<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                               ________________

                                   FORM 10-Q

             [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                 For the Quarterly Period Ended March 31, 2001

             [_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934


                 For the Transition Period From _____ to _____

                               ________________

                       Commission File Number 000-31637

                             GENOMICA CORPORATION
            (Exact name of registrant as specified in its charter)


            Delaware                                              23-2821818
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


                1745 38th Street, Boulder, Colorado    80301-2630
              (Address of principal executive office)  (Zip Code)


      Registrant's telephone number, including area code:  (720) 565-4500



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 shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X]       No [_]


The number of shares outstanding of the registrant's common stock as of May 7,
2001 was 22,765,671.
<PAGE>

                                     INDEX
<TABLE>
<CAPTION>
                                                                                   Page
                                                                                   ----
<S>                                                                                <C>
PART I - FINANCIAL INFORMATION

Item 1 - Condensed Consolidated Financial Statements

Consolidated Balance Sheets (Unaudited)...........................................   1

Consolidated Statements of Operations (Unaudited).................................   2

Consolidated Statements of Cash Flows (Unaudited).................................   3

Notes to Condensed Consolidated Financial Statements (Unaudited)..................   4

Item 2 - Management's Discussion and Analysis of Financial Condition and Results
         of Operations............................................................   7

         Factors that May Impact Future Operating Results.........................   9

Item 3 - Quantitative and Qualitative Disclosures About Market Risk...............  17

PART II - OTHER INFORMATION.......................................................  18

Item 2 - Changes in Securities and Use of Proceeds................................  18

Item 6 - Exhibits and Reports on Form 8-K.........................................  18

         Signatures...............................................................  19
</TABLE>
<PAGE>

PART I.  FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements

                             GENOMICA CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                       March 31,    December 31,
                                                         2001           2000
                                                     ------------   ------------
<S>                                                  <C>            <C>
                     ASSETS
                     ------
Current Assets:
  Cash and cash equivalents........................  $ 17,460,781   $ 25,784,803
  Short-term investments...........................    61,298,293     73,153,650
  Accounts receivable-trade........................       113,420        353,448
  Notes receivable.................................       500,000             --
  Interest receivable..............................     2,285,598      2,162,810
  Prepaid expenses and other.......................       544,989        352,114
                                                     ------------   ------------
     Total current assets..........................    82,203,081    101,806,825
                                                     ------------   ------------
Long-Term Investments..............................    40,943,034     24,992,694
Property and Equipment, net........................     4,449,437      2,723,507
Other Assets.......................................        77,204         66,750
                                                     ------------   ------------
     Total assets                                    $127,672,756   $129,589,776
                                                     ============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
  Accounts payable.................................  $  2,362,085   $    933,903
  Accrued compensation and employee benefits.......       362,254        431,357
  Deferred revenue.................................       449,596        814,626
  Other accrued expenses...........................       307,844        323,751
                                                     ------------   ------------
     Total current liabilities.....................     3,481,779      2,503,637
                                                     ------------   ------------
Commitments and Contingencies
Stockholders' Equity:
  Convertible preferred stock, $.001 par value,
     5,000,000 shares authorized, zero
     shares issued and outstanding, respectively...            --             --
  Common stock, $.001 par value, 50,000,000
     shares authorized, 22,859,231 and 22,839,559
     shares issued and 22,734,688 and 22,715,016
     shares outstanding, respectively..............        22,859         22,839
  Treasury stock, at cost..........................       (19,715)       (19,715)
  Additional paid-in capital.......................   177,238,108    168,136,541
  Options and warrants.............................    23,067,279     33,307,529
  Deferred compensation............................   (13,658,256)   (16,929,010)
  Accumulated other comprehensive income...........       571,776        256,984
  Accumulated deficit..............................   (63,031,074)   (57,689,029)
                                                     ------------   ------------
     Total stockholders' equity....................   124,190,977    127,086,139
                                                     ------------   ------------
     Total liabilities and stockholders' equity      $127,672,756   $129,589,776
                                                     ============   ============
</TABLE>

  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                                                          Page 1
<PAGE>

                             GENOMICA CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

                                              Three Months Ended
                                                   March 31,
                                          --------------------------
                                              2001          2000
                                          -----------   ------------
Revenue:
  Software licenses and services........  $   443,530   $    343,589
  Research grants.......................           --         26,680
                                          -----------   ------------
     Total revenue......................      443,530        370,269
                                          -----------   ------------

Operating Expenses:
  Costs of revenue......................      114,676        102,095
  Research and development..............    3,545,396      2,794,473
  Selling and marketing.................    1,924,803      1,368,113
  General and administrative............    2,119,995      2,493,675
                                          -----------   ------------
     Total operating expenses...........    7,704,870      6,758,356
                                          -----------   ------------
       Operating loss...................   (7,261,340)    (6,388,087)
Interest Income.........................    1,919,295        114,232
Interest Expense........................           --        (16,767)
                                          -----------   ------------
Net Loss................................   (5,342,045)    (6,290,622)
Deemed Dividend Related to
  Beneficial Conversion Feature
  of Preferred Stock....................           --    (15,009,000)
                                          -----------   ------------
Net Loss Applicable to Common
  Stockholders..........................  $(5,342,045)  $(21,299,622)
                                          ===========   ============

Net Loss Per Share, basic and
  diluted...............................       $(0.24)       $(17.51)
                                          ===========   ============

Weighted Average Common
  Shares Outstanding, basic
  and diluted...........................   22,389,254      1,216,163
                                          ===========   ============

Pro Forma Net Loss Per Share (Note 2):
    Net loss per share, basic
     and diluted........................                $      (1.73)
                                                        ============

    Weighted average common
     shares outstanding,
     basic and diluted..................                  12,337,884
                                                        ============


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                                                          Page 2
<PAGE>

