##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

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

For the quarterly period ended June 30, 2010

or



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

For the transition period from  to

Commission file number: 000-30267





ORCHID CELLMARK INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 22-3392819                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)
|                                                               | 
|4390 US Route One
Princeton, NJ                                |  | 08540                               
|(Address of principal executive offices)                       |  | (Zip code)                          

Registrants telephone number, including area code: (609) 750-2200





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

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



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

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

As of August 4, 2010, the registrant had 29,966,562 shares of common stock outstanding.









---

##### Table of Contents

ORCHID CELLMARK INC.

INDEX TO FORM 10-Q



|                               |  |                                                                                                                      |  |     
|------------------------------ |  | -------------------------------------------------------------------------------------------------------------------- |  | ----
|                               |  |                                                                                                                      |  | Page
|PART I - FINANCIAL INFORMATION
|                               |  |                                                                                                                     
|ITEM 1.                        |  | Financial Statements (unaudited)                                                                                     |  | 1   
|                               |  |                                                                                                                     
|                               |  | Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009                                                |  | 1   
|                               |  | Consolidated Statements of Operations for the three and six months ended June 30, 2010 and
2009                      |  | 2   
|                               |  | Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009                                |  | 3   
|                               |  | Consolidated Statement of Stockholders Equity and Comprehensive Income/Loss for the six months ended June
 30, 2010 |  | 4   
|                               |  | Notes to Consolidated Financial Statements                                                                           |  | 5   
|                               |  |                                                                                                                     
|ITEM 2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                                |  | 11  
|                               |  |                                                                                                                     
|ITEM 3.                        |  | Quantitative and Qualitative Disclosures About Market Risk                                                           |  | 18  
|                               |  |                                                                                                                     
|ITEM 4.                        |  | Controls and Procedures                                                                                              |  | 18  
|                              
|PART II - OTHER INFORMATION   
|                               |  |                                                                                                                     
|ITEM 1.                        |  | Legal Proceedings                                                                                                    |  | 21  
|                               |  |                                                                                                                     
|ITEM 1A.                       |  | Risk Factors                                                                                                         |  | 23  
|                               |  |                                                                                                                     
|ITEM 2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                          |  | 23  
|                               |  |                                                                                                                     
|ITEM 3.                        |  | Defaults Upon Senior Securities                                                                                      |  | 23  
|                               |  |                                                                                                                     
|ITEM 4.                        |  | Reserved                                                                                                             |  | 23  
|                               |  |                                                                                                                     
|ITEM 5.                        |  | Other Information                                                                                                    |  | 23  
|                               |  |                                                                                                                     
|ITEM 6.                        |  | Exhibits                                                                                                             |  | 23  
|                               | 
|SIGNATURE                      |  | 24                                                                                                                  



---

##### Table of Contents

PART I  FINANCIAL INFORMATION



|Item 1. | FINANCIAL STATEMENTS
|------- | --------------------

ORCHID CELLMARK INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except share and per share data)



|                                                                                                                                         |  |              |          |   |                  |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                         |  | June 30,2010 |          |   | December 31,2009 |  
|                                                                                                                                         |  | (Unaudited)  |          |   |                  |  
|                                                                                                                                         |  |             
|Assets                                                                                                                                   |  |              |          |   |                  |   |          |  
|Current assets:                                                                                                                          |  |              |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                                |  | $            | 7,041    |   |                  | $ | 8,600    |  
|Available-for-sale securities                                                                                                            |  |              | 11,640   |   |                  |   | 9,525    |  
|Accounts receivable, net                                                                                                                 |  |              | 10,405   |   |                  |   | 11,128   |  
|Inventory                                                                                                                                |  |              | 1,760    |   |                  |   | 1,542    |  
|Prepaid and other current assets                                                                                                         |  |              | 954      |   |                  |   | 1,127    |  
|                                                                                                                                         |  |              |          |   |                  |   |          |  
|Total current assets                                                                                                                     |  |              | 31,800   |   |                  |   | 31,922   |  
|Fixed assets, net                                                                                                                        |  |              | 5,308    |   |                  |   | 4,803    |  
|Goodwill                                                                                                                                 |  |              | 9,372    |   |                  |   | 9,423    |  
|Other intangibles, net                                                                                                                   |  |              | 4,817    |   |                  |   | 5,763    |  
|Other assets                                                                                                                             |  |              | 908      |   |                  |   | 931      |  
|                                                                                                                                         |  |              |          |   |                  |   |          |  
|Total assets                                                                                                                             |  | $            | 52,205   |   |                  | $ | 52,842   |  
|                                                                                                                                         |  |              |          |   |                  |   |          |  
|Liabilities and Stockholders Equity                                                                                                     |  |              |          |   |                  |   |          |  
|Current liabilities:                                                                                                                     |  |              |          |   |                  |   |          |  
|Accounts payable                                                                                                                         |  | $            | 2,905    |   |                  | $ | 2,762    |  
|Accrued expenses and other current liabilities                                                                                           |  |              | 5,925    |   |                  |   | 3,071    |  
|Deferred revenue                                                                                                                         |  |              | 1,049    |   |                  |   | 928      |  
|                                                                                                                                         |  |              |          |   |                  |   |          |  
|Total current liabilities                                                                                                                |  |              | 9,879    |   |                  |   | 6,761    |  
|Other liabilities                                                                                                                        |  |              | 457      |   |                  |   | 432      |  
|                                                                                                                                         |  |              |          |   |                  |   |          |  
|Total liabilities                                                                                                                        |  |              | 10,336   |   |                  |   | 7,193    |  
|                                                                                                                                         |  |             
|Commitments and contingencies                                                                                                            |  |              |          |   |                  |   |          |  
|                                                                                                                                         |  |             
|Stockholders equity:                                                                                                                    |  |              |          |   |                  |   |          |  
|Preferred stock; $0.001 per share par value; authorized 5,000,000 shares                                                                 |  |              |          |   |                  |   |          |  
|Series A redeemable convertible preferred stock; $0.001 per share par value; designated 5 shares; no shares issued or outstanding        |  |              |         |   |                  |   |         |  
|Series A junior participating preferred stock; $0.001 per share par value; designated 1,000,000 shares; no shares issued or
outstanding  |  |              |         |   |                  |   |         |  
|Common stock; $0.001 per share par value; authorized 150,000,000 shares; issued 30,098,269 shares at June 30, 2010 and
December 31, 2009 |  |              | 30       |   |                  |   | 30       |  
|Additional paid-in capital                                                                                                               |  |              | 373,464  |   |                  |   | 372,877  |  
|Accumulated other comprehensive income (loss)                                                                                            |  |              | (404     | ) |                  |   | 343      |  
|Treasury stock at cost, 163,259 shares of common stock at June 30, 2010 and December 31, 2009                                            |  |              | (1,587   | ) |                  |   | (1,587   | )
|Accumulated deficit                                                                                                                      |  |              | (329,634 | ) |                  |   | (326,014 | )
|                                                                                                                                         |  |              |          |   |                  |   |          |  
|Total stockholders equity                                                                                                               |  |              | 41,869   |   |                  |   | 45,649   |  
|                                                                                                                                         |  |              |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                               |  | $            | 52,205   |   |                  | $ | 52,842   |  
|                                                                                                                                         |  |              |          |   |                  |   |          |  

See accompanying notes to consolidated financial statements.



1



---

##### Table of Contents

ORCHID CELLMARK INC. AND SUBSIDIARIES

Consolidated Statements of Operations

Three and six months ended June 30, 2010 and 2009

(In thousands, except per share data)

(Unaudited)



|                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                              |  | Three months endedJune 30, |        |   | Six months endedJune 30, |  
|                                                              |  | 2010                       |        |   | 2009                     |   |        | 2010 |  |   | 2009   |  
|                                                              |  |                            |        |  
|Revenues:                                                     |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Service revenues                                              |  | $                          | 15,684 |   |                          | $ | 14,687 |      |  | $ | 29,800 |   |  | $ | 28,530 |  
|Other revenues                                                |  |                            |       |   |                          |   |       |      |  |   | 14     |   |  |   | 121    |  
|                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total revenues                                                |  |                            | 15,684 |   |                          |   | 14,687 |      |  |   | 29,814 |   |  |   | 28,651 |  
|                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Operating expenses:                                           |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Cost of service revenues                                      |  |                            | 10,568 |   |                          |   | 9,557  |      |  |   | 19,948 |   |  |   | 18,737 |  
|Research and development                                      |  |                            | 492    |   |                          |   | 192    |      |  |   | 889    |   |  |   | 351    |  
|Marketing and sales                                           |  |                            | 1,465  |   |                          |   | 1,216  |      |  |   | 2,776  |   |  |   | 2,380  |  
|General and administrative                                    |  |                            | 3,324  |   |                          |   | 3,730  |      |  |   | 7,130  |   |  |   | 7,745  |  
|Restructuring                                                 |  |                            | 520    |   |                          |   |       |      |  |   | 964    |   |  |   |       |  
|Amortization of intangible assets                             |  |                            | 461    |   |                          |   | 465    |      |  |   | 924    |   |  |   | 927    |  
|                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                      |  |                            | 16,830 |   |                          |   | 15,160 |      |  |   | 32,631 |   |  |   | 30,140 |  
|                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Operating loss                                                |  |                            | (1,146 | ) |                          |   | (473   | )    |  |   | (2,817 | ) |  |   | (1,489 | )
|Other income (expense)                                        |  |                            | 16     |   |                          |   | 8      |      |  |   | 56     |   |  |   | (6     | )
|                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Loss before income tax expense                                |  |                            | (1,130 | ) |                          |   | (465   | )    |  |   | (2,761 | ) |  |   | (1,495 | )
|Income tax expense                                            |  |                            | 455    |   |                          |   | 138    |      |  |   | 859    |   |  |   | 280    |  
|                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net loss                                                      |  | $                          | (1,585 | ) |                          | $ | (603   | )    |  | $ | (3,620 | ) |  | $ | (1,775 | )
|                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                              |  |                            |        |  
|Basic and diluted net loss per share                          |  | $                          | (0.05  | ) |                          | $ | (0.02  | )    |  | $ | (0.12  | ) |  | $ | (0.06  | )
|                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                              |  |                            |        |  
|Shares used in computing basic and diluted net loss per share |  |                            | 29,935 |   |                          |   | 29,935 |      |  |   | 29,935 |   |  |   | 29,935 |  
|                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  

See accompanying notes to consolidated financial statements.



