

As filed with the Securities and Exchange Commission on March 20, 2012	Registration No. 333-

SECURITIES AND EXCHANGE COMMISSION

~~Washington,~~

WASHINGTON, D.C. 20549

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

(Exact ~~Name~~name of ~~Registrant As Specified In Its Charter)~~

registrant as specified in its charter)



Delaware	3826	91-1789357
(State or other jurisdiction of ~~Incorporation)~~ incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(~~IRS~~I.R.S. Employer ~~I.D.~~ Identification Number)

Omaha, ~~Nebraska~~NE 68164 ~~(402) 452-5400~~

(Address, including zip code, and telephone number, including area code, of ~~registrant’s~~registrant's principal executive offices)

Craig J. ~~D’Silva~~

Tuttle

President and Chief Executive Officer

Omaha, ~~Nebraska~~NE 68164 ~~(402) 452-5400~~

(Name, address, including zip code, and telephone number, including area code, of ~~Agent~~agent for ~~Service)~~service)

David E. Gardels, Esq.

Husch Blackwell LLP

~~1650 Farnam~~

1620 Dodge Street,

Suite 2100

Omaha, ~~Nebraska~~NE 68102



Large Accelerated Filer o	Accelerated Filer x

Non-accelerated Filer o(Do not check if smaller reporting company)	Smaller Reporting Company o



Title of Each Class of Securities to be Registered	Amount to be Registered ⁽¹⁾	Proposed Maximum Offering Price Per Share⁽⁴⁾		Proposed Maximum Aggregate Offering Price⁽⁴⁾		Amount of Registration Fee
Common Stock, $0.01 par value per share	22,000,000⁽²⁾	$	1.30	$	28,600,000	$	3,277.56
Common Stock, $0.01 par value per share, issuable upon exercise of Warrants	11,000,000⁽³⁾	$	1.30	$	14,300,000	1,638.78
Total:	33,000,000			$	42,900,000	$	4,916.34

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

The information in this ~~Prospectus~~prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This ~~Prospectus~~prospectus is not an offer to sell these securities and ~~is not seeking~~neither we nor the selling stockholders are soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, ~~dated November 30, 2005~~

Dated March 20, 2012

PRELIMINARY PROSPECTUS

~~25,038,320 Shares~~

33,000,000 SHARES OF COMMON STOCK

TRANSGENOMIC, INC.

~~COMMON STOCK~~

This ~~Prospectus covers 25,038,320 shares (“Shares”) of our common stock that~~prospectus relates to the resale by the investors listed in the section titled “Selling Stockholders”, and we refer to the investors as the selling stockholders ~~listed under “Principal and Selling~~(the “Selling Stockholders” ~~may sell from time to time. These Shares consist of:~~

) of up to ~~16,975,743~~33,000,000 shares of our Common Stock, par value $.01 per share (the “Common Stock” or “Common Shares”). The Common Shares ~~outstanding held by the selling shareholders;~~offered consist of: (i) up to22,000,000 Common Shares and

(ii) up to ~~8,062,577~~11,000,000 Common Shares ~~that may be issued~~issuable upon exercise of outstanding ~~warrants.~~

~~The selling stockholders may sell~~warrants (the “Warrants”). We issued the shares atof our Common Stock and Warrants in connection with a private placement offering in February 2012. We are registering the ~~then~~resale of the Common Shares and the Common Shares underlying the Warrants as required by the Registration Rights Agreement we entered into with the Selling Stockholders on February 2, 2012 (the “Registration Rights Agreement”).

The Selling Stockholders may offer and sell or otherwise dispose of our Common Shares described in this prospectus from time to time through public or private transactions at prevailing market ~~price for the shares~~prices, at ~~the time of the sale,~~prices related to prevailing market prices or at ~~other~~privately negotiated prices. ~~The last reported sale price for our common stock on November 29, 2005 was $0.96 per share. The selling stockholders are offering the Shares as described under~~See “Plan of ~~Distribution.”~~ Distribution” beginning on page 9 for more information.

We will not receive any of the proceeds from the ~~sale of these shares~~Common Stock sold by the ~~selling stockholders, but will be entitled to the~~Selling Stockholders, other than any proceeds from the cash exercise of ~~outstanding warrants.~~

Warrants to purchase shares of our Common Stock.

We have agreed to pay certain expenses in connection with this registration statement and to indemnify the Selling Stockholders against certain liabilities. The Selling Stockholders will pay all underwriting discounts and selling commissions, if any, in connection with the sale of the shares of Common Stock.

Our ~~common stock~~Common Stock is ~~listed~~traded on the ~~Nasdaq National Market~~OTC Bulletin Board under the symbol “TBIO.”

On March 13, 2012, the last reported sale price of our Common Stock was $1.28 per share.

Investing in ~~our common stock~~the Securities involves a high degree of risk. ~~You should carefully consider~~See the ~~information under the heading “Risk Factors~~”section entitled “Risk Factors” beginning on page 57 of this ~~Prospectus before buying shares of~~prospectus, and the section entitled “Risk Factors” in our ~~common stock.~~most recent Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission, which is incorporated herein by reference.

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

~~, 2005~~

The date of this prospectus is _________ __, 2012

ABOUT THIS PROSPECTUS

You should rely only on the information contained or incorporated by reference in this ~~Prospectus. We~~prospectus. Neither we nor the Selling Stockholders have ~~not~~ authorized ~~any other person~~anyone to provide you with information that is different from such information. If anyone provides you with different or inconsistent information, you should not rely on it. The Selling Stockholders are offering to sell Common Stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on its cover page regardless of the time of delivery of this prospectus or any sale of the Common Stock. In case there are differences or inconsistencies between this prospectus and the information incorporated by reference, you should rely on the information in the document with the latest date.

The Selling Stockholders are offering the Common Stock only in jurisdictions where such issuances are permitted. The distribution of this ~~Prospectus~~prospectus and the issuance of the Common Stock in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the issuance of the Common Stock and the distribution of this prospectus outside the United States. This prospectus does not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, the Common Stock offered by this prospectus by any person in any jurisdiction in which it is ~~current~~unlawful for such person to make such an offer or solicitation.

It is important for you to read and consider all of the information contained in this prospectus in making your investment decision. To understand the offering fully and for a more complete description of the offering you should read this entire document carefully, including particularly the “Risk Factors” section beginning on page 7. You also should read and consider the information in the documents to which we have referred you in the sections entitled “Where You Can Find Additional Information” and “Incorporation of Certain Information by Reference”.

As used in this prospectus, unless the context requires otherwise, the terms “we”, “us”, “our”, or “the Company” refer to Transgenomic, Inc. and its subsidiaries on a consolidated basis. References to “Selling Stockholders” refers to those stockholders listed herein under “Selling Stockholders” and their successors, assignees and permitted transferees.

A WARNING ABOUT FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), about the Company and its ~~date.~~ subsidiaries. These forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact, and can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “will”, “could”, “should”, “projects”, “plans”, “goal”, “targets”, “potential”, “estimates”, “pro forma”, “seeks”, “intends”, or “anticipates” or the negative thereof or comparable terminology. Forward-looking statements include discussions of strategy, financial projections, guidance and estimates (including their underlying assumptions), statements regarding plans, objectives, expectations or consequences of various transactions, and statements about the future performance, operations, products and services of the Company and its subsidiaries. We caution our stockholders and other readers not to place undue reliance on such statements.

Our businesses and operations are and will be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. Such risks, uncertainties and other factors that could cause actual results and experience to differ from those projected include, but are not limited to, the risk factors set forth in the section entitled “Risk Factors” beginning on page 7 of this prospectus and elsewhere in the documents incorporated by reference in this prospectus, including our Annual Report on Form 10-K for the year ended December 31, 2011.

All written or oral forward-looking statements attributable to us or any person acting on our behalf made after the date of this prospectus are expressly qualified in their entirety by the risk factors and cautionary statements contained in and incorporated by reference into this prospectus. Unless legally required, we do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

The following summary highlights selected information contained elsewhere in this prospectus and in the documents incorporated by reference in this prospectus and does not contain all the information you will need in making your investment decision. You should read carefully this entire prospectus and the documents incorporated by reference in this prospectus before making an investment decision. This prospectus provides you with a general description of Transgenomic, the Common Stock issuable under this prospectus and the offering.

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

For a complete description of our business, financial condition, results of operations and ~~prospects may have changed since~~other important information, we refer you to our filings with the Securities and Exchange Commission (the “SEC”) that ~~date.~~

~~PROSPECTUS SUMMARY~~

~~The items in the following summary~~ are ~~described in more detail later~~incorporated by reference in this Prospectus. This summary provides an overview of selected information and does not contain all of the information you should consider. Therefore, you should also read the more detailed information set out in this Prospectus,prospectus, including ~~the consolidated financial statements and related notes appearing elsewhere in this Prospectus, before investing in~~ our common stock. In particular, you should carefully consider the information discussed under “Risk Factors.” All references to “we,” “us” or the “Company” in this Prospectus mean Transgenomic, Inc.

~~TRANSGENOMIC, INC.~~

~~Our Business~~

~~We develop, manufacture and sell innovative products~~Annual Report on Form 10-K for ~~the analysis, synthesis and purification of nucleic acids through two operating segments, BioSystems and Nucleic Acids.~~

The BioSystems operating segment develops, assembles, manufactures and markets versatile products and provides analytical services to the medical research, clinical and pharmaceutical markets for use in genetic variation analysis. Products and services are sold through a direct sales force in the United States and throughout much of Western Europe. For the rest of the world, products and services are sold through more than 25 dealers and distributors located in those local markets. Net sales from this operating segment are categorized as bioinstruments, bioconsumables and discovery services.

Bioinstruments. The flagship product of the BioSystems operating segment is the WAVE system which has broad applicability to genetic variation detection in both molecular genetic research and molecular diagnostics. There was a world-wide installed base of 1,269 WAVE systems as of September 30, 2005. Additionally, this operating segment utilizes its sales and distribution network to sell a number of independent, third party equipment platforms. Service contracts to maintain installed systems are sold and supported by technical support personnel.

Bioconsumables. The installed WAVE base generates a demand for consumables that are required for the system’s continued operation. These products are developed, manufactured and sold by this operating segment. In addition, the BioSystems operating segment manufactures and sells consumable products that can be used on multiple, independent platforms. These products include SURVEYOR Nuclease and a range of HPLC separation columns.

Discovery Services. The BioSystems operating segment provides various genetic laboratory services through a contract research lab in Gaithersburg, Maryland and a second laboratory in Omaha, Nebraska that operates in a Good Laboratory Practices (“GLP”) compliant environment and is certified under the Clinical Laboratory Improvement Amendment. The services provided primarily include (1) genomic biomarker analysis services to pharmaceutical and biopharmaceutical companies to support preclinical and clinical development of targeted therapeutics; and (2) molecular-based testing for hematology, oncology and certain inherited diseases for physicians and third-party laboratories.

The Nucleic Acids operating segment develops, manufactures and markets chemical building blocks for nucleic acid synthesis to biotechnology, pharmaceutical, oligonucleotide synthesis companies and research institutions throughout the world. These products are produced primarily in this operating segment’s only facility, in Glasgow, Scotland. Prior to November 11, 2004, this operating segment also manufactured synthesized segments of nucleic acids (known as oligonucleotides) in a facility in Boulder, Colorado. On November 11, 2004, the assets associated with this facility were sold to an unaffiliated

third party. As a result, the Nucleic Acids operating segment no longer manufactures and sells these specialized oligonucleotides. A substantial portion of this operating segment’s revenues during 2005 and 2004 have been derived from one customer.

We have experienced recurring net losses resulting in an accumulated deficit of $110.88 million at September 30, 2005 and have historically relied upon cash flows from investing and financing activities to offset significant cash outflows from operating activities. We instituted significant changes during the fourth quarter of 2004 designed to, among other things, better align our cost structure with projected revenues, focus on opportunities in our BioSystems operating segment, and minimize the adverse financial effect of our Nucleic Acids operating segment. Specifically, during the fourth quarter of 2004, we sold our manufacturing facility in Boulder, Colorado and implemented a restructuring plan. While the primarily goals of these changes were to provide the foundation for a self-sustaining, growth-oriented company with positive cash flows and earnings, there can be no assurance that we can achieve these goals. Our business strategy going forward is to achieve revenue growth in our BioSystems operating segment and to better align our cost structure with anticipated revenues in both of our operating segments.

~~Recent Financing Activities~~

On October 31, 2005, we closed on a private placement of securities to institutional investors (the “2005 Private Placement”). The securities issued consisted of: (i) 14,925,743 shares of the Company’s common stock, plus (ii) five-year, non-callable warrants to purchase another 5,970,297 shares of common stock with an exercise price of $1.20 per share. The aggregate purchase price for the securities sold was $1.01 per share of common stock initially being sold or $15.08 million. In conjunction with this transaction, we issued a warrant to Oppenheimer & Co., Inc. to purchase 932,859 shares at $1.20 per share as part of their placement fee.

The net proceeds from the 2005 Private Placement were $13.90 million after transaction costs of $1.18 million. These proceeds were partially used to repay all outstanding principal and accrued interest on our convertible line of credit (the “Credit Line”) and convertible term note (the “Term Note”) to Laurus Master Fund, Ltd. (“Laurus”) (collectively, the “Laurus Loans”) including fees to facilitate the 2005 Private Placement and prepayment penalties to Laurus in the sum of $0.82 million. As a result, our Laurus Loans have been cancelled and are no longer available to us. The remaining proceeds of $5.35 million will be used for future working capital needs.

~~Shares to be sold by Selling Stockholders~~

This Prospectus covers 25,038,320 shares of our common stock that the selling stockholders listed under “Principal and Selling Stockholders” may offer and resell from time to time. These shares consist of (i) 14,925,743 shares issued in conjunction with the 2005 Private Placement; (ii) 6,903,156 shares issuable upon the exercise of warrants that were also issued in conjunction with the 2005 Private Placement; (iii) 2,050,000 shares in conjunction with a private placement that closed in the fourth quarter of 2003; and (iv) 1,159,421 shares issuable upon the exercise of outstanding warrants that were issued primarily in conjunction with our past indebtedness to Laurus. The exercise price of these warrants range from $1.20 to $3.18 per share. The selling stockholders are offering the common stock as described under “Plan of Distribution.”

At November 29, 2005, we had 49,172,079 shares issued and outstanding. The number of shares outstanding does not include (i) the 8,062,577 shares issuable upon the exercise of outstanding warrants and (ii) up to 6,246,231 shares of our common stock that we could issue under our employee stock option plan of which 5,541,015 options are outstanding.

~~Use of Proceeds~~

This Prospectus relates to shares of our common stock that may be offered and sold from time to time by the selling stockholders. This Prospectus also relates to common stock issuable upon the exercise of warrants held by certain selling stockholders. We will not receive any proceeds from the sale of shares of common stock in this offering. We will, however, receive proceeds from the exercise of the warrants, if exercised. The proceeds from the exercise of warrants, if any, will be used for working capital purposes.

~~Summary Consolidated Financial Information~~

The following tables present our summary consolidated historical financial information for the periods indicated. You should read this information together with the consolidated financial statements and related notes and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Prospectus. The summary consolidated balance sheet data at December 31, 2004 and 2003 and the summary consolidated statements of operations data for each year ended December 31, 2004, 2003 and 2002 have been derived from our audited consolidated financial statements that are included elsewhere in this Prospectus. The summary consolidated balance sheet data at September 30, 2005 and the summary consolidated statements of operations data for the nine months ended September 30, 2005 and 2004 are derived from our unaudited condensed consolidated financial statements included elsewhere in this Prospectus. The unaudited condensed consolidated financial statements include, in the opinion of management, all adjustments that management considers necessary for the fair presentation of the financial information set forth in those statements. Historical results are not necessarily indicative of the results to be expected in the future. The as adjusted balance sheet data as of September 30, 2005 and the as adjusted statements of operations data for the nine months ended September 30, 2005 and the year ended December 31, ~~2004 give effect~~2011. For instructions on how to ~~the 2005 Private Placement and simultaneous repayment~~find copies of the Laurus Loans as if is such transactions had occurred as of September 30, 2005 for purposes of the balance sheet data and as of January 1, 2004 for purposes of the statement of operations data. Such amounts have been derived from our as adjusted unaudited condensed consolidated financial statements that are not included in this Prospectus. For a detailed description of the related adjustments refer to “Capitalization Table” on page 14. Dollar amounts, except per share data, are presented in thousands.

   Nine Months Ended September 30,
Year Ended December 31,

   2005
2005
2004
2004
2004
2003
2002

   As Adjusted As Adjusted
Statement of Operations Data:

Net sales
   $ 23,711 $ 23,711 $ 25,834 $ 33,789 $ 33,789 $ 33,866 $ 37,554
Cost of good sold
   13,609 13,609 18,484 24,596 24,596 24,315 19,569


Gross profit
   10,102 10,102 7,350 9,193 9,193 9,551 17,985
Selling, general and administrative
   10,023 10,023 12,866 17,499 17,499 17,324 24,199
Research and development
   1,696 1,696 5,344 6,685 6,685 9,305 12,201
Restructuring charges⁽¹⁾
   —   —   —   3,570 3,570 738 3,282
Impairment charges⁽²⁾
   247 247 11,964 11,965 11,965 4,772 —
Gain on sale of facility⁽³⁾
   —   —   —   (1,466 ) (1,466 ) —   —
Gain on sale of product line
   —   —   —   —   —   —   —


Operating expenses
   11,966 11,966 30,174 38,253 38,253 32,139 39,682
Other income (expense)⁽⁴⁾
   (1,888 ) (611 ) (4,704 ) (5,406 ) (239 ) (305 ) 437


Loss before income taxes
   (3,752 ) (2,475 ) (27,528 ) (34,466 ) (29,299 ) (22,893 ) (21,260 )
Income tax (benefit) expense
   27 27 (94 ) (94 ) (94 ) 65 105


Net loss
   $ (3,779 ) $ (2,502 ) $ (27,434 ) $ (34,372 ) $ (29,205 ) $ (22,958 ) $ (21,365 )


Basic and diluted loss per share
   $ (0.12 ) $ (0.05 ) $ (0.95 ) $ (1.19 ) $ (0.66 ) $ (0.94 ) $ (0.91 )
Basic and diluted weighted average shares outstanding
   32,837 47,763 28,951 29,066 43,992 24,484 23,583

   As of September 30, 2005
   As of December 31,
   Actual
   As Adjusted
   2004
   2003
Balance Sheet Data:

Total assets⁽⁵⁾
   $ 31,789    $ 37,163    $ 37,458    $ 57,306
Borrowings under credit line
   6,935    —      6,514    2,142
Current portion of long-term debt
   675    —      825    1,693
Long-term debt, less current portion
   1,226    —      2,199    —
Total stockholders’ equity
   15,577    29,220    16,535    45,058

these documents, see “Where You Can Find Additional Information”.

⁽¹⁾

Restructuring plans were implemented in 2002 and 2004 to reduce and align our expenses with current business prospects. The plans included employee terminations, office closures, termination of collaborations and write-offs of abandoned intellectual property. As a result, restructuring charges were recorded and are included in operating expenses. See Note N to the accompanying consolidated financial statements.

⁽²⁾	Impairment charges relate primarily to the impairment of goodwill, and in 2004, also include a charge of $2,100 related to the impairment of property and equipment. See Note C to the accompanying consolidated financial statements.

⁽³⁾	Gain on sale of facility relates to the sale of our specialty olignucleotide manufacturing facility in Boulder, Colorado during the fourth quarter of 2004. See note M to the accompanying consolidated financial statements.

⁽⁴⁾

Other income (expense) for all years presented primarily includes interest expense and in 2004 it includes a loss on debt extinguishment of $2,859 resulting from certain modifications to our Laurus Loans that were treated as extinguishments for financial reporting purposes. See Note E to the accompanying consolidated financial statements.

⁽⁵⁾

The reduction in total assets from December 31, 2003 to December 31, 2004 related primarily to impairment charges of $11,965 in our Nucleic Acids operating segment (see Notes C and K to the accompanying consolidated financial statements) and the sale of our specialty oligonucleotide manufacturing facility in Boulder, Colorado (see Note M to the accompanying consolidated financial statements). The reduction in total assets from December 31, 2002 to December 31, 2003 related primarily to operating losses that were funded by reductions in cash and cash equivalents and short term investments.

~~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). We maintain manufacturing facilities in Omaha, Nebraska, San Jose, California, Glasgow, Scotland~~ and ~~Cramlington, England. We maintain research and development offices in Gaithersburg, Maryland and Omaha, Nebraska.~~

~~We make reports filed by us with the SEC available free of charge on~~ our telephone phone number is 402-452-5400. Our website ~~as soon as reasonably practicable after these reports are filed. The~~ address ~~of our website~~ is ~~www.transgenomic.com.~~www.transgenomic.com. Information on our website, ~~including any SEC report,~~or that can be accessed through our website, is not incorporated by reference into this prospectus and does not constitute part of this ~~Prospectus~~prospectus.

33,000,000 Common Shares⁽²⁾

82,625,725 Common Shares⁽³⁾

We will not receive any proceeds from the sale of the Common Shares. We may, however, receive cash proceeds upon the cash exercise of Warrants, and we intend to use any such proceeds for general corporate and working capital purposes. See "Use of Proceeds" beginning on page 8 of this prospectus.

You should consider carefully the matters set forth under “Risk Factors” beginning on page 7 of this prospectus before deciding to purchase any of the Common Stock.

Ownership of the Common Stock involves certain risks. You should consider carefully the risks and ~~you should not rely on it~~uncertainties described in, ~~deciding whether to invest~~or incorporated by reference in, this prospectus, including the risks described below and under the caption “Risk Factors” in our ~~common stock.~~

~~RISK FACTORS~~

AnAnnual Report on Form 10-K for the year ended December 31, 2011, and in any other reports that we file with the SEC, along with the other information included or incorporated by reference in this prospectus, in evaluating an investment in the Common Stock. The information included or incorporated by reference in this prospectus may be amended, supplemented or superseded from time to time by other reports we file with the SEC in the future. For a description of these reports and documents, and information about where you can find them, see the sections entitled “Where You Can Find Additional Information” and Incorporation of Certain Information by Reference” in this prospectus.

The risks and uncertainties described in this prospectus and the documents incorporated by reference in this prospectus are not the only ones facing us. Additional risks and uncertainties that we do not presently know about or that we current believe are not material may also adversely affect our ~~common stock involves a number of risks. Before making an investment decision, you should carefully consider all~~business. If any of the risks and ~~other information~~uncertainties described in this ~~Prospectus. The risks discussed in this Prospectus could materially adversely affect~~prospectus or the documents incorporated by reference herein actually occur, our business, financial condition and results of operations ~~and~~could be adversely affected in a material way. This could cause the trading price of our ~~common stock~~Common Stock to decline, ~~significantly. If this occurs,~~perhaps significantly, and you may lose part or all of your investment.

Our Common Stock is equity and therefore is subordinate to our indebtedness and preferred stock.

Our Common Stock is an equity interest and does not constitute indebtedness of the Company. Consequently, our Common Stock ranks junior to all current and future indebtedness of the Company and other non-equity claims against us with respect to assets available to satisfy claims against us, including in the event of our liquidation or dissolution. We may, and our other subsidiaries may also, incur additional indebtedness from time to time and may increase our aggregate level of outstanding indebtedness.

Further, holders of our Common Stock are subject to the prior dividend and liquidation rights of any holders of our preferred stock that may be outstanding from time to time. Our Board of Directors has designated 3,879,307 shares of our authorized preferred stock as Series A Convertible Preferred Stock (the “Series A Preferred”) with certain rights, privileges and preferences which are senior to the rights of the holders of our Common Stock. Our Board of Directors is authorized to cause us to issue additional classes or series of preferred stock without any action on the part of ~~your investment.~~

~~Risks Relating~~our common stockholders. If we issue additional shares of Series A Preferred or other preferred shares in the future that have a preference over our Common Stock with respect to ~~Our Business~~

~~We may not have adequate financial resources to execute our business plan.~~

~~At October 31, 2005,~~the payment of dividends or upon liquidation, or if we ~~had cash and cash equivalents and short-term investment of $6.68 million. While we believe~~issue preferred shares with voting rights that existing sources of liquidity are sufficient to meet expected cash needs through 2006, we have experienced recurring net losses and have an accumulated deficit totaling $110.88 million at September 30, 2005 and have historically relied upon cash flows from investing and financing activities to offset significant cash outflows from operating activities. Todilute the ~~extent necessary, we believe that we can manage costs and expenses at reduced levels to conserve working capital. The need for any such cost and expense reductions would likely delay implementation~~voting power of our ~~business plan. Ultimately,~~Common Stock, then the rights of holders of our Common Stock or the market price of our Common Stock could be adversely affected.

Sales of our shares issued in our recent private placement may cause the market price of our shares to decline.

On February 7, 2012, we ~~must achieve sufficient revenues~~issued 22,000,000 shares of Common Stock and Warrants to purchase an additional 11,000,000 shares of Common Stock to investors. Pursuant to the Registration Rights Agreement with the Selling Stockholders, we are registering with the SEC 33,000,000 of those shares and warrant shares for resale as described in ~~order to generate positive net earnings~~this prospectus. The shares issued on February 7, 2012 represent approximately 40% of our issued and outstanding shares of Common Stock, assuming full cash ~~flows from operations. However, we cannot assure you that we will~~exercise of the Warrants. Upon effectiveness of this registration statement of which this prospectus is a part, these shares may be ~~able to increase our revenues.~~

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

~~We have experienced losses from operations since inception~~open market. The sale of our operations. Our loss from operations for the years ended December 31, 2004, 2003 and 2002 were $29.06 million, $22.59 million and $21.70 million, respectively, and for the first nine months of 2005 were $1.86 million. These losses have been due principally to the high levels of research and development expenses and sales and marketing expenses that we have incurred in order to develop and market our products, restructuring charges and impairment charges. In addition, markets for our products have developed more slowly than expected in many cases and may continue to do so. As a result, we may incur operating losses in the future.

~~Markets for our products and services may develop slowly.~~

There are many factors that affect the market demand for our products and services that we cannot control. This is especially true in our Nucleic Acids operating segment where the demand for our products depends to a large degree on the success that our customers and potential customers have in developing useful pharmaceutical products based on genetic intervention. A central strategy for our Nucleic Acids operating segment is to sell synthetic nucleic acid products to biopharmaceutical and pharmaceutical companies that are seeking to develop commercially viable genomic-based diagnostic and therapeutic products. We have invested a significant amount of capital into acquiring and developing manufacturing facilities and other assets to allow us to pursue this market. However, this is a new field of commercial development, and many of these biopharmaceutical and pharmaceutical companies areshares in the ~~early stages of their efforts to develop genomic-based diagnostics and therapeutics and have encountered difficulties in these efforts. As a result,~~open market, or the ~~demand for our synthetic nucleic acid products is difficult to forecast and may develop slowly or sporadically. In addition, we cannot assure you~~perception that these ~~companies will not internally develop the chemistries and manufacturing capabilities to produce the products they~~sales may occur, could buy from us. Demand for our WAVE System is similarly affected by the needs and budgetary resources of research institutions, universities, hospitals and others who use the WAVE System for genetic-variation research. The WAVE System represents a significant expenditure by these types of

customers and often requires a long sales cycle. If revenues from the sales of our products and services continue at current levels, we may need to take steps to further reduce operating expenses or raise additional working capital. We cannot assure you that sales will increase or that we will be able to reduce operating expenses or raise additional working capital.

~~Two customers account for a significant portion of sales in our BioSystems and Nucleic Acids operating segments.~~

During nine months ended September 30, 2005, sales to Geron Corporation (“Geron”) totaled $1.73 million and represented 54%, of net sales within our Nucleic Acids operating segment and 7% of our total consolidated net sales. During the year ended December 31, 2004, sales to Geron Corporation totaled $4.15 million and represented 49% of total net sales within our Nucleic Acids operating segment and 12% of total consolidated net sales. Sales to Geron are governed by a supply agreement that does not require Geron to purchase any minimum quantity of our products. Accordingly, the amount of nucleic acid products we sell to Geron is subject to change. Revenues from our Nucleic Acids operating segment business would be substantially reduced if Geron’s need for our products declined or if it decided to obtain these products from other suppliers.

During the nine months ended September 30, 2005, sales to a large pharmaceutical company totaled $2.0 million and represented 10% of net sales within our BioSystems operating segment and 9% of our total consolidated net sales. During the year ended December 31, 2004, sales to this customer totaled $1.66 million and represented 7% of total net sales within our BioSystems operating segment and 5% of total consolidated net sales. Sales to this customer are governed by a non-binding master services agreement that does not require the customer to purchase any minimum quantity of our services. Accordingly, the amount of sales to this customer is subject to change.

~~Customer clinical trials may be delayed or discontinued.~~

A significant percentage of our Nucleic Acids operating segment and discovery services revenues are generated by sales to customers involved in drug development. Our products and services are generally used by these customers in the manufacture of drug candidates in varying stages of clinical trials. If these clinical trials are delayed or cancelled or are otherwise not successful, this could have a significant impact on revenues we generate from the sales of these products.

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

During the last three fiscal years, our international sales have been approximately 55-65% of our net sales. As a result, a major portion of our revenues and expenses 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 and operating expenses higher in local currencies since our foreign sales and operating expenses are typically paid for in U.S. Dollars, British Pounds or the Euro; and

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

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

We rely on a single supplier, Hitachi High Technologies America, to provide the basic instrument used in our WAVE Systems. While other suppliers of instrumentation and computer hardware are available, we believe that our arrangement with Hitachi offers strategic advantages. Hitachi is replacing its current instrument line with a new instrument line. While we presently plan to convert our technology and applications to this new instrument line, such conversion may not be successful and, therefore, we may incur additional costs for the custom manufacturing of the current instrument line. If we were required to seek alternative sources of supply, it could be time consuming or expensive or require significant and costly modification of our WAVE System. Also, if we were unable to obtain instruments from Hitachi in sufficient quantities or in a timely manner, our ability to manufacture our products could be impaired, which could limit our future revenues.

