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UNITED STATES  SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K





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Commission file number: 000-30267





|ORCHID BIOSCIENCES, INC.                                                      
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|(Exact name of registrant as specified in    its charter)                     
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|Delaware                                                                      
|(State or other
        jurisdiction of
        incorporation or organization)
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|4390 US Route One
  Princeton, NJ                                             
|(Address of principal executive offices)                                      
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|Registrants    telephone number, including area code: (609)    750-2200      
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|Securities    registered pursuant to Section 12(b) of the Exchange Act:       
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|None                                                                          
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|Securities registered pursuant to Section 12(g) of the Exchange Act:          
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|Common Stock, $.001 Par Value Per Share                                       
|(Title of Class)                                                              




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     No





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





Indicate by check mark whether  the registrant is an accelerated filer (as defined in Rule 12b-2 of the  Act).  Yes     No





The aggregate market value of  the
    registrants Common Stock held by non-affiliates of the registrant (without
    admitting that any person whose shares are not included in such calculation
    is an affiliate) computed by reference to the price at which the Common Stock
    was last sold as of the last business day of the Registrants
most recently completed second fiscal quarter was $69,813,441.





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As of March 1, 2003, the registrant had  55,738,781 shares of common stock outstanding.





DOCUMENTS INCORPORATED BY REFERENCE





The following  documents (or parts thereof) are incorporated by reference into the following  parts of this Form 10-K: Certain information required in Part III of this  Annual Report on Form 10-K is incorporated from the Registrants Proxy  Statement for the Annual Meeting of Stockholders to be held on June 12, 2003.





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ORCHID BIOSCIENCES, INC.


FORM 10-K


INDEX





|            |                                                                                                      | Page
|----------- | ---------------------------------------------------------------------------------------------------- | ----
|PART I      |                                                                                                      |     
|            |                                                                                                      |     
|ITEM    1.  | BUSINESS                                                                                             | 2   
|ITEM    2.  | PROPERTIES                                                                                           | 24  
|ITEM    3.  | LEGAL    PROCEEDINGS                                                                                 | 24  
|ITEM    4.  | SUBMISSION    OF MATTERS TO A VOTE OF SECURITY HOLDERS                                               | 25  
|            |                                                                                                      |     
|PART II     |                                                                                                      |     
|            |                                                                                                      |     
|ITEM    5.  | MARKET    FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                             | 26  
|ITEM    6.  | SELECTED    FINANCIAL DATA                                                                           | 26  
|ITEM    7.  | MANAGEMENTS    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS             | 29  
|ITEM    7a. | QUANTITATIVE    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                        | 42  
|ITEM    8.  | FINANCIAL    STATEMENTS AND SUPPLEMENTARY DATA                                                       | 43  
|ITEM    9.  | CHANGES    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES             | 74  
|            |                                                                                                      |     
|PART III    |                                                                                                      |     
|            |                                                                                                      |     
|ITEM    10. | DIRECTORS    AND EXECUTIVE OFFICERS OF THE REGISTRANT                                                | 74  
|ITEM    11. | EXECUTIVE    COMPENSATION                                                                            | 74  
|ITEM    12. | SECURITY    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER    MATTERS | 74  
|ITEM    13. | CERTAIN    RELATIONSHIP AND RELATED TRANSACTIONS                                                     | 75  
|ITEM    14. | CONTROLS    AND PROCEDURES                                                                           | 75  
|            |                                                                                                      |     
|PART IV     |                                                                                                      |     
|            |                                                                                                      |     
|ITEM    15. | EXHIBITS,    FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K                                  | 75  
|            |                                                                                                      |     
|SIGNATURES  | 78                                                                                                  
|            |                                                                                                     




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PART  I





|Item 1. | BUSINESS
|------- | --------




We have a portfolio of business  units that are engaged in the development and commercialization of products and  services that measure and analyze information related to genetic uniqueness, or  the genetic variability that distinguishes one organism from another, also known  as genoprofiling.





Genoprofiling data is used in  the field of identity genomics for paternity and forensics identification  testing, and by health care providers in organ transplantation compatibility  testing.  Genoprofiling data also has  public health applications, such as prion susceptibility testing to breed sheep  resistant to scrapie disease.   Additionally, genoprofiling data is also being used for genetic disease  susceptibility testing and to help physicians manage treatment regimens.  Pharmaceutical companies are now using  genoprofiling data to facilitate the development of more specific and  efficacious drugs and to enable the adoption of personalized medicine which  involves prescribing the right drug for the right person at the optimal dose  based on the individuals genetic profile.   Our products and services are already being used in each of these  applications and we expect their uses to increase.





Our principal executive offices  are located at 4390 US Route One, Princeton, New Jersey, 08540. Our telephone  number is (609) 750-2200 and our web site address is www.orchid.com.  We make available free of charge through the  Investors section of our web site our Annual Reports on Form 10-K, Quarterly  Reports on Form 10-Q, current reports on Form 8-K and all amendments to those  reports as soon as reasonably practicable after such material is electronically  filed with or furnished to the Securities and Exchange Commission (the  SEC).  We include our web site address  in this Annual Report on Form 10-K as an inactive textual reference only.





History





We began operations in 1995,  and in the first three years of business we were primarily focused on  developing our microfluidics technologies for applications in high throughput  synthesis of small molecules under collaborative research programs with  SmithKline Beecham and Sarnoff Corporation.   In 1998, we made a fundamental shift in our focus to apply our  technology to the fields of genetic diversity applications, including single  nucleotide polymorphism, or SNP, genotyping and pharmacogenetics.  Subsequently, we acquired substantially all  of the assets of Molecular Tool, Inc. (Molecular Tool), a wholly owned  subsidiary of GeneScreen, Inc. (GeneScreen).   Molecular Tools proprietary primer extension technology for genotyping  SNPs matched with our existing microfluidics technologies.  In December 1999, we acquired GeneScreen,  Inc., a recognized leader in identity genomics services.  In 2001, we
acquired two new businesses:  Cellmark Diagnostics (Cellmark), a business division of AstraZeneca, a  provider of DNA laboratory testing in the UK and a supplier of genotyping  products for human inherited disease diagnosis; and Lifecodes Corporation  (Lifecodes), one of the largest providers of identity genomics testing for forensics  and paternity in the US, and a major provider of human leukocyte antigens, or  HLA, genotyping products and services for transplantation compatibility  testing.  In early 2002, we began the  process of realigning our business into strategic units for marketing  purposes.  These business units  consisted of  Orchid Identity Genomics,  Orchid GeneShield, Orchid Diagnostics and Orchid LifeSciences.





| |  | Orchid    Identity Genomics provides DNA testing for paternity and forensics    determinations to state and local governmental authorities as well as to    individuals and organizations, through Orchid GeneScreen and Orchid Cellmark,    as well as prion susceptibility testing to the UK government through Orchid    Europe with the goal of breeding sheep genetically resistant to the disease    scrapie;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Orchid    GeneShield is developing programs designed to accelerate the adoption and use    of personalized medicine by patients and physicians;                                                                                                                                                                                                                                                                    
| |  | Orchid    Diagnostics provides products and services for genetic testing, including HLA    genotyping, inherited disease diagnosis and immunogenetics, or the study of    the relationship between an individuals immune response and their genetic    makeup; and                                                                                                                                                
| |  | Orchid Life    Sciences develops and markets products, services and technologies for SNP genotyping,    or scoring, and genetic diversity analyses to life sciences and biomedical    researchers as well as pharmaceutical,                                                                                                                                                                                       




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| |  | agricultural,    diagnostic and biotechnology companies. The instrumentation portion of this    business unit was divested in 2002.
| |  | -----------------------------------------------------------------------------------------------------------------------------------




In 2002, we sharpened our  strategic focus by concentrating our efforts on our high growth genoprofiling  service businesses where we have a market leadership position in forensics,  paternity and prion susceptibility testing.   We have also continued the pioneering work of our Orchid GeneShield unit  in accelerating adoption of personalized medicine.  These segments are represented by Orchid Identity Genomics which  currently accounts for nearly all of our revenues, and Orchid GeneShield.  With the refocusing of our business, we  decided to divest the instrumentation portion of our Orchid Life Sciences  business and our Orchid Diagnostics business unit, as we believe these segments  do not offer the profitable growth prospects of our other business units.  In addition, we believe these segments face  the risk of significant competition and short product cycles in the product  business and require higher levels of research and development
expenses to  maintain a leading position.  These  refocusing actions are consistent with our efforts during 2002 to increase  efficiencies, reduce operating costs and improve our financial position.





In December 2002, we sold the  Orchid Life Sciences product related assets to Beckman Coulter, Inc. for a  combination of cash payments and Beckman Coulters assumption of certain debt  obligations.  In connection with this  transaction, Beckman Coulter acquired rights to the SNP genotyping products,  reagents, and software formerly marketed by Orchid Life Sciences and certain  patent and trademark rights. Beckman Coulter received an exclusive license to  use our proprietary primer extension SNP analysis technology in products sold  to the research and specialty testing markets, and a non-exclusive license to  use our primer extension technology in the field of diagnostics.  We retained rights to use the primer  extension technology in the diagnostics market, as well as in all of our  genoprofiling service businesses, including identity testing for forensics and  paternity, and pharmacogenetic testing for personalized medicine.  We will
continue to use our primer extension  technology to provide advanced clinical-quality genotyping services to  pharmaceutical and agricultural customers.   We retained rights to our portfolio of primer extension technology  patents, as well as to our existing primer extension technology license  agreements.





We are currently pursuing the  sale of our Orchid Diagnostics business unit. Currently we do not have a  definitive agreement to sell the Orchid Diagnostics business unit.  As we committed to the disposition of our  Orchid Diagnostics business unit during 2002, the results of operations of that  business have been reflected as discontinued operations for all periods  presented herein and the related assets and liabilities are reflected as held  for sale as of each period end.





Background





Genetic information provides a  basis for identification as well as understanding biological and medical  functions in organisms. In recent years, scientists have analyzed large  portions of deoxyribonucleic acid, or DNA, to determine the sequence of  nucleotide bases in the DNA within the human genome and within the genomes of  plant and animal species, with the objective of understanding and using this  molecular level knowledge to transform traditional approaches to medicine,  agriculture and other fields.  With the  first phase of the human genome sequence completed in 2000, attention has  turned from mapping the sequence to identifying genetic differences between  individuals and to applying this knowledge in healthcare and other related  fields where genetic variability is of use.   The increasing availability of genomic data derived from species other  than humans is driving use of genetic variability information in such fields as
agriculture and public health, to produce improved characteristics in livestock  or crops, and to protect against animal-borne diseases.  Newer genetic analysis techniques are now  being applied to long-established DNA testing applications, such as, identity  determination for forensics and paternity.   The most common form of genetic variation, single nucleotide  polymorphisms, or SNPs, have become a primary focus of genetic variability  studies, and we expect them to become more important as their impact is better  understood.  We are developing services  to enable the performance of SNP and related genetic variability analyses in  various segments of our business.





SNPs: A Key Element of Genetic Variation





DNA sequences contain a variety  of
    known polymorphisms, or differences, in the genetic code.  The most
    common form of polymorphism involves a change in a single nucleotide base
    and is called a single nucleotide polymorphism, or SNP.  SNPs can impact
    an individuals disease susceptibility and treatment response.  The
    importance of SNPs was highlighted in 1999, when a group of leading pharmaceutical
    companies and others formed The SNP Consortium for the primary purpose of
    discovering human SNPs and making them publicly available. The SNP Consortium
    successfully mapped more than 1.8 million SNPs, which are now publicly available
and are being used in genetic diversity research.  As one of the few





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commercial firms chosen to  collaborate with The SNP Consortium, we conducted work that has provided us  with early access to potentially valuable SNPs, and has enabled us to begin to  incorporate these SNPs into a variety of panels for use in pharmacogenetic  research and for pilot programs that use SNPs in paternity and forensic  testing.





Our SNP Analysis Technology





At the center of our products  and services for SNP scoring, or genotyping, is our proprietary primer  extension technology.  Our primer  extension technology is a method of isolating the precise location of the site  of a suspected SNP and utilizing the inherent accuracy of DNA polymerase to  determine the presence or absence of the SNP.   With more than a decade of use, our SNP technology is among the most  validated genotyping methods used today.   We believe our SNP technology offers an exceptional combination of  attributes, including:





| |  | accuracy,          
| | - | -------------------
| |  | flexibility,       
| |  | cost-effectiveness,
| |  | robustness,    and 
| |  | scalability        




The capabilities of our primer  extension technology have been developed into a next generation tag array  technology, which is a significant   improvement in our core SNP technology.   This tag array technology is based on multiplexing, or the ability to perform  multiple SNP analyses in a single test.   Multiplexing is important in SNP genotyping because as researchers  undertake increasingly complex and large-scale genetic analyses, the need for  technologies with improved cost and time efficiencies and design and  performance flexibility increases.  This  is especially true for the whole genome and chromosome mapping studies that are  used to analyze entire portions of the genome.   It is similarly essential for genotyping specific SNPs in a very large  number of samples, as occurs in our animal testing services.  We expect that rapid and cost-effective  analysis of SNP panels for high volumes of samples will
become increasingly  important as SNP genotyping becomes more established in routine applications  such as healthcare and identity genomics.   Through multiplexing, our tag array technology enables a dramatic  increase in the amount of information per analysis while simultaneously  improving the overall quality of that information and reducing the time and  cost requirements.  Since multiplexing  allows many reactions to be performed on a single sample, it can also generate  very large savings in consumables.   During 2002, we used our tag array technology in three products offered  by Orchid Life Sciences: the microarray-based SNPcode, the medium throughput  SNPstream MT (formerly referred to as our SNPstream 5K), and the ultra high  throughput SNPstream UHT.  Although we  have sold our Orchid Life Sciences product business, we intend to continue to  leverage our SNP technology in our paternity, forensics, public health and  pharmacogenetic service businesses, where it provides
improved operating  efficiencies and the potential for new service offerings.





Microfluidics





Microfluidics is a set of  technologies designed to control the flow, reactions and measurements of minute  amounts of chemicals and biochemicals in miniaturized systems. Our  microfluidics chips are multi-layered devices consisting of arrayed networks of  liquid reagent flow paths in channels or conduits.  These chips allow the processing of sequential and/or parallel  reactions.  The reagents conveyed in the  conduits and delivered to the location of the reactions can range in volume  from nanoliters to milliliters with a typical reactor volume being from 100 to  800 nanoliters.  Proprietary rights and  patents cover our pumping and valving techniques that control the timing,  location and amount of desired reagent delivery.  Although we continue to maintain and prosecute existing  intellectual property rights, we currently do not have any plans to further  commercialize this technology.





Products  and Services to Serve Multiple Genoprofiling Diversity Markets





During 2002, we provided  products and services to a variety of genoprofiling markets, including genetic  variability analyses for identity genomics, agricultural applications and DNA  diagnostics as well as pharmaceutical, biotechnology, academic and the emerging  market of pharmacogenetics and personalized medicine.  We analyzed a number of sources of genetic variability in  addition to SNPs for our varied client base, including short tandem repeats for  identity genomics, mitochondrial DNA for forensics, HLA genotypes for  transplantation compatibility matching and haplotypes for pharmacogenetic  studies.  As a result of our growth  following several acquisitions beginning in 1998 and continuing through





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2001, we marketed these  products and services to our customers in 2002 through the organization of four  strategic business units as described above.





Services





We have established an identity  genomics testing business as a result of our acquisitions of GeneScreen,  Cellmark and Lifecodes, leaders in the provision of paternity and forensics  testing.  Additionally, we are a leader  in prion susceptibility testing, which enables sheep to be bred with reduced  susceptibility to the disease scrapie.   These services, offered by our Identity Genomics business unit, are  conducted in accredited facilities that also provide us with the infrastructure  to conduct clinical SNP genotyping and pharmacogenetic testing.  In total, we have a network of seven  accredited laboratories located in the US and the UK.  We expect that our testing services will generate increasing  revenues as these markets expand and as SNP genotyping moves from the development  laboratory to commercial practice.  We  also offer organ transplant compatibility testing services through our Orchid  Diagnostics business unit. 



During 2002,  our Orchid Life Sciences business unit provided a variety of SNP genotyping  services to the research market.





Paternity Testing Services





Through Orchid GeneScreen, our  Identity Genomics business unit offers paternity testing services for both  governmental agency and private customers to determine the parentage of a child  in three accredited laboratories.  The  public paternity testing market, for which we conduct the majority of testing  services, involves tests ordered by state or county governmental agencies  commonly referred to as Child Support Enforcement Agencies (CSEAs).  CSEAs are required by law to identify the  biological father of a child in circumstances where a mother applies for public  monetary assistance, in order to compel the father to make child support  payments or to recoup any disbursements made for the benefit of the child.  In the US, 90% of the costs of paternity testing  incurred by CSEAs are reimbursed by the Federal government, provided the CSEAs  abide by certain Federal regulations.   These regulations provide incentives to the CSEAs to
increase  effectiveness and efficiency in their paternity establishment measures.  This has resulted in continued expansion of  this market.  Services are provided to  these agencies under contracts awarded in a competitive bid process and  typically are of one to three years in duration.





We continue to build on our  genetic diversity expertise to develop SNP panels capable of establishing  paternity with a higher degree of accuracy and lower cost than currently used  methods, and create forensic panels that enable us to successfully perform  identity determinations that were not possible just a few years ago.  The cutting edge SNP genotyping methods that  we have developed for pharmaceutical and agricultural uses have the potential  to substantially reduce production costs and further improve quality and  service in identity genomics.  We believe  this combination will help create a new market dynamic with the potential for  growth and profitability.  In addition,  we plan to utilize our existing clinical genotyping technology and facilities  for our Orchid GeneShield business, which is designed to accelerate the  adoption of personalized medicine.





Due to changing demographics  related to out-of-wedlock births, reduced stigmas associated with paternity  testing, and increased public understanding of paternity testing, private  customers have increased their demand for paternity testing in recent years and  the private sector has grown rapidly.   During 2002, we began marketing paternity testing services on a much  broader base, and we expect to capture a larger share of the private paternity  market.  In addition to offering  services directly to individuals, in 2002 we began establishing relationships  with firms or individuals acting as our marketing agents.  We supply products and materials to such  agents and in return, the agent agrees to exclusively utilize our services for  their customers seeking private paternity services.  We are further increasing our marketing efforts to the private  sector to increase awareness of our services, increase the number of referral  sources
and improve our service offerings.





Forensic Testing Services





Our Identity Genomics business  unit offers forensics testing through Orchid Cellmark, which is among the most  respected forensic DNA testing services in the world and is known for its high  quality and expert staff.  We test a  variety of forensic evidence samples collected at crime scenes and provide DNA  identification profiles on individual felons for inclusion in national and  state DNA databases.  Testing services  on criminal casework may be provided to implicate or exclude a known suspect,  or may be provided in the absence of a suspect to generate a DNA profile of a  perpetrator for searching DNA databases.   Although the majority of testing is done for criminal justice agencies,  we also provide testing services for defense attorneys as well.  Case work testing for government agencies  may be provided on an individual case basis or under long-term contract.  Contract services are usually awarded in a  competitive bid
process and typically last from one to three years.  In addition to casework, we also provide  felon database testing under contract.   DNA specimens are collected from





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incarcerated individuals  according to state laws, and tested by our laboratory to provide a DNA  identification profile for inclusion in a national database known as the  Combined DNA Index System, or CODIS.   Biological evidence from criminal cases with no known suspects may then  be screened against this database to identify a possible suspect.  Databasing contracts are also usually  awarded in a competitive bid process and typically last from one to three  years.





All three of our forensic  testing facilities in the US have received the prestigious American Society of  Crime Lab Directors-LAB accreditation, a designation that only a very small  number of non-government DNA laboratories have been awarded.  The value of genotyping in solving crimes is  increasingly being recognized and we anticipate Federal and state governments to  allocate greater  resources to support  wider use of DNA.  This is evidenced by  legislation under consideration by the Senate and House of Representatives  known as The Debbie Smith Act, and the recent announcement by the US  Government to allocate $900 million over the next five years towards clearing  up the backlog of forensic testing that currently exists in the criminal  justice system.





In 2002, we were awarded a  contract by the Office of the Chief Medical Examiner of New York City to apply  our SNP technology to analyze unidentified DNA samples collected from the World  Trade Center disaster site.  In a pilot  program conducted with New York City officials in 2002, we demonstrated that  panels of SNPs can enable the identification of additional victims from DNA  specimens that have failed previous attempts with traditional forensic analysis  methods. Orchid Cellmark is also exploring the use of SNPs in other difficult  cases involving degraded DNA samples.





SNP Genotyping Services





Through Orchid Europe, we  conduct the major portion of the UK Governments project to help British  farmers breed sheep with reduced susceptibility to the disease scrapie.  Following a competitive bid process, we were  awarded a multi-year contract in 2001 to generate several million scrapie SNP  genotypes per year for the project.  The  project is part of the innovative National Scrapie Plan (NSP) for Great Britain  developed by the Department for Environment, Food and Rural Affairs (DEFRA) in  conjunction with the Agriculture and Rural Affairs Departments in Scotland and  Wales. Scrapie, one of the transmissible spongiform encephalopathies, is an  untreatable, fatal disease that affects sheep worldwide.  With an estimated UK sheep population of 40  million, scrapie has the potential to cause significant economic losses to  farmers.  Prevention of the disease  agents ability to maintain itself is viewed as the most effective
way to limit  the spread of the disease.  As SNPs  affect an individual sheeps susceptibility to scrapie, sheep with SNPs  associated with a genetic resistance to scrapie are selected as breeding  stock.  Over time, farmers expect to  produce flocks with greatly reduced vulnerability to the condition and, in  turn, decrease the risk of prion diseases disseminating into the food  supply.  In 2002 Orchid Europe was also awarded  a year extendable contract as the sole genotyping supplier to the Northern  Ireland Scrapie Plan. During 2002, we offered low, medium and high throughput  SNP scoring services on multiple platforms, including the SNPstream 25K, the  SNPstream MT, SNPcode and SNPstream UHT platforms.  Our multiple offerings to pharmaceutical, biotechnology, academic  and agricultural customers helped Orchid Life Sciences match its customers  needs to the platform best suited to conduct their work.  In December 2002, we sold our Orchid Life  Sciences product
business assets to Beckman Coulter.  With the sale of the Life Sciences business, we do not intend to  continue to commercialize SNP genotyping services to the research market.





Transplant Testing Services





We provide testing services for  screening and confirmation of HLA genotyping for prospective bone marrow  transplant donors participating in public and private programs, using both DNA  and serological testing.  Our customers  include agencies and individuals in the US and Europe.  HLA testing, also known as tissue typing,  determines the compatibility between donors and recipients for the  transplantation of solid organs (i.e. heart, liver, kidney and lung) and bone  marrow.  Compatibility within the HLA  minimizes immune rejection.   Historically, tissue typing has been performed by serological methods,  but the introduction of DNA molecular technology offers greater versatility and  resolution, while requiring a smaller sample.   Our HLA genotyping laboratory is accredited by the American Society for  Histocompatibility and Immunogentics (ASHI) and New York HLA  Histocompatibility.  We offer a full  array of services and
supplies for phlebotomy, coordination, shipment and  reporting.  In addition to working with  the American Registry and various National Marrow Donor Program donor centers,  we offer coordination of unrelated bone marrow registry and patient family  drives in the US and internationally.





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Products-Systems





LifeMatch System





Our LifeMatch platform is a  system developed by our researchers for automated HLA genotyping and antibody  detection.  The LifeMatch system runs on  the Luminex xMap platform using proprietary reagents.  It includes products, reagents and software developed for optimal  integrated performance, providing laboratories with all of the necessary  components to test more than 350 samples in an eight-hour shift.  During 2002, we launched the LifeMatch  platform in the US and Europe.  This  system is commercialized and supported by our Orchid Diagnostics business.





SNPstream Systems





During 2002, we commercialized  the SNPstream 25K, the SNPstream MT and the SNPstream UHT Systems, each of  which are based upon different platforms and provided various throughput  capabilities.  Beckman Coulter acquired  these systems and the rights to commercialize them in December 2002 when it  purchased the products portion of our Orchid Life Sciences business.





Products-Consumables





During 2002, we commercialized  the following SNPware consumables for use with SNPstream Systems we sold and  systems of other companies:  SNPware  Kits, SNPware 96 Kits, SNPware 384 Kits and SNPcode Kits.  Beckman Coulter acquired the rights to  commercialize these consumables in December 2002 when it acquired the products  portion of our Orchid Life Sciences business.





Products-Diagnostic





ELUCIGENE Kits and Tests





The ELUCIGENE line of kits and  tests are for cystic fibrosis, or CF, genetic testing.  ELUCIGENE kits are sold throughout Europe  and in the US.  The ELUCIGENE CF20 kit  uses patented ARMS detection technology to simultaneously detect 25 common  mutations of the CFTR gene that are associated with cystic fibrosis.  The ELUCIGENE CF29 panel of Analyte Specific  Reagents, or ASRs, detects all 25 mutations recommended by the American College  of Medical Genetics for cystic fibrosis screening.





LifeMatch Consumables





We sell assays to measure the A  and B antigens for transplantation typing that impact the ability of a  transplant recipient to accept a transplant organ.





Other Consumables





During 2002, we commercialized  the following SNPware consumables for use with SNPstream Systems we sold and  systems of other companies:  SNPware  Kits, SNPware 96 Kits, SNPware 384 Kits and SNPcode Kits.  Beckman Coulter acquired the rights to  commercialize these consumables in December 2002 when it acquired the products  portion of our Orchid Life Sciences business.





Orchids  Overall Business Plan





Our goal is to be the leading  provider of services to profile genetic uniqueness through our core Identity  Genomics businesses that offer paternity, forensics and prion susceptibility  testing, as well as our GeneShield personalized medicine initiative.





Orchids Identity Genomics Testing Business





We have become the market  leader in identity genomics in the US, which represents one of the largest  existing markets for genetic analysis today.   Our Identity Genomics business is comprised of: (i) Orchid GeneScreen,  which conducts paternity genotyping determinations for government agencies and  private individuals; (ii) Orchid Cellmark, which is a leading provider of  forensic DNA testing; and (iii) Orchid Europe, which provides paternity,  forensics and prion susceptibility testing.





We have seven accredited  laboratories in the US and UK providing high quality identity genomics testing  services.  Our laboratories have  accreditations from the Clinical Laboratory Improvement Act (CLIA) for clinical  genotyping, from the





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American Association of Blood  Banks (AABB) for paternity testing, and from the American Society of Crime Lab  Directors (ASCLD) for forensics testing, and from the State of New York for  paternity testing and forensic testing.   In 2002, two Orchid Cellmark laboratories received the prestigious ASCLD-LAB  accreditation, bringing our total number of ASCLD-LAB accredited laboratories  to three.  In the US, there are only  five other private laboratories accredited by ASCLD-LAB.  A large portion of paternity and forensic  testing is government sponsored and involves contracts that are generally  awarded by respective state agencies for terms from one to three years.  The contract bidding process is highly  competitive and the criteria used to determine the awards varies.  In some cases contracts are awarded solely  on the basis of price, while others use a scoring matrix to achieve the desired  mix of price, quality and service. 
In  addition to continually seeking more attractively priced contracts based on our  ability to provide high quality services, we intend to implement innovative  technologies that provide us a competitive advantage or premium pricing.





We expect that the strength of  our position in identity genomics will enable us to realize efficiencies, and,  in the case of paternity testing, to apply our advanced SNP technologies to  significantly reduce the cost structure of what has traditionally been a  labor-intensive process.  We intend to  accomplish this by applying the same high throughput SNP scoring systems that  we have developed for advanced life sciences applications to paternity testing,  thereby taking advantage of our investments in new genotyping technologies  across a broad range of both existing and new businesses.  We have recently developed SNP panels to  replace the short tandem repeat, or STR, technology currently used for  paternity testing, and expect to begin implementing these panels during 2003  following AABB approval.





In addition to providing  paternity and forensics testing, Orchid Europe conducts the major portion of  the UK Governments project to help British farmers breed sheep with reduced  susceptibility to the disease scrapie.   Following a competitive bid process, we were awarded a multi-year  contract in 2001 to generate several million scrapie genotypes per year for the  project.  The project is part of the  innovative National Scrapie Plan (NSP) for Great Britain developed by the  Department for Environment, Food and Rural Affairs (DEFRA) in conjunction with  the Agriculture and Rural Affairs Departments in Scotland and Wales. Scrapie,  one of the transmissible spongiform encephalopathies, is an untreatable, fatal  disease that affects sheep worldwide.   With an estimated UK sheep population of 40 million, scrapie has the  potential to cause significant economic losses to farmers and prevention of the  disease agents ability to
maintain itself is viewed as the most effective way  to limit the spread of the disease.  As  SNPs affect an individual sheeps susceptibility to scrapie, sheep with SNPs  associated with a reduced genetic susceptibility to scrapie are selected as  breeding stock, over time farmers expect to produce flocks with greatly reduced  vulnerability to the condition and, in turn, decrease the risk of prion  diseases disseminating into the food supply.





Orchid GeneShield: Creating Value Through Personalized Medicine





Orchid GeneShield, our majority  owned subsidiary, is developing services designed to accelerate the adoption of  personalized medicine into routine medical care.  Our GeneShield team is developing programs that would, among  other things, incorporate pharmacogenetics data in a form familiar to  physicians and be readily acceptable to patients, provide tangible value to  health care providers and payers, and be capable of producing recurring  revenues for us.





We plan to utilize our existing  clinical genotyping technology and facilities that are necessary for the  resulting high-sample throughput demands for genotyping panels of SNPs to help  physicians and patients improve the selection of medicine through GeneShield.  We are currently conducting a limited pilot  program of our first service in collaboration with a number of leading managed  care organizations and expect to launch this service later this year.





Orchids Diagnostic Testing Business





Our Diagnostic business unit focuses  on clinical genotyping for the diagnostics market.  We offer our ELUCIGENE product line for for the diagnosis of  mutations associated with inherited diseases including cystic fibrosis and we  offer our HLA services business for transplant compatibility matching with the  HLA products and services.  In 2002, we  established manufacturing and marketing channels in the US and Europe and  introduced the LifeMatch system, which offers HLA genotyping customers  significant time and cost advantages over current products and  technologies.  The LifeMatch instrument  system is based on the Luminex xMap platform and uses our proprietary  consumables.  It is targeted at the  large number of hospital and independent laboratories who perform their own HLA  genotyping.  In order to focus primarily  on our Orchid identify Genomics testing business and Orchid GeneShield, we are  currently pursuing the sale of
the Orchid Diagnostics business unit.  However, we currently do not have a definitive  agreement to sell this business unit.





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Orchids Life Sciences SNP Genotyping Business





During 2002, we provided SNP  genotyping products and services to pharmaceutical, biotechnology, academic and  agricultural customers through our Orchid Life Sciences business unit.  In December 2002, we sold our Orchid Life  Sciences product business assets to Beckman Coulter.  With the sale of the Orchid Life Sciences product related assets, we do  not intend to continue to commercialize SNP instrumentation or consumables.





Sustained  Competitive Advantage





In order to build and sustain  our competitive advantage in the field of genetic diversity, we plan to  continue to form strategic alliances and scientific collaborations and make  strategic acquisitions as appropriate.   Our seven accredited genotyping facilities provide us with the  foundation for providing clinical quality genotyping testing to a variety of  customers and for our own use.  Through  collaborations and selective acquisitions, we plan to seek access to  distribution channels and opportunities to improve operational efficiencies.





We intend to continue selected  investment in our proprietary technologies through internal development and by  licensing third-party technologies whenever necessary.  We seek to improve the cost-effectiveness  and utility of our existing products and services through improved performance  and development of improved information technologies, including improvements to  our ultra high throughput SNP genotyping system.





Collaborations  and Licenses





We continue to enter into  collaborative research programs and licenses relating to our core primer  extension technology with pharmaceutical and biotechnology companies, including  Asper Biotech, AstraZeneca, Beckman Coulter, Affymetrix, Ellipsis  Biotherapeutics, DNA Link, Hitachi MiraiBio and Luminex.  However, a significant element of our  business strategy is the governmental relationships we establish in providing  large-scale paternity and forensic testing services as well as diagnostic  services.  We currently provide such  services under contracts awarded to us by the Department for Environment, Food  and Rural Affairs (DEFRA), Department of Agriculture and Rural Development  (Northern Ireland), Forensic Alliance, Ltd., the UK Foreign and Commonwealth  office, Deutsche Knochenmarkspenderdatei Gemeinnutzige GmbH, Ohio Department of  Job and Family Services, Georgia Department of Human Resources, Florida  Department of Revenue, Illinois State



Police, New York City Police Department,  Los Angeles Police Department and California Department of Justice.  Also, in order to grow our personalized  medicine business, we engaged in several important collaboration and license  agreements with Laboratory of the Government Chemists (LGC), Quest Diagnostics,  First Genetic Trust and Merck-Medco.





Perkin Elmer





In December 2000, we granted an  exclusive license to the Life Sciences business of PerkinElmer to use our  patented primer extension technology for SNP scoring applications using  fluorescence polarization and energy transfer read-out methods.  Under the terms of the agreement,  PerkinElmer Life Sciences has agreed to produce and sell reagent kits, software  and instruments incorporating our single base primer extension technology to  enable its customers to perform fluorescence-based SNP analyses.  This license grants PerkinElmer exclusive  rights to use our primer extension technology with fluorescence polarization, a  laboratory read-out methodology that is expected to achieve rapid growth as a  result of such attributes as simplicity, accuracy and cost effectiveness.  In addition to licensing fees, we are  entitled to receive royalties (including yearly minimum payments) from product  sales, if any, under the license agreement.   This



agreement, under which we have also granted PerkinElmer an option  to expand the field of use to include diagnostic assays based on fluorescence  methodologies and time resolved energy transfer, terminates on the date upon  which the last of the patents we license to PerkinElmer expires.  In the event of a breach of this agreement,  the non-breaching party may terminate the agreement upon 14 days written  notice for uncured breaches relating to non-payment, except for non-payment of  license fees, and upon 60 days written notice for all other uncured breaches.





In December 2000, we further  granted a non-exclusive license to the Life Sciences business of PerkinElmer to  use our primer extension technology for scoring applications on DNA  sequencers.  Under the agreement,  PerkinElmer will produce and sell reagent kits, software and instruments  incorporating our technology for performing SNP analyses on capillary and slab  gel DNA sequencers.  In addition to  licensing fees, we are entitled to receive royalties from product sales, if any,  under the license agreement.  This will  enable PerkinElmer to develop and sell reagent kits so that researchers can  perform high





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quality SNP analyses using the  DNA sequencers they already own.  This  agreement terminates on the date upon which the last of the patents we license  to PerkinElmer expires.  In the event of  a breach of this agreement, the non-breaching party may terminate the agreement  upon 14 days written notice for uncured breaches relating to non-payment,  except for non-payment of license fees, and upon 60 days written notice for  all other uncured breaches.





Amersham Biosciences





In June 2000, we entered into a  license agreement with Amersham Pharmacia Biotech (now known as Amersham  Biosciences), the life sciences division of Nycomed Amersham Plc, pursuant to  which we granted a royalty bearing, non-exclusive license to Amersham  Biosciences to use our single base primer extension technology.  Under the terms of the agreement, Amersham  Biosciences will produce and sell reagent kits and software incorporating our  technology to allow researchers to perform SNP analyses on Amersham Biosciences  capillary and slab gel DNA sequencers.   In addition to licensing fees, we are entitled to receive royalties for  the duration of the license agreement.   Our agreement with Amersham does not provide for minimum annual sales  requirements, and therefore, we cannot determine at this time the materiality  or the value of this agreement to our business or us.  This agreement terminates on the date upon which the last of the
patents we license to Amersham expires.   In the event of a breach of this agreement, the non-breaching party may  terminate the agreement upon 14 days written notice for uncured breaches  relating to non-payment, except for non-payment of license fees, and upon 60  days written notice for all other uncured breaches.





Applied Biosystems, Inc.





In July 2000, we entered into a  license agreement with PE Biosystems, now known as Applied Biosystems, a  division of PE Corporation, under which we granted a royalty bearing,  non-exclusive license to Applied Biosystems to use our single base primer  extension technology.  Under the terms  of the agreement, Applied Biosystems will produce and sell reagent kits and software  incorporating our technology to allow researchers to perform SNP analyses on  Applied Biosystems ABI PRISM® DNA sequencers.   In addition to licensing fees, we are entitled to receive royalties for  the duration of the license agreement.   Our agreement with Applied Biosystems does not provide for minimum  annual sales requirements, and therefore, we cannot determine at this time the  materiality or the value of this agreement to our business or us.  This agreement terminates on the last day  upon which the last of the patents we licensed to Applied
Biosystems  expires.  In the event of a breach of  this agreement, the non-breaching party may terminate the agreement upon 14  days written notice for uncured breaches relating to non-payment, except  non-payment of license fees, and upon 60 days written notice for all other  uncured breaches.





The SNP Consortium Ltd.





In July 2000, we expanded our  collaboration with The SNP Consortium Ltd. under which we performed certain SNP  scoring services for determining the allelic frequency of 60,000 SNP genomic markers  in diverse populations.  We bore a  substantial portion of the costs to perform these services.  To fulfill our commitment under this  collaboration, we accelerated the hiring of personnel for, and use of SNPware  consumables in our MegaSNPatron facility.   In exchange, we obtained the right to commercialize certain technology  developed as a result of performing these services and also received milestone  payments.  Work under this collaboration  was completed during 2002.





