00%
Defined contribution plan, cost recognized	$ 0.4	$ 0.4

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STOCKHOLDERS' EQUITY (Common Stock) (Details)									1 Months Ended	12 Months Ended
		Jul. 07, 2015 USD ($) $ / shares shares	Feb. 27, 2015 USD ($) $ / shares $ / unit shares	Oct. 22, 2014 USD ($) $ / shares shares	Mar. 13, 2013 shares	Jan. 24, 2013 USD ($) $ / shares shares	Feb. 02, 2012 USD ($) $ / shares shares	Dec. 29, 2010 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2015 USD ($) $ / shares shares	Dec. 31, 2014 USD ($) $ / shares shares	Jun. 30, 2015 $ / shares shares	Jan. 20, 2015 USD ($)	Jan. 15, 2015 USD ($) $ / shares shares	Oct. 21, 2014 $ / shares shares	Mar. 05, 2014 $ / shares shares	Jan. 31, 2013 $ / shares shares
Class of Stock [Line Items]
Common stock, shares authorized	[1]									150,000,000	100,000,000
Proceeds from issuance of common stock and convertible notes | $								$ 6,000,000
Common stock, shares issued	[1]									13,915,691	8,084,471
Common stock warrant, common stock called (in shares)		2,188,177	1,881,396	1,309,785		691,656	948,333			1,387,685	1,387,685	1,881,396		1,483,161	1,212,665		1,097,600
Common stock warrant, exercise price (in usd per share) | $ / shares		$ 6.50	$ 7.56	$ 10.86			$ 15.00			$ 10.25	$ 10.25	$ 7.56		$ 9.59	$ 11.73		$ 12.96
Stock issuance costs | $							$ 1,330,000
Payments of stock issuance costs, percentage of gross offering proceeds							7.00%
Payments of stock issuance costs, warrant right to purchase common stock shares							31,666
Payments of stock issuance costs, warrant right to purchase common stock shares, percentage of shares in offering							2.00%
Stock issuance costs, reimbursable expenses | $							$ 125,000
Payments of stock issuance costs, reduction to equity | $							$ 1,500,000
Private placement, net, shares		1,500,000				1,383,333
Share price (in usd per share) | $ / shares		$ 1.42				$ 6.00				$ 1.07
Private placement, net | $						$ 8,300,000				$ 8,970,000	$ 2,361,000
Class of warrant or right, number of securities called by warrants or rights, price per share (in usd per share) | $ / shares						$ 9.00
Proceeds from issuance of common stock and warrants | $		$ 3,000,000
Common stock warrants term							5 years
Third Security LLC And Affiliates
Class of Stock [Line Items]
Common stock warrant, common stock called (in shares)																1,212,665	1,097,600
Common stock warrant, exercise price (in usd per share) | $ / shares																$ 11.73	$ 12.96
Convertible notes, warrants callable (in shares)							125,000
Affiliates of Third Security, LLC; January 2018
Class of Stock [Line Items]
Common stock warrant, common stock called (in shares)					250,000
Common stock warrant, exercise price (in usd per share) | $ / shares										$ 9
Private placement, net, shares					500,000
Private Placement
Class of Stock [Line Items]
Proceeds from issuance of common stock and convertible notes | $							$ 22,000,000		$ 3,000,000
Common stock, shares issued							1,583,333
Common stock, sale price per share (in usd per share) | $ / shares							$ 12
Common stock warrant, common stock called (in shares)				365,388
Common stock warrant, exercise price (in usd per share) | $ / shares				$ 4.00
Private placement, net, shares				730,776
Share price (in usd per share) | $ / shares				$ 3.25
Private placement, net | $				$ 2,375,000
Common stock warrants term							5 years
Private Placement | Advisor
Class of Stock [Line Items]
Common stock warrant, common stock called (in shares)				9,230
Maximum
Class of Stock [Line Items]
Common stock warrant, common stock called (in shares)							823,333
Convertible Promissory Note
Class of Stock [Line Items]
Debt instrument, face amount | $										$ 750,000	$ 750,000
Convertible Promissory Note | Additional Note Private Placement
Class of Stock [Line Items]
Debt instrument, face amount | $													$ 925,000
Craig-Hallum Capital Group LLC
Class of Stock [Line Items]
Common stock warrant, exercise price (in usd per share) | $ / shares		$ 1.66
Stock issuance costs | $		$ 212,783
Payments of stock issuance costs, percentage of gross offering proceeds		7.00%
Payments of stock issuance costs, warrant right to purchase common stock shares		107,033
Stock issuance costs, reimbursable expenses | $		$ 50,000
Common stock warrants term		5 years
Craig-Hallum Capital Group LLC | Two Thousand Fifteen Offering
Class of Stock [Line Items]
Common stock warrant, common stock called (in shares)			714,780
Common stock warrant, exercise price (in usd per share) | $ / shares			$ 2.24
Private placement, net, shares			3,573,899
Number of shares that can be purchased for each warrant			0.20
Purchase price to the public (in usd per unit) | $ / unit			1.95
Purchase price of stock and warrants (in usd per unit) | $ / unit			1.8135
Net proceeds from the offering | $			$ 6,200,000
Craig-Hallum Capital Group LLC | Convertible Promissory Note | Additional Note Private Placement
Class of Stock [Line Items]
Debt instrument, face amount | $														$ 46,250
Percentage of proceeds from sale and issuance of the Additional Notes														5.00%
Series A Warrants
Class of Stock [Line Items]
Common stock warrants term		5 years 6 months
Third Security LLC And Affiliates | Private Placement
Class of Stock [Line Items]
Convertible notes, common stock callable (in shares)							250,000
Series B Warrants
Class of Stock [Line Items]
Common stock warrant, exercise price (in usd per share) | $ / shares		$ 0.01
Share price (in usd per share) | $ / shares		$ 1.42
Common stock warrants term		5 years 6 months
Series B Warrants | Maximum
Class of Stock [Line Items]
Common stock warrant, common stock called (in shares)		700,000.0
Series A and Series B Warrants
Class of Stock [Line Items]
Common stock warrant, exercise price (in usd per share) | $ / shares		$ 1.66
Series A and Series B Warrants | Maximum
Class of Stock [Line Items]
Common stock warrant, common stock called (in shares)		1,200,000.0