~~We may not have adequate personnel to execute our business plan.~~

In order to reduce our operating costs, we have significantly reduced the number of employees, including reductions in our research and development staff and our sales and marketing personnel. In addition, we may lose other key management, scientific, technical, sales and manufacturing personnel from time to time. It may be very difficult to replace personnel if they are needed in the future, and the loss of key personnel could harm our business and operating results. We cannot assure you that our employee reductions will not impair our ability to continue to develop new products and refine existing products in order to remain competitive. In addition, these reductions could prevent us from successfully marketing our products and developing our customer base.

~~Our markets are very competitive.~~

As described above, we compete with many other companies in both our Biosystems and Nucleic Acids operating segments. Many of these competing companies have greater resources than we do or 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 that 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 substantial 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 secret protection, copyright and trademark laws, non-disclosure agreements and other contractual provisions for some of our confidential and proprietary information that is not subject matter for which patent protection is being sought. Such measures, however, may not provide adequate protection for our trade secrets or other proprietary information. If such measures do not protect our rights, third parties could use our technology and our ability to compete in the market would be reduced.

~~We are dependent upon our 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 technology, we may lose the right to manufacture or sell a substantial portion of our products. In addition, we may need to obtain licenses to additional technologies in the future in order to keep our products competitive. If we fail to license or otherwise acquire necessary technologies, we may not be able to develop new products that we need to remain competitive.

The patent underlying our nonexclusive license to manufacture standard nucleic acid building blocks expired as of March 15, 2005. The expiration of this patent could result in additional manufacturers entering the market for these products. Some of these manufacturers may have lower cost structures or other competitive advantages which may reduce our market share and/or our operating margins related to these products.

~~The protection of intellectual property in foreign countries is uncertain.~~

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

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

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

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

Our research and development and manufacturing activities involve the controlled use of hazardous materials and chemicals. We are subject to federal, state, local and international laws and regulations governing the use, storage, handling and disposal of hazardous materials and waste products. If we fail to comply with applicable laws or regulations, we could be required to pay penalties or be held liable for any damages that result and this liability could exceed our financial resources. We cannot

~~assure you that accidental contamination or injury will not occur. Any such accident could damage our research and manufacturing facilities and operations, resulting in delays and increased costs.~~

~~Risks Relating To This Offering and Ownership of Our Common Stock~~

~~The price for our common stock is volatile and may drop.~~

The trading price for our common stock has fluctuated significantly over recent years. The volatility in the price of our stock is attributable to a number of factors, not all of which relate to our operating results and financial position. Nevertheless, continued volatility in the market price for our stock should be expected and we cannot assure you that the price of our stock will not decrease in the future. Fluctuations or further declines in the price of our stock may affect our ability to sell shares of our stock and to raise capital through future equity financing.

~~If we are unable to maintain our Nasdaq listing, your ability to trade shares of our common stock could suffer~~.

In order for our common stock to remain listed on the Nasdaq National Market (“Nasdaq”), we must meet the minimum listing requirements for continued listing, including, among other requirements, minimum bid price and market value of public float requirements. If our common stock is delisted from the Nasdaq, transactions in our common stock would likely be conducted only in the over-the counter market, or potentially on regional exchanges, which could negatively impact the trading volume and price of our common stock, and investors may find it more difficult to purchase or dispose of, or to obtain accurate quotations as to the market value of, our common stock. In addition, if our common stock were not listed on the Nasdaq andcause the trading price of our ~~common stock remains below $5.00 per share, trading in~~Common Stock to decline or become highly volatile.

Our ability to use our ~~common stock would also~~net operating losses to offset future taxable income will be subject to certain rules that require additional disclosures by broker-dealers in connection with any trades involving a “penny stock.” In such event, the additional burdens imposed on broker-dealers to effect transactions in our common stock could further limit the market liquidity of our common stock and the ability of investors to trade our common stock.

~~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.~~

We also had obligations to issue 13,603,592 shares of common stock under outstanding stock options and warrants. The issuance of these additional shares of common stock may be dilutive to our current shareholders and could negatively impact the market price of our common stock.

~~Sales of substantial amounts of our common stock in the public market could adversely affect the market price of our common stock.~~

At November 29, 2005, we have 49,172,079 shares of common stock outstanding. All but 13,972,384 shares held by affiliates of the Company are freely tradable without restriction or further registration under the Securities Act. Shares held by affiliates may also be sold subject only to the requirements of Rule 144 under the Securities Act. The sale of these shares in the public markets has 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. Such an event could place further downward pressure on the price of our common 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 stock in the market.

~~The price you pay for shares offered by the selling stockholders may be higher than the prices paid by other people acquiring such shares.~~

Selling stockholders may sell shares under this Prospectus from time to time either at prices then prevailing in the market or at other prices they negotiate with buyers. Accordingly, the price you pay for shares of our common stock you purchase from a selling stockholder may be higher than the prices paid by other people acquiring such shares.

~~USE OF PROCEEDS~~

We will not receive additional proceeds from the sale of the Shares offered by this Prospectus. However, we have already received net proceeds (after transaction costs of $1.18 million) of $13.90 million in conjunction with the 2005 Private Placement. These proceeds were partially used to repay all outstanding principal and accrued interest on our Laurus Loans including fees to facilitate the private placement and prepayment penalties to Laurus in the sum of $0.82 million. The remaining proceeds of $5.35 million will be used for future working capital needs. We also received proceeds of $2.05 million in conjunction with the private placement that we closed in the fourth quarter of 2003. Additionally, we may receive approximately $10.49 million upon the exercise of warrants for the remaining 8,062,577 Shares that may be offered hereby. The net proceeds we receive from any exercise of these warrants, if any, will be used by us primarily for working capital purposes.

~~PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY~~

Our common stock is listed for trading on the Nasdaq 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 2003 and 2004 and through November 29, 2005

   High
   Low
Year Ended December 31, 2003

First Quarter
   $ 4.22    $ 1.40
Second Quarter
   $ 2.43    $ 0.93
Third Quarter
   $ 2.14    $ 1.03
Fourth Quarter
   $ 2.98    $ 1.45
Year Ended December 31, 2004

First Quarter
   $ 3.23    $ 1.96
Second Quarter
   $ 1.87    $ 1.24
Third Quarter
   $ 1.58    $ 1.07
Fourth Quarter
   $ 1.52    $ 1.06
Year Ending December 31, 2005

First Quarter
   $ 1.11    $ 0.53
Second Quarter
   $ 0.90    $ 0.45
Third Quarter
   $ 1.24    $ 0.70
Fourth Quarter (through November 29, 2005)
   $ 1.02    $ 0.80

~~At November 29, 2005, there are 49,172,079 shares of our common stock outstanding and approximately 3,475 holders of record.~~

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. We expect to retain all earnings, if any, for investment in our business. Dividends on our common stock will be paid only if and when declared by our Board of Directors. The Board’s ability to declare a dividend is subject to limits imposed by Delaware corporate law. 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.

~~SELECTED CONSOLIDATED FINANCIAL DATA~~

The following selected consolidated financial data should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this Prospectus. The selected consolidated balance sheet data at December 31, 2004 and 2003 and the selected consolidated statements of operations data for each year ended December 31, 2004, 2003 and 2002 have been derived from our audited consolidated financial statements that are included elsewhere in this Prospectus. The selected consolidated balance sheet data at December 31, 2002, 2001 and 2000 and the selected consolidated statements of operations data for each year ended December 31, 2001 and 2000 have been derived from our audited consolidated financial statements that are not included in this Prospectus. The selected consolidated balance sheet data at September 30, 2005 and the selected consolidated statements of operations data for the nine months ended September 30, 2005 and 2004 are derived from our unaudited condensed consolidated financial statements included in this Prospectus. The unaudited condensed consolidated financial statements include, in the opinion of management, all adjustments that management considers necessary for the fair presentation of the financial information set forth in those statements. Historical results are not necessarily indicative of the results to be expected in the future. Dollar amounts, except per share data, are presented in thousands.

   Nine Months Ended September 30,
Year Ended December 31,

   2005
2004
2004
2003
2002
2001⁽¹⁾
2000⁽¹⁾

Statement of Operations Data:

Net sales
   $ 23,711 $ 25,834 $ 33,789 $ 33,866 $ 37,554 $ 38,467 $ 25,883
Cost of good sold
   13,609 18,484 24,596 24,315 19,569 17,198 12,800


Gross profit
   10,102 7,350 9,193 9,551 17,985 21,269 13,083
Selling, general and administrative
   10,023 12,866 17,499 17,324 24,199 21,636 14,908
Research and development
   1,696 5,344 6,685 9,305 12,201 9,372 7,652
Restructuring charges⁽²⁾
   —   —   3,570 738 3,282 —   —
Impairment charges⁽³⁾
   247 11,964 11,965 4,772 —   —   —
Gain on sale of facility⁽⁴⁾
   —   —   (1,466 ) —   —   —   —
Gain on sale of product line
   —   —   —   —   —   —   (784 )


Operating expenses
   11,966 30,174 38,253 32,139 39,682 31,008 21,776
Other income (expense)⁽⁵⁾
   (1,888 ) (4,704 ) (5,406 ) (305 ) 437 2,362 212


Loss before income taxes
   (3,752 ) (27,528 ) (34,466 ) (22,893 ) (21,260 ) (7,377 ) (8,481 )
Income tax (benefit) expense
   27 (94 ) (94 ) 65 105 24 180


Net loss
   $ (3,779 ) $ (27,434 ) $ (34,372 ) $ (22,958 ) $ (21,365 ) $ (7,401 ) $ (8,661 )


Basic and diluted loss per share
   $ (0.12 ) $ (0.95 ) $ (1.19 ) $ (0.94 ) $ (0.91 ) $ (0.33 ) $ (0.52 )
Basic and diluted weighted average shares outstanding
   32,837 28,951 29,066 24,484 23,583 22,560 16,630

   As of
September 30,
2005
   As of December 31,
      2004
   2003
   2002
   2001
   2000
Balance Sheet Data:

Total assets⁽⁶⁾
   $ 31,789    $ 37,458    $ 57,306    $ 74,035    $ 89,286    $ 77,863
Borrowings under credit line
   6,935    6,514    2,142    —      —      —
Current portion of long-term debt
   675    825    1,693    63    —      —
Long-term debt, less current portion
   1,226    2,199    —      1,499    —      —
Total stockholders’ equity
   15,577    16,535    45,058    61,515    82,104    73,966

⁽¹⁾

In May 2001, we acquired Annovis, Inc., a specialty chemicals company that develops, manufactures and markets a wide variety of nucleic acid-based products and services for the life science industry, for a total purchase price of approximately $16,910. Annovis’ results of operations have been included in the accompanying financial statements beginning on May 1, 2001. Additionally, our consolidated financial statements include the results from our non-life sciences product line which was sold effective April 1, 2000.

⁽²⁾ Restructuring plans were implemented in 2002 and 2004 to reduce and align our expenses with current business prospects. The plans included employee terminations, office closures, termination of collaborations and write-offs of abandoned intellectual property. As a result, restructuring charges were recorded and are included in operating expenses. See Note N to the accompanying consolidated financial statements.

⁽³⁾	Impairment charges relate primarily to the impairment of goodwill, and in 2004, also include a charge of $2,100 related to the impairment of property and equipment. See Note C to the accompanying consolidated financial statements.

⁽⁴⁾	Gain on sale of facility relates to the sale of our specialty olignucleotide manufacturing facility in Boulder, Colorado during the fourth quarter of 2004. See note M to the accompanying consolidated financial statements.

⁽⁵⁾

⁽⁶⁾

~~CAPITALIZATION~~

The following table reflects our capitalization as of September 30, 2005 on an actual and as adjusted basis as if the 2005 Private Placement and simultaneous repayment of the Laurus Loans had occurred on September 30, 2005.

   As of September 30,

   Actual
As Adjusted

Credit Line⁽¹⁾
   $ 6,935 $ —
Current portion of Term Note⁽¹⁾
   675 —
Term Note, less current portion⁽¹⁾
   1,226 —
Stockholders’ equity:

Preferred stock, $0.01 par value, 15,000,000 shares authorized, none outstanding
   —   —
Common stock, $0.01 par value, 60,000,000 shares authorized, 34,246,336 and 49,172,079 shares outstanding, respectively⁽²⁾
   348 497
Additional paid-in capital^{(1) (2)}
   125,058 138,803
Accumulated other comprehensive income
   1,051 1,051
Accumulated deficit⁽³⁾
   (110,880 ) (111,131 )


Total stockholders’ equity
   15,577 29,220


Total capitalization
   $ 24,413 $ 29,220

⁽¹⁾

Net proceeds from the 2005 Private Placement (after transaction costs of $1,180) totaled $13,895 and were used in part to prepay all indebtedness and prepayment fees to Laurus. The remaining proceeds will be used for the future working capital needs of the Company. Transaction costs included fees to Oppenheimer of $1,055 and other transaction specific costs of approximately $125.

⁽²⁾	Subsequent to September 30, 2005, we issued 14,925,743 shares in conjunction with the 2005 Private Placement. At November 29, 2005, we have 13,603,592 potentially dilutive securities consisting of 5,541,015 options issued under our stock option plan and warrants representing 8,062,577 shares.

⁽³⁾	The as-adjusted presentation assumes that net premiums related to the Laurus Loans totaling $573 at September 30, 2005 will result in a gain upon prepayment of these loans. This gain will be offset by fees to Laurus of $500 to facilitate the private placement and prepayment penalties of $324.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

The following discussion of our financial condition and results of operations should be read together with our consolidated financial statements, unaudited condensed consolidated financial statements and related notes included elsewhere in this Prospectus. This discussion contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors,” “Information Regarding Forward-Looking Statements” and elsewhere in this Prospectus.

The following discussion also gives effect to the restatement of our statements of cash flows for the years ended December 31, 2004 and 2003, as discussed in Note P to the consolidated financial statements for the years ended December 31, 2004, 2003 and 2002.

~~Overview~~

~~The Company develops, manufactures and sells innovative products for the analysis, synthesis and purification of nucleic acids through two operating segments, BioSystems and Nucleic Acids.~~

The BioSystems operating segment develops, assembles, manufactures and markets versatile products and provides analytical services to the medical research, clinical and pharmaceutical markets for use in genetic variation analysis. Net sales from this operating segment are categorized as bioinstruments, bioconsumables and discovery services.

limitations.

Non-U.S. holders may be subject to U.S. income tax with respect to gain on disposition of their Common Stock or Warrants.

If we are or have been a U.S. real property holding corporation at any time within the shorter of the five-year period preceding a disposition of Common Stock or a warrant by ~~law.~~a non-U.S. holder or such holder's holding period of the stock disposed of, such non-U.S. holder may be subject to United States federal income tax with respect to gain on such disposition. We believe that we are not currently, and do not anticipate becoming, a “United States real property holding corporation” for U.S. federal income tax purposes. Even if we are considered a U.S. real property holding corporation, an additional exception may exempt a non-U.S. holder's gain on disposition of our Common Stock or Warrants from United States federal income tax. See section entitled “United States Federal Income Tax Considerations” for further information.

We will receive no proceeds from the sale of the Common Shares by the Selling Stockholders. We may, ~~make additional contributions~~however, receive cash proceeds equal to the ~~savings plan on behalf~~total exercise price of ~~our employees if our Board of Directors decides to do so. During each of three years ended December 31, 2004, we contributed approximately $0.5 million~~any Warrants to the ~~savings plan on behalf of our employees.~~

~~Employee Stock Purchase Plan~~. ~~Our Second Amended and Restated 2001 Employee Stock Purchase Plan (the “Stock Purchase Plan”) has been structured to qualify as an “employee stock purchase plan” under Section 423 of~~extent that the Internal Revenue Code of 1986, as amended. Additionally, the Stock Purchase Plan authorizes the Compensation Committee of the Board of Directors to adopt sub-plans designed to achieve desired tax and other objectives in locations outside the United States. Up to 500,000 shares of our common stock may be issued during the term of the Stock Purchase Plan that is defined as December 1, 2001 through November 30, 2006. EmployeesWarrants are ~~able to voluntarily participate in the Stock Purchase Plan through payroll deductions. Such deductions accumulate during the participation~~

periods, defined as three month periods. On the first business day of each participation period, each participant is deemed to have been granted an option to purchase common stock at 85% of its fair market value as measured by the closingexercised. The exercise price of the ~~stock on either~~Warrants held by the ~~first or last business day~~Selling Stockholders is $1.25 per share of our Common Stock. The exercise price and the number of Common Shares issuable upon exercise of the ~~participation period, whichever is lower.~~ Warrants may be adjusted in certain circumstances, including stock splits, dividends, distributions or reclassifications, and mergers, consolidations, statutory share exchanges, or other similar transactions. However,

We will pay certain expenses related to the registration of the shares of Common Stock.

DETERMINATION OF OFFERING PRICE

The Selling Stockholders will determine at what price they may sell the offered shares, and such sales may be made at prevailing market prices, or at privately negotiated prices

PLAN OF DISTRIBUTION

We are registering the shares of Common Stock previously issued to the Selling Stockholders and issuable upon exercise of the Warrants previously issued to the Selling Stockholders to permit the resale of these shares of Common Stock by the holders of the Common Stock and Warrants from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the Selling Stockholders of the shares of Common Stock. We will bear all fees and expenses incident to our obligation to register the shares of Common Stock.

The Selling Stockholders, or their pledges, donees, transferees, or any of their successors in interest selling shares received from a Selling Shareholder as a gift, partnership distribution or other non-sale related transfer after the date of this prospectus, may sell all or a portion of the shares of Common Stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of Common Stock are sold through underwriters or broker-dealers, the Selling Stockholders will be responsible for underwriting discounts or commissions or agent's commissions. The shares of Common Stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. The Selling Stockholders will act independently of us in making decisions with respect to the timing, manner and size of each sale. These sales may be affected in transactions, which may involve crosses or block transactions,

The Selling Shareholders may also transfer the Common Shares by gift.

The Selling Shareholders may engage brokers and dealers, and any brokers or dealers may arrange for other brokers or dealers to participate in effecting sales of the Common Shares. These brokers, dealers or underwriters may act as principals, or as an agent of a Selling Shareholder. Broker-dealers may agree with a Selling Shareholder to sell a specified number of the Common Shares at a stipulated price per security. If the broker-dealer is ~~based upon~~unable to sell the ~~participant’s elected withholding amount.~~Common Shares acting as agent for a Selling Shareholder, it may purchase as principal any unsold Common Shares at the stipulated price. Broker-dealers who acquire Common Shares as principals may thereafter resell the Common Shares from time to time in transactions in any stock exchange or automated interdealer quotation system on which the Common Shares are then listed, at prices and on terms then prevailing at the time of sale, at prices related to the then-current market price or in negotiated transactions. Broker-dealers may use block transactions and sales to and through broker-dealers, including transactions of the nature described above. The Selling Shareholders may also sell the Common Shares in accordance with Rule 144 under the Securities Act of 1933, as amended, rather than pursuant to this prospectus, regardless of whether the Common Shares are covered by this prospectus

If the Selling Stockholders effect such transactions by selling shares of Common Stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the Selling Stockholders or commissions from purchasers of the shares of Common Stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of Common Stock or otherwise, the Selling Stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of Common Stock in the course of hedging in positions they assume. The Selling Stockholders may also sell shares of Common Stock short and deliver shares of Common Stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The Selling Stockholders may also loan or pledge shares of Common Stock to broker-dealers that in turn may sell such shares.

The Selling Stockholders may pledge or grant a security interest in some or all of the shares of Common Stock or Warrants owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of Common Stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending, if necessary, the list of Selling Stockholders to include the pledgee, transferee or other successors in interest as Selling Stockholders under this prospectus. The Selling Stockholders also may transfer and donate the shares of Common Stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

In addition, a Selling Shareholder may, from time to time, sell the Common Shares short, and, in those instances, this prospectus may be delivered in connection with the short sales and the Common Shares offered under this prospectus may be used to cover short sales.

The Selling Stockholders and any broker-dealer participating in the distribution of the shares of Common Stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the ~~end of each participation period such option is automatically exercised.~~

~~Employment Agreements~~

We have entered into employment agreements with our Chief Executive Officer, Collin J. D’Silva and our Chief Financial Officer, Michael A. Summers. The employment agreements with Messrs. D’Silva and Summers require these executives to devote their full time to our business activities, provided that they may serve as directors of or consultants to other companies that do not compete with us and for nonprofit corporations, civic organizations, professional groups and similar entities. These executives are not allowed to compete with us during the term of their employment and for one year after they are no longer our employee. Each agreement contains provisions under which these executive officers have agreed to maintain the confidentiality of information concerning us and which prohibits them from disclosing confidential information about our business to people outsidea particular offering of the ~~Company, except for proper business purposes.~~

shares of Common Stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of Common Stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the Selling Stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers. The ~~employment agreement with Mr. D’Silva has a term~~Selling Stockholders may indemnify any broker-dealer that participates in transactions involving the sale of ~~22 months expiring December 2006. The employment agreement with Mr. Summers has an initial term~~the shares of ~~three years expiring July 2007. Each~~Common Stock against certain liabilities, including liabilities arising under the Securities Act.

Under the securities laws of ~~these agreements~~some states, the shares of Common Stock may be ~~extended~~sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of Common Stock may not be sold unless wesuch shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

There can be no assurance that any Selling Stockholder will sell any or all of the shares of Common Stock registered pursuant to the registration statement, of which this prospectus forms a part.

The Selling Stockholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of Common Stock by the Selling Stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of Common Stock to engage in market-making activities with respect to the shares of Common Stock. All of the foregoing may affect the marketability of the shares of Common Stock and the ability of any person or entity to engage in market-making activities

We will pay all expenses of the registration of the shares of Common Stock pursuant to the Registration Rights Agreement, estimated to be $54,316 in total, including, without limitation, SEC filing fees and expenses of compliance with state securities or “Blue Sky” laws; provided, however, that a Selling Stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the Selling Stockholders against liabilities, including some liabilities under the Securities Act, in accordance with the Registration Rights Agreement, or the ~~employee, as the case may be, give notice of an intention not to renew. If one of these officers is terminated for reasons other than an act of serious misconduct, the officer~~Selling Stockholders will be entitled to ~~severance pay~~contribution. We may be indemnified by the Selling Stockholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholder specifically for use in ~~an amount equal~~this prospectus, in accordance with Registration Rights Agreement, or we may be entitled to ~~his then current base annual salary.~~

~~PRINCIPAL AND SELLING STOCKHOLDERS~~contribution.

~~Principal Shareholders~~

~~This table shows~~

Once sold under the ~~beneficial ownership~~registration statement, of ~~our common stock by our directors, for our current executive officers who are named~~which this prospectus forms a part, the shares of Common Stock will be freely tradable in the Summary Compensation Table, by all of our current executive officers and directors as a group, and by each person we believe beneficially owns more than 5% of our outstanding common stock on or about the date of this Prospectus. Each stockholder named in this table has sole voting and investment power over the shares he beneficially owns and all such shares are owned directly by the stockholder unless otherwise indicated. Stock ownership informationhands of persons other than our ~~executive officers and directors is based on available information, including but not limited~~affiliates.

SELLING STOCKHOLDERS

We have prepared this prospectus to ~~Schedules 13D, 13F~~allow the Selling Stockholders or ~~13G filed with the Securities and Exchange Commission.~~

Name
   Number of Shares
Beneficially Owned
Percent
of Class (1)

Directors and Executive Officers

Collin J. D’Silva, Director, President and Chief Executive Officer
   4,739,488 (2) 9.6 %
Michael A. Summers, Chief Financial Officer
   116,667 (3) *
Mitchell L. Murphy, Vice President, Secretary and Treasurer
   168,667 (4) *
Gregory J. Duman, Director
   240,400 (5) *
Jeffrey L. Sklar, M.D., Ph.D., Director
   24,000 (6) *
Roland J. Santoni, Director
   25,000 (7) *
Parag Saxena, Director
   0 (8) *
Gregory T. Sloma, Director
   10,000 (9) *
All directors and executive officers as a group (8 persons)
   5,324,222 (10) 10.8 %
Other Stockholders/Beneficial Owners

Kopp Investment Advisors, Inc.
   9,595,430 (11) 19.5 %
David M. Knott
   5,024,867 (12) 9.9 %
Mazama Capital Management, LLC
   3,792,948 (13) 7.7 %
LB I Group Inc.
   3,960,396 (14) 8.1 %
Michael A. Roth and Brian J. Stark
   2,722,772 (15) 5.5 %
Perceptive Life Sciences Master Fund, Ltd.
   2,772,277 (16) 5.6 %

*	~~Represents less than 1%~~their successors, assignees or other permitted transferees to sell or otherwise dispose of, ~~the outstanding Common Stock of the Company.~~

⁽¹⁾

Applicable percentage ownership is based on 49,172,079 shares of common stock outstanding as of November 29, 2005, together with securities presently exercisable or convertible into shares of common stock and securities that the holder, as of November 29, 2005, had the right to exercise or convert into shares of common stock within sixty (60) days. Securities that are exercisable or convertible as described above are deemed to be outstanding and beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

⁽²⁾

Consists of 2,771,538 shares owned by Mr. D’Silva, 1,400,000 shares owned by the Arthur P. D’Silva Trust, of which Collin J. D’Silva is the sole trustee, 484,616 shares owned by D’Silva, LLC, of which Mr. D’Silva is the managing member and vested options to purchase 83,334 shares at $1.03 per share. Mr. D’Silva also holds unvested options to purchase an additional 166,666 shares at $1.03 per share.

⁽³⁾	Consists of vested options to purchase 66,667 shares at $1.09 per share and 50,000 shares at $1.03 per share. Mr. Summers also holds unvested options to purchase an additional 33,333 shares at $1.09 per share and 100,000 shares at $1.03 per share.

⁽⁴⁾

Consists of 4,000 shares owned by Mr. Murphy and vested options to purchase 50,000 shares at $5.00 per share, 10,000 shares at $11.94 per share, 2,500 shares at $9.91 per share, 8,000 shares at $6.38 per share, 27,500 shares at $6.24 per share, 50,000 shares at $1.92 per share and 16,667 shares at $1.03 per share. Mr. Murphy also holds unvested options to purchase an additional 2,000 shares at $6.38 per share and 33,333 shares at $1.03 per share.

⁽⁵⁾	Consists of 25,400 shares owned by Mr. Duman and vested options to purchase 15,000 shares at $10.00 per share and 200,000 shares at $6.00 per share. Mr. Duman also holds unvested options to purchase an additional 5,000 shares at $2.57 per share.

⁽⁶⁾

Consists of vested options to purchase 15,000 shares at $5.00 per share and 9,000 shares at $13.00 per share. Dr. Sklar also holds unvested options to purchase an additional 3,000 shares at $6.38 per share, 6,000 shares at $6.16 per share, 5,000 shares at $2.57 per share and 5,000 shares at $1.09 per share.

⁽⁷⁾ Consists of 2,500 shares owned by Mr. Santoni and vested options to purchase 17,500 shares at $10.00 per share and 5,000 shares at $2.57 per share. Mr. Santoni also holds unvested options to purchase an additional 3,000 shares at $6.16 per share, 3,000 shares at $6.00 per share and 5,000 shares at $2.57 per share.

⁽⁸⁾	~~Mr. Saxena holds unvested options to purchase 15,000 shares at $1.09 per share.~~

⁽⁹⁾	~~Consists of vested options to purchase 10,000 shares at $2.57 per share. Mr. Sloma also holds unvested options to purchase an additional 5,000 shares at $2.57 per share.~~

⁽¹⁰⁾	~~Includes vested options to acquire 636,168 shares of common stock.~~

⁽¹¹⁾	~~The address of Kopp Investment Advisors, Inc. is 7701 France Avenue South, Suite 500, Edina, Minnesota 55435.~~

⁽¹²⁾

Consists of 3,960,396 shares of common stock held in the names of Knott Partners, L.P.; Matterhorn Offshore Fund Ltd; Common Fund Hedged Equity Company; Shoshone Partners, L.P.; Anno, L.P.; and Good Steward Trading Company (collectively, the “Knott Companies”) and warrants to purchase an additional 1,064,471 shares at $1.20 per share. These shares are beneficially owned by David M. Knott and Dorset Management Corporation. The address of David M. Knott and Dorset Management Group is 485 Underhill Boulevard, Suite 205, Syosset, New York 11791. In addition to the foregoing shares and warrants, the Knott Companies hold warrants to purchase an additional 519,687 shares at $1.20 per share. These warrants are subject to a conversion cap which precludes the holder thereof from exercising such warrants to the extent that such owner would beneficially own in excess of 9.9% of the Company’s common stock.

⁽¹³⁾	~~The address of Mazama Capital Management, LLC is One Southwest Columbia Street, Suite 1500, Portland Oregon 97258.~~

⁽¹⁴⁾

Consists of 3,960,396 shares of common stock held in the name of LB I Group Inc. Lehman Brothers Holdings Inc. beneficially owns these shares along with Lehman Brothers Inc. and LB I Group Inc. The address of each of these beneficial owners is 745 Seventh Avenue, New York, New York 10019. In addition to these shares, LB I Group Inc. holds warrants to purchase an additional 1,584,158 shares at $1.20 per share. These warrants are subject to a conversion cap which precludes the holder thereof from exercising such warrants to the extent that such owner would beneficially own in excess of 4.9% and 9.9% of the Company’s common stock.

⁽¹⁵⁾

Consists of 2,722,772 shares of common stock held in the name of SF Capital Partners Ltd. The named individuals are the managing members of Stark Offshore Management, LLC, which is the investment manager of SF Capital Partners Ltd. and has sole voting and dispositive power over the shares. The named individuals have disclaimed beneficial ownership of the shares. The address for the named individuals is 3600 South Lake Drive, St. Francis, Wisconsin 53235. In addition to these shares, SF Capital Partners Ltd. holds warrants to purchase an additional 1,089,109 shares at $1.20 per share. These warrants are subject to a conversion cap which precludes the holder thereof from exercising such warrants to the extent that such owner would beneficially own in excess of 4.9% and 9.9% of the Company’s common stock.

⁽¹⁶⁾

Consists of 1,980,198 shares owned by Perceptive Life Sciences Master Fund, Ltd. and warrants to purchase an additional 792,079 shares at $1.20 per share. The warrants are subject to a conversion cap which precludes the holder thereof from exercising such warrants to the extent that such owner would beneficially own in excess of 9.9% of the Company’s common stock. The address of Perceptive Life Sciences Master Fund, Ltd. is c/o Perceptive Advisors, 7284 W. Palmetto Park Road, Suite 306, Boca Raton, Florida 33433.