Other Agreements





In addition, we have entered  into various, license, service and collaboration agreements with respect to our  technology, product and services with third parties that are not material to  our business.  We will continue to seek to  enter into similar agreements to enable us to develop or license technologies  and earn revenues from our products and services in the future.





Manufacturing  and Suppliers





During 2002, we manufactured  SNPware consumables at our Princeton, New Jersey facility, products and  consumables for HLA testing at our Stamford, Connecticut facility, and reagents  for inherited disease diagnosis testing at our facility in Abingdon, UK.  If we are unable to meet commercial demand  for our products, we may need to enter into supply arrangements with third parties  to produce commercial quantities of our products.  However, we believe we currently have sufficient manufacturing  capacity to meet commercial demand for our products through 2003.  Our manufacturing facilities are designed to  optimize material flow and personnel movement with centrally located  manufacturing and quality control operations.   We produce critical components in environmentally controlled clean rooms  that are isolated from the rest of the facility.  Our Stamford, Connecticut facility has ISO9001 accreditation and  we plan to comply with
quality system





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requirements, or QSRs, and US  Food and Drug Administration (FDA) guidelines for analyte-specific reagents, or  ASRs, over the next two years.  Access  and safety features are designed to meet Federal, state and local health  ordinances.  Our Abingdon, UK facility  is ISO 13485, EN 46001 and ISO 17025 accredited and complies with QSR for the  FDA, is a registered manufacturer with the FDA, and has ASRS registered with  the FDA.





During 2002, we relied on  outside
    vendors to manufacture a number of central components of our SNPstream system
    and reagents that were provided in our SNPware kits.  We previously
    established agreements with Tecan and Beckman Coulter for the components
    of our SNPstream systems and PerkinElmer for some of the key reagents in
    our SNPware kits.  However, since the disposition of the  product portion
    of our Orchid Life Sciences business to Beckman Coulter in December 2002,
    we no longer need to rely on these suppliers.  We also have agreements
    with Luminex, Applera UK, Cambiex Bioscience Workingham, Ltd, Cambridge Bioscience,
    Qiagen Ltd, and Sigma Aldrich Company, Ltd for the supply of components key
    to our provision of services and sale of products.   In 2002,
    we established a company-wide enterprise resource planning system to manage
    and control our material and product inventories.  This system encompasses
    product  costing, materials procurement, production planning and scheduling,
    inventory tracking and control and batch records, with links to document
    control for all quality control, quality assurance and regulatory compliance
    procedures.





All of our Identity Genomics  laboratories
    have the CLIA accreditations necessary to be in compliance with the required
    regulations, and all three US Orchid Cellmark laboratories have American
    Society for Criminal Laboratory Directors (ASCLD) certification.  Our
    Orchid Europe laboratory has AABB, New York State Department of Health and
    ISO 17025 accreditation.  Our Orchid Diagnostics laboratory has both
    CLIA and American Society of Histocompatibility and Immunology (ASHI) accreditation
    necessary to perform HLA typing services.





Distribution





We have expanded our business  internationally, using the facilities acquired in early 2001 as a headquarters  for the operations of our European subsidiary, Orchid BioSciences Europe, Ltd.,  in Abingdon, UK.  We use our  international operations to expand our identity genomics testing services and  to serve as the base for the eventual introduction of our personalized medicine  products and services into Europe.





Intellectual  Property





We have implemented a patent  strategy designed to provide us with a unique proprietary position in the  fields of genotyping technologies, pharmacogenetics, microfluidics and focused  areas of genetic diversity.  Our strategy  will continue to concentrate on protecting and commercializing our current and  future products.  Our patent portfolio  reflects our international scope and includes pursuing patent protection in  many of the industrialized nations of the world.  We currently own, or have exclusive licenses to, 63 US patents  and 71 foreign patents, and have received notices of allowance for 2 additional  Australian patent applications.   Additionally, we have 88 pending patent applications of which 22 are US  applications and 66 are foreign patent applications.





Our commercial success will  also depend, in part, on our ability to obtain patent protection on the SNPs  for which we discover utility and on the products, methods and services for  which we base such discoveries.  We have  sought and intend to continue to seek patent protection for novel uses of  SNPs.  In such cases where novel uses of  SNPs has already been patented by a third party, we may need to obtain a  license for the use of these SNPs to make use of or sell products using these  SNPs.





We own or exclusively license  key patents covering these fundamental areas of our business:  primer extension technologies and surface  biochemistry and arrays.  We also own or  exclusively license patents covering other areas of our business including  pharmacogenomics, paternity and forensic genetic markers.  As of December 31, 2002, these subject  patents have approximately 10 or more years before they expire.





We also rely on both patent and  trade secret protection of our intellectual property. Complex legal and factual  determinations and evolving laws make patent protection uncertain.  As a result, we cannot be certain that  patents will be issued from any of our patent applications or from applications  licensed to us or that any issued patents will have sufficient breadth to offer  meaningful protection.  In addition, our  issued patents or patents licensed to us may be successfully challenged,  invalidated, circumvented or unenforceable so that our patent rights would not  create an effective competitive barrier.   Moreover, the laws of some foreign countries may not protect our  proprietary rights to the same extent as US law.





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We attempt to protect our trade  secrets by entering into confidentiality agreements with third parties,  employees and consultants.  Most of our  employees and consultants also sign agreements requiring that they assign to us  their interests in discoveries, inventions, patents and copyrights arising from  their work for us, maintain the confidentiality of our intellectual property,  and refrain from unfair competition with us during their employment and for a  period of time after their employment with us, which includes solicitation of  our employees and customers.  We cannot  assure you that these agreements will not be breached or invalidated.  In addition, we cannot assure you that third  parties will not independently discover or invent competing technologies or  reverse engineer our trade secrets or other technologies.





In the future, third parties  may file claims asserting that our technologies or products infringe on their  intellectual property.  We cannot  predict whether third parties will assert such claims against us or against the  licensors of technologies licensed to us, or whether those claims will harm our  business.  If we are forced to defend  against such claims, whether they are with or without any merit or whether they  are resolved in favor of or against us or our licensors, we may face costly  litigation and diversion of managements attention and resources.  As a result of such disputes, we may have to  develop costly non-infringing technologies, or enter into licensing  agreements.  These agreements, if  necessary, may be unavailable on terms acceptable to us, or at all, which could  seriously harm our business and financial condition.





We have 50 trademarks for which  we have received registrations or notices of allowance in the US and  elsewhere.  We also have 53 pending  trademark applications pending. Some of the key trademarks for which we have  either received registrations or notices of allowance include: GeneScreen® and  the Orchid logo.  A majority of our  SNP family trademarks were included in the sale of certain assets to Beckman  Coulter in December 2002.





This Annual Report on Form 10-K  contains references to our trademarks GeneScreen®, GeneShield, Cellmark,  ELUCIGENE, LifeMatch, Platform Propagation  and the Orchid logo.  These are our  trademarks for which we have filed registration applications with the US Patent  and Trademark Office.  All other  trademarks or trade names referred to in this annual report are the property of  their respective owners.





Government  Regulation





While most of our initial  research products will not be subject to government regulation, we anticipate  the manufacturing, labeling, distribution and marketing of some or all of our  future diagnostic products and services developed or performed using our  SNP-related technologies or microfluidics will be subject to government  regulation in the US and in certain other countries.





In the US, the FDA regulates,  as medical devices, most diagnostic tests and in vitro reagents that companies  market as finished test kits or equipment.   Some clinical laboratories, however, purchase individual reagents  intended for specific analyses, and, using those reagents, develop and prepare  their own finished diagnostic tests.  We  intend to market some diagnostic products as finished test kits or equipment  and others as individual reagents.   Consequently, some or all of these products will be regulated as medical  devices.  The AABB has accredited our  CLIA laboratories in Dallas, Texas, Dayton, Ohio, East Lansing, Michigan,  Germantown, Maryland, Nashville, Tennessee, and Abingdon, UK.  Our Abingdon, UK facility is also accredited  by New York State Department of Health for genetic testing.  The American Society of Histocompatibility  and Immunology, or ASHI, has accredited our Dayton, Ohio and Stamford,
Connecticut laboratories for transplantation typing of prospective bone marrow  donors.  The National Forensic Science  Testing Center and the ASCLD have accredited our Germantown, Maryland,  Nashville, Tennessee and Dallas, Texas laboratories for DNA typing for criminal  forensic purposes.  Only eight private  forensics labs in the US have earned the respected ASCLD accreditation of which  three are owned by Orchid.  The Dayton,  Ohio facility has been accredited by the Standards Council of Canada (SCC) for  paternity testing.





The FDA has also adopted a set  of regulations that govern laboratories that use Analyte Specific Reagents, or  ASRs, which cover the production of assays and their components consistent with  Good Manufacturing Practices for use by clinical laboratories producing their  own assays.  We satisfy these ASR guidelines  in connection with our manufacture of diagnostic products that are affected by  these guidelines.





The Food, Drug, and Cosmetic  Act requires that medical devices introduced to the US market, unless exempted  by regulation, be the subject of either a pre-market notification clearance,  also known as a 510(k) or an approved pre-market approval application, or  PMA.  Some of our products may require a  PMA and others may require a 510(k).   With respect to devices reviewed through the 510(k) process, we may not  market a device until the FDA agrees that the product is substantially  equivalent to a legally marketed device known as a predicate device.  A 510(k) submission may involve the  presentation of a substantial volume of data, including clinical data, and may  require a substantial FDA review.  The  FDA





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may agree that the product is  substantially equivalent to a predicate device and allow the product to be  marketed in the US. The FDA, however, may (i) determine that the device is not  substantially equivalent and require a PMA, or (ii) require further  information, such as additional test data, including data from clinical  studies, before it is able to make a determination regarding substantial  equivalence.  By requesting additional  information, the FDA can further delay market introduction of our  products.  If the FDA indicates that a  PMA is required for any of our products, the application may require extensive  clinical studies, manufacturing information and likely review by a panel of  experts outside the FDA.  The FDA could  also require us to conduct clinical studies to support either a 510(k)  submission or a PMA application in accordance with FDA requirements.  Failure to comply with FDA requirements  could result in the
FDAs refusal to accept the data or the imposition of  regulatory sanctions. FDA approval of a PMA application could take  significantly longer than a 510(k) approval.





Medical device laws and  regulations are also in effect in many countries in which we may do business  outside the US.  These range from  comprehensive device approval requirements for some or all of our medical  device products to requests for product data or certifications.  The number and scope of these requirements  are increasing.  We cannot assure you  that we will obtain regulatory approvals in such countries or that we will not  be required to incur significant costs to obtain or maintain any such foreign  regulatory approvals.  In addition, the  export by us of certain of our products which have not yet been cleared for  domestic commercial distribution may be subject to FDA export  restrictions.  Medical laws and  regulations are also in effect in some states in which we do business.  The failure to obtain product approvals in a  timely fashion or to comply with state or foreign medical device laws and  regulations may
have a material adverse impact on our business and results of  operations.





Our current DNA testing  laboratories in the US and our services that Orchid Europe in the UK provides  to US citizens are regulated under CLIA.   The intent of CLIA is to ensure the quality and reliability of clinical  laboratories by mandating specific standards in the areas of personnel  qualifications, administration, participation in proficiency testing, patient  test management, quality control, quality assurance and inspections.  The regulations promulgated under CLIA  establish three levels of diagnostic tests; waived, moderately complex and  highly complex, and the standards applicable to a clinical laboratory depend on  the level of the tests it performs.   Therefore, we cannot assure you that the CLIA regulations and future  administrative interpretations of CLIA will not have a material adverse impact  on us by limiting the potential market for our DNA testing services.





Our gene diagnostic kits sold  by us in Europe are classified as IVD medical devices and are covered by the  European Directive, 98/79/EC, or the IVDD Directive.  The IVDD Directive was implemented into UK legislation through  the In Vitro Diagnostic Medical Devices Regulations, SI 2000/1315, or the IVD  Regulations, which came into force on June 7, 2000.  There is a transition period until December 7, 2003 during which  manufacturers must either comply with the existing national laws or comply with  the IVD Regulations and CE (the mark of conformity) mark their devices.  After the transition period, it will be  mandatory for us to comply with the IVD Regulations.  IVDs are classified into three categories so that the level of  regulatory control applied to an IVD will be proportionate to the degree of  perceived risk based on whom the device user may be or the effect if it fails  to perform as intended.  These  categories



are in order of increasing perceived risk, and our products fall  into the lowest risk category, or general IVDs.  In order to CE mark our IVD products, we will need to  demonstrate compliance with the essential requirements and use the appropriate  conformity assessment route that are both detailed in the IVD Regulations and  the relevant Annexes of the Directive.   In connection with this demonstration of compliance, we must compile a  technical dossier for each IVD we market.   The requirement to comply with the IVD Regulations will increase the  cost of regulatory compliance for our Diagnostics business.





Prior to the Directive becoming  mandatory, manufacturers are subject to other legislation and obligations  relating to quality control and safety, such as the General Product Safety  Regulations 1994 (SI 1994/2328).  Manufacturers  must also comply with the Products of Animal Origin (Import and Export)  Regulations 1996 (SI 1996/3124) if it is applicable to their devices.  Under these regulations we are required to  (and have) obtained registration from the Ministry of Agriculture, Fisheries  & Food of our manufacturing units in relation to the export of genetic  testing kits containing Purified Bovine Serum and Purified Gelatin.





We currently sell a number of  IVD products in the UK and have accreditation certificates for our quality  systems from a Notified Body (SGS Yarsley ICS), thereby meeting the  requirements of ISO9001, EN46001 and ISO13485.   We have also received an accreditation certificate meeting the  requirements of ISO17025 from the United Kingdom Accreditation Service, or  UKAS, in relation to our testing laboratory.   UKAS is the national body for the accreditation of testing and  calibration laboratories, certification and inspection bodies.





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As a result of obtaining the  above-mentioned accreditations, we expect that we will be able to demonstrate  compliance of our IVD products with some of the essential requirements provided  for in Annex I of the Directive.   However, we must also prepare technical dossiers in accordance with  Annex III of the Directive before affixing a CE marking on each IVD.  Products have already been registered with  the UK Competent Authority and we aim to demonstrate compliance of all of our  IVD products with the relevant Annexes of the Directive.





In the US and UK, we are also  subject to numerous environmental and safety laws and regulations, including  those governing the use and disposal of hazardous materials.  Any violation of, and the cost of compliance  with, these regulations could have a material adverse effect on our business  and results of operations.





Employees





As of December 31, 2002, we had  492 full time employees.   The employee  group includes chemists, engineers, computer scientists, and biologists with  experience in the medical diagnostic, genoprofiling, pharmacogenomic, prionic,  computer, and electronic industries.    None of our employees are represented by a collective bargaining  agreement, nor have we experienced work stoppages.   We believe that we maintain good relationships with our  employees.   Our success will depend in  large part on our ability to attract and retain skilled and experienced  employees.   There can be no assurance  that we will be successful in hiring or retaining qualified personnel, and our failure  to do so could have a material adverse impact on our business, financial  condition and results of operations.





Competition





The markets for our products  are competitive and the intensity of competition may increase.  Currently, we compete primarily with other  companies that are pursuing technologies, products and services that are  similar to those that we offer.  Some of  our competitors have greater financial, operational, sales and marketing  resources, and more experience in research and development and  commercialization than we have.  Moreover,  some competitors may have greater name recognition than we do, and may offer  discounts as a competitive tactic.   These competitors and other companies may have developed or could in the  future develop new technologies that compete with our products or which could  render our products obsolete.  We cannot  assure you that we will be able to make the enhancements to our technologies  necessary to compete successfully with newly emerging techniques.





Our competitors in the field of  identity genomics testing include: Bode Labs, DNA Diagnostics, Identigene,  Laboratory Corporation of America, Myriad Genetics, and Reliagene in the US,  along with Forensic Science Service and Laboratory of the Government Chemist in  the UK.





Competitors in the DNA  diagnostics field include: Applied Biosystems, Celera Diagnostics, diaDexus,  Immunogenetics Laboratory Corporation of America, Myriad Genetics, Nanogen,  Quest Diagnostics, Roche, Specialty Labs and Third Wave Technologies.  Competitors in the field of HLA testing  include: Biotest, One Lambda and Pel-Freeze.





Our principal competitors in  the field of pharmacogenetics research and development for personalized  medicine include: Celera Genomics, CuraGen, DNA Sciences, Genaissance  Pharmaceuticals and Millenium Predictive Medicine.  Our principal competitors in the field of pharmacogenetics  patient testing include: Genelex, Great Smokies Laboratory, Laboratory  Corporation of America, Myriad Genetics and Quest Diagnostics.





During 2002, we competed with  several companies in the SNP genotyping field offering alternative technology  concepts.  These companies include:  Affymetrix, Applied Biosystems, Illumina, Nanogen, Pyrosequencing, Qiagen  Genomics, Sequenom and Third Wave Technologies.





Risks  Related to Our Business





If we fail to acquire additional capital to  fund our current and future operating plans or obtain it on unfavorable terms,  then we may have to end further development to some of our programs and  operations.





We have expended significant  resources developing our facilities, and   funding commercialization activities.   We anticipate that our existing cash on hand, including the 2003 financing and the availability of funds under the line of  credit, are sufficient to fund our current and future operating plans at least through  2003.  After this, we may be unable to





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fund our business operations  and may be required to seek other strategic alternatives.  The amount of  additional capital which we will need to raise will depend on many factors,  including those listed under Item 7 Managements Discussion and Analysis of  Financial Condition and Results of Operation  Liquidity and Capital  Resources.





As a result of the March 2003 financing and, in addition, if we raise  additional funds through the sale of equity or convertible debt or  equity-linked securities, your percentage ownership in the company will be  reduced. In addition, these transactions may dilute the value of our  outstanding common stock.  We may issue  securities that have rights, preferences and privileges senior to our common  stock. If we raise additional funds through collaborations or licensing  arrangements, we may be forced to relinquish rights to certain of our  technologies or products, or grant licenses to third parties on terms that are  unfavorable to us.  We may be unable to  raise additional funds on terms acceptable to us.  If future financing is not available to us on acceptable terms,  we may not be able to fund our future needs and we may have to curtail one or more commercial activities.





We may be delisted from Nasdaq resulting in a  limited public or private market for our common stock and volatility in our  stock price.





Our common stock is currently  listed on the Nasdaq National Market.   On January 10, 2003, we received a notice from Nasdaq stating that we  were not in compliance with their continued listing requirements because our  common stock bid price had fallen below Nasdaqs $1.00 minimum bid price  requirement for 90 consecutive trading days.   On February 20, 2003, Orchid attended a hearing before the Nasdaq  Qualifications Panel (the Panel) to appeal the staffs determination.  On March 26, 2003, the Panel determined to  continue listing of our common stock on the Nasdaq National Market through June  24, 2003.  If we are unable to regain  compliance with the $1.00 minimum bid requirement by June 24, 2003, and any  appeal to Nasdaq for relief from this requirement is unsuccessful, our common  stock will be delisted from trading on the Nasdaq National Market.  If this were to happen, trading in our  common stock would decrease
substantially, or may cease altogether, the market  price of the common stock may decline further, potentially to zero, and  stockholders may lose some or all of their investment.  Furthermore, delisting of our common stock  from the Nasdaq National Market would inhibit, if not preclude, our ability to  raise additional working capital on acceptable terms, if at all.





If our common stock is delisted from Nasdaq,  the founders of GeneShield may terminate their agreements with GeneShield.





Pursuant to the terms of our  May 2001 contribution and license agreement with the founders of GeneShield, if  our common stock is delisted from the Nasdaq National Market for a period of 90  days, subject to certain cure periods, the founders may terminate the  contribution and license agreement which would preclude GeneShield from  operating as currently structured, which could have an adverse effect on our  results of operations and financial condition.





We are at an early stage of development and  may never become profitable.





We organized our company as a  Delaware corporation on March 8, 1995 and have a short operating history.  The market for the products and services  that we develop, manufacture and market, all of which are derived from genomics  and microfluidics technologies, is uncertain.   We face risks related to our ability to:





| |  | develop,    market and maintain competitive technologies, products and services;                                                                                                                                                   
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                    
| |  | anticipate    and adapt to changes in our rapidly evolving markets;                                                                                                                                                                
| |   |                                                                                                                                                                                                                                    
| |  | retain    current collaborators and customers and attract new collaborators and    customers for our genoprofiling products and services in paternity, forensics,disease    susceptibility, diagnostic and pharmacogenetic testing;
| |   |                                                                                                                                                                                                                                    
| |  | attract,    retain and motivate qualified management, technical and scientific personnel;                                                                                                                                          
| |   |                                                                                                                                                                                                                                    
| |  | obtain    additional capital to support the expenses of developing our technologies and    commercializing our products and services; and                                                                                          
| |   |                                                                                                                                                                                                                                    
| |  | transition    successfully from a company with a research focus to a company capable of    supporting commercial activities.                                                                                                       




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If we fail to adequately manage  these risks, we may never become profitable and our financial condition would  suffer.





We had an accumulated deficit
  of $263.4 million as of December 31, 2002 and expect to continue to incur operating
  losses through at least the third quarter of 2003 or possibly beyond.





We have had substantial  operating losses since our inception, and we expect our operating losses to  continue at least through the third quarter of 2003 and possibly beyond.  For example, we experienced net losses of  $80.1 million for the year ended December 31, 2002, $84.7 million in 2001, and  $47.9 million in 2000.  In order to  further develop and commercialize our paternity, forensic and animal testing  services, as well as our pharmacogenomic services provided by GeneShield, we  will need to incur expenses in connection with our internal development and  commercialization programs.  As a  result, we expect to incur operating losses at least through the third quarter  of 2003.





Fluctuations in our quarterly revenues and  operating results may negatively impact our stock price.





Revenues and results of  operations have fluctuated significantly in the past and significant  fluctuations are likely to continue in the future due to a variety of factors,  many of which are outside of our control.   These factors include:





| |  | the volume    and timing of orders for our products and services;                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                      
| |  | changes in    the mix of our products and services offered;                                                                                          
| |   |                                                                                                                                                      
| |  | the number,    timing and significance of new products and services introduced by our    competitors;                                                
| |   |                                                                                                                                                      
| |  | our ability    to develop, market and introduce new and enhanced products and services on a    timely basis;                                         
| |   |                                                                                                                                                      
| |  | changes in    the cost, quality and availability of intellectual property and components    required to manufacture or use our products and services;
| |   |                                                                                                                                                      
| |  | availability    of commercial and government funding to researchers who use our products and    services, and                                        
| |   |                                                                                                                                                      
| |  | The timing    of Federal funding for forensics DNA testing for backlog reductions through    the National Institue of Justice.                       




Development costs associated  with our technologies, products and services, as well as personnel costs,  marketing programs and overhead account for a substantial portion of our  operating expenses.  We cannot adjust  these expenses quickly in the short term.   In addition, if we successfully complete the sale of our Diagnostics  business, our revenues may decline.  If  our revenues decline and we are not able to reduce our operating expenses  accordingly, our loss of revenues and failure to reduce operating expenses  could harm our operating results for a particular fiscal period.  In addition, market and other conditions may  require certain non-cash charges such as stock based compensation charges and  impairment charges related to long-lived assets to be recorded by us in future  periods.  If our operating results in  some quarters fail to meet the expectations of public market analysts or  investors, the market price of our
common stock is likely to fall.





We have limited manufacturing experience as  it relates to manufacturing our products and delivering our services on a  commercial scale.





We have limited process  manufacturing experience and currently possess seven accredited facilities  capable of producing limited quantities of our products and services for both  sale to our customers and internal use.   We have completed a significant portion of building out our  manufacturing and service facilities to meet current market needs.  If commercial sales were to increase  dramatically in the short term, we may need to scale-up our manufacturing and  service facilities.  If we are unable to  successfully scale-up our existing capabilities quickly to meet such a demand,  we may not be able to provide our customers with the quantity of products and  services they require, which would result in reduced revenues.  If any natural disaster were to  significantly damage our manufacturing and service facilities or if other  events were to cause our operations to fail, these events could prevent us from  developing and producing our
products and services.  Furthermore, we may not have adequate insurance to cover the  damage, which would adversely affect our results of operations.





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We have limited sales and marketing  experience, and as a result, may be unable to compete successfully with our  competitors in commercializing our potential products and services.





We have limited experience in  sales and marketing.  We have only a  small direct sales force and will continue to rely principally upon a small  number of employees.  We intend to  market our products and services through collaborations and distribution  agreements with healthcare, pharmaceutical, biotechnology, and agricultural  companies.  We also intend to continue  to market our Paternity, Forensic and Agricultural testing services to  governmental entities and our Paternity and Pharmacogenomic testing services to  individual consumers.  We cannot assure  you that we will be able to successfully establish or maintain either a direct  sales force or distribution arrangements to market our products and services,  which could have a material adverse effect on our financial condition and  business strategy.





Our development of future technologies and  commercial products and services utilizing proprietary methods of single base  primer extension may not be commercially viable or successful, which would  adversely affect our revenues.





We cannot be certain that our  prospective customers will value our products or services utilizing primer  extension methodologies.  We are  currently developing and commercializing only a limited number of products and  services based on our SNP scoring technologies.  We cannot assure you that we or our customers will be able to use  our technologies to successfully identify and score SNPs.  In addition, any SNPs which we or our  customers score may not be useful in assisting pharmaceutical or diagnostic  product development.  Our SNP scoring  technologies are in part directed toward the role of genes and polymorphisms in  complex diseases.  A limited number of  companies have developed or commercialized products based on gene discoveries  and/or polymorphisms to date.   Accordingly, even if we or our customers are successful in scoring SNPs  and associating these SNPs with specific drug responses or diseases, we cannot  assure
you that these discoveries will lead to the development of therapeutic  or diagnostic products.  If we fail to  successfully develop our SNP scoring technologies or any commercially  successful diagnostic products and services based on such technologies, we may  not achieve a competitive position in the market.





Our SNP scoring technologies  involve novel uses of products, software and technologies that require  validation in commercial applications.   Previously unrecognized defects or limitations of our SNP scoring  technologies may become apparent in these commercial applications.  As a result, we may be unable to validate or  achieve the improvements in the components of our SNP scoring technologies  necessary for their successful commercialization.





If we fail to maintain the identity genomics  contracts we have with various state and governmental agencies or fail to enter  into additional contracts, we would lose a significant source of revenues.





We currently derive the  majority of our revenues from the identity genomics services we provide in the  paternity, forensic and agricultural fields.   These services are heavily dependent upon contracts we have with various  governmental agencies, which are typically open to bid and awarded every one to  three years.  The process and criteria  for these awards are typically complex and highly competitive.  We may not be able to maintain any of our  existing governmental contracts or be the successful bidder on any additional  governmental contracts which may become available in the future, or negotiate  terms acceptable to us in connection with any governmental contract awarded to  us, which would adversely affect our results of operations and financial  condition.





If we fail to improve our genetic analyses  process, we could fail to achieve cost improvements and lose our competitive  position in the market.





Due to rapid product  development and technological advancement in the medical diagnostics and DNA  testing industry, our growth and future operating results will depend, in  significant part, upon our ability to apply new technologies to automate and  improve our genetic analysis services and modify our existing products to take  advantage of new technologies.  There  can be no assurance that our development efforts will result in any additional  commercially viable or successful improvements to our testing processes or  products.  Any potential improvements to  the testing process or new products will require substantial additional  investment, laboratory development and clinical testing, and possibly  regulatory approvals, prior to commercialization.  Our inability to successfully develop improvements to our testing  processes or new products or to achieve market acceptance of such improvements  or new products could have a material adverse
effect on our business, financial  condition and results of operations.  In  addition, the rapid product development and technological advancement in the  genetic analysis and DNA testing industry could result in our current or future  DNA testing services or products becoming obsolete.  We believe that our future operating results will depend  substantially upon our ability to overcome





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technological challenges,  successfully introduce new technologies into our laboratories and to our  customers and to gain access to and successfully integrate such technologies if  developed by others.





If we cannot enter into new collaborations or  licensing agreements, we may be unable to develop or commercialize our technologies,  products and services.





Our strategy for developing and  commercializing technologies, products and services based on our discoveries  depends upon our ability to form research collaborations and licensing  arrangements.  As a result, we may be dependent  on our collaborators and licensees for regulatory approval and manufacturing  and marketing of diagnostic products and personalized medicine resulting from  the application of our technologies.  If  we are unable to enter into such research collaborations and licensing  arrangements or implement our strategy to develop and commercialize diagnostic  products based upon our discoveries it would have a material adverse effect on  our results of operation and financial condition.





The early termination of any of our  collaborations or licenses could harm our business and financial condition.





The collaboration agreements we  have with third parties may be terminated early under certain circumstances,  including the event of a material breach by us.  In addition, we intend to enter into additional collaborations  and licenses with third parties, who may require that their agreements with us  permit termination by them prior to the expiration of the negotiated term under  certain circumstances.  If any third  party were to terminate its agreement with us or otherwise fail to perform its  obligations or to complete them in a timely manner, we could lose significant  revenues.





We may not be able to attract and retain  consultants and scientific advisors.





We have historically maintained  relationships with consultants and scientific advisors at academic and other  institutions who have conducted research on our behalf critical to the  development of our technologies, products and services.  The majority of these individuals have  commitments to other entities and have limited time available for us.  Some of these entities may also compete with  us.  We will need to establish new  relationships with consultants and scientific advisors in our genetic diversity  fields.  We will have little, if any,  control over the activities of any new collaborators and can expect only  limited amounts of their time to be dedicated to our activities.  Further, we may not be able to negotiate  acceptable collaborations in the future with additional consultants or  scientific advisors at academic and other institutions.





If we do not successfully distinguish and  commercialize our technologies, products and services, we may be unable to  compete successfully with our competitors or to generate significant revenues.





We are subject to significant  competition from companies that are pursuing products and services that are  substantially similar to our existing and proposed products and services.  Many of the organizations competing with us  have greater financial, manufacturing, marketing, sales, distribution and  technical resources than we do.  We may  also compete against certain of our customers, which could adversely affect our  relationships with them.





We also face significant  competition in our strategy designed to identify and patent medically important  uses of SNPs (our GeneShield strategies).   Some of the organizations competing with us have greater financial and  technical resources.  We also have  limited experience working in the managed care and health care delivery  industries and may not be able to successfully commercialize our inventions,  either on our own or in partnership with others.  It may also take longer than currently anticipated for SNPs and  pharmacogenetics to become widely used in clinical practice, which could  adversely impact our ability to realize significant revenues from our  GeneShield business in the foreseeable future.





We believe our future success  will depend, in large part, on our ability to maintain a competitive position  in the identity genomics field and the pharmacogenetics product field.  Others may make rapid technological  developments which may result in our technologies, products or services  becoming obsolete before we recover the expenses incurred to develop them.  Our inability to also make the enhancements  to our technologies necessary to compete successfully with newly emerging  technologies would have a material adverse effect on our competitive position.





If we are unable to protect our proprietary  methods and technologies, we may not be able to commercialize our products and  services.





If our patent applications do not result in  issued patents, our competitors may obtain rights to commercialize our  discoveries, which would harm our competitive position.





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Our commercial success will  depend, in part, on our ability to obtain patent protection on many aspects of  our business, technologies, products and services, including the discovery and  the association of particular SNPs with disease predisposition and adverse drug  metabolism, and on the products, methods and services we develop.  We may not be able to obtain new patents for  these products, methods or services.  We  will pursue patent protection on novel uses of SNPs discovered by us of known  genes, as well as novel uses for previously identified SNPs discovered by third  parties.  We may need to obtain a  license from such third parties with respect to any patent covering such SNPs  in order to make, use or sell any related products or services.  In addition, we may need to obtain a  separate license from the gene patent holder. We may not be able to acquire  such licenses on terms acceptable to us, if at all.





Certain parties are attempting  to rapidly identify and characterize genes and SNPs through the use of gene  expression analysis and other technologies.   To the extent any patents issue to other parties on such partial or  full-length genes or SNPs or on uses for such genes or SNPs, the risk that the  sale of products or processes developed by us or our collaborators may give  rise to claims of patent infringement against us may increase.  Others may have filed and, in the future,  are likely to file, patent applications covering SNP uses.  Any such patent application could have  priority over our patent applications and could further require us to obtain  rights to previously issued patents covering SNP uses.  We cannot assure you that any license that  we may require under any such patents will be made available to us on commercially  acceptable terms, if at all.





The scope of our issued patents may not  provide us with adequate protection of our intellectual property, which would  harm our competitive position.





Any issued patents that cover  our proprietary technologies may not provide us with substantial protection or  be commercially beneficial to us.  The  issuance of a patent is not conclusive as to its validity or its  enforceability.  The US Patent and  Trademark Office may invalidate one or more of our patents.  In addition, third parties may have patents  of their own which could, if asserted, prevent us from practicing our  proprietary technologies, including the methods we use to conduct SNP  scoring.  If we are otherwise unable to  practice our patented technologies, we may not be able to commercialize our  technologies, products or services and our competitors could commercialize our  technologies.





Our success will depend partly on our ability  to operate without misappropriating the intellectual property rights of others.





We may be sued for infringing,  or may initiate litigation to determine that we are not infringing, on the  intellectual property rights of others.   Intellectual property litigation is costly, and could adversely affect  our results of operations.  If we do not  prevail in any intellectual property litigation, in addition to any damages we  might have to pay, we could be required to stop the infringing activity, or  obtain a license to or design around the intellectual property in question.  If we are unable to obtain a required  license on acceptable terms, or are unable to design around any third party  patent, we may be unable to sell some of our products and services, which would  result in reduced revenues.





We may need to initiate lawsuits to protect  or enforce our patents and other intellectual property rights, which could  result in the forfeiture of these rights.





In order to protect or enforce  our patent rights, we may need to initiate patent litigation against third  parties.  These lawsuits could be  expensive, take significant time, and could divert management's attention from  other business concerns.  These lawsuits  could result in the invalidation or a limitation in the scope of our patents or  forfeiture of the rights associated with our patents.  We cannot assure you that we will prevail in any future  litigation or that a court will not find damages or award other remedies in  favor of the opposing party in any of these suits.  During the course of these suits, there may be public  announcements of the results of hearings, motions and other interim proceedings  or developments in the litigation.   Securities analysts or investors may perceive these announcements to be  negative, which would likely cause the market price of our stock to decline.





Other rights and measures that we rely upon  to protect our intellectual property may not be adequate to protect our  products and services and could reduce our ability to compete in the market.





In addition to patents, we rely  on a combination of trade secrets, copyright and trademark laws, non-disclosure  agreements and other contractual provisions and technical measures to protect  our intellectual property rights.  While  we require employees, collaborators, consultants and other third parties to  enter into confidentiality and/or non-disclosure agreements where appropriate,  any of the following could still occur:





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| |  | the    agreements may be breached;                                                                                                                                                    
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                       
| |  | we may have    inadequate remedies for any breach;                                                                                                                                    
| |   |                                                                                                                                                                                       
| |  | proprietary    information could be disclosed to our competitors; or                                                                                                                  
| |   |                                                                                                                                                                                       
| |  | others may    independently develop substantially equivalent proprietary information and    techniques or otherwise gain access to our trade secrets or disclose such    technologies.




If for any of the above reasons  our intellectual property is disclosed or misappropriated, it would harm both  our ability to protect our rights and our competitive position.





Future acquisitions or mergers could disrupt  our ongoing operations, increase our expenses and adversely affect our  revenues.





Since September 1998, we  acquired Molecular Tool, a developer of SNP technologies, as well as  GeneScreen, Cellmark and Lifecodes, providers of identity genomic and  diagnostic testing services.  Although  we have no commitments or agreements with respect to any additional  acquisitions or mergers at present, we anticipate that a portion of our future  growth may be accomplished either by acquiring or merger with existing  businesses.  Factors that will affect  the success of any potential acquisition or merger to be made by us include our  ability to integrate acquired personnel, operations, products and technologies  into our organization effectively, to motivate key personnel and to retain  customers of acquired or merged businesses.   We may not be able to identify suitable acquisition or merger  opportunities, obtain any necessary financing for an acquisition on acceptable  terms or successfully integrate acquired personnel and
operations.  These difficulties could disrupt our ongoing  business, distract our management and employees, increase our expenses and  materially and adversely affect our revenues.





Our failure to comply with applicable  government and industry regulations may affect our ability to develop, produce,  or market our potential products and services and may adversely affect our  results of operations.





Our development, manufacturing  and service activities involve the controlled use of hazardous materials and  chemicals and patient samples.  We are  subject to Federal, state, local, UK and European laws and regulations  governing the use, storage, handling and disposal of such materials and certain  waste products, as well as the conveyance, processing, and storage of data on  patient samples.  Further, we are  subject to CLIA as a result of our acquisition of GeneScreen, Cellmark, and  Lifecodes. CLIA imposes certain certification requirements on all clinical  laboratories performing tests on human specimens for the purpose of providing  information for the diagnosis, prevention or testing of any diseases.  In addition, we are subject to the European  Directive 98/79/EC as a result of our acquisition of the Cellmark laboratory.  European Directive 98/79/EC imposes certain requirements in connection with Cellmark's  sale of gene diagnostic
kits.  Although  we believe we comply in all material respects with the standards prescribed by  Federal, state, local, UK and European laws and regulations, if we fail to  comply with applicable laws or regulations, including CLIA and European  Directive 98/79/EC, or if an accident occurs, we could be required to pay  penalties or be held liable for any damages that result and this liability  could exceed our financial resources.