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

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STOCKHOLDERS' EQUITY (Common Stock Warrants) (Details) - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Jul. 07, 2015	Jun. 30, 2015	Feb. 27, 2015	Jan. 15, 2015	Oct. 22, 2014	Oct. 21, 2014	Jan. 31, 2013	Feb. 02, 2012
Class of Stock [Line Items]
Common stock warrants issued (in shares)	3,466,841	664,703
Warrants to purchase shares of common stock expired	431,027
Underlying Shares	5,920,799
Exercise Price (in usd per share)	$ 10.25	$ 10.25	$ 6.50	$ 7.56	$ 7.56	$ 9.59	$ 10.86	$ 11.73	$ 12.96	$ 15.00
Various Institutional Holders; February 2017
Class of Stock [Line Items]
Underlying Shares	1,899,729
Exercise Price (in usd per share)	$ 6.50
Affiliates of Third Security, LLC; February 2017
Class of Stock [Line Items]
Underlying Shares	288,448
Exercise Price (in usd per share)	$ 6.50
Various Institutional Holders; January 2018
Class of Stock [Line Items]
Underlying Shares	441,655
Exercise Price (in usd per share)	$ 9
Affiliates of Third Security, LLC; January 2018
Class of Stock [Line Items]
Underlying Shares	250,000
Exercise Price (in usd per share)	$ 9
Various Institutional Holders; April 2020
Class of Stock [Line Items]
Underlying Shares	374,618
Exercise Price (in usd per share)	$ 4
Various Institutional Holders; February 2020
Class of Stock [Line Items]
Underlying Shares	714,780
Exercise Price (in usd per share)	$ 2.24
Various Institutional Holders; December 2020
Class of Stock [Line Items]
Underlying Shares	1,284,405
Exercise Price (in usd per share)	$ 1.66
Various Institutional Holders; December 2020
Class of Stock [Line Items]
Underlying Shares	667,164
Exercise Price (in usd per share)	$ 0.01
Private Placement, Repricing Requirements
Class of Stock [Line Items]
Common stock warrants issued (in shares)		290,085
Private Placement
Class of Stock [Line Items]
Common stock warrants issued (in shares)	800,492
Exercise Price (in usd per share)							$ 4.00
Offering
Class of Stock [Line Items]
Common stock warrants issued (in shares)	2,666,349