2



---

##### Table of Contents

ORCHID CELLMARK INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Six months ended June 30, 2010 and 2009

(In thousands)

(Unaudited)



|                                                                            |  |      |        |   |      |   |        |  
|--------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                                            |  | 2010 |        |   | 2009 |  
|Cash flows from operating activities:                                       |  |      |        |   |      |   |        |  
|Net loss                                                                    |  | $    | (3,620 | ) |      | $ | (1,775 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |      |        |   |      |   |        |  
|Gain on sale of assets                                                      |  |      | 2      |   |      |   |       |  
|Stock-based compensation                                                    |  |      | 587    |   |      |   | 790    |  
|Depreciation and amortization                                               |  |      | 1,877  |   |      |   | 1,964  |  
|Bad debt expense                                                            |  |      | 14     |   |      |   | 105    |  
|Changes in assets and liabilities:                                          |  |      |        |   |      |   |        |  
|Accounts receivable                                                         |  |      | 628    |   |      |   | (743   | )
|Inventory                                                                   |  |      | (218   | ) |      |   | (61    | )
|Prepaids and other assets                                                   |  |      | 196    |   |      |   | 398    |  
|Accounts payable                                                            |  |      | 143    |   |      |   | (108   | )
|Accrued expenses and other current liabilities                              |  |      | 2,133  |   |      |   | 632    |  
|Deferred revenue                                                            |  |      | 121    |   |      |   | 144    |  
|Income taxes payable                                                        |  |      | 721    |   |      |   | 156    |  
|Other liabilities                                                           |  |      | 25     |   |      |   | (31    | )
|                                                                            |  |      |        |   |      |   |        |  
|Net cash provided by operating activities                                   |  |      | 2,609  |   |      |   | 1,471  |  
|                                                                            |  |      |        |   |      |   |        |  
|Cash flows from investing activities:                                       |  |      |        |   |      |   |        |  
|Purchases of available-for-sale securities                                  |  |      | (2,285 | ) |      |   |       |  
|Capital expenditures                                                        |  |      | (1,569 | ) |      |   | (371   | )
|                                                                            |  |      |        |   |      |   |        |  
|Net cash used in investing activities                                       |  |      | (3,854 | ) |      |   | (371   | )
|                                                                            |  |      |        |   |      |   |        |  
|Cash flows from financing activities:                                       |  |      |        |   |      |   |        |  
|Repayment of debt                                                           |  |      |       |   |      |   | (338   | )
|                                                                            |  |      |        |   |      |   |        |  
|Net cash used in financing activities                                       |  |      |       |   |      |   | (338   | )
|                                                                            |  |      |        |   |      |   |        |  
|Effect of foreign currency translation on cash and cash equivalents         |  |      | (314   | ) |      |   | 859    |  
|                                                                            |  |     
|Net increase (decrease) in cash and cash equivalents                        |  |      | (1,559 | ) |      |   | 1,621  |  
|Cash and cash equivalents at beginning of period                            |  |      | 8,600  |   |      |   | 14,998 |  
|                                                                            |  |      |        |   |      |   |        |  
|Cash and cash equivalents at end of period                                  |  | $    | 7,041  |   |      | $ | 16,619 |  
|                                                                            |  |      |        |   |      |   |        |  

See accompanying notes to consolidated financial statements.



3



---

##### Table of Contents

ORCHID CELLMARK INC. AND SUBSIDIARIES

Consolidated Statement of Stockholders Equity and Comprehensive Income/Loss

Six months ended June 30, 2010

(In thousands)

(Unaudited)



|                                            |                 |              |        |            |                |                   |                          |         |  |               |      |   |                    |   |        |                     |  |   |          |        |   |   |        |  
|------------------------------------------- | --------------- | ------------ | ------ | ---------- | -------------- | ----------------- | ------------------------ | ------- |  | ------------- | ---- | - | ------------------ | - | ------ | ------------------- |  | - | -------- | ------ | - | - | ------ | -
|                                            |                 | Common Stock |        | Additional |                | Accumulated
Other |                          |         |  |               |      |   |                    |   | Total  |                    
|                                            | Numberof Shares |              | Amount |            | Paid-inCapital |                   | ComprehensiveIncome/Loss |         |  | TreasuryStock |      |   | AccumulatedDeficit |   |        | StockholdersEquity | 
|                                            |                 |              |        |            |                |                   |                         
|Balance at January 1, 2010                  |                 | 30,098       |        | $          | 30             |                   | $                        | 372,877 |  | $             | 343  |   |                    | $ | (1,587 | )                   |  | $ | (326,014 | )      |   | $ | 45,649 |  
|                                            |                 |              |        |            |                |                   |                         
|Net loss                                    |                 |             |        |            |               |                   |                          |        |  |               |     |   |                    |   |       |                     |  |   | (3,620   | )      |   |   | (3,620 | )
|                                            |                 |              |        |            |                |                   |                         
|Gain(loss) on available-for-sale securities |                 |             |        |            |               |                   |                          |        |  |               | (43  | ) |                    |   |       |                     |  |   |         |        |   |   | (43    | )
|                                            |                 |              |        |            |                |                   |                         
|Foreign currency translation adjustment     |                 |             |        |            |               |                   |                          |        |  |               | (704 | ) |                    |   |       |                     |  |   |         |        |   |   | (704   | )
|                                            |                 |              |        |            |                |                   |                          |         |  |               |      |   |                    |   |        |                     |  |   |          |        |   |   |        |  
|                                            |                 |              |        |            |                |                  
|Comprehensive loss                          |                 |              |        |            |                |                   |                          |         |  |               |      |   |                    |   |        |                     |  |   |          | (4,367 | )
|                                            |                 |              |        |            |                |                   |                          |         |  |               |      |   |                    |   |        |                     |  |   |          |        |   |   |        |  
|                                            |                 |              |        |            |                |                   |                         
|Stock-based compensation expense            |                 |             |        |            |               |                   |                          | 587     |  |               |     |   |                    |   |       |                     |  |   |         |        |   |   | 587    |  
|                                            |                 |              |        |            |                |                   |                          |         |  |               |      |   |                    |   |        |                     |  |   |          |        |   |   |        |  
|                                            |                 |              |        |            |                |                   |                         
|Balance at June 30, 2010                    |                 | 30,098       |        | $          | 30             |                   | $                        | 373,464 |  | $             | (404 | ) |                    | $ | (1,587 | )                   |  | $ | (329,634 | )      |   | $ | 41,869 |  
|                                            |                 |              |        |            |                |                   |                          |         |  |               |      |   |                    |   |        |                     |  |   |          |        |   |   |        |  

See accompanying notes to consolidated financial statements.



4



---

##### Table of Contents

ORCHID CELLMARK INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) Basis
of Presentation

The accompanying unaudited consolidated financial statements of Orchid Cellmark Inc. and its subsidiaries
(the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (US) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by accounting principles generally accepted in the US (GAAP) for complete annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring
adjustments, considered necessary for a fair presentation have been included. Interim results are not necessarily indicative of results that may be expected for a full year.

The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial
statements and footnotes thereto included in the Companys Annual Report on Form 10-K, for the year ended December 31, 2009, as amended (the Annual Report), as filed with the Securities and Exchange Commission (SEC) on April 30, 2010.

There have been no changes to the Companys critical accounting policies as disclosed in the Annual Report.

(2) Net Loss per Share

Net loss per share is computed in accordance with FASB ASC 260-10, Earnings Per Shareby dividing the net loss for the period by
the weighted average number of shares of common stock outstanding. During each period presented, the Company has certain options that have not been included in the calculation of diluted net loss per share because to do so would be anti-dilutive. As
such, the numerator and the denominator used in computing both basic and diluted net loss per share for each period are equal.

(3) Fair
Value Measurements

FASB ASC Subtopic No. 820-10, which incorporates accounting literature formerly known as Statement
of Financial Accounting Standards, or SFAS, No. 157, Fair Value Measurements and FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and
Identifying Transactions that Are Not Orderly, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the
exit price). FASB ASC Section No. 820-10-35 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The three tiers include:

(i) Level 1  quoted prices in active markets for identical assets and liabilities.

(ii) Level 2  inputs other than quoted prices included within Level that are observable for the asset or liability,
either directly or indirectly, or quoted prices for similar assets or liabilities in active markets.

(iii)
Level 3  unobservable inputs for which little or no market data exists, requiring management to develop its own assumptions.

Our available-for-sale securities have been classified as Level 1. These investments have initially been valued at the transaction price
and subsequently valued typically utilizing third party pricing services. The pricing validate the prices provided by our third party pricing services by reviewing their pricing methods and matrices, obtaining market values from other pricing
sources and analyzing pricing data in certain instances. The unrealized gains and losses in such securities are reflected, net of tax, in Accumulated other comprehensive income (loss) in the accompanying consolidated balance sheets.