                             GENOMICA CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                         Three Months Ended March 31,
                                                         ---------------------------
                                                             2001           2000
                                                         ------------    -----------
<S>                                                      <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...............................................  $ (5,342,045)   $(6,290,622)
Adjustments to reconcile net loss to net cash used in
  operating activities--
  Depreciation.........................................       293,341        103,907
  Amortization of deferred compensation................     2,125,067      4,052,577
  Change in deposits...................................       (51,847)      (350,000)
  Change in other assets...............................       (10,454)       (23,606)
  Changes in operating assets and liabilities--
     Accounts receivable...............................       240,028        223,287
     Interest receivable...............................      (122,788)       (77,072)
     Prepaid expenses and other assets.................      (192,875)        (8,314)
     Accounts payable..................................     1,428,182        232,911
     Accrued compensation and employee benefits........       (69,103)       (25,288)
     Deferred revenue..................................      (365,030)      (246,899)
     Other accrued expenses............................       (15,907)       202,950
                                                         ------------    -----------
     Net cash used in operating activities.............    (2,083,431)    (2,206,169)
                                                         ------------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption and sales of investments....................    25,776,696      2,254,684
Purchases of investments...............................   (29,505,040)    (6,488,532)
Purchase of property and equipment.....................    (2,019,271)      (886,102)
Investment in note receivable..........................      (500,000)            --
                                                         ------------    -----------
  Net cash used in investing activities................    (6,247,615)    (5,119,950)
                                                         ------------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital leases.............................            --        (31,187)
Proceeds from issuance of preferred stock..............            --     15,033,952
Costs related to issuance of preferred stock...........            --        (25,137)
Deferred financing costs...............................            --       (300,736)
Proceeds from exercise of common stock options.........         7,024        245,683
Purchase of treasury stock.............................            --         (6,625)
                                                         ------------    -----------
  Net cash provided by financing activities............         7,024     14,915,950
                                                         ------------    -----------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS.....................................    (8,324,022)     7,589,831
CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD............................................    25,784,803      3,518,570
                                                         ------------    -----------
CASH AND CASH EQUIVALENTS AT END OF
  PERIOD...............................................  $ 17,460,781    $11,108,401
                                                         ============    ===========
</TABLE>

  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                                                          Page 3
<PAGE>

                             GENOMICA CORPORATION
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

Note 1.  Basis of Presentation

The unaudited condensed consolidated financial statements of Genomica
Corporation (the Company) included herein reflect all adjustments, consisting
only of normal recurring adjustments which, in the opinion of management, are
necessary to fairly present our consolidated financial position, results of
operations, and cash flows for the periods presented.  Certain information and
footnote disclosures normally included in audited financial information prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to the Securities and Exchange Commission's ("SEC") rules
and regulations.  The consolidated results of operations for the period ended
March 31, 2001 are not necessarily indicative of the results to be expected for
any subsequent quarter or for the entire fiscal year.  The information included
in this Form 10-Q should be read in conjunction with the consolidated financial
statements and notes thereto, together with Management's Discussion and Analysis
of Financial Statements and notes thereto included in the Company's Form 10-K
for the fiscal year ended December 31, 2000.

Note 2.  Initial Public Offering

On October 4, 2000, the Company closed its initial public offering and sold
6,440,000 shares of its common stock at $19 per share.  The net proceeds, after
paying the underwriting discount and estimated expenses associated with the
offering, were $112.5 million.  Management has broad discretion as to the
allocation of the net proceeds of the offering.  Although the Company  intends
to evaluate acquisition opportunities, there are no current agreements or
commitments with respect to any acquisition.  Until the Company uses the net
proceeds of the offering, they will be invested in interest-bearing, investment-
grade securities.

Note 3.  Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accounts of the Company have been consolidated.  All intercompany accounts
and transactions have been eliminated.  The consolidated financial statements
are stated in U.S. dollars and are prepared in accordance with accounting
principles generally accepted in the United States.  Certain amounts in the
prior years' consolidated financial statements have been reclassified to conform
to the current year presentation.

Uses of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions.  These estimates and assumptions may affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenue and expenses during the reporting period.  Actual results could differ
from those estimates.

Revenue Recognition

The Company generates revenue from the license and related maintenance of its
proprietary software products.  The Company recognizes revenue when there is
persuasive evidence of an arrangement, delivery has occurred, collection is
probable, and the fee is fixed or determinable.  If an acceptance period exists,
license revenues are recognized upon the earlier of customer acceptance or the
expiration of the acceptance period.  The Company generally bundles its license
fees and subsequent maintenance, consisting of software updates, content updates
and support.  The Company has concluded that there is no basis to allocate the
total license and maintenance fees charged in its software arrangements to these
various elements of the arrangement as the Company currently does not offer the
license fee and maintenance for sale separately.  Accordingly, revenue is
generally deferred and recognized ratably over the term of the arrangement.
Certain software arrangements include other elements, such as services and
training.  If present, such elements are unbundled based on vendor-specific
objective evidence of their fair value and the related revenue is recognized
when those elements are delivered.

                                                                          Page 4
<PAGE>

The Company believes its current revenue recognition policies and practices are
consistent with the provisions of Statement of Position 97-2, "Software Revenue
Recognition" ("SOP 97-2"), as amended by SOP 98-4 and SOP 98-9, which were
issued by the American Institute of Certified Public Accountants.
Implementation guidelines for these standards, as well as potential new
standards, could lead to unanticipated changes in the Company's current revenue
recognition policies.  Such changes could affect the timing of the Company's
future revenue and results of operations.

Note 4.  Net Loss Per Share

Basic earnings or loss per share is computed by dividing the net earnings or
loss by the weighted average number of shares of common stock outstanding.
Diluted earnings or loss per share is determined by dividing the net earnings or
loss by the sum of (1) the weighted average number of common shares outstanding,
(2) if not anti-dilutive, the number of shares of convertible preferred stock as
if converted upon issuance, and (3) if not anti-dilutive, the effect of
outstanding stock options and warrants determined utilizing the treasury stock
method.

For all periods presented, the effects of the convertible preferred stock, stock
options, and warrants were excluded from the calculation of diluted loss per
share since the result would have been anti-dilutive.  The dilutive effect of
convertible preferred stock that was excluded from the calculation of diluted
loss per share was zero and 11,121,721 for the three months ended March 31, 2001
and 2000, respectively.  The dilutive effect of common stock options and
warrants, without regard to the treasury stock method, that are excluded from
the calculation of diluted loss per share because their effect is anti-dilutive
totaled 1,781,034 for the three months ended March 31, 2001 and 2,217,219 for
the three months ended March 31, 2000.

Pro Forma Net Loss Per Share

Pro forma net loss per share for the three months ended March 31, 2001 and 2000
was computed using the net loss and weighted average number of shares of common
stock outstanding, including the pro forma effects of the assumed conversion of
all outstanding shares of the Company's convertible preferred stock into shares
of  common stock as if such conversion occurred on January 1, 2000, or at date
of original issuance, if later.  The resulting pro forma adjustment includes an
increase in the weighted average shares used to compute basic and diluted net
loss per share of 11,121,721 shares for the three months ended March 31, 2000.