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STOCKHOLDERS' EQUITY (Preferred Stock Series A) (Details)						1 Months Ended		12 Months Ended
		Jul. 07, 2015 $ / shares shares	Jan. 24, 2013 shares	Feb. 02, 2012 USD ($) $ / shares	Dec. 29, 2010 USD ($) $ / shares shares	Jan. 31, 2014	Nov. 30, 2011 USD ($)	Dec. 31, 2015 Director $ / shares shares	Dec. 31, 2014 $ / shares shares	Dec. 31, 2013	Jun. 30, 2015 $ / shares	Feb. 27, 2015 $ / shares	Jan. 15, 2015 $ / shares	Oct. 22, 2014 $ / shares	Oct. 21, 2014 $ / shares	Jan. 31, 2013 $ / shares
Class of Stock [Line Items]
Preferred stock, shares authorized								15,000,000	15,000,000
Private placement, net, shares		1,500,000	1,383,333
Common stock warrant, exercise price (in usd per share) | $ / shares		$ 6.50		$ 15.00				$ 10.25	$ 10.25		$ 7.56	$ 7.56	$ 9.59	$ 10.86	$ 11.73	$ 12.96
Proceeds from issuance of common stock and convertible notes | $					$ 6,000,000
Stock issuance costs | $				$ 1,330,000
Minimum
Class of Stock [Line Items]
Number of directors | Director								2
Common Stock
Class of Stock [Line Items]
Private placement, net, shares	[1]							5,047,411	730,776
Preferred stock revaluation | $							$ 300,000
Series A Preferred Stock
Class of Stock [Line Items]
Common stock warrant, exercise price (in usd per share) | $ / shares					$ 2.32
Convertible notes, common stock callable (in shares)					1,293,102
Stock issuance costs | $					$ 200,000
Series A Preferred Stock | Preferred Stock
Class of Stock [Line Items]
Conversion ratio						0.3333				4
Preferred stock, shares authorized								3,879,307
Private placement, net, shares					2,586,205
Common stock warrant, exercise price (in usd per share) | $ / shares					$ 2.32
Preferred stock, dividend rate, percentage								10.00%
Preferred stock, dividend rate, compound percentage maximum								50.00%

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

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STOCKHOLDERS' EQUITY (Preferred Stock Series B) (Details) $ / shares in Units, $ in Thousands				12 Months Ended
	Jul. 07, 2015 $ / shares shares	Mar. 05, 2014 USD ($) $ / shares shares	Jan. 24, 2013 USD ($) $ / shares shares	Dec. 31, 2015 USD ($) $ / shares shares	Dec. 31, 2014 USD ($) $ / shares shares	Jun. 30, 2015 $ / shares shares	Feb. 27, 2015 $ / shares shares	Jan. 15, 2015 $ / shares shares	Oct. 22, 2014 $ / shares shares	Oct. 21, 2014 $ / shares shares	Jan. 31, 2013 $ / shares shares	Feb. 02, 2012 $ / shares shares
Class of Stock [Line Items]
Private placement, net, shares | shares	1,500,000		1,383,333
Preferred stock, par value (in usd per share)				$ 0.01	$ 0.01
Share price (in usd per share)	$ 1.42		$ 6.00	$ 1.07
Private placement, net | $			$ 8,300	$ 8,970	$ 2,361
Common stock warrant, exercise price (in usd per share)	$ 6.50			$ 10.25	$ 10.25	$ 7.56	$ 7.56	$ 9.59	$ 10.86	$ 11.73	$ 12.96	$ 15.00
Common stock warrant, common stock called (in shares) | shares	2,188,177		691,656	1,387,685	1,387,685	1,881,396	1,881,396	1,483,161	1,309,785	1,212,665	1,097,600	948,333
Third Security LLC And Affiliates
Class of Stock [Line Items]
Common stock warrant, exercise price (in usd per share)		$ 11.73									$ 12.96
Common stock warrant, common stock called (in shares) | shares		1,212,665									1,097,600
Third Security LLC And Affiliates | Preferred Stock | Series B Preferred Stock
Class of Stock [Line Items]
Private placement, net, shares | shares		1,443,297
Preferred stock, par value (in usd per share)		$ 0.01
Share price (in usd per share)		$ 4.85
Private placement, net | $		$ 7,000
Conversion ratio		1

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STOCKHOLDERS' EQUITY (Preferred Stock Dividends) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Class of Stock [Line Items]
Accrued preferred stock dividend	$ 0	$ 3,130
Reversal of dividends on preferred stock	3,130
Cumulative undeclared dividends	4,400	3,100
Preferred Stock
Class of Stock [Line Items]
Accrued preferred stock dividend		$ 3,100
Accumulated Deficit
Class of Stock [Line Items]
Reversal of dividends on preferred stock	$ 3,130