5



---

##### Table of Contents

ORCHID CELLMARK INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



(4) Inventory

Inventory is comprised of the following at June 30, 2010 and December 31, 2009 (in thousands):



|                 |  |              |       |                  |   |      
|---------------- |  | ------------ | ----- | ---------------- | - | -----
|                 |  | June 30,2010 |       | December 31,2009
|Raw materials    |  | $            | 1,104 |                  | $ | 1,001
|Work in progress |  |              | 648   |                  |   | 533  
|Finished goods   |  |              | 8     |                  |   | 8    
|                 |  |              |       |                  |   |      
|                 |  | $            | 1,760 |                  | $ | 1,542
|                 |  |              |       |                  |   |      

Raw materials consist mainly of reagents, enzymes,
chemicals and plates used in DNA testing. Work in progress consists mainly of casework not yet completed and DNA testing kits that are being processed. Finished goods consist mainly of DNA testing kits that have not yet been shipped.

(5) Goodwill and Other Intangible Assets

The following table sets forth the activity for goodwill during the six months ended June 30, 2010 (in thousands):



|                                       |  |   |       |  
|-------------------------------------- |  | - | ----- | -
|Balance as of January 1, 2010          |  | $ | 9,423 |  
|Effect of foreign currency translation |  |   | (51   | )
|                                       |  |   |       |  
|Balance as of June 30, 2010            |  | $ | 9,372 |  
|                                       |  |   |       |  

The following table sets forth the Companys other intangible assets at June 30, 2010 and
December 31, 2009 (in thousands):



|                       |  |               |        |                         |   |         |     |  |          |       |                         |   |        |     |   |         |   |  |   |      
|---------------------- |  | ------------- | ------ | ----------------------- | - | ------- | --- |  | -------- | ----- | ----------------------- | - | ------ | --- | - | ------- | - |  | - | -----
|                       |  | June 30, 2010 |        | December 31, 2009      
|                       |  | Cost (1)      |        | AccumulatedAmortization |   |         | Net |  | Cost (1) |       | AccumulatedAmortization |   |        | Net
|Customer list          |  | $             | 7,215  |                         | $ | (5,512  | )   |  | $        | 1,703 |                         | $ | 7,264  |     | $ | (5,262  | ) |  | $ | 2,002
|Patents and know-how   |  |               | 4,896  |                         |   | (3,445  | )   |  |          | 1,451 |                         |   | 4,899  |     |   | (3,240  | ) |  |   | 1,659
|Trademark/tradename    |  |               | 4,222  |                         |   | (3,276  | )   |  |          | 946   |                         |   | 4,263  |     |   | (3,131  | ) |  |   | 1,132
|Base technology        |  |               | 5,995  |                         |   | (5,278  | )   |  |          | 717   |                         |   | 6,019  |     |   | (5,049  | ) |  |   | 970  
|Non-compete agreements |  |               | 20     |                         |   | (20     | )   |  |          |      |                         |   | 20     |     |   | (20     | ) |  |   |     
|                       |  |               |        |                         |   |         |     |  |          |       |                         |   |        |     |   |         |   |  |   |      
|Totals                 |  | $             | 22,348 |                         | $ | (17,531 | )   |  | $        | 4,817 |                         | $ | 22,465 |     | $ | (16,702 | ) |  | $ | 5,763
|                       |  |               |        |                         |   |         |     |  |          |       |                         |   |        |     |   |         |   |  |   |      



|(1) | Cost includes the cumulative historical effect of foreign currency translation on intangible assets acquired in a prior business combination. This cumulative historical
effect of foreign currency translation amounted to $85 thousand and $201 thousand as of June 30, 2010 and December 31, 2009, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Amortization expense associated with intangible assets was $461 thousand and $924 thousand, respectively, for the three and six months
ended June 30, 2010. Amortization expense associated with intangible assets was $465 thousand and $927 thousand, respectively, for the three and six months ended June 30, 2009.



6



---

##### Table of Contents

ORCHID CELLMARK INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



(6) Fixed Assets

Fixed assets are comprised of the following at June 30, 2010 and December 31, 2009 (in thousands):



|                                               |  |              |         |   |                  |   |         |  
|---------------------------------------------- |  | ------------ | ------- | - | ---------------- | - | ------- | -
|                                               |  | June 30,2010 |         |   | December 31,2009 |  
|Laboratory equipment                           |  | $            | 13,463  |   |                  | $ | 14,141  |  
|Leasehold improvements                         |  |              | 7,588   |   |                  |   | 6,628   |  
|Computers and software                         |  |              | 5,106   |   |                  |   | 5,223   |  
|Furniture and fixtures                         |  |              | 1,855   |   |                  |   | 1,702   |  
|                                               |  |              |         |   |                  |   |         |  
|                                               |  |              | 28,012  |   |                  |   | 27,694  |  
|Less accumulated depreciation and amortization |  |              | (22,704 | ) |                  |   | (22,891 | )
|                                               |  |              |         |   |                  |   |         |  
|                                               |  | $            | 5,308   |   |                  | $ | 4,803   |  
|                                               |  |              |         |   |                  |   |         |  

Depreciation expense associated with fixed assets was $468 thousand and $954 thousand, respectively, for the
three and six months ended June 30, 2010. Depreciation expense associated with fixed assets was $525 thousand and $1.0 million, respectively, for the three and six months ended June 30, 2010.

(7) Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are comprised of the following at June 30, 2010 and December 31, 2009 (in
thousands):



|                          |  |              |       |                  |   |      
|------------------------- |  | ------------ | ----- | ---------------- | - | -----
|                          |  | June 30,2010 |       | December 31,2009
|VAT and other taxes       |  | $            | 2,644 |                  | $ | 1,415
|Professional fees         |  |              | 446   |                  |   | 240  
|Employee compensation     |  |              | 867   |                  |   | 475  
|Facility related accruals |  |              | 440   |                  |   | 380  
|Restructuring             |  |              | 498   |                  |   | 142  
|Other                     |  |              | 1,030 |                  |   | 419  
|                          |  |              |       |                  |   |      
|                          |  | $            | 5,925 |                  | $ | 3,071
|                          |  |              |       |                  |   |      

(8) Restructuring

During the six months ended June 30, 2010, the Company recognized $964 thousand in restructuring expenses related to the
consolidation of the Companys East Lansing, Michigan paternity testing operations into the Companys Dayton, Ohio facility and the consolidation of its Nashville CODIS testing operation into our Dallas, Texas facility. The Company
announced the East Lansing consolidation on October 20, 2009 and substantially completed this consolidation during the quarter ended March 31, 2010. The Company announced the planned Nashville consolidation on January 14, 2010 and
expects to complete this consolidation by August 31, 2010. The expenses in the first and second quarters of 2010 relate primarily to employee severance costs.

The Company currently expects to incur restructuring charges and cash expenditures in connection with these consolidations of $1.8
million to $2.3 million in the aggregate, which includes: severance and retention bonuses for employees in the range of $990 thousand to $1.2 million; relocation in the range of $135 thousand to $185 thousand; recruiting and training costs in
connection with the transfer of work of approximately $100 thousand; lease termination costs in the range of $200 thousand to $300 thousand; and equipment relocation and reinstallation costs in the range of $375 thousand to $485 thousand. A
substantial portion of these charges and expenditures are expected to be reported in the first three quarters of 2010. The Company currently expects to offset these restructuring charges and expenditures through annual cost savings of approximately
$2.4 million from operational efficiencies, plant and equipment cost reductions and increased scalability.



7



---

##### Table of Contents

ORCHID CELLMARK INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



As of June 30, 2010 and December 31, 2009, the Company had approximately $498
thousand and $142 thousand, respectively, in restructuring accruals outstanding that are related to severance and facility obligations.

A summary of the restructuring activity is as follows (in thousands):



|                                                      |  |       |      |  
|----------------------------------------------------- |  | ----- | ---- | -
|                                                      |  | Total |     
|                                                      | 
|Restructuring liability as of December 31, 2009       |  | $     | 142  |  
|                                                      | 
|Charge recorded in the six months ended June 30, 2010 |  |       | 964  |  
|                                                      | 
|Cash payments in the six months ended June 30, 2010   |  |       | (608 | )
|                                                      |  |       |      |  
|                                                      | 
|Restructuring liability as of June 30, 2010           |  | $     | 498  |  
|                                                      |  |       |      |  

(9) Income Taxes

As of June 30, 2010 and December 31, 2009, the Company has unrecognized income tax benefits related to uncertain tax positions
of approximately $213 thousand in the UK. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The tax years 2007 through 2009 remain open to examination by the UK taxing authorities and the
tax years 2006 through 2009 remain open to examination by the US taxing authorities. In addition, the US taxing authorities may examine the tax years from the Companys inception in 1995 through 2005, but are barred from adjusting the tax
liabilities in excess of the net operating losses generated in any of those tax years. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is approximately $213 thousand. With respect to the
Companys UK subsidiarys open tax years and based upon the filing of a UK tax return in October 2009, the Company recognized an income tax benefit in the fourth quarter of 2009 of approximately $385 thousand.

(10) Recently Issued Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements
during the six months ended June 30, 2010, as compared to the recent accounting pronouncements described in the Annual Report that are of significance, or potential significance to the Company.

In January 2010, the FASB issued Accounting Standard Update No. 2010-06, Improving Disclosures about Fair Value Measurements
(ASU No. 2010-06), which amends the existing fair value measurements and disclosures guidance currently included in Accounting Standards Codification No. 820 to require additional disclosures regarding fair value measurements.
Specifically, ASU No. 2010-06 requires entities to disclose the amounts of significant transfers between Level 1 and Level 2 of the fair value hierarchy and the reasons for these transfers, the reasons for any transfer in or out of Level 3, and
information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuance and settlements on a gross basis. In addition, ASU No. 2010-06 also clarifies the requirement for entities to disclose information about both
the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. ASU No. 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009, except for additional disclosures
related to Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010. The Company is in the process of evaluating these additional disclosure requirements but does not expect they will have a
significant impact on its condensed consolidated financial statements.

