1107216--3/12/2010--ORCHID_CELLMARK

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Risks Related to Our Business If we fail to maintain the service contracts we have with various governmental agencies or fail to enter into additional contracts, we would lose a significant source of revenues. The markets in which we participate are very competitive and price sensitive, and if we do not compete effectively, our operating results may be harmed. We cannot guarantee the receipt of work or revenues from our government contracts. We cannot guarantee that we will be awarded a significant portion of the service packages under the UK s National Procurement Plan. If we fail to provide adequate service levels to police forces under the U.K. National Procurement Plan, we may be required to issue service credits which would reduce the amounts payable for our services and adversely affect our business. Work awarded to us in the UK may be subject to unanticipated TUPE expenses. International sales are subject to increased costs and other risks, which could affect our revenues. If general economic trends continue to decline, trends in government spending and, therefore, demand for DNA testing services may change and reduce demand for our services, which would have a materially negative impact on our business. Changes in outsourcing trends for forensic DNA testing could adversely affect our operating results and growth rate. If government funding is not available to reduce the rape kit backlog or if this work is not outsourced to private laboratories, our business may be adversely affected. Recent turmoil across various sectors of the financial markets may negatively impact our business. The change in the method of awarding CODIS contracts has adversely affected our CODIS business. We are currently consolidating our US paternity testing and forensic testing operations, and if we fail to manage these consolidations, our business may suffer. We currently are building a new CODIS laboratory at our Dallas, Texas facility, and if we fail to properly manage the establishment of this new laboratory, our business may suffer. If we fail to comply with industry regulations and accreditations, we may not be able to provide certain services at our laboratories. We currently rely primarily on a single supplier for the majority of reagents and other components we need for the performance of our DNA testing services. Our future sales and marketing efforts may not be successful in achieving revenue growth. We have limited sales and marketing resources, and as a result, we may not achieve our expected levels of revenue. Future acquisitions or mergers could disrupt our ongoing operations, increase our expenses and adversely affect our revenues. We had an accumulated deficit of $326 million as of December 31, 2009. If we fail to reach profitability and need to raise additional capital to fund our current and future operating plans or obtain such capital on unfavorable terms, then we may have to take further cost-cutting measures. We may be held liable for any inaccuracies associated with our services, which may require us to defend ourselves in costly litigation. Our improvement of existing technologies and our ability to capture and develop future technologies to be utilized in our service offerings may not be commercially successful, which could adversely affect our revenues. We may be unable to hire an adequate number of DNA analysts or successfully apply new technology. Our ability to provide services may be seriously impaired by the occurrence of a natural disaster affecting any one or more of our laboratories. Our success will depend partly on our ability to operate without misappropriating the intellectual property rights of others. The scope of our issued patents may not provide us with adequate protection of our intellectual property, which would harm our competitive position. 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. Other rights and measures that we rely upon to protect our intellectual property may not be adequate to protect our services and could reduce our ability to compete in the market. We may be required to record additional significant charges to earnings if our goodwill becomes impaired. Our ability to utilize our net operating loss carryforwards and other tax benefits may be limited. Risks Associated with Our Common Stock Future issuance of our securities may dilute the ownership interests of our stockholders. There are a limited number of stockholders who have significant control over our common stock, allowing them to have significant influence over the outcome of all matters submitted to our stockholders for approval, which may conflict with the interests of our other stockholders. We have various mechanisms in place that stockholders may not consider favorable, which may discourage takeover attempts and may prevent or frustrate attempts by stockholders to change our direction or management. Our stock price has been, and likely will continue to be, volatile and your investment may suffer a decline in value. The liquidity of our common stock could be adversely affected if we are delisted from the NASDAQ Global Market. Fluctuations in our operating results may negatively impact our stock price.

Full 10-K form ▸

1107216--3/12/2010--ORCHID_CELLMARK_INC