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EQUITY INCENTIVE PLAN (Narrative) (Details) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, unrecognized compensation expense related to unvested stock options	$ 400,000
Share-based compensation, weighted average period that unrecognized compensation expense related to unvested stock options is recognized	1 year 3 months 1 day
Number of outstanding options vested or expected to vest (in shares)	945,685
Selling, general and administrative expenses
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 600,000	$ 900,000
Stock Appreciation Rights (SARs)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options, fair value assumptions, dividend yield	0.00%
Outstanding SARs (in shares)	98,333	98,333
Weighted average exercise price of SARs (in usd per share)	$ 4.14	$ 4.14
Intrinsic value	$ 0
Weighted average remaining contractual terms	7 years 11 months
Number of shares exercisable	68,220
Exercises in period (in shares)	0	0
Stock Appreciation Rights (SARs) | Accrued expenses
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 100,000
Stock Appreciation Rights (SARs) | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options, fair value assumptions, risk free interest rate	1.32%
Stock options, fair value assumptions, expected life	4 years
Stock options, fair value assumptions, historical volatility rate	83.00%
Stock Appreciation Rights (SARs) | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options, fair value assumptions, risk free interest rate	1.91%
Stock options, fair value assumptions, expected life	6 years
Stock options, fair value assumptions, historical volatility rate	86.00%
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options, fair value assumptions, dividend yield	0.00%
Stock options, grants in period, weighted average grant date fair value	$ 0.96	$ 3.51
Weighted average exercise price (in usd per share)	$ 3.45	$ 6.56
Stock options, outstanding, aggregate intrinsic value	$ 0
Remaining weighted average contractual life	8 years 6 months 1 day
Options exercisable (in shares)	417,968
Options exercisable, weighted average exercise price (in usd per share)	$ 5.28
Stock options, exercisable, aggregate intrinsic value	$ 0
Stock options, remaining weighted-average contractual life	7 years 10 months
Stock options, exercised (in shares)	0	0
Stock options vested in current year, fair value	$ 800,000	$ 600,000
Stock Options | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options, fair value assumptions, risk free interest rate	1.50%
Stock options, fair value assumptions, expected life	4 years
Stock options, fair value assumptions, historical volatility rate	82.00%
Stock Options | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options, fair value assumptions, risk free interest rate	1.74%
Stock options, fair value assumptions, expected life	5 years
Stock options, fair value assumptions, historical volatility rate	105.00%
Equity incentive plan 2006
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, number of shares authorized	1,666,666
Share-based compensation, award expiration period	10 years
Equity incentive plan 2006 | Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares And Other Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation, number of shares authorized	1,250,000

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EQUITY INCENTIVE PLAN (Stock Option Activity) (Details) - Stock Options	12 Months Ended
	Dec. 31, 2015 $ / shares shares
Number of Options
Balance at beginning of period (in shares) | shares	685,984
Granted (in shares) | shares	665,560
Forfeited (in shares) | shares	(154,189)
Expired (in shares) | shares	(89,561)
Balance at end of period (in shares) | shares	1,107,794
Exercisable at end of period (in shares) | shares	417,968
Weighted Average Exercise Price
Balance at beginning of period (in usd per share) | $ / shares	$ 6.56
Granted (in usd per share) | $ / shares	1.50
Forfeited (in usd per share) | $ / shares	4.72
Expired (in usd per share) | $ / shares	10.57
Balance at end of period (in usd per share) | $ / shares	3.45
Exercisable at end of period (in usd per share) | $ / shares	$ 5.28

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EQUITY INCENTIVE PLAN (Stock Appreciation Rights) (Details) - Stock Appreciation Rights (SARs)	12 Months Ended
	Dec. 31, 2015 $ / shares shares
Number of SARs
Balance at beginning of period (in shares) | shares	98,333
Granted (in shares) | shares	0
Forfeited (in shares) | shares	0
Expired (in shares) | shares	0
Balance at end of period (in shares) | shares	98,333
Exercisable at end of period (in shares) | shares	68,220
Weighted Average Exercise Price
Balance at beginning of period (in usd per share) | $ / shares	$ 4.14
Granted (in usd per share) | $ / shares	0.00
Forfeited (in usd per share) | $ / shares	0.00
Expired (in usd per share) | $ / shares	0.00
Balance at end of period (in usd per share) | $ / shares	4.14
Exercisable at end of period (in usd per share) | $ / shares	$ 4.23