(11) Comprehensive Income/Loss

Comprehensive income/loss is comprised of net earnings, foreign currency translation adjustments, and unrealized gains and losses on
available-for-sale securities. Total comprehensive income/(loss) for the three months ended June 30, 2010 and 2009 was $1.6 million and $1.4 million, respectively and total comprehensive income/(loss) for the six months ended June 30, 2010
and 2009 was $4.4 million and zero, respectively. The difference from net loss for the three and six months ended June 30, 2010 and 2009 consists of foreign currency translation adjustments, and unrealized gains and losses on available-for-sale
securities. Accumulated other comprehensive loss as reflected in the consolidated balance sheets consists of cumulative foreign currency translation adjustments.



8



---

##### Table of Contents

ORCHID CELLMARK INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



(12) Legal Proceedings

On or about November 21, 2001, a complaint was filed in the United States District Court for the Southern District of New York naming
us as a defendant, along with certain of our former officers and underwriters. An amended complaint was filed on April 19, 2002. The complaint, as amended, purportedly was filed on behalf of persons purchasing our stock between May 4, 2000
and December 6, 2000, and alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The
amended complaint alleges that, in connection with our May 5, 2000 initial public offering, or IPO, the defendants failed to disclose additional and excessive commissions purportedly solicited by and paid to the underwriter defendants in
exchange for allocating shares of our stock to preferred customers and alleged agreements among the underwriter defendants and preferred customers tying the allocation of IPO shares to agreements to make additional aftermarket purchases at
pre-determined prices. Plaintiffs claim that the failure to disclose these alleged arrangements made our registration statement on Form S-1 filed with the SEC in May 2000 and the prospectus, a part of the registration statement, materially false and
misleading. On or about July 15, 2002, we filed a motion to dismiss all of the claims against us and our former officers. On October 9, 2002, the Court dismissed without prejudice only our former officers, Dale R. Pfost and Donald R.
Marvin, from the litigation in exchange for us entering into a tolling agreement with plaintiffs executive committee. On February 19, 2003, we received notice of the Courts decision to dismiss the Section 10(b) claims against
us. Plaintiffs and the defendant issuers involved in related IPO securities litigation, including us, have agreed in principal on a settlement that, upon a one-time surety payment by the defendant issuers insurers, would release the defendant
issuers and the individual officers and directors from claims and any future payments or out-of-pocket costs. On March 10, 2005, the Court issued a memorandum and order (i) preliminarily approving the settlement, contingent on the
parties agreement on modifications of the proposed bar order in the settlement documents, (ii) certifying the parties proposed settlement classes, (iii) certifying the proposed class representatives for the purposes of the
settlement only and (iv) setting a further hearing for the purposes of (a) making a final determination as to the form, substance and program of notice of proposed settlement and (b) scheduling a public fairness hearing in order to
determine whether the settlement can be finally approved by the Court. On April 24, 2006, the Court held a fairness hearing and took the motion for final approval under advisement. On October 5, 2009, the Court granted the plaintiffs
motion for an order of final approval of the settlement, plan of allocation and certification of the class. Such settlement does not require any payment by us to the plaintiffs. The issuers share of the settlement amount is funded by the insurers.
Notices of appeal have been filed by six groups of appellants. None of the notices state the basis for appeal.

In related
proceedings against the underwriters, the United States Court of Appeals for the Second Circuit ruled on December 5, 2006 that the certification by the District Court for the Southern District of New York of class actions against the
underwriters in six focus cases was vacated and remanded for further proceedings. In so doing, the Second Circuit ruled that the cases pending on this appeal may not be certified as class actions. On April 6, 2007, the
Second Circuit denied the plaintiffs petition for rehearing, and no further appeals have been taken.

As a result of the
Second Circuits ruling, the plaintiffs and the issuers stipulated on June 22, 2007 that the Stipulation and Agreement of Settlement with Defendant Issuers and Individuals, which was originally submitted to the Court on June 10, 2004,
was terminated, which resolved the motion for final approval of the class action settlement with the issuers and individual defendants. The Court entered the parties stipulation as an Order on June 25, 2007. As a result of these
developments, the plaintiffs have filed amended complaints against the underwriters and focus case issuers and individuals and are attempting to certify a class action.

In response to the amended complaints, the underwriters and focus case issuers moved to dismiss the amended complaints. On
March 26, 2008, the motion to dismiss was granted in part and denied in part. As a result, the Court will proceed with the plaintiffs amended complaints against the underwriters and focus case issuers to determine whether
class actions can be certified.

We are a defendant in litigation pending in the United States District Court for the Southern
District of New York entitled Enzo Biochem, Inc. et al. (Enzo) v. Amersham PLC, et al. (Amersham), filed in October 2002. By their complaint, plaintiffs allege that certain defendants (i) breached their distributorship agreements by selling
certain products for commercial development (which they allege was not authorized), (ii) infringed plaintiffs patents through the sale and use of certain products, and (iii) are liable for unfair competition and tortious interference
with contractual relations. We did not have a contractual relationship with plaintiffs, but we are alleged to have purchased the product at issue from one of the other defendants. We have sold the business unit that was allegedly engaged in the
unlawful conduct. As a result, there is no relevant injunctive relief to be sought from us. The complaint seeks damages in an undisclosed amount. Most of the fact discovery in the case has been taken, and a Markman hearing to construe the patent
claims was conducted in early July 2005. On July 17, 2006, the Court ruled in our favor on its construction of the patents asserted against us, and the co-defendants, including us, moved for summary judgment on all claims against us in January
2007. A hearing on the defendants motions



9



---

##### Table of Contents

ORCHID CELLMARK INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)

(Unaudited)



for summary judgment occurred on July 17-18, 2007, and the Court reserved ruling on the motions, taking them under advisement. Such matter has been delayed due to the death of the judge and
the assignment of a new judge.

In other litigation brought by Enzo against another defendant under the same patents asserted
against us, a Connecticut Federal Court has invalidated the patents asserted there and asserted against us in the New York case. That decision was reversed in part by the Court of Appeals on March 26, 2010. As a result of these
developments, the Enzo v. Amersham case has been stayed pending the outcome of the Connecticut Federal Court case.

On
June 5, 2008, we and Beckman Coulter, Inc. filed suit against Sequenom, Inc. (Sequenom) in the United States District Court for the Southern District of California alleging infringement of U.S. patent numbers 5,888,819, 6,004,744 and 6,537,748.
This lawsuit seeks damages and injunctive relief. Sequenom filed an answer and counterclaims on August 15, 2008. A reply to the counterclaims was filed on August 29, 2008. On June 22, 2009, the parties filed a stipulation of dismissal
which dismissed the lawsuit with prejudice.

On February 12, 2010, a complaint was filed in the United States District
Court for the Western District of Wisconsin by Genetic Technologies Limited naming us as a defendant, along with eight other companies. The complaint, entitled Genetic Technologies Limited v. Beckman Coulter, Inc., et al., alleges that the
defendants infringed U.S. Patent No. 5,612,179 through the sale and use of certain products and services. There is no request for injunctive relief by the plaintiff. We have been served with a complaint and have filed an answer. Discovery is
currently being conducted. We believe the allegations are without merit and intend to vigorously defend ourselves against such claims.

Additionally, we have certain other claims against us arising from the normal course of our business. The ultimate resolution of such
matters, including those cases disclosed above, in the opinion of management, will not have a material effect on our financial position and liquidity, but could have a material impact on our results of operations for any reporting period.

(13) Subsequent Event

In accordance with ASC 855-10, the Company has evaluated subsequent events through the date these consolidated financial statements were
issued. No significant events occurred subsequent to the balance sheet date but prior to the filing of this report that would have a material impact on the Consolidated Financial Statements.



10



---

##### Table of Contents

|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

This Managements Discussion and Analysis of Financial Condition and Results of Operations as of June 30, 2010 and for the three
and six months ended June 30, 2010 and 2009 should be read in conjunction with our unaudited Consolidated Financial Statements and related unaudited Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report on Form
10-Q.

OVERVIEW

We are engaged in the provision of DNA testing services that generate genetic profile information by analyzing an organisms unique
genetic identity. We focus our business on DNA testing primarily for human identity and, to a lesser extent, agricultural and other applications. In the human identity area, we principally provide DNA testing services for forensic, family
relationship and, to a lesser extent, security applications. Forensic DNA testing is primarily used to confirm that a suspect committed a particular crime, to exonerate an innocent person or to establish or maintain databases of individuals
convicted of crimes or, in some instances, arrested in connection with crimes. We are also engaged in the provision of non-DNA forensic laboratory services. Family relationship DNA testing is used to establish whether two or more people are
genetically related. DNA testing is used by individuals and employers in security applications to establish or store a persons genetic profile for identification purposes in the event of an emergency or accident. In agricultural applications,
we provide DNA testing services for selective trait breeding.

We have operations in the United States, or US, and in the
United Kingdom, or UK, and the majority of our current customers are based in these two countries. Our forensic, family relationship and security DNA testing services are conducted in both the US and the UK, while all of our agricultural DNA testing
services are conducted in the UK. Based on our review of publicly available information regarding contract sizes and competitor activity, supplemented by industry publications and third-party market assessment data, we believe that the US and UK are
two of the largest existing markets for DNA testing services today. In the US and UK, a significant amount of our current testing activity is under established non-exclusive contracts with government agencies. These contracts are usually awarded
through a sealed bid process and, when awarded, typically have a term from one to three years. We believe that our experience and reputation as a reliable provider of services to government agencies is a valued credential that can be used in
securing both new contracts and renewing existing contracts.