~~Selling Stockholders~~

~~The shares offered by this Prospectus may be sold~~ from time to time, ~~by the selling stockholders named in the following table. The number of shares these selling stockholders are offering under this Prospectus will be adjusted~~up to ~~reflect any additional~~33,000,000 shares of ~~common stock which may become~~our Common Stock. The 33,000,000 shares includes the following: (i) 19,000,000 shares of our Common Stock issued pursuant to the Securities Purchase Agreement dated February 2, 2012 (the “Securities Purchase Agreement”); (ii) 9,500,000 shares of Common Stock issuable upon exercise of five-year Warrants with an exercise price of $1.25 issued pursuant to the Securities Purchase Agreement; (iii) 3,000,000 shares of Common Stock issued to the entities associated with Third Security, LLC (the “Third Security Entities”) in connection with the conversion of the convertible notes issued by us; and (iv) 1,500,000 shares of Common Stock issuable to the ~~selling stockholders by reason~~Third Security Entities upon exercise of ~~any stock dividend, stock split or other similar transaction effected without~~Warrants on the ~~receipt of consideration and which results in an increase~~same terms as the investors in the ~~number of our outstanding shares of common stock or which otherwise increases~~above-described private placement.

The table below presents information regarding the ~~number of shares issuable upon conversion of the loan proceeds or upon the exercise of the warrants under which such shares may by issued.~~

~~The following table also sets forth the total number of shares of our common stock beneficially owned by each of the selling stockholders~~Selling Stockholders and ~~the percentage of our total outstanding shares of common stock that each selling stockholder beneficially owns. Percentage ownership is based on~~ the shares of our ~~common stock~~Common Stock that they may sell or otherwise dispose of from time to time under this prospectus. The table is based on information supplied to us by the Selling Stockholders. Percentages of beneficial ownership are based upon 98,142,953 shares of Common Stock issued and outstanding onas of March 13, 2012. Beneficial ownership is determined under Section 13(d) of the Exchange Act and generally includes voting or ~~about~~investment power with respect to securities and including any securities that grant the ~~date~~Selling Stockholders the right to acquire Common Stock within 60 days of ~~this Prospectus plus~~March 13, 2012. We do not know when or in what amounts the Selling Stockholders may sell or otherwise dispose of the shares ~~that may be issued to certain~~covered hereby. The Selling Stockholders might not sell any or all of the ~~selling stockholders and which~~shares covered by this prospectus or may ~~be sold under~~sell or dispose of some or all of the shares other than pursuant to this ~~Prospectus. The estimate~~prospectus. Because the Selling Stockholders may not sell or otherwise dispose of some or all of the shares ~~owned after~~covered by this ~~offering assumes that all shares offered by the Prospectus are sold. These estimates may prove to be inaccurate because the selling stockholders may offer all or some of their shares~~prospectus and because there are currently no agreements, arrangements or understandings with respect to the sale or other disposition of any of the ~~shares.~~

   Shares Beneficially Owned
Prior to the Offering
   Shares Beneficially Owned
After the Offering

Name
   Number
   Percentage⁽¹⁾
Shares
to be Sold
   Number
   Percentage

Laurus Master Fund, Ltd.⁽²⁾
   1,075,000    2.1 % 1,075,000    0    *
TN Capital Equities, Ltd.⁽³⁾
   61,484    * 61,484    0    *
Kopp Emerging Growth Fund⁽⁴⁾
   9,595,430    19.5 % 2,050,000    7,545,430    15.3 %
Oppenheimer & Co. Inc.⁽⁵⁾
   932,859    1.9 % 932,859    0    *
LB I Group Inc.⁽⁶⁾
   3,960,396    8.1 % 5,544,554    0    *
Knott Partners, L.P.^{(7), (8)}
   1,990,800    4.0 % 1,990,800    0    *
Matterhorn Offshore Fund Ltd.^{(7), (9)}
   2,181,754    4.4 % 2,181,754    0    *
Common Fund Hedged Equity Company^(7),(10)
   249,200    * 249,200    0    *
Shoshone Partners, L.P.^{(7), (11)}
   989,800    2.0 % 989,800    0    *
Anno, L.P.^{(7), (12)}
   62,300    * 62,300    0    *
Good Steward Trading Company^{(7), (13)}
   70,700    * 70,700    0    *
SF Capital Partners Ltd.⁽¹⁴⁾
   2,722,772    5.5 % 3,811,881    0    *
Perceptive Life Sciences Master Fund, Ltd.⁽¹⁵⁾
   2,772,277    5.6 % 2,772,277    0    *
Iroquois Master Fund Ltd.⁽¹⁶⁾
   1,732,674    3.5 % 1,732,674    0    *
Saffron Capital Int’l Fund Ltd.⁽¹⁷⁾
   693,070    1.4 % 693,070    0    *
RAQ, LLC⁽¹⁸⁾
   346,535    * 346,535    0    *
Omicron Master Trust⁽¹⁹⁾
   346,535    * 346,535    0    *
Endeavor Asset Management, L.P.⁽²⁰⁾
   103,960    * 103,960    0    *

shares, we cannot estimate the number of the shares that will be held by the Selling Stockholders after completion of the offering.

Except as provided below, none of the Selling Stockholders has held any position or office or had any other material relationship with us or any of our predecessors or affiliates within the past three years other than as a result of the ownership of our securities.



Name of Selling Stockholder	Number of Shares of Common Stock Owned Prior to Offering⁽¹⁾	Maximum Number of Shares of Common Stock to be Offered Pursuant to this Prospectus	Number of Shares of Common Stock Owned After Offering⁽²⁾
	Number	Number	Number	Percent

James E. Douglas III⁽³⁾	600,000	600,000	—	—	%
K & M Douglas TR u/a dtd 3/23/06. Kevin and Michelle Douglas TTEES⁽³⁾	2,400,000	2,400,000	—	—	%



Douglas Irrev Descendants TR u/a dtd 8/7/98 Kevin & Michelle Douglas TTEES⁽³⁾	1,980,000	1,980,000	—	—	%
Douglas Family TR u/a dtd 1/29/90 James and Jean Douglas TTEES⁽³⁾	1,020,000	1,020,000	—	—	%
Special Situations Fund II QP, L.P.⁽⁴⁾	2,625,000	2,625,000	—	—	%
Special Situations Private Equity Fund, L.P.⁽⁴⁾	1,125,000	1,125,000	—	—	%
Special Situations Life Sciences Fund, L.P.⁽⁴⁾	1,500,000	1,500,000	—	—	%
Third Security Incentive 2010 LLC ⁽⁵⁾	4,052,626	900,000	3,152,626	3	%
Third Security Staff 2010 LLC⁽⁵⁾	8,105,252	1,800,000	6,305,252	6	%
Third Security Senior Staff 2008 LLC⁽⁵⁾	8,105,252	1,800,000	6,305,252	6	%
Fidelity Select Portfolios: Biotechnology Portfolio⁽⁶⁾	4,257,000	4,257,000	—	—	%
Fidelity Advisor Series VII: Fidelity Advisor Biotechnology Fund⁽⁶⁾	243,000	243,000	—	—	%
Perceptive Life Sciences Master Fund Ltd.⁽⁷⁾	3,000,000	3,000,000	—	—	%
Burguete Investment Partnership, LP⁽⁸⁾	1,500,000	1,500,000	—	—	%
Robert G. Allison	255,000	255,000	—	—	%
William H. Baxter Trustee FBO William H. Baxter Revocable Trust u/a dtd 7/3/96	60,000	60,000	—	—	%
Gary A. Bergren	90,000	90,000	—	—	%
David & Carole Brown TTEES FBO David & Carole Brown Rev Tr u/a dtd 10/23/97	52,500	52,500	—	—	%
Dennis D. Gonyea	60,000	60,000	—	—	%
Dorothy J. Hoel	60,000	60,000	—	—	%
Dr. Paul & Nancy Seel JtRos	60,000	60,000	—	—	%
E. Terry Skone TTEE E. Terry Skone Rev TR u/a dtd 11/30/05	60,000	60,000	—	—	%
Janet & Donald Voight TTEES FBO Janet M Voight TR u/a dtd 8/28/96	52,500	52,500	—	—	%
Kettle Hill Master Fund, Ltd⁽⁹⁾	274,500	274,500	—	—	%
Kettle Hill Partners II, LP⁽⁹⁾	148,500	148,500	—	—	%
Kettle Hill Partners, LP⁽⁹⁾	327,000	327,000	—	—	%
Capital Ventures International⁽¹⁰⁾	750,000	750,000	—	—	%
DAFNA Lifescience LTD⁽¹¹⁾	247,500	247,500	—	—	%
DAFNA Lifescience Market Neutral LTD⁽¹¹⁾	202,500	202,500	—	—	%
DAFNA Lifescience Select LTD⁽¹¹⁾	300,000	300,000	—	—	%
Aristides Fund LP⁽¹²⁾	600,000	600,000	—	—	%
Pennington Capital LLC⁽¹³⁾	560,000	450,000	110,000	—	%
Itasca Capital Partners, LLC⁽¹⁴⁾	405,000	375,000	30,000	—	%
L2 Opportunity Fund⁽¹⁵⁾	375,000	375,000	—	—	%
FT Options, LLC⁽¹⁶⁾	375,000	375,000	—	—	%
Brian H. Davidson	375,000	375,000	—	—	%
Iroquois Master Fund, Ltd.⁽¹⁷⁾	300,000	300,000	—	—	%
MLPF&S FPO Gary S. Kohler RRA FBO Gary S. Kohler	300,000	300,000	—	—	%
Kingsbrook Opportunities Master Fund LP⁽¹⁸⁾	300,000	300,000	—	—	%



Cranshire Capital Master Fund, Ltd.⁽¹⁹⁾	210,000	210,000	—	—	%
Freestone Advantage Partners II, LP⁽²⁰⁾	15,000	15,000	—	—	%
Midsummer Small Cap Master, Ltd.⁽²¹⁾	225,000	225,000	—	—	%
Lacuna Hedge Fund LLLP⁽²²⁾	187,500	187,500	—	—	%
Doit L. Koppler II⁽²³⁾	107,500	52,500	55,000	—	%
Robert M. Patzig⁽²⁴⁾	92,500	37,500	55,000	—	%
Theodore J. Fisher⁽²⁵⁾	22,500	22,500	—	—	%
MLPF&S FPO Michael John Qualen IRA FB⁽²⁶⁾	150,000	150,000	—	—	%
Craig-Hallum Capital Group 401k Bradley W. Baker Roth 401k Acct.⁽²⁷⁾	30,000	30,000	—	—	%
Bradley W. Baker⁽²⁷⁾	150,000	150,000	—	—	%
George F. Sutton⁽²⁸⁾	77,500	37,500	40,000	—	%
James H. Zavoral, Jr. and Johanna M. Zavoral⁽²⁹⁾	97,500	97,500	—	—	%
Craig-Hallum Capital Group 401k UTD 5/30/02 Contribution Acct A/C William F. Hartfiel II⁽³⁰⁾	150,000	150,000	—	—	%
John L. Flood⁽³¹⁾	90,000	90,000	—	—	%
MLPF&S Cust FPO John L. Flood IRRA FBO John L. Flood⁽³¹⁾	90,000	90,000	—	—	%
Kevin P. Harris⁽³²⁾	180,000	180,000	—	—	%
MLPF&S Cust FPO Michael J. Hasslinger IRRA FBO Michael J. Hasslinger⁽³³⁾	75,000	75,000	—	—	%

Edward C. Johnson 3d and FMR LLC, through its control of Fidelity, and the funds each has sole power to dispose of the 4,500,000 Shares owned by the Funds. Members of the family of Edward C. Johnson 3d, Chairman of FMR LLC, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders' voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders' voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Edward C. Johnson 3d, Chairman of FMR LLC, has the sole power to vote or direct the voting ~~and dispositive power over these shares and warrants.~~

to be beneficially owned by Kingsbrook Opportunities. KB GP LLC (“GP LLC”) is the general partner of Kingsbrook Partners and may be considered the beneficial owner of any securities deemed to be beneficially owned by Kingsbrook Partners. Ari J. Storch, Adam J. Chill and Scott M. Wallace are the sole managing members of Opportunities GP and GP LLC and as a result, may be considered beneficial owners of any securities deemed beneficially owned by Opportunities GP and GP LLC. Each of Kingsbrook Partners, Opportunities GP, GP LLC and Messrs. Storch, Chill and Wallace disclaim beneficial ownership of these securities.

has represented that he acquired his shares in the ordinary course of business and, at the time of the acquisition of the shares, had no agreements or understandings, directly or indirectly, with any person to distribute the shares.

DESCRIPTION OF ~~CAPITAL~~COMMON STOCK

General

We can issue up to 100,000,000 shares of our common stock and 15,000,000 shares of our preferred stock. At November 29, 2005, there are 49,172,079 shares of our common stock outstanding. We have not issued any shares of preferred stock. You should read the following summary description of our capital stock in conjunction with our certificate of incorporation and our bylaws, each of which is available upon request.

~~Common Stock~~

Matters

The holders of our common stock are entitled to one vote per share on all matters submitted to a vote of our stockholders; the payment of any dividends declared by the Board of Directors out of legally available funds, after the superior rights of any preferred stockholders have been satisfied and share ratably in company assets available for distribution to them in the event of the liquidation, dissolution, distribution of assets or winding up of the Company.

The holders of common stock do not have cumulative voting rights. As a result, the holders of a majority of the outstanding common stock can elect all the directors of the company. The remaining common stock holders will not be able to elect any directors. The holders of common stock have no preemptive or other subscription rights, and there are no conversion, redemption or sinking fund

provisions with respect to the common stock. All outstanding shares of common stock are, and all shares of common stock to be outstanding upon completion of this offering will be, fully paid and non-assessable. The common stock has a par value of $0.01 per share.

~~Preferred Stock~~

~~The~~Company's Board of Directors is authorized to issue up to 100,000,000 shares of Common Stock, from time to time, as provided in a resolution or resolutions adopted by the Board of Directors.

As of March 13, 2012, 71,625,725 shares of our Common Stock were issued and outstanding, held by approximately 2,800 stockholders of record, not including beneficial holders whose shares are held in names other than their own.

Dividends, Voting Rights and Liquidation

Holders of Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the shareholders and do not have cumulative voting rights. Holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by our Board of Directors out of funds legally available for dividend payments. All outstanding shares of Common Stock are fully paid and non-assessable. The holders of Common Stock have no preferences or rights of conversion, exchange, pre-emption or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. In the event of any liquidation, dissolution or winding-up of our affairs, holders of Common Stock will be entitled to share ratably in our assets that are remaining after payment or provision for payment of all of our debts and obligations. The rights, preferences and privileges of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock currently outstanding or which may designate and issue in the future.

Under our Third Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), we have the authority to issue up to 15,000,000 shares of preferred stock, $0.01 par value per share (“Preferred Stock”), issuable in ~~one or more~~specified series and ~~to fix the~~having specified voting, dividend, conversion, liquidation, and other rights ~~powers,~~and preferences ~~qualifications, limitations and restrictions granted to or imposed on the preferred stock. The authority of the~~as our Board of Directors ~~includes the right~~may determine, subject to ~~fix dividend rights,~~limitations set forth in our Certificate of Incorporation. The Preferred Stock may be issued for any lawful corporate purpose without further action by our stockholders. The issuance of any Preferred Stock having conversion rights ~~terms~~might have the effect of ~~redemption, liquidation preference, sinking fund terms~~diluting the interests of our other stockholders. In addition, shares of Preferred Stock could be issued with rights, privileges and preferences which would deter a tender or exchange offer or discourage the acquisition of control of the Company.

Series A Convertible Preferred Stock

Of the number of shares ~~constituting any series~~of Preferred Stock authorized by or Certificate of Incorporation, as of March 13, 2012, 3,879,307 shares had been designated Series A Convertible Preferred Stock with such rights, privileges and preferences as set forth in the ~~designation~~Certificate of ~~a series, without any further vote or action by~~Designation of Series A Convertible Preferred Stock and filed with the ~~stockholders. The preferred stock may be~~Secretary of State of the State of Delaware on December 28, 2011 (the “Certificate of Designation”). As of March 13, 2012, 2,586,205 shares of the Series A Convertible

Certain rights ~~that could adversely affect the voting power~~ of the holders of the Series A Preferred are senior to the rights of the holders of our Common Stock. The Series A Preferred has a liquidation preference equal to its original price per share, plus any accrued and unpaid dividends thereon. The Series A Preferred accrues cumulative dividends at the rate of 10.0% of the original price per share per annum.

All outstanding shares of Series A Preferred will be automatically converted into Common Stock, at an initial conversion rate of 4:1, at the election of the holders of a majority of the then-outstanding shares of Series A Preferred. At any time following the fifth anniversary of the original issue date, the holders of a majority of the then-outstanding Series A Preferred, voting together as a separate class, can require the Company to redeem all of the then-outstanding Series A Preferred at a price equal to the then-current stated value of such shares plus all accrued but unpaid dividends thereon. The initial conversion rate for the Series A Preferred is subject to adjustment in the event of certain stock splits, stock dividends, mergers, reorganizations, reclassifications, and dilutive issuances.

The Certificate of Designation provides that the holders of Series A Preferred shall be entitled, as a separate voting group, at each annual or special election of directors, to elect two directors of the Company.

Generally, the holders of the Series A Preferred are entitled to vote together as a single group with the holders of Common Stock on an as-converted basis. However, the Certificate of Designation provides that we will not perform the following activities, subject to certain exceptions, without the affirmative vote of a majority of the holders of the outstanding shares of Series A Preferred:

~~Options~~Anti-Takeover Effects

At November 29, 2005, options to purchase 5,541,015 shares of our common stock are outstanding at exercise prices ranging from $1.00 to $13.00 per share. Additional options to acquire 705,216 shares of common stock may be issued in the future under our Stock Option Plan.

~~Anti-takeover Provisions of Delaware Law and Charter Provisions~~

~~Delaware Law.~~

~~In general,~~Under Section 203 of the Delaware General Corporation Law

We are subject to Section 203 of the Delaware General Corporation Law, which prohibits a ~~publicly held~~ Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years ~~following~~after the date that ~~the~~such stockholder became an interested stockholder, ~~unless:~~

with the following exceptions:

In general, Section 203 defines ~~“business combination”~~"business combination" to ~~include:~~

include the following:

In general, Section 203 defines an "interested stockholder" as an entity or a person who, together with the person's affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder ~~as any entity or person beneficially owning~~status did own, 15% or more of the outstanding voting stock of the corporation.

A Delaware corporation ~~and any entity~~may “opt out” of these provisions with an express provision in its original certificate of incorporation or ~~person affiliated with~~an express provision in its certificate of incorporation or ~~controlling~~bylaws resulting from a stockholders' amendment approved by at least a majority of the outstanding voting shares. We have not opted out of these provisions. As a result, mergers or ~~controlled by the entity~~other takeover or ~~person.~~

~~Charter~~change in control attempts of us may be discouraged or prevented.

Anti-Takeover Effects Under Certain Provisions

~~Our Third Amended and Restated~~ of our Certificate of Incorporation and Bylaws

Our Certificate of Incorporation and our Amended and Restated Bylaws (”Bylaws”) include a number of provisions that may have the effect of deterring hostile takeovers or delaying or preventing changes in control or management of ~~Transgenomic.~~ the Company.

First, our ~~certificate~~Certificate of ~~incorporation~~Incorporation provides that all stockholder actions must be effected at a duly called meeting of holders and not by a consent in writing.

Second, our ~~bylaws~~Bylaws provide that special meetings of the holders may be called only by the chairman of the Board of Directors, the Chief Executive Officer or our Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors.

Third, our ~~certificate~~Certificate of ~~incorporation~~Incorporation provides that our Board of Directors can issue up to 15,000,000 shares of ~~preferred~~Preferred stock, as described under “Preferred Stock” above.

Fourth, our ~~certificate~~Certificate of ~~incorporation~~Incorporation and the Bylaws provide for a classified Board of Directors in which approximately one-third of the directors would be elected each year. Consequently, any potential acquirer would need to successfully complete two proxy contests in order to take control of the Board of Directors. As a result of the provisions of the ~~certificate~~Certificate of ~~incorporation~~Incorporation and Delaware law, stockholders will not be able to cumulate votes for directors.

Fifth, our ~~certificate~~Certificate of ~~incorporation~~Incorporation prohibits a business combination with an interested stockholder without the approval of the holders of 75% of all voting shares and the vote of a majority of the voting shares held by disinterested stockholders, unless it has been approved by a majority of the disinterested directors.

Finally, our ~~bylaws~~Bylaws establish procedures, including advance notice procedures, with regard to the nomination of candidates for election as directors and stockholder proposals. These provisions of our ~~certificate~~Third Amended and Restated Certificate of ~~incorporation~~Incorporation and ~~bylaws~~our Amended and Restated Bylaws could discourage potential acquisition proposals and could delay or prevent a change in control or management of our company.

In addition to the Warrants to purchase 11,000,000 of the shares of Common Stock we are registering hereunder, as of March 13, 2012, warrants to purchase 380,000 shares of Common Stock with an exercise price of $1.25 per share were outstanding, and warrants to purchase 1,293102 shares of Series A Preferred with an exercise price of $2.32 per share were outstanding. All outstanding warrants contain provisions for the adjustment of the exercise price in the event of stock dividends, stock splits, reorganizations, reclassifications or mergers. In addition, certain of the warrants contain a “cashless exercise” feature that allows the holders thereof to exercise the warrants without a cash payment to us under certain circumstances.

Our Common Stock is traded on the OTC Bulletin Board under the symbol “TBIO”.

Transfer Agent and Registrar

Wells Fargo Bank Minnesota, N.A. ~~has been appointed as~~, is the transfer agent and registrar for our ~~common stock.~~

Common Stock. Their address is Shareowner Services, P.O. Box 64854, St. Paul, MN 55164-0854, and their telephone number is (800) 478-9715.

UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the material U.S. federal income tax considerations relating to the purchase, ownership and disposition of the shares of the Common Stock purchased by the investor pursuant to this offering and ownership of the Warrants and exercise, lapse or disposition of the Warrants. We have based this summary upon the Internal Revenue Code of

1986, as amended (the “Code”), Treasury regulations promulgated under the Code, as amended (the “Treasury Regulations”), administrative rulings and pronouncements and judicial decisions, in each case as of the date hereof. These authorities are subject to differing interpretations and are subject to change, perhaps retroactively, resulting in U.S. federal income tax consequences different from those discussed below. We have not sought any ruling from the Internal Revenue Service (the “IRS”) with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions or that a court will not sustain any challenge by the IRS in the event of litigation.

This summary assumes that a beneficial owner will hold the Warrants or shares of the Common Stock, as the case may be, as capital assets within the meaning of section 1221 of the Code. This summary does not address the tax consequences arising under the laws of any state or local jurisdiction or non-U.S. jurisdiction or any other U.S. federal tax consequences, such as estate and gift tax consequences. In addition, this summary does not address all tax considerations that might be applicable to your particular circumstances (such as the alternative minimum tax provisions of the Code), or to certain types of holders subject to special tax rules, including, without limitation, partnerships, banks, financial institutions or other “financial services” entities, broker-dealers, insurance companies, tax-exempt organizations, regulated investment companies, real estate investment trusts, retirement plans, individual retirement accounts or other tax-deferred accounts, persons who use or are required to use mark-to-market accounting for federal income tax purposes, persons that hold the Warrants or shares of the Common Stock as part of a “straddle”, a “hedge”, a “conversion transaction” or other arrangement involving more than one position, U.S. holders (as defined below) that have a functional currency other than the U.S. dollar and certain former citizens or permanent residents of the United States.

If a partnership holds the Warrants or shares of the Common Stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding the Warrants or shares of the Common Stock, you should consult your tax advisor.

If you are considering the purchase of the shares of the Common Stock or an investment in or the exercise or disposition of the Warrants, or permitting the Warrants to lapse unexercised, you should consult your own tax advisors concerning the U.S. federal income tax consequences to you in light of your particular facts and circumstances and any consequences arising under the laws of any state, local, foreign or other taxing jurisdiction.

As used in this discussion, a “U.S. Holder” is a beneficial owner of the Warrants or shares of the Common Stock, as applicable, that is not a partnership or entity treated as a partnership for U.S. federal income tax purposes and is:

As used in this discussion, a “Non-U.S. Holder” is a beneficial owner of the Warrants or shares of the Common Stock, as applicable, that is neither a U.S. Holder nor a partnership or other entity treated as a partnership for U.S. federal income tax purposes. Special rules may apply to Non-U.S. Holders that are subject to special treatment under the Code, including controlled foreign corporations, passive foreign investment companies, U.S. expatriates, and foreign persons eligible for benefits under an applicable income tax treaty with the United States. Such Non-U.S. Holders should consult their tax advisors to determine U.S. federal, state, local and other tax consequences that may be relevant to them.

THIS DISCUSSION IS ONLY A SUMMARY OF CERTAIN MATERIAL U.S. FEDERAL INCOME TAX OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE COMMON STOCK AND OWNERSHIP AND EXERCISE, DISPOSITION OR LAPSE OF THE WARRANTS. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR, INCLUDING THE APPLICABILITY AND EFFECT OF ANY LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS, AND ANY APPLICABLE TAX TREATIES.

Consequences to U.S. Holders

~~National Market Listing~~Distributions on Common Stock.

~~Our common~~ Distributions made to U.S. Holders out of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be included in the income of a U.S. Holder as dividend income and will be subject to tax as ordinary income. Dividends received by an individual U.S. Holder in taxable years beginning before January 1, 2013 that constitute “qualified dividend income” are generally subject to tax at a maximum rate of 15%, provided that

certain holding period and other requirements are met. After December 31, 2012, higher income tax rates will apply unless further legislative action is taken. Dividends received by a corporate U.S. Holder, except as described in the next subsection, generally will be eligible for the 70% dividends-received deduction.

Distributions in excess of our current and accumulated earnings and profits will not be taxable to a U.S. Holder to the extent that the distributions do not exceed the U.S. Holder's adjusted tax basis in the stock to which such distribution relates, but rather will reduce the adjusted tax basis of such shares. To the extent that distributions in excess of our current and accumulated earnings and profits exceed the U.S. Holder's adjusted tax basis in the shares of stock to which the distribution relates, such distributions will generally be treated as the sale or exchange of such stock, resulting in capital gain. See “-Sale, Exchange or other Taxable Disposition” below. In addition, a corporate U.S. Holder will not be entitled to the dividends-received deduction on this portion of a distribution.

We will notify holders of our shares after the close of our taxable year as to the portions of the distributions attributable to that year that constitute ordinary income, qualified dividend income and non-dividend distributions, if any.

Limitations on Dividends-Received Deduction. A corporate U.S. Holder may not be entitled to take the 70% dividends-received deduction in all circumstances. Prospective corporate investors in our Common Stock should consider the effect of:

Extraordinary Dividends. A corporate U.S. Holder will be required to reduce its tax basis (but not below zero) in our Common Stock by the non-taxed portion of any “extraordinary dividend” if the stock was not held for more than two years before the earliest of the date such dividend is declared, announced, or agreed. Generally, the non-taxed portion of an extraordinary dividend is the amount excluded from income by operation of the dividends-received deduction. An extraordinary dividend generally would be a dividend that:

In determining whether a dividend paid on stock is ~~listed~~an extraordinary dividend, a corporate U.S. Holder may elect to substitute the fair market value of the stock for its tax basis for purposes of applying these tests if the fair market value as of the day before the ex-dividend date is established to the satisfaction of the Secretary of the Treasury. An extraordinary dividend also includes any amount treated as a dividend in the case of a redemption that is either non-pro rata as to all stockholders or in partial liquidation of the corporation, regardless of the stockholder's holding period and regardless of the size of the dividend. Any part of the non-taxed portion of an extraordinary dividend that is not applied to reduce the corporate U.S. Holder's tax basis as a result of the limitation on reducing its basis below zero would be treated as capital gain and would be recognized in the taxable year in which the extraordinary dividend is received.

Corporate U.S. Holders should consult with their own tax advisors with respect to the possible application of the extraordinary dividend provisions of the Code to the ownership or disposition of the Warrants or the Common Stock in their particular circumstances.

Sale, Exchange, or other Taxable Disposition of Common Stock. Upon the sale, exchange, or other taxable disposition of Common Stock, a U.S. Holder generally will recognize gain or loss equal to the difference between the amount realized upon the sale, exchange, or other taxable disposition and the U.S. Holder's adjusted tax basis in such shares. The amount realized by the U.S. Holder will include the amount of any cash and the fair market value of any other property received upon the sale, exchange, or other taxable disposition of such shares. A U.S. Holder's tax basis in a share generally will be equal to the cost of the share to such U.S. Holder, which may be adjusted for certain subsequent events (for example, if the U.S. Holder receives a

non-dividend distribution, as described above). Gain or loss realized on the ~~Nasdaq~~sale, exchange, or other taxable disposition of Common Stock ~~Market’s National Market~~generally will be capital gain or loss and will be long-term capital gain or loss if the shares have been held for more than one year. Net long-term capital gain recognized by an individual U.S. Holder before January 1, 2013 generally is subject to tax at a maximum rate of 15%, which such maximum rate is scheduled to increase to 20% after December 31, 2012. For corporate U.S. Holders, capital gain is generally subject to the same tax rate as ordinary income, that is, currently at a maximum rate of 35%. The ability of U.S. Holders to deduct capital losses is subject to limitations under the ~~symbol TBIO.~~

Code.

~~PLAN OF DISTRIBUTION~~Taxation of the Warrants.

~~The selling stockholders~~ A warrant is an option granted by an issuer of stock to acquire stock at a set price within a specified period. Warrants are generally taxed in the same manner as options. If you exercise a warrant, you will not recognize any gain or loss for U.S. federal income tax purposes (except that gain or loss will be recognized to the extent you receive cash in lieu of a fractional common share as if you had actually received the fractional share and the fractional share was immediately redeemed for cash). Your initial tax basis in the security received upon exercise will be the sum of the exercise price paid and your adjusted tax basis in the warrant (excluding any portion of such sum allocable to a fractional share), and your holding period for the security received will begin on the day you exercise the warrant. If you sell or exchange a warrant, you will generally recognize gain or loss equal to the difference between the amount realized in the sale or exchange and your adjusted tax basis in the warrant sold or exchanged. If the warrant expires unexercised, you will recognize a loss in an amount equal to your adjusted tax basis in the warrant. Any such gain or loss from the sale, exchange or expiration of the Warrants will be capital gain or loss and will be long-term capital gain or loss if your holding period for the Warrants exceeds one year at the time of the sale, exchange or expiration.