All seven of our clinical quality genotyping
  laboratories must comply with various industry regulations and accreditation
  standards in order to continue to provide our paternity testing, forensic testing
  and bone marrow typing services.  For example, our GeneScreen laboratories
  have obtained accreditation from the American Association of Blood Banks in
  order to provide paternity testing, from the National Forensic Science Testing
  Center in order to provide criminal forensic testing services and from the American
  Society of Histocompatibility and Immunology in order to provide bone marrow
  donor typing services.  In addition, our Cellmark laboratory must comply
  with various industry regulations and accreditation standards in order to provide
  paternity and forensic testing services.  For example, our Cellmark laboratory
  has obtained accreditation from a Notified Body (SGC Yarsley ICS) and the United
  Kingdom Accreditation Service and a registration from the Ministry of Agriculture,
  Fisheries and Food in order to provide paternity and forensic testing services.
  In addition, Cellmark must comply with regulations applicable to the marketing
  of its products and services.  We cannot assure you that we will be able
  to maintain our accreditations with any of these authorities or comply with
  the regulations applicable to the marketing of Cellmark products.  If we
  fail to comply with the applicable regulations promulgated by any of these agencies
  or if we were to lose our accreditation by any of them, the revenues supporting
  our GeneScreen or Cellmark businesses could be eliminated or significantly reduced.





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The international sale of our products and  services are subject to increased costs and other risks which could affect our  revenues.





Our Cellmark laboratory as well  as our Diagnostic business unit rely upon international sales which are subject  to certain inherent risks, including difficulties in collecting accounts  receivable, potentially longer payment cycles, increased costs associated with  maintaining international marketing efforts, currency fluctuations, changes in  regulatory requirements, and difficulties in enforcement of contractual  obligations and intellectual property rights.





We may be held liable for any inaccuracies  associated with our research and identity genomics services, which may require  us to defend ourselves in costly litigation.





Our genoprofiling laboratory  testing centers provide pharmacogenetic, forensic, paternity, diagnostic and  animal testing services. Claims may be brought against us for false  identification of paternity or other inaccuracies.  Litigation of these claims can be costly. We could expend  significant funds during any litigation proceeding brought against us.  Further, if a court were to require us to  pay damages to a plaintiff, the amount of such damages could significantly harm  our financial condition.





If our vendors fail to supply us with  components for which availability is limited, we may experience delays in our  product development and commercialization.





Certain key components of our  SNP scoring and other pharmacogenetic and identity genomic testing technologies  are currently available only from a single source or a limited number of  sources.  We currently rely on outside  vendors to supply or manufacture certain components of our systems and certain  reagents we use in our services.  Some  or all of these key components may not continue to be available in commercial  quantities at acceptable costs.   Consequently, if any events cause delays or interruptions in the supply  of our components, we may not be able to supply our customers with our products  and services on a timely basis which would adversely affect our results of  operations.  To the extent that our  suppliers fail to meet our requirements completely or consistently, we may need  to enter into new agreements with other suppliers, the terms of which may not  be as favorable toward us as our existing supply agreements.





If we fail to hire, train and retain  qualified employees, we may not be able to compete effectively, which could  result in reduced revenues.





Our researchers, scientists and  technicians have significant experience in research and development related to  pharmacogenomics, identity genomics, and diagnostics.  If we were to lose these employees to our competitors, we could  spend a significant amount of time and resources to replace them, which could  impair our research and development efforts.   Further, in order to maintain our manufacturing capability and to  further our development efforts, we will need to hire, train and retain  additional research, scientific and technical personnel.  If we are unable to do so, we may experience  delays in the development and commercialization of our technologies, products  and services.  In addition, we currently  are operating without a Chief Executive Officer.  We cannot guarantee you that we will be able to hire a Chief  Executive Officer that meets our requirements.   Failure to hire a suitable Chief Executive Officer may
reduce investor  interest and credibility in our company and negatively affect the share price.







Risks  Related to the Biotechnology Industry





Public opinion regarding ethical issues  surrounding the use of genetic information may adversely affect demand for our  products.





Public opinion regarding  ethical issues related to the confidentiality and appropriate use of genetic  testing results and their application in personalized medicine may influence  governmental authorities to call for limits on, or regulation of the use of,  genetic testing and its application in personalized medicine.  In addition, such authorities could prohibit  testing for genetic predisposition for certain conditions, particularly for  those that have no known cure.  Any of  these scenarios could reduce the potential markets for our products, which  could materially and adversely affect our revenues.





Commercializing medical products has  associated risks, including compliance with clinical testing and manufacturing  regulations.





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If we were to undertake the  development of medical, testing or diagnostic products without the  collaboration of others, we would have to expend significant funds.  Any of our potential medical, testing or  diagnostic products will be subject to the risks of failure inherent in the  development of diagnostic products based on new technologies.  These risks include the following  possibilities:





| |  | that the    products, if efficacious, will be difficult to manufacture on a large scale    or uneconomical to market;         
| | - | ------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                               
| |  | that    proprietary rights of third parties will preclude us or our collaborative    partners from marketing such products; or
| |   |                                                                                                                               
| |  | that third    parties will market superior or equivalent products.                                                            




If we have difficulty managing  these risks, we may not be able to develop commercially viable products.  In addition, clinical trials or marketing of  any such potential medical, testing or diagnostic products may expose us to  liability claims from the use of such products.  We may not be able to obtain product liability insurance and,  even if we do, any coverage we obtain could be insufficient or costly.  In addition, should we choose to manufacture  or to develop our own products independently, we will have to make significant  investments in product development, marketing, sales and regulatory compliance  resources, and we will have to establish or contract for the manufacture of  products under the regulations of the FDA regarding good manufacturing  practices.  We cannot assure you that we  will be able to develop or commercialize successfully any potential medical,  testing or diagnostic products.





Risks  Associated with Our Common Stock





Future issuance of our preferred stock may  dilute the rights of our common stockholders.





Our board of directors has the  authority to issue up to 5,000,000 shares of preferred stock, some of which the  board of directors has already designated, and to determine the price,  privileges and other terms of these shares.   Our board of directors may exercise this authority without any further  approval of our stockholders.  The  rights of the holders of our common stock may be adversely affected by the  rights of the holders of our preferred stock that may be issued in the future.





We have various mechanisms in place that you  as a stockholder may not consider favorable, which may discourage takeover  attempts.





Certain provisions of our  certificate of incorporation and by-laws, as well as Section 203 of the  Delaware General Corporation Law and our adoption of a shareholder's rights  plan, may discourage, delay or prevent a change in control of the Company, even  if the change in control would be beneficial to stockholders.  These provisions include:





| |  | authorizing    the issuance of "blank check" preferred stock that could be    designated and issued by our board of directors to increase the number of    outstanding shares and thwart a takeover attempt;   
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                
| |  | creating a    classified board of directors with staggered, three-year terms, which may    lengthen the time required to gain control of our board of directors;                                               
| |   |                                                                                                                                                                                                                
| |  | prohibiting    cumulative voting in the election of directors, which will allow a majority    of stockholders to control the election of all directors;                                                        
| |   |                                                                                                                                                                                                                
| |  | requiring    super-majority voting to effect certain amendments to our certificate of    incorporation and by-laws;                                                                                            
| |   |                                                                                                                                                                                                                
| |  | limiting who    may call special meetings of stockholders;                                                                                                                                                     
| |   |                                                                                                                                                                                                                
| |  | prohibiting    stockholder action by written consent, which requires all actions to be taken    at a meeting of stockholders; and                                                                              
| |   |                                                                                                                                                                                                                
| |  | establishing    advance notice requirements for nominations of candidates for election to our    board of directors or for proposing matters that can be acted upon by    stockholders at stockholder meetings.




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Pursuant to our stockholder  rights plan, each share of our common stock has an associated preferred share  purchase right.  The rights will not  trade separately from the common stock until, and are exercisable only upon,  the acquisition or the potential acquisition through tender offer by a person  or group of 15% or more of our outstanding common stock.





In addition, our stock  incentive plans may discourage, delay or prevent a change in control of the  Company.





Our stock price has been, and likely will  continue to be, volatile and your investment may suffer a decline in value.





The market prices for  securities of companies quoted on The Nasdaq Stock Market, including our market  price, have in the past been, and are likely to continue in the future to be,  very volatile.  The Nasdaq Composite  Index has significantly declined since our initial public offering in May 2000  and remains very volatile.  The market  price of our common stock has been, and likely will continue to be, subject to  substantial volatility depending upon many factors, many of which are beyond  our control, including:





| |  | announcements    regarding the results of development efforts by us or our competitors;                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                               
| |  | announcements    regarding the acquisition of technologies or companies by us or our    competitors;                                          
| |   |                                                                                                                                               
| |  | changes in    our existing strategic alliances or licensing arrangements or formation of    new alliances or arrangements;                    
| |   |                                                                                                                                               
| |  | technological    innovations or new commercial products developed by us or our competitors;                                                   
| |   |                                                                                                                                               
| |  | changes in    our intellectual property portfolio;                                                                                            
| |   |                                                                                                                                               
| |  | developments    or disputes concerning our proprietary rights;                                                                                
| |   |                                                                                                                                               
| |  | issuance of    new or changed securities analysts' reports and/or recommendations applicable    to us;                                        
| |   |                                                                                                                                               
| |  | additions or    departures of our key personnel;                                                                                              
| |   |                                                                                                                                               
| |  | operating    losses by us;                                                                                                                    
| |   |                                                                                                                                               
| |  | actual or    anticipated fluctuations in our quarterly financial and operating results and    degree of trading liquidity in our common stock;
| |   |                                                                                                                                               
| |  | continued    economic uncertainty with respect to valuation of certain technology    companies and other market conditions; and               
| |   |                                                                                                                                               
| |  | our ability    to maintain our common stock listing on the Nasdaq National Market.                                                            




We cannot assure you that your  initial investment in our common stock will not fluctuate significantly.  One or more of these factors could  significantly harm our business and cause a decline in the price of our common stock  in the public market, which would adversely affect our business and financial  operations.





Our directors, executive officers and  principal stockholders will have substantial control over our affairs.





Our directors, executive  officers and principal stockholders beneficially own, in the aggregate,  approximately 4.2% of our common stock.   These stockholders, acting together, will have the ability to exert  substantial influence over all matters requiring approval by our  stockholders.  These matters include the  election and removal of our directors and any merger, consolidation or sale of  all or substantially all of our assets. In addition, they may dictate the  management of our business and affairs.   This concentration of ownership could have the effect of delaying,  deferring or preventing a change in control, or impeding a merger or  consolidation, takeover or other business combination of which you might  otherwise approve.





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|Item 2. | PROPERTIES
|------- | ----------




We lease four facilities which provide
  us with approximately 76,000 square feet for our operations in Princeton, New
  Jersey which serve as our headquarters and as the base for marketing and product
  support operations.  We are currently in default for nonpayment of rent
  in connection with one of the leases for one of the four facilities encompassing
  approximately 14,000 square feet.  This facility is not essential to our
  continued operation.  We lease approximately 8,000 square feet of office
  space in Roslyn, Virginia.  We lease an approximately 20,000 square foot
  facility in Dallas, Texas; an approximately 16,500 square foot facility in Dayton,
  Ohio; and an approximately 5,100 square foot facility in Sacramento, California. 
  We also lease an approximately 37,000 square foot facility in Stamford, Connecticut,
  an approximately 16,000 square foot facility in Germantown, Maryland, an approximately
  15,000 square foot facility in Nashville, Tennessee, and an approximately 9,000
  square foot facility in East Lansing, Michigan.  Of these facilities, these
  last eight include CLIA approved laboratories where our genetic DNA diversity
  testing services are located.  We also lease a total of approximately 75,000
  square feet in three buildings located in Abingdon, UK for the operations of
  Orchid BioSciences Europe Limited.  We currently believe our facilities
  are sufficient to meet our space requirements through the year 2003.  We
  are currently attempting to sublease our Princeton based facilities.





|Item 3. | LEGAL PROCEEDINGS
|------- | -----------------




On February 13, 2002 we  received a Notice of Lawsuit and Request for Waiver of Service of Summons and a  copy of the complaint filed in the United States District Court for the  Southern District of New York in connection with a class action lawsuit.  The complaint purportedly was filed on  behalf of persons purchasing our stock between May 4, 2000 and December 6,  2000, and alleged violations of Sections 11, 12(a)(2) and 15 of the Securities  Act of 1933, as amended, and Section 10(b) of the Securities Exchange Act of  1934, as amended, and Rule 10b-5 promulgated thereunder.  The complaint alleged that, in connection  with our May 5, 2000 initial public offering, 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.   Plaintiffs seek unspecified damages.   On February 19, 2003, we received notice of the courts decision to  dismiss the Section 10(b) claims against Orchid.  The claims against individuals officers named as defendants were  earlier dismissed without prejudice, subject to a tolling agreement.  There is currently a draft settlement  agreement in review by defendant issuers.   We have not reserved any amount related to this case as we believe that  the allegations are without merit and intend to vigorously defend against the  plaintiffs claims.





We had been in a litigation  with St. Louis University of St. Louis, Missouri regarding its belief that our  SNP scoring technology infringes certain claims under US patent 5,846,710,  which was controlled by the University. On August 7, 2002, the parties  dismissed the litigation.  St. Louis  University conditionally assigned both the patent and all license agreements  related thereto to us.  On March 13,  2003, St. Louis University notified us that it was unable to obtain a required  consent to assign the patent to us.   Pursuant to the terms of our settlement agreement with St. Louis  University, the failure to obtain such consent results in the automatic grant  to us of an exclusive license under the patent.  We are currently in discussions with St. Louis University  regarding the terms of such license and the restructuring of our obligations to  St. Louis University.





We are a co-defendant in litigation
  commenced by Enzo Biochem, Inc. and Enzo Life Sciences, Inc. against ten defendants. 
  The complaint asserts that we purchased materials from plaintiffs authorized
  distributor and resold those materials in a manner not authorized by the related
  distribution agreements.   The complaint, therefore, seeks money damages
  based primarily on alleged patent infringement by us.   We have asserted
  a cross-claim for indemnification against the distributor.  The litigation
  currently is in fact discovery and no expert discovery has occurred.  
  As a result, it is not possible for us to provide an opinion on the likely outcome
  of the various claims, but we intend to vigorously defend against plaintiffs
  claims as we believe the claims against us are without merit.





Prior to our acquisition of  Lifecodes, which occurred on December 5, 2001, Lifecodes sold Medical Molecular  Diagnostics GmbH, or MMD, a wholly owned subsidiary of Lifecodes based in  Dresden, Germany to Duetsche Knochenmarkspenderdatei gemeinnutzige Gesellschaft  mbH, or DKMS, pursuant to a Stock Purchase Agreement dated November 15, 2002  (SPA).  Upon the acquisition of Lifecodes,  we assumed Lifecodes obligations to DKMS under the SPA.





The MMD lab conducts HLA typing services
  using both membrane and Microarray technologies.  Lifecodes has clinically
  validated and used the Microarray technology in its HLA testing laboratory in
  the US.  The equipment in this laboratory has produced reliable results
  for Lifecodes and the management of Lifecodes had no reason to believe that
  the





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identical equipment, which is  installed in the MMD lab, would operate any differently.  We met our obligation to provide a  laboratory director for the first year of the contract following the  acquisition.  Our laboratory  director also successfully guided the MMD lab through stringent ASHI mandated  inspections to obtain ASHI regulatory certification.  During the transition of ownership,  DKMS expressed concerns about the operating effectiveness of the  equipment in the MMD lab. In the opinion of Lifecodes and our management, these  concerns reflect a failure of DKMS to commit appropriately trained personnel to  the MMD lab, rather than equipment concerns.





As a result of this continuing  dispute, we anticipate receiving notification in the near future that DKMS has  filed a suit against us for damages under the SPA for the full amount of the  cost to acquire MMD.  DKMS is  anticipated to claim defects in the MMD lab.   We have not reserved any amount related to this case and believe that  the allegations are without merit and intend to vigorously defend against  these anticipated claims.  Legal  proceedings are likely to occur no earlier than the fall 2003.  In addition, in December 2002, we filed a  claim in Germany against DKMS for significant unpaid accounts receivable that  accrued during the year ended December 31, 2002.  The accounts receivable amounts were for HLA typing conducted by  the Orchid Diagnostics business unit, which we currently plan to sell.  The services performed by the Diagnostics  business unit were exclusively upon DKMS request.  Legal proceedings for
our outstanding accounts receivable are  expected to take place in Germany by summer 2003.





|Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------




No matters  were submitted during the fourth quarter of the year ended December 31, 2002.





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PART  II





|Item 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|------- | ---------------------------------------------------------------------




Market  Information





Our common stock began trading  on The Nasdaq National Market on May 5, 2000 under the symbol ORCH.  The following table sets forth, for the  periods indicated, the high and low sales prices for our common stock, as  reported by Nasdaq, since our common stock commenced public trading:





|                                  |  | Common    Stock |      
|--------------------------------- |  | --------------- | -----
|                                  |  |                 |      
|                                  |  | High            |      
|                                  |  |                 |      
|2000:                             |  |                 |      
|Second Quarter (from May 5, 2000) |  | $               | 38.75
|Third Quarter                     |  |                 | 61.00
|Fourth Quarter                    |  |                 | 33.75
|2001:                             |  |                 |      
|First Quarter                     |  | $               | 14.38
|Second Quarter                    |  |                 | 8.74 
|Third Quarter                     |  |                 | 7.30 
|Fourth Quarter                    |  |                 | 6.35 
|2002:                             |  |                 |      
|First Quarter                     |  | $               | 5.95 
|Second Quarter                    |  | $               | 2.78 
|Third Quarter                     |  | $               | 1.56 
|Fourth Quarter                    |  | $               | 0.83 




See the discussion under Item 7  Managements Discussion and Analysis of Financial Condition and Results of  Operation  The Nasdaq National Market Listing regarding the status of the  listing of our common stock on the Nasdaq National Market.





On March 3, 2003, the last sale  price of the common stock was $0.41.





Stockholders





As of March 3, 2003, there were  approximately 586 stockholders of record of the 55,738,781 outstanding shares  of common stock.





Dividends





We have not paid dividends to our stockholders since our inception and do not plan to pay cash dividends in  the foreseeable
 future, except as may be required to the holders of our Series A Convertible Preferred Stock. See the discussion under item 7 Managements Discussion and Analysis of Financial Condition and Results of Operation  Liquidity and Capital Resources regarding the rights of the Series A Convertible Preferred Stock to receive dividends.





|Item 6. | SELECTED FINANCIAL DATA
|------- | -----------------------




The consolidated statements of  operations data for the years ended December 31, 2002, 2001, and 2000 and the  consolidated balance sheet data as of December 31, 2002 and 2001 were derived  from our audited consolidated financial statements included elsewhere in this  Annual Report on Form 10-K.  The  consolidated statements of operations data for the years ended December 31,  1999 and 1998 and the consolidated balance sheet data as of December 31, 2000,  1999, and 1998 were derived from our audited financial statements not included  in this Annual Report on Form 10-K.  Our  historical results are not necessarily indicative of results to be expected for  any





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future period.  The data presented below should be read in  conjunction with Managements Discussion and Analysis of Financial Condition  and Results of Operation included in Item 7 and our consolidated financial statements  and related notes included elsewhere in this Annual Report on Form 10-K.





|                                                                                                     |  | Year ended    December 31             |        
|---------------------------------------------------------------------------------------------------- |  | ------------------------------------- | -------
|                                                                                                     |  |                                       |        
|                                                                                                     |  | 2002                                  |        
|                                                                                                     |  |                                       |        
|                                                                                                     |  | (In thousands, except per share data) |        
|Consolidated statements of operations data:                                                          |  |                                       |        
|Revenues:                                                                                            |  |                                       |        
|Product revenues and access fees                                                                     |  | $                                     | 2,454  
|Clinical laboratory testing                                                                          |  |                                       | 44,597 
|License, grant and other revenues                                                                    |  |                                       | 3,374  
|                                                                                                     |  |                                       |        
|Total revenues                                                                                       |  |                                       | 50,425 
|Operating    expenses:                                                                               |  |                                       |        
|Cost of product revenues and access fees                                                             |  |                                       | 1,690  
|Cost of clinical laboratory testing                                                                  |  |                                       | 25,957 
|Research and development                                                                             |  |                                       | 21,006 
|Marketing and sales                                                                                  |  |                                       | 8,701  
|General and administrative                                                                           |  |                                       | 32,967 
|Impairment of assets                                                                                 |  |                                       | 20,771 
|Restructuring                                                                                        |  |                                       | 6,880  
|Amortization of intangible assets                                                                    |  |                                       | 3,039  
|Acquisition of in-process research and development                                                   |  |                                       |       
|                                                                                                     |  |                                       |        
|Total operating expenses                                                                             |  |                                       | 121,011
|                                                                                                     |  |                                       |        
|Operating loss                                                                                       |  |                                       | (70,586
|Other income    (expense):                                                                           |  |                                       |        
|Interest income                                                                                      |  |                                       | 536    
|Interest expense                                                                                     |  |                                       | (583   
|Other income (expense)                                                                               |  |                                       | (117   
|Loss on sale of assets                                                                               |  |                                       | (921   
|                                                                                                     |  |                                       |        
|Total other income (expense)                                                                         |  |                                       | (1,085 
|                                                                                                     |  |                                       |        
|Loss from continuing operations before income taxes                                                  |  |                                       | (71,671
|Income tax    benefit                                                                                |  |                                       | 577    
|                                                                                                     |  |                                       |        
|Loss from    continuing operations                                                                   |  |                                       | (71,094
|Discontinued    operations:                                                                          |  |                                       |        
|Loss from    operations of a business held for sale                                                  |  |                                       | (9,003 
|                                                                                                     |  |                                       |        
|Net loss                                                                                             |  |                                       | (80,097
|Beneficial    conversion feature of preferred stock                                                  |  |                                       |       
|                                                                                                     |  |                                       |        
|Net loss allocable to common stockholders                                                            |  | $                                     | (80,097
|                                                                                                     |  |                                       |        
|Basic and    diluted net loss per share allocable to common stockholders                             |  | $                                     | (1.48  
|Shares used    in computing basic and diluted net loss per share allocable to common    stockholders |  |                                       | 54,001 




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|                                                                                                       |  | December    31 |       
|------------------------------------------------------------------------------------------------------ |  | -------------- | ------
|                                                                                                       |  |                |       
|                                                                                                       |  | 2002           |       
|                                                                                                       |  |                |       
|Consolidated balance sheet data:                                                                       |  |                |       
|Cash, cash    equivalents, and short-term investments (including $3,385 of restricted cash    in 2002) |  | $              | 13,370
|Working    capital                                                                                     |  |                | 7,556 
|Total assets                                                                                           |  |                | 70,434
|Long-term    debt, less current portion                                                                |  |                | 2,299 
|Mandatorily    redeemable preferred stock                                                              |  |                |      
|Convertible    preferred stock                                                                         |  |                |      
|Total    stockholders equity (deficit)                                                                |  |                | 38,693




The following transactions had  a material effect on the comparability of the data presented in the  consolidated financial data above, as follows: contract revenues received from  related parties relating to the SmithKline Beecham agreement, the acquisition  of certain Molecular Tool assets in September 1998, the acquisition of  GeneScreen in December 1999, the sale of series C mandatorily redeemable  convertible preferred stock in December 1997 and March 1998, the sale of series  E mandatorily redeemable convertible preferred stock in December 1999 and  January 2000, the sale of common stock in our initial public offering in May  2000, the sale of common stock in our secondary offering in June 2001, the  acquisitions of Cellmark in February 2001 and Lifecodes in December 2001, the  sale of our common stock in February and March 2002, the decision to eliminate  the Life Sciences product business including the sale of assets in 2002, the  line of credit
entered into in 2002 and the decision in 2002 to sell the  Diagnostics business, which results have been classified as discontinued  operations and assets and liabilities held for sale in 2002 and 2001.  Please see our notes to the consolidated  financial statements included elsewhere in this Annual Report on Form 10-K for  further discussions of these transactions.





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|Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND    RESULTS OF OPERATION
|------- | ---------------------------------------------------------------------------------------




This Managements Discussion  and Analysis of Financial Condition as of December 31, 2002 and Results of  Operations for the years ended December 31, 2002, 2001, and 2000 should be read  in conjunction with our Consolidated Financial Statements and related Notes to  Consolidated Financial Statements and Selected Financial Data included  elsewhere in this Annual Report on Form 10-K.





OVERVIEW





We are engaged in the provision  of services and products for profiling genetic uniqueness.  Since we began operations in March 1995, we  have devoted substantially all of our resources to the provision of DNA testing  and the development and application of a portfolio of products and services  using our proprietary biochemistry for scoring single nucleotide polymorphisms,  or SNPs, as well as microfluidics technologies for applications, principally in  the field of high volume SNP scoring and pharmacogenetics analysis.





In 2001, our business focused  on our SNP scoring products and services that used our proprietary SNP-IT  primer extension technology, and on our identity genomics services in paternity  and forensics.  During 2001, we entered  into various agreements.  These  agreements had varying terms and included but were not limited to: (i) services  agreements whereby we agreed to provide genetic analysis services; (ii)  services agreements under which we would provide SNP genotyping services; (iii)  license agreements pursuant to which we granted third parties royalty bearing,  nonexclusive and exclusive licenses to use our SNP-IT single base primer  extension technology to produce and sell reagent kits and software  incorporating our technology; and (iv) agreements under which we agreed to  provide various Orchid products under the proprietary labels such as SNPstream  instruments, SNPware and ELUCIGENE consumables.  Since late 1999, following our
acquisition of GeneScreen, Inc.  (GeneScreen) and, our subsequent acquisitions of Cellmark and Lifecodes, both  in 2001, we have been a leading provider of DNA testing services in the  paternity, forensics and human leukocyte antigen, or HLA, transplantation  typing fields.





During 2002, we conducted a  strategic review of our business and, as a result, we are focusing on our high  growth services businesses where we are a market leader in profiling genetic  uniqueness, including forensics, paternity and public health testing as well as  personalized medicine.  In December 2002,  we disposed of our SNP genotyping instruments and related consumables assets  offered by our Orchid Life Sciences business unit.  We intend to continue to leverage our leading SNP technology in  providing genoprofiling services offered by our other business units.  During 2002 we also decided to sell our  Diagnostics business unit.  This  business unit offers diagnostic testing consumables for laboratories throughout  the US and Europe as well as HLA testing for organ transplantation and cystic  fibrosis testing instrumentation.  The  Diagnostic business unit is considered to be a non-core asset that we expect to  sell and,
therefore, has been reflected as a discontinued operation in our  consolidated results of operations.





Our ability to achieve  profitability will depend largely on our ability to continue to grow revenues and increase gross margins in genoprofiling services for the forensics, paternity, agricultural, and  personalized healthcare markets.  Our  provision of genoprofiling services depends, in part, on our ability to  leverage our leading SNP technology where it provides us a competitive  advantage.





We have incurred losses since inception,
  and, as of December 31, 2002, we had total stockholders equity of approximately
  $38.7 million, including an accumulated deficit of approximately $263.4 million. 
  We anticipate incurring additional losses at least through the third quarter
  of 2003.  We expect the need to raise additional cash to fund operations
  until we become profitable which is anticipated to be in late 2003.  During
  2002, we secured a $10 million line of credit with a commercial lender which
  expires in December 2003 but contains automatic renewal provisions at the commercial
  lender's option.  In 2003, we issued and sold 1,600 units consisting of
  one share of our Series A convertible preferred stock and one warrant to purchase
  our common stock for aggregate gross proceeds of $16.0 million (see Liquidity
  and Capital Resources below).  In addition, we are also evaluating
  other sources of cash including our commitment to sell and divest non-core assets
  such as the Diagnostics business unit.  We cannot make any assurance that
  any of these prospective arrangements to secure cash to fund future operations
  will be successful.





Acquisition,   Divestitures and Establishment of New Businesses





On December 30, 1999, we  acquired GeneScreen, Inc., which operates DNA testing laboratories in Dallas,  Texas and Dayton, Ohio.  Orchid  GeneScreen performs DNA laboratory analyses for paternity, transplantation, and  forensic testing. Orchid GeneScreens primary source of revenue is paternity  testing under contracts with various state and county government agencies.





On February 12, 2001, we  acquired Cellmark Diagnostics, a division of AstraZeneca, in an asset  acquisition.  Cellmark is a leading  provider of genetic testing services in the UK and sells kits and conducts  testing for genetic diseases, including cystic fibrosis.





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On December 5, 2001, we acquired all
  of the outstanding equity securities of Lifecodes Corporation. Lifecodes is
  a leading provider of DNA testing for forensics and paternity in the US. 
  We acquired Lifecodes in order to strengthen our position in the clinical grade
  testing market.  Lifecodes also maintains a diagnostic kit business which,
  subsequent to our sale of the Orchid Life Sciences product related assets, comprises
  our only products business and which is currently held for sale as part of Orchid
  Diagnostics.  We view this acquisition, in addition to the two previous
  acquisitions of GeneScreen and Cellmark, as a significant step in providing
  cost efficient, high throughput clinical testing businesses which form the core
  focus of our company.





The GeneScreen, Cellmark, and  Lifecodes businesses in paternity and forensics testing support our goal of  extending our genoprofiling business. 
We intend to apply our SNP technology to the paternity and forensics businesses  of GeneScreen, Cellmark, and Lifecodes where it enables us to reduce the cost  of providing genotyping services. 
We  also plan to use our laboratories to conduct pharmacogenetic SNP scoring services that we plan to offer to subscribers in the future through a number of  distribution channels. 
Our DNA testing  business is dependent upon our ability to successfully and competitively bid  and qualify for contracts with various governmental entities to provide  paternity and forensics testing services.   We expect revenues from our respective forensics businesses of  GeneScreen, Cellmark, and Lifecodes to increase as DNA analyses are  increasingly being used by the authorities within the criminal justice system  to
identify perpetrators and exonerate the innocent.





Our GeneShield business,  established in 2001, is developing a number of innovative pharmacogenetic-based  programs designed to accelerate the adoption of personalized medicine.  These programs are focused on health  outcomes, specifically how a persons individual genetic makeup can affect  responses to many prescription and over-the-counter medicines. Orchid  GeneShield expects to launch the commercialization of one of its programs,  RxShield, in 2003.





In December 2002, as part of  our strategic restructuring, we sold the products related assets of the Orchid  Life Sciences business to Beckman Coulter, Inc. for a combination of cash  payments and Beckman Coulters assumption of certain debt.  In addition, we have committed to sell the  Orchid Diagnostics business unit.  We  believe that our acquisitions, establishment of new businesses and selected  divestitures will allow us to focus on key portions of our business and allow  us to move closer to achieving profitability.





Compensation Charges





In prior years, we recorded  deferred compensation resulting from the granting of stock options to  employees, directors, or consultants with
exercise prices below the fair market  value of the underlying common stock at the date of their grant.
During 2001  and 2002, all stock options were granted with grant prices equal to the fair  value of our common stock at the grant date. 
The portion of these deferred compensation amounts which resulted from  grants to consultants is subject to remeasurement
at the end of each reporting  period based upon the changes in the fair value of our common stock until the  consultant completes performance under his or her respective option agreement.





Critical Accounting Policies





Our critical accounting  policies are as follows:





| | revenue    recognition                                        
|- | --------------------------------------------------------------
|  |                                                               
| | valuation of    long-lived and intangible assets and goodwill.




Revenue Recognition





We have several sources of  revenues. Prior to our acquisitions of GeneScreen, Cellmark, and Lifecodes, we  derived substantially
all of our revenues from research and development  collaborations, technology grants and awards from several governmental  agencies. 
In 1999, we derived our first  revenues from the placement of our first commercial SNPstream hardware system,  and through 2002, we derived revenues from the sale of SNP-IT-based consumables. 
As a result of the sale of assets to Beckman  Coulter, we will no longer have revenues from placements of SNPstream  systems or SNPware-based consumables in the future.  We also derived license revenues beginning in 2000.  In 2000, we derived our first revenues from  the performance of laboratory DNA testing services by GeneScreen, our wholly  owned subsidiary, in the US.  In 2001,  we derived our first revenues from the sale of testing kits and laboratory DNA  testing services from
our Cellmark division in the UK.





In connection with the research and
  development collaborations that provided the majority of our revenues in the
  early years of our corporate history, we recognized revenues when related research
  expenses are incurred and when we satisfied specific performance obligations
  under the terms of the respective research contracts.  We deferred up-front
  licensing fees obtained in connection with such agreements and amortized them
  over the estimated performance period of the respective research contract. 
  We recognized milestone





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payments as revenues upon the  completion of the milestone event or requirement,
if it represented the  achievement of a significant step in research and development or performance  process.





We recognized DNA laboratory  and SNP scoring services revenues on a completed contract basis
at the time  test results were completed and reported.   Deferred revenues represent the unearned portion of payments received in  advance of tests being completed and reported.





We offered our SNPstream system  hardware in two basic types of transactions, either a purchase and sale  transaction or an arrangement in which the customer takes possession of the  system and pays an access fee for its use.   We recorded revenues on the sale of the hardware upon transfer of title  and after we had met all of our significant performance obligations.  We deferred access fee payments that we  received when a system was initially placed with a customer, and recognized  revenues on a straight-line basis over the term of the agreement.





Revenues from the sale of  consumables were recognized upon the transfer of title, generally when our  products were shipped to our customers from our facilities.





Revenues from license  arrangements, including license fees creditable against future  royalty obligations of the licensee, were recognized when an arrangement is  entered into if we
had no significant continuing involvement under the terms  of the arrangement.  If we had significant continuing involvement under such an arrangement, license fees were deferred and recognized over the estimated performance period.  Management has made estimates and  assumptions relating to the performance period which are subject to change.  Changes in these estimates and assumptions could affect the amount of revenues  from licenses reported in any given period.





Valuation of Long-Lived and Intangible Assets  and Goodwill





We assess the impairment of amortizable
     identifiable intangibles, including goodwill, and long-lived assets whenever
  events or changes in circumstances indicate that the carrying value may not
     be recoverable.  Factors we consider important which could trigger
     an impairment  review include the following:





| | significant    underperformance relative to expected historical or projected future    operating results;          
|- | -------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                    
| | significant    changes in the manner of our use of the acquired assets or the strategy for    our overall business;
|  |                                                                                                                    
| | significant    negative industry or economic trends; and                                                           
|  |                                                                                                                    
| | significant    decrease in market value of assets.                                                                 




When we determine that the carrying
  value of amortizable intangibles and other long-lived assets may not be recoverable
  based upon the existence of one or more of the above indicators of impairment,
  we measure any impairment based on a projected discounted cash flow method using
  a discount rate determined by our management to be commensurate with the risk
  inherent in our current business.  Net amortizable intangible assets and
  long-lived assets, excluding goodwill, amounted to $29.8 million as of December
  31, 2002. Goodwill is subject to at least an annual recoverability assessment
  pursuant to the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets.





Recently Issued Accounting Pronouncements








In April 2002, the Financial Accounting
  Standards Board (FASB) issued SFAS No. 145, Rescission on FASB Statements
  4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections
  (SFAS 145).  Under certain provisions of SFAS  145, gains and losses
  related to the extinguishment of debt should no longer be segregated on the
  income statement as extraordinary items net of the effects of income taxes. 
  Instead, those gains and losses should be included as a component of income
  before income taxes.  The provisions of SFAS 145 are effective for fiscal
  years beginning after May 15, 2002 with early adoption encouraged.  Any
  gain or loss on the extinguishment of debt that was





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classified as an extraordinary  item should be reclassified upon adoption.   We do not expect the adoption of SFAS 145 to have a material impact on  our financial position, results of operations, or cash flows.





In June 2002, the FASB issued  SFAS No. 146, Accounting for Costs Associated with Exit or Disposal
Activities (SFAS 146). SFAS 146 addresses financial accounting and reporting  for costs associated with exit or disposal activities and nullifies Emerging
Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee  Termination Benefits and Other Costs to Exit an Activity (including Certain  Costs Incurred
in a Restructuring).   SFAS 146 requires that a liability for costs associated with an exit or  disposal activity be recognized when the liability is incurred rather than when  a company commits to such an activity and also establishes fair value as the  objective for initial measurement of the liability.  We will adopt SFAS 146 for exit or disposal activities that are  initiated after December 31, 2002.  We  do not expect the adoption of SFAS 146 to have a material impact on our  financial position,
results of operations and cash flows.





The Nasdaq National  Marketing Listing





We received a notice from the  Nasdaq National Stock Market indicating that we have failed to comply with the  $1.00 minimum bid price required for continued listing by Marketplace Rule  4450(a)(5) and that our common stock is subject to delisting from the  Nasdaq.  We filed a request for a hearing  before the Nasdaq Qualifications Panel (the Panel) to appeal the staff  determination, which occurred on February 19, 2003.  On March 26, 2003, the Panel determined to continue listing of  our common stock on the Nasdaq National Market through June 24, 2003.  We have implemented a number of actions  during the past several months which are designed to enhance our overall  business, reduce our operating losses and strengthen our cash position.  We expect that these actions, as well as  further initiatives currently being pursued, will help increase our share price  above $1.00 before June 24, 2003.  We  are also seeking stockholder
approval to implement a reverse stock split in  order to comply with the minimum bid price requirement.  We have filed a definitive proxy statement  regarding the reverse stock split proposal with the Securities and Exchange  Commission (SEC), and have mailed the definitive proxy statement regarding this  proposal to our stockholders.  There can  be no assurance that the Panel will decide to allow us to remain listed or that  our actions will prevent the delisting of our common stock from the Nasdaq  National Market after June 24, 2003.