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FAIR VALUE (Details) $ / shares in Units, $ in Thousands		12 Months Ended
	Sep. 30, 2015 shares	Dec. 31, 2015 USD ($) simulation $ / shares shares	Dec. 31, 2014 USD ($) shares	Jul. 07, 2015 $ / shares	Jan. 24, 2013 $ / shares
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Common stock warrants issued (in shares) | shares		3,466,841	664,703
Share price (in usd per share) | $ / shares		$ 1.07		$ 1.42	$ 6.00
Stock options, fair value assumptions, expected life		1 year 1 month 8 days
Volatility		104.00%
Risk-free interest rate		0.69%
Term of U.S. treasury bond		1 year
Percentage of simulated equity values below the down-round financing cut-off point		100.00%
Number of independent simulations | simulation		10
Simulation period		6 months
Liability
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Common stock warrants issued (in shares) | shares	2,200,000
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance		$ 145
Total gains or losses
Recognized in earnings		(205)
Ending balance		$ 350	$ 145

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OPERATING SEGMENT AND GEOGRAPHIC INFORMATION (Details) - operating_segments	9 Months Ended	12 Months Ended
	Sep. 29, 2015	Dec. 31, 2015
Segment Reporting [Abstract]
Number of operating segments	2	1

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SUBSEQUENT EVENTS (Details) - USD ($)							3 Months Ended	12 Months Ended
		Jan. 06, 2016	Jul. 07, 2015	Jan. 24, 2013	Feb. 02, 2012	Dec. 29, 2010	Mar. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Jun. 30, 2015	Feb. 27, 2015	Jan. 15, 2015	Oct. 22, 2014	Oct. 21, 2014	Jan. 27, 2014	Jan. 31, 2013
Subsequent Event [Line Items]
Preferred stock, par value (in usd per share)								$ 0.01	$ 0.01
Common stock, par value (in usd per share)	[1]							$ 0.01	$ 0.01						$ 0.01
Preferred stock, shares outstanding								4,029,502	4,029,502
Number of common stock issued to Preferred Holders			1,500,000	1,383,333
Promissory note converted								$ 1,012,000	$ 0
Preferred stock, shares issued								4,029,502	4,029,502
Common stock warrant, common stock called (in shares)			2,188,177	691,656	948,333			1,387,685	1,387,685	1,881,396	1,881,396	1,483,161	1,309,785	1,212,665		1,097,600
Common stock warrant, exercise price (in usd per share)			$ 6.50		$ 15.00			$ 10.25	$ 10.25	$ 7.56	$ 7.56	$ 9.59	$ 10.86	$ 11.73		$ 12.96
Share price (in usd per share)			1.42	$ 6.00				$ 1.07
Stock issuance costs					$ 1,330,000
Payments of stock issuance costs, percentage of gross offering proceeds					7.00%
Common stock warrants term					5 years
Payments of stock issuance costs, warrant right to purchase common stock shares					31,666
Stock issuance costs, reimbursable expenses					$ 125,000
Subsequent Event
Subsequent Event [Line Items]
Common stock, par value (in usd per share)		$ 0.01
Number of common stock issued pursuant to the accrued and unpaid dividends on preferred stocks		4,474,825
Number of common stock issued to Preferred Holders		6,780,179
Series A Preferred Stock
Subsequent Event [Line Items]
Preferred stock, shares outstanding								2,586,205
Common stock warrant, exercise price (in usd per share)						$ 2.32
Stock issuance costs						$ 200,000
Series A Preferred Stock | Subsequent Event
Subsequent Event [Line Items]
Preferred stock, par value (in usd per share)		$ 0.01
Preferred stock dividends rate per share of common stock (in dollars per share)		$ 1.00
Conversion ratio		0.3333
Preferred stock, shares outstanding		0
Shares of common stock issued from preferred stock conversion		862,057
Amount of preferred stock accrued and unpaid dividends		$ 3,681,591.90
Number of common stock issued pursuant to the accrued and unpaid dividends on preferred stocks		3,681,590
Series A-1 Convertible Preferred Stock and Warrants | Subsequent Event
Subsequent Event [Line Items]
Proceeds from issuance of convertible preferred stock		$ 2,200,000
Shares issued, price per share		$ 0.93
Series B Preferred Stock
Subsequent Event [Line Items]
Preferred stock, shares outstanding								1,443,297
Series B Preferred Stock | Subsequent Event
Subsequent Event [Line Items]
Preferred stock, par value (in usd per share)		0.01