U.S. Holders should consult with their own tax advisors regarding the U.S. federal income tax consequences and the tax consequences of any other taxing jurisdiction relating to the ownership and exercise, disposition or lapsing of the Warrants in light of their ~~pledges, assignees, donees selling shares~~investment or tax circumstances.

Information Reporting and Backup Withholding. In general, information reporting will apply to distributions in respect of stock and the proceeds from the sale, exchange or other disposition of stock that are paid to a U.S. holder within the United States (and in certain cases, outside the United States), unless the holder is an exempt recipient.

In general, backup withholding (currently at the rate of 28%, but scheduled to increase to 31% for payments made after December 31, 2012) will apply to payments received ~~from such selling stockholders as~~by a ~~gift, and successors-in-interest may, from time~~U.S. Holder with respect to ~~time, sell any or all of their~~ shares of our ~~common stock on any stock exchange, market~~Common Stock unless the U.S. Holder is (i) a corporation or ~~trading facility on which~~other exempt recipient and, when required, establishes this exemption or (ii) provides its correct taxpayer identification number, certifies that it is not currently subject to backup withholding tax and otherwise complies with applicable requirements of the ~~shares are traded or in private transactions. These sales~~backup withholding tax rules. A U.S. Holder that does not provide us with its correct taxpayer identification number might be subject to penalties imposed by the IRS.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a U.S. Holder may be ~~at fixed~~refunded or ~~negotiated prices. The selling stockholders may use~~credited against the U.S. Holder's U.S. federal income tax liability, if any, ~~one~~provided that the required information is furnished to the IRS in a timely manner.

Medicare Tax on Investment Income. On March 30, 2010, President Obama signed into law the Health Care and Education Reconciliation Act of 2010. This legislation requires certain individuals, estates and trusts to pay a 3.8% Medicare surtax on “net investment income” including, among other things, dividends and gain on sale in respect of securities like the Warrants or ~~more~~shares of our Common Stock, subject to certain exceptions, for taxable years beginning after December 31, 2012. Prospective purchasers of the ~~following methods when selling shares:~~

~~ordinary brokerage transactions~~Warrants or shares of our Common Stock should consult their own tax advisors regarding the effect, if any, of the legislation on their ownership and ~~transactions~~disposition of the Warrants or shares of our Common Stock.

Consequences to Non-U.S. Holders

Distributions on Common Stock. Any distribution we make to a Non-U.S. Holder of shares of our Common Stock, other than certain pro rata distributions of Common Stock, to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute a dividend for U.S. federal income tax purposes. Any distribution not constituting a dividend will be treated for U.S. federal income tax purposes as a tax-free return of capital to the extent of the Non-U.S. Holder's adjusted tax basis in its shares of our Common Stock (with a corresponding reduction to such basis), and, to the extent such distribution exceeds the Non-U.S. Holder's adjusted tax basis, as gain from the sale or other disposition of the Common Stock, which will be treated as described under “Sale, Exchange, or other Taxable Disposition” below.

Generally, any distribution to a Non-U.S. Holder that is a dividend for U.S. federal income tax purposes and that is not effectively connected with the ~~broker-dealer solicits purchasers;~~Non-U.S. Holder's conduct of a trade or business within the Unites States, as described below, will be subject to U.S. federal withholding tax at a rate of 30% percent of the gross amount of the dividend, unless such Non-U.S. Holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN). If the Non-U.S. Holder holds the stock through a financial

~~block trades~~

institution or other agent acting on the Non-U.S. Holder's behalf, the Non-U.S. Holder will be required to provide appropriate documentation to the agent, who then will be required to provide certification to us or our paying agent, either directly or through other intermediaries. If U.S. federal income tax is withheld on the amount of a distribution in ~~which~~excess of the ~~broker-dealer will attempt to sell~~amount constituting a dividend, the ~~shares as agent but~~Non-U.S. Holder may ~~position and resell~~obtain a refund of all or a portion of the ~~block as principal to facilitate the transaction;~~

~~purchases~~excess amount withheld by timely filing a ~~broker-dealer as principal and resale by the broker-dealer~~claim for ~~its account;~~

~~an exchange distribution in accordance~~refund with the ~~rules~~IRS. If a Non-U.S. Holder holds shares of ~~the applicable exchange;~~

~~privately negotiated transactions;~~

~~broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;~~

~~a combination of any such methods of sale; and~~

~~any other method permitted pursuant to applicable law.~~

~~The selling stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended, if available, rather than under this Prospectus.~~

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

~~The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act~~our Common Stock in connection with a trade or business in the United States, dividends we pay to a Non-U.S. Holder that are effectively connected with such ~~sales. In~~Non-U.S. Holder's conduct of a trade or business within the United States (or, if certain income tax treaties apply, are attributable to a U.S. permanent establishment or fixed base maintained by the Non-U.S. Holder) generally will not be subject to U.S. withholding tax, provided such ~~event,~~Non-U.S. Holder complies with certain certification and disclosure requirements (usually by providing an IRS Form W-8ECI). Instead, such dividends generally will be subject to U.S. federal income tax, net of certain deductions, at the same graduated individual or corporate tax rates applicable to U.S. persons. If the Non-U.S. Holder is a foreign corporation, dividends that are effectively connected income may also be subject to a “branch profits tax” at a rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. Non-U.S. Holders should consult any ~~commissions received by such broker-dealers~~applicable income tax treaties that may provide for different rules.

A Non-U.S. Holder who claims the benefit of an applicable income tax treaty generally will be required to satisfy applicable certification and other requirements prior to the distribution date. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty.

Sale, Exchange, or ~~agents and~~other Taxable Disposition of Common Stock. A Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on any ~~profit~~capital gain realized on the ~~resale~~sale, exchange, or other taxable disposition of the Warrants or our Common Stock provided that:

(a) the gain is not effectively connected with the conduct of a trade or business within the United States, or a permanent establishment maintained in the United States if certain tax treaties apply,

(b) in the case of a Non-U.S. Holder that is an individual, the Non-U.S. Holder is not present in the United States for 183 days or more in the taxable year of the sale, exchange, or other disposition of the shares, ~~purchased by them~~

(c) the Non-U.S. Holder is not subject to tax pursuant to certain provisions of U.S. federal income tax law applicable to certain expatriates, and

(d) we are not nor have we been a “United States real property holding corporation” (“USRPHC”) for U.S. federal income tax purposes.

Unless an applicable tax treaty provides otherwise, gain described in the (a) or (d) above generally will be subject to U.S. federal income tax, net of certain deductions, at the same tax rates applicable to U.S. persons. Any gains described in (a) above of a Non-U.S. Holder that is a foreign corporation may also be subject to an additional “branch profits tax” at a rate of 30% (or such lower rate as may be ~~deemed to~~specified by an applicable income tax treaty) of its effectively connected earnings and profits for the taxable year, as adjusted for certain items. Any U.S. source capital gain of a Non-U.S. Holder described in (b) above (which may be ~~underwriting commissions or discounts under~~offset by U.S. source capital losses during the ~~Securities Act.~~

~~We are required to pay all fees and expenses incident to the registration~~taxable year of the ~~shares, including certain fees and disbursements of counsel to~~disposition provided that the ~~selling stockholders. We have agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.~~

~~To the extent required, we will amend or supplement this Prospectus to disclose material arrangements regarding the plan of distribution.~~

~~To comply with the securities laws of certain jurisdictions, registered or licensed brokers or dealers may need to offer or sell the shares offered by this Prospectus. The applicable rules and~~

regulations under the Securities Exchange Act of 1934, as amended, may limit any person engaged in a distribution of the shares of common stock covered by this Prospectus in its ability to engage in market activitiesNon-U.S. Holder has timely filed U.S. federal income tax returns with respect to such ~~shares. A selling stockholder, for example,~~losses) generally will be subject to a flat 30% U.S. federal income tax (or such lower rate as may be specified by an applicable income tax treaty).

With respect to (d) above, we would not be treated as a USRPHC if less than 50% of our assets throughout a prescribed testing period consist of interests in real property located within the United States, excluding, for this purpose, interests in real property solely in a capacity as a creditor. We believe that we are not currently, and do not anticipate becoming, a “United States real property holding corporation” for U.S. federal income tax purposes . However, even if we are or have been a USRPHC, so long as our Common Stock is regularly traded on an established securities market, a Non-U.S. Holder will not recognize taxable gain, if any, on a sale, exchange, redemption, conversion or other taxable disposition of the Common Stock or Warrants under (d) above unless:

If any of the three bullet points immediately described above applies to a Non-U.S. Holder of our Warrants or Common Stock, then the gain recognized by a Non-U.S. Holder on the sale, exchange, redemption, conversion, if applicable, or other disposition of such would be treated as effectively connected with a U.S. trade or business if we are a USRPHC. In such situations, the Non-U.S. Holder would be subject to U.S. federal income tax at applicable graduated U.S. federal income tax rates in much the same manner as applicable to U.S. persons and may be subject to withholding tax at a 10% rate with respect to the gross proceeds realized with respect to the sale, exchange, redemption, conversion or other disposition of the Warrants or our Common Stock. Non-U.S. Holders are urged to consult their own tax advisors in determining the U.S. tax consequences of their investment in the Warrants or our Common Stock.

Taxation of the Warrants. If you exercise a Warrant, you will not recognize any gain or loss for U.S. federal income tax purposes (except that gain or loss will be recognized to the extent you receive cash in lieu of a fractional common share as if you had actually received the fractional share and the fractional share was immediately redeemed for cash). Your initial tax basis in the security received upon exercise will be the sum of the exercise price paid and your adjusted tax basis in the warrant (excluding any portion of such sum allocable to a fractional share), and your holding period for the security received will begin on the day you exercise the warrant or subscription right. If you sell or exchange a warrant, you will generally recognize gain or loss equal to the difference between the amount realized in the sale or exchange and your adjusted tax basis in the warrant sold or exchanged. If the warrant expires unexercised, you will recognize a loss in an amount equal to your adjusted tax basis in the warrant at such time. Any such gain or loss from the sale, exchange or expiration of the Warrants will be capital gain or loss and will be long-term capital gain or loss if your holding period for the Warrants exceeds one year at the time of the sale, exchange or expiration. Non-U.S. Holders of Warrants should see the discussion above under "Distributions on Common Stock" and “Sale, Exchange, or other Taxable Disposition of Common Stock” and should consult their own tax advisers with respect to the United States federal income tax and withholding tax, and state, local and foreign tax consequences of ownership and exercise, disposition or lapsing, of the Warrants.

Information Reporting and Backup Withholding. We generally must report annually to the IRS and to each Non-U.S. Holder the amount of dividends and certain other distributions we pay to such holder on our Common Stock and the amount of tax, if any, withheld with respect to those distributions. Copies of the information returns reporting those distributions and withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder is a resident under the provisions of an applicable income tax treaty or agreement. Information reporting is also generally required with respect to proceeds from the ~~Exchange Act~~sales and other dispositions of our Common Stock to or through the United States office (and in certain cases, the foreign office) of a broker.

In addition, backup withholding of U.S. federal income tax, currently at a rate of 28%, generally will apply to distributions made on our Common Stock to, and the ~~rules~~proceeds from sales and ~~regulations~~other dispositions of our Common Stock by, a non-corporate U.S. holder who:

A Non-U.S. Holder generally may eliminate the requirement for information reporting and backup withholding with respect to payments of dividends by providing certification of its foreign status, under ~~it, which provisions~~penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption. Notwithstanding the foregoing, backup withholding may ~~limit~~apply if either we or our paying agent has actual knowledge or reason to know that the ~~timing of purchases and sales~~holder is a United States person that is not an exempt recipient.

Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. holder's or a Non-U.S. Holder's U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the availability of and procedure for obtaining an exemption from backup withholding in their particular circumstances.

Foreign Financial Institutions. On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment Act (the “Act”). The Act imposes withholding taxes on certain types of payments made to “foreign financial institutions” (as specifically defined in the Act) and certain other non-United States entities (including financial intermediaries) after December 31, 2012. The Act imposes a 30% withholding tax on “withholdable payments” to a foreign financial institution or to a foreign non-financial entity, unless (i) the foreign financial institution undertakes certain diligence and reporting obligations or (ii) the foreign non-financial entity either certifies it does not have any substantial United States owners or furnishes identifying information regarding each substantial United States owner. For these purposes, a “withholdable payment” includes any United States source payments of interest (including original issue discount), dividends, rents, compensation and other fixed or determinable annual or periodical gains, profits and income. If the payee is a foreign financial institution, it must enter into an agreement with the United States Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain United States persons or United States-owned foreign entities, annually report certain information about such accounts, and withhold 30% on payments to account holders whose actions prevent it from complying with these reporting and other requirements. Although this legislation currently applies to applicable payments made after December 31, 2012, recently issued Proposed Treasury Regulations provide that the withholding provisions described above will generally apply to payments of dividends on our Common Stock made on or after January 1, 2014 and to payments of gross proceeds from a sale or other disposition of such stock on or after January 1, 2015. Prospective purchasers of shares of ~~common stock~~the Warrants or shares of our Common Stock should consult their tax advisors regarding this legislation and the potential implications of this legislation on their particular circumstances.

The validity of our Common Stock offering hereby will be passed upon by ~~that selling stockholder.~~

Husch Blackwell LLP.

The audited consolidated financial statements of Transgenomic, Inc. and its subsidiaries as of December 31, ~~2004~~2011 and ~~2003~~2010, and for ~~each of~~ the ~~three years in the~~three-year period ended December 31, ~~2004~~2011, included in our Annual Report on Form 10-K for the year ended December 31, 2011, and the effectiveness of our internal control over financial reporting as of December 31, 2011, incorporated by reference in this ~~Prospectus~~prospectus have been audited by ~~Deloitte~~McGladrey & ~~Touche~~Pullen, LLP, an independent registered public accounting firm, as stated in their report ~~(which report expresses an unqualified opinion and includes explanatory paragraphs relating to an extension of the waiver of the borrowing base limit through~~dated March ~~31, 2006 and the restatement of the Company’s consolidated statements of cash flows for the years ended December 31, 2004 and 2003), appearing~~20, 2012, which is incorporated by reference herein, and ~~have~~has been so ~~included~~incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND ~~MORE~~ADDITIONAL INFORMATION

We file annual, quarterly and ~~special~~current reports, proxy statements and other ~~information~~documents with the ~~Securities and Exchange Commission (the “SEC”).~~SEC. These filings contain important information which does not appear in this prospectus. You may read and copy, at prescribed rates, any documents we have filed with the ~~materials we file~~SEC at ~~the SEC’s~~its Public Reference Room located at 100 F Street, N.E., Washington, ~~D.C. 20549, as well as at the SEC’s regional office at Citicorp Center, 500 West Madison Street, Room 1400, Chicago, Illinois 60661-2511. Please call the Commission at 1-800-SEC-0330 for further~~DC 20549. You may obtain information on the operation of the Public Reference ~~Rooms. Our~~Room by calling the SEC at 1-800-SEC-0330. We also file these documents with the SEC electronically. You can access the electronic versions of these filings ~~are also available~~on the SEC's website found at http://www.sec.gov .

We have filed with the SEC a registration statement on Form S-1 relating to the ~~public from~~securities covered by this prospectus. This prospectus is a part of the ~~SEC’s World Wide Web site~~registration statement and does not contain all the information in the registration statement. Whenever a reference is made in this prospectus to a contract, agreement or other document, the reference is only a summary and you should refer to the exhibits that are filed with, or incorporated by reference into, the registration statement for a copy of the contract, agreement or other document. You may review a copy of the registration statement at the SEC's Public Reference Room in Washington, D.C., as well as on the ~~Internet at http://www.sec.gov. This site contains reports, proxy and~~SEC's website.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The SEC's rules allow us to “incorporate by reference” into this prospectus certain information ~~statements and other information regarding issuers~~ that we file ~~electronically~~ with the SEC.

This means that we can include in this prospectus information by referring you to another document already on file with the SEC that contains that information. Any information incorporated by reference into this prospectus is considered to be part of this prospectus.

We ~~make reports~~incorporate by reference the following documents filed with the SEC:

Notwithstanding the foregoing, we are not incorporating by reference any information furnished and not filed with the SEC, unless, and to the extent, expressly specified otherwise. Any statement contained in a document incorporated in this prospectus shall be deemed to be modified or superseded to the extent that a statement contained in this prospectus modifies or supersedes such statement. Any such statement so modified or superseded shall only be deemed to be a part of this prospectus as so modified or superseded.

We will provide without charge to each person, including any beneficial owner, to whom this prospectus is delivered, upon his or her written or oral request, a copy of any or all of the reports or documents referred to above that have been incorporated by reference into this prospectus, excluding exhibits to those documents unless they are specifically incorporated by reference into those documents. You may request a copy of these filings, at no cost, by contacting:

Attn: Investor Relations

Phone: (402) 452-5416

E-mail: investorrelations@transgenomic.com

You also may access these filings on our website ~~as soon as reasonably practical after these reports are filed.~~at www.transgenomic.com under Investor Relations Real Time Filings. We ~~maintain a site~~do not incorporate the information on ~~the World Wide Web at www.transgenomic.com. The information contained in~~ our website ~~is not part of~~into this ~~Prospectus~~prospectus or any supplement to this prospectus and you should not ~~rely~~consider any information on, ~~it in deciding whether to invest in our common stock.~~

~~TRANSGENOMIC INC. AND SUBSIDIARIES~~

~~INDEX TO CONSOLIDATED FINANCIAL STATEMENTS~~


		~~Page No.~~

~~UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Unaudited Condensed Consolidated Balance Sheet as of September 30, 2005~~		~~F-1~~

~~Unaudited Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 2005 and 2004~~		~~F-2~~

~~Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004~~		~~F-3~~

~~Notes to Unaudited Condensed Consolidated Financial Statements~~		~~F-4~~

~~CONSOLIDATED FINANCIAL STATEMENTS~~

~~Report of Independent Registered Public Accounting Firm~~		~~F-14~~

~~Consolidated Balance Sheets as of December 31, 2004 and 2003~~		~~F-15~~

~~Consolidated Statements of Operations for the Years Ended December 31, 2004, 2003 and 2002~~		~~F-16~~

~~Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2004, 2003 and 2002~~		~~F-17~~

~~Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002~~		~~F-18~~

~~Notes to Consolidated Financial Statements~~		~~F-19~~

~~TRANSGENOMIC INC.~~

~~UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET~~

~~As of September 30, 2005~~

~~(Dollars in thousands except per share data)~~

   September 30,
2005

ASSETS

CURRENT ASSETS:

Cash and cash equivalents
   $ 1,361
Short-term investments
   1,556
Accounts receivable (net of allowances for bad debts of $896)
   8,729
Inventories
   4,101
Prepaid expenses and other current assets
   652

Total current assets
   16,399

PROPERTY AND EQUIPMENT:

Land and buildings
   2,221
Equipment
   18,066
Furniture and fixtures
   5,833

   26,120
Less: accumulated depreciation
   15,509

   10,611
GOODWILL
   638
OTHER ASSETS
   4,141

   $ 31,789

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable
   $ 2,463
Accrued expenses
   4,383
Accrued compensation
   530
Line of credit
   6,935
Current portion of long-term debt
   675

Total current liabilities
   14,986
Long-term debt
   1,226

Total liabilities
   16,212

COMMITMENTS AND CONTINGENCIES (Note F)

STOCKHOLDERS’ EQUITY:

Preferred stock, $.01 par value, 15,000,000 shares authorized, none outstanding
   —
Common stock, $.01 par value, 60,000,000 shares authorized, 34,246,336 shares outstanding
   348
Additional paid-in capital
   125,058
Accumulated other comprehensive income
   1,051
Accumulated deficit
   (110,880 )

Total stockholders’ equity
   15,577

   $ 31,789

~~See notes to consolidated financial statements.~~

~~TRANSGENOMIC INC.~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

   Nine Months Ended
September 30,

   2005
2004

Net sales
   $ 23,711 $ 25,834
Cost of goods sold
   13,609 18,484


Gross profit
   10,102 7,350
Operating expenses:

Selling, general and administrative
   10,023 12,866
Research and development
   1,696 5,344
Impairment charges (Notes C and D)
   247 11,964


   11,966 30,174


Income (Loss) from operations
   (1,864 ) (22,824 )
Other income (expense):

Interest expense (Note E)
   (1,919 ) (1,684 )
Loss on debt extinguishment
   —   (2,859 )
Other income (expense), net
   31 (161 )


   (1,888 ) (4,704 )


Income(loss) before income taxes
   (3,752 ) (27,528 )
Current income tax expense (benefit)
   27 (94 )


Net income (loss)
   $ (3,779 ) $ (27,434 )


Basic and diluted weighted average shares outstanding
   32,837,078 28,951,230
Net income (loss) per common share—basic and diluted
   $ (0.12 ) $ (0.95 )

~~See notes to consolidated financial statements.~~

~~TRANSGENOMIC INC.~~

~~UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

   Nine Months Ended
September 30,

   2005
2004

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss
   $ (3,779 ) $ (27,434 )
Adjustments to reconcile net loss to net cash flows from operating activities:

Depreciation and amortization
   3,294 3,607
Impairment charges
   247 11,964
Loss on debt extinguishment
   —   2,859
Non-cash financing costs
   1,298 759
(Gain)/Loss on sale of securities
   (9 ) 370
Other
   2 12
Changes in operating assets and liabilities:

Accounts receivable
   (626 ) (2,469 )
Inventories
   960 819
Prepaid expenses and other current assets
   650 (69 )
Accounts payable
   (912 ) 100
Accrued expenses
   (3,101 ) 774


Net cash flows from operating activities
   (1,976 ) (8,708 )
CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from the maturities and sale of available for sale securities
   617 2,768
Purchase of property and equipment
   (554 ) (1,250 )
Proceeds from sales of property and equipment
   139 —
Change in other assets
   34 26


Net cash flows from investing activities
   236 1,544
CASH FLOWS FROM FINANCING ACTIVITIES:

Advances on line of credit
   15,367 19,691
Payments on line of credit
   (12,848 ) (13,594 )
Proceeds from long-term debt
   —   2,750
Payments on long-term debt
   (178 ) (1,729 )
Issuance of common stock, net of expenses
   (35 ) 67


Net cash flows from financing activities
   2,306 7,185
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH
   (207 ) (137 )


NET CHANGE IN CASH AND CASH EQUIVALENTS
   359 (116 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
   1,002 1,241


CASH AND CASH EQUIVALENTS AT END OF PERIOD
   $ 1,361 $ 1,125


SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid during the period for:

Interest
   $ 491 $ 390
Income taxes, net
   27 (94 )
Non-cash transactions:

Available for sale securities received for goods and services
   2,099 3,137
Conversions of debt to equity
   2,535 2,000

~~See notes to consolidated financial statements.~~

~~TRANSGENOMIC, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

~~A. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

The accompanying unaudited condensed consolidated financial statements of Transgenomic, Inc. and Subsidiaries (the “Company”) have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulations. In the opinion of management of the Company, all adjustments (consisting of only normal and recurring items) have been made to present fairly the financial positions, the results of operations and cash flows for the periods presented.

~~The results of operations for the nine months ended September 30, 2005 are not necessarily indicative of the results to be expected for the full year.~~

Although the Company believes that the disclosures are adequate to make the information presented not misleading, these financial statements should be read in conjunction with the consolidated financial statements for the years ended December 31, 2004, 2003 and 2002 that are included elsewhere in this Registration Statement.

As discussed in Note L, the Company completed a private placement of additional common stock and warrants subsequent to September 30, 2005 which allowed it to repay outstanding indebtedness to Laurus Master Funds Ltd. (“Laurus”) and provided $5,374 in additional working capital. While the Company’s management believes that existing sources of liquidity are sufficient to meet expected cash needs through 2006, the Company has experienced recurring net losses and has historically relied upon cash flows from investing and financing activities to offset significant cash outflows from operating activities. To the extent necessary, the Company’s management believes that they can manage costs and expenses at reduced levels to conserve working capital. The need for any such cost and expense reductions would likely delay implementation of the Company’s business plan. Ultimately, the Company must achieve sufficient revenues in order to generate positive net earnings and cash flows from operations.

~~Business Description~~

~~The Company develops, manufactures and sells innovative products for the analysis, synthesis and purification of nucleic acids through two operating segments, BioSystems and Nucleic Acids.~~

Bioinstruments. The flagship product of the BioSystems operating segment is the WAVE system which has broad applicability to genetic variation detection in both molecular genetic research and molecular diagnostics. There was a world-wide installed base of 1,241 WAVE systems as of September 30, 2005. Additionally, this operating segment utilizes its sales and distribution network to sell a number of independent, third party equipment platforms. Service contracts to maintain installed systems are sold and supported by technical support personnel.

Bioconsumables. The installed WAVE base generates a demand for consumables that are required for the system’s continued operation. These products are developed, manufactured and sold by this operating segment. In addition, the BioSystems operating segment manufactures and sells consumable productsor that can be ~~used on multiple, independent platforms. These products include SURVEYOR Nuclease and a range~~accessed through, our website as part of ~~HPLC separation columns.~~

~~Discovery Services. The BioSystems operating segment provides various genetic laboratory services through a contract research lab in Gaithersburg, Maryland and a second laboratory in Omaha, Nebraska~~this prospectus or any supplement to this prospectus (other than those filings with the SEC that operates in a Good Laboratory Practices (“GLP”) compliant environment and is certified under the Clinical Laboratory Improvement Amendment. The services provided primarily include (1) genomic biomarker analysis serviceswe specifically incorporate by reference into this prospectus or any supplement to pharmaceutical and biopharmaceutical companies to support preclinical and clinical development of targeted therapeutics; and (2) molecular-based testing for hematology, oncology and certain inherited diseases for physicians and third-party laboratories.this prospectus).

33,000,000 SHARES OF COMMON STOCK

TRANSGENOMIC, INC.

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

~~The Nucleic Acids operating segment develops, manufactures and markets chemical building blocks for nucleic acid synthesis~~

PROSPECTUS

__________ __, 2012

Neither we nor the selling shareholders have authorized any dealer, salesperson or other person to ~~biotechnology, pharmaceutical, oligonucleotide synthesis companies and research institutions throughout the world. These products are produced primarily~~give any information or to make any representations not contained in this ~~operating segment’s only facility~~prospectus or any prospectus supplement. You must not rely on any unauthorized information. This prospectus is not an offer to sell these securities in ~~Glasgow, Scotland. Prior to November 11, 2004,~~any jurisdiction where an offer or sale is not permitted. The information in this ~~operating segment also manufactured synthesized segments~~prospectus is current as of large-scale, GMP nucleic acids (known as oligonucleotides) in a facility in Boulder, Colorado. On November 11, 2004, the assets associated with this facility were sold to an unaffiliated, third party. As a result, the Nucleic Acids operating segment no longer manufactures and sells these specialized oligonucleotides. A substantial portion of this operating segment’s revenues during 2005 and 2004 have been derived from one customer.

~~Principles of Consolidation.~~

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

~~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 revenues and expenses during the reporting period. In particular, estimates of the valuation of long-term inventory are subject to considerable estimation error due to the inherent uncertainty in projecting sales of this product over a period of years. In addition, estimates and assumptions associated with the determination of fair value of certain assets and related impairments, and the determination of goodwill impairments require considerable judgment by management. Actual results could differ from the estimates and assumptions used in preparing these financial statements.

~~Cash and Cash Equivalents.~~

~~For purposes of reporting cash flows, cash and cash equivalents include cash and temporary investments with original maturities at acquisition of three months or less.~~

~~Accounts Receivable.~~

~~Accounts receivable are shown net of allowance for doubtful accounts. The following~~prospectus. You should not assume that this prospectus is ~~a summary of activity for the allowance for doubtful accounts.~~

   September 30,
   2005
   2004
Beginning balance
   $ 1,051    $ 549
Charges to income
   —      46
Deductions from reserves
   155    15


Ending balance
   $ 896    $ 580

~~Revenue Recognition.~~

Revenue on the sales of products is 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. Our sales terms do not provide for the right of return unless the product is damaged or defective. Revenues from certain services associated with our 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. The Company also enters into various service contracts that cover installed WAVE systems. These contracts cover specific time periods and revenue associated with these contracts is deferred and recognized over the service period. At September 30, 2005, deferred revenue associated with the Company’s service contracts was approximately $1,600 and is included in “accrued expenses” in the accompanying unaudited consolidated balance sheets.

~~TRANSGENOMIC, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

During the nine months ended September 30, 2004, the Company recognized approximately $646 of product sales under bill-and-hold arrangements. Under these arrangements, the customer had accepted title and risk of ownership to the product, but had requested that the Company store the product on behalf of the customer, in a rented freezer, until the nine months ended September 30, 2004. There were no sales under bill-and-hold arrangements recognized during the nine months ended September 30, 2005.

~~Stock Based Compensation.~~

~~The Company accounts for its employee stock option grants under the provisions of Accounting Principles Board Opinion No. 25,~~~~Accounting for Stock Issued to Employee~~s, which utilizes the intrinsic value method. Accordingly, compensation cost for stock options is measured as the excess, if any, of the fair market value of the Company’s common stock at the date of grant over the stock option exercise price. Stock option grants to non-employees are accounted for using the fair value method of accounting in accordance with SFAS No. 123,~~Accounting for Stock-Based Compensation,~~ ~~using the Black-Scholes model.~~

~~The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock based employee compensation.~~

   September 30,

   2005
2004

Net Income (Loss):

As reported
   $ (3,779 ) $ (27,434 )
Less pro forma stock-based employee compensation expense determined under fair value method, net of related tax
   (504 ) (764 )


Pro forma
   $ (4,283 ) $ (28,198 )


Basic and Diluted Income (Loss) Per Share:

As reported
   $ (0.12 ) $ (0.95 )
Pro forma
   $ (0.13 ) $ (0.97 )

The weighted average fair value of options granted during the nine months ended September 30, 2005 and 2004 was $0.63 per share and $1.34 per share, respectively. The fair value of each stock option granted is estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for options granted during the nine months ended September 30, 2005 and 2004: no common stock dividends; risk-free interest rates of 4.14% to 4.79%; 95% volatility in 2005 and 85% in 2004; and an expected option life of 3 years. At September 30, 2005, the weighted average remaining contractual life of options outstanding was 5.5 years.

