##### 



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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

(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, 2002  
|     |  |                                                                                                                                       
|     |  | 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 0-23317

---

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|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 06-1411336
(I.R.S. Employer
Identification No.)

708 Quince Orchard Road
Gaithersburg, Maryland 20878
(Address of principal executive offices)(301) 987-1700
(Registrants phone number, including area code)

---

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 [  ]

The number of shares outstanding of the Registrants Common Stock, $.01
par value, was 27,022,508 as of July 31, 2002.

---





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##### 



GENE LOGIC INC.

TABLE OF CONTENTS

|                                                                                                      |  |  |    | 
|----------------------------------------------------------------------------------------------------- |  |  | -- | 
|PART I                      FINANCIAL INFORMATION                                                     |  |  |    | 
|                                                                                                      |  |  |    | 
|Item 1. Financial Statements                                                                          |  |  |    | 
|                                                                                                      |  |  |    | 
|Balance Sheets at June 30, 2002 and December 31, 2001                                                 |  |  | 3  | 
|Statements of Operations for the Three and Six Months Ended June 30, 2002 and 2001                    |  |  | 4  | 
|Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001                              |  |  | 5  | 
|Notes to Financial Statements                                                                         |  |  | 6  | 
|                                                                                                      |  |  |    | 
|Item 2. Managements Discussion and Analysis         of Results of Operations and
Financial Condition |  |  | 8  | 
|                                                                                                      |  |  |    | 
|Item 3. Quantitative and Qualitative Disclosure About Market Risk                                     |  |  | 10 | 
|                                                                                                      |  |  |    | 
|PART II                      OTHER INFORMATION                                                        |  |  |    | 
|                                                                                                      |  |  |    | 
|Item 4. Submission of Matters to a Vote of Security Holders                                           |  |  | 11 | 
|                                                                                                      |  |  |    | 
|Item 6. Exhibits and Reports on Form 8-K                                                              |  |  | 12 | 
|                                                                                                      |  |  |    | 
|Signatures                                                                                            |  |  | 13 | 

2



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##### 



PART I                  FINANCIAL INFORMATION

Item 1.   Financial Statements

GENE LOGIC INC.

BALANCE SHEETS
(in thousands, except share data)

|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |              |          |         |        | 
|------------------------------- | ---------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------ | -------- | ----------- | ------ | ------------ | -------- | ------- | ------ | 
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          | June 30,    |        | December 31,
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          | 2002        |        | 2001        
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |             
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          | (Unaudited) |        |              |          |        
|                                |                                          |                                                                                                                                                                             |                                            | ASSETS                               |          |             |        |              |          |         |        | 
|Current assets:                 |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |             
|                                | Cash and cash equivalents                |                                                                                                                                                                             | $                                          | 180,971                              |          |             | $      | 128,273      |         
|                                | Marketable securities available-for-sale |                                                                                                                                                                             |                                            |                                     |          |             |        | 69,545       |         
|                                | Accounts receivable                      |                                                                                                                                                                             |                                            | 3,048                                |          |             |        | 2,460        |         
|                                | Inventory, net                           |                                                                                                                                                                             |                                            | 6,551                                |          |             |        | 6,097        |         
|                                | Prepaid expenses                         |                                                                                                                                                                             |                                            | 3,180                                |          |             |        | 2,348        |         
|                                | Other current assets                     |                                                                                                                                                                             |                                            | 1,040                                |          |             |        | 3,512        |         
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |              |         
|                                |                                          |                                                                                                                                                                             | Total current assets                       |                                      |          | 194,790     |        |              |          | 212,235 |       
|Property and equipment, net     |                                          |                                                                                                                                                                             | 17,030                                     |                                      |          |             | 18,358 |             
|Long-term investments           |                                          |                                                                                                                                                                             | 6,021                                      |                                      |          |             | 4,631  |             
|Notes receivable from employees |                                          |                                                                                                                                                                             | 64                                         |                                      |          |             | 106    |             
|Goodwill, net                   |                                          |                                                                                                                                                                             | 2,677                                      |                                      |          |             | 2,677  |             
|Intangibles, net                |                                          |                                                                                                                                                                             | 22,393                                     |                                      |          |             | 17,480 |             
|Other assets                    |                                          |                                                                                                                                                                             | 51                                         |                                      |          |             | 1,440  |             
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |              |         
|                                |                                          |                                                                                                                                                                             | Total assets                               |                                      | $        | 243,026     |        |              | $        | 256,927 |       
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |              |         
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |             
|                                |                                          |                                                                                                                                                                             |                                            | LIABILITIES AND STOCKHOLDERS EQUITY |          |             |        |              |         
|Current liabilities:            |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |             
|                                | Accounts payable                         |                                                                                                                                                                             | $                                          | 6,035                                |          |             | $      | 8,479        |         
|                                | Accrued expenses                         |                                                                                                                                                                             |                                            | 4,679                                |          |             |        | 5,022        |         
|                                | Current portion of long-term debt        |                                                                                                                                                                             |                                            | 39                                   |          |             |        | 38           |         
|                                | Deferred revenue                         |                                                                                                                                                                             |                                            | 12,715                               |          |             |        | 11,512       |         
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |              |         
|                                |                                          |                                                                                                                                                                             |                                            | Total current liabilities            |          |             | 23,468 |              |          |         | 25,051 | 
|Deferred revenue                |                                          |                                                                                                                                                                             | 2,332                                      |                                      |          |             | 4,525  |             
|Long-term debt                  |                                          |                                                                                                                                                                             | 730                                        |                                      |          |             | 300    |             
|Other noncurrent liabilities    |                                          |                                                                                                                                                                             | 1,048                                      |                                      |          |             | 1,024  |             
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |              |         
|                                |                                          |                                                                                                                                                                             |                                            | Total liabilities                    |          |             | 27,578 |              |          |         | 30,900 | 
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |              |         
|Commitments and contingencies   |                                          |                                                                                                                                                                             |                                           |                                      |          |             |       |             
|Stockholders equity:           |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |             
|                                |                                          | Preferred stock, $.01 par value; 10,000,000
shares authorized; no shares issued and
outstanding as of June 30, 2002 and December
31, 2001                                   |                                            |                                      |         |             |        |              |         |        
|                                |                                          | Common stock, $.01 par value; 60,000,000
shares authorized; 26,921,289 and 26,767,837
shares issued and outstanding as of June 30,
2002 and December 31, 2001, respectively |                                            |                                      | 269      |             |        |              | 268      |        
|                                |                                          | Additional paid-in capital                                                                                                                                                  |                                            |                                      | 362,417  |             |        |              | 361,067  |        
|                                |                                          | Accumulated other comprehensive income                                                                                                                                      |                                            |                                      |         |             |        |              | 17       |        
|                                |                                          | Accumulated deficit                                                                                                                                                         |                                            |                                      | (147,238 | )           |        |              | (135,325 | )      
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |              |         
|                                |                                          |                                                                                                                                                                             | Total stockholders equity                 |                                      |          | 215,448     |        |              |          | 226,027 |       
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |              |         
|                                |                                          |                                                                                                                                                                             | Total liabilities and stockholders equity |                                      | $        | 243,026     |        |              | $        | 256,927 |       
|                                |                                          |                                                                                                                                                                             |                                            |                                      |          |             |        |              |         

