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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





Form 10-K

(Mark One)



| ̈ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended

or



|x | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from April 1, 2010 to December 31, 2010

Commission file number: 0-27188

Accelrys, Inc.

(Exact name of registrant as specified in its
charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 33-0557266                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)
|10188 Telesis Court, Suite 100, San Diego, California          |  | 92121                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(858)
799-5000

(Registrants telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



|                                          |  |                                          
|----------------------------------------- |  | -----------------------------------------
|Title of Each Class                       |  | Name of Each Exchange on Which Registered
|Common Stock, par value $0.0001 per share |  | NASDAQ Global Market                     

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes   ̈    No  x

Notechecking the box above will not relieve any registrant required to file reports pursuant to Section 13 of 15(d) of the
Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of the 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.  x

Indicate by check mark whether the registrant is
a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule
12b-2 of the Exchange Act. (Check one):



|                                              |  |                             
|--------------------------------------------- |  | ----------------------------
|Large accelerated filer   ̈                    |  | Accelerated filer  x        
|Non-accelerated filer   ̈                      |  | Smaller reporting company   ̈
|(Do not check if a smaller reporting company) |  |                             

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).    Yes   ̈    No  x

The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 30, 2010 was $301.1 million
(based upon the September 30, 2010 closing price for shares of the registrants common stock as reported by the NASDAQ Global Market). Shares of common stock held by each officer, director and holder of 5% or more of the outstanding common
stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of outstanding shares of the registrants common stock, par value $0.0001 per share, as of February 21, 2011 was
55,398,562, net of treasury shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Part II of this Form 10-K and Items 10, 11, 12, 13 and 14 of Part III of this Form 10-K incorporate information by reference
from the registrants definitive proxy statement filed pursuant to Regulation 14A in connection with the registrants 2011 Annual Meeting of Stockholders or an amendment to this Transition Report on Form 10-K to be filed with the
Securities and Exchange Commission within 120 days after the close of the fiscal year covered by this transition report.

The
Exhibit Index (Item No. 15) lists several documents incorporated by reference.









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ACCELRYS, INC.

FORM 10-KTRANSITION REPORT

For the Transition Period from April 1, 2010 to December 31, 2010

Table of Contents



|           |  |                                                                                                              |    |      |    | 
|---------- |  | ------------------------------------------------------------------------------------------------------------ | -- | ---- | -- | 
|           |  |                                                                                                              |    | Page |   
|PART I     |  |                                                                                                              |    |      |    | 
|Item 1     |  | Business                                                                                                     |    |      | 3  | 
|Item 1A    |  | Risk Factors                                                                                                 |    |      | 10 | 
|Item 1B    |  | Unresolved Staff Comments                                                                                    |    |      | 21 | 
|Item 2     |  | Properties                                                                                                   |    |      | 21 | 
|Item 3     |  | Legal Proceedings                                                                                            |    |      | 22 | 
|Item 4     |  | Removed and Reserved                                                                                         |    |      | 22 | 
|           |  |                                                                                                             
|PART II    |  |                                                                                                              |    |      |    | 
|Item 5     |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |    |      | 23 | 
|Item 6     |  | Selected Consolidated Financial Data                                                                         |    |      | 25 | 
|Item 7     |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations                        |    |      | 27 | 
|Item 7A    |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |    |      | 41 | 
|Item 8     |  | Financial Statements and Supplementary Data                                                                  |    |      | 42 | 
|Item 9     |  | Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure                         |    |      | 81 | 
|Item 9A    |  | Controls and Procedures                                                                                      |    |      | 81 | 
|Item 9B    |  | Other Information                                                                                            |    |      | 82 | 
|           |  |                                                                                                             
|PART III   |  |                                                                                                              |    |      |    | 
|Item 10    |  | Directors, Executive Officers and Corporate Governance                                                       |    |      | 84 | 
|Item 11    |  | Executive Compensation                                                                                       |    |      | 84 | 
|Item 12    |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters               |    |      | 84 | 
|Item 13    |  | Certain Relationships and Related Transactions, and Director Independence                                    |    |      | 84 | 
|Item 14    |  | Principal Accountant Fees and Services                                                                       |    |      | 84 | 
|           |  |                                                                                                             
|PART IV    |  |                                                                                                              |    |      |    | 
|Item 15    |  | Exhibits, Financial Statement Schedules                                                                      |    |      | 85 | 
|Signatures |  |                                                                                                              | 91 |     