Our operations in the US accounted for 40% and 51% of our total
revenues for the three months ended June 30, 2010 and 2009, respectively, and for 40% and 53% of our total revenues for the six months ended June 30, 2010 and 2009, respectively. We continue to experience significant price competition in
our forensics and paternity testing businesses. We are focused on improving our operational execution to increase throughput in our laboratories and lower aggregate operating costs. In particular, in our forensics business we have reduced our sample
processing time and decreased the number of samples that need to be retested. Additionally, we have increased the number of samples processed per analyst. We believe that our forensic and paternity laboratory testing volumes have increased our
operational efficiencies. On October 20, 2009, we announced a consolidation of our East Lansing, Michigan paternity testing operations into our Dayton, Ohio facility which was substantially completed during the quarter ended March 31,
2010. On January 14, 2010, we announced a planned consolidation of our Nashville, Tennessee forensic DNA testing facility into our Dallas, Texas facility and we expect to complete this consolidation by August 31, 2010. We believe these
consolidations may lead to additional operational efficiencies, plant and equipment cost reductions and increased scalability.

Our operations in the UK accounted for 60% and 49% of our total revenues for the three months ended June 30, 2010 and 2009,
respectively, and for 60% and 47% of our total revenues for the six months ended June 30, 2010 and 2009, respectively. Prior to 2009, a significant portion of our UK revenues were derived through our agreement with LGC Ltd., or LGC. LGC is a
provider of analytical and diagnostic services and one of our competitors in providing DNA testing services in the UK. Our focus is on providing our services directly to UK government and police forces. In 2006, we were successful in winning
forensic work directly with UK police forces and, in February 2008, we were awarded, overall, a significant portion of the service packages we bid on in the North West/South West and Wales regional tender. We were awarded work from nine of the
fourteen police forces that participated in this tender. Under the terms of the award, we are providing forensic services, including DNA testing of database crime scene samples, forensic casework and database testing services under the UKs
Police and Criminal Evidence Act, or PACE, for multiple police forces that collectively tendered their work. We believe that the actions we have taken to date have enabled us to successfully transition from our prior reliance on revenues derived
from LGC to directly providing these



11



---

##### Table of Contents

services to police forces in the UK. In addition, we expect the remaining police forces in the UK to solicit initial tenders for forensic services through the UKs National Forensic
Framework Agreement by the end of 2011.

Operating Highlights

Our revenues are predominately generated from DNA testing services provided to our customers. Our costs and expenses include costs of
service revenues, research and development expenses, marketing and sales expenses, general and administrative expenses, amortization expense and other income and expense. Costs of service revenues consist primarily of salaries and related personnel
costs, laboratory supplies, fees paid for the collection of samples, depreciation and facility expenses. Research and development expenses consist primarily of salaries and related costs, laboratory supplies and other expenses related to the design,
development, testing and enhancement of our services. Marketing and sales expenses consist of salaries and benefits for marketing and sales personnel within our organization and all related costs of selling and marketing our services. General and
administrative expenses consist primarily of salaries and related expenses for executive, finance and administrative personnel, professional fees including legal expenses, insurance and other corporate expenses.

For the three months ended June 30, 2010 as compared to the three months ended June 30, 2009, total revenues increased
approximately 7%, while gross margin, as percentage of service revenues decreased 2% to approximately 33% for the three months ended June 30, 2010. For the three months ended June 30, 2010 as compared to the same period in 2009, our UK
revenues increased by approximately 32% as measured in US dollars as a result of increased forensics and immigration revenues due to increased volume. In the US, we experienced decreased revenues in our forensic casework and paternity testing
businesses, offset in part by increased revenues from testing services involving DNA profile uploads into the Combined DNA Index System (CODIS) and individual state databases. Gross margin, as a percentage of service revenue, decreased as a result
of lower volume and price decreases in our US-based testing services, partially offset by increased forensic volume in our UK operations. For the three months ended June 30, 2010, our operating expenses, other than cost of service revenues,
increased by approximately 12% as compared to the same period in 2009, as a result of restructuring expenses, as well as increased research and development, and sales and marketing expenses.

Overall, for the six months ended June 30, 2010 as compared to the six months ended June 30, 2009, total revenues increased
approximately 4%, while gross margin, as a percentage of service revenues, decreased from approximately 34% to approximately 33%. We experienced revenue increases in our UK forensic, paternity and immigration testing services and in our US CODIS and
individual state database testing services. The increased revenues in our US CODIS testing services were offset by decreased revenues in our forensic casework and paternity testing businesses. The decrease in gross margin, as a percentage of service
revenue, was primarily a result of lower volume and price decreases in our US-based testing services, partially offset by increased volume in our UK operations. Cost of service revenues increased due to higher personnel costs and lab costs as a
result of the increased volume in our UK operations, partially offset by decreased costs in the US primarily associated with lower volume. For the six months ended June 30, 2010, our operating expenses, other than cost of service revenues,
increased by approximately 11% as compared to the same period in 2009, as a result of restructuring expenses, as well as increased research and development, and sales and marketing expenses.



12



---

##### Table of Contents

RESULTS OF OPERATIONS

The following table sets forth a quarter-over-quarter comparison of the components of our net loss for the three months ended
June 30, 2010 and 2009:



|                                  |  |                |        |   |          |   |        |          |  |   |       |   |  |       |  
|--------------------------------- |  | -------------- | ------ | - | -------- | - | ------ | -------- |  | - | ----- | - |  | ----- | -
|                                  |  | (In thousands) |        |   | % Change |  
|                                  |  | 2010           |        |   | 2009     |   |        | $ Change |  |  
|                                  |  |                |        |  
|Total revenues                    |  | $              | 15,684 |   |          | $ | 14,687 |          |  | $ | 997   |   |  | 7     | %
|Cost of service revenues          |  |                | 10,568 |   |          |   | 9,557  |          |  |   | 1,011 |   |  | 11    |  
|Research and development          |  |                | 492    |   |          |   | 192    |          |  |   | 300   |   |  | >100  |  
|Marketing and sales               |  |                | 1,465  |   |          |   | 1,216  |          |  |   | 249   |   |  | 20    |  
|General and administrative        |  |                | 3,324  |   |          |   | 3,730  |          |  |   | (406  | ) |  | (11   | )
|Restructuring expense             |  |                | 520    |   |          |   |       |          |  |   | 520   |   |  | 100   |  
|Amortization of intangible assets |  |                | 461    |   |          |   | 465    |          |  |   | (4    | ) |  | (1    | )
|Total other income expense, net   |  |                | 16     |   |          |   | 8      |          |  |   | 8     |   |  | 100   |  
|Income tax expense                |  |                | 455    |   |          |   | 138    |          |  |   | 317   |   |  | >100  |  
|Net loss                          |  |                | (1,585 | ) |          |   | (603   | )        |  |   | (982  | ) |  | >(100 | )

Revenues

Total revenues for the three months ended June 30, 2010 of $15.7 million represented an increase of $997 thousand, or
approximately 7%, as compared to revenues of $14.7 million for the comparable period in 2009.

Revenues from our UK-based
testing services of $9.4 million for the three months ended June 30, 2010 increased by $2.3 million, or approximately 32%, as compared to $7.1 million for the comparable period in 2009. For the three months ended June 30, 2010, as compared
to the comparable period in 2009, our UK revenues were unfavorably impacted by approximately 4% as a result of the exchange rate movement of the British pound as compared to the US dollar. Our UK-based revenue increase was driven by an increase in
forensics revenues, as work awarded under the North West/South West and Waless regional tender and pilot work has replaced and surpassed revenues previously generated under our previous arrangements with LGC, as well as an increase in our
immigration businesses.

Our US service revenues for the three months ended June 30, 2010 of $6.3 million decreased by
approximately $1.2 million, or approximately 17%, as compared to $7.5 million for the comparable period in 2009, primarily due to a decrease in forensics casework and paternity testing services due, in part, to budgetary constraints at the state and
local levels related to forensic casework testing. This decrease was partially offset by an increase in our CODIS and individual state database testing services.

During the three months ended June 30, 2010 and 2009, we recognized no other revenues.

Cost of Service Revenues

Cost of service revenues were $10.6 million, or approximately 67% of service revenues, for the three months ended June 30, 2010,
compared to $9.6 million, or approximately 65% of service revenues, for three months ended June 30, 2009. For three months ended June 30, 2010, as compared to the comparable period in 2009, our UK cost of service revenues were unfavorably
impacted by approximately 4% as a result of the exchange rate movement of the British pound as compared to the US dollar. Cost of service revenues for the three months ended June 30 2010, as compared to the comparable period in 2009, increased
due to higher personnel and lab costs as a result of increased volume in our UK operations. Our gross margin percentage decreased by 2% as a result of price and volume decreases in our US-based testing services, partially offset by increased volume
in our UK operations. On October 20, 2009, we announced a consolidation of our East Lansing, Michigan paternity testing operations into our Dayton, Ohio facility which was substantially completed in the quarter ended March 31, 2010. On
January 14, 2010, we announced a planned consolidation of our Nashville, Tennessee forensic DNA testing facility into our Dallas, Texas facility, which will be substantially completed by August 31, 2010. We believe these consolidations may
lead to additional operational efficiencies, plant and equipment cost reductions and increased scalability.



13



---

##### Table of Contents

Research and Development

Research and development expenses for each of the three months ended June 30, 2010 and 2009 were $492 thousand and $192 thousand,
respectively. The increase in research and development expenses was primarily due to increased costs associated with the establishment of a CODIS laboratory at our Dallas, Texas testing facility.

Marketing and Sales

Marketing and sales expenses for the three months ended June 30, 2010 and 2009 were $1.5 million and $1.2 million, respectively. The
increase in marketing and sales expenses was primarily due to increased program costs in the US.

General and Administrative

General and administrative expenses for the three months ended June 30, 2010 and 2009 were $3.3 million and $3.7
million, respectively. The decrease in general and administrative expenses is primarily due to decreased legal and professional fees.