RESULTS  OF OPERATIONS





Years ended December 31, 2002 and 2001





The Diagnostic business unit is  considered to be a non-core asset which we expect to and have committed to sell  and, therefore, has been reflected as a discontinued operation.  Accordingly, we have not included the  results of operations of the Diagnostics business held for sale in the results  of continuing operations in any period presented.  The results of operations for this business unit have been  reflected in discontinued operations for all periods presented.  The assets and liabilities of the  Diagnostics business held for sale have been reflected as such in the  consolidated balance sheets as of December 31, 2002 and 2001.  As we expect to sell this business within  the next year, all of the assets and liabilities as of December 31, 2002 have  been reflected as current.





Revenues





Revenues for the year ended December
  31, 2002 of approximately $50.4 million represents an increase of approximately
  $19.8 million as compared to revenues of approximately $30.6 million for 2001. 
  This increase is primarily attributable to an increase of approximately $23.7
  million in clinical laboratory testing revenues, which primarily relates to
  an increase in clinical laboratory testing revenues from our acquisition of
  Lifecodes, which we acquired in December 2001.  Lifecodes had clinical
  laboratory testing revenues during the year ended December 31, 2002 of approximately
  $20.2 million as compared to clinical laboratory testing revenues of $1.3 million
  in 2001.  Our business based in the UK experienced an increase in clinical
  laboratory testing revenues in 2002 as well.  Our UK business, which performs
  paternity and forensics testing as well as public health SNP genotyping services,
  had clinical laboratory testing revenues of approximately $12.1 during the year
  ended December 31, 2002 as compared to approximately $6.1 million during the
  year ended December 31, 2001.  Product revenues and access fees which decreased
  by approximately $2.5 million from $5.0 million during the year ended December
  31, 2001 to approximately $2.5 million during the year ended December 31, 2002
  relate primarily to SNP instrumentation and consumables.  The decrease
  in revenues on a year over year basis relates to a disappointing product launch
  of our Ultra High Throughput (UHT) product platform, which was ultimately sold
  during the fourth quarter of 2002.  Due to our divestiture of the Orchid
  Life Sciences products related assets in December 2002, we will not have additional
  revenues from the placement of SNPstream systems or the sale of SNPware consumables. 
  We also recognized approximately $3.4 million in license, grant and other revenues
  during the year ended December 31, 2002, compared to $4.7 million





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during the year ended December  31, 2001.  This decline relates to  various technology licensing arrangements entered into in 2001 which did not  occur in 2002. As a result of the strategic refocusing of our business,
we anticipate entering into fewer licensing arrangements than in prior years as we focus on the services businesses.





Cost of Product Revenues and Access Fees





Cost of product revenues and  access fees for the year ended December 31, 2002 was approximately $1.7  million, or 68% of product revenues and
access fees, compared to approximately  $3.8 million, or 76% of product revenues and access fees, for 2001.  During 2002, the cost of product revenues  and access fees includes an
inventory charge of approximately $0.8 million  which relates to the costs of discontinued inventory.  As adjusted, without the effect of this inventory charge, the  cost of product
revenues and access fees would have been approximately $0.9  million, or 36% of product revenues and access fees.  This percentage decrease in cost of product revenues and access  fees
as a percentage of product revenues and access fees, excluding the effect  of the inventory charge, is attributable to an increase in the proportion  of  SNPware consumables which had a
higher gross margin than SNPstream systems, for the year ended December 31, 2002.  We divested our  commercialization efforts relating to the SNPstream systems and SNPware  consumables
in December 2002 with our sale of the Orchid Life Sciences products  related assets to Beckman Coulter.





Cost of Clinical Laboratory Testing





Cost of clinical laboratory testing
  was approximately $26.0 million, or 58% of clinical laboratory testing revenues,
  for the year ended December 31, 2002 compared to approximately $14.5 million,
  or 69% of clinical laboratory testing revenues, in 2001.  The increase
  in cost of clinical laboratory testing revenues, in dollars, was primarily attributable
  to increased costs of approximately $11.3 million associated with a full year
  of cost related to Lifecodes.  The decrease in cost of clinical laboratory
  testing revenues as a percent of clinical laboratory testing revenues is attributed
  to the inclusion of Lifecodes in the results of operations for a full twelve-month
  period, which generates a higher gross margin on clinical laboratory testing
  revenues than our previous clinical laboratory testing business.  In addition,
  our UK based business has experienced significant growth in higher margin clinical
  laboratory testing that also contributed to the improved cost of clinical laboratory
  testing on a percentage basis.





Research and Development Expenses





Research and development  expenses consist primarily of salaries and related personnel costs, fees paid  to consultants and outside service providers for development, laboratory  supplies, and other expenses related to the design, development, testing, and  enhancement of our products.  Research  and development expenses for the year ended December 31, 2002 were  approximately $21.0 million, a decrease of approximately $13.0 million, as  compared to approximately $34.0 million for 2001.  During the year ended December 31, 2002, we incurred  approximately $1.4 million of software development costs associated with our  GeneShield business unit and $2.6 million of research and development costs  associated with an internal decision to utilize inventory previously held for  sale in the research and development of our ultra-high throughput genotyping  product for use in our  business units  other than Orchid Life Sciences.   Without giving
effect to these research and development charges, the  decrease in research and development expenses would have been approximately  $17.0 million.  The decrease in research  and development expense for the year ended December 31, 2002 as compared to the  comparable previous year was primarily attributable to a decrease in purchases  of laboratory supplies of approximately $7.7 million.  There was also a reduction in research and development personnel,  primarily related to our Life Sciences business unit, and facility costs which  contributed to the overall decrease during the year ended December 31, 2002 as  compared to the prior year.  During the  year ended December 31, 2001, we had a significant amount of research and  development costs in connection with the expansion of our internal and  collaborative efforts, including our collaboration with the SNP Consortium  which was not incurred during the year ended December 31, 2002, except for an  insignificant amount during early 2002.
During 2002, we also had a reduction in  salary expense from the restructuring efforts taken during the year ended  December 31, 2002.





Marketing and Sales Expenses





Marketing and sales expenses  consist of salaries and benefits for salespeople within our company and all  related costs of selling and marketing our products and services.  These costs include travel, advertising,  market research costs, and certain professional fees.  Marketing and sales expense for the year ended December 31, 2002  was approximately $8.7 million as compared to approximately $6.3 million during  the comparable year of 2001.  The  increase in these costs of approximately $2.4 million was substantially related  to Lifecodes costs of $2.6 million during the current year which were not  included in the previous years results of operations.





General and Administrative Expenses





General and administrative  expenses consist primarily of salaries and related expenses for executive,  finance and administrative personnel, professional fees, general legal and  intellectual property and other corporate expenses.  General and administrative





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expenses for the year ended  December 31, 2002 were approximately $33.0 million, an increase of  approximately $9.1 million, as compared to approximately $23.9 million for  2001.  We attribute the increase in  overall general and administrative expenses to Lifecodes which accounted for  approximately $4.2 million in general and administrative expenses which were  not included in the previous years results of operations.  In addition, our UK business had general and  administrative expenses of approximately $4.1 million during the year ended  December 31, 2002 as compared to approximately $2.8 million during 2001 which  was caused by the growth of that business and the inclusion of its results of  operations for a full 12-month period.





Impairment of Assets





We recorded approximately $20.8 million
  in impairment of asset charges during the year ended December 31, 2002 as compared
  to approximately $30.7 million during 2001.  As a result of continuing
  losses incurred by our Life Sciences business unit, we prepared an internal
  evaluation of this units long-lived assets.  Based on this internal
  evaluation, approximately $5.4 million of laboratory equipment was determined
  to be idle and not able to be utilized in our other facilities and, therefore,
  determined to be permanently impaired. In addition, we estimated an impairment
  loss of approximately $3.5 million as it relates to leasehold improvements related
  to a facility utilized by the Life Sciences business unit.  Certain intangibles
  which underlie the primer extension technology were considered permanently impaired
  and were written down by approximately $10.1 million during the year ended December
  31, 2002.  These intangible assets supported our Life Sciences business unit.
  Upon completion of a strategic review, a change in senior management and the
  sale of the Life Sciences product related assets in 2002, we determined that
  these assets were no longer needed for our current operations. In addition,
  certain investments were impaired by approximately $1.7 million.  The impairment
  of assets of $30.7 million recorded during the year ended December 31, 2001
  relates to $27.3 million of goodwill recorded in connection with our acquisition
  of GeneScreen in December of 1999 as well as an impairment of lab equipment
  of $3.4 million which represents the amount by which the carrying value of the
  equipment exceeds the related fair value of the SNPstream 25K instrumentation
  which was considered impaired with the anticipated introduction of the UHT genotyping
  platform.





Restructuring





During the year ended December  31, 2002, we formalized and announced plans to restructure certain operations  in order to reduce costs.  As a result,  over 135 positions which cover certain areas of our operations were eliminated.  Most of these terminations were from our Princeton, New Jersey facilities.  During the year ended December 31, 2002, we  recorded a restructuring charge of approximately $6.9 million which consisted  of employee related charges such as severance, benefits and outplacement  services of approximately $3.4 million and approximately $3.5 million of  facility charges related to lease exit costs.   During the year ended December 31, 2001, we recorded approximately $0.4  million as a restructuring charge related to severance benefits and the closure  costs for a facility.





Amortization of Intangible Assets





During the year ended December  31, 2002, we recorded approximately $3.0 million of amortization of intangible  assets as compared to approximately $3.8 million during 2001.  During the prior year, a significant portion  of the amortization of intangible assets related to goodwill recorded on  previously acquired businesses which, effective January 1, 2002 are no longer  amortized.  Also, during the year ended  December 31, 2002, we have recorded amortization expense associated with  intangible assets acquired pursuant to our acquisitions of Lifecodes in  December of 2001 and Cellmark in February of 2001, which were not amortized for  the full year in 2001.





Interest Income





Interest income for the year  ended December 31, 2002 was approximately $0.5 million, compared to  approximately $2.9 million for 2001.   This decrease was primarily due to interest received on larger cash,  cash equivalent, and short-term investment balances which we held during 2001.  This decrease is also attributable to lower interest rates during 2002 as  compared to 2001.





Interest Expense





Interest expense for the year  ended December 31, 2002 was approximately $0.6 million compared to  approximately $0.8 million in 2001.   Interest expense during these years was comparable because of the  comparable level of long term debt.





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Loss on sale of assets





On December 19, 2002, we sold  our Life Sciences product-related assets to Beckman Coulter for cash of  approximately $1.1 million and the assumption of certain debt and  liabilities.  Our decision to sell this  product line was the culmination of a strategic review untaken by  management.  We sold inventory which  consisted of our UHT platform and certain equipment that was needed to operate  and maintain our existing customer base.   We are also entitled to receive incremental consideration from the sale  upon Beckman Coulters completion of the next version of the ultra-high  throughput and ultimate sale of two UHT systems that were placed by us prior to  the consummation of the sale.  While Beckman  Coulter also assumed our obligation under our supply arrangement with NEN Life  Sciences, we have committed to purchase $2.6 million in materials and supplies  from Beckman Coulter over the next two years.   We recorded a loss on
the sale of these assets of approximately $0.9  million during the year ended December 31, 2002.




Income Tax Benefit





During the year ended December  31, 2002, we recorded an income tax benefit of approximately $0.6 million.  This was related to the sale of some of our  state net operating loss carryforwards to another company, which was authorized  by the New Jersey Economic Development Authority.  The sales of net operating losses generated an income tax benefit  of approximately $1.5 million which was offset by approximately $0.9 million of  income tax expense which related to our UK based business, which was profitable  during 2002.





Discontinued Operations





The Diagnostic business unit is  considered to be a non-core asset which we expect to and have committed to sell  and, therefore, has been reflected as a discontinued operation.  The results of operations for this business  unit have been reflected in discontinued operations.  We recognized approximately $9.0 and $0.1 million  in losses from the discontinuance of the  Diagnostic business during the years ended December 31, 2002 and 2001,  respectively.  The loss for the year  ended December 31, 2002 is mainly a result of an approximate $5.9 million  impairment of long-lived assets of the Diagnostic business unit based on its  estimated sale price, as well as approximately $2.4 million in bad debt expense  associated with a certain Diagnostic customer.





Net Loss and Net Loss Allocable to Common Stockholders





Due to the factors described  above, for the year ended December 31, 2002, we reported a net loss and a net  loss allocable to common stockholders of approximately $80.1 million as  compared to approximately $84.7 million in 2001.





Years ended December 31, 2001 and 2000





Revenues





Revenues for 2001 of  approximately $30.6 million represent an increase of approximately $12.2  million as compared to revenues of approximately $18.4 million for 2000.  This increase was primarily attributable to  a $8.8 million increase in clinical laboratory testing revenues, of which $6.5  million related to our two acquisitions in 2001, Cellmark and Lifecodes, an  increase in revenues derived from our GeneScreen operations, as well as  genotyping services performed under genotyping service arrangements entered  into during 2001.  Product revenues and  access fees also increased by approximately $2.7 million during 2001, of which  $0.8 million relates to our two acquisitions in 2001, Cellmark and Lifecodes,  the placement of SNPstream systems, as well as an increase in related  consumable sales.  We also recognized  approximately $1.3 million in collaboration revenues during 2001 which was  primarily related to the successful completion of
the first milestone under our  genotyping agreement with AstraZeneca; whereby we recognized $0.8 million.  We also recognized license revenues of  approximately $2.3 million for 2001 versus $3.1 million in 2000, which was  primarily composed of royalty bearing, nonexclusive, and exclusive licenses to  use our SNP-IT technology.





Cost of Product Revenues and Access Fees





Cost of product revenues and  access fees for 2001 was approximately $3.8 million, or 76% of product revenues  and access fees, compared to approximately $1.6 million, or 69% of product  revenues and access fees, for 2000.  The  increase in cost of product revenues and access fees as a percent of product  revenues and access fees was attributable to an increased number of SNPstream  25K placements in 2001 which had a lower gross margin.  The increase in cost of product revenues and  access fees was attributable to the costs associated with the SNPstream  instrument placements, and to consumables sold during 2001, including an  increase of $0.6 million related to our acquisition of Cellmark on February 12,  2001 and Lifecodes on December 5, 2001.





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Cost of Clinical Laboratory Testing





Cost of clinical laboratory  testing was approximately $14.5 million, or 69% of clinical laboratory testing  revenues for 2001, compared to approximately $9.3 million, or 77%, for  2000.  The increase was attributable to  costs associated with our Cellmark division of approximately $2.3 million,  which we acquired on February 12, 2001, and costs associated with Lifecodes of  approximately $0.5 million, which we acquired on December 5, 2001.  The decrease in cost of clinical laboratory  testing as a percent of clinical laboratory testing revenues was attributed to  our Cellmark division, which generates a higher gross margin.





Research and Development Expenses





Research and development  expenses consist primarily of salaries and related personnel costs, fees paid  to consultants and outside service providers, material costs for prototypes and  test units, and other expenses related to the design, development, testing and  enhancement of our products.  Research  and development expenses for 2001 were approximately $34.0 million, compared to  approximately $28.9 million for 2000.   The increase in research and development expenses of approximately $5.1  million for 2001 included the netting effect of a prior year transaction with  Sarnoff Corporation whereby we recorded an approximate $7.8 million charge  related to approximately a $3.0 million cash payment made to and the fair value  of 350,000 shares of common stock and five-year warrants to purchase 75,000  shares of common stock issued to Sarnoff Corporation as an advance on the  issuances that would have been owed in December 2000 under a License and
Option  Agreement, and an amendment to that agreement.   As the licensed technology under this agreement had not reached  technological feasibility and had no alternative uses, the $7.8 million was  charged to research and development.   Excluding this transaction, research and development expense in 2001  increased by approximately $12.9 million.   This increase was primarily attributable to increased expenses as we  hired additional research and development personnel of approximately $5.1  million, increased purchases of material and laboratory supplies of  approximately $2.6 million, and increased research and development expenses  related to our GeneScreen, Cellmark, and Lifecodes facilities of approximately  $1.5 million, $0.5 million, and $0.1 million, respectively.  This increase was also attributable to  increased facilities expenses in connection with the expansion of our internal  and collaborative research efforts, including our collaboration with The SNP  Consortium, of



approximately $2.0 million.   These various increases were offset by a decrease in amortization of  deferred compensation during 2001 of approximately $0.8 million.





Marketing and Sales Expenses





Marketing and sales expenses  consist of salaries and benefits for sales people within our company and all  related costs of selling and marketing our products and services.  These costs include travel, advertising, market  research costs, and certain professional fees.   Marketing and sales expense for the year ended December 31, 2001 was  approximately $6.3 million as compared to approximately $4.0 million during the  comparable year of 2000.  The increase  in these costs of approximately $2.3 million was directly related to  commercialization of our SNP Stream product line and related consumables.





General and Administrative Expenses





General and administrative  expenses consist primarily of salaries and related expenses for executive,  finance and other administrative personnel, recruiting expenses, professional  fees, legal expenses resulting from intellectual property prosecution and  protection, and other corporate expenses including business development and  general legal activities.  General, and  administrative expenses for 2001 were approximately $23.9 million, an increase  of approximately $1.6 million, as compared to approximately $22.3 million for  2000.  We attributed this increase  primarily to the expansion of administration facilities and the hiring of  additional personnel as we increased our executive and administrative staffing  in anticipation of growth.  During 2001,  there was an increase in our depreciation expense of approximately $0.9  million, due to capital expenditures made in 2001 for computers, furniture and  fixtures, and leasehold improvements
associated with facilities expansion.  We also incurred additional salaries and  related expenses of approximately $1.6 million, as well as an increase in  general and administrative expenses of approximately $2.5 million relating to  our Cellmark division and $0.6 million relating to Lifecodes.  These various increases in general and  administrative expenses were offset by a decrease in amortization of deferred  compensation in 2001 of approximately $1.5 million.





Impairment of Assets





During 2001, we recorded an  impairment charge of approximately $27.3 million to write-down goodwill which  was recorded when we acquired GeneScreen on December 30, 1999. Subsequent to  September 30, 2001, we announced our intention to acquire Lifecodes (as





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discussed above).  Lifecodes operates primarily in the same  industry and provides the same services as GeneScreen. Based primarily on the  acquisition price for Lifecodes, among other matters, we determined that a  triggering event occurred for which an impairment review would be required  pursuant to SFAS 121, Accounting for the Impairment of Long-Lived Assets and  for Long-Lived Assets to Be Disposed Of.   The impairment charge was recorded based on the fair value of GeneScreen  as computed using a discounted cash flow valuation model.  This charge reduced the unamortized goodwill  recorded in the acquisition of GeneScreen to zero.  This charge related to the Orchid Identity Genomics segment of  our business based on the 2002 segment reporting.





During the year ended December  31, 2001, we recorded an impairment charge related to certain equipment.  We utilize this equipment primarily to  perform research and development activities and, to a limited extent,  genotyping services for customers.   During 2002, we launched the second generation of this equipment.  The second generation provides higher  throughput and is more cost effective.   We expect to use this next generation equipment to replace the first  generation equipment over time and to provide the same services and functions  that the first generation equipment provided.   We performed an analysis of our future needs relating to this equipment  and determined its fair value.  As a  result of this analysis, we recorded an impairment charge of approximately $3.4  million, which represents the amount by which the carrying value of the  equipment exceeded the related fair value.





Interest Income





Interest income for 2001 of  approximately $2.9 million decreased approximately $1.2 million from  approximately $4.1 million for 2000.   This decrease was primarily due to interest received on larger cash,  cash equivalent and short-term investment balances which we held during 2000,  which were reduced in 2001 by amounts used to fund operating activities.  This decrease was also attributable to lower  interest rates during 2001 compared to 2000.





Interest Expense





Interest expense for 2001 was  approximately $0.8 million compared to approximately $0.5 million for  2000.  This increase was due to  borrowings made during late 2000 and in May and December 2001 on our existing  equipment loan line.





Net Loss Allocable to Common Stockholders





Due to the factors discussed  above, for 2001, we reported a net loss allocable to common stockholders of  approximately $84.7 million as compared to approximately $77.4 million for  2000.  Net loss allocable to common  stockholders for 2000 includes a beneficial conversion feature on preferred  stock of approximately $29.6 million.





LIQUIDITY  AND CAPITAL RESOURCES





In 2003, we completed the
  issuance and sale of 1,600 units (Units) to certain investors
  (each an Investor and collectively, the Investors).  Each
  Unit consists of (i) one share of our newly created Series A Convertible Preferred
  Stock, $.001 par value per share (the Series A Preferred Stock), convertible
  into approximately 22,222.22 shares of our common stock, and (ii) a warrant
  (Warrant) to purchase approximately 6,666.67 shares of our common stock. 
  Each Unit had a purchase price of $10,000, providing us with $16.0 million in gross proceeds. We also issued an additional 75 Units to
  our banker as a fee for this transaction and will pay certain other banker fees and expenses in connection with the transaction.





The Series A Preferred Stock is convertible
  into our common stock, at the Investors discretion, at a per share conversion
  price of $0.45, provided, however, that no Investor is allowed to convert Series
  A Preferred Stock if the conversion would result in such Investor beneficially
  owning more than 4.99% of our outstanding common stock (the Cap Amount), and
  it is entitled to vote on all matters submitted to a vote of our stockholders
  on an as-converted basis, subject again to the Cap Amount.  The Series
  A Preferred Stock bears cumulative dividends, payable quarterly, at an initial
  annual rate of 6% for the first nine quarters.  After the ninth quarter,
  the dividend rate will increase by 2% for each quarter thereafter, to a maximum
  of 12% per year.  If, however, our common stock ceases to be listed on
  either the Nasdaq (the National Market or SmallCap) (collectively, the NASDAQ),
  the New York Stock Exchange (the NYSE) or the American Stock Exchange (the AMEX),
  the dividend rate will automatically increase to 14% per year until our common
  stock is subsequently listed on one of the aforementioned markets or exchanges. 
  Dividends are payable, at our option, in cash or shares of our common stock,
  valued at the average closing sales price of our common stock for the five trading
  day period prior to the dividend date. The proceeds of this financing can be
  used for general and corporate purposes and working capital, but is restricted
  as to certain other uses.





The holders of the Series A  Preferred Stock have the right to require us to repurchase for cash the then  outstanding shares of Series A Preferred Stock upon the occurrence of certain  events, including:





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| |  | if our    common stock is not listed
      on either the NYSE, AMEX, NASDAQ, the OTCBB or the Bulletin Board Exchange
      for a total of ten days in any nine month period;                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | the    institution of bankruptcy, insolvency, reorganization or liquidation proceedings    by or against us, an assignment for the benefit of creditors by us or the    appointment of a receiver or trustee for us;                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | a change of control of our company,
        as defined in the Agreement;                                                                                                                                                                                                                                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | our failure to pay in full dividends
        on the Series A Preferred Stock on any two consecutive dividend dates;                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | a registration statement
      required to be filed by the Company to register common shares underlying
      the Series A Preferred Stock and Warrants is not declared effective within
      a certain period, as defined in the agreement or after being declared effective,
      cannot be utilized by the holders of the Series A Preferred Stock for resale
      of all of their shares for more than a total of 45 days; or
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | our failure to convert
       the Series A Preferred Stock when requested by the holders, as defined
       in the agreement.                                                                                                                                                                                                                                                                                                       




The redemption amount that we  are required to pay equals 125% of the purchase price of the Series A Preferred  Stock and the accrued and unpaid dividends, except that in the case of a change  of control, the redemption equals 150% of such amount.  The Series A Preferred Stock is also  entitled to a liquidation preference equal to the purchase price plus all  accrued and unpaid dividends.





If certain requirements as defined
    in the agreement are met after the second anniversary  of the financing,
    we at our option may redeem the Series A Preferred Stock in whole or in part
    for 125% of the original purchase price. If our stock price exceeds certain
    levels for certain periods of time, as defined in the agreement,
or we consumate an underwritten offering at certain levels as defined in the
    agreement, we may at our option redeem the Series A Preferred Stock in an
    amount equal
    to the original purchase price.





Stockholder approval is  normally required for financings similar to the one described above.  However, we sought and obtained a financial  viability exception from the National Association of Securities Dealers  (NASD) stockholder approval requirement pursuant to NASD Marketplace Rule  4350(i)(2).  On March 20, 2003, in  accordance with NASD Marketplace Rule 4350(i)(2), we mailed to our stockholders  a notice (the Notice) that we had requested and received from Nasdaq a  financial viability exception to the stockholder approval requirements of  NASD Marketplace Rule 4350(i)(1)(D).  In  accordance with the terms of NASD Marketplace Rule 4350(i)(2), we closed the  financing at least ten days after the mailing of the Notice.





On December 23, 2002, we consummated
     a line of credit with a commercial bank for a maximum of $10 million. 
  The borrowing base is based on 80% of eligible accounts receivable (as defined
   in the agreement).  Borrowings pursuant to the line of credit bear interest
    at a range of prime plus 0.5% to 2.5% based on our liquidity ratio as defined). 
  The line of credit contains certain financial and non-financial covenants which
   we were in compliance with as of December 31, 2002.   This agreement
    also contains a material adverse change clause which, if triggered, would
   constitute
  an event of default. The line of credit expires in one year but contains automatic
    renewal provisions at the banks option. As of December 31, 2002, the
    Company  had $5.2 million outstanding under the line of credit.





In March 2002, we completed a  follow-on offering of our common stock for approximately $21.2 million. At  December 31, 2002,
we had borrowings of approximately $5.4 million outstanding  related to a loan which was entered into primarily for equipment  financing.  If we do not maintain  minimum
unrestricted cash, as defined in the loan agreement, equal to the  greater of $35.0 million or twelve months cash needs (calculated by taking the  trailing three months
net cash used in operations multiplied by four), we are  required to provide a cash security deposit or letter of credit equal to an  amount defined in the loan agreement, not to
exceed 50% of outstanding amounts  on draws made in or subsequent to December 2000. As of December 31, 2001, and  just prior to our March 2002 equity offering we did not maintain the minimum
unrestricted cash defined in the loan agreement.  We received a waiver from our lender regarding our noncompliance  with this covenant for this period. Subsequent to March 31, 2002, we did
not  maintain the minimum cash defined in the loan agreement.  We have also received written notice from  the lender stating that the lender waived the financial covenant violation as a  result
of not maintaining a pledge of cash security deposit or letter or credit  under this loan agreement for the period of noncompliance through June 19,  2002. On June 19, 2002, we obtained a letter of credit in the amount of  approximately $2.7 million as required by the loan agreement, which was supported  by a cash restriction on certain securities held by us.  As such, this cash restriction, in addition  to cash restricted under two of our operating leases is reflected as restricted
cash in the consolidated balance sheet as of December 31, 2002 of  $3.4 million, of which approximately $1.9 million is
classified as a long term  asset.





On May 10, 2001, we filed a Registration
  Statement on Form S-3 with the Securities and Exchange Commission. Subject to
  our ongoing obligations under the Securities Act of 1933, as amended, and the
  Securities Exchange Act of 1934, as amended, the Registration Statement permits
  us to offer and sell various types of securities, up to an aggregate value of
  approximately $75.0 million, of which approximately $16.8 million remains available
  for future use.  The sale of common stock in June 2001 for gross proceeds
  of approximately $35.7 million was registered under this Registration Statement. 
  The subsequent sale of common stock in February and March 2002 for gross proceeds
  of approximately $22.5 million was also registered under a Prospectus Supplement
  to this Registration Statement.  The availability to offer and sell various
  types of securities under the shelf registration statement expires in May 2003.
  To issue securities registered on this registration statement we must either
  have an aggregate market value of the voting and non-voting common equity excluding
  shares held by our affiliates of $75 million or more, or we must file a post
  effective amendment to the registration statement on Form S-2 or S-1.





As of December 31, 2002, we had  approximately $10.0 million in cash and cash equivalents and short-term  investments, as compared to approximately $27.9 million as of December 31,  2001.  Working capital decreased to  approximately $7.6 million at December 31, 2002 from approximately $27.5  million at December 31, 2001.  This is  due to cash used to fund operations for the year ended





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December 31, 2002, partially  offset by our follow-on offering of common stock in February and March 2002  which generated net proceeds of approximately $21.2 million and proceeds of  $5.2 million from our line of credit which was entered into during December of  2002.





Net cash used in operations for  the year ended December 31, 2002 was approximately $35.0 million compared with  approximately $46.0 million for 2001.   Investing activities included capital expenditures of approximately $2.9  million, and approximately $17.2 million of proceeds from maturities, net of  purchases, of short term investments.   Financing activities primarily consisted of approximately $21.2 million  of net proceeds from our offering of common stock in February and March 2002,  $5.2 million from our line of credit and repayment of debt of $4.3 million.





We expect our restructuring efforts
  taken in 2002 will reduce future cash expenditures.  We believe that the
  result of these efforts coupled with anticipated divestitures of certain non-core
  assets, expected increases in both revenues and gross margins in our remaining
  core business units and our financing in 2003 will enable us to operate our
  ongoing business activities until we reach operating profitability and positive
  cashflows, expected in late 2003.





We believe that our existing cash on
  hand, in addition to the 2003 financing as described above, will be sufficient
  to fund our operations through at least 2003. We may need to access the capital
  markets for additional financing to operate our ongoing business activities
  after that time if our future results of operations fall below our expectations.
  We may be unable 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.  Our capital requirements depend on numerous  factors, including the following:





| | our ability    to enter into strategic alliances or make acquisitions;                                                                                                                    
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                           
| | our ability    to divest non-core assets;                                                                                                                                                 
|  |                                                                                                                                                                                           
| | regulatory    changes and competing technological and market developments;                                                                                                                
|  |                                                                                                                                                                                           
| | changes in    our existing collaborative relationships;                                                                                                                                   
|  |                                                                                                                                                                                           
| | the cost of    filing, prosecuting, defending and enforcing patent claims and other    intellectual property rights;                                                                      
|  |                                                                                                                                                                                           
| | the    application of our SNP technologies to our other business areas, including    paternity, forensics, and pharmacogenetic testing;                                                   
|  |                                                                                                                                                                                           
| | our ability    to successfully secure contracts for high volume genotyping services from    pharmaceutical, biotechnology and agricultural companies;                                     
|  |                                                                                                                                                                                           
| | the success    rate of establishing new contracts, and renewal rate of existing contracts,    for identity genomics services in the areas of paternity, forensics, and    transplantation;
|  |                                                                                                                                                                                           
| | the progress    of our existing and future milestone and royalty producing activities; and                                                                                                
|  |                                                                                                                                                                                           
| | the    availability of additional funding at favorable terms, if necessary.                                                                                                               




As of December 31, 2002, our  net operating loss carry forwards were approximately $178.0 million and  approximately $161.5 million for Federal and state income tax purposes,  respectively.  If not utilized, our  Federal and state tax loss carry forwards will begin to expire in 2005.  Utilization of our net operating losses to  offset future taxable income, if any, may be substantially limited due to  "change of ownership" provisions in the Internal Revenue Code of  1986.  We have not yet determined the  extent to which limitations were triggered as a result of past financings or  may be triggered as a result of future financings.  This annual limitation is likely to result in the expiration of  certain net operating losses prior to their use.





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CONTRACTUAL  COMMITMENTS





We maintain multiple  contractual commitments as of December 31, 2002, which will support our future  business operations.  Such commitments  related to noncancelable operating lease arrangements, long-term debt, minimum  supply purchases, and future patent and minimum royalty obligations.  We have identified and quantified the  significant commitments in the following table.





Payments due by period


(In thousands)





|                                                  |  | Year    ending December 31 |        |      |  |       |  |      |      
|------------------------------------------------- |  | -------------------------- | ------ | ---- |  | ----- |  | ---- | -----
|                                                  |  |                            |        |      |  |       |  |      |      
|                                                  |  | 2003                       |        | 2004 |  | 2005  |  | 2006 |      
|                                                  |  |                            |        |      |  |       |  |      |      
|Contractual    obligations:                       |  |                            |        |      |  |       |  |      |      
|Noncancelable    operating lease arrangements (1) |  | $                          | 3,886  |      |  | 3,433 |  |      | 3,072
|Long-term    debt (2)                             |  |                            | 8,510  |      |  | 1,702 |  |      | 597  
|Future    patent obligations (3)                  |  |                            | 1,618  |      |  | 1,593 |  |      | 310  
|Minimum    purchase commitments (4)               |  |                            | 1,300  |      |  | 1,300 |  |      |     
|Future minimum    royalties                       |  |                            |       |      |  |      |  |      | 1,240
|                                                  |  |                            |        |      |  |       |  |      |      
|Total contractual obligations                     |  | $                          | 15,314 |      |  | 8,028 |  |      | 5,219
|                                                  |  |                            |        |      |  |       |  |      |      




|(1) | Such amounts represent future    minimum rental commitments for office space leased under noncancelable    operating lease arrangements.  We    lease approximately 208,000 square feet for operations in the US and    approximately 75,000 square feet in Abingdon, UK to support foreign operations.                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Such amounts primarily    consist of amounts payable pursuant to our line of credit and equipment loan    line.  Also included in such amounts    are capital lease obligations for certain machinery and equipment (including    interest).                                                                            
|(3) | Such amounts represent    obligations to pay future amounts over the next three years in conjunction    with our acquisition of US Patent No. 5,856,092 and its foreign counterparts    from Affymetrix in July 2001 as well as our obligation to pay St. Louis    University in connection with our patent acquisition.
|(4) | Such amounts represent    minimum purchase commitments of materials and supplies from Beckman Coulter    Inc. as a result of the OEM Supply Agreement dated December 19, 2002.                                                                                                                                          
|(5) | In connection with our    acquisition of US Patent No. 5,856,092, we are also obligated to pay future    minimum royalties as shown and $1.9 million until the expiration of the    agreement related to these patents.                                                                                                 




FORWARD-LOOKING  STATEMENTS





This report may contain 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;
  the expected increase in the uses of our products and services; the expectation
  that SNPs and the rapid and cost-effective analysis of SNP panels will become
  more important; the expectation that our testing services will generate increasing
  revenues and that revenues generally will increase; the expectation that we
  will capture a larger share of the private paternity market; farmers expectation
  that flocks will be produced with greatly reduced vulnerability to scrapie;
  the expectation that the strength of our position in identity genomics will
  enable us to realize efficiencies and to apply our advanced SNP technologies
  to significantly reduce costs; the expected uses for, the timing of the introduction
  of, and the implementation of our and GeneShields products and services;
  the expectation of rapid growth of florescence-based SNP analysis; the expectation
  that our products and services will be subject to and meet all required legal
  compliance standards; the expectation of continued operating losses; the expected
  timing and outcome of litigation; the expectation of selling the Diagnostics
  business unit within the next year; the expectation of needing to raise additional
  cash to fund operations; the expectation of becoming profitable in late 2003;
  the expectation of reaching operating profitability and positive cash flows
  in late 2003; the expectation that the adoption of new accounting standards
  will not have a material impact on our financial position, results of operations
  or cash flows; the expectation that our actions and initiatives will increase
  our share price and ability to remain listed on the Nasdaq National Market;
  the expectation that restructuring efforts in 2002 will reduce cash expenditures;
  the expectation of increased gross margins; the expected amounts of future expenses;
  the expectation of subleasing portions of our laboratory facilities; the anticipation
  of Federal and state governments allocating greater resource to support wider
  use of DNA; the anticipation that our existing capital resources are sufficient
  to fund our current and future operating plans through 2003; the anticipation
  of future growth through mergers and acquisitions; the planned commercialization
  of our technologies; the planned





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utilization of our existing clinical
  genotyping technology and facilities for our Orchid GeneShield business; the
  planned continuation of forming strategic alliances, entering into license agreements
  and seeking access to distribution channels; the expectation of not paying cash
  dividends in the foreseeable future, except to the holders of our Series A Convertible
  Preferred Stock; the planned uses of our laboratories; the intention of continuing
  to leverage our SNP technologies in our paternity, forensics, public health
  and pharmacogentic businesses; the intention of discontinuing to commercialize
  SNP genotyping services; the intended manners in which we will strengthen our
  position in identity genomics; the intention of continuing selected investment
  in our proprietary technologies; the intention of seeking patent protection
  for our technologies and processes; the intended manner in which we will market
  our products and services; the intention to vigorously defend lawsuits; the
  belief that our partners will sell products and service incorporating our technologies
  or products; the belief that new technology and methods will create new markets
  and expand existing markets; the belief that we have sufficient manufacturing
  capacity through 2003 and that our facilities are sufficient to meet our space
  requirements through 2003; the belief that our acquisitions, establishment of
  new businesses, selected divestitures and increases in revenues and gross margins
  will allow us to focus on key portions of our business and allow us to move
  closer to achieving profitability;  and the belief that our existing cash
  reserves in addition to the 2003 financing will be sufficient to fund our operations
  through at least 2003.  For further information, refer to the more specific
  factors and uncertainties discussed throughout this Annual Report or Form 10-K
  and in the Risk Factors section  hereof.  Except as required
  by law, we undertake no obligations to update any forward-looking statements. 
  You should also carefully consider the factors set forth in other reports or
  documents that we file from time to time with the Securities and Exchange Commission.





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|Item 7a. | QUANTITATIVE AND QUALITATIVE    DISCLOSURES ABOUT MARKET RISK
|-------- | -------------------------------------------------------------




Our exposure to market risk is principally confined to our cash  equivalents, which are conservative in nature, with a focus on preservation of  capital.