~~Translation of Foreign Currency.~~

Financial statements of subsidiaries outside the U.S. are measured using the local currency as the functional currency. The adjustments to translate those amounts into U.S. dollars are accumulated in a separate account in stockholders’ equity and are included in other comprehensive income. Foreign currency transaction gains or losses resulting from changes in currency exchange rates are included in the determination of net income (loss). Foreign currency transaction adjustments increased operating expenses by approximately $237 during the nine months ended September 30, 2005 and reduced operating expenses by approximately $135 during the nine months ended September 30, 2004.

~~Earnings or Loss Per Share.~~

Basic earnings or loss per share is calculated based on the weighted-average number of common shares outstanding during each period. Diluted earnings or loss per share includes shares issuable upon exercise of outstanding stock options and warrants or conversion of convertible notes, where dilutive. For all periods presented, basic and diluted weighted average shares outstanding and loss per share are identical, since all potentially dilutive securities are antidilutive. Potentially dilutive securities consist of stock options and warrants representing 5,541,015 and 1,159,421 shares of common stock, respectively, at September 30, 2005,. Additionally, the Company’s gross indebtedness to Laurus totaling $8,263 at September 30, 2005 is convertible into the Company’s

~~TRANSGENOMIC, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

common stock at $1.00 per share, which was the closing price of the Company’s common stock on September 30, 2005. As described in Note L, this indebtedness was repaid subsequent to September 30, 2005.

~~Recently Issued Accounting Pronouncements~~

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R, “Share-Based Payment”. SFAS No.123R addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123R eliminates the ability to account for share-based compensation transactions using Accounting Principles Board Opinion No. 25 and generally requires that such transactions be accounted for using a fair-value-based method. The Company expects to adopt this standard on January 1, 2006. The Company is currently assessing the final impact of this standard on its financial position, results of operations or cash flows. This assessment includes evaluating option valuation methodologies and assumptions as well as potential changes to compensation strategies.

On November 24, 2004, the FASB issued SFAS No. 151, “Inventory Costs” – an amendment of ARB No. 43. SFAS No. 151 requires idle facility expenses, freight, handling costs, and wasted material (spoilage) costs to be excluded from the cost of inventory and expensed when incurred. It also requires that allocation of fixed production overhead be based on the normal capacity of the production facilities. SFAS No. 151 will be effective for the Company on January 1, 2006. The Company is currently assessing the final impact of this standard on its financial position, results of operations or cash flows.

~~B. INVENTORIES~~

~~Inventories consisted of the following at September 30, 2005.~~

   BioSystems
   Nucleic
Acids
   Total
Finished Goods
   $ 2,155    $ 1,529    $ 3,684
Raw materials and work in process
   516    2,393    2,909
Demonstration inventory
   123    —      123



   2,794    3,922    6,716
Less inventory classified as a long-term asset
   —      2,615    2,615



Net Inventory
   $ 2,794    $ 1,307    $ 4,101

The Nucleic Acids operating segment inventory at September 30, 2005 consisted primarily of chemical building blocks for synthetic nucleic acids (know as phosphoramadites) and the raw materials to produce phosphoramadites which are used and produced at the Company’s facility in Glasgow, Scotland. As of September 30, 2005, the Company has classified a portion of this inventory as a long-term other asset based on its existing sales forecasts for these products.

The Company periodically evaluates its inventory of phosphoramadites to determine whether they continue to meet quality and other specifications and over what time period such products are expected to be sold. Product that does not meet quality and other specifications can generally be re-worked to enhance purity. Costs to purify such product and related yield losses are expensed as incurred.

~~C. GOODWILL~~

~~Goodwill totaled $638 at September 30, 2005 and related entirely to the BioSystems. The following summarizes goodwill adjustments for the nine months ended September 30, 2005 and 2004.~~

   Nine Months
Ended
September 30,

   2005
   2004

Beginning balance
   $ 638    $ 10,503
Adjustments
   —      (9,865 )


Ending balance
   $ 638    $ 638

~~TRANSGENOMIC, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

The Company recorded a charge of $9,865 during the nine months ended September 30, 2004 related to the impairment of goodwill associated with the Nucleic Acids operating segment. The amount of the impairment charges was based, in part, on an independent valuation performed by an unaffiliated valuation firm. The charge resulted from an interim period impairment test performed during the second quarter of 2004.

The interim period impairment test became necessary after the Company’s Board of Directors directed management during the second quarter of 2004 to explore strategic alternatives for the Nucleic Acids operating segment. This process included significant due diligence by management, third-party advisors and prospective independent buyers and other interested parties. Information obtained through this process indicated that it was more likely than not that the assets associated with the Nucleic Acids operating segment were impaired.

~~The Company also recorded a charge of $2,100 during the nine months ended September 30, 2004 related to the impairment of property and equipment associated with the Nucleic Acids operating segment.~~

~~D. OTHER ASSETS~~

~~Finite lived intangible assets and other assets consisted of the following at September 30, 2005.~~

   Cost
   Accumulated
Amortization
   Net
Book
Value
Finite Lived Intangible Assets

Capitalized software
   $ 2,132    $ 1,978    $ 154
Intellectual property
   765    518    247
Patents
   651    114    537



   3,548    2,610    938



Other Assets

Long Term Inventory
   2,615    —      2,615
Deferred Financing Costs
   576    326    250
Other
   543    205    338



   3,734    531    3,203



Total
   $ 7,282    $ 3,141    $ 4,141

During the nine months ended September 30, 2005, management determined that certain international patent pursuits were no longer consistent with the Company’s strategic plan. Accordingly, the Company recorded an impairment charge of $247 related to the abandonment of such pursuits.

Amortization expense for intangible assets was $717 and $728 for the nine months ended September 30, 2005 and 2004, respectively. Amortization expense for intangible assets is expected to be approximately $297 for the remainder of 2005, $342 in 2006, $331 in 2007, $62 in 2008, $134 in 2009, $134 in 2010 and $26 in 2011.

~~E. DEBT~~

~~Debt consisted of the following at September 30, 2005.~~

Credit Line (“Credit Line”) with Laurus

Gross amount due (accruing interest at 2% above prime or 8.75% at September 30, 2005, due December 2006)
   $ 6,588
Debt premium
   435
Debt discount—warrants
   (61 )
Debt discount—beneficial conversion premium
   (27 )

   $ 6,935
Long-Term Debt with Laurus (“Term Note”)

Convertible debt (accruing interest at 2% above prime or 8.75% at September 30, 2005, due February 2007)
   $ 1,675
Debt premium
   226
Less current portion
   (675 )

   $ 1,226

~~TRANSGENOMIC, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

~~Funds available under the Credit Line are determined by a borrowing base equal to 90% of eligible accounts receivable balances plus up to $1,000 related to inventory balances.~~

On August 31, 2004, Laurus agreed to extend a then existing borrowing base waiver, defer certain payments due under the Term Note and reduce the interest rate on both of the Laurus Loans to 0% for any day the closing sale price of the Company’s common stock is at or above $1.75 per share. In return, the Company lowered the conversion price on each of the Laurus Loans to $1.00 per share and issued a warrant to Laurus covering an additional 400,000 common shares at an exercise price of $1.25 per share. The closing price of the Company’s common stock on August 31, 2004 was $1.20 per share.

The August 31, 2004 Laurus modifications were treated as extinguishments for financial reporting purposes since the change in present value of expected cash flows between the original and modified agreements is greater than 10%. As such, the Company recorded a loss on extinguishment of debt of $2,859 at August 31, 2004 reflecting the difference between (i) the recorded amount of debt, net of related discounts, of $7,427 and (ii) the fair value of the new debt instrument of $10,287 plus the fair value of the new warrants of $111. The difference between the fair value of the new debt of $10,287 and the face value of the debt of $8,572 represents a premium, which will be reflected as a reduction of interest expense over the life of the new debt.

On March 18, 2005, Laurus agreed to further extend the waiver of the borrowing base until March 31, 2006. In connection with this extension, the Company agreed to allow Laurus to convert $1,879 of the outstanding principal balance under the Credit Line into 3,600,000 shares of its common stock at $0.52 per share. In addition, on March 24, 2005 the Company agreed to allow Laurus to convert $650 of the outstanding principal balance of the Term Note into 1,250,000 shares of common stock at $0.52 per share. Laurus agreed to apply this Term Note conversion against substantially all remaining 2005 scheduled principal payments on such loan. The closing market price of the Company’s common stock the day before each of these conversions was $0.58 per share. No other provisions of the Company’s Credit Line or Term Note (collectively, the “Laurus Loans”) were modified, including the $1.00 conversion price for remaining debt. In conjunction with these conversions, the Company accelerated amortization of $409 of related debt premiums and discounts and recorded a charge of $1,365 related to the fair value of incremental shares received by Laurus.

~~Interest expense consisted of the following for the nine months ended September 30:~~

   2005
2004
Interest paid or accrued on outstanding debt
   $ 477 $ 388
Amortization of debt premiums
   (816 ) —
Amortization of debt discounts – warrants
   24 —
Amortization of debt discount – beneficial conversion feature
   725 809
Fair value of incremental shares received by Laurus
   1,365 —
Deferred Financing Costs
   144 487


   $ 1,919 $ 1,684

As of September 30, 2005 principal repayments under the Term Note are scheduled as follows: $0 for the remainder of 2005, $875 in 2006, and $800 in 2007. As describe in Note L, the Company repaid the entire principal balance and terminated the Laurus Loans subsequent to September 30, 2005 with the proceeds from the private placement. Accordingly, the Company no longer has any borrowings which require scheduled principal and interest payments.

~~TRANSGENOMIC, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

~~F. COMMITMENTS AND CONTINGENCIES~~

The Company is 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 claims currently pending will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company leases certain equipment, vehicles and operating facilities. The Company’s leases related to its operating facilities currently expire on various dates through 2010. At September 30, 2005, the future minimum lease payments required under non-cancelable lease provisions were approximately $359 for the remainder of 2005, $1,233 in 2006, $443 in 2007, $189 in 2008, $193 in 2009, and $167 in 2010. Rent expense related to all operating leases was approximately $968 and $1,689 for the nine months ended September 30, 2005 and 2004, respectively.

~~At September 30, 2005, the Company had firm commitments totaling $872 to purchase components used in WAVE Systems.~~

~~G. INCOME TAXES~~

~~Income tax recorded during the nine months ended September 30, 2005 and 2004 related to income taxes in states, foreign countries and other local jurisdictions offset by refunds received.~~

Due to the Company’s cumulative losses, expected losses in future years and inability to utilize any additional losses as carrybacks, the Company has not provided for an income tax benefit during the nine months ended September 30, 2005 or 2004 based on management’s determination that it was more likely than not that such benefits would not be realized. The Company will continue to assess the recoverability of deferred tax assets and the related valuation allowance. To the extent the Company begins to generate taxable income in future periods and it determines that such valuation allowance is no longer required, the tax benefit of the remaining deferred tax assets will be recognized at such time. As of September 30, 2005, the Company’s deferred tax assets were offset by a valuation allowance of approximately $41,227.

~~H. STOCKHOLDERS’ EQUITY~~

~~The following shows changes to the components of stockholders’ equity during the nine months ended September 30, 2005.~~

   Common Stock
   Additional
Paid in
Capital
   Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total

   Outstanding
Shares
   Par
Value

Balance, January 1, 2005
   29,330,874    $ 299    $ 120,798    $ (107,101 ) $ 2,539 $ 16,535
Net loss
   —      —      —      (3,779 ) (3,779 ) (3,779 )
Other comprehensive income (loss), net of tax of zero:

Foreign currency translation adjustment
   —      —      —      —   (1,553 ) (1,553 )
Unrealized gain on available for sale securities
   —      —      —      —   65 65





Comprehensive loss
   —      —      —      —   (5,267 )
Beneficial conversion premium
   —      —      399    —   —   399
Issuance of shares upon conversion of Laurus Loans
   4,900,000    48    2,487    —   —   2,535
Fair value of incremental shares issued
   —      —      1,365    —   —   1,365
Issuance of shares for employee stock purchase plan
   15,462    1    9    —   —   10





Balance, September 30, 2005
   34,246,336    $ 348    $ 125,058    $ (110,880 ) $ 1,051 $ 15,577

~~During the nine months ended September 30, 2005, the Company issued zero and 4,900,000 shares, respectively, of common stock in conjunction with conversions under the Laurus Loans.~~

~~TRANSGENOMIC, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

Date
Price
Shares
Issued
Proceeds
Facility
Applied
To
January 2005 $ 1.00 50,000 $ 50 Term Note Principal
March 2005 $ 0.52 3,600,000 1,835 Credit Line Principal
March 2005 $ 0.52 1,250,000 650 Term Note Principal

4,900,000 $ 2,535

~~I. STOCK OPTIONS~~

~~The following table summarizes activity under the 1997 Stock Option Plan during the nine months ended September 30, 2005.~~

   Number of
Options
Weighted
Average
Exercise Price
Balance at January 1, 2005
   5,088,037 $ 5.09
Granted
   1,123,500 $ 1.04
Cancelled
   (670,522 ) $ 4.21


Balance at September 30, 2005
   5,541,015 $ 4.37


Exercisable at September 30, 2005
   4,396,281 $ 5.11

~~The following table summarizes information about options outstanding~~accurate as of ~~September 30, 2005:~~

   Options Outstanding
   Options Exercisable
Range of Exercise Prices
   Number
Outstanding
   Weighted-
Average
Remaining
Contractual
Life
   Weighted-
Average
Exercise
Price
   Number
Exercisable
   Weighted-
Average
Exercise
Price
      (in years)
$ 1.00—$ 1.30
   1,360,167    9.2    $ 1.08    558,384    $ 1.12
$ 1.31—$ 2.60
   798,167    7.6    $ 1.91    510,682    $ 1.92
$ 2.61—$ 3.90
   35,000    7.1    $ 2.90    23,334    $ 2.90
$ 3.91—$ 5.20
   2,074,700    2.3    $ 5.00    2,074,700    $ 5.00
$ 5.21—$ 6.50
   692,750    5.6    $ 6.15    662,150    $ 6.15
$ 6.51—$ 9.10
   10,000    5.6    $ 9.00    10,000    $ 9.00
$ 9.11—$10.40
   300,500    5.3    $ 9.88    296,500    $ 9.88
$10.41—$13.00
   269,731    4.6    $ 12.80    260,531    $ 12.83



   5,541,015    5.5    $ 4.37    4,396,281    $ 5.11

~~J. OPERATING SEGMENT AND GEOGRAPHIC~~ any other date.

PART II.

INFORMATION

~~Operations for the BioSystems~~ NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Nucleic Acids operating segments are evaluated based upon specific identification of revenues and expenses associated with the business activities resulting in a segment operating income. Expenses that cannot be directly identified to an operating activity or are considered corporate overhead are not allocated to the segments in arriving at operating income for the segment. Generally, decisions regarding asset allocation, financing, taxes or other items impacting the Company’s balance sheet are made at the corporate level and, accordingly, operating segment balance sheet information is not reviewed by operating decision makers.

Distribution.

The following table sets forth ~~net sales and operating income (loss) by segment.~~

   Nine Months Ended
September 30,

   2005
2004

Net Sales

BioSystems
   $ 20,479 $ 18,450
Nucleic Acids
   3,232 7,384


Total
   $ 23,711 $ 25,834


Income (Loss) from Operations

BioSystems
   $ 2,227 $ (1,309 )
Nucleic Acids
   (630 ) (17,073 )
Corporate
   (3,461 ) (4,442 )


Total
   $ (1,864 ) $ (22,824 )

~~TRANSGENOMIC, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

During the nine months ended September 30, 2005, sales to a large pharmaceutical company totaled $2,009 and represented 10% of net sales within the Company’s BioSystems operating segment and 9% of total consolidated net sales. Sales to this customer are governed by a non-binding master services agreement dated August 22, 2002.

During the nine months ended September 30, 2005, sales to Geron Corporation (“Geron”) totaled $1,729 and represented 54%, of net sales within the Company’s Nucleic Acids operating segment 7% total net consolidated sales. Sales to Geron are governed by a non-binding supply agreement dated June 15, 2002, as amended. Under the supply agreement and related addendums, Geron has historically paid the Company for goods and services with its common stock. The terms of each addendum generally provide that Geron pre-pay 50% of the total sales price of goods sold under the addendum upon execution of the addendum and the remaining 50% upon acceptance of the related goods and services. Geron shares received by the Company are restricted for resale until they are registered with the Securities and Exchange Commission. The Company assumes all market risk related to the value of these securities and any selling costs are paid by the Company. Once registered, it has been the Company’s intent and practice to sell such securities as soon as practical.

~~The following is a summary of Geron shares received and sold during the nine months ended September 30, 2005 and 2004.~~

Date Received

Shares

Product Sales Price

Date Sold

Net
Proceeds

Gain (Loss)
January 2004 85,855 $959 February 2004 $   932 $(27)
March 2004 33,662 $289 July 2004 $   263 $(26)
April 2005 101,801 $608 May 2005 $   617 $   9
August 2005 151,550 $1,491 October 2005 $1,534 $ 43

~~K. RESTRUCTURING PLAN~~

The Company had accrued expenses associated with its 2004 restructuring plan of $368 at September 30, 2005 that relates primarily to future rents on closed facilities (net of projected sublease rents) of which $27 is expected to be paid during the remainder of 2005 and $341 in 2006 and thereafter.

~~L. SUBSEQUENT EVENT~~

On October 31, 2005, the Company closed on a private placement of securities to institutional investors. The securities issued consisted of: (i) 14,925,743 shares of the Company’s common stock, plus (ii) five-year, non-callable warrants to purchase another 5,970,297 shares of common stock with an exercise price of $1.20 per share (the “Offering”). The aggregate purchase price for the securities sold in the private placement was $1.01 per share of common stock initially being sold (the “Purchase Price”) or $15,075. In conjunction with the private placement, the Company issued a warrant to Oppenheimer & Co., Inc. (“Oppenheimer”) to purchase 932,859 shares at $1.20 per share as part of their placement fee for the private placement.

Contemporaneously with the closing of the private placement, the Company repaid all outstanding principal and accrued interest on the Laurus Loans, including fees to facilitate the private placement and prepayment penalties to Laurus in the sum of $824. As a result, the Credit Line with Laurus has been cancelled and is no longer available to the Company.

~~TRANSGENOMIC, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Nine Months Ended September 30, 2005 and 2004~~

~~(Dollars in thousands except per share data)~~

The Company is required to register all shares of common stock sold in the Offering and issuable upon exercise of the warrants. The common stock issued to these institutional investors may be sold in the secondary market at any time once such registration is effective. Failure to register these shares in a timely manner will subject the Company to liquidated damages of 1.5% of the aggregate purchase price per month for each successive 30-day period, calculated on a pro rata basis for any partial 30-day period.

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the Board of Directors and Stockholders of~~

~~Transgenomic, Inc.~~

~~Omaha, Nebraska~~

We have audited the accompanying consolidated balance sheets of Transgenomic, Inc. and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Transgenomic, Inc. and subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

~~As discussed in Note O, during the first quarter of 2005, the Company obtained an extension of the waiver of the borrowing base limit through March 31, 2006.~~

~~As discussed in Note P, the Company restated its consolidated statements of cash flows for the years ended December 31, 2004 and 2003.~~

~~/s/ DELOITTE & TOUCHE LLP~~

~~Omaha, Nebraska~~

~~April 14, 2005 (May 25, 2005, as to the effects of the restatement discussed in Note P)~~

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED BALANCE SHEETS~~

~~As of December 31, 2004 and 2003~~

~~(Dollars in thousands except per share data)~~

   2004
2003

ASSETS

CURRENT ASSETS:

Cash and cash equivalents
   $ 1,002 $ 1,241
Accounts receivable (net of allowances for bad debts of $1,051 and $549)
   10,197 10,877
Inventories
   5,366 10,584
Prepaid expenses and other current assets
   1,343 1,676


Total current assets
   17,908 24,378
PROPERTY AND EQUIPMENT:

Land and buildings
   2,427 2,239
Equipment
   19,263 20,362
Furniture and fixtures
   5,781 9,054


   27,471 31,655
Less: accumulated depreciation
   13,946 12,951


   13,525 18,704
GOODWILL
   638 10,503
OTHER ASSETS
   5,387 3,721


   $ 37,458 $ 57,306


LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable
   $ 3,431 $ 3,580
Other accrued expenses
   7,318 3,874
Accrued compensation
   636 959
Line of credit
   6,514 2,142
Current portion of long-term debt
   825 1,693


Total current liabilities
   18,724 12,248
Long-term debt
   2,199 —


Total liabilities
   20,923 12,248
COMMITMENTS AND CONTINGENCIES (Note F)

STOCKHOLDERS’ EQUITY:

Preferred stock, $.01 par value, 15,000,000 shares authorized, none outstanding
   —   —
Common stock, $.01 par value, 60,000,000 shares authorized, 29,330,874 and 28,119,122 shares outstanding in 2004 and 2003, respectively
   299 286
Additional paid-in capital
   120,798 115,904
Accumulated other comprehensive income
   2,539 1,597
Accumulated deficit
   (107,101 ) (72,729 )


Total stockholders’ equity
   16,535 45,058


   $ 37,458 $ 57,306

~~See notes to consolidated financial statements.~~

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

   2004
2003
2002

NET SALES
   $ 33,789 $ 33,866 $ 37,554
COST OF GOODS SOLD
   24,596 24,315 19,569


Gross profit
   9,193 9,551 17,985
OPERATING EXPENSES:

Selling, general and administrative
   17,499 17,324 24,199
Research and development
   6,685 9,305 12,201
Restructuring charges (Note N)
   3,570 738 3,282
Impairment charges (Note C)
   11,965 4,772 —
Gain on sale of facility (Note M)
   (1,466 ) —   —


   38,253 32,139 39,682
LOSS FROM OPERATIONS
   (29,060 ) (22,588 ) (21,697 )
OTHER INCOME (EXPENSE):

Interest expense
   (2,383 ) (315 ) (62 )
Loss on debt extinguishment
   (2,859 ) —   —
Other—net
   (164 ) 10 499


   (5,406 ) (305 ) 437
LOSS BEFORE INCOME TAXES
   (34,466 ) (22,893 ) (21,260 )
CURRENT INCOME TAX EXPENSE (BENEFIT)
   (94 ) 65 105


NET LOSS
   $ (34,372 ) $ (22,958 ) $ (21,365 )


BASIC AND DILUTED LOSS PER SHARE
   $ (1.19 ) $ (0.94 ) $ (0.91 )
BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING
   29,006,241 24,483,861 23,582,687

~~See notes to consolidated financial statements.~~

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

   Common Stock
   Additional
Paid in
Capital
   Unearned
Compensation
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total

   Outstanding
Shares
Par
Value

Balance, January 1, 2002
   23,606,003 $ 239    $ 113,260    $ (158 ) $ (28,406 ) $ (81 ) $ (2,750 ) $ 82,104
Net loss
   —   —      —      —   (21,365 ) (21,365 ) —   (21,365 )
Other comprehensive income (loss):

Foreign currency translation adjustment
   —   —      —      —   —   493 —   493
Unrealized gain on available for sale securities
   —   —      —      —   —   (34 ) —   (34 )


Comprehensive loss
   —   —      —      —   —   (20,906 ) —
Issuance and exercise of stock options or warrants
   81,900 1    460    (51 ) —   410
Issuance of shares for employee stock purchase plan
   56,842 —      214    —   —   —   —   214
Deferred compensation
   —   —      —      131 —   —   —   131
Purchase of treasury stock
   (232,700 ) —      —      —   —   —   (438 ) (438 )





Balance, December 31, 2002
   23,512,045 240    113,934    (78 ) (49,771 ) 378 (3,188 ) 61,515
Net loss
   —   —      —      (22,958 ) (22,958 ) —   (22,958 )
Other comprehensive income (loss):
         —
Foreign currency translation adjustment
   —   —      —      —   —   1,219 —   1,219


Comprehensive loss
   —   —      —      —   —   (21,739 ) —
Issuance of stock options and warrants
   —   —      386    —   —   —   —   386
Beneficial Conversion Premium
   —   —      480    —   —   —   —   480
Issuance of shares
   4,500,000 45    969    —   —   —   3,188 4,202
Issuance of shares for employee stock purchase plan
   107,077 1    135    —   —   —   —   136
Amortization of unearned compensation
         78 —   —   —   78





Balance, December 31, 2003
   28,119,122 286    115,904    —   (72,729 ) 1,597 —   45,058
Net loss
   —   —      —      —   (34,372 ) (34,372 ) (34,372 )
Other comprehensive income (loss):

Foreign currency translation adjustment
   —   —      —      —   —   942 —   942


Comprehensive loss
   —   —      —      —   —   (33,430 ) —
Issuance of stock options and warrants
   —   —      189    —   —   —   —   189
Beneficial Conversion Premium
   —   —      2,420    —   —   —   —   2,420
Issuance of shares
   1,134,850 12    2,198    —   —   —   —   2,210
Issuance of shares for employee stock purchase plan
   76,902 1    87    —   —   —   —   88





Balance, December 31, 2004
   29,330,874 $ 299    $ 120,798    $ —   $ (107,101 ) $ 2,539 $ —   $ 16,535

~~See notes to consolidated financial statements.~~

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

2004
(as restated, see
Note P)

2003
(as restated, see
Note P)
2002

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss
   $ (34,372 ) $ (22,958 ) $ (21,365 )
Adjustments to reconcile net loss to net cash flows from operating activities:

Depreciation and amortization
   4,625 4,597 3,993
Non-cash restructuring charges (Note N)
   2,027 364 1,698
Impairment charges (Note C)
   11,965 4,772 —
Gain on sale of facility (Note M)
   (1,466 ) —   —
Non-cash financing costs
   1,642 —   —
Loss on debt extinguishment
   2,859 —   —
(Gain)/Loss on sale of securities
   128 (64 ) —
Other
   18 93 131
Changes in operating assets and liabilities, net of acquisitions:

Purchase of trading securities
   —   (1,566 ) —
Proceeds from sale of trading securities
   —   1,519 —
Accounts receivable
   (3,334 ) 342 794
Inventories
   2,611 2,887 (5,767 )
Prepaid expenses and other current assets
   (130 ) 334 527
Accounts payable
   (268 ) (1,509 ) 2,249
Accrued expenses
   941 (1,828 ) (204 )


Net cash flows from operating activities
   (12,754 ) (13,017 ) (17,944 )
CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from the maturities and sale of available for sale securities
   4,269 4,000 39,355
Purchases of available for sale securities
   —   —   (19,088 )
Purchase of property and equipment
   (1,758 ) (6,413 ) (11,468 )
Change in other assets
   522 (543 ) (2,871 )
Proceeds from sale of specialty oligonuceotide manufacturing facility (Note M)
   3,000 —   —
Proceeds from asset sales
   —   9 —


Net cash flows from investing activities
   6,033 (2,947 ) 5,928
CASH FLOWS FROM FINANCING ACTIVITIES:

Net change in line of credit
   4,956 2,992 —
Proceeds from long-term debt
   2,750 —   1,559
Payments on long-term debt
   (1,779 ) (35 ) —
Issuance of common stock, net of expenses
   71 4,338 624
Purchase of treasury stock
   —   —   (438 )


Net cash flows from financing activities
   5,998 7,295 1,745
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE CHANGES ON CASH
   484 175 393


NET CHANGE IN CASH AND CASH EQUIVALENTS
   (239 ) (8,494 ) (9,878 )
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
   1,241 9,735 19,613


CASH AND CASH EQUIVALENTS AT END OF YEAR
   $ 1,002 $ 1,241 $ 9,735


SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid during the year for:

Interest
   $ 560 $ 314 $ 30
Income taxes, net
   (94 ) 70 120
Non-cash transactions:

Available for sale securities acquired for goods and services
   4,397 277 —
Conversions of debt to equity
   2,226 —   —

~~See notes to consolidated financial statements.~~

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

~~A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~Business Description.~~

Transgenomic, Inc., a Delaware corporation, and its subsidiaries (the “Company”) provide innovative products and services for the synthesis, purification and analysis of nucleic acids. The Company’s products and services include automated instrument systems, associated consumables, nucleic acid chemical building blocks, nucleic acid synthesis products, novel chemistry development for nucleic acids, and genetic variation discovery services. The Company develops, assembles, manufactures and markets its products and services to the life sciences industry to be used in research focused on molecular genetics of humans and other organisms. Such research could lead to development of new diagnostics and therapeutics. The Company’s business plan is to participate in the value chain associated with these activities by providing key technology, tools, consumables, biochemical reagents and services to those entities engaged in basic biomedical research and the development of diagnostics and therapeutic agents.

The Company operates in two reportable segments, BioSystems and Nucleic Acids. The BioSystems operating segment generates revenue from the sale of automated instrument systems and associated consumable products and services. The Nucleic Acids operating segment generates revenue from the sale of nucleic acid-based products and services.

The Company markets and sells these products primarily through a direct sales and support group in North America and Europe and through a network of distributors in the Pacific Rim and other international markets. These sales efforts are directed from the Company headquarters in Omaha, Nebraska and through a series of sales and support offices strategically located throughout the United States, Europe and Japan.

The Company has experienced recurring net losses and had an accumulated deficit of $107,101 at December 31, 2004. Based on the Company’s 2005 operating plan, management believes its existing sources of liquidity will be sufficient to meet its cash needs during 2005. If necessary, the Company’s management believes they can manage costs and expenses at reduced levels to conserve working capital. The need for any such cost and expense reductions during 2005 would likely delay implementation of the Company’s business plan. Additionally, management may pursue additional financing alternatives. Ultimately, the Company must achieve sufficient revenue levels to support its cost structure.