Restructuring

During the three months ended June 30, 2010, we recognized $520 thousand in restructuring expenses related to the consolidation of
our East Lansing, Michigan paternity testing operations into our Dayton, Ohio facility and the consolidation of our Nashville CODIS testing operation into our Dallas, Texas facility. We announced the planned East Lansing consolidation on
October 20, 2009 and substantially completed this consolidation during the quarter ended March 31, 2010. We announced the planned Nashville consolidation on January 14, 2010 and expect to complete this consolidation by August 31,
2010. The expenses for the three months ended June 30, 2010 primarily relate to employee severance costs.

Amortization of Intangible Assets

During the three months ended June 30, 2010 and 2009, we recorded $461 thousand and $465 thousand of amortization expense,
respectively.

Income Tax Expense

During the three months ended June 30, 2010 and 2009, we recorded income tax expense of $455 thousand and $138 thousand,
respectively, primarily related to our UK business. No tax benefit was recorded relating to our US business losses as management deemed that it was not likely that such tax benefit would be realized.

Net Loss

For the three months ended June 30, 2010, we reported a net loss of $1.6 million, which represents an increase of $982 thousand
compared to a net loss of $603 thousand for the three months ended June 30, 2009.

The following table sets forth a
comparison of the components of our net loss for the six months ended June 30, 2010 and 2009:



|                                  |  |                |        |   |          |   |        |          |  |   |        |   |  |      |  
|--------------------------------- |  | -------------- | ------ | - | -------- | - | ------ | -------- |  | - | ------ | - |  | ---- | -
|                                  |  | (In thousands) |        |   | % Change |  
|                                  |  | 2010           |        |   | 2009     |   |        | $ Change |  |  
|Total revenues                    |  | $              | 29,814 |   |          | $ | 28,651 |          |  | $ | 1,163  |   |  | 4    | %
|Cost of service revenues          |  |                | 19,948 |   |          |   | 18,737 |          |  |   | 1,211  |   |  | 6    |  
|Research and development          |  |                | 889    |   |          |   | 351    |          |  |   | 538    |   |  | >100 |  
|Marketing and sales               |  |                | 2,776  |   |          |   | 2,380  |          |  |   | 396    |   |  | 17   |  
|General and administrative        |  |                | 7,130  |   |          |   | 7,745  |          |  |   | (615   | ) |  | (8   | )
|Restructuring expense             |  |                | 964    |   |          |   |       |          |  |   | 964    |   |  | 100  |  
|Amortization of intangible assets |  |                | 924    |   |          |   | 927    |          |  |   | (3     | ) |  | 0    |  
|Total other income (expense), net |  |                | 56     |   |          |   | (6     | )        |  |   | 62     |   |  | >100 |  
|Income tax expense                |  |                | 859    |   |          |   | 280    |          |  |   | 579    |   |  | >100 |  
|Net loss                          |  |                | (3,620 | ) |          |   | (1,775 | )        |  |   | (1,845 | ) |  | >100 |  



14



---

##### Table of Contents

Revenues

Total revenues for the six months ended June 30, 2010 of $29.8 million represented an increase of $1.1 million, or approximately 4%,
as compared to revenues of $28.7 million for the comparable period in 2009.

Revenues from our UK-based testing services of
$18.0 million for the six months ended June 30, 2010 increased by $4.5 million, or approximately 33%, as compared to the comparable period in 2009. For the six months ended June 30, 2010, as compared to the comparable period in 2009, our
UK revenues were favorably impacted approximately 1% as a result of the exchange rate movement of the British pound as compared to the US dollar. Our UK-based revenue increase was primarily driven by an increase in forensics revenues, as work
awarded under the North West/South West and Waless regional tender and pilot work has replaced and surpassed revenues previously generated under our expired LGC agreement. We also experienced revenue increases in paternity and immigration
testing services, for the six months ended June 30, 2010, as compared to the comparable period in 2009.

Our US service
revenues for the six months ended June 30, 2010 of $11.8 million decreased by $3.2 million, or approximately 21% compared to $15.0 million for the comparable period in 2009, primarily due to a decrease in forensics casework and paternity
testing services due, in part, to budgetary constraints at the state and local levels related to forensic casework testing. This decrease was partially offset by an increase in our US CODIS and individual state database testing services.

Prior to 2009, a significant portion of our UK revenues were derived through our agreement with LGC Ltd., or LGC. LGC is a provider of
analytical and diagnostic services and one of our competitors in providing DNA testing services in the UK. Our focus is on providing our services directly to UK government and police forces. In 2006, we were successful in winning forensic work
directly with UK police forces and, in February 2008, we were awarded, overall, a significant portion of the service packages we bid on in the North West/South West and Wales regional tender. We were awarded work from nine of the fourteen police
forces that participated in this tender. Under the terms of the award, we are providing forensic services, including DNA testing of database crime scene samples, forensic casework and database testing services under the UKs Police and Criminal
Evidence Act, or PACE, for multiple police forces that collectively tendered their work. We believe that the actions we have taken to date have enabled us to successfully transition from our prior reliance on revenues derived from LGC to directly
providing these services to police forces in the UK. In addition, we expect the remaining police forces in the UK to solicit initial tenders for forensic services through the UKs National Forensic Framework Agreement by the end of 2011.

During the six months ended June 30, 2010 and 2009, we recognized $14 thousand and $121 thousand, respectively, in other
revenues, specifically license revenues.

Cost of Service Revenues

Cost of service revenues were $19.9 million, or approximately 67% of service revenues, for the six months ended June 30, 2010,
compared to $18.7 million, or approximately 66% of service revenues, for six months ended June 30, 2009. For six months ended June 30, 2010, as compared to the comparable period in 2009, our UK cost of service revenues were unfavorably
impacted approximately 1% as a result of the exchange rate movement of the British pound as compared to the US dollar. Cost of service revenues for the six months ended June 30 2010, as compared to the comparable period in 2009, increased due
to higher personnel and lab costs as a result of increased volume in our UK operations, partially offset by decreased costs in the US as a result of lower volume. Our gross margin percentage decreased by 2% as a result of price and volume decreases
in our US-based testing services, partially offset by increased volume in our UK operations. On October 20, 2009, we announced a consolidation of our East Lansing, Michigan paternity testing operations into our Dayton, Ohio facility which was
substantially completed in the quarter ended March 31, 2010. On January 14, 2010, we announced a planned consolidation of our Nashville, Tennessee forensic DNA testing facility into our Dallas, Texas facility, which will be substantially
completed by August 31, 2010. We believe these consolidations may lead to additional operational efficiencies, plant and equipment cost reductions and increased scalability.

Research and Development

Research and development expenses for the six months ended June 30, 2010 and 2009 were $889 thousand and $351 thousand, respectively.
The increase in research and development expenses was primarily due to increased costs associated with the establishment of a CODIS laboratory at our Dallas, Texas testing facility.



15



---

##### Table of Contents

Marketing and Sales

Marketing and sales expenses for the six months ended June 30, 2010 and 2009 were $2.8 million and $2.4 million, respectively. The
increase in marketing and sales expenses was primarily due to increased program costs in the US.

General and Administrative

General and administrative expenses for the six months ended June 30, 2010 and 2009 were $7.1 million and $7.7
million, respectively. The decrease in general and administrative expenses is primarily due to decreased legal and professional fees.

Restructuring

During the six months ended June 30, 2010, we recognized $964 thousand in restructuring expenses related to the consolidation of the
Companys East Lansing, Michigan paternity testing operations into our Dayton, Ohio facility and the consolidation of our Nashville CODIS testing operation into our Dallas, Texas facility. We announced the planned East Lansing consolidation on
October 20, 2009 and substantially completed this consolidation during the quarter ended March 31, 2010. We announced the planned Nashville consolidation on January 14, 2010 and expect to complete this consolidation by August 31,
2010. The expenses for the six months ended June 30, 2010 primarily relate to employee severance costs.

Amortization
of Intangible Assets

During the six months ended June 30, 2010 and 2009, we recorded $924 thousand and $927 thousand
of amortization expense, respectively.

Income Tax Expense

During the six months ended June 30, 2010 and 2009, we recorded income tax expense of $859 thousand and $280 thousand, respectively,
primarily related to our UK business. No tax benefit was recorded relating to our US business losses as management deemed that it was not likely that such tax benefit would be realized.

Net Loss

For the six months ended June 30, 2010, we reported a net loss of $3.6 million, which represents an increase of $1.8 million as
compared to a net loss of $1.8 million for the six months ended June 30, 2009.

LIQUIDITY AND CAPITAL RESOURCES

As of June, 2010, we had $18.7 million in cash, cash equivalents and available-for-sale securities, as compared to
$18.1 million as of December 31, 2009. Working capital decreased to $21.9 million at June 30, 2010 from $25.2 million at December 31, 2009.

Sources of Liquidity

Our primary sources of liquidity have been issuances of our securities and other capital raising activities.

The following table sets forth a comparison of the components of our liquidity and capital resources for the six months ended
June 30, 2010 and 2009:



|                            |  |                |        |   |          |   |       |          |  |   |        |   |  |       |  
|--------------------------- |  | -------------- | ------ | - | -------- | - | ----- | -------- |  | - | ------ | - |  | ----- | -
|                            |  | (In thousands) |        |   | % Change |  
|                            |  | 2010           |        |   | 2009     |   |       | $ Change |  |  
|Cash provided by (used) in: |  |                |        |   |          |   |       |          |  |   |        |   |  |       |  
|Operating activities        |  | $              | 2,609  |   |          | $ | 1,471 |          |  | $ | 1,138  |   |  | 77    |  
|Investing activities        |  |                | (3,854 | ) |          |   | (371  | )        |  |   | (3,483 | ) |  | >(100 | )
|Financing activities        |  |                |       |   |          |   | (338  | )        |  |   | 338    |   |  | 100   |  



16



---

##### Table of Contents

Net cash provided by operations for the six months ended June 30, 2010 was $2.6
million, compared with net cash provided by operations of approximately $1.5 million for the comparable period in the prior year. The change in operating cash flows was mainly a result of increase in accrued expenses during the first six months of
2010. Investing activities during the six months ended June 30, 2010 and 2009 consisted of the purchase of available-for-sale securities, as well as capital expenditures, while financing activities during the six months 2009 primarily consisted
of repayments of debt obligations. There were no financing activities for the first six months of 2010.