Market risk refers to the risk of loss arising from adverse changes in  foreign currency exchange rates.  As a  result of the acquisition of Cellmark, in February 2001, the acquisition of  Lifecodes in December 2001, and a limited number of agreements with foreign  companies, we may be affected by fluctuations in currency exchange rates.





We have a certain amount of long-term debt recorded on our books. The  interest rates applicable to such debt are not variable with respect to market  conditions.





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|Item 8. | FINANCIAL STATEMENTS AND    SUPPLEMENTARY DATA
|------- | ----------------------------------------------




ORCHID  BIOSCIENCES, INC.


AND  SUBSIDIARIES





Index to Consolidated Financial  Statements and Schedule





|                                                                                                                      | Page
|--------------------------------------------------------------------------------------------------------------------- | ----
|Independent Auditors Report                                                                                          | 44  
|                                                                                                                      |     
|Consolidated Financial Statements:                                                                                    |     
|Consolidated    Balance Sheets as of December 31, 2002 and 2001                                                       | 45  
|Consolidated    Statements of Operations for the years ended December 31, 2002, 2001, and    2000                     | 46  
|Consolidated    Statements of Comprehensive Loss for the years ended December 31, 2002, 2001,    and 2000             | 47  
|Consolidated    Statements of Stockholders Equity (Deficit) for the years ended December 31,    2002, 2001, and 2000 | 48  
|Consolidated    Statements of Cash Flows for the years ended December 31, 2002, 2001, and    2000                     | 49  
|Notes to    Consolidated Financial Statements                                                                         | 50  
|                                                                                                                      |     
|Financial Statement Schedule:                                                                                         |     
|                                                                                                                      |     
|Schedule of Valuation and Qualifying Accounts                                                                         | 87  




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Independent Auditors Report





The Stockholders and Board of Directors


Orchid BioSciences, Inc.:





We have audited the consolidated financial statements of Orchid  BioSciences, Inc. and subsidiaries as listed in the accompanying index.  In connection with our audits of the  consolidated financial statements, we also have audited the financial statement  schedule as listed in the accompanying index.   These consolidated financial statements and financial statement schedule  are the responsibility of the Companys management.  Our responsibility is to express an opinion on these consolidated  financial statements and financial statement schedule based on our audits.





We conducted our audits in accordance with auditing standards generally  accepted in the United States of America.   Those standards require that we plan and perform the audit to obtain  reasonable assurance about whether the financial statements are free of  material misstatement.  An audit  includes examining, on a test basis, evidence supporting the amounts and  disclosures in the financial statements.   An audit also includes assessing the accounting principles used and  significant estimates made by management, as well as evaluating the overall  financial statement presentation.  We  believe that our audits provide a reasonable basis for our opinion.





In our opinion, the consolidated financial statements referred to above  present fairly, in all material respects, the financial position of Orchid  BioSciences, Inc. and subsidiaries as of December 31, 2002 and 2001, and the  results of their operations and their cash flows for each of the years in the  three-year period ended December 31, 2002, in conformity with accounting  principles generally accepted in the United States of America.  Also in our opinion, the related financial  statement schedule, when considered in relation to the basic consolidated  financial statements taken as a whole, presents fairly in all material  respects, the information set forth therein.





As discussed in notes 1(g) and 3 to the consolidated financial statements,  effective July 1, 2001 the Company adopted the provisions of Statement of  Financial Accounting Standards (SFAS) No. 141, Business Combinations, and  certain provisions of SFAS No. 142, Goodwill and Other Intangible Assets, as  required for goodwill and other intangibles resulting from business  combinations consummated after June 30, 2001.   As discussed in notes 1(g) and 8 to the consolidated financial  statements, effective January 1, 2002, the Company fully adopted SFAS No. 142.





|                                         | /s/ KPMG LLP
|---------------------------------------- | ------------
|                                         |             
|Princeton, New Jersey                    |             
|February 19, 2003, except as to Note 23, |             
|which is as of April 1,
       2003      |             




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ORCHID  BIOSCIENCES, INC.


AND  SUBSIDIARIES





Consolidated  Balance Sheets





December  31, 2002 and 2001





(In  thousands, except share and per share data)





|                                                                                                                                                                 |  | 2002 |          | 2001 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | ---- | -
|                                                                                                                                                                 |  |      |          |      |  
|Assets                                                                                                                                                           |  |      |          |      |  
|Current assets:                                                                                                                                                  |  |      |          |      |  
|Cash and cash    equivalents                                                                                                                                     |  | $    | 9,985    |      | $
|Short-term investments                                                                                                                                           |  |      |         |      |  
|Restricted cash                                                                                                                                                  |  |      | 1,522    |      |  
|Accounts receivable,    net                                                                                                                                      |  |      | 10,716   |      |  
|Inventory                                                                                                                                                        |  |      | 944      |      |  
|Other current assets                                                                                                                                             |  |      | 1,623    |      |  
|Assets of a business    component held for sale                                                                                                                  |  |      | 10,497   |      |  
|                                                                                                                                                                 |  |      |          |      |  
|Total current assets                                                                                                                                             |  |      | 35,287   |      |  
|Fixed assets, net                                                                                                                                                |  |      | 13,244   |      |  
|Goodwill                                                                                                                                                         |  |      | 3,072    |      |  
|Other intangibles, net                                                                                                                                           |  |      | 16,585   |      |  
|Restricted cash                                                                                                                                                  |  |      | 1,863    |      |  
|Other assets                                                                                                                                                     |  |      | 383      |      |  
|Assets of a business component held for sale                                                                                                                     |  |      |         |      |  
|                                                                                                                                                                 |  |      |          |      |  
|Total assets                                                                                                                                                     |  | $    | 70,434   |      | $
|                                                                                                                                                                 |  |      |          |      |  
|Liabilities    and Stockholders Equity                                                                                                                          |  |      |          |      |  
|Current liabilities:                                                                                                                                             |  |      |          |      |  
|Current portion of    long-term debt                                                                                                                             |  | $    | 8,510    |      | $
|Accounts payable                                                                                                                                                 |  |      | 3,405    |      |  
|Accrued expenses                                                                                                                                                 |  |      | 11,677   |      |  
|Deferred revenue                                                                                                                                                 |  |      | 1,642    |      |  
|Liabilities of a    business component held for sale                                                                                                             |  |      | 2,497    |      |  
|                                                                                                                                                                 |  |      |          |      |  
|Total current    liabilities                                                                                                                                     |  |      | 27,731   |      |  
|Long-term debt, less current portion                                                                                                                             |  |      | 2,299    |      |  
|Other liabilities                                                                                                                                                |  |      | 1,711    |      |  
|Liabilities of a business component held for sale                                                                                                                |  |      |         |      |  
|Commitments and contingencies                                                                                                                                    |  |      |          |      |  
|Stockholders equity:                                                                                                                                            |  |      |          |      |  
|Preferred stock, $.001    par value; Authorized 5,000,000 shares; no shares issued or outstanding                                                                |  |      |         |      |  
|Series A junior    participating preferred stock, $.001 par value; Designated 1,000,000 shares;    no shares issued or outstanding                               |  |      |         |      |  
|Common stock, $.001 par    value; Authorized 150,000,000 shares; issued and outstanding 55,738,781 and    46,180,450 at December 31, 2002 and 2001, respectively |  |      | 56       |      |  
|Additional paid-in    capital                                                                                                                                    |  |      | 303,953  |      |  
|Deferred compensation                                                                                                                                            |  |      | (2,305   | )    |  
|Accumulated other    comprehensive income                                                                                                                        |  |      | 389      |      |  
|Accumulated deficit                                                                                                                                              |  |      | (263,400 | )    |  
|                                                                                                                                                                 |  |      |          |      |  
|Total stockholders    equity                                                                                                                                    |  |      | 38,693   |      |  
|                                                                                                                                                                 |  |      |          |      |  
|Total liabilities and    stockholders equity                                                                                                                    |  | $    | 70,434   |      | $
|                                                                                                                                                                 |  |      |          |      |  




See accompanying notes to consolidated financial statements.





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ORCHID  BIOSCIENCES, INC.


AND  SUBSIDIARIES





Consolidated  Statements of Operations





Years  ended December 31, 2002, 2001, and 2000





(In  thousands, except share and per share data)





|                                                                                                                       |  | 2002 |            | 2001 |   | 2000       |  
|---------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | -
|                                                                                                                       |  |      |            |      |   |            |  
|Revenues:                                                                                                              |  |      |            |      |   |            |  
|Product revenues and    access fees                                                                                    |  | $    | 2,454      |      | $ | 5,003      |  
|Clinical laboratory    testing                                                                                         |  |      | 44,597     |      |   | 20,910     |  
|License, grant and    other revenues                                                                                   |  |      | 3,374      |      |   | 4,735      |  
|                                                                                                                       |  |      |            |      |   |            |  
|Total revenues                                                                                                         |  |      | 50,425     |      |   | 30,648     |  
|                                                                                                                       |  |      |            |      |   |            |  
|Operating expenses:                                                                                                    |  |      |            |      |   |            |  
|Cost of product    revenues and access fees (includes write-down of discontinued product    inventory of $811 in 2002) |  |      | 1,690      |      |   | 3,822      |  
|Cost of clinical    laboratory testing                                                                                 |  |      | 25,957     |      |   | 14,499     |  
|Research and    development                                                                                            |  |      | 21,006     |      |   | 33,984     |  
|Marketing and sales                                                                                                    |  |      | 8,701      |      |   | 6,313      |  
|General and    administrative                                                                                          |  |      | 32,967     |      |   | 23,936     |  
|Impairment of assets                                                                                                   |  |      | 20,771     |      |   | 30,652     |  
|Restructuring                                                                                                          |  |      | 6,880      |      |   | 388        |  
|Amortization of    intangible assets (including goodwill in 2001 and 2000)                                             |  |      | 3,039      |      |   | 3,778      |  
|                                                                                                                       |  |      |            |      |   |            |  
|Total operating    expenses                                                                                            |  |      | 121,011    |      |   | 117,372    |  
|                                                                                                                       |  |      |            |      |   |            |  
|Operating loss                                                                                                         |  |      | (70,586    | )    |   | (86,724    | )
|Other income (expense):                                                                                                |  |      |            |      |   |            |  
|Interest income                                                                                                        |  |      | 536        |      |   | 2,898      |  
|Interest expense                                                                                                       |  |      | (583       | )    |   | (847       | )
|Other income (expense)                                                                                                 |  |      | (117       | )    |   | 60         |  
|Loss on sale of assets                                                                                                 |  |      | (921       | )    |   |           |  
|                                                                                                                       |  |      |            |      |   |            |  
|Total other income    (expense)                                                                                        |  |      | (1,085     | )    |   | 2,111      |  
|                                                                                                                       |  |      |            |      |   |            |  
|Loss from continuing    operations before income taxes                                                                 |  |      | (71,671    | )    |   | (84,613    | )
|Income tax benefit                                                                                                     |  |      | 577        |      |   |           |  
|                                                                                                                       |  |      |            |      |   |            |  
|Loss from continuing    operations                                                                                     |  |      | (71,094    | )    |   | (84,613    | )
|Discontinued operations:                                                                                               |  |      |            |      |   |            |  
|Loss from operations of    a business held for sale                                                                    |  |      | (9,003     | )    |   | (65        | )
|                                                                                                                       |  |      |            |      |   |            |  
|Net loss                                                                                                               |  |      | (80,097    | )    |   | (84,678    | )
|Beneficial conversion feature of preferred stock                                                                       |  |      |           |      |   |           |  
|                                                                                                                       |  |      |            |      |   |            |  
|Net loss allocable to    common stockholders                                                                           |  | $    | (80,097    | )    | $ | (84,678    | )
|                                                                                                                       |  |      |            |      |   |            |  
|Basic and diluted loss from continuing operations    per share                                                         |  | $    | (1.32      | )    | $ | (2.27      | )
|Basic and diluted loss from discontinued operations    per share                                                       |  | $    | (0.17      | )    | $ |           |  
|Basic and diluted net loss per share                                                                                   |  | $    | (1.48      | )    | $ | (2.27      | )
|Basic and diluted net loss per share allocable to    common stockholders (note 1)                                      |  | $    | (1.48      | )    | $ | (2.27      | )
|Shares used in computing basic and diluted net loss    per share allocable to common stockholders (note 1)             |  |      | 54,000,873 |      |   | 37,259,779 |  




See accompanying notes to consolidated financial statements.





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ORCHID  BIOSCIENCES, INC.


AND  SUBSIDIARIES





Consolidated  Statements of Comprehensive Loss





Years  ended December 31, 2002, 2001, and 2000





(In  thousands)





|                                                                                 |  | 2002 |         | 2001 |   | 2000    |  
|-------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | ------- | -
|                                                                                 |  |      |         |      |   |         |  
|Net loss                                                                         |  | $    | (80,097 | )    | $ | (84,678 | )
|Other comprehensive    income (loss):                                            |  |      |         |      |   |         |  
|Unrealized holding    gains (losses) arising during the period                   |  |      | (483    | )    |   | 195     |  
|Less reclassification
        adjustment for gains (losses) included in net loss |  |      | (48     | )    |   | 599     |  
|                                                                                 |  |      |         |      |   |         |  
|Unrealized holding gain    (loss) on available-for-sale securities               |  |      | (435    | )    |   | (404    | )
|Foreign currency    translation adjustment                                       |  |      | 643     |      |   | 8       |  
|                                                                                 |  |      |         |      |   |         |  
|Other comprehensive    income (loss)                                             |  |      | 208     |      |   | (396    | )
|                                                                                 |  |      |         |      |   |         |  
|Comprehensive loss                                                               |  | $    | (79,889 | )    | $ | (85,074 | )
|                                                                                 |  |      |         |      |   |         |  




See accompanying notes to consolidated financial statements.





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ORCHID  BIOSCIENCES, INC.


AND  SUBSIDIARIES


Consolidated  Statements of Shareholders Equity(Deficit)


Years  ended December 31, 2002, 2001, and 2000


(In  thousands, expect share data)





|                                                                                                                                                                              |  | Convertible
        preferred stock |          |                  |   |                          |   |        |          |                          |   |        |  |                                           |            |                                            |                                                                |                                         |  |  |                             |                                                              |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------- | -------- | ---------------- | - | ------------------------ | - | ------ | -------- | ------------------------ | - | ------ |  | ----------------------------------------- | ---------- | ------------------------------------------ | -------------------------------------------------------------- | --------------------------------------- |  |  | --------------------------- | ------------------------------------------------------------ | -
|                                                                                                                                                                              |  |                                     |          |                  |   |                          |   |        |          |                          |   |        |  |                                           |            |                                            |                                                                |                                         |  |  |                             |                                                              |  
|                                                                                                                                                                              |  | Series
        A                    |          | Series
        B |   | Common
        Stock     |   |        |          |                          |   |        |  |                                           |            |                                            |                                                                |                                         |  |  |                             |                                                              |  
|                                                                                                                                                                              |  |                                     |          |                  |   |                          |   |        |          |                          |   |        |  |                                           |            |                                            | Accumulated
        other
        comprehensive
        income |                                         |  |  |                             | Total
        stockholders
        equity
        (deficit) |  
|                                                                                                                                                                              |  | Number
        of shares            |          | Amount           |   | Number
        of shares |   | Amount |          | Number
        of shares |   | Amount |  | Common
        stock to
        be issued |            | Additional
        paid-in
        capital |                                                                | Deferred
        compen-
        sation |  |  | Accumulated
        deficit |                                                              |  
|                                                                                                                                                                              |  |                                     |          |                  |   |                          |   |        |          |                          |   |        |  |                                           |            |                                            |                                                                |                                         |  |  |                             |                                                              |  
|Balance,
        December 31, 1999:                                                                                                                                           |  |                                     | 970,900  |                  | $ | 1                        |   |        | 103,840  |                          | $ |       |  |                                           | 845,450    |                                            | $                                                              | 1                                       |  |  | 76                          |                                                              | $
|Issuance
        of common stock to be issued at December 31, 1999                                                                                                            |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 10,000     |                                            |                                                                |                                        |  |  | (76                         | )                                                            |  
|Issuance
        of common stock in connection with supply Agreement                                                                                                          |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 125,000    |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Issuance
        of common stock for technology licenses                                                                                                                      |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 350,000    |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Exercise
        of common stock options                                                                                                                                      |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 183,084    |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Issuance
        of common stock in connection with the initial public offering, net                                                                                          |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 6,900,000  |                                            |                                                                | 7                                       |  |  |                            |                                                              |  
|Conversion
        of mandatorily redeemable convertible preferred stock and convertible
        preferred stock into common stock in connection with initial public offering |  |                                     | (970,900 | )                |   | (1                       | ) |        | (103,840 | )                        |   |       |  |                                           | 24,781,562 |                                            |                                                                | 25                                      |  |  |                            |                                                              |  
|Deferred
        compensation resulting from the grant and remeasurement of common stock
        options                                                                      |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Amortization
        of deferred compensation                                                                                                                                 |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Foreign
        currency translation adjustment                                                                                                                               |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Unrealized
        gain on available-for-sale securities                                                                                                                      |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Net
        loss                                                                                                                                                              |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|                                                                                                                                                                              |  |                                     |          |                  |   |                          |   |        |          |                          |   |        |  |                                           |            |                                            |                                                                |                                         |  |  |                             |                                                              |  
|Balance,
        December 31, 2000:                                                                                                                                           |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 33,195,096 |                                            |                                                                | 33                                      |  |  |                            |                                                              |  
|Issuance
        of common stock to AstraZeneca in connection with the acquisition of Cellmark                                                                                |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 222,980    |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Issuance
        of common stock in connection with follow-on offering, net                                                                                                   |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 5,950,000  |                                            |                                                                | 6                                       |  |  |                             |                                                              |  
|Issuance
        of common stock in connection with the acquisition of Lifecodes                                                                                              |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 6,622,951  |                                            |                                                                | 7                                       |  |  |                            |                                                              |  
|Common
        stock options and warrants issued in connection with the acquisition of
        Lifecodes                                                                      |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Issuance
        of common stock in connection with services                                                                                                                  |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 29,609     |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Reversal
        of deferred compensation resulting from the grant and remeasurement of
        common stock options                                                          |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Amortization
        of deferred compensation                                                                                                                                 |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Exercise
        of common stock options                                                                                                                                      |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 134,814    |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Exercise
        of common stock warrants                                                                                                                                     |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 25,000     |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Foreign
        currency translation adjustment                                                                                                                               |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Unrealized
        loss on available-for-sale securities                                                                                                                      |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Net
        loss                                                                                                                                                              |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|                                                                                                                                                                              |  |                                     |          |                  |   |                          |   |        |          |                          |   |        |  |                                           |            |                                            |                                                                |                                         |  |  |                             |                                                              |  
|Balance,
        December 31, 2001                                                                                                                                            |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 46,180,450 |                                            |                                                                | 46                                      |  |  |                            |                                                              |  
|Issuance
        of common stock in connection with follow-on offering, net                                                                                                   |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 9,000,000  |                                            |                                                                | 9                                       |  |  |                            |                                                              |  
|Issuanace
        of common stock to acquire patents                                                                                                                          |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 505,050    |                                            |                                                                | 1                                       |  |  |                            |                                                              |  
|Reversal
        of deferred compensation resulting from forfeitures and remeasurement
        of common stock options                                                        |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Amortization
        of deferred compensation                                                                                                                                 |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Compensation
        expense for grant of common stock options to non-employees and common
        stock option modifications                                                 |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Exercise
        of common stock options                                                                                                                                      |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           | 53,281     |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Issuance
        of common stock warrants                                                                                                                                     |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Foreign
        currency translation adjustment                                                                                                                               |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Unrealized
        loss on available-for-sale securities                                                                                                                      |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|Net
        loss                                                                                                                                                              |  |                                     |         |                  |   |                         |   |        |         |                          |   |       |  |                                           |           |                                            |                                                                |                                        |  |  |                            |                                                              |  
|                                                                                                                                                                              |  |                                     |          |                  |   |                          |   |        |          |                          |   |        |  |                                           |            |                                            |                                                                |                                         |  |  |                             |                                                              |  
|Balance,
        December 31, 2002                                                                                                                                            |  |                                     |         |                  | $ |                         |   |        |         |                          | $ |       |  |                                           | 55,738,781 |                                            | $                                                              | 56                                      |  |  |                            |                                                              | $
|                                                                                                                                                                              |  |                                     |          |                  |   |                          |   |        |          |                          |   |        |  |                                           |            |                                            |                                                                |                                         |  |  |                             |                                                              |  




See accompanying notes to consolidated financial statements.





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ORCHID  BIOSCIENCES, INC.


AND  SUBSIDIARIES


Consolidated  Statements of Cash Flows


Years  ended December 31, 2002, 2001, and 2000


(In  thousands)





|                                                                                                                         |  | 2002 |         | 2001 |   | 2000    |  
|------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------- | ---- | - | ------- | -
|                                                                                                                         |  |      |         |      |   |         |  
|Cash flows from operating activities:                                                                                    |  |      |         |      |   |         |  
|Loss from continuing    operations                                                                                       |  | $    | (71,094 | )    | $ | (84,613 | )
|Loss from discontinued    operations                                                                                     |  |      | (9,003  | )    |   | (65     | )
|Adjustments to    reconcile net loss to net cash used in operating activities:                                           |  |      |         |      |   |         |  
|Cash used in    discontinued operations                                                                                  |  |      | (2,430  | )    |   |        |  
|Noncash research and    development expense                                                                              |  |      |        |      |   |        |  
|Noncash compensation    expense                                                                                          |  |      | 3,541   |      |   | 3,271   |  
|Depreciation and    amortization                                                                                         |  |      | 9,149   |      |   | 7,906   |  
|Impairment of assets                                                                                                     |  |      | 20,771  |      |   | 30,652  |  
|Impairment loss from    discontinued operations                                                                          |  |      | 5,941   |      |   |        |  
|Loss on sale of assets                                                                                                   |  |      | 921     |      |   |        |  
|Bad debt expense                                                                                                         |  |      | 469     |      |   | 106     |  
|Bad debt expense from    discontinued operations                                                                         |  |      | 2,427   |      |   |        |  
|Changes in assets and    liabilities:                                                                                    |  |      |         |      |   |         |  
|Accounts receivable                                                                                                      |  |      | (114    | )    |   | (3,441  | )
|Inventory                                                                                                                |  |      | 896     |      |   | 667     |  
|Other current assets                                                                                                     |  |      | (125    | )    |   | 522     |  
|Other assets                                                                                                             |  |      | 835     |      |   | 453     |  
|Accounts payable                                                                                                         |  |      | (455    | )    |   | (1,493  | )
|Accrued expenses                                                                                                         |  |      | 2,496   |      |   | (73     | )
|Due to related party                                                                                                     |  |      |        |      |   |        |  
|Deferred revenue                                                                                                         |  |      | 818     |      |   | (214    | )
|Other liabilities                                                                                                        |  |      |        |      |   | 352     |  
|                                                                                                                         |  |      |         |      |   |         |  
|Net cash used in    operating activities                                                                                 |  |      | (34,957 | )    |   | (45,970 | )
|                                                                                                                         |  |      |         |      |   |         |  
|Cash flows from investing activities:                                                                                    |  |      |         |      |   |         |  
|Proceeds from the sale    of assets                                                                                      |  |      | 1,077   |      |   |        |  
|Cash paid to acquire    Cellmark, including acquisition costs                                                            |  |      |        |      |   | (2,909  | )
|Cash paid to acquire    Lifecodes, including acquisition costs, net of cash acquired                                     |  |      |        |      |   | (6,378  | )
|Cash paid to acquire    patents and license                                                                              |  |      |        |      |   | (4,064  | )
|Capital expenditures                                                                                                     |  |      | (2,935  | )    |   | (10,077 | )
|Decrease (increase) in    restricted cash                                                                                |  |      | (3,385  | )    |   |        |  
|Purchase of short-term    investments                                                                                    |  |      | (11,198 | )    |   | (78,881 | )
|Sales of short-term    investments                                                                                       |  |      |        |      |   | 6,563   |  
|Maturities of    short-term investments                                                                                  |  |      | 28,394  |      |   | 106,575 |  
|Other investing    activities                                                                                            |  |      | (140    | )    |   | (2,135  | )
|                                                                                                                         |  |      |         |      |   |         |  
|Net cash provided by    (used in) investing activities                                                                   |  |      | 11,813  |      |   | 8,694   |  
|                                                                                                                         |  |      |         |      |   |         |  
|Cash flows from financing activities:                                                                                    |  |      |         |      |   |         |  
|Net proceeds from    issuance of common stock                                                                            |  |      | 21,222  |      |   | 33,350  |  
|Net proceeds from    issuance of Series E mandatorily redeemable convertible preferred stock                             |  |      |        |      |   |        |  
|Proceeds from issuance    of debt from line of credit                                                                    |  |      | 5,200   |      |   | 2,796   |  
|Payments made on  patent liability                                                                                       |  |      | (775    | )    |   |        |  
|Repayment of debt on    line of credit                                                                                   |  |      | (3,483  | )    |   | (2,716  | )
|                                                                                                                         |  |      |         |      |   |         |  
|Net cash provided by    financing activities                                                                             |  |      | 22,164  |      |   | 33,430  |  
|                                                                                                                         |  |      |         |      |   |         |  
|Effect of foreign currency translation on cash and    cash equivalents                                                   |  |      | 219     |      |   | 34      |  
|                                                                                                                         |  |      |         |      |   |         |  
|Net decrease in cash    and cash equivalents                                                                             |  |      | (761    | )    |   | (3,812  | )
|Cash and cash equivalents at beginning of year                                                                           |  |      | 10,746  |      |   | 14,558  |  
|                                                                                                                         |  |      |         |      |   |         |  
|Cash and cash equivalents at end of year                                                                                 |  | $    | 9,985   |      | $ | 10,746  |  
|                                                                                                                         |  |      |         |      |   |         |  
|Supplemental disclosure of noncash financing and    investing activities:                                                |  |      |         |      |   |         |  
|Issuance of note    payable for acquisition of patent                                                                    |  | $    | 1,500   |      | $ |        |  
|Settlement of note    payable with issuance of common stock                                                              |  |      | 285     |      |   |         |  
|Incremental Lifecodes'    liabilities recorded as incremental goodwill                                                   |  |      | 525     |      |   |        |  
|Debt assumed by buyer    in sale of assets                                                                               |  |      | 572     |      |   |        |  
|Deferred compensation    from grant and remeasurement of common stock options and warrants                               |  |      | (1,876  | )    |   | (2,560  | )
|Warrants issued in    connection with line of credit                                                                     |  |      | 88      |      |   |        |  
|Issuance of common    stock in connection with the acquisition of Cellmark                                               |  |      |        |      |   | 2,019   |  
|Issuance of common    stock and common stock options and warrants in connection with the    acquisition of Lifecodes     |  |      |        |      |   | 16,140  |  
|Issuance of common    stock for services accrued in 2000                                                                 |  |      |        |      |   | 229     |  
|Obligations assumed in    connection with patent acquisitions, net of discount                                           |  |      |        |      |   | 2,725   |  
|Issuance of common    stock in connection with supply agreement                                                          |  |      |        |      |   |        |  
|Issuance of common    stock, common stock warrants and Series A convertible preferred stock for    technology licenses   |  |      |        |      |   |        |  
|Conversion of    mandatorily redeemable convertible preferred stock and convertible preferred    stock into common stock |  |      |        |      |   |        |  
|Common stock granted or    to be issued to SB                                                                            |  |      |        |      |   |        |  
|Supplemental disclosure of cash flow information:                                                                        |  |      |         |      |   |         |  
|Cash paid during the    year for interest                                                                                |  | $    | 562     |      |   | 830     |  




See accompanying notes to consolidated financial statements.





49


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ORCHID  BIOSCIENCES, INC. AND SUBSIDIARIES





NOTES TO  CONSOLIDATED FINANCIAL STATEMENTS


December  31, 2002 and 2001


(in  thousands except share and per share data)





|(1) |     | Summary of Significant Accounting    Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (a) | Organization and    Business Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |     | Orchid BioSciences, Inc. (previously known as Orchid    Biocomputer, Inc.) and subsidiaries (the Company), was organized under the    laws of the State of Delaware on March 8, 1995 to develop and commercialize    genetic diversity technologies, products and services using the Companys    proprietary biochemistry for scoring single nucleotide polymorphisms (SNPs)    and microfluidics technologies for applications in drug discovery,    principally in the field of pharmacogenetics and DNA synthesis.  The Company was a wholly owned subsidiary    of Sarnoff Corporation (Sarnoff) at inception, was reduced to a majority-owned    subsidiary of Sarnoff in 1995 and as a result of the December 1997 financing,    Sarnoffs ownership in the Company was reduced to less than a majority.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |     | On December 30, 1999, the Company acquired    GeneScreen, Inc. (GeneScreen), which operates genetic diversity testing    laboratories in Dallas, Texas and     Dayton, Ohio.  GeneScreen    performs DNA laboratory analyses for paternity, transplantation and forensic    testing. GeneScreens primary source of revenue is paternity testing under    contracts with various state and county government agencies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |     | During 2001, the Company consummated two    acquisitions. On February 12, 2001, the Company acquired Cellmark Diagnostics    (Cellmark), a division of AstraZeneca. Cellmark is a leading provider of    genetic testing services in the United Kingdom (UK) which also sells kits and    conducts testing for genetic diseases, including cystic fibrosis. On December    5, 2001, the Company acquired Lifecodes Corporation (Lifecodes). Lifecodes is    a leading provider of genetic testing for forensics and paternity in the    United States (US), as well as donor transplantation matching.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |     | The Company has not achieved profitable
        operations or positive cash flow from operations. There is no assurance
        that profitable operations and positive cash flows can be achieved or,
        if ever achieved, could be sustained on a continuing basis.  The
        Companys accumulated deficit aggregated $263,400 at December 31,
        2002. In 2003, the Company consummated a financing transaction that it
        expects to be sufficient coupled with existing cash on hand, to fund the
        Companys operations at least through December 31, 2003. In addition,
        the Company holds the Diagnostic business for sale and expects that the
        sale of its Diagnostics business will generate incremental cash resources
        in 2003. The Company may be unable to raise additional funds or raise
        funds on terms that are acceptable to the Company. If future financing
        is not available to the Company, or is not available on terms acceptable
        to the Company, it may not be able to fund its future needs. If the Company
        raises funds through equity or convertible securities, the Companys
        stockholders may experience dilution and the Companys stock price
        may decline.
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |     | The Company has received a notice
       from the Nasdaq National Stock Market indicating that the Company has

        failed to comply with the $1.00 minimum bid price required for continued
       listing by Marketplace Rule 4450(a)(5) and that its common stock is subject

        to delisting from the Nasdaq.  The Company filed a request for a
         hearing before the Nasdaq Qualifications Panel (the Panel) to appeal
        the
        staff determination which occurred on February 19, 2003.  On March
         26, 2003, the Panel determined to continue listing of the Companys
          common stock on the Nasdaq National Market through June 24, 2003. The
         Company is seeking
        stockholder approval to implement a reverse stock split in order to comply
          with the minimum bid price above $1.00 before June 24, 2003.  In
           addition, the Company has filed a definitive proxy statement regarding

        the reverse stock split proposal with the Securities and Exchange Commission
           (SEC), and has mailed the definitive proxy statement regarding this
          proposal
        to its stockholders.                                                                                        
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |     | There can be no assurance that the Panel will decide    to allow the Company to remain listed or that the Companys actions will    prevent the delisting of its common stock from the Nasdaq National Market    after June 24, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | (b) | Consolidated    Financial Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |     | The accompanying consolidated financial
        statements include the results of operations of the Company and its subsidiaries. 
        All intercompany accounts and transactions have been eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            




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| | (c) | Cash and Cash    Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | The Company considers all highly liquid investments    with an original maturity of three months or less when purchased to be cash    equivalents.  All cash and cash    equivalents are held in US financial institutions and money market    funds.  To date, the Company has not    experienced any losses on its cash and cash equivalents.  The carrying amount of cash and cash    equivalents approximates its fair value due to its short-term and liquid    nature.  The Company also maintains    $3,385 of restricted cash as of December 31, 2002 pursuant to the    requirements of its long-term debt (See Note 13).                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (d) | Short-Term    Investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Short-term investments consist of corporate debt    securities with original maturities greater than three months.  In accordance with Statement of Financial    Accounting Standards (SFAS) No. 115 , Accounting for Certain Investments in    Debt and Equity Securities, the Company classifies its short-term investments    as available-for-sale. Available-for-sale securities are recorded at fair    value of the investments based on quoted market prices at December 31, 2002.  Cost is determined on a specific    identification basis.  The Company    considered all of these investments to be available-for-sale.                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (e) | Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Inventory is stated at the lower of cost or market.    Cost is determined by the first-in, first-out method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (f) | Fixed Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Fixed assets which consist of lab equipment,    furniture and fixtures, computers and software are carried at cost, less    accumulated depreciation, which is computed on the straight-line basis over    the estimated useful lives of the related assets, which range from two to    eight years.  Leasehold improvements,    which are also included in fixed assets, are recorded at cost, less    accumulated depreciation, which is computed on the straight-line basis over    the shorter of their estimated useful lives or the remaining lease term.  Expenditures for maintenance and repairs    are charged to expense as incurred.                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | (g) | Business Combinations, Goodwill and    Intangible Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | On July 1, 2001 the Company adopted the provisions    of SFAS No. 141,
Business Combinations(SFAS    141), and on January 1, 2002 fully adopted the provisions of SFAS No. 142, Goodwill and Other Intangible Assets    (SFAS 142). SFAS 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001 as well as all    purchase method business combinations completed
after June 30, 2001. SFAS 141    also specifies criteria intangible assets acquired in a purchase method    business combination
must meet to be recognized and reported apart from    goodwill, noting that any purchase price allocable to an assembled workforce
   may not be accounted for separately.     In accordance with SFAS 142, goodwill and intangible assets with    indefinite
useful lives are no longer amortized, but instead tested for    impairment at least annually.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     | Goodwill represents the excess purchase price over    fair value of net assets acquired in a business combination.  Intangible assets acquired as a result of    a business combination are recorded at their fair value at the acquisition    date.  Intangible assets acquired    individually are recorded at their acquisition cost.  Prior to the full adoption of SFAS 142,    goodwill was amortized like other intangible assets.  Other intangible assets are amortized on a    straight-line basis over their estimated useful lives (see note 3 regarding    intangible assets acquired in connection with the Lifecodes acquisition), as    follows:                                                                                                                                                                                                                                                               




|                                         |  | Years | 
|---------------------------------------- |  | ----- | 
|                                         |  |       | 
|Customer lists                           |  | 11    | 
|Base technology                          |  | 10-12 | 
|Trademarks and tradename                 |  | 10-15 | 
|Goodwill (prior to adoption of SFAS 142) |  | 10-15 | 
|Patents                                  |  | 10-15 | 
|Other intangibles                        |  | 4     | 




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| | (h) | Impairment of    Long-Lived Assets and Long-Lived Assets to be Disposed Of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | On January 1, 2002 the Company adopted SFAS No. 144,   Accounting for the Impairment
or Disposal of Long-Lived Assets(SFAS 144),    which supersedes both SFAS No. 121, Accounting for the Impairment of    Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of (SFAS 121), and    the accounting and reporting provisions of APB Opinion No. 30,
Reporting the    Results of Operations-Reporting Effects of Disposal of a Segment of a    Business, and Extraordinary, Unusual and
Infrequently Occurring Events and    Transactions, for the disposal of a business segment (as previously defined    in that Opinion).
  In accordance with    SFAS 144, the Company reviews long-lived assets and certain identifiable    intangibles for impairment
whenever events or changes in circumstances    indicate that the carrying amount of an asset may not be recoverable. 
Recoverability of assets to be held and    used is measured by a comparison of the carrying amount of
an asset to the    undiscounted future net cash flows expected to be generated by the    asset.  If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by    which the carrying amount of the assets exceed the
fair value of the    assets.  Assets to be disposed of are    reported at the lower of the carrying amount or fair value less
costs to    dispose.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (i) | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The Company
accounts for income taxes in accordance    with the asset and liability method prescribed by Statement of Financial    Accounting Standards No. 109,
Accounting for Income Taxes.  Under this method, deferred tax liabilities    and assets are determined based on the difference between the financial    statement and
tax basis of assets and liabilities using tax rates in effect    for the years in which the differences are expected to reverse.  The measurement of deferred tax assets
is    reduced, if necessary, by a valuation allowance for any tax benefits which    are not expected to be realized.  The    effect on deferred tax assets and
liabilities of a change in tax rates is    recognized in the period that such tax rate changes are enacted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (j) | Revenue    Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Revenues related to research and development    collaborations are recognized when related research expenses are incurred and    when the Company has satisfied specific performance obligations under the    terms of the respective research contracts.     Up-front fees obtained in connection with such agreements are deferred    and amortized over the estimated performance period of the respective    research contract.  Milestone payments    are recognized as revenues upon the completion of the milestone event or    requirement, if it represents the achievement of a significant step in the    research and development or performance process.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | Clinical laboratory and SNP scoring services    revenues are recognized on a completed contract basis at the time test    results are completed and reported.     Deferred revenue represents the unearned portion of payments received    in advance of tests being completed and reported.  Unbilled receivables represent revenue which has been earned on    completed and reported tests, but has not been billed to the customer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     | The Company offered SNPstream system hardware in two    basic types of transactions, either a purchase and sale transaction or an    arrangement in which the customer takes possession of the system and pays an    access fee for its use.  Revenue on the    sale of the SNPstream system hardware was recorded upon transfer of title and    after the Company has met all significant performance obligations.  Access fee payments, which were received    when a system was initially placed, were deferred and revenue was recognized    on a straight-line basis over the term of the agreement.  Revenue from the sale of SNPware    consumables were recognized upon the transfer of title, generally when the    SNPware products were shipped to customers from the Companys facility.  As a result of the sale of the Life    Sciences product business in December 2002, the Company no longer offers    these products.                                                                                                                                                                                                                                                                                                                                                                                                                                                                            