Note 5.  Stockholders' Equity

Stock Plan

Deferred compensation is included as a component of stockholders' equity and is
being amortized in accordance with FASB Interpretation No. 28 over the vesting
periods of the related options, which are generally three to five years.  Stock
compensation expense recognized for the three months ended March 31, 2001, and
remaining compensation expense to be recognized (without regard to forfeitures)
are as follows:
<TABLE>
<CAPTION>
                                Deferred Stock Compensation          Unamortized Deferred Stock Compensation To Be Recognized
                                   Recognized During The                        During the Periods Ending December 31,
                                    Three Months Ended          --------------------------------------------------------------------
                                      March 31, 2001               2001            2002           2003            2004        2005
                                ---------------------------     ----------      ----------      ---------       --------     -------
<S>                             <C>                             <C>             <C>             <C>             <C>          <C>
Research and development                 $  387,983
Selling and marketing                       771,214
General and administrative                  965,870
                                         ----------
                                          2,125,067             $5,820,668      $4,655,765      $2,353,802      $783,811     $44,210
                                         ==========             ==========      ==========      ==========      ========     =======
</TABLE>

Note 6.  Contingencies

The Company, from time to time, may be subject to certain claims, assertions or
litigation by outside parties as part of its ongoing business operations. The
Company is currently not a party to any legal proceedings.

Note 7.  Recent Accounting Pronouncements

Effective January 1, 2001, the Company adopted the provisions of Statement of
Financial Accounting Standards No.  133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No.  133").  SFAS No. 133 establishes accounting
and reporting standards for derivative financial instruments and hedging
activities related to those

                                                                          Page 5
<PAGE>

instruments as well as other hedging activities. Since inception, the Company
has not entered into arrangements that would fall under the scope of SFAS No.
133 and thus, the adoption of SFAS No. 133 had no impact on the Company's
financial condition or its results of operations.

In December 1999, the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition" ("SAB 101"). SAB 101 provides the SEC Staff's views in applying
generally accepted accounting principles to selected revenue recognition issues.
The Company has implemented the guidance in SAB 101 for all periods presented.

                                                                          Page 6
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion of our financial condition and results of operations
should be read in conjunction with the Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Financial Statements and
the Notes thereto included in our Form 10-K for the fiscal year ended December
31, 2000.  This quarterly report on Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
including statements using terminology such as "may," "will," "expects,"
"plans," "anticipates," "estimates," "potential," or "continue," or the negative
thereof or other comparable terminology regarding beliefs, plans, expectations
or intentions regarding the future. Forward-looking statements involve risks and
uncertainties and actual results could differ materially from those discussed in
the forward-looking statements.  All forward-looking statements and risk factors
included in this document are made as of the date hereof, based on information
available to us as of the date thereof, and we assume no obligation to update
any forward-looking statement or risk factors.

Overview

We are a provider of innovative software products and services that are designed
to enable pharmaceutical and biotechnology researchers to accelerate the drug
discovery and development process.  We believe Discovery Manager, our first
product, offers the broadest set of software tools for genomics researchers of
any commercially available product.  Discovery Manager is used for genomics
research, including genetic research, gene discovery and pharmacogenomics.  This
product allows researchers to turn the vast volumes of gene, SNP, and patient
data from diverse sources into information useful for drug discovery.  Our
current customers include leading genomics-based research organizations such as
AstraZeneca, GlaxoSmithKline, Pfizer and the National Cancer Institute.  We have
a strategic alliance with Applied Biosystems to market our software products to
be used with its industry-leading systems for drug discovery.  We also have
entered into an agreement with Celera Genomics to form a strategic alliance to
create a special "Celera Edition" of Discovery Manager for use with the Celera
Discovery System's SNP Reference Database.

We have sold our product to customers directly since June 1998.  We derive
revenue primarily from granting licenses to our Discovery Manager products and
the Reference Database to pharmaceutical, biotechnology, and academic research
organizations.  Our software license agreements are typically one to three years
in length, and include support and maintenance.  The price for each agreement
depends upon the number of users licensed by our customers, the duration of the
agreement and which of our product components and services the customer
purchases.  We typically invoice our customers on an annual or quarterly basis
at the commencement of the software license agreement and on each anniversary
date.  We record deferred revenue at the time of our invoice and we recognize
the associated revenue ratably over the related period.

We have incurred losses since our inception.  As of March 31, 2001, we had an
accumulated deficit of $63.0 million.  The deficit includes stock-based non-cash
compensation charges of $18.4 million, including $2.1 million recognized in
2001, and a $17.1 million non-cash deemed dividend for the difference between
the deemed fair value of our common stock and the price at which our Series C
preferred stock and Series D preferred stock were convertible.  The remainder of
the accumulated deficit, $27.5 million, resulted from the significant costs
incurred in the development of our technology platform and the establishment of
relationships with our customers.  We intend to invest heavily in research and
development, selling and marketing and our computer and administrative
infrastructure.  In addition, as a result of option grants made prior to our
initial public offering with exercise prices below their deemed fair market
value for financial reporting purposes, we will incur approximately $13.7
million in additional charges to earnings in future periods.

Results of Operations

Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

Total Revenue.  Total revenue increased to $444,000 from $370,000 for the same
period of 2000.  The revenue growth is primarily due to licensing our software
to an increased number of pharmaceutical, biotechnology, and academic
organizations.  Grant revenues of $27,000 were recognized for the first quarter
of 2000; there were no grant revenues in the first quarter of 2001 as the grant
was completed in February of 2000.

                                                                          Page 7
<PAGE>

Costs of Revenue.   Costs of revenue increased to $115,000 in 2001 from $102,000
for the same period of 2000.  The increase is primarily due to increased
customer support costs partially offset by decreased costs of research grants.
We expect our costs of revenue to increase in absolute dollars but decrease as a
percent of revenue as we spread customer service and support and maintenance
over a larger revenue base.  Because we recognize revenue ratably over the life
of our license agreements, our revenue may grow more slowly than our costs for a
period of time, as we continue building our infrastructure to support our
customers.