~~Principles of Consolidation.~~

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

~~Cash and Cash Equivalents.~~

~~For purposes of reporting cash flows, cash and cash equivalents include cash and temporary investments with original maturities at acquisition of three months or less.~~

~~Short Term Investments.~~

The Company classifies all of its short-term investments with maturities at acquisition of greater than three months as available for sale securities. Such short-term investments consist primarily of United States government and federal agency securities, corporate commercial paper and corporate debt that are stated at market value, with unrealized gains and losses on such securities reflected, net of tax, as other comprehensive income in stockholders’ equity. Realized gains and losses on short term investments are included in earnings and are derived using the specific identification method for determining the cost of securities. It is the Company’s intent to maintain a liquid portfolio to take advantage of investment opportunities; therefore, all securities are considered to be available for sale and are classified as current assets.

During 2003 and 2004, the Company accepted common stock from one of its customers (Geron Corporation) as payment for goods and services. These shares were classified as available-for-sale securities. Net losses on these securities of $128 during 2004 and net gains of $111 during 2003 were reflected as other expense on the consolidated statement of operations. Proceeds from the sales of these available for sale securities were reflected within net cash flows from investing activities.

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

~~Accounts Receivable.~~

Accounts receivable are shown net of allowance for doubtful accounts. The following is a summary of activity for the allowance for doubtful accounts during each of the three years ended December 31, 2004:

   Beginning
Balance
   Additional
Charges
to Income
   Deductions
from
Reserve
   Ending
Balance
Year Ended December 31, 2004
   $ 549    $ 534    $ 32    $ 1,051
Year Ended December 31, 2003
   $ 450    $ 174    $ 75    $ 549
Year Ended December 31, 2002
   $ 213    $ 418    $ 181    $ 450

~~While payment terms are generally 30 days, the Company has also provided extended payment terms of up to 90 days in certain cases.~~

~~Inventories.~~

~~Inventories are stated at the lower of cost or market. Cost is computed using standard costs for finished goods and average or latest actual cost for raw materials and work in process.~~

~~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:~~


~~Buildings~~		~~15 years~~

~~Leasehold improvements~~		~~3 to 7 years~~

~~Furniture and fixtures~~		~~5 to 7 years~~

~~Production equipment~~		~~5 to 7 years~~

~~Computer equipment~~		~~3 to 5 years~~

~~Research and development equipment~~		~~3 to 5 years~~

~~Demonstration equipment~~		~~3 to 5 years~~

~~Depreciation of property and equipment totaled $4,009, $3,983 and $3,993 in 2004, 2003 and 2002, respectively.~~

~~Goodwill and other Intangible Assets~~

~~The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142,~~~~Goodwill and Other Intangible Assets,~~beginning on January 1, 2002. SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives will not be amortized, but will be tested for impairment annually. Impairment occurs when the fair value of the asset is less than its carrying amount. If impaired, the asset’s carrying value is reduced to its fair value. Identifiable intangible assets with definite lives are amortized over their estimated useful lives and tested for impairment as events or changes in circumstances indicate the carrying amount of the asset may be impaired. Impairment occurs when the carrying value is not recoverable and the fair value of the asset is less than the carrying value.

~~The Company has not amortized goodwill for any period presented. Accordingly, there are no differences between reported net loss and loss per share related to goodwill amortization.~~

~~Other Assets.~~

Other assets include long-term inventory, patents, intellectual property, deferred financing costs and capitalized software development costs. The Company capitalizes the external and in-house legal costs and filing fees associated with obtaining patents on its new discoveries and amortizes these costs using the straight-line method over the shorter of the legal life of the patent or its

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

~~economic life, generally 17 years, beginning on the date the patent is issued. The Company capitalized software development costs for products offered for sale in accordance with SFAS No. 86,~~~~Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed~~. This Standard allows for the capitalization of certain development costs once a software product has reached technological feasibility. Development costs capitalized totaled $0 in 2004 and 2003 and $1,127 in 2002.

~~Stock Based Compensation.~~

~~The following table illustrates the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock based employee compensation.~~

   2004
2003
2002

Net Loss:

As reported
   $ (34,372 ) $ (22,958 ) $ (21,365 )
Pro forma
   $ (35,432 ) $ (24,794 ) (23,274 )
Basic and diluted loss per share:

As reported
   (1.19 ) (0.94 ) (0.91 )
Pro forma
   (1.22 ) (1.01 ) (0.99 )

~~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 unlikely they will be realized.

~~Revenue Recognition.~~

Revenue on the sales of products is 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. Our sales terms do not provide for the right of return unless the product is damaged or defective. Revenues from certain services associated with our 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. The Company also enters into various service contracts that cover installed WAVE systems. These contracts cover specific time periods and revenue associated with these contracts is deferred and recognized over the service period. At December 31, 2004 and 2003, deferred revenue, mainly associated with the Company’s service contracts, included on the Company’s balance sheet was approximately $1,478 and $1,792 respectively.

~~Research and Development.~~

~~Research and development costs are charged to expense when incurred.~~

~~Translation of Foreign Currency.~~

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

~~included in the determination of net income. Foreign currency transaction adjustments decreased net loss approximately $328 in 2004 and $1,089 in 2003 and 2002.~~

~~Comprehensive Income.~~

Accumulated other comprehensive income at December 31, 2004 and 2003 consisted of foreign currency translation adjustments, net of applicable tax of $0. For all previous periods presented, accumulated other comprehensive income consists of foreign currency translation adjustments and unrealized gains or losses on available for sale investments, net of applicable tax of $0. The Company deems its foreign investments to be permanent in nature and does not provide for taxes on currency translation adjustments arising from converting its investments in a foreign currency to U.S. dollars. There were no reclassification adjustments to be reported in the periods presented.

~~Fair Value of Financial Instruments.~~

The carrying amount of the Company’s cash and cash equivalents, receivables, accounts payable and accrued expenses approximate fair value because of the short maturity of those instruments. The Company derives the fair value of its short-term investments based on quoted market prices. The carrying value of long-term debt and the line of credit approximates fair value based upon existing interest rates available to the Company for similar debt.

~~Earnings Per Share.~~

Basic earnings per share are 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 and warrants or conversion of convertible notes, where dilutive. Potentially dilutive securities totaling 13,484,072, 7,671,771 and 5,158,672 in 2004, 2003 and 2002, respectively, have been excluded from the computation of diluted earnings per share as they have an antidilutive effect due to the Company’s net loss.

~~Recently Issued Accounting Pronouncements~~

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R, Share-Based Payment. SFAS No.123R addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123R eliminates the ability to account for share-based compensation transactions using Accounting Principles Board Opinion No. 25 and generally requires that such transactions be accounted for using a fair-value-based method. The Company expects to adopt this standard on January 1, 2006. The Company is currently assessing the final impact of this standard on its financial position, results of operations or cash flows. This assessment includes evaluating option valuation methodologies and assumptions as well as potential changes to compensation strategies.

On November 24, 2004, the FASB issued SFAS No. 151, Inventory Costs – an amendment of ARB No. 43. SFAS No. 151 requires idle facility expenses, freight, handling costs, and wasted material (spoilage) costs to be excluded from the cost of inventory and expensed when incurred. It also requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 will be effective at the beginning of 2006. The Company is currently assessing the final impact of this standard on its financial position, results of operations or cash flows.

~~Use of Estimates.~~

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

~~B. INVENTORIES~~

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

~~Inventories consisted of the following at December 31:~~

   Biosystems
Operating
Segment
   Nucleic Acids
Operating
Segment
   Total
   2004
   2003
   2004
   2003
   2004
   2003
Finished goods
   $ 2,637    $ 2,875    $ 2,380    $ 2,247    $ 5,017    $ 5,122
Raw materials and work in process
   780    1,223    2,275    3,851    3,055    5,074
Demonstration inventory
   153    388    —      —      153    388






   3,570    4,486    4,655    6,098    8,225    10,584
Less inventory classified as a long-term asset
   —      —      2,859    —      2,859    —






Net Inventory
   $ 3,570    $ 4,486    $ 1,796    $ 6,098    $ 5,366    $ 10,584

The Nucleic Acids operating segment inventory at December 31, 2004 and 2003 consisted primarily of phosphoramadites and the raw materials to produce phosphoramadites which are used and produced at the Company’s facility in Glasgow, Scotland. As of December 31, 2004, the Company has classified a portion of this inventory as a long-term other asset based on its existing sales forecasts for these products.

The Company periodically evaluates its inventory of chemical building blocks to determine whether they continue to meet quality and other specifications and over what time period such products are expected to be sold. Product that does not meet quality and other specifications can generally be re-worked to enhance purity. Costs to purify such product and related yield losses are expensed as incurred.

~~C. GOODWILL~~

~~At December 31, 2004 and 2003, goodwill by operating segment consist of the following:~~

   Biosystems
Operating
Segment
   Nucleic Acids
Operating
Segment
Total

Net balance December 31, 2002
   $ 638    $ 14,637 $ 15,275
Goodwill impairment charge
   —      (4,772 ) (4,772 )



Net balance December 31, 2003
   638    9,865 10,503
Goodwill impairment charge
   —      (9,865 ) (9,865 )



Net Balance December 31, 2004
   $ 638    $ 0 $ 638

The Company recorded charges of $9,865 and $4,772 during 2004 and 2003, respectively, related to the impairment of goodwill associated with the Nucleic Acids operating segment. In each case, the amount of the impairment charge was based, in part, on independent valuations performed by the same unaffiliated valuation firm. The 2003 charge resulted from the Company’s annual impairment test that was performed in the fourth quarter of 2003. The 2004 charge resulted from an interim period impairment test performed during the second quarter of 2004.

~~The Company also recorded a charge of $2,100 during the second quarter of 2004 related to the impairment of property and equipment associated with the Nucleic Acids operating segment.~~

~~D. OTHER ASSETS~~

~~At December 31, 2004 and 2003, finite lived intangible assets and other assets consisted of the following:~~

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

   2004
   2003
   Cost
   Accumulated
Reserve
   Net
Book
Value
   Cost
   Accumulated
Reserve
   Net
Book
Value
Capitalized software
   $ 2,132    $ 1,468    $ 664    $ 2,132    $ 758    $ 1,374
Intellectual property
   765    476    289    765    165    600
Patents
   1,071    194    877    1,035    170    865
Deferred Financing Costs
   576    183    393    409    —      409
Long Term Inventory
   4,797    1,938    2,859    —      —      —
Other
   452    147    305    656    183    473






Total
   $ 9,793    $ 4,406    $ 5,387    $ 4,997    $ 1,276    $ 3,721

Amortization expense for intangible assets was $1,197, $825 and $150 during 2004, 2003 and 2002, respectively. Amortization expense for intangible assets is expected to be approximately $1,009 in 2005, $342 in 2006, $320 in 2007, $62 in 2008 and $130 in 2009.

~~E. DEBT~~

~~Debt consisted of the following at December 31:~~

   2004
2003

Credit Line

Gross amount due (2% above prime, due December 2006)
   $ 5,948 $ 2,992
Debt premium
   1,004 —
Debt discount – warrants
   (85 ) (370 )
Debt discount – beneficial conversion premium
   (353 ) (480 )


   $ 6,514 $ 2,142


Long-Term Debt

Convertible debt (2% above prime, due February 2007)
   $ 2,550 $ —
Debt Premium
   474 —
Mortgage debt
   —   1,693
Less current portion
   (825 ) (1,693 )


   $ 2,199 $ —

In December 2003, the Company entered into a $7,500 line of credit (the “Credit Line”) with Laurus Master Fund, Ltd. (“Laurus”). The term of the Credit Line is three years carrying an interest rate of 2.0% over the prime rate or a minimum of 6.0% (7.25% at December 31, 2004). Funds available under the Credit Line are determined by a borrowing base equal to 90% of eligible accounts receivable balances plus up to $1,000 related to inventory balances. The Credit Line is secured by most of the Company’s assets. Prior to amendments to the Credit Line discussed below, payment of interest and principal could, under certain circumstances, be made with shares of the Company’s common stock at a fixed conversion price of $2.20 per share. Conversion of this debt to common stock may be made at the election of Laurus or the Company. The Company could elect to convert only if its shares trade at a price exceeding $2.42 per share for ten consecutive trading days, and such conversion is further subject to trading volume limitations and a limitation on the total beneficial ownership by Laurus of the Company’s common stock. Upon entering into the Credit Line, the Company issued warrants to Laurus to acquire 550,000 shares of the Company’s common stock at an exercise price exceeding the average trading price of the Company’s common stock over the ten trading days prior to the date of the warrant. The amount available under the Credit Line at December 31, 2004 and 2003 was $1,552 and $4,508, respectively.

In February 2004, the Company entered into a separate $2,750 convertible note with Laurus (the “Term Note”). The Term Note carries an interest rate of 2.0% over the prime rate or a minimum of 6.0% (7.25% at December 31, 2004) and has a term of 3 years. Prior to amendments to the Term Note discussed below, the principal and interest on the Term Note could be converted into common stock of the Company at a fixed conversion price of $2.61 per share. Upon entering the Term Note, the Company issued warrants to Laurus to acquire 125,000 shares of its common stock. Borrowings under the Term Note were primarily used to retire the mortgage

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

debt on the Company’s Glasgow facility. Remaining borrowings of approximately $750 were used to complete the build-out of the Glasgow facility, complete the consolidation the Company’s Glasgow operations into the new facility and provide funds for operations.

Certain features of the Credit Line and Term Note (collectively, the “Laurus Loans”) require the Company to separately account for the value of certain amounts related to the warrants issued and the conversion feature of the Laurus Loans. Specifically, Emerging Issues Task Force (“EITF”) No. 00-27,~~Application of Issue No. 98-5 to Certain Convertible Instruments,~~ requires the Company to separately value the warrants issued and the “beneficial conversion premium” related to the Laurus Loans. Any borrowings under the Credit Line may result in additional beneficial conversion premiums. The values of the warrants and the beneficial conversion premium have been recorded on the balance sheet as a debt discount and an increase to additional paid in capital. The debt discount recorded for these items will be amortized as expense to the income statement over the terms of the Laurus Loans or as the warrants are exercised or the debt is converted into common stock thereby increasing the effective interest rate on the Laurus Loans. In January and February 2004, Laurus exercised its conversion rights on the Credit Line and converted $2,000 of amounts outstanding on the Credit Line into approximately 910,000 shares of common stock of the Company. In connection with this conversion, the Company accelerated the amortization of approximately $480 of the beneficial conversion premium.

In February 2004, Laurus waived the borrowing base limitation on the Credit Line, thereby making the full $7,500 facility available to the Company regardless of the available collateral. On August 31, 2004, Laurus agreed to extend the borrowing base waiver on the Credit Line through March 19, 2005. In addition, Laurus deferred certain payments due under the Term Note and reduced the interest rate on both of the Laurus Loans to 0% for any day the closing sale price of the Company’s common stock is at or above $1.75 per share. In return, the Company lowered the conversion price on each of the Laurus Loans to $1.00 per share and issued a warrant to Laurus covering an additional 400,000 common shares at an exercise price of $1.25 per share. The closing price of the Company’s common stock on August 31, 2004 was $1.20 per share.

Prospectively, draws on the Credit Line may result in beneficial conversion charges to the extent the price of the Company’s common stock exceeds the conversion price on the day of the draw. Such beneficial charges will be amortized as expense to the income statement during the period the draw remains outstanding or up to the point the debt is converted into common stock thereby increasing the effective interest rate on the Credit Line.

~~Principal repayments under the Term Note are scheduled as follows: $850 in 2005, $900 in 2006, and $800 in 2007.~~

~~Amortization of debt premiums and discounts totaled $1,644 during 2004 and $0 in each 2003 and 2002 and is reflected as interest expense in the accompanying statement of operations.~~

During 2002, Cruachem Ltd., a wholly owned subsidiary of the Company, entered into a mortgage loan with The Royal Bank of Scotland. The original principal amount of the loan was £1.0 million. Principal and interest were payable in quarterly installments. The loan carried a 15-year term and a fixed annual interest rate of 6.77%. Security for this loan was the Company’s 45,000 square foot manufacturing facility located in Glasgow, Scotland. The loan carried certain financial and non-financial covenants that included a minimum net cash flow requirement. The net book value of the facility was approximately $2,000 at December 31, 2003. During February 2004, the Company repaid the principal balance of the mortgage loan and therefore, the Company included the entire outstanding principal balance of this loan at December 31, 2003 within current liabilities.

~~F. COMMITMENTS AND CONTINGENCIES~~

The Company has been named as a defendant in a lawsuit filed in Spain by a prospective distributor who claims that the Company breached a promise to grant the plaintiff a distributorship for certain of the Company’s products in a specific geographic area

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

~~in Europe. The plaintiff is seeking monetary relief of approximately $500. The Company believes the lawsuit is without merit and intends to vigorously defend this matter.~~

The Company is subject to a number of other claims of various amounts, which arise out of the normal course of business. In the opinion of management, the disposition of all claims currently pending will not have a material adverse effect on the Company’s financial position, results of operations or cash flows, after considering amounts already reflected in the consolidated financial statements.

The Company leases certain equipment, vehicles and operating facilities. The Company’s leases related to its operating facilities currently expire on various dates through 2010. At December 31, 2004, the future minimum lease payments required under non-cancellable lease provisions are approximately $1,958 in 2005, $1,382 in 2006, $486 in 2007, $187 in 2008, $191 in 2009, and $181 in 2010. Rent expense related to all operating leases for the years ended December 31, 2004, 2003 and 2002 was approximately $2,007, $2,487 and $2,266, respectively.

~~At December 31, 2004, the Company had firm commitments totaling $798 to a vendor to purchase components used in WAVE Systems.~~

~~G. INCOME TAXES~~

~~Loss before income taxes consists of the following:~~

   Years ended December 31,

   2004
2003
2002

United States
   $ (30,467 ) $ (19,809 ) $ (19,640 )
International
   (3,999 ) (3,084 ) (1,620 )


   $ (34,466 ) $ (22,893 ) $ (21,260 )

The Company’s provision for income taxes for the years ended December 31, 2004, 2003 and 2002 differs from the amounts determined by applying the statutory Federal income tax rate to loss before income taxes for the following reasons:

   2004
2003
2002

Benefit at Federal Rate
   $ (11,718 ) $ (7,784 ) $ (7,228 )
Increase (decrease) resulting from:

State income taxes—net of federal benefit
   (595 ) (485 ) (518 )
Foreign subsidiary tax rate difference
   493 427 224
Research and development tax credit
   (141 ) (250 ) (188 )
Impairment charges
   3,569 —   —
Other—net
   78 82 137
Valuation allowance
   8,220 8,075 7,678


Total income tax expense (benefit)
   $ (94 ) $ 65 $ 105

~~The Company’s deferred income tax asset at December 31, 2004 and 2003 is comprised of the following temporary differences:~~

   2004
2003

Net operating loss carryforward
   $ 35,587 $ 29,292
Research and development credit carryforwards
   1,328 1,188
Deferred revenue
   708 400
Accrued vacation
   81 134
Other
   583 (422 )


   38,287 30,592
Less valuation allowance
   (38,287 ) (30,592 )


   $ —   $ —

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

At December 31, 2004, the Company had total used federal tax net operating loss carryforwards of $91,474 of which $1,770 expire in 2008, $3,698 expire in 2009, $2,970 expire in 2010, $943 expire in 2011, $3,425 expire in 2012, $1,838 expire in 2018, $8,182 expire in 2019, $9,662 expire in 2020, $8,228 expire in 2021, $16,862 expire in 2022; $16,173 expire in 2023 and $17,723 expire in 2024. Of these federal net operating loss carryforwards, $11,820 were obtained in the acquisition of Annovis, Inc. and may be subject to certain restrictions. At December 31, 2004, the Company had unused state tax net operating loss carryforwards of approximately $37,619 that expire at various times between 2005 and 2024. At December 31, 2004, the Company had unused research and development credit carryforwards of $1,328 that expire at various times between 2008 and 2024. A valuation allowance has been provided for the remaining deferred tax assets, due to the Company’s cumulative losses in recent years, expected losses in future years and an inability to utilize any additional losses as carrybacks. The Company will continue to assess the recoverability of deferred tax assets and the related valuation allowance. To the extent the Company begins 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.

~~H. EMPLOYEE BENEFIT PLAN~~

The Company maintains an employee 401(k) retirement savings plan that allows for voluntary contributions into designated investment funds by eligible employees. The Company matches the employees’ contributions at the rate of 50% on the first 6% of contributions. The Company may at the discretion of its Board of Directors, make additional contributions on behalf of the Plan’s participants. Company contributions were approximately $500 for each of the three years ended December 31, 2004.

~~I. STOCKHOLDERS’ EQUITY~~

~~Preferred Stock.~~

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

~~Common Stock.~~

~~During 2004, the Company issued 1,134,850 shares of common stock in conjunction with conversions under the Laurus Loans.~~

Date
Price
Shares
Issued

Net
Proceeds
Facility
Applied To
January 2004 $ 2.20 650,000 $ 1,422 Credit Line Principal
February 2004 $ 2.20 259,091 570 Credit Line Principal
December 2004 $ 1.00 150,000 146 Term Note Principal
December 2004 $ 1.00 75,759 72 Term Note Interest

1,134,850 $ 2,210

In September 2003, the Company issued 1,780,000 shares of its common stock and in November 2003, the Company issued 2,720,000 shares of its common stock in privately-negotiated sales. These shares were sold pursuant to the terms of a Securities Purchase Agreement, dated August 27, 2003. The sale of these shares was exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) as a sale not involving a public offering. These shares have been registered for resale under the Securities Act. The net proceeds to the Company, after payment of transaction fees and other expenses of the offering, were approximately $4,202.

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

In May 2001, Company shareholders approved the adoption of the Transgenomic, Inc. 2001 Employee Stock Purchase Plan that was subsequently implemented in November 2001. Substantially all of the Company’s U.S. employees are eligible to participate in the Plan. Eligible employees authorize payroll deductions to be made for the purchase of shares. Such deductions are accumulated during a defined participation period at the end of which each participant is deemed to have been granted an option to purchase shares of stock from the Company at 85% of the fair market value of the Company stock as measured by the closing price of the stock on either the first or last business day of the participation period, whichever is lower. The number of shares purchased under the option is based upon the participants elected withholding amount. At the end of the participation period such option is automatically exercised. This plan is structured to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 1986, as amended. During 2004, 2003 and 2002 there were 76,902, 107,077 and 56,842 shares issued under this plan, respectively.

~~Common Stock Warrants.~~

~~The following is a summary of the 1,159,421 common stock warrants outstanding at December 31, 2004. No warrants expired or were exercised during 2004.~~

Warrant Holder
   Issue
Year
   Expiration
Year
   Underlying
Shares
   Exercise
Price
Laurus Master Fund, Ltd.⁽¹⁾
   2003    2010    200,000    $ 2.25
Laurus Master Fund, Ltd.⁽¹⁾
   2003    2010    200,000    $ 2.44
Laurus Master Fund, Ltd.⁽¹⁾
   2003    2010    150,000    $ 2.32
Laurus Master Fund, Ltd.⁽¹⁾
   2004    2011    125,000    $ 3.11
Laurus Master Fund, Ltd.⁽¹⁾
   2004    2011    400,000    $ 1.25
TN Capital Equities, Ltd.⁽¹⁾
   2003    2008    45,918    $ 2.94
TN Capital Equities, Ltd.⁽¹⁾
   2004    2009    15,566    $ 3.18
GE Capital⁽²⁾
   2002    2007    13,762    $ 3.27
GE Capital⁽²⁾
   2003    2008    9,175    $ 3.27

~~(1)~~

~~These warrants were issued in conjunction with the Laurus Loans and subsequent modifications. Refer to Note E.~~

~~(2)~~

~~These warrants were issued in conjunction with operating leases with GE Capital. While the leases have since been terminated, the warrants are still outstanding.~~

~~J. STOCK OPTIONS~~

The Company’s 1997 Stock Option Plan, as amended (the “Stock Option Plan”), allows the Company to grant both incentive stock options and nonqualified stock options to acquire shares of the Company’s common stock to employees and directors of the Company and to nonemployee advisors. Either incentive or non-qualified stock options may be granted to employees of the Company, but only nonqualified stock options may be granted to nonemployee directors and advisors. The maximum number of shares for which options may be granted under the Stock Option Plan is 7,000,000. The Stock Option 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 options granted under the Stock Option Plan, subject to the terms thereof. The options must be granted at exercise prices not less than the fair market value of the common stock on the date of the grant. Generally, the stock options vest at a rate of either 20% per year over a five-year period or 33¹/₃% per year over a three-year period and expire 10 years after the date the option was granted. If the option holder ceases to be employed by the Company, the Company will have the right to terminate any outstanding but unexercised options.

~~The following table summarizes activity under the Stock Option Plan during the three years ended December 31, 2004:~~

   Number of
Options
Weighted
Average
Exercise
Price
Balance at January 1, 2002
   5,133,831 6.90
Granted
   632,000 5.09
Exercised
   (81,900 ) 5.01
Forfeited
   (539,021 ) 7.69


Balance at December 31, 2002:
   5,144,910 6.62
Granted
   1,282,000 1.64
Exercised
   —   —
Forfeited
   (733,994 ) 7.25


Balance at December 31, 2003:
   5,692,916 6.62


Granted
   360,000 1.70
Exercised
   —   —
Forfeited
   (964,879 ) 5.24


Balance at December 31, 2004:
   5,088,037 $ 5.09


Exercisable at December 31, 2004
   4,214,214 $ 5.55

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

~~The weighted average fair value per share of options granted in 2004, 2003 and 2002 was $0.40, $0.93 and $2.92, respectively.~~

The Company has elected to follow the measurement provisions of APB No. 25, under which no recognition of expense is required in accounting for stock options granted to employees for which the exercise price equals or exceeds the deemed fair market value of the stock at the grant date. In those cases where options have been granted with an exercise price below the deemed fair market value, the Company recognizes compensation expense using the straight-line method over the vesting periods of the individual stock options.

Stock-based compensation expense recorded by the Company represents amortization of unearned compensation related to options granted to employees with an exercise price less than the deemed fair market value at the date of grant and options granted to non-employees. During 2004, 2003 and 2002, the Company recorded compensation expense of $0, $93 and $131, respectively. The expense amounts were calculated using the Black-Scholes option pricing model with the following assumptions: no common stock dividends, risk-free interest rates ranging from 3.10% to 6.53%; volatility ranging from 35% to 85%; and an expected option life of 1 to 7.5 years.

~~The following table summarizes information about options outstanding as of December 31, 2004:~~

   Options Outstanding
   Options Exercisable
Range of Exercise Prices
   Number
Outstanding
   Weighted-
Average
Remaining
Contractual
Life
   Weighted-
Average
Exercise
Price
   Number
Exercisable
   Weighted-
Average
Exercise
Price
      (in years)
$ 1.00—$ 1.30
   408,335    6.8    $ 1.30    155,011    $ 1.30
$ 1.31—$ 2.60
   1,009,167    7.9    $ 1.89    551,850    $ 1.90
$ 2.61—$ 3.90
   50,002    5.5    $ 2.90    38,336    $ 2.90
$ 3.91—$ 5.20
   2,142,200    3.0    $ 5.00    2,142,200    $ 5.00
$ 5.21—$ 6.50
   768,182    6.1    $ 6.16    692,633    $ 6.15
$ 6.51—$ 9.10
   10,000    6.4    $ 9.00    10,000    $ 9.00
$ 9.11—$10.40
   396,420    5.6    $ 9.88    358,253    $ 9.88
$10.41—$13.00
   303,731    5.2    $ 12.80    265,931    $ 12.81





   5,088,037    5.1    $ 5.09    4,214,214    $ 5.55

~~K. OPERATING SEGMENT AND GEOGRAPHIC INFORMATION~~

The Company operates in two reportable segments, BioSystems and Nucleic Acids. Operations for these segments are evaluated based upon specific identification of revenues and expenses associated with the business activities resulting in a segment operating income. Expenses that cannot be directly identified to an operating activity or are considered corporate overhead are not allocated to the segments in arriving at operating income for the segment. Generally, decisions regarding asset allocation, financing, taxes or other items impacting the Company’s Balance Sheet are made at the corporate level and, accordingly, operating segment Balance Sheet information is not typically reviewed by operating decision makers.

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

The BioSystems operating segment generates revenue from the sale of automated instrument systems and associated consumable products and services. This segments products are based upon two of the Company’s three core competencies, separations chemistries and enzymology. Specifically, this segment’s main products are the WAVE system, related bioconsumables and research services.

The Nucleic Acids operating segment generates revenue from the sale of products and services based upon all three of the Company’s core competencies, nucleic acid chemistries, separations chemistries and enzymology. Specifically, this segments main products are nucleic acid building blocks or “phosphoramidites”, fluorescent markers, dyes and associated reagents and novel chemistry and process development services.

~~The following is information for net sales and operating income by segment.~~

   2004
2003
2002

Net Sales

BioSystems
   $ 25,243 $ 26,044 $ 24,235
Nucleic Acids
   8,546 7,822 13,319


Total
   $ 33,789 $ 33,866 $ 37,554


Loss from operations

BioSystems
   $ (2,294 ) $ (2,786 ) $ (9,417 )
Nucleic Acids
   (17,623 ) (12,440 ) (1,004 )
Corporate
   (9,143 ) (7,362 ) (11,276 )


Total
   $ (29,060 ) $ (22,588 ) $ (21,697 )

During 2004, sales to Geron Corporation totaled $4,151 and represented 49% of net sales within our Nucleic Acids operating segment and 12% of total consolidated net sales. During 2003 and 2002 no single customer accounted for more than 10% of operating segment or consolidated net sales.

The following is information for fixed assets and fixed asset additions by segment. Fixed assets are tracked by location and department and thus can be identified to operating segments even though specific segment Balance Sheets are not produced.