See accompanying notes.

3



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##### 



GENE LOGIC INC.

STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)

|                                                                     |                                     |                          |        |                    |        |                  |        |        |         |      |        |        |         |   |        |        |         |  
|-------------------------------------------------------------------- | ----------------------------------- | ------------------------ | ------ | ------------------ | ------ | ---------------- | ------ | ------ | ------- | ---- | ------ | ------ | ------- | - | ------ | ------ | ------- | -
|                                                                     |                                     |                          |        | Three Months Ended |        | Six Months Ended
|                                                                     |                                     |                          |        | June 30,           |        | June 30,        
|                                                                     |                                     |                          |        |                    |        |                 
|                                                                     |                                     |                          |        | 2002               |        | 2001             |        | 2002   |         | 2001
|                                                                     |                                     |                          |        |                    |        |                  |        |        |         |     
|Revenue                                                              |                                     | $                        | 14,066 |                    |        | $                | 9,603  |        |         | $    | 25,908 |        |         | $ | 17,815 |       
|Expenses:                                                            |                                     |                          |        |                    |        |                  |        |        |         |      |        |        |         |   |        |       
|                                                                     | Research and development            |                          |        | 14,115             |        |                  |        | 15,109 |         |      |        | 28,408 |         |   |        | 30,799 |        
|                                                                     | Selling, general and administrative |                          |        | 4,977              |        |                  |        | 5,412  |         |      |        | 10,703 |         |   |        | 10,204 |        
|                                                                     | Amortization of goodwill            |                          |        |                   |        |                  |        | 381    |         |      |        |       |         |   |        | 762    |        
|                                                                     |                                     |                          |        |                    |        |                  |        |        |         |      |        |        |         |   |        |       
|                                                                     |                                     | Total operating expenses |        |                    | 19,092 |                  |        |        | 20,902  |      |        |        | 39,111  |   |        |        | 41,765  |  
|                                                                     |                                     |                          |        |                    |        |                  |        |        |         |      |        |        |         |   |        |       
|                                                                     |                                     | Loss from operations     |        |                    | (5,026 | )                |        |        | (11,299 | )    |        |        | (13,203 | ) |        |        | (23,950 | )
|Interest (income), net                                               |                                     |                          | (785   | )                  |        |                  | (2,278 | )      |         |      | (1,624 | )      |         |   | (5,564 | )     
|Other (income)                                                       |                                     |                          | (250   | )                  |        |                  | (83    | )      |         |      | (250   | )      |         |   | (83    | )     
|Income tax expense                                                   |                                     |                          | 389    |                    |        |                  | 164    |        |         |      | 584    |        |         |   | 213    |       
|Equity in net loss of unconsolidated investee                        |                                     |                          |       |                    |        |                  | 261    |        |         |      |       |        |         |   | 1,450  |       
|                                                                     |                                     |                          |        |                    |        |                  |        |        |         |      |        |        |         |   |        |       
|                                                                     |                                     | Net loss                 |        | $                  | (4,380 | )                |        | $      | (9,363  | )    |        | $      | (11,913 | ) |        | $      | (19,966 | )
|                                                                     |                                     |                          |        |                    |        |                  |        |        |         |      |        |        |         |   |        |       
|Basic and diluted net loss per common share                          |                                     | $                        | (0.16  | )                  |        | $                | (0.35  | )      |         | $    | (0.44  | )      |         | $ | (0.76  | )     
|                                                                     |                                     |                          |        |                    |        |                  |        |        |         |      |        |        |         |   |        |       
|Shares used in computing basic and diluted net loss per
common share |                                     |                          | 26,915 |                    |        |                  | 26,495 |        |         |      | 26,874 |        |         |   | 26,372 |       
|                                                                     |                                     |                          |        |                    |        |                  |        |        |         |      |        |        |         |   |        |       

See accompanying notes.