Research and Development.  Research and development expenses increased to $3.5
million in 2001 from $2.8 million for the same period of 2000.  Excluding non-
cash compensation charges of $387,000 in 2001 and $1.4 million in 2000, research
and development expenses increased $1.7 million.  The increase in costs is
primarily due to increased salaries, recruiting, and other personnel costs
associated with our engaging additional software developers and scientists to
develop scientific applications using Java technology and Oracle Corporation's
relational database management system.  We expect research and development
expenses will continue to increase because of our plans to hire additional
employees to meet our product development plans.

Selling and Marketing.  Selling and marketing expenses increased to $1.9 million
in 2001 from $1.4 million for the same period of 2000.  Excluding non-cash
compensation charges of $771,000 in 2001 and $700,000 in 2000, selling and
marketing costs increased $486,000.  Additional salaries, other personnel costs,
consulting, travel, advertising, and exhibition costs related  to the expansion
of our selling and marketing efforts comprised the majority of the increase for
the period.  We expect selling and marketing expenses will increase
significantly as we continue implementing our selling and marketing strategy,
including hiring additional employees and increasing marketing and advertising
efforts.

General and Administrative.  General and administrative expenses decreased to
$2.1 million in 2001 from $2.5 million for the same period of 2000.  Excluding
non-cash compensation charges of $966,000 in 2001 and $2.0 million in 2000,
general and administrative costs increased $642,000.  The cost increase for the
period is primarily related to salaries, and other personnel costs, investor
relations and reporting costs associated with being a public company.  We expect
general and administrative expenses will continue to increase because of costs
associated with being a public company and an increase in our administrative
infrastructure required to support operations.

Non-cash Stock-based Compensation.  Deferred compensation is included as a
component of stockholders' equity and is being amortized in accordance with FASB
Interpretation No. 28 over the vesting periods of the related options, which are
generally three to five years.  Deferred compensation for options granted is the
difference between the exercise price and the deemed fair value for financial
reporting purposes of our common stock on the date the options were granted
prior to our initial public offering.  Non-cash charges representing the
amortization of deferred stock compensation totaled $2.1 million for the period
in 2001 compared to $4.0 million for the comparative period in 2000.  The
decrease in non-cash compensation expense is due to the method of amortizing our
deferred compensation, which results in the recognition of a larger portion of
expense in the initial periods after grant, and due to employees who left the
company.

Interest Income.  Interest income increased to $1.9 million in 2001 from
$114,000 in the same period of 2000.  The increase is due to our higher cash and
investment balances in this quarter from the proceeds of our initial public
offering.  The proceeds from our initial public offering have been invested in
investment grade securities to be used as needed.  We expect interest income
will decrease in future periods as we use our cash to expand the business.

Interest Expense.   Interest expense decreased to $0 in 2001 from $17,000 for
the same period of 2000.  The decrease is because our capital leases were repaid
in the fourth quarter of 2000 with a portion of the proceeds from our initial
public offering.

Deemed Dividend Related to Beneficial Conversion Feature of Preferred Stock.  We
recorded a one-time non-cash charge of approximately $15.0 million in the
quarter ending March 31, 2000 for the difference between the deemed fair market
value of our common stock for financial reporting purposes and the price at
which our Series C preferred stock could be converted into common stock.  All of
our preferred stock converted to common stock upon the closing of our initial
public offering on October 4, 2000.  There was no comparable charge for the same
period in 2001.

                                                                          Page 8
<PAGE>

Liquidity and Capital Resources

On October 4, 2000, we closed our initial public offering of 6,440,000 shares of
common stock at $19 per share.  We received net proceeds of approximately $112.5
million in cash.  Prior to this offering, we financed our operations primarily
from the net proceeds of approximately $38.1 million generated from the issuance
of preferred stock.

During the three months ended March 31, 2001, we used cash of approximately $2.1
million to fund our net losses of $5.3 million.  Our investing activities for
the three months ended March 31, 2001 used cash of $6.2 million, and consisted
of $3.7 million in net purchases and maturities of investments, $2.0 million in
purchases of property and equipment, and $500,000 for investment in a note
receivable used in our business.  We expect to continue making additional
investments in our computer infrastructure and facilities to support our
expanding operations.  Our financing activities for the three months ended March
31, 2001 generated $7,000 from the exercise of stock options.

As of March 31, 2001, we had cash, cash equivalents and investments of
approximately $119.7 million, down from the $123.9 million of cash, cash
equivalents and investments at December 31, 2000.  This decrease reflects the
cash used to fund our operations and capital equipment purchases for the three
months ended March 31, 2001.

We expect our usage of cash to continue to increase significantly for the
foreseeable future as we expand research and development efforts, implement our
sales and marketing strategy, and grow our administrative support activities.
The amount and timing of cash usage will depend on market acceptance of our
products and the resources we devote to researching and developing, marketing,
selling and supporting our products.  We may also acquire complementary
businesses or products, although we have no commitment to do so.  We believe
that our cash, cash equivalents and short-term investments, including the net
proceeds of the initial public offering, are sufficient to fund our working
capital requirements for the foreseeable future.

FACTORS THAT MAY IMPACT FUTURE OPERATING RESULTS

In addition to the other information in this report, the following factors
should be considered carefully in evaluating our business and prospects:

We have a history of operating losses and an accumulated deficit, and we may not
succeed or become profitable.

We will need to generate significant revenue to achieve profitability and we may
be unable to do so.  Even if we do achieve profitability, we may not be able to
sustain or increase profitability in the future. If we do not achieve or sustain
profitability, then we may be unable to continue our operations.  We have
incurred operating losses every quarter since we began operations and we have
not generated enough revenue to cover the substantial amounts that we have spent
to develop and market our products and services.  We had an accumulated deficit
of $63.0 million at March 31, 2001.

We expect to invest substantial financial and other resources to develop and
introduce new products and services and expand our sales and marketing
departments, strategic relationships and operating infrastructure.  We expect
that our expenses will continue to exceed our revenues, resulting in continued
operating losses and negative cash flow from operations, for the foreseeable
future.

We will incur significant charges to earnings as a result of stock option
grants.  This will hamper our ability to become profitable.

As a result of option grants prior to our initial public offering, we will incur
significant non-cash charges to earnings in future periods, which will hamper
our ability to become profitable.  For 2000 these charges were $14.7 million.
These charges were $2.1 million in the first quarter of 2001 and are expected to
be approximately $5.8 million for the remainder of 2001, $4.7 million for 2002
and $3.2 million for future periods.  Our lack of profitability in any
particular period and the amount of any net loss, which will be exacerbated by
these charges, could cause the market price for our common stock to drop,
perhaps significantly.