   2004
   2003
Fixed Assets

BioSystems
   $ 2,695    $ 3,412
Nucleic Acids
   10,150    13,991
Corporate
   680    1,301


Total
   $ 13,525    $ 18,704


Fixed Asset Additions

BioSystems
   $ 901    $ 1,000
Nucleic Acids
   848    5,393
Corporate
   9    20


Total
   $ 1,758    $ 6,413

~~The following is supplemental information for net sales by geographic area.~~

   2004
   2003
   2002
Sales by Geographic Area:

United States
   $ 13,580    $ 12,251    $ 16,805
Europe
   15,392    15,955    16,011
Pacific Rim
   2,794    3,335    4,129
Other
   2,023    2,325    609



Total
   $ 33,789    $ 33,866    $ 37,554

~~Long-lived assets by geographic area as of December 31 are as follows:~~

   2004
   2003
United States
   $ 7,754    $ 20,935
Europe
   7,564    9,705
Pacific Rim
   11    32


Total
   $ 15,329    $ 30,672

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

~~L. QUARTERLY RESULTS (UNAUDITED)~~

~~The following table contains selected unaudited consolidated statements of operations data for each quarter for fiscal years 2004 and 2003.~~

   2004

   1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Total

Net Sales
   $ 8,629 $ 9,011 $ 8,194 $ 7,955 $ 33,789
Gross Profit
   $ 2,861 $ 3,153 $ 1,337 $ 1,842 $ 9,193
Net loss
   $ (3,859 ) $ (15,132 ) $ (8,442 ) $ (6,939 ) $ (34,372 )
Basic & Diluted Loss Per Share
   $ (0.13 ) $ (0.52 ) $ (0.29 ) $ (0.24 ) $ (1.19 )
Basic and Diluted Weighted Average Shares Outstanding
   28,728 29,053 29,078 29,338 29,006

   2003

   1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Total

Net Sales
   $ 9,505 $ 8,481 $ 7,537 $ 8,343 $ 33,866
Gross Profit
   $ 3,691 $ 2,556 $ 775 $ 2,529 $ 9,551
Net loss
   $ (3,596 ) $ (4,670 ) $ (6,097 ) $ (8,595 ) $ (22,958 )
Basic & Diluted Loss Per Share
   $ (0.15 ) $ (0.20 ) $ (0.25 ) $ (0.32 ) $ (0.94 )
Basic and Diluted Weighted Average Shares Outstanding
   23,519 23,540 24,177 26,723 24,484

~~Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per share losses may not equal the annual loss per share.~~

~~M. SALE OF SPECIALTY OLIGONUCLEOTIDE MANUFACTURING FACILITY~~

On November 11, 2004, the Company sold the assets associated with its specialty oligonucleotides manufacturing facility in Boulder, Colorado to a subsidiary of Eyetech Pharmaceuticals, Inc. (“Eyetech”). The sale price was $3,000 in cash plus the assumption of the lease on the Boulder facility and of certain equipment leases with a gross value of $2,377. Substantially all of the 27 employees at the Boulder facility became Eyetech employees. Net proceeds from the sale (after transaction expenses and fees paid to our investment advisors) equaled approximately $2,700. In conjunction with this transaction, we recorded a gain on sale of $1,466 in the fourth quarter of 2004.

~~N. RESTRUCTURING PLANS~~

On November 13, 2004, the Company’s Board of Directors approved a restructuring plan designed to refocus on the BioSystems operating segment and to better align the Company’s cost structure with anticipated revenues. The plan (which is incremental to the sale of the specialty oligonucleotide manufacturing facility in Boulder, Colorado facility) included a workforce reduction of approximately 60 positions and the closure of two domestic research and development facilities associated with our Nucleic Acids operating segment and two European field offices. Additionally, the Company eliminated approximately 10 positions at its chemical building blocks manufacturing facility in Glasgow, Scotland. In conjunction with these changes, the Company incurred a charge of $3,570 during the quarter ending December 31, 2004 consisting of severance benefits of $1,406, future rents on closed facilities (net of projected sublease rents) of $1,241, the write-off property and equipment specifically attributable to closed facilities of $740 and other costs of $183. The Company had accrued expenses associated with this restructuring plan of $1,909 at December 31, 2004 of which $1,486 is expected to be paid 2005 and $423 in 2006.

~~TRANSGENOMIC, INC. AND SUBSIDIARIES~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)~~

~~Years Ended December 31, 2004, 2003 and 2002~~

~~(Dollars in thousands except per share data)~~

During the fourth quarter of 2002 management formulated and executed a significant portion of a restructuring plan. The plan was developed to reduce expenses thereby better aligning the Company’s expense structure with current business prospects. The plan included employee terminations, office closures, termination of collaborations and write-offs of abandoned intellectual property. Specifically, in the fourth quarter of 2002 the Company notified approximately 60 employees of their termination, notified landlords of our intent to close four facilities and reduce our space commitment under lease at two other facilities, terminated certain consulting and collaboration agreements and abandoned certain patents. As a result of the plan $3,282 in restructuring charges were recorded and are included in operating expenses. These charges consisted of approximately $775 of employee severance costs, $1,200 in office closure related costs, $400 of collaboration and other agreement termination charges and $900 in write-offs of abandoned intellectual property. Approximately 45% of the total charges were for non-cash items. Additional restructuring charges totaling $741 were incurred in the first half of 2003. The Company had accrued expenses associated with these restructuring activities of $0 at December 31, 2004 and $227 at December 31, 2003.

~~O. SUBSEQUENT EVENTS~~

On March 18, 2005, Laurus agreed to further extend the borrowing base waiver on the Credit Line until March 31, 2006. In connection with this waiver, the Company agreed to allow Laurus to convert $1,872 of the outstanding principal balance under the Credit Line into 3,600,000 shares of its common stock. In addition, on March 24, 2005 the Company agreed to allow Laurus to convert $650 of the outstanding principal balance of the Term Note into 1,250,000 shares of common stock. As a result, the Company increased the amount available under the Credit Line by $1,872 and eliminated substantially all remaining 2005 scheduled principal payments on the Term Loan.

~~P. RESTATEMENT OF STATEMENTS OF CONSOLIDATED CASH FLOWS~~

Subsequent to the issuance of the Company’s financial statements for the year ended December 31, 2004, the Company’s management determined that it had incorrectly included the amortization of software development costs within net cash flows from investing activities rather than within net cash flows from operating activities. The Company’s management also determined that restricted common stock accepted as payment for goods and services from one of the Company’s customers and subsequently sold was incorrectly classified within the consolidated statements of cash flows. It is the Company’s policy to account for restricted common stock received in settlement of a customer’s accounts receivable as available for sale securities. The sale of such securities should be reflected in the consolidated statements of cash flows as an investing activity. Available for sale securities acquired for goods and services should be reflected as non-cash transactions.

As a result, the Company’s consolidated statements of cash flows for the fiscal years ended December 31, 2004 and 2003 have been restated from the amounts previously reported to correct these errors. This restatement had no impact on the statements of consolidated cash flows for the fiscal year ended December 31, 2002. In addition, this restatement had no impact on the Company’s consolidated balance sheets or consolidated statements of operations. The impact of this restatement on the consolidated statements of cash flows is as follows: (dollars in thousands):

   2004 As
Previously
Reported

2004
As
Restated
2003 As
Previously
Reported

2003
As
Restated

Depreciation and amortization
   $ 4,009 $ 4,625 $ 3,981 $ 4,597
Trading securities acquired in settlement of accounts receivable
   (4,397 ) —   (1,843 ) —
Proceeds from sales of trading securities
   4,269 —   1,907 1,519
Purchase of trading securities
   —   —   —   (1,566 )
Accounts receivable
   1,063 (3,334 ) 619 342
Net cash flows from operating activities
   (9,101 ) (12,754 ) (13,245 ) (13,017 )
Proceeds from the maturities and sale of available for sale securities
   —   4,269 3,612 4,000
Change in other assets
   1,138 522 73 (543 )
Net cash flows from investing activities
   2,380 6,033 (2,719 ) (2,947 )

~~25,038,320 Shares~~

~~TRANSGENOMIC, INC.~~

~~COMMON STOCK~~

~~PROSPECTUS~~

~~, 2005~~

~~PART II~~

~~INFORMATION NOT REQUIRED IN PROSPECTUS~~

~~Item 13.~~

~~Other Expenses of Issuance and Distribution~~

~~The following table indicates~~ the expenses ~~to be incurred~~ in connection with the ~~offering described in this Registration Statement,~~issuance and distribution of the securities being registered, other than ~~the~~ underwriting discounts and ~~commissions, all~~commissions. All of ~~which will be paid by~~ the ~~Company. All~~ amounts shown are ~~estimates, other than~~estimated, except the SEC registration fee.

Securities and Exchange Commission filing fee
   $ 2,371
Legal fees and expenses
   10,000
Accounting fees and expenses
   15,000
Printing and engraving
   1,500
Miscellaneous expenses
   1,129
Total
   $ 30,000

~~Item 14.~~

~~Indemnification of Directors and Officers~~



SEC registration fee	$	4,916
Legal fees and expenses	25,000
Accounting fees and expenses	14,400
Miscellaneous	10,000
Total	$	54,316

The Company will bear all of the expenses shown above.

Item 14. Indemnification of Directors and Officers.

Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement of expenses incurred) arising under the Securities Act of 1933.

As permitted by the Delaware General Corporation Law, the ~~Registrant’s~~Registrant's Third Restated Certificate of Incorporation eliminates the personal liability of its directors for monetary damages for breach of fiduciary duty as a director, except for liability (1) for any breach of the ~~director’s~~director's duty of loyalty to the Registrant or its stockholders, (2) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (3) under Section 174 of the Delaware General Corporation Law (regarding unlawful dividends and stock purchases) or (4) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended to authorize further elimination or limiting of ~~directors’~~directors' personal liability, then the Third Amended and Restated Certificate provides that the personal liability of directors will be eliminated or limited to the fullest extent provided under the Delaware General Corporation Law.

As permitted by the Delaware General Corporation Law, the ~~Registrant’s~~Registrant's Third Amended and Restated Certificate of Incorporation and its Amended and Restated Bylaws provide that (1) the Registrant is required to indemnify its directors and officers to the fullest extent permitted by the Delaware General Corporation Law, subject to certain very limited exceptions, (2) the Registrant may indemnify its other employees and agents as set forth in the Delaware General Corporation Law, (3) the Registrant is required to advance expenses, as incurred, to its directors and executive officers in connection with a legal proceeding to the fullest extent permitted by the Delaware General Corporation Law, subject to certain conditions and (4) the rights conferred by the Third Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws are not exclusive.

The Delaware General Corporation Law authorizes a corporation to indemnify its directors and officers provided that the corporation shall not eliminate or limit the liability of a director as follows:

(a) for any action brought by or in the right of a corporation where the director or officer is adjudged to be liable to the corporation, except where a court determines the director or officer is entitled to indemnity;

~~II-1~~

(b) for acts or omissions not in good faith or which involve conduct that the director or officer believes is not in the best interests of the corporation;

(d) for any transaction from which the directors derived an improper personal benefit; and

(e) for payment of dividends or approval of stock repurchases or redemptions leading to liability under Section 174 of the Delaware General Corporation Law.

The Delaware General Corporation Law requires a corporation to indemnify a director or officer to the extent that the director or officer has been successful, on the merits or otherwise, in defense of any action, suit or proceeding for which indemnification is lawful.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

The Company maintains a director and officer insurance policy which insures the directors and officers of the Company against damages, judgments, settlements and costs incurred by reason of certain wrongful acts committed by such persons in their capacities as directors and officers.

~~Item 15.~~

~~Recent Sales of Unregistered Securities~~

Item 15. Recent Sales of Unregistered Securities.

Series A Preferred Shares and Series A Preferred Warrants

On ~~October 31, 2005, we issued~~December 29, 2010, the Company entered into a Series A Convertible Preferred Stock Purchase Agreement (the “Series A Purchase Agreement”) with Third Security Senior Staff 2008 LLC, Third Security Staff 2010 LLC, and Third Security Incentive 2010 LLC (collectively, the “Third Security Entities”), pursuant to ~~a group~~which the Company: (i) sold to the Third Security Entities an aggregate of ~~unaffiliated institutional investors 14,925,743 shares of our common stock, together with warrants to purchase an additional 5,970,297~~2,586,205 shares of the ~~Registrant’s common stock. The~~Company's Series A Convertible Preferred Stock (the “Series A Preferred”) at a price per share of $2.32 for aggregate gross proceeds of approximately $6,000,000; and (ii) issued to the Third Security Entities warrants ~~carry~~(the “Series A Warrants”) to purchase up to an aggregate of 1,293,102 shares of Series A Preferred with an exercise price of ~~$1.20~~$2.32 per share ~~are not callable~~(collectively, the “Financing”). The Series A Preferred and ~~expire in 5 years.~~Series A Warrants were issued pursuant to applicable exemptions from the registration requirements of the Securities Act. 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 shares of Series A Preferred issuable pursuant to the Series A Purchase Agreement and upon exercise of the Series A Warrants are initially convertible into shares of the Company's common stock (“Common Stock”) at a rate of 4-for-1, which conversion rate is subject to further adjustment as set forth in the Certificate of Designation of Series A Convertible Preferred Stock. The Company used the net proceeds from the Financing to acquire certain assets of Clinical Data, Inc. (“Clinical Data”) and PGx Health, LLC, a wholly-owned subsidiary of Clinical Data (“PGx”).

In connection with the Financing, the Company also entered into a registration rights agreement with the Investors (the “Registration Rights Agreement”). Pursuant to the terms of the Registration Rights Agreement, the Company has granted the Investors certain demand, “piggyback” and S-3 registration rights covering the resale of the shares of Common Stock underlying the Series A Preferred 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.

On November 8, 2011, the Company entered into an Amendment Agreement with the Third Security Entities, which are the holders of all of the outstanding shares of the Company's Series A Preferred. Pursuant to the Amendment Agreement, the Third Security Entities and the Company agreed to amend the Certificate of Designation to eliminate certain features of the Series A Preferred relating to (i) an anti-dilution adjustment to the conversion rate upon which the Series A Preferred is convertible into the Company's common stock and (ii) an optional redemption of the Series A Preferred by the Third Security Investors (the “Certificate Amendment”); subject to the requisite stockholder approval of the Certificate Amendment at the Company's next annual meeting of its stockholders. Pursuant to the Amendment Agreement, the Third Security Investors agreed to vote the Series A Preferred and their common stock in favor of the Certificate Amendment and agreed to waive their rights to the features of the Series A Preferred being eliminated by the Certificate Amendment. In exchange for the Third Security Entities entering into the Amendment Agreement, the Company agreed to issue to the holders an aggregate of $0.3 million market value of common stock or 245,903 shares of Common Stock.

Convertible Promissory Notes

On December 30, 2011, the Company entered into a Convertible Promissory Note Purchase Agreement (the “Note Purchase Agreement”) with the Third Security Entities in the aggregate amount of $3.0 million. Affiliates of the investors currently own all the outstanding shares of the Company's Series A Preferred. Under the Note Purchase Agreement, the Company sold to

each of the Third Security Entities a convertible note which had a March 31, 2012 maturity date. The Note Purchase Agreement and notes provided for conversion of any amount remaining due to the Third Security Entities under the notes into equity securities of the Company of the same class(es) or series and at the same price as the equity securities of the Company sold in the Company's first sale or issuance of its equity securities after December 30, 2011, in the aggregate amount of at least $3.0 million. The notes and the equity securities into which the notes are convertible have not been registered under the Securities Act and applicable state securities laws, but were offered and sold in the United States pursuant to applicable exemptions from registration requirements under the Securities Act and applicable state securities laws.

2012 Private Placement and Note Conversion

On February 2, 2012, the Company entered into a Securities Purchase Agreement with certain institutional and other accredited investors pursuant to which the Company: (i) sold to the investors an aggregate of 19,000,000 shares of the Company's Common Stock at a price per share of $1.00 for aggregate gross proceeds of approximately $19.0 million; and (ii) issued to the investors Warrants to purchase up to an aggregate of 9,500,000 shares of Common Stock with an exercise price of $1.25 per share. The Warrants may be exercised, in whole or in part, at any time from February 7, 2012 until February 7, 2017 and contain both cash and “cashless exercise” features. The Warrants also impose penalties on the Company for failure to deliver the shares of Common Stock issuable upon exercise. The Company currently intends to use the net proceeds from the offering for general corporate and working capital purposes, primarily to accelerate development of several of the Company's key initiatives. The common stock and warrants were issued pursuant to applicable exemptions from registration requirements under the Securities Act and applicable securities law.

As part of the offering, in connection with the conversion of n convertible promissory notes in the aggregate amount of $3.0 million issued by the Company on December 30, 2011 to the Third Security Entities collectively received 3,000,000 shares of Common Stock and Warrants to purchase up to 1,500,000 shares of Common Stock upon the same terms as the investors.

In connection with the offering, the Company also entered into a Registration Rights Agreement with the investors and the Third Security Entities. The Registration Rights Agreement requires that the Company file a registration statement with the Securities and Exchange Commission within forty-five (45) days of the closing date of the offering for the resale by the investors and the Third Security Entities of all of the Common Shares, the shares of Common Stock issuable upon exercise of the Warrants, the Third Security Common Shares, the shares of Common Stock issuable upon exercise of the Third Security Warrants and all shares of Common Stock issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect thereto. The initial registration statement must be declared effective by the SEC within ninety (90) days of the closing date of the offering subject to certain adjustments. Upon the occurrence of certain ~~Securities Purchase Agreements which were authorized and approved by our shareholders at a special meeting~~events, including, but not limited to, that the initial Registration Statement is not filed prior to the filing date, the Company will be required to pay liquidated damages to each of the ~~shareholders held on October 26, 2005. The~~investors and the Third Security Entities upon the date of the event and then monthly thereafter until the earlier of: (i) the event is cured, or (ii) the registrable shares are eligible for resale under Rule 144 without manner of sale or volume limitations. In no event shall the aggregate ~~proceeds from~~amount of liquidated damages payable to each of the ~~sale were $15.08 million. We~~investors and Third Security Entities exceed in the aggregate 10% of the aggregate purchase price paid by such investor or Third Security Entity for the registrable securities. Pursuant to this Registration Statement and as required by the Registration Rights Agreement, the Company is registering the resale of the Common Shares, the shares of Common Stock issuable upon exercise of the Warrants, the Third Security Common Shares, the shares of Common Stock issuable upon exercise of the Third Security Warrants and all shares of Common Stock issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect thereto.

Craig-Hallum Capital Group LLC served as the sole placement agent for the offering. In consideration for services rendered as the placement agent ~~a commission and expenses consisting of cash~~ in the ~~amount~~offering, the Company agreed to (i) pay to the placement agent cash commissions equal to $1,330,000, or 7.0% of ~~$1.08 million. Additionally, we issued~~the gross proceeds received in the offering, (ii) issue to the placement agent a five-year warrant to purchase ~~932,859~~up to 380,000 shares of ~~our common stock at~~the Company's Common Stock (representing 2% of the Common Shares sold in the offering) with an exercise price of ~~$1.20~~$1.25 per ~~share.~~

share and other terms that are the same as the terms of the Warrants and the Third Security Warrants issued in connection with the offering; and (iii) reimburse the placement agent for reasonable out-of-pocket expenses, including fees paid to the placement agent's legal counsel, incurred in connection with the offering, which reimbursable expenses shall not exceed $125,000. In addition, the Company will also pay the placement agent the cash fee and Warrants, determined in accordance with the percentages set forth above, if, during a 12-month period commencing January 2, 2012, the Company signs a definitive agreement or letter of intent or other evidence of commitment which subsequently results in an offering of the securities of the Company being consummated. The ~~offer~~calculation of the placement agent's fees did not include the Third Security Common Shares and ~~sale~~Third Security Warrants issued to the Third Security Entities in connection with the conversion of ~~these securities was exempt from~~the convertible promissory notes described above.

Item 16. Exhibits

See the Exhibit Index attached hereto and incorporated herein by reference.

Item 17. Undertakings.

The undersigned Registrant hereby undertakes:


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


(i)	To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Act");

(ii)

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


(iii)	To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.


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


(3)	To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4)

That, for the purpose of determining liability under the Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however , that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

(5)

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

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, ~~(the “Act”) under Section 4(2)~~the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Omaha. State of Nebraska, onMarch 20, 2012.



	Transgenomic, Inc.

	By:
		Craig J. Tuttle
		President and Chief Executive Officer
		(Principal Executive Officer)

POWER OF ATTORNEY

Each of the ~~Act~~undersigned hereby appoints each of Craig J. Tuttle and ~~Rule 506~~Brett L. Frevert as attorney-in-fact and agent for the undersigned, with full power of ~~Regulation D.~~

~~On September 9, 2003, we issued 1,780,000 shares~~substitution, for and in the name, place and stead of ~~our common stock~~the undersigned, to sign and on November 13, 2003, we issued 2,720,000 shares of our common stock in privately-negotiated sales to certain unaffiliated institutional investors. The sale of these shares was exempt from registrationfile with the Securities and Exchange Commission under the Securities Act of 1933, as amended, ~~(the “Securities Act”) as a sale not involving a public offering. These shares were sold~~any and all amendments (including post-effective amendments) to this registration statement, any other registration statements and exhibits thereto that is the subject of this registration statement filed pursuant to the terms of a Securities Purchase Agreement, dated August 27, 2003. The net proceeds to us, after payment of a 5% sales commission to Fahnestock & Co. Inc., who acted as our placement agent for the sale,Rule 462 under such Act, and any and all applications, instruments and other ~~expenses~~documents to be filed with the Securities and Exchange Commission pertaining to the registration of securities covered hereby, with full power and authority to do and perform any and all acts and things as may be necessary or desirable in furtherance of such registration.

Pursuant to the requirements of the ~~offering, were approximately $4.24 million.~~

Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities indicated on March 20, 2012.

~~Item 16.~~

~~Exhibits.~~


~~2.1~~ Signature		~~Agreement~~Title

/s/ CRAIG J. TUTTLE Craig J. Tuttle		Director, President and ~~Plan of Merger, dated as of April 30, 2001, by~~Chief Executive Officer (Principal Executive Officer)

/s/ BRETT L. FREVERT Brett L. Frevert		Chief Financial Officer (Principal Financial Officer and ~~among Registrant, TBIO Nebraska, Inc., TBIO, Inc. and Annovis, Inc. (incorporated by reference to Exhibit 2.1 to Registrant’s Report on Form 8-K filed on May 31, 2001)~~Principal Accounting Officer)

/s/ RODNEY S. MARKIN Rodney S. Markin		Director

/s/ ANTONIUS P. SCHUH Antonius P. Schuh		Director

/s/ ROBERT M. PATZIG Robert M. Patzig		Director

/s/ DOIT L. KOPPLER II Doit L. Koppler II		Director

EXHIBIT INDEX



~~2.2~~		Addendum to Agreement and Plan of Merger, dated as of May 18, 2001, by and among Registrant, TBIO Nebraska, Inc., TBIO, Inc. and Annovis, Inc. (incorporated by reference to Exhibit 2.2 to Registrant’s Report on Form 8-K filed on May 31, 2001)

~~II-2~~


~~2.3~~ 3.1	Asset Purchase Agreement, dated as of November 8, 2004, by and between Registrant and Eyetech Boulder Inc. (incorporated by reference to Exhibit 2.3 to Registrant’s Annual Report on Form 10-K filed on April 15, 2005)

~~3.1~~	Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to ~~Registrant’s~~Registrant's Quarterly Report on Form 10-Q filed on November 14, 2005).
3.2
~~3.2~~	Amended and Restated Bylaws of the Registrant 8-K (incorporated by reference to Registrant's Current Report on Form 8-K filed on the May 25, 2007).
4.1		Form of Certificate of the Registrant's Common Stock (incorporated by reference to Exhibit ~~3.2~~4 to Registrant's Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).
4.2
~~4.1~~	~~Form of~~ Certificate of ~~the Registrant’s Common~~Designation of Series A Convertible Preferred Stock dated as of December 28, 2010 (incorporated by reference to Exhibit 43.1 to ~~Registration Statement~~Registrant's Current Report on Form ~~S-1 (Registration No. 333-32174)~~8-K filed on ~~March 10, 2000)~~January 4, 2011).
5.1
~~5.1~~	Opinion of ~~Kutak Rock~~Husch Blackwell, LLP
*10.1
~~10.1~~	~~Fourth Amended and Restated 1997 Stock Option~~2006 Equity Incentive Plan of the Registrant (incorporated by reference to Exhibit ~~10.1~~4(b) to ~~Registrant’s Annual Report~~Registrant's Registration Statement on Form ~~10-K~~S-8 (Registration No. 333-139999) filed on ~~April 15, 2005)~~January 16, 2007.
*10.2
~~10.2~~	1999 UK Approved Stock Option Sub Plan of the Registrant (incorporated by reference to Exhibit 10.7 to Registrant's Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).
*10.3
~~10.3~~	~~Employee Stock Purchase Plan of~~Employment Agreement between the ~~Registrant~~Company and Craig J. Tuttle dated July 12, 2006 (incorporated by reference to Exhibit ~~4(b)~~10.1 to ~~Registration Statement~~Registrant's Current Report on Form ~~S-8 (Registration No. 333-71866)~~8-K filed on ~~October 19, 2001)~~July 12, 2006.
*10.4
~~10.4~~	Employment Agreement, dated April 1, 2000, by and between the Registrant and Collin J. D’Silva (incorporated by reference to Exhibit 10.8 to Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000)

~~10.5~~	Amendment No. 1 to the Employment Agreement between the Company and Craig J. Tuttle, effective ~~March 1, 2000, by and between Transgenomic, Inc. and Collin D’Silva~~July 12, 2006 (incorporated by reference to Exhibit ~~10.9 of the Registrant’s Quarterly Report on Form 10-Q filed on May 17, 2004)~~

~~10.6~~	~~Employment Agreement, effective July 31, 2004, by and between Transgenomic, Inc. and Michael A. Summers (incorporated by reference~~10.1 to ~~Exhibit 10.11 to Registrant’s~~Registrant's Quarterly Report on Form 10-Q filed on November ~~15, 2004)~~14, 2006).
10.5
~~10.7~~	Employment Agreement, dated January 22, 2002, between the Registrant and Keith A. Johnson (incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q filed on May 14, 2002)

~~10.8~~	License Agreement, dated September 1, 1994, between Registrant and Professor Dr. Gunther Bonn, et. al. and Amendment thereto, dated March 14, 1997 (incorporated by reference to Exhibit 10.14 to Registrant's Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000)

~~II-3~~

	.
~~10.9~~ 10.6		License Agreement, dated August 20, 1997, between the Registrant and Leland Stanford Junior University (incorporated by reference to Exhibit 10.15 to Registrant's Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).
10.7
~~10.10~~	License Agreement, dated December 1, 1989, between Cruachem Holdings ~~Ltd.~~Limited (a ~~wholly-owned~~wholly owned subsidiary of the Registrant) and Millipore Corporation (incorporated by reference to Exhibit 10.13 to ~~Registrant’s~~Registrant's Annual Report on Form 10-K filed on March 25, 2002).
10.8
~~10.11~~	Sublicense Agreement, dated October 1, 1991, between Cruachem Holdings ~~Ltd.~~Limited (a ~~wholly-owned~~wholly owned subsidiary of the Registrant) and Applied Biosystems, Inc. (incorporated by reference to Exhibit 10.14 to ~~Registrant’s~~Registrant's Annual Report on Form 10-K filed on March 25, 2002).
10.9
~~10.12~~	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 ~~Registrant’s~~Registrant's Quarterly Report on Form 10-Q filed on August 14, 2002).
10.10
~~10.13~~	License Amendment Agreement, dated June 2, 2003, by and between Geron Corporation and the Registrant (incorporated by reference to Exhibit 10.2 to ~~Registrant’s~~Registrant's Quarterly Report on Form 10-Q filed on August 12, 2003).
10.11
~~10.14~~	Supply Agreement, dated January 1, 2000, between the Registrant and Hitachi Instruments (incorporated by reference to Exhibit 10.16 to Registrant's Registration Statement on Form S-1 (Registration No. 333-32174) filed on March 10, 2000).
10.12
~~10.15~~	Form of Securities Purchase Agreement by and between the Registrant and various counterparties, dated August 27, 2003 (incorporated by reference to Exhibit 10 to the Registrant’s Report on Form 8-K filed on August 29, 2003)

~~10.16~~	Securities Purchase Agreement by and between the Registrant and Geron Corporation, dated June 2, 2003 (incorporated by reference to Exhibit 10.0 to Amendment No. 3 to Registration Statement on Form S-3 (Registration No. 333-108319) as filed on October 14, 2003)

~~10.17~~	Security Agreement by and between the Registrant and Laurus Master Fund, Ltd., dated December 3, 2003 (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-111442) filed on December 22, 2003)

~~10.18~~	Amendment to Security Agreement and Related Documents by and between the Registrant and Laurus Master Fund, Ltd., dated August 31, 2002 (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-3 (Registration No. 333-118970) as filed on September 14, 2004)

~~10.19~~	Secured Revolving Note by and between the Registrant and Laurus Master Fund, Ltd., dated December 3, 2003 (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-111442) filed on December 22, 2003)

~~10.20~~	Secured Convertible Minimum Borrowing Note by and between the Registrant and Laurus Master Fund, Ltd., dated December 3, 2003 (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-111442) filed on December 22, 2003)

~~II-4~~


~~10.21~~		Secured Convertible Minimum Borrowing Note Series B by and between the Registrant and Laurus Master Fund, Ltd., dated December 3, 2003, as amended on April 15, 2004 (incorporated by reference to the Registration Statement of the Registrant (Registration No. 333-114661) filed on April 21, 2004)

~~10.22~~		Common Stock Purchase Warrant by and between the Registrant and Laurus Master Fund, Ltd., dated December 3, 2003 (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-111442) filed on December 22, 2003).
10.13
~~10.23~~		Registration Rights Agreement by and between the Registrant and Laurus Master Fund, Ltd., dated December 3, 2003 (incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-111442) filed on December 22, 2003).
10.14
~~10.24~~		Common Stock Purchase Warrant by and between the Registrant and TN Capital Equities, Ltd., dated December 3, 2003 (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-111442) filed on December 22, 2003)

~~10.25~~		Securities Purchase Agreement by and between the Registrant and Laurus Master Fund, Ltd., dated February 19, 2004, as amended on April 15, 2004 (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-114661) filed on April 21, 2004).
10.15
~~10.26~~		Amendment to Securities Purchase Agreement and Related Document by and between the Registrant and Laurus Master Fund, Ltd., dated August 31, 2004 (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-118970) as filed on September 14, 2004).
10.16
~~10.27~~		Secured Convertible Term Note by and between the Registrant and Laurus Master Fund, Ltd., dated February 19, 2004, as amended on April 15, 2004 (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-114661) filed on April 21, 2004)

~~10.28~~		Common Stock Purchase Warrant by and between the Registrant and Laurus Master Fund, Ltd., dated February 19, 2004, as amended on April 15, 2004 (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-114661) filed on April 21, 2004).
10.17
~~10.29~~		Registration Rights Agreement by and between the Registrant and Laurus Master Fund, Ltd., dated February 19, 2004 (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-114661) filed on April 21, 2004).
10.18
~~10.30~~		Common Stock Purchase Warrants by and between the Registrant and TN Capital Equities, Ltd., dated March 1, 2004 (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-114661) filed on April 21, 2004)

~~II-5~~


~~10.31~~		Common Stock Purchase Warrant by and between the Registrant and Laurus Master Fund, Ltd., dated August 31, 2004 (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-3 of the Registrant (Registration No. 333-118970) as filed on September 14, 2004).