4



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GENE LOGIC INC.

STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

|                                                                         |                                                                              |                                          |         |                  |        |      |         |        |         |  
|------------------------------------------------------------------------ | ---------------------------------------------------------------------------- | ---------------------------------------- | ------- | ---------------- | ------ | ---- | ------- | ------ | ------- | -
|                                                                         |                                                                              |                                          |         | Six Months Ended
|                                                                         |                                                                              |                                          |         | June 30,        
|                                                                         |                                                                              |                                          |         |                 
|                                                                         |                                                                              |                                          |         | 2002             |        | 2001
|                                                                         |                                                                              |                                          |         |                  |        |     
|Cash flows from operating activities:                                    |                                                                              |                                          |         |                  |        |      |         |       
|Net loss                                                                 |                                                                              | $                                        | (11,913 | )                |        | $    | (19,966 | )     
|Adjustments to reconcile net loss to net cash from operating activities: |                                                                              |                                          |         |                  |        |      |         |       
|                                                                         | Depreciation and amortization                                                |                                          |         | 6,374            |        |      |         | 5,413  |        
|                                                                         | Amortization of goodwill                                                     |                                          |         |                 |        |      |         | 762    |        
|                                                                         | Amortization of deferred compensation                                        |                                          |         |                 |        |      |         | 558    |        
|                                                                         | Net loss from investment in unconsolidated investee                          |                                          |         |                 |        |      |         | 1,450  |        
|                                                                         | Gain from the sale of equity investment                                      |                                          |         | (250             | )      |      |         |       |        
|Changes in operating assets and liabilities:                             |                                                                              |                                          |         |                  |        |      |         |       
|                                                                         | Accounts receivable                                                          |                                          |         | (588             | )      |      |         | (108   | )      
|                                                                         | Inventory, net                                                               |                                          |         | (454             | )      |      |         | 1,249  |        
|                                                                         | Prepaid expenses                                                             |                                          |         | (832             | )      |      |         | (530   | )      
|                                                                         | Other current assets                                                         |                                          |         | 2,470            |        |      |         | 2,349  |        
|                                                                         | Other assets                                                                 |                                          |         |                 |        |      |         | (169   | )      
|                                                                         | Accounts payable                                                             |                                          |         | (2,444           | )      |      |         | 2,641  |        
|                                                                         | Litigation settlement payable                                                |                                          |         |                 |        |      |         | (9,000 | )      
|                                                                         | Accrued expenses                                                             |                                          |         | (343             | )      |      |         | (3,504 | )      
|                                                                         | Deferred revenue                                                             |                                          |         | (1,990           | )      |      |         | (1,185 | )      
|                                                                         | Other noncurrent liabilities                                                 |                                          |         | 24               |        |      |         | 287    |        
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       
|                                                                         |                                                                              | Net cash flows from operating activities |         |                  | (9,946 | )    |         |        | (19,753 | )
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       
|Cash flows from investing activities:                                    |                                                                              |                                          |         |                  |        |      |         |       
|                                                                         | Purchases of property and equipment                                          |                                          |         | (1,433           | )      |      |         | (5,660 | )      
|                                                                         | Purchases of licenses and patent costs                                       |                                          |         | (1,103           | )      |      |         | (624   | )      
|                                                                         | Software
development and database upgrade costs                              |                                          |         | (7,424           | )      |      |         | (2,955 | )      
|                                                                         | Sale (Purchase) of equity investment                                         |                                          |         | 1,250            |        |      |         | (753   | )      
|                                                                         | Repayments of notes receivable from employees                                |                                          |         | 44               |        |      |         | 41     |        
|                                                                         | Proceeds from sale and maturity of marketable securities available-for-sale  |                                          |         | 69,528           |        |      |         |       |        
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       
|                                                                         |                                                                              | Net cash flows from investing activities |         |                  | 60,862 |      |         |        | (9,951  | )
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       
|Cash flows from financing activities:                                    |                                                                              |                                          |         |                  |        |      |         |       
|                                                                         | Proceeds from issuance of common stock                                       |                                          |         | 1,351            |        |      |         | 2,911  |        
|                                                                         | Proceeds from exercise of warrant                                            |                                          |         |                 |        |      |         | 534    |        
|                                                                         | Proceeds from note payable                                                   |                                          |         | 450              |        |      |         |       |        
|                                                                         | Repayments of equipment loans                                                |                                          |         | (19              | )      |      |         | (761   | )      
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       
|                                                                         |                                                                              | Net cash flows from financing activities |         |                  | 1,782  |      |         |        | 2,684   |  
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       
|Net increase (decrease) in cash and cash equivalents                     |                                                                              |                                          | 52,698  |                  |        |      | (27,020 | )     
|Cash and cash equivalents, beginning of period                           |                                                                              |                                          | 128,273 |                  |        |      | 229,482 |       
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       
|Cash and cash equivalents, end of period                                 |                                                                              | $                                        | 180,971 |                  |        | $    | 202,462 |       
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       
|Supplemental disclosure:                                                 |                                                                              |                                          |         |                  |        |      |         |       
|                                                                         | Taxes paid                                                                   |                                          | $       | 754              |        |      | $       | 208    |        
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       
|                                                                         | Interest paid                                                                |                                          | $       | 8                |        |      | $       | 107    |        
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       
|Non-cash transactions:                                                   |                                                                              |                                          |         |                  |        |      |         |       
|                                                                         | Equity investment received as partial payment for a GeneExpress subscription |                                          | $       | 1,000            |        |      | $       |       |        
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       
|                                                                         | Promissory note received from sale of investment                             |                                          | $       |                 |        |      | $       | 2,654  |        
|                                                                         |                                                                              |                                          |         |                  |        |      |         |       