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| |     | Revenues from license arrangements, including    license fees creditable against potential future royalty obligations of the    licensee, are recognized when an arrangement is entered into if the Company    has no significant continuing involvement under the terms of the    arrangement.  If the Company has    significant continuing involvement under such an arrangement, license fees    are deferred and recognized over the estimated performance period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (k) | Research and Development                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | Costs incurred for research and product development,    including salaries and related personnel costs, fees paid to consultants and    outside service providers, material costs for prototypes and test units, and    other expenses related to the design, development, testing and enhancement of    our products, are expensed as incurred.     In addition, the Company recognizes research and development expenses    in the period incurred and in accordance with the specific contractual    performance terms of such research agreements.  Costs incurred in obtaining technology licenses and development    of software are charged to research and development expense if the technology    licensed or the software has not reached technological feasibility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (l) | Stock-Based    Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | The Company accounts for its stock-based    compensation to employees and members of the board of directors in accordance    with the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,    and related interpretations.  As such,    compensation is recorded on the date of issuance or grant as the excess of    the current market price (estimated fair value prior to the initial public    offering in May 2000 (IPO)) of the underlying stock over the purchase or    exercise price.  Any deferred    compensation is amortized over the respective vesting periods of the equity    instruments, if any.  The Company has    adopted the disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123)  which    permits entities to provide pro forma net loss and net loss per share    disclosures for stock-based compensation as if the fair value method defined    in
SFAS 123 had been applied.  Pro    forma net loss and net loss per share disclosures for stock-based    compensation have been prepared as if the fair value method had been applied    in periods subsequent to the Companys IPO and as if the minimum value method    had been applied prior to the Companys IPO, as the Company was not a public    registrant during those years.  As    required by SFAS 123, transactions with non-employees, in which goods or    services are the consideration received for the issuance of equity    instruments, are accounted for under the fair value basis in accordance with    SFAS 123 and related interpretations.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | In December 2002, the Financial Accounting
        Standards Board (FASB) issued SFAS No. 148, Accounting for Stock Based
        Compensation Transition and Disclosure, an amendment of SFAS 123 (SFAS
        148).  SFAS 148 amends SFAS 123 to provide alternative methods of
        transition for a voluntary change to the fair value method of accounting
        for stock based employee compensation.  In addition, SFAS 148 
        amends the disclosure requirements of SFAS 123 to require prominent disclosures
        in both annual and interim financial statements.  Certain of the
        disclosure modifications are required for fiscal years ending after December
        15, 2002 and are included below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | Had the Company determined compensation cost for    options based on the minimum value method at the measurement date for 2000    (pre-IPO) and the fair value method for 2002, 2001 and 2000 (post IPO) for    its stock options under SFAS 123, the Companys net loss allocable to common    stockholders and net loss per share allocable to common stockholders would    have been increased to the pro forma amounts indicated below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     




|                                                                                                                  |  | Years    ended December 31 |        
|----------------------------------------------------------------------------------------------------------------- |  | -------------------------- | -------
|                                                                                                                  |  |                            |        
|                                                                                                                  |  | 2002                       |        
|                                                                                                                  |  |                            |        
|Net loss allocable to    common stockholders:                                                                     |  |                            |        
|As reported                                                                                                       |  | $                          | (80,097
|Add:  Stock-based employee compensation expense    included in reported net loss allocable to common stockholders |  |                            | 3,681  
|Deduct:  Total stock-based employee compensation    expense determined under the fair value method for all awards |  |                            | (6,769 
|                                                                                                                  |  |                            |        
|Pro forma under SFAS    123                                                                                       |  | $                          | (83,185
|                                                                                                                  |  |                            |        
|Basic and diluted net loss per share allocable to    common stockholders:                                         |  |                            |        
|As reported                                                                                                       |  | $                          | (1.48  
|Pro forma under SFAS    123                                                                                       |  |                            | (1.54  




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| | (m) | Use
        of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | The
        preparation of consolidated financial statements in conformity with accounting
        principles generally accepted in the United States of America requires
        the Company to make estimates and assumptions that affect the amounts
        reported in the consolidated financial statements and accompanying notes. 
        Actual results could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (n) | Financial
        Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | The
        carrying amounts of cash and cash equivalents, accounts receivable, accounts
        payable, and accrued expenses approximate their fair values because of
        the short maturity of these instruments.  The interest rates on long-term
        debt and capital leases approximates rates for similar types of borrowing
        arrangements at December 31, 2002 and 2001, therefore, the fair value
        of the long-term debt and capital leases approximate the carrying value
        at December 31, 2002 and 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (o) | Net
        Loss Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | Net
        loss per share is computed in accordance with SFAS 128, Earnings Per Share,
        by dividing the net loss allocable to common stockholders by the weighted
        average number of shares of common stock outstanding.  During each
        year presented, the Company has certain options, warrants, convertible
        preferred stock and/or mandatorily redeemable convertible preferred stock,
        which have not been used in the calculation of diluted net loss per share
        allocable to common stockholders 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 allocable to common stockholders for each
        year are equal.  For the year ended December 31, 2000, the Company
        has reflected $29,574 as a beneficial conversion feature in the net loss
        allocable to common stockholders as result of the Series E stock sold
        in January 2000.  The amount of the beneficial conversion feature
        was calculated as the difference between the fair value of the Companys
        common stock on the commitment dates of $11.75 per share over the conversion
        price of $4.50 per share, with a limitation that the beneficial conversion
        feature can not exceed the gross proceeds received from the issuance of
        the stock. See Note 23 regarding the issuance of convertible preferred stock which will substantially increase
        potential common shares in 2003.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | (p) | Recent
        Accounting Pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | In
        April 2002, the FASB issued SFAS 145, Rescission on FASB Statements
        4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections
         (SFAS 145).  Under certain provisions of SFAS 145, gains and losses
        related to the extinguishment of debt should no longer be segregated on
        the income statement as extraordinary items net of the effects of income
        taxes.  Instead, those gains and losses should be included as a component
        of income before income taxes.  The provisions of SFAS 145 are effective
        for fiscal years beginning after May 15, 2002 with early adoption encouraged. 
        Any gain or loss on the extinguishment of debt that was classified as
        an extraordinary item should be reclassified upon adoption.  The
        Company does not expect the adoption of SFAS 145 to have a material impact
        on its financial position, results of operations, and cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |     | In
        June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
        with Exit or Disposal Activities (SFAS 146). SFAS 146 addresses financial
        accounting and reporting for costs associated with exit or disposal activities
        and nullifies Emerging Issues Task Force Issue No. 94-3, Liability
        Recognition for Certain Employee Termination Benefits and Other Costs
        to Exit an Activity (including Certain Costs Incurred in a Restructuring).SFAS 146 requires that a liability for costs associated with an exit
        or disposal activity be recognized when the liability is incurred rather
        than when a company commits to such an activity and also establishes fair
        value as the objective for initial measurement of the liability. 
        SFAS 146 will be adopted by the Company for exit or disposal activities
        that are initiated after December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            




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|    | (q) | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |     | Certain
        prior period amounts have been reclassified to conform to the current
        year presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(2) |     | Acquisition
        of Cellmark Diagnostics and Genotyping Collaboration Agreement with AstraZeneca                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |     | On
        February 12, 2001, the Company completed its acquisition of certain assets
        of AstraZenecas business division, Cellmark, a leading provider
        of genetic diversity testing services in the UK which also sells kits
        for and conducts tests for genetic diseases, including cystic fibrosis. 
        The acquisition has been accounted for under the purchase method of accounting
        and, accordingly, the assets and liabilities acquired have been recorded
        at their fair values. Assets acquired included intangibles of approximately
        $2,700.  The purchase price, including acquisition costs, was comprised
        of $2,909 in cash and 222,980 shares of the Companys common stock
        valued at $2,019.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |     | As
        part of the agreement to purchase the Cellmark assets from AstraZeneca,
        the Company entered into an Investor Rights Agreement with AstraZeneca,
        pursuant to which the Company agreed to register 222,980 shares of the
        Companys common stock issued to AstraZeneca.  The shares issued
        to AstraZeneca as part of the purchase were registered with the Securities
        and Exchange Commission on May 10, 2001, which registration became effective
        on May 18, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |     | The
        results of operations of Cellmark have been included in the Companys
        consolidated statement of operations since the date of acquisition by
        the Company on February 12, 2001.  The pro forma results of operations
        of Cellmark have not been presented because they are immaterial to the
        Companys results of operations for 2001 and 2000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |     | In
        addition, on February 12, 2001, the Company entered into a multi-year
        agreement with AstraZeneca to conduct a variety of studies using SNPs. 
        The genotyping agreement also allows AstraZeneca access to the Companys
        SNP databases, the development by the Company of proprietary SNP panels,
        and the use of these panels in genetic association and linkage studies. 
        In 2001, the Company recognized revenue related to the accomplishment
        of a milestone under this agreement of $750.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(3) |     | Acquisition
        of Lifecodes Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |     | On
        December 5, 2001, the Company acquired all of the outstanding equity securities
        of Lifecodes. Lifecodes, now a wholly owned subsidiary of Orchid, is a
        leading provider of genomics testing for forensics and paternity in the
        US.  The Company acquired Lifecodes in order to strengthen its position
        in the clinical testing market.  Lifecodes also maintains a diagnostic
        kit business which will add to the Companys current products. 
        The Company views this acquisition, in addition to the two previous acquisitions
        of GeneScreen and Cellmark as a significant step in providing a cost efficient
        high throughput clinical and diagnostic testing business.  In exchange
        for Lifecodes equity securities the Company issued 6,622,951 shares of
        its common stock to former stockholders of Lifecodes, 1,414,754 shares
        of which the Company deposited in an escrow account and may be used to
        compensate the Company in the event that it is entitled to indemnification
        under the Amended and Restated Agreement and Plan of Merger (the Merger
        Agreement).  In March 2003, the Company asserted claims against the
        escrow shares for obligations it believes are subject to indemnification
        obligations set forth in the Merger Agreement.  The value of these
        escrow shares has been included in the recorded purchase price. 
        The Company also issued 313,978 and 472,313 fully vested options and warrants,
        respectively, which are exercisable for Orchid common stock in exchange
        for existing Lifecodes options and warrants.  The acquisition has
        been accounted for by the purchase method under SFAS 141, and accordingly,
        the assets and liabilities acquired have been recorded at their fair values.
|    |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |     | The
        fair value of the 6,622,951 shares issued in connection with the Lifecodes
        acquisition of $14,125 was determined based on the average market price
        of the Companys common stock for a reasonable period before and
        after the date of announcement of the acquisition, October 1, 2001. 
        The value of the common stock options and warrants issued of $2,015 was
        determined by using the Black-Scholes option pricing model.  Also
        included in the purchase price was $5,000 of Lifecodes debt repaid by
        the Company and a $700 working capital advance made by the Company to
        Lifecodes, both prior to closing the acquisition.  The Company also
        assumed approximately $750 in acquisition related liabilities and paid
        $1,150 in acquisition costs, which were included in the purchase price.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            




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| |  | The net purchase price of $23,740 was allocated to    the assets and liabilities of Lifecodes as follows:
| |  | ---------------------------------------------------------------------------------------------------------




|Cash                                 |  | $ | 472    |  
|------------------------------------ |  | - | ------ | -
|Accounts receivable, net             |  |   | 3,452  |  
|Inventory                            |  |   | 2,325  |  
|Property and equipment               |  |   | 5,904  |  
|Other current and long-term assets   |  |   | 1,172  |  
|Trademark/tradename                  |  |   | 1,800  |  
|Patents and know-how                 |  |   | 8,800  |  
|Developed technology                 |  |   | 4,080  |  
|Other intangibles                    |  |   | 800    |  
|Goodwill                             |  |   | 1,658  |  
|Amounts payable and accrued expenses |  |   | (5,380 | )
|Deferred revenue                     |  |   | (426   | )
|Capital lease obligations            |  |   | (800   | )
|Other liabilities                    |  |   | (117   | )
|                                     |  |   |        |  
|                                     |  | $ | 23,740 |  
|                                     |  |   |        |  

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The results of operations of Lifecodes since its    acquisition by the Company on December 5, 2001 have been included in the    Companys 2001 consolidated statement of operations.  Amortization of intangibles was immaterial    during the period ended December 31, 2001 (see note 8 for weighted average lives    and expected future amortization expense).                                                                                                                                                                                                                                                                                                                                       
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | The following unaudited pro forma financial    information presents the combined results of operations of the Company and    Lifecodes as if the acquisition had occurred as of January 1, 2001 and    January 1, 2000, after giving effect to certain pro forma adjustments,    including amortization of other intangibles and elimination of    transaction-related costs incurred by Lifecodes prior to the    acquisition.  The pro forma financial    information does not necessarily reflect the results of operations that would    have occurred had the Company and Lifecodes constituted a single entity    during this period or the results of operations which may occur in the    future.




|                                                                         |  | Years ended December 31 |        
|------------------------------------------------------------------------ |  | ----------------------- | -------
|                                                                         |  |                         |        
|                                                                         |  | 2001                    |        
|                                                                         |  |                         |        
|                                                                         |  | (Unaudited)             |        
|Revenues(1)                                                              |  | $                       | 46,611 
|Net loss                                                                 |  |                         | (84,815
|Net loss allocable to common stockholders                                |  |                         | (84,815
|Basic and diluted net loss per share allocable to common    stockholders |  |                         | (1.95  




| | (1) | Excludes revenues during    such periods from the Lifecodes Diagnostic business that would have been    considered to be discontinued operations based on the Companys 2002    commitment to sell this business unit.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    




|(4) |  | Short-Term Investments                                                                                                                                                                                                                                                
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                       
|    |  | As of December 31, 2002, the Company does not    maintain any short-term investments.     The cost, gross unrealized gains, and fair value for    available-for-sale securities by major security type and class of security at    December 31, 2001, were as follows:




|                                     |  | Cost |        | Gross    Unrealized    gains |   | Fair    value | 
|------------------------------------ |  | ---- | ------ | ---------------------------- | - | ------------- | 
|                                     |  |      |        |                              |   |               | 
|Debt securities of the US government |  | $    | 6,900  |                              | $ | 11            | 
|Corporate debt securities            |  |      | 10,101 |                              |   | 184           | 
|                                     |  |      |        |                              |   |               | 
|                                     |  | $    | 17,001 |                              | $ | 195           | 
|                                     |  |      |        |                              |   |               | 




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|    |  | All available-for-sale securities held by the    Company as of December 31, 2001 had contractual maturity dates within one    year of the date of purchase.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                            
|(5) |  | Accounts Receivable and Credit    Risks                                                                                                                    
|    |  |                                                                                                                                                            
|    |  | Accounts receivable are comprised of the following    at December 31, 2002 and 2001:                                                                       




|                                     |  | 2002 |        | 2001 |  
|------------------------------------ |  | ---- | ------ | ---- | -
|                                     |  |      |        |      |  
|Billed trade receivables             |  | $    | 10,012 |      | $
|Unbilled trade receivables           |  |      | 1,924  |      |  
|                                     |  |      |        |      |  
|                                     |  |      | 11,936 |      |  
|Less allowance for doubtful accounts |  |      | (1,220 | )    |  
|                                     |  |      |        |      |  
|Accounts receivable,    net          |  | $    | 10,716 |      | $
|                                     |  |      |        |      |  




|    |  | Clinical laboratory testing accounts receivable is    primarily composed of amounts
owed by government agencies.  The Company performs periodic credit    evaluation of its customers financial condition
and generally does not require    a deposit from government agencies or private institutions.  The Company believes private
pay accounts    for paternity testing represent the most significant credit risk and    generally requires a deposit for all or a
portion of the services to be rendered.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(6) |  | Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |  | Inventory is comprised of the following at December    31, 2002 and 2001:                                                                                                                                                                                                                                                                                                                                                                                                                                       




|                 |  | 2002 |     | 2001 |  
|---------------- |  | ---- | --- | ---- | -
|                 |  |      |     |      |  
|Raw materials    |  | $    | 691 |      | $
|Work in progress |  |      | 227 |      |  
|Finished goods   |  |      | 26  |      |  
|                 |  |      |     |      |  
|                 |  | $    | 944 |      | $
|                 |  |      |     |      |  




|    |  | Raw materials consist mainly of reagents, enzymes,    chemicals and plates
used in SNP scoring, genotyping and to manufacture    consumables.  Work in progress    consists mainly of case work not
yet completed and kits that are in the    production process.  Finished goods    consist mainly of kits that have been
produced, but have not been    shipped.  The decline in inventory is    a direct result of the sale of  the
Life Sciences product related assets in 2002.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(7) |  | Fixed Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |  | Fixed assets are comprised of the following at    December 31, 2002 and 2001:                                                                                                                                                                                                                                                                                                                                                                                                       




|                              |  | 2002 |         | 2001 |  
|----------------------------- |  | ---- | ------- | ---- | -
|                              |  |      |         |      |  
|Laboratory equipment          |  | $    | 14,022  |      | $
|Computers and software        |  |      | 6,701   |      |  
|Furniture and fixtures        |  |      | 1,521   |      |  
|Leasehold improvements        |  |      | 3,830   |      |  
|                              |  |      |         |      |  
|                              |  |      | 26,074  |      |  
|Less accumulated depreciation |  |      | (12,830 | )    |  
|                              |  |      |         |      |  
|                              |  | $    | 13,244  |      | $
|                              |  |      |         |      |  




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|    |  | During the years ended December 31, 2002 and 2001,    the Company recorded impairment charges related to its fixed assets for    $8,939 and $3,396, respectively (see note 9).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                               
|(8) |  | Goodwill and Other Intangible    Assets                                                                                                                                       
|    |  |                                                                                                                                                                               
|    |  | The following table sets forth the Companys other    intangible assets at December 31, 2002 and 2001:                                                                        




| |  |                              |  | 2002 |        | 2001                             |  
| |  | ---------------------------- |  | ---- | ------ | -------------------------------- | -
| |  |                              |  |      |        |                                  |  
| |  |                              |  | Cost |        | Accumulated
        Amortization |  
| |  |                              |  |      |        |                                  |  
| |  | Base
        technology      |  | $    | 5,980  |                                  | $
| |  | Customer
        list        |  |      | 5,040  |                                  |  
| |  | Trademark/tradename          |  |      | 3,946  |                                  |  
| |  | Patents and
        know-how |  |      | 4,895  |                                  |  
| |  | Other                        |  |      | 579    |                                  |  
| |  |                              |  |      |        |                                  |  
| |  | Totals                       |  | $    | 20,440 |                                  | $
| |  |                              |  |      |        |                                  |  




| |  | The Company has estimated the following
        useful lives as it relates to intangible assets acquired in connection
        with the 2001 acquisition of Lifecodes as follows:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|                     |  | Useful    life |   
|-------------------- |  | -------------- | --
|                     |  |                |   
|Trademark/tradename  |  |                | 10
|Patents and know-how |  |                | 12
|Developed technology |  |                | 10
|Other intangibles    |  |                | 3 




| |  | The weighted average useful life
        for these Lifecodes intangible assets is approximately 10.43 years.                           
| |  | ---------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                        
| |  | The Companys expected future
        amortization expense related to intangible assets over the next five years
        is as follows:




|2003 |  | $ | 1,844 | 
|---- |  | - | ----- | 
|2004 |  |   | 1,798 | 
|2005 |  |   | 1,699 | 
|2006 |  |   | 1,699 | 
|2007 |  |   | 1,699 | 




| |  | The following table sets forth the
        activity during the years ended December 31, 2002 and 2001as it relates
        to goodwill:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------




|                                                                                 |  | Gross |         | Accumulated
        amortization |   | Net    |  
|-------------------------------------------------------------------------------- |  | ----- | ------- | -------------------------------- | - | ------ | -
|                                                                                 |  |       |         |                                  |   |        |  
|Balance
        as of December 31, 2000                                          |  | $     | 31,061  |                                  | $ | (2,084 | )
|Goodwill
        recorded from acquisition of Cellmark                           |  |       | 497     |                                  |   |       |  
|Goodwill
        recorded from acquisition of Lifecodes                          |  |       | 912     |                                  |   |       |  
|Amortization
        expense during 2001                                         |  |       |        |                                  |   | (1,940 | )
|Impairment
        of goodwill (see note 9)                                      |  |       | (31,144 | )                                |   | 3,888  |  
|Other
        (primarily the effect of foreign currency translation)             |  |       | 6       |                                  |   |       |  
|                                                                                 |  |       |         |                                  |   |        |  
|Balance
        as of December 31, 2001                                          |  |       | 1,332   |                                  |   | (136   | )
|Reclassification
        of workforce to goodwill                                |  |       | 1,397   |                                  |   | (324   | )
|Incremental
        liabilities assumed as a result of the Lifecodes acquisition |  |       | 525     |                                  |   |       |  
|Other
        (primarily the effect of foreign currency translation)             |  |       | 278     |                                  |   |       |  
|                                                                                 |  |       |         |                                  |   |        |  
|Balance
        as of December 31, 2002                                          |  | $     | 3,532   |                                  | $ | (460   | )
|                                                                                 |  |       |         |                                  |   |        |  




| |  | Upon full adoption of SFAS 142 in
        2002, the Company was required to perform an assessment as of January 1,
        2002 of whether goodwill was impaired at the date of adoption.  The
        Company performed this assessment and determined that goodwill was not
        impaired.  The Company also performed an annual assessment of goodwill
        as required under the provisions of SFAS 142 and concluded that goodwill
        was not impaired.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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| |  | SFAS 142 also requires disclosure of what reported    net loss and net loss per share allocable to common stockholders would have    been in all periods presented exclusive of amortization expense recognized in    those periods related to goodwill and intangible assets that will no longer    be amortized and changes in amortization periods for intangible assets that    will continue to be amortized.  This    disclosure is reflected in the table below.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|                                                                         |  | For the    years ended |        
|------------------------------------------------------------------------ |  | ---------------------- | -------
|                                                                         |  |                        |        
|                                                                         |  | 2001                   |        
|                                                                         |  |                        |        
|Net loss allocable to common stockholders as    reported                 |  | $                      | (84,678
|Add back:     Goodwill amortization                                      |  |                        | 1,940  
|                                                                         |  |                        |        
|Net loss allocable to common stockholders, as    adjusted                |  |                        | (82,738
|                                                                         |  |                        |        
|Basic and diluted net loss per share allocable to    common stockholders |  |                        | (2.27  
|Goodwill amortization per share                                          |  |                        | 0.05   
|                                                                         |  |                        |        
|Net
        loss per share allocable to common stockholders, as adjusted |  | $                      | (2.22  
|                                                                         |  |                        |        




|(9) |  | Impairment of Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |  | During the year ended December 31,
        2002, the Company recorded an impairment charge related to fixed assets,
        investments and intangible assets of $20,771.  The Company determined
        that as a result of continuing losses incurred by the Companys Life
        Sciences business unit which prompted the restructuring actions taken during
        2002 and the sale of the Life Sciences product related assets in December
        2002 constituted triggering events for which impairment reviews would
        be required pursuant to SFAS 144.  The impairment charges were recorded
        based on the fair value of the long lived assets being evaluated as computed
        using a discounted cash flow valuation model.  The laboratory equipment,
        furniture and fixtures, computers and software and leasehold improvements,
        which had a nominal salvage value, were determined to be idle and not
        able to be utilized in the Companys other facilities and, therefore,
        determined to be permanently impaired.  The intangible assets which
        were impaired related primarily to patents and base technology. 
        Upon completion of the strategic review, a change in senior management
        and the sale of the Life Sciences products related assets, the Company
        determined that these assets were no longer needed for its current operations. All
        of the impaired assets, except for investments, were initially purchased
        to support the Life Sciences strategic business unit and the impairment
        charge was allocated to this segment of the business accordingly. 
        A summary of the charge is as follows:




|Lab equipment          |  | $ | 4,349  | 
|---------------------- |  | - | ------ | 
|Furniture and fixtures |  |   | 478    | 
|Computers and software |  |   | 589    | 
|Leasehold improvements |  |   | 3,523  | 
|Investments            |  |   | 1,750  | 
|Intangible assets      |  |   | 10,082 | 
|                       |  |   |        | 
|Total                  |  | $ | 20,771 | 
|                       |  |   |        | 




| |  | During the year ended December 31, 2001, the Company    recorded an impairment charge of approximately $27,256 to write-down goodwill    which was recorded when the Company acquired GeneScreen on December 30, 1999.    On October 1, 2001, the Company announced its intention to acquire Lifecodes    (see note 3).  Lifecodes operates    primarily in the same industry and provides the same services as    GeneScreen.  Based primarily on the    acquisition price for Lifecodes, among other matters, the Company determined    that a triggering event occurred for which an impairment review would be    required pursuant to SFAS 121.  The    impairment charge was recorded based on the fair value of GeneScreen as    computed using a discounted cash flow valuation model. This charge reduced    the unamortized goodwill recorded in the acquisition of GeneScreen to    zero.  This charge relates to the    Identity Genomics segment of the
Companys business.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | During the year ended December 31, 2001, the Company    recorded an impairment charge related to certain equipment.  The Company utilizes this equipment    primarily to perform research and development activities and, to a limited    extent, genotyping services for customers.     During 2002, the Company launched the second generation of this    equipment.  The second generation    provides higher throughput at a lower cost.     The Company expects to use this next generation equipment to replace    the first generation equipment over time and to provide the same services and    functions that the first generation equipment provided.  The Company determined that a triggering    event occurred for which an impairment review of this equipment was required                                                                                                                                                                                               




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|     |  | pursuant to SFAS 121.  As such, the Company performed an analysis of its future needs    relating to this equipment and determined its fair value.  As a result of this analysis, the Company    recorded an impairment charge of $3,396 which represents the amount by which    the carrying value of the equipment exceeded the related fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(10) |  | Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  | During the year ended December 31,
        2002, the Company formalized and announced a plan to restructure certain
        operations of the Company in order to reduce costs.  As a result,
        over 135 positions which cover certain areas of the Companys operations
        were eliminated.  Most of these terminations were from the Companys
        Princeton, New Jersey facilities.  During the year ended December
        31, 2002, the Company recorded a restructuring charge of approximately
        $6,880 which included employee related charges such as severance, benefits
        and outplacement services of approximately $3,389 and facility costs of
        approximately $3,491.  The restructuring charge related to facilities
        was based upon management's estimate of when these facilities are expected
        to be subleased and an estimate of the expected discount to the existing
        lease rates from the anticipated subleasing arrangements. Of the total
        restructuring charge, approximately $4,285 remains as an accrual as of
        December 31, 2002.  The most significant remaining liability relates
        to severance obligations. There is also significant facility costs remaining
        outstanding as of December 31, 2002.  The Company expects to sublease
        all of its Princeton based laboratory facilities, which are currently
        not in use.                                      
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(11) |  | Sale of assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  | On December 19, 2002, the Company sold its Life    Sciences product line and related assets for cash of $1,077 and the    assumption of certain liabilities.     The Companys decision to sell this product line was the culmination    of a strategic review untaken by management of the Company.  The Company sold inventory which consisted    of the Companys ultra-high throughput (UHT) platform and certain equipment    that was needed to operate and maintain the Companys customer base.  The Company is also entitled to receive    incremental consideration from the sale upon the buyers completion of the    next version of the ultra-high throughput, if and/or when the completion of    the next version occurs.  In addition,    the Company placed two evaluation UHT systems to prospective customers before    the sale was consummated.  As a    result, the Company is entitled to half of the proceeds if those two UHT    systems
are ultimately sold.  The    buyer also assumed the Companys obligation under its supply arrangement with    NEN Life Sciences.  The Company    committed to purchase a minimum amount of materials and supplies in the    amount of $1,300 during 2003 and $1,300 during 2004 from the buyer.  The Company recorded a loss on the sale of    these assets of approximately $921 which has been reflected in other loss in    the accompanying consolidated statement of operations for the year ended    December 31, 2002.
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(12) |  | Discontinued Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |  | During the year ended December 31,
        2002, management with the appropriate authority made the decision to sell
        the Diagnostics business unit.  This decision was made after an internal
        evaluation of the strategic direction of the Company was performed. 
        The Company decided to focus its efforts on the services businesses where
        it offers paternity, forensics and public health testing.  The Company
        expects this sale to occur in 2003. In accordance with the provisions
        of SFAS 144, the Company has not included the results of operations of
        the Diagnostics business held for sale in the results from continuing
        operations.  The results of operations for this business unit held
        for sale has been reflected in discontinued operations.  The $9,003
        and $65 loss from discontinued operations for the year ended December
        31, 2002 and 2001, respectively, consists of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        




|                                        |  | 2002 |        | 2001 |  
|--------------------------------------- |  | ---- | ------ | ---- | -
|                                        |  |      |        |      |  
|Revenues                                |  | $    | 13,972 |      | $
|Costs of products and services revenues |  |      | 8,617  |      |  
|                                        |  |      |        |      |  
|Gross margin                            |  |      | 5,355  |      |  
|Research and development                |  |      | 1,113  |      |  
|Selling and marketing                   |  |      | 1,746  |      |  
|General and administrative              |  |      | 2,057  |      |  
|Bad debt expense                        |  |      | 2,427  |      |  
|Impairment of assets                    |  |      | 5,941  |      |  
|Amortization of intangible assets       |  |      | 931    |      |  
|                                        |  |      |        |      |  
|Operating loss                          |  |      | (8,860 | )    |  
|Other expenses                          |  |      | (143   | )    |  
|                                        |  |      |        |      |  
|Net loss                                |  | $    | (9,003 | )    | $
|                                        |  |      |        |      |  




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| | Based upon    the commitment to sell the Diagnostics business unit, the Company determined    that a triggering event occurred for which management was required to    evaluate the recoverability of long-lived assets.  As a result of this evaluation, the Company recorded an    impairment charge of $5,941 (of which $996 related to goodwill) based on the    amount by which the carrying value of the Diagnostic business exceeded the    fair value.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | The assets    and liabilities of the business held for sale has been reflected as such in    the consolidated balance sheet as of December 31, 2002 and 2001.  As the Company expects to sell this    business within the next year, all of the assets and liabilities as of    December 31, 2002 have been reflected as current.  The components of these assets and liabilities are as follows:                                                             




|                                         |  | 2002 |        | 2001 |  
|---------------------------------------- |  | ---- | ------ | ---- | -
|                                         |  |      |        |      |  
|Accounts    receivable                   |  | $    | 1,321  |      | $
|Inventory                                |  |      | 2,388  |      |  
|Other    current assets                  |  |      | 222    |      |  
|                                         |  |      |        |      |  
|Current assets                           |  |      | 3,931  |      |  
|Fixed assets                             |  |      | 3,045  |      |  
|Goodwill                                 |  |      |       |      |  
|Intangible    assets                     |  |      | 3,521  |      |  
|Other long    term assets                |  |      |       |      |  
|                                         |  |      |        |      |  
|Total assets                             |  |      | 10,497 |      |  
|Accounts    payable and accrued expenses |  |      | 2,459  |      |  
|Other    liabilities                     |  |      | 38     |      |  
|                                         |  |      |        |      |  
|Net assets                               |  | $    | 8,000  |      | $
|                                         |  |      |        |      |  




|(13) | Debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | On December 23, 2002, the Company
        consummated a line of credit with a commercial bank for a maximum of $10,000. 
        Any amounts outstanding pursuant to this line of credit are secured by
        substantially all of the Companys assets.  The borrowing base
        is based on 80% of eligible accounts receivable (as defined in the agreement). 
        Borrowings pursuant to the line of credit bear interest at a range of
        prime plus 0.5% to 2.5% based on the liquidity ratio of the Company (as
        defined).  The line of credit contains certain financial and non-financial
        covenants which the Company was in compliance with as of December 31,
        2002.  This Agreement also contains a material adverse changes clause
        which, if triggered, would constitute an event of default. Pursuant to
        the terms of the line of credit, the Company also issued 215,000 warrants
        to purchase common stock of the Company at an exercise price of $0.64
        per share.  The warrants are immediately exercisable and have a five-year
        term.  The Company calculated the $88 fair value of the warrants
        using the Black Scholes option pricing model.  This value was recorded
        as debt issuance costs and is being amortized over the term of the debt. 
        The line of credit expires in one year but contains automatic renewal
        provisions at the banks option. As of December 31, 2002, the Company
        maintains $5,200 outstanding under the line of credit which is the maximum
        amount available.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | In December    1998, the Company entered into a $6,000 equipment loan line which is secured    by the purchased equipment whose availability expired in 1999.  In December 2000, the Company amended the    loan line and established a new borrowing base of $8,000.  As of December 31, 2002, the Company does    not have the ability to draw down on the loan line due to the expiration of    the loan line in December 2001.  At    December 31, 2002 and 2001, the Company had $5,419 and $8,753 outstanding    under this and the previous lines of credit.     If the Company does not maintain minimum unrestricted cash, as defined    in the agreement, equal to the greater of $35,000 or twelve months cash    needs (calculated by taking the trailing three months net cash used in    operations multiplied by four), the Company is required to provide a cash    security deposit or letter of credit equal to an amount defined in the    agreement, not to
exceed 50% of outstanding amounts on draws made in or    subsequent to December 2000.  The    Company was also required to provide a cash security deposit or obtain a    letter of credit equal to $2,150 plus 50% of any future draw amount no later    than June 30, 2001, unless the Company completed a follow-on equity offering    of at least $50,000 in net unrestricted proceeds.  During 2001, the Company did complete a follow-on offering as    described in note 19 below.  However,    the net unrestricted proceeds from this offering were less than the minimum    amount required under the loan line.     The Company has received written notice from the lender stating that the    lender waived the requirement of a pledge of cash security deposit or letter    of credit under this agreement.  In    addition, subsequent to March 31, 2002, the Company did not maintain the    minimum unrestricted cash as defined in the Agreement.  The Company has also received written    notice from





the lender stating that the lender waived the financial covenant    violation as a result of not maintaining a pledge of cash security deposit or    letter of credit under this agreement for the period of non-compliance through    June 19, 2002.  On June 19, 2002, the    Company obtained a letter of credit in the amount of approximately $2,682 as    required by the amended line of credit, which was supported by a cash    restriction on certain securities held by the Company.  As
such, this cash restriction, in addition to cash restricted under two of the
Companys operating leases is    reflected as restricted cash in the consolidated balance sheet as of December    31, 2002 of $3,385, of which $1,863 is classified as a long term asset.