~~10.32~~	Engagement Agreement by and between the Registrant and Goldsmith, Agio, Helms Securities, Inc., dated March 19, 2004, as amended August 12, 2004 (incorporated by reference to Exhibit 10.10 to Registrant’s Quarterly Report on Form 10-Q filed on November 15, 2004)

~~10.33~~10.19		Form of Securities Purchase Agreement by and between the Registrant and various ~~counterparties~~counter-parties dated September 22, 2005 (incorporated by reference to Exhibit 10.1 to ~~Registrant’s~~the Registrant's Quarterly Report on Form 10-Q filed on November 14, 2005).
10.20
~~23.1~~	~~Consent of Deloitte~~ Common Stock Purchase Warrant by and between the Registrant and Oppenheimer & ~~Touche LLP~~Co., Inc. dated October 27, 2005 (incorporated by reference to Exhibit 10.34 to the Registrant's Annual Report on Form 10-K filed on March 31, 2006).
10.21
~~23.2~~	~~Consent of Kutak Rock LLP (included in~~ Letter Agreement by and between the Registrant and Laurus Master Fund, Ltd. dated October 31, 2005 (incorporated by reference to Exhibit ~~5.1)~~10.36 to the Registrant's Annual Report on Form 10-K filed on March 31, 2006).
*10.22
24	~~Powers of Attorney (included~~ Employment Agreement Extension between the Company and Craig Tuttle dated July 12, 2008 (incorporated by reference to Registrant's Current Report on ~~page II-8 hereto)~~

~~Item 17.~~

~~Undertakings~~

~~We undertake:~~

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

~~(i) to include any Prospectus required by section 10(a)(3) of the Securities Act of 1933;~~

(ii) to reflect in the Prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement;

(iii) to include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement (notwithstanding the foregoing, any increase or decrease in volume of securities (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a Prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” in this registration statement); provided, however, that the undertakings set forth in paragraphs (i) and (ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement.

~~II-6~~

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

~~(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.~~

(4) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(5) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referred to in Item 15 (other than the insurance policies referred to therein), or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

~~II-7~~

~~SIGNATURES~~

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Omaha, Nebraska, on the November 28, 2005.

		Form 8-K filed on July 16, 2008).
~~TRANSGENOMIC, INC.~~
10.23
~~By:~~		~~/s/ COLLIN~~ ~~J. D’SILVA~~ License Agreement between the Company 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).
10.24				~~Collin J. D’Silva,~~License Agreement between the Company and Power3 Medical Products, Inc. dated January 23, 2009 (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q filed on November 5, 2009).
+10.25			Asset Purchase Agreement, dated November 29, 2010, by and among PGxHealth, LLC, Clinical Data, Inc. and Transgenomic, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on January 4, 2011).
+10.26			Amendment to Asset Purchase Agreement, dated December 29, 2010, by and among PGxHealth, LLC, Clinical Data, Inc. and Transgenomic, Inc. (incorporated by reference to Exhibit2.1 to the Registrant's Current Report on Form 8-K filed on January 4, 2011).
10.27			Series A Convertible Preferred Stock Purchase Agreement with Third Security dated December 29, 2010 (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on January 4, 2011).
10.28			Form of Series A Convertible Preferred Stock Warrant issued to Third Security Senior Staff 2008 LLC, Third Security Staff 2010 LLC, and Third Security Incentive 2010 LLC on December 29, 2010 (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on January 4, 2011).
10.29			Registration Rights Agreement, dated December 29, 2010, by and among Transgenomic, Inc., Third Security Senior Staff 2008 LLC, Third Security Staff 2010 LLC, and Third Security Incentive 2010 LLC (incorporated by reference to Exhibit 4.3 to the Registrant's Current Report on Form 8-K filed on January 4, 2011).
10.30			Secured Promissory Note, issued December 29, 2010 by Transgenomic, Inc. in favor of PGxHealth, LLC. (incorporated by reference to Exhibit 4.4 to the Registrant's Current Report on Form 8-K filed on January 4, 2011).
10.31			Secured Promissory Note, issued December 29, 2010 by Transgenomic, Inc. in favor of PGxHealth, LLC. (incorporated by reference to Exhibit 4.5 to the Registrant's Current Report on Form 8-K filed on January 4, 2011).
10.32			Sublease Agreement, dated December 29, 2010, by and between Transgenomic, Inc. and Clinical Data, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on January 4, 2011).
10.33			Noncompetition and Nonsolicitation Agreement, dated December 29, 2010, by and among PGxHealth, LLC, Clinical Data, Inc. and Transgenomic, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on January 4, 2011).
10.34	~~President~~		Security Agreement, dated December 29, 2010, by and ~~Chief Executive Officer~~between PGxHealth, LLC and Transgenomic, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed on January 4, 2011).
10.35			First Amendment to Registration Rights Agreement dated November 8, 2011 (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on November 14, 2011).
10.36			Agreement Regarding Preferred Stock dated November 8, 2011 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on November 14, 2011).
10.37			Convertible Promissory Note Purchase Agreement by and among the Company; Third Security Senior Staff 2008 LLC; Third Security Staff 2010 LLC; and Third Security Incentive 2010 LLC dated December 30, 2011 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on January 6, 2012).
10.38			Convertible Promissory Note by and between Transgenomic, Inc. and Third Security Senior Staff 2008 LLC dated December 30, 2011(incorporated by reference to Exhibit 10.3 to the Registrant's Current Report on Form 8-K filed on January 6, 2012).
10.39			Convertible Promissory Note by and between Transgenomic, Inc. and Third Security Staff 2010 LLC dated December 30, 2011 (incorporated by reference to Exhibit 10.4 to the Registrant's Current Report on Form 8-K filed on January 6, 2012).
10.40			Convertible Promissory Note by and between Transgenomic, Inc. and Third Security Incentive 2010 LLC dated December 30, 2011(incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed on January 6, 2012).

~~POWER OF ATTORNEY~~

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, whose signatures appear below, hereby constitute and appoint Collin J. D’Silva and Michael Summers, or either of them, as their true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for them and in their name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as full and to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

~~Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.~~



~~Date: November 28, 2005~~ 10.41	Securities Purchase Agreement entered into by and among the Company and the Investors dated February 2, 2012 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on February 7, 2012).
10.42	~~By:~~Form of Warrant issued by the Company to the Third Securities 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).
10.43	~~/s/ COLLIN~~ ~~J. D’SILVA~~ Form of Warrant issued by the Company 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).
10.44	Form of Registration Rights Agreement entered into by and among the Company, the Third Securities 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).
21.1	Subsidiaries of the Registrant
23.1	Consent of Independent Registered Public Accounting Firm
23.2	Consent of Husch Blackwell, LLP (included as part of Exhibit 5.1)
24.1	Power of Attorney (included as part of the signature page of the registration statement on Form S-1)

*	Denotes exhibit that constitutes a management contract, or compensatory plan or arrangement.
+		~~Collin J. D’Silva,~~Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
					~~President, Chief Executive Officer and~~
				~~Director (Principal Executive Officer)~~

~~Date: November 28, 2005~~			~~By:~~	~~/s/ MICHAEL~~ ~~A. SUMMERS~~
				~~Michael A. Summers~~
				~~Chief Financial Officer~~
				~~(Principal Financial Officer)~~

~~Date: November 28, 2005~~			~~By:~~	~~/s/ GREGORY~~ ~~J. DUMAN~~
				~~Gregory J. Duman,~~
				~~Director~~

~~Date: November 28, 2005~~			~~By:~~	~~/s/ JEFFREY~~ S~~KLAR~~
				~~Jeffrey Sklar,~~
				~~Director~~

~~Date: November 28, 2005~~			~~By:~~	~~/s/ ROLAND~~ ~~J. SANTONI~~
				~~Roland J. Santoni,~~
				~~Director~~

~~Date: November 28, 2005~~			~~By:~~	~~/s/ PARAG~~ S~~AXENA~~
				~~Parag Saxena,~~
				~~Director~~

~~Date: November 28, 2005~~			~~By:~~	~~/s/ GREGORY~~ S~~LOMA~~
				~~Gregory Sloma,~~
				~~Director~~

~~II-8~~



Title of each class of securities to be Registered	Amount to be registered	Proposed maximum offering price per unit(1)	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee
Common Stock, par value $0.01	25,038,320(2)	$0.885	$22,158,913	$2,371


Dollars in thousands	2005			2004			Change			% Change
Net Sales
Bioinstruments	$	11,343		$	10,766		$	577		5	%
Bioconsumables		6,977			6,286			691		11	%
Discovery Services		2,159			1,398			761		54	%

Total BioSystems Business Unit		20,479			18,450			2,029		11	%
Chemical Building Blocks		3,232			5,588			(2,356	)	(42	)%
Specialty Oligonucleotides and Services		—			1,796			(1,796	)	(100	)%

Total Synthetic Nucleic Acids Business Unit		3,232			7,384			(4,152	)	(56	)%

Total Net Sales		23,711			25,834			(2,123	)	(8	)%
Cost of Goods Sold
Bioinstruments		5,396			4,401			995		23	%
Bioconsumables		3,334			2,981			353		12	%
Discovery Services		1,744			1,041			703		68	%

Total BioSystems Business Unit		10,474			8,423			2,051		24	%
Chemical Building Blocks		3,135			5,452			(2,317	)	(43	)%
Specialty Oligonucleotides and Services		—			4,609			(4,609	)	(100	)%

Total Synthetic Nucleic Acids Business Unit		3,135			10,061			(6,926	)	69	%

Total Cost of Goods Sold		13,609			18,484			(4,875	)	(26	)%
Selling, General and Administrative Expenses		10,023			12,866			(2,843	)	(22	)%
Research and Development Expenses		1,696			5,344			(3,648	)	(68	)%
Impairment Charges		247			11,964			(11,717	)	(98	)%
Other Income (Expense)		(1,888	)		(4,704	)		(2,816	)	(60	)%


									Dollar Change						Percent Change
	2004			2003			2002		2003 to 2004			2002 to 2003			2003 to 2004		2002 to 2003
Net Sales
Bioinstruments	$	14,385		$	17,916		$	19,098	$	(3,531	)	$	(1,182	)	(20	)%	(6	)%
Bioconsumables		8,838			7,260			5,137		1,578			2,123		22	%	41	%
Discovery Services		2,020			868			—		1,152			868		133	%	—

Total BioSystems operating segment		25,243			26,044			24,235		(801	)		1,809		(3	)%	7	%
Chemical Building Blocks		6,488			6,631			13,319		(143	)		(6,688	)	(2	)%	(50	)%
Specialty Oligonucleotides		2,058			1,191			—		867			1,191		73	%	—

Total Nucleic Acids operating segment		8,546			7,822			13,319		724			(5,497	)	9	%	(41	)%

Total Net Sales		33,789			33,866			37,554		(77	)		(3,688	)	(1	)%	(10	)%
Cost of Goods Sold
Bioinstruments		6,382			7,343			7,650		(961	)		(307	)	(13	)%	(4	)%
Bioconsumables		4,012			3,475			2,284		537			1,191		15	%	52	%
Discovery Services		1,603			557			—		1,046			557		188	%	—

Total BioSystems operating segment		11,997			11,375			9,934		622			1,441		5	%	15	%
Chemical Building Blocks		7,165			6,937			9,635		228			(2,698	)	3	%	(28	)%
Specialty Oligonucleotides		5,434			6,003			—		(569	)		6,003		(9	)%	—

Total Nucleic Acids operating segment		12,599			12,940			9,635		(341	)		3,305		(3	)%	34	%

Total Cost of Goods Sold		24,596			24,315			19,569		281			4,746		(1	)%	24	%
Selling, General and Administrative Expenses		17,499			17,324			24,199		175			(6,875	)	1	%	(28	)%
Research and Development Expenses		6,685			9,305			12,201		(2,620	)		(2,896	)	(28	)%	(24	)%
Restructuring Charges		3,570			738			3,282		2,832			(2,544	)	384	%	(78	)%
Impairment Charges		11,965			4,772			—		5,726			4,772		120	%	—
Gain on sale of facility		1,466			—			—		1,466			—		—		—
Other Income (Expense)		(5,406	)		(305	)		437		5,102			742		1673	%	170	%


Location	Function	Square Footage	Annual Rent		Lease Term Expires
Owned
Glasgow, Scotland	Phosphoramidite Manufacturing	44,212		N/A	N/A

Leased and Occupied
Omaha, Nebraska	WAVE^{^®} and Consumable Manufacturing	25,000	$	130	June 2007
San Jose, California	Consumable Manufacturing	14,360	$	139	October 2010
Cramlington, England	Consumable Manufacturing	8,500	$	53	March 2006
Omaha, Nebraska	Multi Functional⁽¹⁾	18,265	$	187	July 2007
Paris, France	Multi Functional⁽¹⁾	4,843	$	109	January 2014
Gaithersburg, Maryland	Multi Functional⁽¹⁾	6,560	$	114	May 2006
Cambridge, Massachusetts	Multi Functional⁽¹⁾	2,500	$	70	January 2007
Leased and Not Occupied ⁽²⁾	Multi Functional⁽¹⁾	55,759	$	505	2005 – 2007


	(b) Number of Securities Underlying Options/SARs Granted (#)⁽¹⁾	(c) % of Total Options/SARs Granted to Employees in Fiscal Year		(d) Exercise or Base Price ($/Sh)		(e) Expiration Date	Potential Realized Value at Assumed Annual Rates of Stock Price Appreciation for Option Term⁽²⁾
(a) Name				(d) Exercise or Base Price ($/Sh)		(e) Expiration Date	(f) 5%($)		(g) 10%($)
Keith A. Johnson	25,000	6.9	%	$	1.32	5/21/2014	$	21,000	$	53,000


(1)	~~Calculated~~Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), the shares being registered hereunder include such indeterminate number of shares of our Common Stock as may be issuable with respect to the shares being registered hereunder to prevent dilution by reason of any stock dividend, stock split, recapitalization or other similar transaction.


(4)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities Act based onupon the average of the ~~high~~ask and ~~low sale price~~bid prices per share of the ~~shares~~Common Stock, as reported on the ~~Nasdaq Stock Market~~OTC Bulletin Board, on ~~November 25, 2005.~~March 15, 2012.


~~PROSPECTUS SUMMARY~~		1

~~RISK FACTORS~~		5

~~USE OF PROCEEDS~~		10

~~PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY~~		10

~~SELECTED FINANCIAL DATA~~		12

~~CAPITALIZATION~~		14

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS~~		15

~~BUSINESS~~		31

~~MANAGEMENT~~		36

~~PRINCIPAL AND SELLING STOCKHOLDERS~~		45

~~DESCRIPTION OF CAPITAL STOCK~~		48

~~PLAN OF DISTRIBUTION~~		51

~~EXPERTS~~		52

~~LEGAL OPINIONS~~		52

~~WHERE YOU CAN FIND MORE INFORMATION~~		53

~~INDEX TO FINANCIAL STATEMENTS~~
About this Prospectus	5
A Warning about Forward-Looking Statements	5
Prospectus Summary	6
The Offering	7
Risk Factors	7
Use of Proceeds	8
Determination of Offering Price	9
Plan of Distribution	9
Selling Stockholders	11
Description of Common Stock	16
United States Federal Income Tax Considerations	19
Legal Matters	25
Experts	26
Where You Can Find Additional Information	26
Incorporation of Certain Information by Reference	26


	Nine Months Ended September 30,									Year Ended December 31,
	2005			2005			2004			2004			2004			2003			2002
				As Adjusted									As Adjusted
Statement of Operations Data:
Net sales	$	23,711		$	23,711		$	25,834		$	33,789		$	33,789		$	33,866		$	37,554
Cost of good sold		13,609			13,609			18,484			24,596			24,596			24,315			19,569

Gross profit		10,102			10,102			7,350			9,193			9,193			9,551			17,985
Selling, general and administrative		10,023			10,023			12,866			17,499			17,499			17,324			24,199
Research and development		1,696			1,696			5,344			6,685			6,685			9,305			12,201
Restructuring charges⁽¹⁾		—			—			—			3,570			3,570			738			3,282
Impairment charges⁽²⁾		247			247			11,964			11,965			11,965			4,772			—
Gain on sale of facility⁽³⁾		—			—			—			(1,466	)		(1,466	)		—			—
Gain on sale of product line		—			—			—			—			—			—			—

Operating expenses		11,966			11,966			30,174			38,253			38,253			32,139			39,682
Other income (expense)⁽⁴⁾		(1,888	)		(611	)		(4,704	)		(5,406	)		(239	)		(305	)		437

Loss before income taxes		(3,752	)		(2,475	)		(27,528	)		(34,466	)		(29,299	)		(22,893	)		(21,260	)
Income tax (benefit) expense		27			27			(94	)		(94	)		(94	)		65			105

Net loss	$	(3,779	)	$	(2,502	)	$	(27,434	)	$	(34,372	)	$	(29,205	)	$	(22,958	)	$	(21,365	)

Basic and diluted loss per share	$	(0.12	)	$	(0.05	)	$	(0.95	)	$	(1.19	)	$	(0.66	)	$	(0.94	)	$	(0.91	)
Basic and diluted weighted average shares outstanding		32,837			47,763			28,951			29,066			43,992			24,484			23,583


	As of September 30, 2005				As of December 31,
	Actual		As Adjusted		2004		2003
Balance Sheet Data:
Total assets⁽⁵⁾	$	31,789	$	37,163	$	37,458	$	57,306
Borrowings under credit line		6,935		—		6,514		2,142
Current portion of long-term debt		675		—		825		1,693
Long-term debt, less current portion		1,226		—		2,199		—
Total stockholders’ equity		15,577		29,220		16,535		45,058



Issuer	Transgenomic, Inc.

Common Stock outstanding	71,625,725 Common Shares⁽¹⁾

Common Stock, offered by the selling stockholders	33,000,000 Common Shares⁽²⁾

Common Stock outstanding after the offering	82,625,725 Common Shares⁽³⁾

Use of proceeds	We will not receive any proceeds from the sale of the Common Shares. We may, however, receive cash proceeds upon the cash exercise of Warrants, and we intend to use any such proceeds for general corporate and working capital purposes. See "Use of Proceeds" beginning on page 8 of this prospectus.

Listing	Our Common Stock is listed on the OTC Bulletin Board under the symbol “TBIO”.

Risk Factors	You should consider carefully the matters set forth under “Risk Factors” beginning on page 7 of this prospectus before deciding to purchase any of the Common Stock.


(2)	The number of shares shown to be registered hereunder includes 22,000,000 shares of Common Stock outstanding and 11,000,000 shares of Common Stock issuable upon exercise of Warrants.


	High		Low
Year Ended December 31, 2003
First Quarter	$	4.22	$	1.40
Second Quarter	$	2.43	$	0.93
Third Quarter	$	2.14	$	1.03
Fourth Quarter	$	2.98	$	1.45

Year Ended December 31, 2004
First Quarter	$	3.23	$	1.96
Second Quarter	$	1.87	$	1.24
Third Quarter	$	1.58	$	1.07
Fourth Quarter	$	1.52	$	1.06

Year Ending December 31, 2005
First Quarter	$	1.11	$	0.53
Second Quarter	$	0.90	$	0.45
Third Quarter	$	1.24	$	0.70
Fourth Quarter (through November 29, 2005)	$	1.02	$	0.80


	As of September 30, 2005		As of December 31,
	As of September 30, 2005		2004		2003		2002		2001		2000
Balance Sheet Data:
Total assets⁽⁶⁾	$	31,789	$	37,458	$	57,306	$	74,035	$	89,286	$	77,863
Borrowings under credit line		6,935		6,514		2,142		—		—		—
Current portion of long-term debt		675		825		1,693		63		—		—
Long-term debt, less current portion		1,226		2,199		—		1,499		—		—
Total stockholders’ equity		15,577		16,535		45,058		61,515		82,104		73,966


	As of September 30,
	Actual			As Adjusted
Credit Line⁽¹⁾	$	6,935		$	—
Current portion of Term Note⁽¹⁾		675			—
Term Note, less current portion⁽¹⁾		1,226			—
Stockholders’ equity:
Preferred stock, $0.01 par value, 15,000,000 shares authorized, none outstanding		—			—
Common stock, $0.01 par value, 60,000,000 shares authorized, 34,246,336 and 49,172,079 shares outstanding, respectively⁽²⁾		348			497
Additional paid-in capital^{(1) (2)}		125,058			138,803
Accumulated other comprehensive income		1,051			1,051
Accumulated deficit⁽³⁾		(110,880	)		(111,131	)

Total stockholders’ equity		15,577			29,220

Total capitalization	$	24,413		$	29,220


	2004					2003
	Dollars			Percent		Dollar			Percent
BioSystems operating segment	$	13,246		52	%	$	14,669		56	%
Nucleic Acids operating segment		(4,053	)	(47	)%		(5,118	)	(65	)%

	$	9,193		27	%	$	9,551		28	%


	September 30, 2005		December 31, 2004			Change
Current assets⁽¹⁾	$	16,399	$	17,908		$	(1,509	)
Current liabilities		14,986		18,724			(3,738	)

Working Capital	$	1,413	$	(816	)	$	2,229


	September 30, 2005
	Actual		As Adjusted
Cash and cash equivalents	$	1,361	$	6,669

Credit Line	$	6,935	$	—

Current portion of Term Note	$	675	$	—

Term Note, less current portion	$	1,226	$	—

Total stockholder’s equity⁽¹⁾	$	15,577	$	29,220


	Payments Due by Period
	2005		2006		2007		2008		2009 and Thereafter
Credit Line⁽¹⁾	$	5,948	$	—	$	—	$	—	$	—
Term Note⁽¹⁾		850		900		850		—		—
Operating lease payments⁽²⁾		1,958		1,382		486		187		372

Total contractual obligations	$	8,756	$	2,282	$	1,336	$	187	$	372


	September 30, 2005	December 31, 2004	December 31, 2003
BioSysytems Operating Segment
Manufacturing	51	52	54
Sales, Marketing and Administration	67	75	90
Research and Development	10	19	31

	128	146	175
Nucleic Acids Operating Segment
Manufacturing	16	20	45
Sales, Marketing and Administration	8	6	8
Research and Development	0	6	16

	24	32	69

	152	178	244


~~Name~~	~~Age~~	~~Position~~
~~Collin J. D’Silva~~	48	~~Chairman of the Board, Chief Executive Officer and Director~~
~~Michael A. Summers~~	41	~~Chief Financial Officer~~
~~Mitchell L. Murphy~~	49	~~Vice President, Secretary and Treasurer~~


Name	Age	Principal Occupation	Director Since	Term To Expire
Gregory T. Sloma	54	Executive Vice President and Chief Financial Officer of SpeedNet Services, Inc.⁽¹⁾	2004	2008
Jeffrey L. Sklar, M.D., Ph.D.	57	Professor of Pathology, Yale University School of Medicine⁽²⁾	1997	2008
Gregory J. Duman	50	President of Prism Technologies LLC⁽³⁾	2000	2006
Roland J. Santoni	64	Vice President of West Development, Inc.⁽⁴⁾	2000	2006
Collin J. D’Silva	48	President and Chief Executive Officer of the Company⁽⁵⁾	1997	2007
Parag Saxena	50	Chief Executive Officer of INVESCO Private Capital, Inc.	1999	2007


~~(a)~~ ~~Name~~	~~(b)~~ ~~Shares Acquired~~ ~~on Exercise(#)~~	~~(c)~~ ~~Value Realized~~ ~~($)~~⁽¹⁾	~~(d)~~ ~~Number of~~ ~~Securities~~ ~~Underlying~~ ~~Unexercised~~ ~~Options/SARs at~~ ~~Year End(#)~~ ~~Exercisable/~~ ~~Unexercisable~~	~~(e)~~ ~~Value of~~ ~~Unexercised~~ ~~In-the-Money~~ ~~Options/SARs at~~ ~~YearEnd($)~~⁽¹⁾ ~~Exercisable/~~ ~~Unexercisable~~
~~Collin J. D’Silva~~	—	—	~~0 / 0~~	~~$0 / $0~~
~~Michael A. Summers~~	—	—	~~0 / 0~~	~~$0 / $0~~
~~Mitchell L. Murphy~~	—	—	~~146,000 / 4,000~~	~~$0 / $0~~
~~Keith A. Johnson~~	—	—	~~72,917 / 87,083~~	~~$0 / $0~~
~~John L. Allbery~~	—	—	~~0 / 0~~	~~$0 / $0~~
~~Michael J. Draper~~	—	—	~~61,253 / 0~~	~~$0 / $0~~


Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	5,088,037	$	5.09	867,727
Equity compensation plans not approved by security holders	—		—	—

Total	5,088,037	$	5.09	867,727


Name	Number of Shares Beneficially Owned		Percent of Class (1)
Directors and Executive Officers
Collin J. D’Silva, Director, President and Chief Executive Officer	4,739,488	(2)	9.6	%
Michael A. Summers, Chief Financial Officer	116,667	(3)	*
Mitchell L. Murphy, Vice President, Secretary and Treasurer	168,667	(4)	*
Gregory J. Duman, Director	240,400	(5)	*
Jeffrey L. Sklar, M.D., Ph.D., Director	24,000	(6)	*
Roland J. Santoni, Director	25,000	(7)	*
Parag Saxena, Director	0	(8)	*
Gregory T. Sloma, Director	10,000	(9)	*
All directors and executive officers as a group (8 persons)	5,324,222	(10)	10.8	%

Other Stockholders/Beneficial Owners
Kopp Investment Advisors, Inc.	9,595,430	(11)	19.5	%
David M. Knott	5,024,867	(12)	9.9	%
Mazama Capital Management, LLC	3,792,948	(13)	7.7	%
LB I Group Inc.	3,960,396	(14)	8.1	%
Michael A. Roth and Brian J. Stark	2,722,772	(15)	5.5	%
Perceptive Life Sciences Master Fund, Ltd.	2,772,277	(16)	5.6	%


	Shares Beneficially Owned Prior to the Offering				Shares Beneficially Owned After the Offering
Name	Number	Percentage⁽¹⁾		Shares to be Sold	Number	Percentage
Laurus Master Fund, Ltd.⁽²⁾	1,075,000	2.1	%	1,075,000	0	*
TN Capital Equities, Ltd.⁽³⁾	61,484	*		61,484	0	*
Kopp Emerging Growth Fund⁽⁴⁾	9,595,430	19.5	%	2,050,000	7,545,430	15.3	%
Oppenheimer & Co. Inc.⁽⁵⁾	932,859	1.9	%	932,859	0	*
LB I Group Inc.⁽⁶⁾	3,960,396	8.1	%	5,544,554	0	*
Knott Partners, L.P.^{(7), (8)}	1,990,800	4.0	%	1,990,800	0	*
Matterhorn Offshore Fund Ltd.^{(7), (9)}	2,181,754	4.4	%	2,181,754	0	*
Common Fund Hedged Equity Company^(7),(10)	249,200	*		249,200	0	*
Shoshone Partners, L.P.^{(7), (11)}	989,800	2.0	%	989,800	0	*
Anno, L.P.^{(7), (12)}	62,300	*		62,300	0	*
Good Steward Trading Company^{(7), (13)}	70,700	*		70,700	0	*
SF Capital Partners Ltd.⁽¹⁴⁾	2,722,772	5.5	%	3,811,881	0	*
Perceptive Life Sciences Master Fund, Ltd.⁽¹⁵⁾	2,772,277	5.6	%	2,772,277	0	*
Iroquois Master Fund Ltd.⁽¹⁶⁾	1,732,674	3.5	%	1,732,674	0	*
Saffron Capital Int’l Fund Ltd.⁽¹⁷⁾	693,070	1.4	%	693,070	0	*
RAQ, LLC⁽¹⁸⁾	346,535	*		346,535	0	*
Omicron Master Trust⁽¹⁹⁾	346,535	*		346,535	0	*
Endeavor Asset Management, L.P.⁽²⁰⁾	103,960	*		103,960	0	*


(3)	Kevin Douglas and his wife, Michelle Douglas, hold shares jointly as the ~~purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.~~


(7)	Joseph Edelman makes investment and voting decisions with respect to shares held by Perceptive Life Sciences Master Fund Ltd.


(8)	James J. Tiampo, President of Verbier Management Corp., which is the general partner of Burguete Investment Partnership, LP, makes investment and voting decisions with respect to shares held by Burguete Investment Partnership, LP.


(9)	Andrew Yoichi Kurita, Portfolio Manager, makes investment and voting decisions with respect to shares held by Kettle Hill Master Fund, Ltd., Kettle Hill Partners, L.P. and Kettle Hill Partners II, L.P.


(11)	Fariba Ghodsian, Managing Member, makes investment and voting decisions with respect to shares held by DAFNA Lifescience LTD, DAFNA Lifescience Market Neutral LTD and DAFNA Lifescience Select LTD.


(12)	Christopher M. Brown, Managing Member of the general partner of Aristides Fund LP, makes investment and voting decisions with respect to shares held by Aristides Fund LP.


(13)	Robert J. Evans, Managing Partner, makes investment and voting decisions with respect to shares held by Pennington Capital LLC.


(14)	Michael S. Wallace, Managing Member, makes investment and voting decisions with respect to shares held by Itasca Capital Partners, LLC.


(15)	Russ Silvestri, Managing Director, makes investment and voting decisions with respect to shares held by L2 Opportunity Fund.