                                                                          Page 9
<PAGE>

Our limited operating history makes evaluating our business difficult.  This
also makes it difficult to forecast our future operating results.

We commenced operations in September 1995 and we did not begin generating
revenue from our product and services until June 1998. Also, we have only sold
our product to a limited number of customers to date. Our limited operating
history makes it difficult to evaluate our business and to forecast our future
operating results. As a result, you must consider the risks and uncertainties
inherent in the development of a new business enterprise.

The market for our products and services is evolving and uncertain, and if our
products and services do not achieve market acceptance, our business will be
harmed.  Our future results of operations depend on whether the market accepts
Discovery Manager and new products and services that we intend to develop.  As
is typical in new and evolving markets, demand and market acceptance for our
products and services are subject to a high level of uncertainty.  Only a few
commercially available software products designed specifically for genomics-
based drug development and discovery exist and these are unproven.

Our software is designed to incorporate features that respond to the needs of
pharmaceutical, biotechnology, and academic researchers.  To the extent we
experience delays or difficulties implementing features that these researchers
request, our ability to serve our customers may be adversely affected.

Market acceptance of our products and services will depend on a number of
factors, some of which are not in our control.  The amount and timing of our
revenues and profitability will be negatively impacted if the market for our
products fails to develop or develops more slowly than we expect.

If we are unable to obtain additional capital to fund our operations when
needed, our sales and marketing and product development efforts would be
adversely affected.  This could cause our operating results to be materially
harmed.

Future capital requirements will depend on the extent to which we acquire or
invest in businesses, products and technologies.  If we should require
additional financing due to unanticipated developments, additional financing may
not be available when needed or, if available, we may not be able to obtain this
financing on terms favorable to us or to our stockholders.  Insufficient funds
may require us to delay, scale back or eliminate some or all of our research and
development programs, or may adversely affect our ability to operate as a going
concern.  If additional funds are raised by issuing equity securities,
substantial dilution to existing stockholders may result.

If we fail to successfully redevelop our product to use a different computer
programming language and database, our customer base will likely decline.

To maintain and increase our customer base, we are currently redeveloping our
product with a different programming language and database platform.  We are not
sure if the redeveloped product will have the same performance level as our
current product.  If we do not successfully redevelop this product, our customer
base may decline.  Any delays in this redevelopment may result in postponement
of future sales and erosion of our competitive position.  In addition, until our
customers transition to our redeveloped product, we will be required to devote
resources to maintain and support both our current product and redeveloped
product, which could consume both our personnel and other resources.  If in the
future our customers demand a different programming language or database
platform than the ones we have chosen for the current redevelopment, we will
incur substantial additional costs in redeveloping our product and our operating
results will be harmed.

We expect to rely heavily on strategic relationships with larger companies to
help us achieve market acceptance for our products.  If we are unable to
successfully develop these relationships, or if these companies do not perform
as expected, our ability to achieve profitability would be materially harmed.

Part of our business strategy is to work with larger, more established companies
that are suppliers to the drug discovery and development industry to help create
market awareness and acceptance of our products.  We have limited experience in
developing strategic relationships of this type and have entered into only three
to date.  If we are unsuccessful in developing strategic relationships, or if
parties with which we develop relationships do not perform as expected, our
products may not achieve broad market acceptance and our ability to achieve
profitability will be significantly harmed.

                                                                         Page 10
<PAGE>

If we do not increase our brand and name recognition, our ability to sell our
products will be reduced and our business and operating results will suffer.

We have generated revenue from product licenses only since 1998 and currently
have only 16 customers.  Most of our target customers are large pharmaceutical
and biotechnology companies and other research organizations.  We believe that
establishing and maintaining brand and name recognition is critical for
attracting and expanding this targeted customer base because we believe these
targeted customers generally prefer to do business with established brands and
companies.  We also believe that the importance to us of name recognition and
reputation will increase as competition in our market increases.  Promotion and
enhancement of our brand and name will depend on the effectiveness of our
marketing and advertising efforts and on our ability to continue providing high-
quality products and services.  We may not be successful in either regard.  If
we are not successful, our ability to generate revenue will be limited.

Our revenue and profits may decrease if we lose any of our major customers.

Historically, a small number of customers have accounted for a significant
portion of our revenue in any particular period.  The loss of a major customer
could harm our business.  For the three month period ended March 31, 2001, four
of our customers, AstraZeneca, GlaxoSmithKline, Oxagen Limited and Pfizer,
represent approximately 50% of our total revenue.  We anticipate that sales of
our products to a small number of customers will continue to account for a
significant portion of our total revenue.  In addition, some of our license
agreements are short-term and may not be renewed by our customers.

Our customer contracts are cancelable with little notice and if we lose any of
these contracts, our revenues and marketing efforts with other customers will be
materially adversely affected.

The contracts with our customers are cancelable by them with little notice.  Our
customers do not have any obligation to continue to use our current product or
to purchase additional services from us.  Our strategy has been to focus on
potential customers who are considered market leaders in the drug discovery and
development industries.  Consequently, we depend on our customers not only for
generating revenue but also for enhancing our marketing efforts with other
potential customers.  The loss of any of these contracts would adversely impact
our revenue and operating results, and may affect our marketing efforts with
other customers.

We are developing new products that may be subject to different pricing
strategies from our current products potentially resulting in increased
volatility of our future revenues.

We have limited experience developing new products and in determining the
appropriate pricing strategy for those products.  These future products are
anticipated to be sold under perpetual license agreements with recurring annual
support and maintenance fees or in combination with time-based license
agreements.  As a result, this pricing strategy may make our future revenues
more volatile than they have been with our existing products that are sold on an
annual subscription fee basis.  In addition, we may be subject to uncertain
sales cycles and we may have difficulty estimating our future revenues.

If we are unable to expand our sales and marketing capabilities, we will be
unable to significantly increase our revenue.

We have limited experience in sales and marketing and a small sales and
marketing department.  If we are unable to increase our sales and marketing
personnel and efforts, both in the United States and in Western Europe, or
arrange with a third party to perform these services, we will be unable to
significantly increase our revenue.  We are currently attempting to hire and
train additional personnel, but we cannot assure you that our sales force will
be sufficiently large or knowledgeable to meaningfully increase our sales and
customer base.  Even if we are able to hire additional sales personnel in the
near future, their effectiveness will be limited until they gain sufficient
experience.