See accompanying notes.

5



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##### 



GENE LOGIC INC.

NOTES TO FINANCIAL STATEMENTS
June 30, 2002
(Unaudited)

Note 1  Summary of significant accounting policies

Basis of Presentation

For the three and six months ended June 30, 2001, the unaudited financial
statements include the accounts of Gene Logic Inc. (the Company) and its
wholly owned subsidiary. The Company and its wholly owned subsidiary were
merged in the fourth quarter of 2001. The accompanying unaudited financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. The balance sheet as of June 30, 2002,
statements of operations for the three and six months ended June 30, 2002 and
2001 and the statements of cash flows for the six months ended June 30, 2002
and 2001 are unaudited, but include all adjustments (consisting of normal
recurring adjustments) which the Company considers necessary for a fair
presentation of the financial position, operating results and cash flows for
the periods presented. Although the Company believes that the disclosures in
these financial statements are adequate to make the information presented not
misleading, certain information and footnote information normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission.

Results for any interim period are not necessarily indicative of results
for any future interim period or for the entire year. The accompanying
unaudited financial statements should be read in conjunction with the financial
statements and notes thereto included in the Companys Annual Report on Form
10-K for the year ended December 31, 2001.

Segment Information

The Company currently operates in one business segmentthe development of
products and services related to genomic information. The Company is managed
and operated as one business segment. Accordingly, the Company does not
prepare financial information for separate product areas and does not have
separate reportable segments as defined by Statement of Financial Accounting
Standards No. 131, Disclosure about Segments of an Enterprise and Related
Information.

The following is a breakdown by major customers exceeding ten percent
(10%) of revenue:

|                            |               |  |                 |    |   |  |  |    |  
|--------------------------- | ------------- |  | --------------- | -- | - |  |  | -- | -
|                            |               |  | Major Customers
|                            |               |  |                
|                            |               |  | A               |    | B
|                            |               |  |                 |    |  
|For the three months ended: |               |  |                 |    |   |  |  |   
|                            | June 30, 2002 |  |                 |   |   |  |  |   |  
|                            | June 30, 2001 |  |                 | 11 | % |  |  | 10 | %
|For the six months ended:   |               |  |                 |    |   |  |  |   
|                            | June 30, 2002 |  |                 |   |   |  |  |   |  
|                            | June 30, 2001 |  |                 | 12 | % |  |  | 10 | %

Reclassifications

Certain reclassifications have been made to the prior periods financial
statements to conform with the current periods presentation.

Note 2  Goodwill and intangible assets

As of January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS No.
142), which addresses the financial accounting and reporting standards for the
acquisition of intangible assets outside of a business combination and for
goodwill and other intangible assets subsequent to their acquisition. This
accounting standard requires that goodwill be separately disclosed from other
intangible assets in the balance sheet, and no longer be amortized but tested
for impairment on a periodic basis.

6



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##### 



In accordance with SFAS No. 142, the Company discontinued the amortization
of goodwill effective January 1, 2002. A reconciliation of previously reported
net loss and loss per common share to the pro forma amounts adjusted for the
exclusion of goodwill amortization is as follows:

|                                             |  |                    |        |                  |  |      |        |      |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                             |  | Three Months Ended |        | Six Months Ended
|                                             |  | June 30,           |        | June 30,        
|                                             |  |                    |        |                 
|                                             |  | 2002               |        | 2001             |  | 2002 |        | 2001
|                                             |  |                    |        |                  |  |      |        |     
|Reported net loss                            |  | $                  | (4,380 | )                |  | $    | (9,363 | )    |  | $ | (11,913 | ) |  | $ | (19,966 | )
|Add: Goodwill amortization                   |  |                    |       |                  |  |      | 381    |      |  |   |        |   |  |   | 762     |  
|                                             |  |                    |        |                  |  |      |        |      |  |   |         |   |  |   |         |  
|Pro forma adjusted net loss                  |  | $                  | (4,380 | )                |  | $    | (8,982 | )    |  | $ | (11,913 | ) |  | $ | (19,204 | )
|                                             |  |                    |        |                  |  |      |        |      |  |   |         |   |  |   |         |  
|Basic and diluted net loss per common share: |  |                    |        |                  |  |      |        |      |  |   |         |   |  |   |         |  
|Reported net loss                            |  |                    | (0.16  | )                |  | $    | (0.35  | )    |  | $ | (0.44   | ) |  | $ | (0.76   | )
|Add: Goodwill amortization                   |  |                    |       |                  |  |      | 0.01   |      |  |   |        |   |  |   | 0.03    |  
|                                             |  |                    |        |                  |  |      |        |      |  |   |         |   |  |   |         |  
|Pro forma adjusted net loss                  |  | $                  | (0.16  | )                |  | $    | (0.34  | )    |  | $ | (0.44   | ) |  | $ | (0.73   | )
|                                             |  |                    |        |                  |  |      |        |      |  |   |         |   |  |   |         |  