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| | All    borrowings under the facility are to be repaid in monthly principal    installments plus interest over 48 months from the date of funding, with the    final 15% of the original principal amount due in a balloon payment at the    end of loan term.  At December 31,    2002, annual interest rates on the seven draws range from 9.16% to    11.66%.  During 1999, in connection    with this arrangement, 20,894 warrants to purchase common stock were granted    at the time of the borrowings with exercise prices which ranged from $4.50 to    $12.25 per share.  The fair value of    these warrants of $76, as determined using a Black-Scholes option pricing    model, was recorded as debt issuance costs and is being amortized over the    term of the debt.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Long-term    debt is comprised of the following at December 31, 2002 and 2001:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      




|                                                                    |  | 2002 |        | 2001 | 
|------------------------------------------------------------------- |  | ---- | ------ | ---- | 
|                                                                    |  |      |        |      | 
|Line of    credit                                                   |  | $    | 5,200  |      | 
|Equipment    loan line secured by purchased equipment               |  |      | 5,419  |      | 
|Notes    payable to former employees,net of unamortized discount    |  |      |       |      | 
|Capital    lease obligations (see Note 22) and other long-term debt |  |      | 190    |      | 
|                                                                    |  |      |        |      | 
|                                                                    |  |      | 10,809 |      | 
|Less current    portion                                             |  |      | 8,510  |      | 
|                                                                    |  |      |        |      | 
|Long-term debt, less current portion                                |  | $    | 2,299  |      | 
|                                                                    |  |      |        |      | 




| | The    scheduled maturities of long-term debt outstanding as of December 31, 2002    are summarized as follows:
| | ---------------------------------------------------------------------------------------------------------------




|2003 |  | $ | 8,510  | 
|---- |  | - | ------ | 
|2004 |  |   | 1,702  | 
|2005 |  |   | 597    | 
|     |  |   |        | 
|     |  | $ | 10,809 | 
|     |  |   |        | 




|(14) | Accrued Expenses                                                                 
|---- | ---------------------------------------------------------------------------------
|     |                                                                                  
|     | Accrued    expenses are comprised of the following at December 31, 2002 and 2001:




|                                         |  | 2002 |        | 2001 | 
|---------------------------------------- |  | ---- | ------ | ---- | 
|                                         |  |      |        |      | 
|Employee    compensation                 |  | $    | 349    |      | 
|Current    portion of patent obligations |  |      | 1,618  |      | 
|Royalties on    licensed technology      |  |      | 864    |      | 
|Restructuring                            |  |      | 4,285  |      | 
|Professional    fees                     |  |      | 526    |      | 
|Acquisition    related liabilities       |  |      | 953    |      | 
|Taxes                                    |  |      | 1,153  |      | 
|Other                                    |  |      | 1,929  |      | 
|                                         |  |      |        |      | 
|                                         |  | $    | 11,677 |      | 
|                                         |  |      |        |      | 




|(15) | Income Taxes                                                                
|---- | ----------------------------------------------------------------------------
|     |                                                                             
|     | The    components of income tax expense/(benefit) are summarized as follows:




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|                               |  | Year ended    December 31, |       
|------------------------------ |  | -------------------------- | ------
|                               |  | 2002                       |       
|                               |  |                            |       
|Current    state tax benefit   |  | $                          | (1,450
|Current    foreign tax expense |  |                            | 873   
|                               |  |                            |       
|Income tax benefit             |  | $                          | (577  
|                               |  |                            |       




| | During 2002,    the Company has recognized a tax benefit of approximately $1,460 from the    sale of its New Jersey state net operating loss carryforwards.  In addition, the Company has recognized in    2002 state tax expense of $10 as a result of recent legislation in New Jersey    which enacted an alternative minimum assessment tax on companies doing    business in the state of New Jersey.     Furthermore, the Company recognized a current foreign tax expense of    $873 as it relates to its business in the UK as that business is profitable    for tax purposes in that jurisdiction.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | The tax    effects of temporary differences that give rise to significant portions of    the deferred tax assets and liabilities at December 31, 2002 and 2001 are    presented below:                                                                                                                                                                                                                                                                                                                                                                                                                      




|                                 |  | 2002 |         | 2001 |  
|-------------------------------- |  | ---- | ------- | ---- | -
|                                 |  |      |         |      |  
|Deferred tax    assets:          |  |      |         |      |  
|Bad debt allowance               |  | $    | 1,652   |      | $
|Inventory reserve                |  |      | 736     |      |  
|Deferred compensation            |  |      | 6440    |      |  
|Deferred revenue                 |  |      | 547     |      |  
|Net operating loss carryforwards |  |      | 77,153  |      |  
|Research and development credits |  |      | 2,073   |      |  
|Accrued restructuring expenses   |  |      | 1,885   |      |  
|Accrued expenses                 |  |      | 1,315   |      |  
|Amortization and depreciation    |  |      | 3,733   |      |  
|Investments                      |  |      | 770     |      |  
|                                 |  |      |         |      |  
|Total gross deferred tax assets  |  |      | 96,304  |      |  
|Less valuation allowance         |  |      | (94,785 | )    |  
|                                 |  |      |         |      |  
|Net deferred tax assets          |  |      | 1,519   |      |  
|Deferred tax    liabilities:     |  |      |         |      |  
|Intangible assets                |  |      | (1,519  | )    |  
|                                 |  |      |         |      |  
|Net deferred taxes               |  | $    |        |      | $
|                                 |  |      |         |      |  




| | At December    31, 2002 and 2001, valuation allowances of $94,785 and $58,220, respectively,    have been recognized to offset the net deferred tax assets, as realization of    these assets is uncertain.  The net    change in the valuation allowance for 2002 and 2001 were increases of $36,565    and $17,379, respectively, related primarily to additional net operating    losses incurred by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | As of    December 31, 2002, the Company has approximately $178,000 of Federal and    $161,477 of state net operating loss (NOL) carryforwards available to offset    future taxable income.  The Federal    and state NOL carryforwards will begin expiring in 2005 and 2007,    respectively, if not utilized.  At    December 31, 2002, the Company had research and development credit    carryforwards for Federal and state tax purposes of approximately $2,073    which will begin expiring in 2022 and 2009, respectively.  As a result of our acquisitions of    GeneScreen and Lifecodes, the Company acquired Federal NOLs of approximately    $4,536 and $1,693, respectively. In the event that the Company becomes    profitable in the future and is able to utilize these NOLs, these acquired    NOL carryforwards will not be reflected as income tax benefits in the results    of operations, but as a reduction of intangible assets and goodwill related





 to these acquisitions.  The Company    also may receive tax benefits in the future relating to stock option    deductions that will not be reflected in the results of operations.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The Tax    Reform Act of 1986 (the Act) provides for a limitation on the annual use of    NOL carryforwards and research and development credits (following certain    ownership changes, as defined by the Act) which could significantly limit the    Companys ability to utilize these carryforwards and research and development    credits.  The Company may have    experienced various ownership changes, as defined by the Act, as a result of    past financings and may experience others in connection with                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  




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|     | future financings.  Accordingly, the Companys ability to    utilize the aforementioned carryforwards may be limited.  The Company has not yet determined whether    or not ownership changes, as defined by the Act, have occurred.  Additionally, because US tax laws limit the    time during which these carryforwards may be applied against future taxes,    the Company may not be able to take full advantage of these attributes for    Federal income tax purposes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     | Based on the Companys net
      loss  before income taxes during 2002, 2001, and 2000, the Company would
      have
        recorded a tax benefit. During 2002 and 2001, the Company recorded approximately
       $996 (included in discontinued operations) and $27,256 as impairments

        to goodwill, which is considered a permanent difference and is not deductible
       for tax purposes in future years.  These permanent differences reduced
        the expected tax benefits in 2002 and 2001.  There was an increase
        in the valuation allowance during 2002 and 2001 due to uncertainty regarding
        the realization of deferred taxes, which further reduced the actual tax
        benefit to zero in 2001.  During 2002, the increase in its valuation
         allowance was offset by a tax benefit due to the sale of state net operating

        loss carryforwards partially offset by foreign tax expense.  During
         2000, the Company recorded an increase in the valuation allowance due

        to uncertainty regarding the realization of deferred taxes which reduced
         the Companys actual income tax benefit in that year.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     | The Company    participates in the State of New Jerseys corporation business tax benefit    certificate transfer program (the Program), which allows certain high    technology and biotechnology companies to sell unused net operating loss    carryovers to other New Jersey corporation business taxpayers.  During 2000, the Company submitted an    application to the New Jersey Economic Development Authority (the EDA) to    participate in the Program, and the application was approved.  The EDA then issued a certificate    certifying the Companys ability to participate in the Program and the amount    of New Jersey net operating loss carryovers the Company has available to    transfer.  Since New Jersey law    provides that net operating losses can be carried over for up to seven years,    the Company may be able to transfer its New Jersey net operating losses from    the last seven years.  The Program    requires that the
purchaser pay at least 75% of the amount of the surrendered    tax benefit.                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     | During January 2002, the Company
        completed the sale of approximately $11,000 of its New Jersey tax loss
        carryforwards and received $894, which was recorded as an income tax benefit. 
        During December 2002, the Company completed the sale of approximately
        an additional $7,443 of its New Jersey tax loss carryforwards and received
        $566, which was recorded as an income tax benefit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(16) | Segment Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     | The Company    had historically operated in two segments, the Products segment and the    Services segment, each of which represented activities of strategic    businesses that were historically managed separately because each business    provided distinct products and services.     The Products segment marketed and sold equipment and consumables for    SNP scoring and other genetic analyses, whereas the Services segment included    genotyping, or genoprofiling, services including DNA laboratory analysis for    paternity, forensic and transplantation testing and SNP scoring    services.  During 2002, the Company    continued to market and sell these products and provide these services to its    customers; however, in early 2002, the Company completed an internal process    of realigning its business into four business units.  These business units consisted of Orchid    Identity Genomics, Orchid GeneShield, Orchid Diagnostics and Orchid Life





 Sciences.  A brief description of all    of the business units which were determined to be reportable segments is as    follows:                                                              




| |  |  | Orchid    Identity Genomics provides DNA testing for paternity and forensics
determinations to state and local governmental authorities as well as to    individuals and organizations, through Orchid GeneScreen
and Orchid Cellmark,    as well as scrapie susceptibility testing to the UK government through Orchid    Europe with the goal of breeding
sheep genetically resistant to the disease    scrapie;
| |  | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | Orchid    GeneShield is developing programs designed to accelerate the adoption and use    of personalized medicine by patients and physicians;                                                                                                                                                                                                                                                                   
| |  |  | Orchid    Diagnostics provides products and services for genetic testing, including HLA    genotyping, disease susceptibility testing and immunogenetics, or the study    of the relationship between an individuals immune response and their genetic    makeup, to individuals; and                                                                                                                            
| |  |  | Orchid Life    Sciences developed and marketed products, services and technologies for SNP    genotyping, or scoring, and genetic diversity analyses to life sciences and    biomedical researchers as well as pharmaceutical, agricultural, diagnostic    and biotechnology companies.  The    product portion of this business unit was divested in 2002.                                                       




| | As discussed    in note 12, the Company committed to sell its Diagnostic business unit
during 2002.  As a    result of this decision, the segment information for the Diagnostics business
unit has been excluded below.  Note 12    depicts the operations of that business which is reflected as discontinued
operations and the assets and liabilities of that business unit are    considered as held for sale.  The    chief
operating decision maker of the Company measures segment profit/(loss)    using operating income/(loss), which excludes other income
(expense) and    allocation of corporate expenditures.     These corporate costs which include treasury, human resources,
finance, restructuring costs and certain other corporate functions, are    included in corporate and all other. 
All other also reflects the operations of Orchid GeneShield which    during the year ended December
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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| | 31, 2002 and    2001 which is considered to be insignificant from a segment reporting
perspective.  Goodwill has been allocated to each    reportable segment as shown below. Prior period information presented below
has been restated to the current segment presentation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|                                                  |  | Identity
        Genomics |         | Life
        Sciences |   | Corporate
        and all
        other |   | Total |        
|------------------------------------------------- |  | ------------------------- | ------- | --------------------- | - | --------------------------------------- | - | ----- | -------
|                                                  |  |                           |         |                       |   |                                         |   |       |        
|Year
        ended December 31, 2002:             |  |                           |         |                       |   |                                         |   |       |        
|Revenues
        from external customers          |  | $                         | 39,106  |                       | $ | 11,239                                  |   | $     | 80     
|Segment
        operating income/(loss)           |  |                           | 2,141   |                       |   | (31,675                                 | ) |       | (41,052
|Depreciation
        and amortization expense     |  |                           | 2,707   |                       |   | 3,702                                   |   |       | 2,740  
|Noncash
        stock based compensation          |  |                           |        |                       |   |                                        |   |       | 3,541  
|Capital
        expenditures                      |  |                           | 977     |                       |   | 958                                     |   |       | 1,000  
|Impairment
        of assets                      |  |                           |        |                       |   | 19,021                                  |   |       | 1,750  
|Goodwill                                          |  |                           | 3,072   |                       |   |                                        |   |       |       
|                                                 
|Total
        assets from continuing operations   |  |                           | 38,222  |                       |   | 4,468                                   |   |       | 17,247 
|Total
        assets from discontinued operations |  |                           |         |                       |   |                                         |   |       |        
|                                                  |  |                           |         |                       |   |                                         |   |       |        
|Total
        assets                              |  |                           |         |                       |   |                                         |   |       |        
|                                                  |  |                           |         |                       |   |                                         |   |       |        
|Year
        ended December 31, 2001:             |  |                           |         |                       |   |                                         |   |       |        
|Revenues
        from external customers          |  | $                         | 21,244  |                       | $ | 9,404                                   |   | $     |       
|Segment
        operating loss                    |  |                           | (36,897 | )                     |   | (30,564                                 | ) |       | (19,263
|Depreciation
        and amortization expense     |  |                           | 3,977   |                       |   | 2,581                                   |   |       | 1,348  
|Noncash
        stock based compensation          |  |                           |        |                       |   |                                        |   |       | 3,271  
|Capital
        expenditures                      |  |                           | 5,069   |                       |   | 3,290                                   |   |       | 1,718  
|Impairment
        of assets                      |  |                           | 27,256  |                       |   | 3,396                                   |   |       |       
|Goodwill                                          |  |                           | 1,196   |                       |   |                                        |   |       |       
|                                                 
|Total
        assets from continuing operations   |  |                           | 28,646  |                       |   | 37,608                                  |   |       | 37,375 
|Total
        assets from discontinued operations |  |                           |         |                       |   |                                         |   |       |        
|                                                  |  |                           |         |                       |   |                                         |   |       |        
|Total
        assets                              |  |                           |         |                       |   |                                         |   |       |        
|                                                  |  |                           |         |                       |   |                                         |   |       |        
|Year
        ended December 31, 2000:             |  |                           |         |                       |   |                                         |   |       |        
|Revenues
        from external customers          |  | $                         | 12,198  |                       | $ | 6,183                                   |   | $     |       
|Segment
        operating loss                    |  |                           | (5,977  | )                     |   | (23,546                                 | ) |       | (21,835
|Depreciation
        and amortization expense     |  |                           | 793     |                       |   | 5,118                                   |   |       | 578    
|Noncash
        stock based compensation          |  |                           |        |                       |   |                                        |   |       | 5,542  
|Capital
        expenditures                      |  |                           | 345     |                       |   | 11,153                                  |   |       | 1,239  
|Goodwill                                          |  |                           | 28,907  |                       |   | 70                                      |   |       |       
|                                                  |  |                           |         |                       |   |                                         |   |       |        
|Total assets                                      |  |                           | 26,958  |                       |   | 44,448                                  |   |       | 70,921 
|                                                  |  |                           |         |                       |   |                                         |   |       |        




|     | There is no concentration of revenue
      during 2002 to any one customer in excess of 10% of total revenues.  During
      2001, the  Company generated approximately $3,388, or 68% of products revenues
      from four customers.  These customers    represented
approximately 31%, 15%, 11%, and 11%, respectively, of the    product revenues
      in 2001.  During    2001, the Company entered
into two license agreements which accounted for 48%    and 18% of the total license
      revenues of $2,275.  During 2001, the
Company generated approximately $8,304 or 40% of clinical laboratory testing
      revenue from four customers.     These customers represented
approximately 15%, 11%, 8%, and 6%,    respectively, of the clinical laboratory
      testing revenues in 2001.  During 2000, the
Company generated    approximately $5,943, or 49% of  clinical laboratory testing
      revenues from four customers.  These four
customers represented    approximately 20%, 11%, 9% and 9%, respectively, of
      clinical laboratory testing revenues in 2000. 
 During    2000, the Company entered into three license agreements which accounted
 for approximately $2,800 of total license
revenues.  One customer, to which the Company primarily sells SNPware
 consumables, represented approximately 11% of
consolidated revenue for 2000.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | As a result    of the Companys acquisition of Cellmark in February 2001, the Company now    has significant international operations, primarily in the UK. During the    year ended December 31, 2002 and 2001, the Company recorded revenues from    international customers, primarily from Cellmark, of approximately $12,122,    or 24% and $8,510 or 28%, respectively, of total consolidated revenues.  One customer represented approximately 48%    and 29% of total international revenues for 2002 and 2001, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(l7) | Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | On April 13,    2000, the Company amended its License and Option Agreement with Sarnoff.    Under the terms of the amendment, in lieu of all future cash payment,    research funding, potential royalty payment and stock issuance obligations,    the Company made a payment to Sarnoff of approximately $3,000 and issued    250,000 shares of common stock and granted five-year warrants to purchase    75,000 shares of common stock at an exercise price of $8.00 per share.  The Company exercised the remaining two    option fields on a nonexclusive basis as a result of this amendment.  In February 2000, the Company also issued    100,000 shares of common stock to Sarnoff as an advance on the issuances which    would be owed in December 2000 for the two option fields previously issued    under the License and Option Agreement.     As this licensed technology has not reached technological feasibility    and has no alternative future uses, the cash payment





of approximately $3,000    and the fair value of the equity securities of approximately $4,800 has been    charged to research and development expense during 2000.                                                                                                                                                                                                            




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|     | On March 27,    1998, the Company entered into a license agreement with Motorola, Inc.    (Motorola).  In 1999, Motorola    exercised an option to acquire a license under this agreement, effective    January 1, 2000, by making a $100 payment.     This amount has been recorded as deferred revenue at December 31,    1999.  During 2000, the Company    recognized $333 in license revenues which consisted of the $100 deferred at    December 31, 1999 and an additional $233 earned and received pursuant to the    agreement.  During 2002 and 2001, the    Company recognized approximately $1,000 and $666, respectively, in revenues    pursuant to the agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     | On February 21, 2000, the Company
        entered into an Agreement for the License and Supply of Terminators with
        PerkinElmer (formerly known as NEN Life Science Products, Inc.) pursuant
        to which PerkinElmer has agreed to supply the Company with terminators
        for use in the Companys SNP kits.  In consideration of PerkinElmers
        agreement to supply the Company with terminators at favorable prices,
        the Company sold PerkinElmer 125,000 shares of its common stock for a
        purchase price of $750 and paid PerkinElmer an up-front fee of $750. 
        The Company also agreed to pay PerkinElmer a certain percentage of net
        sales revenue based on the number of SNP kits sold, in certain cases. 
        The 125,000 shares had a fair value of $1,500 on the date of the agreement. 
        Since the products being supplied were used in the Companys then
        current products and might have been used in future products, the Company
        deferred and was amortizing the $750 up-front fee plus the $750 excess
        than of the fair value of the issued common stock over the purchase price
        (or a total of $1,500) over the estimated four year term of the agreement
        on a straight-line basis.  The Company measured the fair value of
        the common stock on the date of the agreement as these shares were fully
        paid and nonforfeitable on that date.  In connection with the disposition
        of the Life Sciences product business in December 2002, this agreement
        has been assigned. Accordingly the unamortized deferred costs were considered
        part of the cost basis in connection with this disposition and the remaining
        balance at December 31, 2002 is $0.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     | In July 2000, the Company expanded
        its collaboration with The SNP Consortium Ltd. under which the Company
        performed certain SNP scoring services for determining the allelic frequency
        of 60,000 SNP genomic markers in diverse populations.  The Company
        assumed all costs to perform these services.  To fulfill its commitment
        under this collaboration, the Company hired additional personnel for,
        the operation of the Companys MegaSNPatron facility, resulting in
        additional research and development expenses in 2000 and 2001.  The
        Company also accelerated previously planned capital expenditures relating
        to the build-out of the MegaSNPatron facility of several million dollars
        in 2000.  In exchange, the Company has the right to commercialize
        certain technology developed as a result of performing these services. 
        The collaboration continued into 2001.  The agreement was further
        amended in November 2000 to include potential milestone payments to the
        Company.  During 2001, the Company recognized approximately $250
        in revenue for achieving certain milestones.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     | In July 2001, the Company completed
        a series of agreements that replace its existing collaboration agreement
        with Affymetrix entered into in November 1999, which combined the Companys
        primer extension technology with the Affymetrix GeneChip©®
        GenFlex Tag Array in the Companys SNPcode genotyping kits. 
        In addition, the Company also acquired from Affymetrix exclusive ownership
        of U.S. Patent No. 5,856,092 and its foreign counterparts (See note 22). 
        Under the terms of these agreements, Affymetrix will supply GenFlex arrays
        to the Company that the Company will use to provide SNPcode-based genotyping
        services to its customers and distribute GenFlex arrays in connection
        with SNPcode reagents to its customers to conduct primer extension-based
        genotyping using the Affymetrix GeneChip system.  Also, Affymetrix
        granted the Company a nonexclusive license to make and sell products incorporating
        Affymetrixs proprietary universal Tag sequences.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     | During 2001,    the Company has entered into various collaboration agreements under which the    Company recognized revenue.  These    agreements had varying terms and included but were not limited to: (i)    services agreements whereby the Company would provide genetic analysis    services; (ii) services agreements under which the Company would provide    genotyping services; (iii) license agreements which granted third parties    royalty bearing, nonexclusive and exclusive licenses to use its SNP-IT single    base primer extension technology to produce and sell reagent kits and    software incorporating the Companys technology; (iv) and agreements under    which the Company would provide SNPstream instruments and SNPware    consumables.  The Company received    fees associated with these agreements which were recognized as revenue in    2002 and 2001.  The Company is    entitled to receive royalties on product sales, if any, for the
duration of    any of its license agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(18) | Stock Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     | During 1995,    the Company established the 1995 Stock Incentive Plan (the 1995 Plan), which    provides for the granting of restricted common stock or incentive and    nonqualified stock options to directors, employees and consultants.  An aggregate of 3,500,000 shares of the    Companys common stock is authorized to be issued under the 1995 Plan.  During 2000, the board of directors and    stockholders of the Company approved the 2000 Employee, Director, and    Consultant Stock Incentive Plan (the 2000 Plan) for the issuance of common    stock, incentive stock options and nonqualified stock options to employees,    directors and consultants.  The    Company is authorized to issue options for up to 4,500,000 shares of the    Companys common stock.  The options    granted are exercisable generally for a period of ten years after the date of    grant and generally vest over a                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      




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| | four-year    period.  The Plans provide that in the    event of a change in control in the beneficial ownership of the Company, as    defined, all options may at the discretion of the compensation committee become    fully vested and exercisable immediately prior to the change in control.  The plans also specify other terms such as    eligibility and annual limits.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                
| | A summary of    activity under the 1995 and 2000 Plans is as follows:                                                                                                                                                                                                                                                                                                          




|                                |  | Options |            | Weighted    average    exercise price    per share |  
|------------------------------- |  | ------- | ---------- | -------------------------------------------------- | -
|                                |  |         |            |                                                    |  
|Balance at    December 31, 1999 |  |         | 1,463,011  |                                                    | $
|Granted                         |  |         | 2,362,977  |                                                    |  
|Exercised                       |  |         | (183,084   | )                                                  |  
|Cancelled                       |  |         | (50,367    | )                                                  |  
|                                |  |         |            |                                                    |  
|Balance at    December 31, 2000 |  |         | 3,592,537  |                                                    |  
|Granted                         |  |         | 2,192,126  |                                                    |  
|Exercised                       |  |         | (134,814   | )                                                  |  
|Cancelled                       |  |         | (520,668   | )                                                  |  
|                                |  |         |            |                                                    |  
|Balance at    December 31, 2001 |  |         | 5,129,181  |                                                    |  
|Granted                         |  |         | 1,613,689  |                                                    |  
|Exercised                       |  |         | (53,281    | )                                                  |  
|Cancelled                       |  |         | (1,719,086 | )                                                  |  
|                                |  |         |            |                                                    |  
|Balance at    December 31, 2002 |  |         | 4,970,503  |                                                    |  
|                                |  |         |            |                                                    |  




| | At December    31, 2002, the 1995 and 2000 Plans had the following options outstanding and    exercisable by price range, as follows:
| | -------------------------------------------------------------------------------------------------------------------------------------




|                                |  | Options    outstanding |           | Options    exercisable                               | 
|------------------------------- |  | ---------------------- | --------- | ---------------------------------------------------- | 
|                                |  |                        |           |                                                      | 
|Range     of exercise    prices |  | Number    of shares    |           | Weighted    average    remaining    contractual life | 
|                                |  |                        |           |                                                      | 
|$0.01-1.25                      |  |                        | 1,583,400 |                                                      | 
|1.29-2.50                       |  |                        | 952,709   |                                                      | 
|2.53-4.93                       |  |                        | 889,554   |                                                      | 
|4.94-6.00                       |  |                        | 836,252   |                                                      | 
|6.05-45.00                      |  |                        | 705,671   |                                                      | 
|49.00                           |  |                        | 2,917     |                                                      | 
|                                |  |                        |           |                                                      | 
|0.01-49.00                      |  |                        | 4,970,503 |                                                      | 
|                                |  |                        |           |                                                      | 




| | The Company    applies APB Opinion No. 25 in accounting for its stock option plans. In 2002,    2001, and 2000, certain employees of the Company were granted options to    acquire 1,458,689, 2,150,276, and 2,146,670 shares of common stock,    respectively.  Included in the    2,146,670 options granted in 2000 to employees were 800,000, including 600,000    to executive officers, performance-based options at an exercise price of    $6.00 for which compensation expense will be measured as the difference    between the fair value of the common stock at the time the performance    criteria is met and the exercise price and will be immediately recorded as    compensation expense.  Through    December 31, 2002, all of the 600,000 performance based stock options issued    to executives in 2000 were forfeited or will likely be forfeited as the    performance criteria was not met and is not expected to be met.  The weighted average fair values of
common    stock for the year ended December 31, 2000     was $16.37 per share.  During    2000, the difference between the respective exercise prices at the grant    dates and the fair value of the common stock on the dates of grant has been    recorded as deferred compensation of $8,105, which is being amortized on a    straight-line basis to expense over the respective vesting periods.  During 2002 and 2001, all stock options    granted by the Company were made at or above the fair value on the date of    grant.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | In 2002,    2001, and 2000, the Company granted options to certain non-employees to    purchase 155,000, 41,850, and 216,307 shares of common stock,    respectively.  Options to    non-employees were also granted prior to 2000. Such options vest over a three    or four-year period based upon future service requirements.  The Company recorded deferred compensation    of $33, $129,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 




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|     | and $2,344    for 2002, 2001, and 2000, respectively, based on the fair value at the grant    date as determined using a Black-Scholes option pricing model.  Such deferred compensation is being    amortized to expense using the methodology prescribed in FASB Interpretation    No. 28 over the respective vesting periods.     In accordance with EITF Issue 96-18, the amount of compensation    expense to be recorded in future periods related to the 2002, 2001, and 2000    grants is subject to change each reporting period based upon changes in the    fair value of the Companys common stock, estimated volatility and risk free    interest rate until the non-employee completes performance under the option    agreement.  Changes in deferred    compensation in the amount of $(316), $(2,689), and $537 were recorded in    2002, 2001, and 2000, respectively, related to the remeasurement of the    non-employee grants. 172,815 options subject to this
treatment remain    unvested at December 31, 2002.                                                                                                                                                                                                                                                                                                                   
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | The per    share weighted average fair value (post-IPO) and minimum value (pre-IPO) of
   the stock options granted to employees during 2002, 2001, and 2000 was $1.01,    $3.50, and $15.01 per share, respectively, on
the date of grant.  The per share weighted average fair value    of stock options granted to non-employees during 2002, 2001,
and 2000 was    $0.53, $3.62, and $16.25 per share, respectively, on the date of grant.  Such values were determined using the
   minimum value method for employees in 2000 (pre-IPO) and the Black Scholes    option-pricing model for employees during 2002, 2001
and 2000 (post-IPO) and    for non-employees during 2002, 2001, and 2000 with the following weighted    average assumptions:
expected dividend yield 0%; risk free interest rate of    4.85% for 2002, risk free interest rate of 5%    and 6.5% for 2001,
and 6.5% for 2000, volatility of 90% for both employees    (post-IPO) and non-employees in 2002, 2001, and 2000; and an expected option
life of 5.5 years in 2002 and 7 years in 2001 and 2000 for employees and 10    years for non-employees for all     years.                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(19) | Mandatorily Redeemable Convertible Preferred Stock, Convertible    Preferred Stock, and Common Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | In March    2002, the Board of Directors of the Company approved, subject to stockholder    approval, an increase of the Companys authorized shares of common stock to    150,000,000 shares.  The stockholders    approved this increase in authorized shares at its annual meeting in June of    2002, and the Company filed an Amendment to its Certificate of Incorporation    on June 17, 2002 effectuating the increase in authorized shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | On March 5,    2002, the Company completed an offering through which an aggregate of    9,000,000 shares were sold, including an overallotment, to a group of new and    existing shareholders.  The shares of    common stock were offered through a prospectus supplement pursuant to the    Companys effective shelf registration statement (see below).  The Company generated net proceeds as a    result of this offering of approximately $21,153.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | On May 10, 2001, the Company filed
       a shelf registration statement on Form S-3 with the Securities and Exchange

        Commission.  This will permit the Company, from time to time, to
         offer and sell various types of securities, up to a total value of $75,000. 
        The Company filed the registration statement to gain additional flexibility
         in accessing capital markets for general corporate business purposes. 
        In June 2001, the Company sold 5,950,000 shares to a group of new and
         existing stockholders at a price of $6.00 per share.  The shares
          of common stock were offered through a prospectus supplement pursuant

        to the Companys effective shelf registration statement.  The
         offering raised net proceeds of approximately $33,150 which will be
        used
        for general corporate business purposes.  In order for the Company
        to issue securities registered on this registration statement it must
        either have an aggregate market value of the voting and non-voting common
        equity excluding shares held by its affiliates of $75,000 or more,
        or it must file a post effective amendment to the registration statement
        on Form S-2 or S-1. The shelf registration statement expires in May 2003.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | In May 2000,    the Company completed its initial public offering of 6,900,000 shares of    common stock at a price of $8.00 per share (excluding underwriters discounts    and commissions), generating net proceeds of approximately $48,400.  All shares of Series A and B convertible    preferred stock (Series A and Series B), and Series E mandatorily redeemable    convertible preferred stock (Series E) outstanding as of the closing date of    the offering were automatically converted into shares of common stock on a    one-for-one basis.  The 2,480,176    shares outstanding of Series C mandatorily redeemable convertible preferred    stock (Series C) converted into 4,825,259 shares of common stock. No dividends    were paid on any of the Series A, B, C or E stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | On May 10,    2000, the Company filed a restated certificate of incorporation which revoked    all existing preferred stock designations and authorized 5,000,000 shares of    preferred stock.  The board of    directors has the authority, without any further stockholder approval, to    determine the price, privileges and other terms of the shares of unissued    preferred stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     | In January    2000, the Company completed the sale of 5,791,903 shares of Series E for    gross proceeds of $29,574.  The    issuance of these securities resulted in a $29,574 beneficial conversion    feature which increased net loss per share allocable to common stockholders    in 2000.  The fair value of the    Companys common stock on the commitment date was $11.75; however, the amount    of the beneficial conversion feature was limited to the amount of gross    proceeds received from the issuance of the Series E.  The Company also issued 1,040,341 shares    of Series E related to the conversion of an Affymetrix convertible promissory    note and for cash received by December 31, 1999 for which shares were not    issued in the December 1999 Series E offering, and which was included in    Series E stock to be issued at December 31, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       




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|(20) | Stockholder Rights Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     | On May 16,    2001, the Companys board of directors (the Board) adopted a Stockholder    Rights Plan (Rights Plan), which is designed to protect the Companys    stockholders in the event of any takeover offer.  On May 16, 2001, the Companys Board declared a dividend of one    preferred stock purchase right (a Right) for each outstanding share of the    Companys common stock to stockholders of record at the close of business on    May 31, 2001 (the Record Date).  Each    Right entitles the registered holder to purchase from the Company one    one-hundredth of a share of Series A Junior Participating Preferred Stock,    $0.001 par value per share, at an initial purchase price of $40.00 in cash,    subject to adjustment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     | Initially,    the Rights will be attached to all common stock certificates representing    shares then outstanding, and no separate Rights certificates will be    distributed.  The Rights will separate    from the common stock and a Distribution Date, as defined in the Rights Plan,    will occur if certain events as described below transpire.  Rights will also be attached to all shares    of common stock issued following the Record Date but prior to the    Distribution Date.  The Rights are not    exercisable until the Distribution Date and will expire at the close of    business on May 16, 2011, unless earlier redeemed by the Company.  The Distribution Date has not occurred as    of December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     | In the event    that a person or a group of affiliated or associated persons becomes the    beneficial owner of more than 15% of the then outstanding shares of common    stock (except pursuant to an offer for all outstanding shares of common stock    which the Board determines to be fair to, and otherwise in the best interests    of, the Company and its stockholders), each holder of a Right will thereafter    have the right to receive, upon exercise, that number of shares of common    stock (or, in certain circumstances, cash, property or other securities of    the Company) which equals the exercise price of the Right divided by one-half    of the current market price (as defined in the Rights Plan) of the common    stock at the date of the occurrence of the event.  However, Rights are not exercisable following the occurrence of    any of the events set forth above until such time as the Rights are no longer    redeemable by the Company.  In the





 event that the Company is acquired in a merger or other business combination    transaction in which the Company is not the surviving corporation, or, more than    50% of the Companys assets or earning power is sold or transferred, each    holder of a Right shall thereafter have the right to receive, upon exercise,    that number of shares of common stock of the acquiring company which equals    the exercise price of the Right divided by one-half of the current market    price (as defined in the Rights Plan) of such common stock at the date of the    occurrence of the event.  In March    2003, the Company amended the Rights Plan to prevent the issuance and sale of    its Series A Convertible Preferred Stock and associated warrants (see Note    23) from triggering the holders of the Rights ability to exercise the Rights.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(21) | Employee Benefit Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     | The Company    sponsors a defined contribution 401(k) savings plan (the 401(k) Plan)    covering all employees of the Company. Participants can contribute up to 15%    of their pretax annual compensation to the 401(k) Plan, subject to certain    limitations.  The Company matches 50%    of the participants contribution, up to 4% of compensation.  For 2002, 2001, and 2000 the Companys    contributions amounted to $406, $265, and $108, respectively, in accordance    with the terms of the Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(22) | Commitments and Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     | The Company    leases office and laboratory facilities under noncancelable operating lease    arrangements.  Future minimum rental    commitments required by such leases as of December 31, 2002 are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     




|2003       |  | $ | 3,886  | 
|---------- |  | - | ------ | 
|2004       |  |   | 3,433  | 
|2005       |  |   | 3,072  | 
|2006       |  |   | 2,429  | 
|2007       |  |   | 2,100  | 
|Thereafter |  |   | 7,713  | 
|           |  |   |        | 
|           |  | $ | 22,633 | 
|           |  |   |        | 




| | Rent expense    aggregated $3,184 in 2002, $2,313 in 2001, and $1,437 in 2000.
| | ------------------------------------------------------------------------------




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| | The Company    has capital leases for certain machinery and equipment. Minimum lease    payments, including interest, under capital leases at December 31, 2002 are    as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|2003                                                   |  | $ | 150 | 
|------------------------------------------------------ |  | - | --- | 
|2004                                                   |  |   | 67  | 
|                                                       |  |   |     | 
|Total minimum lease payments                           |  |   | 217 | 
|Less amounts    representing interest                  |  |   | 27  | 
|                                                       |  |   |     | 
|Present value of future minimum lease payments         |  |   | 190 | 
|Less current    portion                                |  |   | 125 | 
|                                                       |  |   |     | 
|Obligations under capital leases, less current portion |  | $ | 65  | 
|                                                       |  |   |     | 




| | In    connection with the Companys acquisition of certain patents in 2002 and
2001, the Company assumed obligations to pay future amounts over the next two    to three years.  The obligations have
been recorded in the accompanying consolidated balance sheet as of December    31, 2002, at the net present value of the future
obligations.  The payments which are to be made to the    original patent holders are as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|2003                                                         |  | $ | 1,618 |  
|------------------------------------------------------------ |  | - | ----- | -
|2004                                                         |  |   | 1,593 |  
|2005                                                         |  |   | 310   |  
|                                                             |  |   |       |  
|Total                                                        |  |   | 3,521 |  
|Less amount    that represents interest                      |  |   | (255  | )
|                                                             |  |   |       |  
|Present value of future obligations                          |  |   | 3,266 |  
|Less current    portion                                      |  |   | 1,618 |  
|                                                             |  |   |       |  
|Present    value of future obligations, less current portion |  | $ | 1,648 |  
|                                                             |  |   |       |  




| | The
        Company is also obligated to pay minimum royalties related to these patents
        of $1.2 million in 2005, $1.6 million in 2006, and $1.9 million in 2007
        until the expiration of the agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | In
        connection with sale of the Life Sciences product related assets, the
        Company is committed to purchase materials and supplies in the amount
        of $1,300 in 2003 and $1,300 in 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Pursuant to the
          terms of the May 2001 contribution and license agreement with the founders
          of GeneShield, if the Companys  common stock is delisted from the Nasdaq National
          Market for a period of 90 days, subject to certain cure periods, the
          founders
        may terminate the contribution and license agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | On
        February 13, 2002 the Company received a Notice of Lawsuit and Request
        for Waiver of Service of Summons and a copy of the complaint filed in
        the United States District Court for the Southern District of New York
        in connection with a class action lawsuit.  The complaint purportedly
        was filed on behalf of persons purchasing the Companys stock between
        May 4, 2000 and December 6, 2000, and alleged violations of Sections 11,
        12(a)(2) and 15 of the Securities Act of 1933, as amended, and Section
        10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5
        promulgated thereunder.  The complaint alleged that, in connection
        with the Companys May 5, 2000 initial public offering, 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. 
        Plaintiffs seek unspecified damages.  On February 19, 2003, the Company
        received notice of the courts decision to dismiss the Section 10(b)
        claims against the Company.  The claims against individuals officers
        named as defendants were earlier dismissed without prejudice, subject
        to a tolling agreement.  There is currently a draft settlement agreement
        in review by defendant issuers.  The Company has not reserved any
        amount related to this case as it believes that the allegations are without
        merit and intend to vigorously defend against the plaintiffs claims.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The
        Company had been in a litigation with St. Louis University of St. Louis,
        Missouri regarding its belief that our SNP scoring technology infringes
        certain claims under US patent 5,846,710, which was controlled by the
        University.  On August 7, 2002, the parties dismissed the litigation
        and the Company acquired the subject patent. St. Louis University conditionally
        assigned both the patent and all license agreements related thereto to
        us.  On March 13, 2003, St. Louis University notified the Company
        that it was unable to obtain a required consent to assign the patent to
        the Company.  Pursuant to the terms of the Companys settlement
        agreement with St. Louis University, the failure to obtain such consent
        results in the automatic grant to the Company of an exclusive license
        under the patent.  The Company is currently in discussions with St.
        Louis University regarding the terms of such license and the restructuring
        of the Companys obligations to St. Louis University.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      




