ORCHID CELLMARK INC

In September 2011, the FASB issued guidance that simplified how entities test for goodwill impairment. This guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a two-step goodwill impairment test. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, and early adoption is permitted. This guidance is not expected to have a material effect on the Company’s financial condition or results of operations.

On October 5, 2009, the Federal trial Court entered an Opinion and Order approving another Settlement, Plan of Allocation, and Settlement Class Certification. A number of appeals had been filed with respect to that Opinion and Order. Some appeals have been withdrawn or dismissed, and there remains only one unresolved appeal with regard to the Opinion and Order, in a case unrelated to the Company.

Our operations in the UK accounted for 65% and 66% of our total revenues for the three months ended September 30, 2011 and 2010, respectively, and for 65% and 63% of our total revenues for the nine months ended September 30, 2011 and 2010, respectively. In 2007, UK police forces commenced soliciting competitive bids for all forensic testing services in a series of regional tenders. In February 2008, we were awarded, overall, a significant portion of the service packages we bid on in the North West/South West and Wales regional tender. We were awarded work from nine of the fourteen police forces that participated in this tender. Under the terms of the award, we are providing forensic services, including DNA testing of database crime scene samples, forensic casework and database testing services under the UK’s Police and Criminal Evidence Act, or PACE, for multiple police forces that collectively tendered their work. In August 2010, such contracts were extended for a two-year term ending in 2013. In September 2010, we commenced work for five additional UK police forces in the East Midlands region under three-year contracts awarded under the National Forensic Procurement Project. Under the terms of the award, we are conducting DNA analysis of crime scene samples for submission to the UK’s National DNA Database. Following the announcement in December 2010 by the UK’s Home Office to implement a wind down of the Forensic Science Service, or the FSS, the Association of Chief Police Officers, working with the National Police Improvement Agency, established a national program, involving an acceleration of the ongoing regional tendering process, to manage and transition all forensics services from the FSS to other service providers by March 2012. Under this program, in July 2011, we were awarded a significant amount of new PACE, DNA and forensic casework from the East Midlands Region, the Eastern Region and the West Midlands Region. The contracts for this work have an initial two-year term with varying additional yearly renewal options from two to seven years. We have completed the transition of this new work in the third quarter of 2011. During July and August 2011, we were awarded three new forensic tenders in the UK. The first award has a three-year term with a one-year extension. The second award has a one-year term with up to four one-year extensions. Transition of work under these two contracts has been completed. The third award involves the supply of a significant amount of forensic casework services to the

Metropolitan Police, and we are currently engaged in implementation discussions and contract finalization. The contract for this work will be for two years with two one-year extensions. We estimate the incremental annual revenue from these new awards will be approximately $12 million (at the current exchange rate). In the third quarter of 2011, we were also awarded a forensic tender to retain work previously performed by us. This retained contract has a 32-month term, with annual reviews, and the option of two one-year extensions.

For the three months ended September 30, 2011, as compared to the three months ended September 30, 2010, total revenues decreased by approximately 7%, while gross margin, as percentage of service revenues, decreased to 26% from 38%. For the three months ended September 30, 2011 as compared to the same period in 2010, our UK revenues decreased by approximately 8%, as measured in US dollars, primarily as a result of decreased forensics revenues, as well as a decrease in immigration revenues, offset, in part, by increased revenues for agricultural testing and paternity testing. For the three months ended September 30, 2011, as compared to the same period in 2010, our UK revenues were favorably impacted by approximately 4% as a result of the exchange rate movement of the British pound as compared to the US dollar. For the three months ended September 30, 2011, as compared to the same period in 2010, our US revenues decreased by approximately 4%, primarily as a result of a decrease in paternity testing revenues, as well as a decrease in other forensic revenues, partially offset by an increase in revenues from CODIS testing and forensic casework. Gross margin, as a percentage of service revenue decreased primarily as a result of price decreases in our UK-based business, lower volumes in our US paternity operations and higher UK costs. For the three months ended September 30, 2011, our operating expenses, other than cost of service revenues, decreased by approximately 15% as compared to the same period in 2010, primarily as a result of decreased restructuring expenses and decreased general and administrative expenses.

In September 2011, the FASB issued guidance that simplified how entities test for goodwill impairment. This guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a two-step goodwill impairment test. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, and early adoption is permitted. This guidance is not expected to have a material effect on our financial condition or results of operations.