There were no changes in the carrying amount of goodwill for the quarter
ended June 30, 2002 based on the initial impairment test performed as of
January 1, 2002, which resulted in no impairment to the value of goodwill in
the Companys financial statements. Additionally, as required by SFAS No. 142,
intangible assets that do not meet the criteria for recognition apart from
goodwill must be reclassified. As a result of the Companys analysis, no
reclassifications were required as of June 30, 2002.

Information regarding the Companys other intangible assets is as follows:

|                               |                            |   |          |        |              |   |        |        | 
|------------------------------ | -------------------------- | - | -------- | ------ | ------------ | - | ------ | ------ | 
|                               |                            |   | June 30, |        | December 31,
|                               |                            |   | 2002     |        | 2001        
|                               |                            |   |          |        |             
|Carrying amount:               |                            |   |          |        |              |   |        |       
|                               | Licenses                   |   | $        | 9,333  |              |   | $      | 8,140  | 
|                               | Patent costs               |   |          | 2,451  |              |   |        | 2,541  | 
|                               | Software development costs |   |          | 15,212 |              |   |        | 11,578 | 
|                               | Database upgrade costs     |   |          | 7,804  |              |   |        | 4,013  | 
|                               |                            |   |          |        |              |   |        |        | 
|Total carrying amount          |                            | $ | 34,800   |        |              | $ | 26,272 |       
|                               |                            |   |          |        |              |   |        |        | 
|Accumulated amortization:      |                            |   |          |        |              |   |        |       
|                               | Licenses                   |   | $        | 3,844  |              |   | $      | 3,067  | 
|                               | Patent costs               |   |          | 340    |              |   |        | 257    | 
|                               | Software development costs |   |          | 4,914  |              |   |        | 3,146  | 
|                               | Database upgrade costs     |   |          | 3,309  |              |   |        | 2,322  | 
|                               |                            |   |          |        |              |   |        |        | 
|Total accumulated amortization |                            | $ | 12,407   |        |              | $ | 8,792  |       
|                               |                            |   |          |        |              |   |        |        | 
|Net carrying value:            |                            |   |          |        |              |   |        |       
|                               | Licenses                   |   | $        | 5,489  |              |   | $      | 5,073  | 
|                               | Patent costs               |   |          | 2,111  |              |   |        | 2,284  | 
|                               | Software development costs |   |          | 10,298 |              |   |        | 8,432  | 
|                               | Database upgrade costs     |   |          | 4,495  |              |   |        | 1,691  | 
|                               |                            |   |          |        |              |   |        |        | 
|Total net carrying value       |                            | $ | 22,393   |        |              | $ | 17,480 |       
|                               |                            |   |          |        |              |   |        |        | 

Amortization expense for the three and six months ended June 30, 2002 was
$2.0 million and $3.6 million, respectively. Amortization expense for the three
and six months ended June 30, 2001 was $1.1 million and $2.7 million,
respectively. Estimated amortization expense for existing intangible assets for
each of the five succeeding years ended December 31 will be as follows:

|                          |  |   |       | 
|------------------------- |  | - | ----- | 
|2002 (remaining 6 months) |  | $ | 4,478 | 
|2003                      |  |   | 7,993 | 
|2004                      |  |   | 4,933 | 
|2005                      |  |   | 1,879 | 
|2006                      |  |   | 337   | 

7



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Item 2. Managements Discussions and Analysis of Results of Operations and Financial Condition

This Quarterly Report contains certain forward-looking statements within
the meaning of the United States Private Securities Litigation Reform Act of
1995, as amended. These statements involve risks and uncertainties that could
cause actual results to differ materially from those expressed in this
Quarterly Report. These risks and uncertainties include, but are not limited
to, the extent of utilization of genomic information by the pharmaceutical and
biotechnology industries in research and product development, our ability to
retain existing and obtain additional customers in a timely manner, capital
markets and other economic conditions adversely affecting the purchasing
patterns of pharmaceutical and biotechnology companies, risks relating to the
development of genomic information products and their use by existing and
potential customers and ultimate consumers, our reliance on Affymetrix, Inc.
for GeneChip® microarrays and other sole source suppliers, our ability to limit
our losses and become profitable, our ability to timely supply customers with
new general and customer-specific products, continued access to necessary human
and animal tissue samples, the impact of technological advances and
competition, our ability to enforce our intellectual property rights, and the
impact of intellectual property rights of others, as well as other risks and
uncertainties included in our filings with the Securities and Exchange
Commission, including our Annual Report on Form 10-K for the year ended
December 31, 2001. We assume no obligation to update any forward-looking
statements contained in this Quarterly Report.

Unless the context requires otherwise, references in this Quarterly Report
to Gene Logic, the Company, we, us, and our refer to Gene Logic Inc.

GeneExpress® is
a registered trademark of Gene Logic. BioExpressTM,
DataSuites, CustomSuites, ToxExpressTM, ToxSuites, ToxScreen Reports and
Genesis: The GeneExpress Enterprise SystemTM (Genesis or Genesis Enterprise
System) are trademarks of Gene Logic. GeneChip® is a registered trademark of
Affymetrix, Inc.