                                                                         Page 11
<PAGE>

We are highly dependent on Dr. Thomas Marr, and the loss of his services could
affect our ability to be successful.

We are highly dependent on Dr. Thomas Marr, our founder, President and Chief
Scientist.  Dr. Marr is important to developing information, tools and services
required for implementation of our business plan.  Moreover, we believe Dr.
Marr's reputation and prominence in the genomics field provides us with a
competitive advantage.  A significant component of our marketing strategy is to
capitalize on the reputation and contacts of Dr. Marr.  If we lost Dr. Marr's
expertise, we would have difficulty replacing him and our product development
efforts and business opportunities could be adversely affected.  Although we
have an employment agreement with Dr. Marr, he could leave us at anytime.  In
addition, we do not have "key person" life insurance on Dr. Marr.

Our success depends on the continuing contribution of our other key personnel
who may leave us at any time and our ability to integrate new personnel,
including several key members of our management team.

Our future success depends to a significant extent on the continued service of
our key senior management personnel.  In particular, the loss of the services of
Teresa W. Ayers, our chief executive officer, would adversely affect our
business development efforts.  Although we have an employment agreement with Ms.
Ayers, she and any other of our key personnel may leave us at any time.  In
addition, we do not have "key person" life insurance policies on any of our
employees.

Several key members of our management team have joined us within the last year.
If we cannot effectively integrate these employees into our business, or if they
cannot work together as a management team to implement our business strategy,
successfully achieving our revenue goals and profitability will be difficult.
If any of our management team left or were seriously injured and unable to work,
it could be costly and time consuming to replace them.

If we cannot attract, retain, motivate and integrate additional skilled
personnel, our ability to compete will be impaired.

We are a small company and we believe many of our current and potential
competitors have more employees than we do.  Our success depends in large part
on our ability to attract, retain and motivate highly qualified management and
scientific personnel.  We face intense competition for qualified personnel and
the industry in which we compete has a high level of employee mobility.  If we
are unable to continue to employ our key personnel or to attract and retain
qualified personnel in the future, our ability to successfully execute our
business plan will be jeopardized and our growth will be inhibited.

Our failure to manage planned growth could adversely affect our ability to
increase revenue and become profitable.

If we do not effectively manage our planned growth, our ability to significantly
increase revenue and become profitable will be limited.  We need to rapidly and
significantly expand our operations.  Our growth has strained and will continue
to strain our management, financial controls, operations systems, personnel and
other resources.  If we do not manage our planned future growth effectively, our
efforts to increase our customer base and product and service offerings may not
be successful.  In addition, our planned rapid growth could adversely affect our
ability to provide services and technical support in a timely manner and in
accordance with customer expectations.  To manage growth of our operations, we
must:

     .  improve existing and implement new operational, financial and management
        information controls, reporting systems and procedures

     .  hire, train and manage additional qualified personnel

     .  effectively manage multiple relationships with our customers, suppliers
        and other third parties, including our collaborators

We may not be able to install management information and control systems in an
efficient and timely manner, and our current or planned personnel, systems,
procedures and controls may not be adequate to support our future operations.

                                                                         Page 12
<PAGE>

Our business will suffer if our product contains defects or does not function as
intended, which would cause our revenues to decline.

Our business would suffer if our product malfunctions or our customers' access
to their information stored on our product is interrupted.  In addition, our
product is complex and sophisticated and holds vast amounts of data.  As a
result, our product and third-party software incorporated into our product could
contain erroneous data, design defects or software errors that could be
difficult to detect and correct.  Software defects could be found in current or
future products.  If we fail to maintain the quality and integrity of our
product, we would fail to achieve market acceptance.

If we are unable to maintain a product with adequate security safeguards, our
product will not achieve market acceptance and our business would suffer.

Researchers use our product to analyze proprietary data, sometimes in disparate
locations.  Our product must have effective, reliable and secure operations.  If
we fail to maintain an effective, reliable and secure product, our customers'
data may be compromised and our customers would lose confidence in our product.
Our revenues and ability to maintain or increase market share would then suffer.

Our business depends on our topographer technology license from Cold Spring
Harbor Laboratory, the loss of which would jeopardize our business.

The Genome Topographer technology license from Cold Spring Harbor Laboratory
provides the intellectual property foundation for our Discovery Manager product.
A breach by us of any of the terms of, or other failure to maintain, this
license agreement could preclude future sales of Discovery Manager or delay or
prevent the introduction of new products.  Ways in which we could breach the
license agreement include (1) uncured monetary breaches, (2) our failure to
comply with United States export laws regarding software exports, (3) any breach
of the confidentiality and proprietary information provisions of the license
agreement, (4) our filing of bankruptcy or the imposition of receivership on our
business, or (5) any impermissible assignment of the license agreement by us.

If we were unable to continue using the Genome Topographer technology license
for any reason, we may not be able to continue our operations.  Our ability to
identify and license or develop other equivalent technology is highly uncertain
and, even if we were successful in doing so, the cost and delays of such a
changeover in our base technology would likely cause material harm to our
business.  Further, the Chang-Marr algorithm patent included in the Genome
Topographer technology may be challenged, invalidated or circumvented.  This
could limit or prevent our ability to make, use or sell this algorithm in our
product.

Our product currently depends on components licensed from other third parties,
and the failure to maintain these licenses could result in the loss of access to
these components and could delay or suspend our commercialization efforts.

Discovery Manager incorporates technologies which are the subject of proprietary
rights of others.  We have obtained licenses for some of these technologies and
may be required to obtain licenses for others.  We may not be able to obtain any
necessary licenses for the proprietary technology of other parties on
commercially reasonable terms, or at all.  In addition, one or more third
parties whose software or technologies are used in our product might cease to
make its software or other technologies available to us or to update such
software or technologies as appropriate.  We may not be able to develop
alternative approaches if we are unable to obtain necessary licenses, or if
third-party software or technologies become unavailable to us or obsolete.  We
cannot assure you that our current or future licenses will be adequate for the
operation of our business.  The failure to obtain necessary licenses or identify
and implement alternative approaches could have a material adverse effect on our
business, financial condition and results of operations.

Our intellectual property protection may be inadequate, allowing others to use
our technology or similar technologies, reducing our ability to compete.