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|     | The Company is a co-defendant in
        litigation commenced by Enzo Biochem, Inc, and Enzo Life Sciences, Inc.
        against ten defendants.  The complaint asserts that the Company purchased
        materials from plaintiffs authorized distributor and resold those
        materials in a manner not authorized by the related distribution agreements. 
        The complaint, therefore, seeks money damages based primarily on alleged
        patent infringement by the Company.  The Company has asserted a cross-claim
        for indemnification against the distributor.  The litigation currently
        is in fact discovery and no expert discovery has occurred.  As a
        result, it is not possible for the Company to provide an opinion on the
        likely outcome of the various claims, but the Company intends to vigorously
        defend against plaintiffs claims and believes that the claims are
        without merit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | Prior to the  Companys
acquisition  of Lifecodes,  which  occurred on December 5, 2001,  Lifecodes sold
Medical  Molecular  Diagnostics  GmbH,  (MMD),  a  wholly  owned  subsidiary  of
Lifecodes  based  in  Dresden,   Germany  to  Duetsche   Knochenmarkspenderdatei
gemeinnutzige  Gesellschaft mbH, (DKMS),  pursuant to a Stock Purchase Agreement
dated November 15, 2002  (SPA).   Upon the  acquisition  of Lifecodes,  the
Company assumed Lifecodes obligations to DKMS under the SPA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | The Company is in a dispute
with and  anticipates  receiving  notification  in the near future that DKMS
         has filed a suit against it for damages under the SPA for the full amount
         of their
cost to  acquire  MMD.   DKMS is  anticipated  to claim  defects in the
MMD
lab.   The Company  has not  reserved  any amount  related to this case
and believes that the allegations are without merit and intends to vigorously
defend
against these anticipated claims.  Legal proceedings are likely to occur
no earlier than the fall 2003.   In addition,  in December  2002, the Company
filed a claim in Germany against DKMS for significant unpaid accounts receivable
that  accrued  during the year  ended  December  31,  2002.   The  accounts
receivable  amounts were for HLA typing  conducted by the  Diagnostics  business
unit, which the Company currently plans to sell.  The services performed
by the Diagnostics business unit were exclusively upon DKMS request.   Legal
proceedings for the Companys  outstanding accounts receivable are expected
to take place in Germany by summer 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | Additionally,    the Company has other certain claims against it arising from the normal    course of its business.  The ultimate    resolution of such matters, in the opinion of management, will not have a    material effect on the Companys financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(23) | Subsequent Event - Issuance and Sale of Series A Convertible    Preferred Stock and Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | On April 1, 2003, the Company
      completed the  issuance and sale of 1,600 units (Units) to certain investors
      (each an
        Investor and collectively, the Investors). Each Unit consists of (i)
      one  share of the Companys newly created Series A Convertible Preferred
       Stock, $.001 par value per share (the Series A Preferred Stock), convertible

        into approximately 22,222.22 shares of common stock, and (ii) a warrant
       (Warrant) to purchase approximately 6,666.67 shares of common stock. 
        Each Unit had a purchase price of $10, providing the Company with $16,000
        in gross proceeds. The Company also issued an additional 75 Units to
        a banker as a fee for this transaction and will pay certain other banker
        fees
        and
        expenses in connection with the transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | The Series A    Preferred Stock
      is convertible into common stock, at the Investors    discretion,
      at a per share conversion price of $0.45, provided, however, that no Investor
      is allowed to convert Series A Preferred Stock if the conversion would
      result in such Investor beneficially owning more than 4.99% of the Companys
      outstanding common stock (the Cap Amount), and it is entitled to vote on
      all matters submitted to a vote of the Companys stockholders on an
      as-converted basis, subject again to the Cap Amount.  The Series A
      Preferred Stock bears cumulative dividends, payable quarterly, at an initial
      annual rate of 6% for the first nine quarters.  After the    ninth
      quarter, the dividend rate will increase by 2% for each quarter thereafter,
      to a
      maximum of 12% per year.     If, however, the common stock ceases
      to be listed on either the Nasdaq (the National Market or SmallCap) (collectively,
      the  NASDAQ), the New York Stock Exchange (the NYSE) or the American Stock
      Exchange (the AMEX), the dividend rate will automatically increase to 14%
      per year until the common stock is subsequently listed on one of the aforementioned
      markets or exchanges.  Dividends are payable, at    the Companys
      option, in cash or shares of common stock, valued at the average closing
      sales price of the common stock for the five trading day period prior to
      the dividend date. The proceeds from this financing can be used for general and corporate purposes and working capital, but is restricted as to certain other uses.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     | The holders    of the Series A Preferred Stock have the right to require the Company to    repurchase for cash the then outstanding shares of Series A Preferred Stock    upon the occurrence of certain events, including:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        




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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | if the common
        stock is not listed on either the NYSE, AMEX, NASDAQ, the OTCBB or the
        Bulletin Board Exchange for a total of ten days in any nine month period;                                                                                                                                                                                                                                                        
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | the institution
        of bankruptcy, insolvency, reorganization or liquidation proceedings by
        or against the Company, an assignment for the benefit of creditors by
        the Company or the appointment of a receiver or trustee for the Company;                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | a change of control
        of the Company as defined in the agreement;                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | the Companys
        failure to pay in full dividends on the Series A Preferred Stock on any
        two consecutive dividend dates;                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | a registration statement
      required to be filed by the Company to register common shares underlying
      the Series A Preferred Stock and Warrants is not declared effective within
      a certified period, as defined in the agreement or after being declared
      effective, cannot be utilized by the holders of the Series A Preferred Stock
      for resale of all of their shares for more than a total of 45 days; or
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | failure by the Company
      to convert the Series A Preferred Stock when requested by the holders.                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The
        redemption amount that the Company is required to pay equals 125% of the
        purchase price of the Series A Preferred Stock and the accrued and unpaid
        dividends, except that in the case of a change of control, the redemption
        equals 150% of such amount.  The Series A Preferred Stock is also
        entitled to a liquidation preference equal to the purchase price plus
        all accrued and unpaid dividends.                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | If certain requirements as defined in the agreement are met after the second anniversary of the financing, the Company may at their option redeem the Series A Preferred Stock in whole or in part for 125% of the original purchase price. If the Company stock price exceeds certain levels for certain periods of time, as defined in the agreement, or the Company consumates an underwritten offering at certain levels, as defined in the agreement, the Company may at their option redeem the Series A Preferred Stock in an amount equal to the original purchase price.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The
        Warrants are exercisable at any time after the first anniversary of the
        issuance date through the fifth anniversary of the issuance date at an
        exercise price equal to $0.45 per share.  In addition, the Warrants
        are exercisable via a cashless exercise from the second anniversary of
        the issuance date through the fifth anniversary of the issuance date.                                                                                                                                                                      




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|(24) | Quarterly Financial Data (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                      
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     | The    following tables represent certain unaudited consolidated quarterly financial    information for each of the quarters in 2002 and 2001.  In the opinion of the Companys    management, this quarterly information has been prepared on the same basis as    the annual consolidated financial statements and include all adjustments    (consisting only of normal recurring adjustments) necessary to present fairly    the information for the period presented.




|                                                                         |  | Quarters    ended |        
|------------------------------------------------------------------------ |  | ----------------- | -------
|                                                                         |  |                   |        
|                                                                         |  | March 31,    2002 |        
|                                                                         |  |                   |        
|Total    revenues                                                        |  | $                 | 11,701 
|Gross margin    on product revenue and access fees                       |  |                   | 475    
|Gross margin    on clinical laboratory testing                           |  |                   | 3,699  
|Loss from    continuing operations                                       |  |                   | (11,031
|Income/loss    from discontinued operations                              |  |                   | 514    
|Net loss                                                                 |  |                   | (10,517
|Net loss    allocable to common stockholders                             |  |                   | (10,517
|Basic and    diluted net loss per share allocable to common stockholders |  | $                 | (0.21  




|                                                                         |  | Quarters    ended |        
|------------------------------------------------------------------------ |  | ----------------- | -------
|                                                                         |  |                   |        
|                                                                         |  | March 31,    2001 |        
|                                                                         |  |                   |        
|Total    revenues                                                        |  | $                 | 5,635  
|Gross margin    on product revenue and access fees                       |  |                   | 190    
|Gross margin    on clinical laboratory testing                           |  |                   | 1,025  
|Loss from    continuing operations                                       |  |                   | (11,491
|Loss from    discontinued operations                                     |  |                   |       
|Net loss                                                                 |  |                   | (11,491
|Net loss    allocable to common stockholders                             |  |                   | (11,491
|Basic and    diluted net loss per share allocable to common stockholders |  | $                 | (0.34  




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|Item 9.            | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND    FINANCIAL DISCLOSURE
|------------------ | ---------------------------------------------------------------------------------------
|                   |                                                                                        
|Not    applicable.




PART  III





|Item 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|-------- | --------------------------------------------------




The response to this item is  incorporated by reference from the discussion responsive thereto under the  captions Management and Compliance with Section 16(a) of the Securities  Exchange Act of 1934 in the Companys Proxy Statement for the 2003 Annual  Meeting of Stockholders.





|Item 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------




The response to this item is  incorporated by reference from the discussion responsive thereto under the  caption Executive Compensation in the Companys Proxy Statement for the 2003  Annual Meeting of Stockholders.





|Item 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND    RELATED STOCKHOLDER MATTERS
|-------- | -------------------------------------------------------------------------------------------------




The response to this item is  incorporated by reference from the discussion responsive thereto under the  caption Share Ownership in the Companys Proxy Statement for the 2003 Annual  Meeting of Stockholders.





Equity Compensation Plan Information





The following table provides  certain aggregate information with respect to all of the Companys equity  compensation plans in effect as of December 31, 2002:





|Plan Category                                                |  | Number of    Securities to be    Issued Upon Exercise of    Outstanding Options |           | Weighted    Average    Exercise Price of    Outstanding Options |   | Number of    Securities    Remaining Available for    Future Issuance Under    Equity Compensation    Plans (excluding securities    reflected in first    column) | 
|------------------------------------------------------------ |  | ------------------------------------------------------------------------------- | --------- | --------------------------------------------------------------- | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | 
|                                                             |  |                                                                                 |           |                                                                 |   |                                                                                                                                                                    | 
|Equity    Compensation Plans Approved by Securityholders (1) |  |                                                                                 | 4,970,503 |                                                                 | $ | 4.24                                                                                                                                                               | 
|Equity    Compensation Plans not Approved by Securityholders |  |                                                                                 |          |                                                                 |   |                                                                                                                                                                   | 
|Total                                                        |  |                                                                                 | 4,970,503 |                                                                 | $ | 4.24                                                                                                                                                               | 




|(1) | These plans consist of    the 1995
      Stock Incentive Plan (the 1995 Plan) which provides for the granting of
      restricted common stock or incentive and nonqualified stock options to
      directors, employees and consultants.     An aggregate of 3,500,000 shares of the Companys common stock is    authorized to be issued under the 1995 Plan.     During 2000, the board of directors and stockholders of the Company    approved the 2000 Employee, Director, and Consultant Stock Incentive Plan    (the 2000 Plan) for the issuance of common stock, incentive stock options and    nonqualified stock options to employees, directors and consultants.  The Company is authorized to issue options    for up to 4,500,000 shares of the Companys common stock.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




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|Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------




The response to this item is
incorporated by reference from the discussion responsive thereto under the
caption Certain Relationships and Related Transactions and
Executive Compensation--Employment Agreements, Termination of
Employment and Change of Control Arrangements in the Companys Proxy
Statement for the 2003 Annual Meeting of Stockholders.





|Item 14. | CONTROLS AND PROCEDURES
|-------- | -----------------------




(a) Evaluation of Disclosure
Controls and Procedures.  The Companys principal executive officer
and principal financial officer, after evaluating the effectiveness of the
Companys disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c)) as of a date within 90 days of the filing date of
this Annual Report on Form 10-K, have concluded that, based on such evaluation,
the Companys disclosure controls and procedures were adequate and
effective to ensure that material information relating to the Company, including
its consolidated subsidiaries, was made known to them by others within those
entities, particularly during the period in which this Annual Report on Form
10-K was being prepared.





(b) Changes in Internal
Controls.  There were no significant changes in the Companys internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, nor were there any significant
deficiencies or material weaknesses in the Companys internal
controls.  Accordingly, no corrective actions were required or
undertaken.





PART  IV





|Item 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON    FORM 8-K
|-------- | -------------------------------------------------------------------




|Item 15(a). | The    following documents are filed as part of this annual report on Form 10-K.
|----------- | --------------------------------------------------------------------------------




|Item 15(a)(1)
    and (2) | See Index to Consolidated
Financial Statements and Financial Statement Schedules at Item 8 to
this Annual Report on Form 10-K.  Other financial statement schedules have
not been included because they are not applicable or the information is included
in the consolidated financial statements or notes thereto.
|------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




|Item 15(a)(3) | Exhibits
|------------- | --------




|Exhibit
        Number |  | Description                                                                                                                                                                                                                                                     
|---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                       |  |                                                                                                                                                                                                                                                                 
|(1)1.1                 |  | Underwriting
        Agreement by and between the Registrant and Robertson Stephens, Inc.,
        dated February 21, 2002 (filed as Exhibit 1.1)                                                                                                               
|(2)2.1                 |  | Agreement
        and Plan of Merger by and among the Registrant, GS Acquisition Corp. and
        GeneScreen, Inc., dated December 21, 1999 (filed as Exhibit 2)                                                                                               
|(3)2.2                 |  | Amended
        and Restated Agreement and Plan of Merger by and among the Registrant,
        Persia Merger Sub, Inc., Lifecodes Corporation and certain stockholders
        of Lifecodes Corporation, dated as of November 5, 2001 (filed as Annex
        A)
|(4)3.1                 |  | Restated
        Certificate of Incorporation of the Registrant, dated May 10, 2000 (filed
        as Exhibit 3.1)                                                                                                                                              
|(4)3.2                 |  | Certificate
        of Amendment to the Restated Certificate of Incorporation of the Registrant,
        dated June 12, 2001 (filed as Exhibit 3.2)                                                                                                             
|(4)3.3                 |  | Certificate
        of Amendment to the Restated Certificate of Incorporation of the Registrant,
        dated June 17, 2002 (filed as Exhibit 3.3)                                                                                                             
|(4)3.4                 |  | Certificate
        of Designations, Preferences, and Rights of Series A Junior Participating
        Preferred Stock of the Registrant, dated August 1, 2001 (filed as Exhibit
        3.4)                                                                    
|(5)3.5                 |  | Certificate of
        Designations, Preferences, and Rights of Series A Convertible Preferred
        Stock of the Registrant, dated March 31, 2003 (filed as Exhibit 3.1)                                                                                     
|(6)3.6                 |  | Second
        Amended and Restated Bylaws of the Registrant (filed as Exhibit 3.4)                                                                                                                                                                             
|(7)4.1                 |  | Specimen
        certificate for share of common stock (filed as Exhibit 4.1)                                                                                                                                                                                   




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|(8)4.2       |  | Rights
        Agreement, dated as of July 27, 2001, by and between the Registrant and
        American Stock Transfer & Trust Company, which includes the form of
        Certificate of Designations setting forth the terms of the Series A Junior
        Participating Preferred Stock, $0.001 par value, as Exhibit A, the form
        of rights certificate as Exhibit B and the summary of rights to purchase
        Series A Junior Participating Preferred Stock as Exhibit C.  Pursuant
        to the Rights Agreement, printed rights certificates will not be mailed
        until after the Distribution Date (as defined in the Rights Agreement)
        (filed as Exhibit 4.1)
|------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5)4.3       |  | First Amendment to
      Rights Agreement by an between the Registrant and American Stock Transfer
      & Trust Company, as rights agent, dated as of March 31, 2003 (filed
      as Exhibit 10.3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(5)4.4       |  | Form of Warrant dated
      March 31, 2003 issued to investors (filed as Exhibit 4.1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(2)10.1      |  | 1995
        Stock Incentive Plan, as amended, including form of stock option certificate
        for incentive and non-statutory stock options (filed as Exhibit 10.1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2)10.2      |  | 2000
        Employee, Director, Consultant Stock Plan, including form of stock option
        agreement for non-statutory and incentive stock options (filed as Exhibit
        10.2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(2)10.3      |  | Executive
        Benefit Program, including Executive Deferred Compensation Plan and Executive
        Severance Plan (filed as Exhibit 10.3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(2)10.4      |  | Lease
        Agreement by and between College Road Associates, Limited Partnership
        and the Registrant, dated March 6, 1998 (filed as Exhibit 10.4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(2)10.5     |  | Collaboration
        Agreement, by and between the Registrant and Affymetrix, Inc., dated November
        5, 1999, as amended by Amendment No. 1, dated November 12, 1999 (filed
        as Exhibit 10.5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(2)10.6      |  | License
        and Option Agreement, dated December 10, 1997, by and between Sarnoff
        Corporation and the Registrant, as amended by Amendment to License and
        Option Agreement, dated as of April13, 2000, by and between Sarnoff Corporation
        and the Registrant (filed as Exhibit 10.6)                                                                                                                                                                                                                                                                                                                                                                                   
|(2)10.7      |  | Employment
        Agreement, effective as of January 1, 2000, by and between the Registrant
        and Dale R. Pfost, Ph.D. (filed as Exhibit 10.7)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(2)10.8      |  | Employment
        Agreement, effective as of January 1, 2000, by and between the Registrant
        and Donald R. Marvin (filed as Exhibit 10.8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2)10.9     |  | Agreement
        for the License and Supply of Terminators, dated February 16, 2000, by
        and between the Registrant and NEN Life Science Products, Inc. (filed
        as Exhibit 10.9)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(9)10.10   |  | Non-Exclusive
        License Agreement by and between Registrant and Applied Biosystems, dated
        as of July 1, 2000 (filed as Exhibit 10.1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(9)10.11   |  | Non-Exclusive
        License Agreement by and between Registrant and Amersham Pharmacia Biotech,
        Inc., dated as of June 12, 2000 (filed as Exhibit 10.2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(9)10.12   |  | License
        and Supply Agreement for Automated SNP Analysis by and between Registrant
        and Bristol-Myers Squibb Company, dated as of June 12, 2000 (filed as
        Exhibit 10.3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(10)10.13 |  | Genotyping
        Collaboration Agreement, dated as of February 12, 2001, by and between
        the Registrant and AstraZeneca UK, Limited (filed as Exhibit 10.13)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(10)10.14    |  | Investor
        Rights Agreement, dated as of February 12, 2001, by and between Registrant
        and AstraZeneca UK, Limited (filed as Exhibit 10.14)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(11)10.15    |  | Lifecodes
        Corporation 1992 Employee Stock Option Plan (filed as Exhibit 99.2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(11)10.16    |  | Lifecodes
        Corporation 1995 Employee Stock Option Plan (filed as Exhibit 99.3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(11)10.17    |  | Lifecodes
        Corporation 1998 Stock Plan (filed as Exhibit 99.4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.18        |  | Loan
        and Security Agreement between Registrant and Comerica Bank California
        dated December  23, 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(5)10.19     |  | Securities Purchase Agreement by
      and among the Registrant and the purchasers set forth on the execution pages
      thereof, dated as of March 31, 2003 (filed as Exhibit 10.1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(5)10.20     |  | Registration Rights Agreement, dated as of March 31, 2003 (filed as Exhibit 10.2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|21.1         |  | Subsidiaries
        of the Registrant                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|23.1         |  | Consent
        of KPMG LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|99.1         |  | Certification
        of the Chairman of the Board and Chief Financial Officer under Section
        906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        




|   |  | Portions
        of this Exhibit were omitted and have been filed separately with the Secretary
        of the Commission pursuant to the Registrants application requesting
        confidential treatment under Rule 406 of the Act, filed on February 18,
        2000, April 7, 2000, and May 1, 2000.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |  | Portions
        of this Exhibit were omitted and have been filed separately with the Secretary
        of the Commission pursuant to the Registrants application requesting
        confidential treatment under Rule 406 of the Act, filed as of August 14,
        2000.                               
| |  | Portions
        of this Exhibit were omitted and have been filed separately with the Secretary
        of the Commission pursuant to the Registrants application requesting
        confidential treatment under Rule 406 of the Act, filed as of April 2,
        2001.                                 
|(1) |  | Previously
        filed with the Commission as Exhibits to and incorporated by reference
        from the Registrants current report on Form 8-K for the February
        21, 2002 event.                                                                                                                
|(2) |  | Previously
        filed with the Commission as Exhibits to, and incorporated by reference
        from, the Registrants Registration Statement on Form S-1, File No.
        333-30774.                                                                                                                  




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|(3)  |  | Previously
        filed with the Commission as Exhibits to, and incorporated by reference
        from, the Registrants Proxy Statement-Prospectus on Form S-4, File
        No. 333-72442.                   
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4)  |  | Previously
        filed with the Commission as Exhibits to, and incorporated herein by reference
        from, the Registrants Quarterly Report on Form 10-Q for the period
        ending June 30, 2002.     
|(5)  |  | Previously filed with
      the Commission as Exhibits to, and incorporated herein by reference from,
      the Registrants Current Report on Form 8-K for the March 31, 2003 event.                           
|(6)  |  | Previously
        filed with the Commission as Exhibits to, and incorporated herein by reference
        from, the Registrants Annual Report on Form 10-K for the year ended
        December 31, 2001        
|(7)  |  | Previously
        filed with the Commission as Exhibits to, and incorporated herein by reference
        from, the Registrants Quarterly Report on Form 10-Q for the period
        ending September 30, 2001.
|(8)  |  | Previously
        filed with the Commission as Exhibits to, and incorporated by reference
        from, the Registrants Registration Statement on Form 8-A.                                                   
|(9)  |  | Previously
        filed with the Commission as Exhibits to, and incorporated herein by reference
        from, the Registrants Quarterly Report on Form 10-Q for the period
        ending June 30, 2000.     
|(10) |  | Previously
        filed with the Commission as Exhibits to, and incorporated herein by reference
        from, the Registrants Annual Report on Form 10-K for the year ending
        December 31, 2000.      
|(11) |  | Previously
        filed with the Commission as Exhibits to, and incorporated by reference
        from, the Registrants Registration Statement on Form S-8, File No.
        333-76744.                       




|Item 15 | Reports on Form 8-K
|------- | -------------------




The Company filed or furnished the following  reports on form 8-K with the Securities and Exchange Commission during


the quarter  ended December 31, 2002:





| |                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Form 8-K    filed October 15, 2002 announcing that the Companys revised strategic    business focus.                                                                                                        
| |                                                                                                                                                                                                              
| | Form 8-K    filed October 17, 2002 announcing the appointment of Andrew P. Savadelis as    Chief Financial Officer of the Company.                                                                           
| |                                                                                                                                                                                                              
| | Form 8-K    furnished November 14, 2002 regarding certifications of the Companys principal    executive office and principal financial officer pursuant to Section 906 of    the Sarbanes Oxley Act of 2002.
| |                                                                                                                                                                                                              
| | Form 8-K    filed December 9, 2002 announcing the resignation of the Companys President    and Chief Executive Officer, Dale R. Pfost, PhD.                                                                 




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SIGNATURES





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





|                    | ORCHID BIOSCIENCES, INC.                         
|------------------- | -------------------------------------------------
|                    |                                                  
|Date: April 2, 2003 | By:    /s/    ANDREW P. SAVADELIS                
|                    | Andrew P.    Savadelis                           
|                    | Sr. Vice    President and Chief Financial Officer




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





|Signatures | Title                                     | Date                                         
|---------- | ----------------------------------------- | ---------------------------------------------
|By:        | /s/ GEORGE POSTE, DVM, PhD                | Director                                     
|           | George    Poste, DVM, Ph.D.               | Chairman of    the Board                     
|           |                                           | (Principal    Executive Officer)             
|           |                                           |                                              
|By:        | /S/ ANDREW P. SAVADELIS                   | Senior Vice    President and                 
|           | Andrew P.    Savadelis                    | Chief    Financial Officer                   
|           |                                           | (Principal    Financial & Accounting Officer)
|           |                                           |                                              
|By:        | /s/ SIDNEY M. HECHT,    PhD               | Director                                     
|           | Sidney M.    Hecht, Ph.D.                 |                                              
|           |                                           |                                              
|By:        | /s/ SAMUEL D. ISALY                       | Director                                     
|           | Samuel D.    Isaly                        |                                              
|           |                                           |                                              
|By:        | /s/ JEREMY M. LEVIN,    D.Phil, MB.B Chir | Director                                     
|           | Jeremy M.    Levin, D.Phil., MB.BChir.    |                                              
|           |                                           |                                              
|By:        | /s/ ERNEST MARIO, PhD                     | Director                                     
|           | Ernest    Mario, Ph.D.                    |                                              
|           |                                           |                                              
|By:        | /s/ KENNETH D. NOONAN,    PhD             | Director                                     
|           | Kenneth D.    Noonan, Ph.D.               |                                              
|           |                                           |                                              
|By:        | /s/ ROBERT M. TIEN,    MD, MPH            | Director                                     
|           | Robert M.    Tien, M.D., M.P.H.           |                                              
|           |                                           |                                              
|By:        | /s/ NICOLE S. WILLIAMS                    | Director                                     
|           | Nicole S.    Williams                     |                                              




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Certification


Pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002





|I, George    Poste, Chairman of
      the Board of Directors of Orchid BioSciences, Inc., (the Registrant) certify that:
|--------------------------------------------------------------------------------------------------------------------------
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          
|                                                                                                                          




|Date: April 2, 2003 | /s/ GEORGE POSTE                
|------------------- | --------------------------------
|                    | George    Poste, DVM, Ph.D.     
|                    | Chairman of    the Board        
|                    | (Principal    Executive Officer)




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Certification


Pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002





|I, Andrew P.    Savadelis, Senior Vice President and Chief Financial Officer of Orchid    BioSciences, Inc., (the Registrant) certify that:
|---------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             
|                                                                                                                                             

| |    | c.                                                                                                                                                                                                                                                                                                                                                                                            | presented in    this annual report our conclusions about the effectiveness of the disclosure    controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The    Registrants other certifying officer and I have disclosed, based on our most    recent evaluation, to the Registrants auditors and the audit committee of    Registrants board of directors (or persons performing the equivalent    functions):                                                                                                                                   
| |    | a.                                                                                                                                                                                                                                                                                                                                                                                            | all    significant deficiencies in the design or operation of internal controls    which could adversely affect the Registrants ability to record, process,    summarize and report financial data and have identified for the Registrants    auditors any material weaknesses in internal controls; and
| |    | b.                                                                                                                                                                                                                                                                                                                                                                                            | any fraud,    whether or not material, that involves management or other employees who have    a significant role in the Registrants internal controls; and                                                                                                                                              
| | 6. | The    Registrants other certifying officer and I have indicated in this annual    report whether there were significant changes in internal controls or in    other factors that could significantly affect internal controls subsequent to    the date of our most recent evaluation, including any corrective actions with    regard to significant deficiencies and material weaknesses.




|Date: April 2, 2003 | /s/ ANDREW P. SAVADELIS                             
|------------------- | ----------------------------------------------------
|                    | Andrew P.    Savadelis                              
|                    | Senior Vice    President and Chief Financial Officer
|                    | (Principal    Financial Officer)                    







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| | Exhibits                                                                                   
| | -------------------------------------------------------------------------------------------
| |                                                                                            
| | The    following is a list of exhibits filed as part of this Annual Report on Form    10-K.




Exhibit
          Number
      
      Description(1)1.1
      
      Underwriting
          Agreement by and between the Registrant and Robertson Stephens, Inc.,
          dated February 21, 2002 (filed as Exhibit 1.1)(2)2.1
      
      Agreement
          and Plan of Merger by and among the Registrant, GS Acquisition Corp.
          and GeneScreen, Inc., dated December 21, 1999 (filed as Exhibit 2)(3)2.2
      
      Amended
          and Restated Agreement and Plan of Merger by and among the Registrant,
          Persia Merger Sub, Inc., Lifecodes Corporation and certain stockholders
          of Lifecodes Corporation, dated as of November 5, 2001 (filed as Annex
          A)(4)3.1
      
      Restated
          Certificate of Incorporation of the Registrant, dated May 10, 2000 (filed
          as Exhibit 3.1)(4)3.2
      
      Certificate
          of Amendment to the Restated Certificate of Incorporation of the Registrant,
          dated June 12, 2001 (filed as Exhibit 3.2)(4)3.3
      
      Certificate
          of Amendment to the Restated Certificate of Incorporation of the Registrant,
          dated June 17, 2002 (filed as Exhibit 3.3)(4)3.4
      
      Certificate
          of Designations, Preferences, and Rights of Series A Junior Participating
          Preferred Stock of the Registrant, dated August 1, 2001 (filed as Exhibit
          3.4)(5)3.5
      
      Certificate
          of Designations, Preferences, and Rights of Series A Convertible Preferred
          Stock of the Registrant, dated March 31, 2003 (filed as Exhibit 3.1)(6)3.6
      
      Second
          Amended and Restated Bylaws of the Registrant (filed as Exhibit 3.4)(7)4.1
      
      Specimen
          certificate for share of common stock (filed as Exhibit 4.1)


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(8)4.2
      
      Rights
          Agreement, dated as of July 27, 2001, by and between the Registrant
          and American Stock Transfer & Trust Company, which includes the
          form of Certificate of Designations setting forth the terms of the Series
          A Junior Participating Preferred Stock, $0.001 par value, as Exhibit
          A, the form of rights certificate as Exhibit B and the summary of rights
          to purchase Series A Junior Participating Preferred Stock as Exhibit
          C.  Pursuant to the Rights Agreement, printed rights certificates
          will not be mailed until after the Distribution Date (as defined in
          the Rights Agreement) (filed as Exhibit 4.1)(5)4.3
      
      First Amendment to
        Rights Agreement by an between the Registrant and American Stock Transfer
        & Trust Company, as rights agent, dated as of March 31, 2003 (filed
        as Exhibit 10.3)(5)4.4
      
      Form of Warrant dated
        March 31, 2003 issued to investors (filed as Exhibit 4.1)(2)10.1
      
      1995
          Stock Incentive Plan, as amended, including form of stock option certificate
          for incentive and non-statutory stock options (filed as Exhibit 10.1)(2)10.2
      
      2000
          Employee, Director, Consultant Stock Plan, including form of stock option
          agreement for non-statutory and incentive stock options (filed as Exhibit
          10.2)(2)10.3
      
      Executive
          Benefit Program, including Executive Deferred Compensation Plan and
          Executive Severance Plan (filed as Exhibit 10.3)(2)10.4
      
      Lease
          Agreement by and between College Road Associates, Limited Partnership
          and the Registrant, dated March 6, 1998 (filed as Exhibit 10.4)(2)10.5
      
      Collaboration
          Agreement, by and between the Registrant and Affymetrix, Inc., dated
          November 5, 1999, as amended by Amendment No. 1, dated November 12,
          1999 (filed as Exhibit 10.5)(2)10.6
      
      License
          and Option Agreement, dated December 10, 1997, by and between Sarnoff
          Corporation and the Registrant, as amended by Amendment to License and
          Option Agreement, dated as of April13, 2000, by and between Sarnoff
          Corporation and the Registrant (filed as Exhibit 10.6)(2)10.7
      
      Employment
          Agreement, effective as of January 1, 2000, by and between the Registrant
          and Dale R. Pfost, Ph.D. (filed as Exhibit 10.7)(2)10.8
      
      Employment
          Agreement, effective as of January 1, 2000, by and between the Registrant
          and Donald R. Marvin (filed as Exhibit 10.8)(2)10.9
      
      Agreement
          for the License and Supply of Terminators, dated February 16, 2000,
          by and between the Registrant and NEN Life Science Products, Inc. (filed
          as Exhibit 10.9)(9)10.10
      
      Non-Exclusive
          License Agreement by and between Registrant and Applied Biosystems,
          dated as of July 1, 2000 (filed as Exhibit 10.1)(9)10.11
      
      Non-Exclusive
          License Agreement by and between Registrant and Amersham Pharmacia Biotech,
          Inc., dated as of June 12, 2000 (filed as Exhibit 10.2)(9)10.12
      
      License
          and Supply Agreement for Automated SNP Analysis by and between Registrant
          and Bristol-Myers Squibb Company, dated as of June 12, 2000 (filed as
          Exhibit 10.3)(10)10.13
      
      Genotyping
          Collaboration Agreement, dated as of February 12, 2001, by and between
          the Registrant and AstraZeneca UK, Limited (filed as Exhibit 10.13)(10)10.14
      
      Investor
          Rights Agreement, dated as of February 12, 2001, by and between Registrant
          and AstraZeneca UK, Limited (filed as Exhibit 10.14)(11)10.15
      
      Lifecodes
          Corporation 1992 Employee Stock Option Plan (filed as Exhibit 99.2)(11)10.16
      
      Lifecodes
          Corporation 1995 Employee Stock Option Plan (filed as Exhibit 99.3)(11)10.17
      
      Lifecodes
          Corporation 1998 Stock Plan (filed as Exhibit 99.4)10.18
      
      Loan
          and Security Agreement between Registrant and Comerica Bank California
          dated December  23, 2002(5)10.19
      
      Securities Purchase Agreement
        by an among the Registrant and the purchasers set forth on the execution
        pages thereof, dated as of March 31, 2003 (filed as Exhibit 10.1)(5)10.20
      
      Registration Rights Agreement,
        dated as of March 31, 2003 (filed as Exhibit 10.2)21.1
      
      Subsidiaries
          of the Registrant23.1
      
      Consent
          of KPMG LLP99.1
      
      Certification
          of the Chairman of the Board and Chief Financial Officer under Section
          906 of the Sarbanes-Oxley Act of 2002



      
      Portions
          of this Exhibit were omitted and have been filed separately with the
          Secretary of the Commission pursuant to the Registrants application
          requesting confidential treatment under Rule 406 of the Act, filed on
          February 18, 2000, April 7, 2000, and May 1, 2000.
      
      Portions
          of this Exhibit were omitted and have been filed separately with the
          Secretary of the Commission pursuant to the Registrants application
          requesting confidential treatment under Rule 406 of the Act, filed as
          of August 14, 2000.
      
      Portions
          of this Exhibit were omitted and have been filed separately with the
          Secretary of the Commission pursuant to the Registrants application
          requesting confidential treatment under Rule 406 of the Act, filed as
          of April 2, 2001.(1)
      
      Previously
          filed with the Commission as Exhibits to and incorporated by reference
          from the Registrants current report on Form 8-K for the February
          21, 2002 event.(2)
      
      Previously
          filed with the Commission as Exhibits to, and incorporated by reference
          from, the Registrants Registration Statement on Form S-1, File
          No. 333-30774.(3)
      
      Previously filed with the
            Commission as Exhibits to, and incorporated by reference from, the
            Registrants Proxy Statement-Prospectus on Form S-4, File No.
            333-72442.(4)
      
      Previously filed with the
            Commission as Exhibits to, and incorporated herein by reference from,
            the Registrants Quarterly Report on Form 10-Q for the period
            ending June 30, 2002.(5)
      
      Previously filed
          with the Commission as Exhibits to, and incorporated herein by reference
          from, the Registrants Current Report on Form 8-K for the March
          31, 2003 event.(6)
      
      Previously filed with the
            Commission as Exhibits to, and incorporated herein by reference from,
            the Registrants Annual Report on Form 10-K for the year ended
            December 31, 2001(7)
      
      Previously filed with the
            Commission as Exhibits to, and incorporated herein by reference from,
            the Registrants Quarterly Report on Form 10-Q for the period
            ending September 30, 2001.(8)
      
      Previously filed with the
            Commission as Exhibits to, and incorporated by reference from, the
            Registrants Registration Statement on Form 8-A.(9)
      
      Previously filed with the
            Commission as Exhibits to, and incorporated herein by reference from,
            the Registrants Quarterly Report on Form 10-Q for the period
            ending June 30, 2000.(10)
      
      Previously filed with the
            Commission as Exhibits to, and incorporated herein by reference from,
            the Registrants Annual Report on Form 10-K for the year ending
            December 31, 2000.(11)
      
      Previously filed with the
            Commission as Exhibits to, and incorporated by reference from, the
            Registrants Registration Statement on Form S-8, File No. 333-76744.


Where a  document is incorporated by reference from a previous filing, the Exhibit  number or Annex in that previous filing is indicated in parentheses after the  description of such document.





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Schedule II





ORCHID BIOSCIENCES, INC.


AND SUBSIDIARIES





Schedule of Valuation and Qualifying Accounts





Year ended December 31, 2002





(In thousands)





|Column A                        |  | Column B                             |     | Column C                            |  | Column D                              |  | Column E  |    
|------------------------------- |  | ------------------------------------ | --- | ----------------------------------- |  | ------------------------------------- |  | --------- | ---
|                                |  |                                      |     |                                     |  |                                       |  |           |    
|Description                     |  | Balance at    beginning of    period |     | Charged to    costs and    expenses |  | Charged to    other    accounts (net) |  | Deduction |    
|                                |  |                                      |     |                                     |  |                                       |  |           |    
|2002:                           |  |                                      |     |                                     |  |                                       |  |           |    
|Allowance for doubtful accounts |  | $                                    | 751 |                                     |  | 469                                   |  |           |   
|2001:                           |  |                                      |     |                                     |  |                                       |  |           |    
|Allowance for doubtful accounts |  |                                      | 508 |                                     |  | 106                                   |  |           | 266
|2000:                           |  |                                      |     |                                     |  |                                       |  |           |    
|Allowance for doubtful accounts |  |                                      | 218 |                                     |  | 445                                   |  |           |   




|(1) | Relates to    an increase in the Companys allowance for doubtful accounts recorded upon    the acquisition of Lifecodes which effect has not been included in the    Companys consolidated results of operations.
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