Overview

We were incorporated in September 1994 and have devoted substantially all
of our resources to the development, marketing and sales of genomic information
and bioinformatics products and services to pharmaceutical and biotechnology
companies for use in drug discovery and drug development.

We commenced operations in 1996. In 1997, we began developing customized
information products based on proprietary genomic services under collaboration
agreements; these products were designed for our customers internal research and development
programs targeted to specific therapeutic areas of interest. The skills and
competencies acquired in creating such customized information products became
the foundation for developing GeneExpress, our large-scale reference database
of gene expression information, in early 1999. GeneExpress comprises what we
believe to be one of the worlds most comprehensive surveys of gene expression
in human and animal tissues related to disease and drug toxicity. The first
commercial version of GeneExpress was launched in late 1999. We sold our first
subscription to GeneExpress in December 1999. Currently, we market and sell our
GeneExpress line of products and services to pharmaceutical and biotechnology
customers worldwide.

Our GeneExpress information products and services consist of three primary
products: BioExpress, from which are derived additional products: DataSuites,
CustomSuites and GeneExpress Reports; ToxExpress, from which are derived
additional products: ToxSuites and ToxScreen Reports; and Genesis Enterprise
System and its associated professional services. Typically, GeneExpress
products, other than reports and the Genesis Enterprise System, are accessed
under three-year term subscription agreements with current aggregate pricing
per customer ranging between $2.5 million and $16.0 million, depending upon a
variety of factors, including the product accessed and the level and type of
information. Current pricing for GeneExpress Reports is on a pay-per-view
basis and ranges between $25,000 and $0.3 million, depending on the number of
genes and tissue samples surveyed. Pricing for ToxScreen Reports is anticipated
to be at a level comparable to pricing for GeneExpress Reports, and will depend
upon the scope and the number of compounds analyzed. Current pricing for a
license to Genesis Enterprise System and its associated professional services
range from $0.3 million to over $1.0 million, depending upon which elements of
the system and services are purchased. Pricing for customized information
products based on proprietary genomic services under collaboration agreements
have been determined on a case-by-case basis and typically include annual
access fees, research support and milestone payments.

Subscription fees for GeneExpress products are recognized systematically
over the term of the subscription. Fees for GeneExpress Report and ToxScreen Report
purchases are recognized upon delivery of the report(s). Fees associated with
Genesis Enterprise System licenses are currently recognized ratably over the
term of the initial maintenance provision under the license agreement.
Integration services fees are recognized on the percentage-of-completion
method. Fees from customized information products are recognized when custom
services are performed or costs are incurred. Milestone payments related to
customized information products are recognized when they are earned in
accordance with the applicable performance requirements and contractual terms.
Under agreements in which we create databases in exchange for fixed fees,
revenue from such agreements is recognized on the percentage-of-completion
method. Our business agreements may provide the right for early termination
without penalty to our customers.

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Our future profitability will depend in part on the continued successful
commercialization of our GeneExpress products and services through the
establishment of agreements with additional customers, renewal of agreements
with, and agreements for additional products for, existing customers. Payments
to access our GeneExpress products and services are expected to be our primary
source of revenue for the foreseeable future. We have not received, and do not
expect to receive, significant royalty or other revenue from development and
commercialization of products by our customers using our information
products. Revenue from our customers may
be subject to significant fluctuation in both timing and amount; therefore, our
results of operations for any period may not be comparable to the results of
operations for any other period.

We have incurred operating losses in each year since our inception. At
June 30, 2002, we had accumulated operating losses of $147.2 million. Our
losses have resulted principally from costs incurred in the development of our
genomic information products and services, a $35.2 million non-recurring charge
incurred in connection with our acquisition of Oncormed and selling, general
and administrative costs associated with our operations. These costs have
exceeded our revenue, which to date have been generated principally from
subscriptions to our GeneExpress products and services and agreements for our
customized information products. We expect to incur additional operating
losses in the future.

Results of Operations

Three And Six Months Ended June 30, 2002 And 2001

Revenue increased $4.5 million, or 46%, to $14.1 million for the three
months ended June 30, 2002 from $9.6 million for the same period in 2001.
Revenue increased $8.1 million, or 45%, to $25.9 million for the six months
ended June 30, 2002 from $17.8 million for the same period in 2001. The
increase in revenue resulted primarily from additional subscribers to our
GeneExpress product line and expanded subscription levels for existing
GeneExpress customers. Revenue from Boehringer Ingelheim and Proctor & Gamble
accounted for 10% or more of revenue for the three and six months ended June
30, 2001. Due to current economic uncertainty, we experienced delays in purchase
decisions among a number of our existing and potential customers during the second quarter.
These delays will slow our revenue growth at least through the end of 2002.