ReliaGene Debt

As part of the acquisition of ReliaGene on October 31, 2007, we assumed $948 thousand in debt comprised of a line
of credit and various notes payable with outstanding balances of $260 thousand and $688 thousand, respectively. The line of credit was fully paid off during 2008 with a then outstanding balance of $170 thousand. The notes payable, which were secured
by ReliaGenes equipment, had interest rates ranging from 4.50% to 8.50% and maturity dates ranging from June 30, 2009 through September 5, 2011. In April 2009, we fully paid off the ReliaGene notes payable, along with all accrued
interest.

Expected Uses of Liquidity in 2010

Throughout 2010, we plan to continue making investments in our business. We expect the following to be significant uses of liquidity: cost
of service revenues, salaries and related personnel costs, laboratory supplies, fees for the collection of samples, facility expenses, marketing expenses and general and administrative costs. Actual expenditures may vary substantially from our
estimates. We also expect to make capital expenditures related to the expansion of our Dallas facility to build out the CODIS laboratory and the expansion of our UK facilities in Abingdon and Chorley. In addition, we may make additional investments
in future acquisitions of businesses or technologies which would increase our capital expenditures.

We believe that our
existing cash on hand will be sufficient to fund our operations at least through the next twelve months. We may need to raise additional capital through debt or equity financing to fund future growth opportunities or to operate our ongoing business
activities if our future results of operations fall below our expectations. However, we may not be able to raise additional funds or raise funds on terms that are acceptable to us. If future financing is not available to us, or is not available on
terms acceptable to us, we may not be able to fund our future needs. If we raise funds through equity or convertible securities, our stockholders may experience dilution and our stock price may decline.

We cannot assure you that our business or operations will not change in a manner that would consume available resources more rapidly than
anticipated. We also cannot assure you that we will not require substantial additional funding before we can achieve profitable operations. We also may need additional capital if we seek to acquire other businesses or technologies.

Commitments and Contingencies

There were no material changes during the six months ended June 30, 2010 to our contractual obligations and commercial commitments as
reported in the Annual Report.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies

There were no changes during the six months ended June 30, 2010 to our critical accounting policies as reported in our Annual Report.

Recently Issued Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements
during the three months ended June 30, 2010, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as amended, that are of significance, or potential
significance to us.



17



---

##### Table of Contents

In January 2010, the FASB issued Accounting Standard Update No. 2010-06, Improving
Disclosures about Fair Value Measurements (ASU No. 2010-06), which amends the existing fair value measurements and disclosures guidance currently included in Accounting Standards Codification No. 820 to require additional
disclosures regarding fair value measurements. Specifically, ASU No. 2010-06 requires entities to disclose the amounts of significant transfers between Level 1 and Level 2 of the fair value hierarchy and the reasons for these transfers, the
reasons for any transfer in or out of Level 3, and information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuance and settlements on a gross basis. In addition, ASU No. 2010-06 also clarifies the
requirement for entities to disclose information about both the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. ASU No. 2010-06 is effective for interim and annual reporting periods beginning
after December 15, 2009, except for additional disclosures related to Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010. We are in the process of evaluating these additional disclosure
requirements but do not expect they will have a significant impact on its condensed consolidated financial statements.



|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

Interest Rate Sensitivity

Our exposure to market risk is principally confined to our cash equivalents and available-for-sale securities which are conservative in
nature, with a focus on preservation of capital. Due to the short-term nature of our investments and the investment policies and procedures, we have determined that the risks associated with interest rate fluctuations related to these financial
instruments are not material to our business. There has not been any significant change to the interest rate sensitivity analysis we performed as of December 31, 2009.

Foreign Currency Risk

Our business derives a substantial portion of its revenues from international operations. We record the majority of our foreign
operational transactions, including all cash inflows and outflows, in the local currency, British pound. We record all of our US operational transactions, including cash inflows and outflows, in US dollars. We expect that international sales will
continue to represent a significant portion of our revenues. The significant percentage of our revenues derived from our UK operations makes us vulnerable to future fluctuations in the exchange rate. However, all of our operating expenses related to
our UK operations also are subject to exchange rate fluctuations and thus provide a natural hedge against such exchange rate movements. Currently, there is no material adverse impact to our financial results from exchange rate movements.



|Item 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

(a) Disclosure Controls and Procedures. As of June 30, 2010, we conducted an evaluation under the supervision and with
the participation of our management, including our President and Chief Executive Officer and Vice President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The term
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that
information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the
companys management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our President
and Chief Executive Officer and Vice President and Chief Financial Officer concluded as of June 30, 2010 that our disclosure controls and procedures were adequate and effective.

(b) Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial
reporting during the quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

(c) Limitations on the Effectiveness of Controls. Our disclosure controls and procedures are designed to provide reasonable
assurance of achieving their objectives and our President and Chief Executive Officer and Vice President and Chief Financial Officer have concluded that our disclosure controls and procedures are adequate and effective at that reasonable assurance
level. However, our management, including our President and Chief Executive Officer and



18



---

##### Table of Contents

Vice President and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A
control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of
fraud, if any, within an organization have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all
potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. Such statements are based on managements current
expectations and are subject to a number of factors and uncertainties that could cause actual results or outcomes to differ materially from those described in such forward-looking statements. These statements address or may address the following
subjects:



| |  |  | our expectation of the amount and timing of future revenues, expenses and other items affecting the results of our operations;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that, with the increasing availability of non-human genomic data, improved characteristics in livestock or crops will be produced to
protect humans against animal-borne diseases;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our belief that scientists hope to understand and use DNA molecular level knowledge to transform traditional approaches to medicine, agriculture and
other fields;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our belief that our forensic and paternity laboratory testing volumes have increased our operational efficiencies;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation to complete the consolidation of our Nashville, Tennessee forensic DNA testing facility into our Dallas, Texas facility by
August 31, 2010;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that we will incur restructuring charges and cash expenditures in connection with the consolidation of our East Lansing, Michigan
paternity testing operations into our Dayton, Ohio facility of $775,000 to $1,000,000 in the aggregate, which includes: severance and retention bonuses for employees in the range of $450,000 to $550,000; relocation costs for employees relocating
from the East Lansing facility in the range of $50,000 to $75,000; recruiting and training costs for the Dayton facility in connection with the transfer of work from the East Lansing facility of approximately $50,000; lease termination costs in the
range of $150,000 to $200,000; and equipment relocation and reinstallation costs in the range of $75,000 to $125,000;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that a substantial portion of the restructuring charges and expenditures in connection with the consolidation of our East Lansing,
Michigan paternity testing operations into our Dayton, Ohio facility will be reported in first and second quarters of 2010;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that we will offset the restructuring charges and expenditures in connection with the consolidation of our East Lansing, Michigan
paternity testing operations into our Dayton, Ohio facility through future annual cost savings of approximately $1 million from operational efficiencies, plant and equipment cost reductions and increased scalability;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that we will incur restructuring charges and cash expenditures in connection with the consolidation of our Nashville, Tennessee
forensic DNA testing facility into our Dallas, Texas facility of $1,025,000 to $1,300,000 in the aggregate, which includes: severance and retention bonuses for employees in
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



19



---

##### Table of Contents

| | the range of $540,000 to $680,000; relocation costs for employees relocating from the Nashville facility in the range of $85,000 to $110,000; recruiting and training costs in our Dallas facility
in connection with the transfer of work from the Nashville facility of approximately $50,000; lease termination costs in the range of $50,000 to $100,000; and equipment relocation and reinstallation costs in the range of $300,000 to $360,000;
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that a substantial portion of the restructuring charges and cash expenditures in connection with the consolidation of our Nashville,
Tennessee forensic DNA testing facility into our Dallas, Texas facility will be reported in second, third and fourth quarters of 2010;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that we will offset the restructuring charges and cash expenditures in connection with the consolidation of our Nashville, Tennessee
forensic DNA testing facility into our Dallas, Texas facility through future annual cost savings of approximately $1.4 million from operational efficiencies, plant and equipment cost reductions and increased scalability;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our belief that the UK government and police forces will continue to support the use of DNA testing in forensic cases;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | our belief that DNA testing of non-violent or property crime evidence is a growth area for our forensics business;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that the competition for DNA testing services will intensify in the future;
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | our belief that states are building up their backlogs of DNA samples and that such states will eventually move to administer the awards in order to
bring down the backlog;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our belief that excess capacity in the private sector may affect pricing in the future;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | our belief that our experience and reputation as a reliable provider of services to government agencies is a valued credential that can be used in
securing both new contracts and renewing existing contracts;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that the police forces in the UK who have not yet done so will solicit initial tenders for forensic services through the UKs
National Forensic Framework Agreement by the end of 2011;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that our future agricultural testing services revenues will not be significant to our operating results;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | our intention to develop and evaluate new technologies to enhance our laboratory processes, including instrumentation, automation and new testing
methodologies;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that our instrumentation, automation and new testing methodologies will enable us to reduce our costs for and improve the quality of
our service offerings;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our anticipation that the volume of CODIS testing will grow in the US and that volume of work related to the UK National DNA Database will be
relatively stable;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our anticipation that our current facilities should serve our near term capacity needs;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | our anticipation that federal and state governments in the US will allocate greater resources to support wider use of DNA testing;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that our award under the North West/South West and Wales regional tender in the UK will continue to result in significant revenues;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our intention to seek and continue to seek patent protection for novel uses of SNPs in the genetic testing field;
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | our intention to continue to concentrate on protection of our intellectual property as it relates to our DNA testing services;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that we will continue to receive substantial discounts based upon reaching a specific threshold of purchases per year of reagents and
other components from our current supplier;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