The steps taken by us to protect our proprietary technology may be inadequate to
prevent misappropriation of our technology by third parties or third parties may
develop similar technology independently.  We rely on a combination of
trademark, copyright and trade secret laws, employee and third-party non-
disclosure agreements and other contracts to establish and protect our
technology and other intellectual property rights.  However, these agreements
may be breached or terminated, and we may not have adequate remedies for any
breach.  In addition, we currently have no patents or

                                                                         Page 13
<PAGE>

patent applications pending, although we do have an exclusive license to one
patent. A third party could copy or otherwise obtain and use our products or
technology without authorization.

Our products could infringe on the intellectual property of others, which may
cause us to engage in costly litigation and, if we are not successful, could
cause us to pay substantial damages and prohibit us from selling our products.

Third parties may assert infringement or other intellectual property claims
against us based on their patents or other intellectual property claims.  We may
have to pay substantial damages, possibly including treble damages, for past
infringement if it is ultimately determined that our products infringe a third-
party's patents.  We would have to obtain a license to sell our product if our
product infringed another person's intellectual property.  We might be
prohibited from selling our product before we obtain a license, which, if
available at all, may require us to pay substantial royalties.  Even if
infringement claims against us are without merit, defending a lawsuit takes
significant time, may be expensive and may divert management attention from
other business concerns.

Our employees may be bound by confidentiality and other nondisclosure agreements
regarding the trade secrets of their former employers.  As a result, our
employees or we could be subject to allegations of trade secret violations and
other similar violations if claims are made that they breached these agreements.

Our operating results may fluctuate, making it likely that, in some future
quarter or quarters, we will fail to meet analysts' estimates of operating
results or financial performance, causing our stock price to fall.

If revenue declines in a quarter, our earnings will decline because many of our
expenses are relatively fixed.  In particular, research and development, sales
and marketing and general and administrative expenses are not affected directly
by variations in revenue.  In some future quarter or quarters, our operating
results likely will be below the expectations of securities analysts or
investors.  In this event, the market price of our common stock may fall
abruptly and significantly.

We may fail to engage in strategic acquisitions, which could limit our future
growth.

One of our strategies for growth is to engage in selective strategic
acquisitions of key products, technologies or companies.  Our ability to conduct
such acquisitions is limited by our ability to identify potential acquisition
candidates, obtain necessary financing and consummate the acquisitions.  In the
event we are unable to identify and take advantage of these opportunities, we
may experience difficulties in growing our business.  In addition, pursuing
acquisition opportunities could divert our management's attention from our
ongoing business operations and result in decreased operating performance.

If we engage in acquisitions, we may experience significant costs and difficulty
assimilating the operations or personnel of the acquired companies, which could
threaten our future growth.

If we make any acquisitions, we could have difficulty assimilating the
operations, technologies and products acquired or integrating or retaining
personnel of acquired companies.  In addition, acquisitions may involve entering
markets in which we have no or limited direct prior experience.  The occurrence
of any one or more of these factors could disrupt our ongoing business, distract
our management and employees and increase our expenses.  In addition, pursuing
acquisition opportunities could divert our management's attention from our
ongoing business operations and result in decreased operating performance.
Moreover, our ability to become profitable may suffer because of acquisition-
related costs or amortization of intangible assets.  Furthermore, we may have to
incur debt or issue equity securities in any future acquisitions.  The issuance
of equity securities would dilute our existing stockholders.

We face intense competition, including from internal bioinformatics departments,
and we may not have the resources required to successfully compete.

We face significant competition from the internal bioinformatics departments of
our customers and other companies that are potential customers.  Some of our
customers and potential customers have internally developed software to organize
and analyze genomic data.  These companies may believe that their software is
adequate for their needs and that our product is unnecessary.  In addition,
certain internal departments of a corporation may be resistant to outsourcing
software because it could reduce the departments' budgets.

                                                                         Page 14
<PAGE>

We face competition from other organizations, as well, including:

     .  other bioinformatics companies

     .  specialized drug discovery software companies

     .  academic and scientific institutions

     .  public and private research organizations

Many of our customers and potential customers and other competitors have much
greater resources and name recognition than we do.  Some of our third-party
competitors may offer discounts as a competitive tactic.  Moreover, our
competitors may in the future offer broader product lines or technologies or
products that are more commercially attractive than our current or future
products or that may render our technologies or products obsolete.

If our customers and potential customers elect to continue to develop their own
bioinformatics software, or we are unable to compete successfully with our
third-party competitors, then we will be unable to meaningfully improve our
operating results and we may not be able to continue operating our business.

We experience rapid technological change in our markets.  If we do not modify
our products to incorporate new technologies, they may become obsolete and our
sales will suffer.

We compete in a market that is subject to rapid technological change, frequent
new product introductions and enhancements, changes in customer demands and
evolving industry standards.  To remain competitive, we must continue to expand
our databases, improve our software, and invest in new technologies in
anticipation of the needs of our customers.  Our products could become obsolete
due to the introduction of products containing new technologies, changing
customer requirements or changing industry standards.  This would have a
significant negative impact on our revenue generation.

The technological life cycles of our products are difficult to estimate.  Our
future success will depend upon our ability to continue to enhance our current
products and to continue to develop and introduce new products that keep pace
with competitive and technological developments and customer demands.  If we
fail to develop, market and deliver new products on a timely basis, we may lose
market share, perhaps significantly, and our ability to continue our business
could be seriously jeopardized.

Our current and potential customers primarily consist of biotechnology and
pharmaceutical organizations, which face risks that could affect our ability to
license our products.

We currently derive a substantial portion of our revenue from product licenses
to biotechnology and pharmaceutical organizations.  We expect that these
organizations will continue to be our primary source of revenue for the
foreseeable future.  If the drug discovery, development and related industries
experience a downturn, our business will be harmed.  Thus, our ability to
generate revenue is indirectly subject to risks and uncertainties that could
cause reductions and delays in research and development expenditures within the
drug discovery, development and related industries.  These reductions and delays
may result from factors such as:

     .  market-driven pressures on companies to consolidate and reduce costs

     .  reduced revenue or profitability of our current and potential customers

     .  the uncertainty of healthcare reform, including the continuing efforts
        of governmental and third-party payors to contain or reduce the cost of
        health care

     .  changes in regulations of the U.S. Food and Drug Administration or other
        regulatory agencies

These factors are not within our control.  In addition, consolidation in the
drug discovery and development industries will reduce the number of our
potential customers and, therefore, may adversely affect our future revenues.

                                                                         Page 15
<PAGE>

We will not be able to sell our products if the use of genomic information to
develop drugs is not commercially successful.