Research and development expenses decreased to $14.1 million and $28.4
million for the three and six months ended June 30, 2002, respectively, from
$15.1 million and $30.8 million for the same periods in 2001. The decrease in
research and development expenses was largely due to lower expenses as a result
of our efforts in upgrading our GeneExpress databases using the new Affymetrix
GeneChip Human Genome U-133 Set and a decrease in research and consulting
agreements. During the upgrade, new content was added to our GeneExpress databases at a lower rate than normal. Costs
incurred to upgrade our GeneExpress databases are capitalized and will be
amortized over a two-year period. The decrease in these expenses was partially
offset by higher usage of other Affymetrix microarrays used primarily to
generate data for ToxExpress. Research and development expenses fluctuate with
regard to both timing and amount, depending on the type and quantity of new
content added to the GeneExpress databases. When compared to the first half of
2002, research and development expenses are expected to increase for the second
half of the year due to our continued addition of new content to our
GeneExpress databases, release of the GeneExpress upgrade and enhanced
bioinformatics capabilities and development of new product offerings.

Selling, general and administrative expenses include the costs of
corporate operations, sales and marketing, finance and accounting, legal, human
resources and other general operations. Selling, general and administrative
expenses decreased to $5.0 million for the three months ended June 30, 2002
from $5.4 million for the same period in 2001, which was due to normal
fluctuations in the costs of operations. For the six months ended June 30, 2002,
selling, general and administrative expenses increased to $10.7 million from
$10.2 million for the same period in 2001, of which $0.7 million was due to
increased costs of our sales and marketing efforts. When compared to the first
half of 2002, selling, general and administrative expenses are not expected to
increase significantly for the second half of the year.

In accordance with SFAS 142, which we adopted January 1, 2002, we no
longer amortize goodwill, but instead apply annual impairment tests in
accordance with the Statement. We completed the initial impairment analysis
upon its adoption, which resulted in no impairment to goodwill. Amortization of
goodwill was $0.4 million and $0.8 million for the three and six months ended
June 30, 2001, respectively, and was the result of the acquisition of Oncormed
in September 1998.

Net interest income decreased to $0.8 million and $1.6 million for the
three and six months ended June 30, 2002 from $2.3 million and $5.6 million for
the same periods in 2001, primarily due to a decrease in the rates of return
for our investments in, and to a lesser degree a decline in our balance of,
cash, cash equivalents and marketable securities available-for-sale.

Other income increased to $0.3 million for the three and six months ended
June 30, 2002 from $0.1 million for the same periods in 2001, due to the gain
recognized from the sale of an equity investment in 2002.

9



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During 2000, we purchased a 26.7% voting stock interest in Neuralstem,
Inc., a privately held unconsolidated investee. The investment was accounted
for under the equity method of accounting. Through April 30, 2001, we recorded
our equity share of losses of Neuralstem and intercompany transactions were
eliminated in the accompanying financial statements. Effective April 30, 2001
as our voting stock interest was reduced below 15%, we began accounting for our
investment in Neuralstem under the cost method of accounting and our financial
statements do not reflect any additional share of Neuralstems losses or
elimination of intercompany sales and expenses after such date. At June 30,
2002, the book value of our investment was $4.3 million.

Liquidity and Capital Resources

From inception through June 30, 2002, we have financed our operations
through the sale of equity securities and payments from customers. As of June
30, 2002, we had approximately $181.0 million in cash, cash equivalents and
marketable securities, compared to $197.8 million as of December 31, 2001.

Net cash used in operating activities was $10.0 million for the six months
ended June 30, 2002 compared to $19.8 million during the same period in 2001.
The negative operating cash flow for the six months ended June 30, 2002 and
2001 was primarily due to the continued funding of our operating losses.

During the six months ended June 30, 2002 and 2001, our investing
activities, other than purchases and sales and maturities of available-for-sale
securities, consisted primarily of capital expenditures and software
development and database upgrade costs. Capital expenditures for the six months
ended June 30, 2002 and 2001 amounted to $1.4 million and $5.7 million,
respectively. For the six months ended June 30, 2001, approximately $3.2
million of these expenditures related to the build-out of our production
facility, which was completed in March 2001. We expect laboratory and computer
equipment purchases to continue as we expand the content of, and the products
derived from, GeneExpress.

We have capitalized software costs of $3.6 million and $3.0 million for
the six months ended June 30, 2002 and 2001, respectively. These costs relate
to ongoing efforts to enhance our Genesis Enterprise System, the software
platform of our GeneExpress product line. During the six months ended June 30,
2002, we capitalized $3.8 million of costs related to the upgrade of data in
GeneExpress as a result of Affymetrixs release of their GeneChip Human Genome
U-133 Set; the upgrade was substantially completed in the second quarter of
2002. Software development and database upgrade costs are being amortized over
their expected useful lives of three and two years, respectively.
Capitalization of additional software development and database upgrade costs is
expected to continue as a result of ongoing efforts to further enhance our
GeneExpress line of products and services.

Our financing activities, other than the repayment of equipment loans,
consisted primarily of the exercise of stock options.

In January 1999, we entered into a three-year agreement with Affymetrix,
pursuant to which Affymetrix supplied its GeneChip microarrays to us for the
development of gene expression databases. During 2001, we renegotiated and
extended this agreement for two years, subject to renewal, commencing January
2002. Under the terms of the new agreement, we continue to pay Affymetrix
subscription fees for access to its microarrays, purchase the microarrays and
related instrumentation and software and expect to incur royalty expense in
future years upon meeting certain GeneExpress subscription revenue thresholds.
During 2002, we have agreed to purchase from Affymetrix a minimum of $15.1
million in products and services. Our commitments under other research and
license agreements do not represent significant expenditures in relation to our
total research and development expense.