20



---

##### Table of Contents

| |  |  | our anticipation that our existing cash on hand will be sufficient to fund our operations at least through the next twelve months;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | our anticipation that a portion of our future growth may be accomplished either by acquiring or merging with existing businesses;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | our plan to continue to market our services to governments, commercial companies and private individuals;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | our belief that litigation claims arising against us from the normal course of business will not have a material effect on our financial position and
liquidity, but could have a material impact on our results of operations for any reporting period;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation to not pay any dividends in the foreseeable future;
| | - |  | -------------------------------------------------------------------



| |  |  | our intention to retain earnings, if any, to finance our growth;
| | - |  | ----------------------------------------------------------------



| |  |  | our plan to continue to make investments in our business;
| | - |  | ---------------------------------------------------------



| |  |  | our expectation about our significant uses of liquidity;
| | - |  | --------------------------------------------------------



| |  |  | our expectation that the adoption of various recently issued accounting pronouncements will not have a material impact on our consolidated financial
statements;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our belief that the probability of us incurring a material restoration expense upon exiting our operating leases is minimal; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | our expectation that our disclosure controls and procedures or our internal control over financial reporting will not prevent all error and all fraud.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

While management makes its best efforts to be accurate in making forward-looking statements, such
statements are subject to risks and uncertainties that could cause actual results to vary materially, including the risks and uncertainties discussed throughout this Quarterly Report on Form 10-Q and the cautionary information set forth under the
heading Risk Factors appearing in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009, as amended. Except as required by law, we undertake no obligation to publicly update or revise forward-looking
statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

PART II  OTHER INFORMATION



|Item 1. | LEGAL PROCEEDINGS
|------- | -----------------

On or
about November 21, 2001, a complaint was filed in the United States District Court for the Southern District of New York naming the Company as a defendant, along with certain of the Companys former officers and underwriters. An amended
complaint was filed on April 19, 2002. The complaint, as amended, purportedly was filed on behalf of persons purchasing the Companys stock between May 4, 2000 and December 6, 2000, and alleges violations of Sections 11, 12(a)(2)
and 15 of the Securities Act of 1933, as amended, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The amended complaint alleges that, in connection with the Companys
May 5, 2000 initial public offering, or IPO, the defendants failed to disclose additional and excessive commissions purportedly solicited by and paid to the underwriter defendants in exchange for allocating shares of the Companys stock to
preferred customers and alleged agreements among the underwriter defendants and preferred customers tying the allocation of IPO shares to agreements to make additional aftermarket purchases at pre-determined prices. Plaintiffs claim that the failure
to disclose these alleged arrangements made the Companys registration statement on Form S-1 filed with the SEC in May 2000 and the prospectus, a part of the registration statement, materially false and misleading. On or about July 15,
2002, the Company filed a motion to dismiss all of the claims against the Company and the Companys former officers. On October 9, 2002, the Court dismissed without prejudice only the Companys former officers, Dale R. Pfost and
Donald R. Marvin, from the litigation in exchange for the Company entering into a tolling agreement with plaintiffs executive committee. On February 19, 2003, the Company received notice of the Courts decision to dismiss the
Section 10(b) claims against the Company. Plaintiffs and the defendant issuers involved in related IPO securities litigation, including us, have agreed in principal on a



21



---

##### Table of Contents

settlement that, upon a one-time surety payment by the defendant issuers insurers, would release the defendant issuers and the individual officers and directors from claims and any future
payments or out-of-pocket costs. On March 10, 2005, the Court issued a memorandum and order (i) preliminarily approving the settlement, contingent on the parties agreement on modifications of the proposed bar order in the settlement
documents, (ii) certifying the parties proposed settlement classes, (iii) certifying the proposed class representatives for the purposes of the settlement only and (iv) setting a further hearing for the purposes of
(a) making a final determination as to the form, substance and program of notice of proposed settlement and (b) scheduling a public fairness hearing in order to determine whether the settlement can be finally approved by the Court. On
April 24, 2006, the Court held a fairness hearing and took the motion for final approval under advisement. On October 5, 2009, the Court granted the plaintiffs motion for an order of final approval of the settlement, plan of
allocation and certification of the class. Such settlement does not require any payment by the Company to the plaintiffs. The issuers share of the settlement amount is funded by the insurers. Notices of appeal have been filed by six groups of
appellants. None of the notices state the basis for appeal.

In related proceedings against the underwriters, the United
States Court of Appeals for the Second Circuit ruled on December 5, 2006 that the certification by the District Court for the Southern District of New York of class actions against the underwriters in six focus cases was vacated and
remanded for further proceedings. In so doing, the Second Circuit ruled that the cases pending on this appeal may not be certified as class actions. On April 6, 2007, the Second Circuit denied the plaintiffs petition for
rehearing, and no further appeals have been taken.

As a result of the Second Circuits ruling, the plaintiffs and the
issuers stipulated on June 22, 2007 that the Stipulation and Agreement of Settlement with Defendant Issuers and Individuals, which was originally submitted to the Court on June 10, 2004, was terminated, which resolved the motion for final
approval of the class action settlement with the issuers and individual defendants. The Court entered the parties stipulation as an Order on June 25, 2007. As a result of these developments, the plaintiffs have filed amended complaints
against the underwriters and focus case issuers and individuals and are attempting to certify a class action.

In
response to the amended complaints, the underwriters and focus case issuers moved to dismiss the amended complaints. On March 26, 2008, the motion to dismiss was granted in part and denied in part. As a result, the Court will
proceed with the plaintiffs amended complaints against the underwriters and focus case issuers to determine whether class actions can be certified.

The Company is a defendant in litigation pending in the United States District Court for the Southern District of New York entitled Enzo
Biochem, Inc. et al. (Enzo) v. Amersham PLC, et al. (Amersham), filed in October 2002. By their complaint, plaintiffs allege that certain defendants (i) breached their distributorship agreements by selling certain products for commercial
development (which they allege was not authorized), (ii) infringed plaintiffs patents through the sale and use of certain products, and (iii) are liable for unfair competition and tortious interference with contractual relations. The
Company did not have a contractual relationship with plaintiffs, but the Company is alleged to have purchased the product at issue from one of the other defendants. The Company sold the business unit that was allegedly engaged in the unlawful
conduct. As a result, there is no relevant injunctive relief to be sought from the Company. The complaint seeks damages in an undisclosed amount. Most of the fact discovery in the case has been taken, and a Markman hearing to construe the patent
claims was conducted in early July 2005. On July 17, 2006, the Court ruled in the Companys favor on its construction of the patents asserted against the Company, and the co-defendants, including the Company, moved for summary judgment on
all claims against the Company in January 2007. A hearing on the defendants motions for summary judgment occurred on July 17-18, 2007, and the Court reserved ruling on the motions, taking them under advisement. Such matter has been
delayed due to the death of the judge and the assignment of a new judge.

In other litigation brought by Enzo against another
defendant under the same patents asserted against us, a Connecticut Federal Court has invalidated the patents asserted there and asserted against us in the New York case. That decision was reversed in part by the Court of Appeals on
March 26, 2010. As a result of these developments, the Enzo v. Amersham case has been stayed pending the outcome of the Connecticut Federal Court case.

On June 5, 2008, the Company and Beckman Coulter, Inc. filed suit against Sequenom, Inc, or Sequenom, in the United States District
Court for the Southern District of California alleging infringement of U.S. patent numbers 5,888,819, 6,004,744 and 6,537,748. This lawsuit seeks damages and injunctive relief. Sequenom filed an answer and counterclaims on August 15, 2008. A
reply to the counterclaims was filed on August 29, 2008. On June 22, 2009, the parties filed a stipulation of dismissal which dismissed the lawsuit with prejudice.



22



---

##### Table of Contents

On February 12, 2010, a complaint was filed in the United States District Court for the
Western District of Wisconsin by Genetic Technologies Limited naming the Company as a defendant, along with eight other companies. The complaint, entitled Genetic Technologies Limited v. Beckman Coulter, Inc., et al., alleges that the defendants
infringed U.S. Patent No. 5,612,179 through the sale and use of certain products and services. There is no request for injunctive relief by the plaintiff. The Company has been served with a complaint and has filed an answer. Discovery is
currently being conducted. The Company believes the allegations are without merit and intends to vigorously defend the Company against such claims.

Additionally, the Company has certain other claims against us arising from the normal course of our business. The ultimate resolution of
such matters, including those cases disclosed above, in the opinion of management, will not have a material effect on our financial position and liquidity, but could have a material impact on the Companys results of operations for any
reporting period.



|Item 1A. | RISK FACTORS
|-------- | ------------

There have
not been any material changes to the risk factors disclosed under the heading Risk Factors appearing in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009.



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

Not applicable.



|Item 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

Not applicable.



|Item 4. | [RESERVED.]
|------- | -----------



|Item 5. | OTHER INFORMATION
|------- | -----------------

Not
applicable.



|Item 6. | EXHIBITS
|------- | --------

The following
is a list of exhibits filed as part of this Quarterly Report on Form 10-Q.



|              |  |                                                                                                                                                       
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                           
|              | 
|31.1          |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                
|              | 
|31.2          |  | Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                 
|              | 
|32            |  | Certifications of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



23



---

##### Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.



|                     |  |                      |  |                                                                                                       
|-------------------- |  | -------------------- |  | ------------------------------------------------------------------------------------------------------
|                     |  | ORCHID CELLMARK INC.
|                     |  |                     
|Date: August 6, 2010 |  | By:                  |  | /S/    JAMES F.
SMITH                                                                                 
|                     |  |                      |  | James F. Smith
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)



24