The development of new drugs based on genomic information is unproven.  Few
therapeutic products based on genomic discoveries have been developed and
commercialized.  If our customers and potential customers are unable to develop
drugs based on genomic information in general and using our products or services
in particular, then demand for our products will diminish and our ability to
generate revenue and profitability would be significantly harmed.

If ethical and other concerns surrounding the use of genetic information become
widespread, the demand for our products could decrease.

Genetic testing and research has raised ethical issues regarding confidentiality
and the appropriate uses of the resulting information.  For these reasons,
governmental authorities may limit or regulate the use of genetic testing or
prohibit testing for genetic predisposition to certain conditions, particularly
for those that have no known cure.  Any such action by governmental authorities
could reduce the potential markets for our products, which could seriously harm
our ability to generate revenue.

Doing business outside of the United States involves numerous factors that could
negatively affect our financial results.

International operations involve numerous factors not typically present in
domestic operations.  If any one or more of these factors adversely affects us
and we cannot effectively manage them, our business, operating results and
financial condition could be significantly harmed.  These factors include:

     .  costs of operations in countries outside the United States

     .  licenses, tariffs and other trade barriers

     .  difficulties in staffing and managing remote operations

     .  potentially adverse tax consequences

     .  the burden of complying with multiple and complex laws, regulations and
        treaties

     .  currency fluctuations

     .  political and economic instability

Our stock price may be volatile and your investment in our stock could decline
in value.

The trading price of our common stock is likely to be highly volatile and could
be subject to wide fluctuations in price in response to various factors, many of
which are beyond our control, including:

     .  announcements of technological innovations or new commercial products by
        our competitors or us

     .  developments concerning proprietary rights by our competitors or us

     .  developments concerning any development or marketing collaborations

     .  publicity regarding actual or potential medical results relating to
        products under development by our competitors or us

     .  litigation

     .  economic and other external factors, including disasters or crises or

     .  period-to period fluctuations in financial results

In addition, the stock market and the market for technology companies in
particular have experienced extreme price and volume fluctuations that often
have been unrelated or disproportionate to the performance of those companies.
During the recent drops in value of the Nasdaq National Market, companies with
ongoing losses like us were among the most vulnerable to sharp declines in
value.  You may not be able to sell your common stock at a price at or above
your purchase price.

                                                                         Page 16
<PAGE>

If our stock price is volatile, we may become subject to securities litigation,
which is expensive and could divert our resources.

Many companies with a volatile stock price have been subject to class-action
litigation brought by security holders.  If the market value of our common stock
experiences adverse fluctuations, and we become involved in this type of
litigation, we could incur substantial legal costs and our management's
attention could be diverted, causing our business to suffer, regardless of the
outcome of the litigation.

The proceeds from our initial public offering have been invested in interest-
bearing, investment-grade securities that may be subject to market risk.

We have invested our IPO proceeds in interest-bearing, investment-grade
securities that may be subject to interest rate fluctuations and credit risk.
Our investment portfolio is used to preserve our capital until it is required to
fund our business.  If interest rate fluctuations and credit risk do occur, then
the principal amount of our investments will decline.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

The primary objective of our investment activities is to preserve principal
while at the same time maximize the income we receive from our investments
without significantly increasing risk.  Some of the securities that we invest in
may have market risk.  This means that a change in prevailing interest rates or
a change in the credit of any companies represented by such securities may cause
the principal amount of the investment to fluctuate.  For example, if we hold a
security that was issued with a fixed interest rate at the then-prevailing rate
and the prevailing interest rate later rises, the market value of our investment
will probably decline.  For investments held at March 31, 2001, a 1% change in
the interest rate would change the value of our investments by approximately $1
million.  In addition, if we hold a security that was rated on the credit risk
of certain companies and any of these company's credit is downgraded, the market
value of our investment will probably decline.  To minimize this risk in the
future, we intend to maintain our portfolio of cash equivalents and short-term
investments in a variety of securities, including commercial paper, money market
funds, government and non-government debt securities.  Set forth below is
quantitative, tabular disclosure relating to our current investments:

<TABLE>
<CAPTION>
                                                       Maturity Dates
                                        -------------------------------------------
                                            2001            2002           Total         Fair Value
                                        -----------     -----------     -----------     ------------
  <S>                                   <C>             <C>             <C>             <C>
  Marketable Debt Securities,
   Principal Values...................  $60,994,299     $37,219,000     $98,213,299     $102,241,327
  Average Interest Rate...............       6.373%          5.610%          6.084%
</TABLE>

                                                                         Page 17
<PAGE>

PART II.  OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds

On October 4, 2000, in connection with our initial public offering, a
Registration Statement on Form S-1 (File No. 333-32472) was declared effective
by the Securities and Exchange Commission, pursuant to which 6,440,000 shares of
our common stock were offered and sold for our account at a price of $19 per
share, generating net proceeds of approximately $112.5 million.  As of March 31,
2001, we had used $833,000 to pay off capital leases and to finance a note
receivable.  We have been able to fund our operations and growth from our
financings completed prior to our initial public offering.  The remaining $111.7
million has been invested in money market funds as well as other interest-
bearing, investment-grade securities.  In subsequent quarters, we intend to draw
upon these resources to continue our development of Discovery Manager and new
products, to expand our sales and marketing activities, and to fund other
general corporate purposes.

Item 6.  Exhibits and Reports on Form 8-K.

(a)  Exhibits

The following exhibit is filed herewith:

     Exhibit Number     Exhibit Title
     --------------     -------------

     10.17*             First Amendment and Further Terms to the Product
                        Development and Reseller Agreement between the Company
                        and Applied Biosystems, Inc. dated March 30, 2001.

_____
*  Certain confidential information contained in this exhibit, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission based upon a request for confidential treatment pursuant to Rule 24b-
2 of the Securities Exchange Act of 1934, as amended.

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed during the quarter ended March 31, 2001.

                                                                         Page 18
<PAGE>

                                  SIGNATURES

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

Dated:  May 10, 2001

                         GENOMICA CORPORATION
                         (Registrant)

                         /s/ Daniel R. Hudspeth
                         ----------------------------------------------
                         Daniel R. Hudspeth
                         Vice President of Finance, Chief Financial Officer,
                         Secretary and Treasurer
                         (Duly Authorized Officer and Principal Financial and
                         Accounting Officer)

                                                                         Page 19