During January 2001, we paid Incyte Genomics, Inc. $9.0 million in
connection with the settlement of litigation. As part of the settlement
agreement, we acquired a worldwide, nonexclusive license for the terms of the
relevant patents. A portion of the payment to Incyte has been recorded as a
license and is being amortized over its expected useful life of five years.

We believe that existing cash and cash equivalents and anticipated
payments from customers will be sufficient to support our operations for the
foreseeable future. These estimates are forward-looking statements that involve
risks and uncertainties. Our actual future capital requirements and the
adequacy of our available funds will depend on many factors, including those
discussed under BusinessRisk Factors in our Annual Report on Form 10-K for
the year ended December 31, 2001.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

We have limited exposure to financial market risks, including changes in
interest rates. At June 30, 2002, we had cash and cash equivalents of
approximately $181.0 million. Cash and cash equivalents consist of money market
accounts and investment-grade commercial paper. Based on the cash balance at
June 30, 2002, a 100 basis point decline in interest rates would result in an
increase in net loss for the three and six months ended June 30, 2002 of
approximately $0.5 million and $0.9 million, respectively. Actual changes in
rates may differ from the hypothetical assumptions used in computing this
exposure.

10



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PART II                  OTHER INFORMATION

Item 4.   Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting of Stockholders on June 6, 2002. At
the Annual Meeting, the Companys stockholders elected two directors to the
Companys Board of Directors and approved the proposals described below.

At the Annual Meeting, 25,086,375 shares out of a total of 26,906,462
shares of Common Stock outstanding at the record date were represented in
person or by proxy.

The proposals considered at the Annual Meeting were voted on as follows:



|1. |  | Election of Directors                                                                                                              
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Proposal to elect two directors to hold office until the 2005 Annual
Meeting of Stockholders or his earlier resignation or removal.

|                         |  |           |            |                |  |  |           | 
|------------------------ |  | --------- | ---------- | -------------- |  |  | --------- | 
|Nominee                  |  | Votes For |            | Votes Withheld
|                         |  |           |            |               
|Mark D. Gessler          |  |           | 22,819,479 |                |  |  | 2,266,896 | 
|J. Stark Thompson, Ph.D. |  |           | 24,548,868 |                |  |  | 537,507   | 



|   |  | The following individuals term of office as a director continue after the
meeting: Jules Blake, Ph.D., Michael J. Brennan, M.D., Ph.D., Charles L.
Dimmler III and G. Anthony Gorry, Ph.D.                                                                                                                                                                                              
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Approve the Companys 1997 Equity Incentive Plan, as amended                                                                                                                                                                                                                                                                                                                             
|  
|   |  | Proposal to approve the Companys 1997 Equity Incentive Plan, as amended,
to, among other things, increase the aggregate number of shares of Common
Stock authorized for issuance under such plan by 1,000,000 shares. The
proposal was approved by a vote of 11,920,024 shares in favor, 7,536,612
shares against, 915,268 shares abstaining and 0 shares representing
broker non-votes.
|  
|3. |  | Approve the Companys 1997 Non-Employee Directors Stock Option Plan, as
amended                                                                                                                                                                                                                                                                                                         
|  
|   |  | Proposal to approve the Companys 1997 Non-Employee Directors Stock
Option Plan, as amended, to increase the aggregate number of shares of
Common Stock authorized for issuance under such plan by 250,000 shares.
The proposal was approved by a vote of 16,235,810 shares in favor,
3,216,724 shares against, 919,369 shares abstaining and 0 shares
representing broker non-votes.   
|  
|4. |  | Approve the Companys Employee Stock Purchase Plan, as amended                                                                                                                                                                                                                                                                                                                           
|  
|   |  | Proposal to approve the Companys Employee Stock Purchase Plan, as
amended, to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 250,000 shares. The proposal
was approved by a vote of 18,125,354 shares in favor, 1,333,062 shares
against, 913,487 shares abstaining and 0 shares representing broker
non-votes.                     
|  
|5. |  | Appointment of Independent Auditors                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | Proposal to ratify the selection of Ernst & Young, LLP as independent
auditors of the Company for its year ending December 31, 2002.
The proposal was approved by a vote of 24,342,019 shares in favor, 718,696 shares
against, 25,660 shares abstaining and 0 shares representing broker
non-votes.                                                                                     

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Item 6. Exhibits and Reports on Form 8-K

|   |  |                                                                                                                                                  
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|A) |  | Exhibits:                                                                                                                                        
|  
|   |  | *10.75     Employment Agreement, dated May 30, 2002, between Registrant and Dudley Staples.                                                      
|  
|   |  | 10.99      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
               of the Sarbanes-Oxley Act of 2002.
|  
|   |  |                                                                                                                                                  
|  
|   |  | * Indicates management compensatory plan, contract or arrangement.                                                                               
|  
|  
|B) |  | Reports on Form 8-K:                                                                                                                             
|  
|   |  | No reports on Form 8-K were filed during the three months ended June 30, 2002.                                                                   

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SIGNATURES

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



|      |                |     |                                                                                                                     | 
|----- | -------------- | --- | ------------------------------------------------------------------------------------------------------------------- | 
|      |                |     | GENE LOGIC INC.                                                                                                    
|     
|Date: | August 9, 2002 | By: | /s/ Philip L. Rohrer, Jr.Philip L. Rohrer, Jr.
Chief Financial Officer
(Principal Financial and Accounting Officer)

13