Preferred stock dividends rate per share of common stock (in dollars per share)		$ 1.00
Conversion ratio		1
Preferred stock, shares outstanding		0
Shares of common stock issued from preferred stock conversion		1,443,297
Amount of preferred stock accrued and unpaid dividends		$ 793,236.17
Number of common stock issued pursuant to the accrued and unpaid dividends on preferred stocks		793,235
Series A-1 Convertible Preferred Stock | Subsequent Event
Subsequent Event [Line Items]
Preferred stock, par value (in usd per share)		$ 0.01
Conversion ratio		1
Preferred stock, shares issued		2,365,243
Number of preferred shares per one vote		1.075269
Common Stock
Subsequent Event [Line Items]
Number of common stock issued to Preferred Holders	[2]							5,047,411	730,776
Common Stock | Subsequent Event
Subsequent Event [Line Items]
Shares of common stock issued from preferred stock conversion		2,305,354
Convertible Promissory Note
Subsequent Event [Line Items]
Debt instrument, face amount								$ 750,000	$ 750,000
Convertible Promissory Note | Subsequent Event
Subsequent Event [Line Items]
Promissory note converted							$ 200,000
Maximum
Subsequent Event [Line Items]
Common stock warrant, common stock called (in shares)					823,333
Craig-Hallum Capital Group LLC
Subsequent Event [Line Items]
Common stock warrant, exercise price (in usd per share)			$ 1.66
Stock issuance costs			$ 212,783
Payments of stock issuance costs, percentage of gross offering proceeds			7.00%
Common stock warrants term			5 years
Payments of stock issuance costs, warrant right to purchase common stock shares			107,033
Stock issuance costs, reimbursable expenses			$ 50,000
Craig-Hallum Capital Group LLC | Subsequent Event
Subsequent Event [Line Items]
Common stock warrant, exercise price (in usd per share)		$ 1.21
Stock issuance costs		$ 140,000
Payments of stock issuance costs, percentage of gross offering proceeds		7.00%
Proceeds from issuance of warrants		$ 50
Common stock warrants term		5 years
Payments of stock issuance costs, warrant right to purchase common stock shares		107,527
Stock issuance costs, reimbursable expenses		$ 50,000
Series A-1 Warrant | Subsequent Event
Subsequent Event [Line Items]
Common stock warrant, common stock called (in shares)		1,773,929
Period in which warrants can be exercised		5 years
Common stock warrant, exercise price (in usd per share)		$ 1.21
Warrants aggregate exchange amount		$ 1,436,882
Warrant exercise period not subject to cash payment to Warrant holder		90 days
Warrant exchange price calculation threshold		$ 0.50
Series A-1 Warrant | Maximum | Subsequent Event
Subsequent Event [Line Items]
Common stock warrant, common stock called (in shares)		2,873,765
Series A-1 Warrant | Pro Forma | Subsequent Event
Subsequent Event [Line Items]
Warrants aggregate exchange amount		$ 1,436,882
Share price (in usd per share)		$ 0.25
Payments for additional shares beyond the Required Approvals shares		$ 718,441
Series A-1 Warrant | Pro Forma | Maximum | Subsequent Event
Subsequent Event [Line Items]
Common stock warrant, common stock called (in shares)		2,873,765
Series A Warrants
Subsequent Event [Line Items]
Common stock warrants term			5 years 6 months
Series A Warrants | Subsequent Event
Subsequent Event [Line Items]
Warrants aggregate exchange amount		$ 941,197
Warrant exercise period not subject to cash payment to Warrant holder		90 days
Warrant exchange price calculation threshold		$ 0.50
Series A Warrants | Maximum | Subsequent Event
Subsequent Event [Line Items]
Common stock warrant, common stock called (in shares)		1,161,972
Series A Warrants | Pro Forma | Subsequent Event
Subsequent Event [Line Items]
Warrants aggregate exchange amount		$ 941,197
Share price (in usd per share)		$ 0.25
Payments for additional shares beyond the Required Approvals shares		$ 470,599
Series A Warrant, Cashless Exchange | Maximum | Subsequent Event
Subsequent Event [Line Items]
Common stock warrant, common stock called (in shares)		1,882,395
Series A Warrant, Cashless Exchange | Pro Forma | Maximum | Subsequent Event
Subsequent Event [Line Items]
Common stock warrant, common stock called (in shares)		1,882,395

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

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