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Forward-Looking Statements

This Transition Report on Form 10-K (this Report) contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never
materialize or prove incorrect, could cause our results to differ materially and adversely from those expressed or implied by such forward-looking statements. These statements are often identified by the use of words such as expect,
believe, anticipate, estimate, intend, plan and similar expressions and variations or negatives of these words These forward-looking statements may include statements addressing our future
financial and operating results. We have based these forward-looking statements on our current expectations about future events. Such statements are subject to certain risks and uncertainties including those related to the execution of our strategic
plans, the successful release and acceptance of new products, the demand for new and existing products, additional competition, changes in economic conditions and those described in documents we have filed with the Securities and Exchange Commission
(the SEC), including this Report in Managements Discussion and Analysis of Financial Condition and Results of Operations, Risk Factors, and subsequent reports on Form 10-Q. All forward-looking
statements in this document are qualified entirely by the cautionary statements included in this document and such other filings. These forward-looking statements speak only as of the date of this document. We disclaim any undertaking to publicly
update or revise any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Unless the context requires otherwise, in this report the terms we, us and our refer to
Accelrys, Inc. and its wholly-owned or indirect subsidiaries, and their predecessors.

PART I



|Item 1. | Business
|------- | --------

Change in Fiscal Year

On August 3, 2010, our board of directors approved a change in our fiscal year end from March 31 to
December 31. The fiscal year end change was effective December 31, 2010 and resulted in a nine month reporting period from April 1, 2010 to December 31, 2010. As a result, this Report is a transition report and includes financial
information for the transition period from April 1, 2010 through December 31, 2010 (the Transition Period). Subsequent to this Report, our annual reports on Form 10-K will cover the calendar year January 1 to
December 31. All references to years, unless otherwise noted, refer to the twelve-month fiscal year, which prior to April 1, 2010, ended on March 31, and beginning with January 1, 2011, ends on December 31, of
each year.

Overview

On July 1, 2010, pursuant to the terms of the Agreement and Plan of Merger and Reorganization, dated April 5, 2010 (the Merger Agreement), by and among us, Alto Merger Sub, Inc.,
our wholly-owned subsidiary (Merger Sub), and Symyx Technologies, Inc. (Symyx), Merger Sub merged with and into Symyx, with Symyx surviving as our wholly-owned subsidiary (the Merger). Symyxs operating
results are included in our consolidated financial statements and results of operations beginning July 1, 2010.

We
develop and commercialize scientific informatics software products and services for industries and organizations that rely on scientific innovation to differentiate themselves in the marketplace. In July 2010, we completed the Merger, broadening the
breadth and depth of our scientific product portfolio by adding a set of complementary scientific applications, content databases and technologies. Prior to the Merger, our products were primarily utilized by our customers research
organizations. As a result of the Merger we have expanded our focus to include products that are utilized by our customers development organizations. Collectively, therefore, our products and services are intended to optimize our
customers research and development value



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chain, from early research through development into early manufacturing. Our software is used by our customers scientists, biologists, chemists and information technology professionals to
design, execute and manage scientific experiments in-silico or in the lab and to aggregate, mine, manage, analyze and interactively report on the scientific data from those experiments. The ability to integrate and access data from diverse data
sources, and to make that information accessible throughout the scientific value chain, enables our customers to reduce costs, enhance productivity and more efficiently provide innovative and effective products to their customers.

Our customers include leaders from a variety of industries, including pharmaceutical, biotechnology, agricultural, energy, chemicals,
aerospace, consumer packaged goods and industrial products, as well as various government and academic entities. We market our software products and services worldwide, principally through our direct sales force, augmented by the use of third party
distributors. We are headquartered in San Diego, California and were incorporated in Delaware in 1993.

Description of Our Markets and
Business

Our customers differentiate themselves through scientific innovation. As a result, innovation in the discovery
and development of new products, compliance with applicable regulations, rapid, cost-effective commercialization of such products and the ability to protect the intellectual property therein is crucial to our customers success. Therefore, they
invest considerable resources in technologies that help identify productive new pathways for research projects, help develop new materials, increase the efficiency of discovery and development processes, and otherwise enable them to maximize the use
of scientific data, information and knowledge. Our software solutions allow our customers to effectively design, plan and execute scientific experiments in a repeatable process and in compliance with regulations; leverage the vast amounts of
information stored in both corporate databases and public data sources to optimize their processes and accelerate innovation; model, predict and analyze potential scientific outcomes; and access comprehensive, integrated and cross-referenced
databases and reference works.

The pharmaceutical and biotechnology industries are a very important part of our business. Our
products have been widely adopted within the research functions of the businesses in these industries, but less widely adopted by the development functions of such businesses. In addition, these markets present challenges due to industry
consolidation, the maturity of these markets, patent expirations, reduction in the level of discovery research activity, increased competition, including competition from open source software and outsourcing of research to other entities. The other
industries to which we market our products, including energy, material, agricultural, aerospace and consumer packaged goods, are earlier in the adoption curve for such scientific software products, which we view as both a challenge and an
opportunity.

Business Strategy

Scientific research and development organizations face several challenges that impact their ability to comply with applicable regulations, protect their intellectual property and rapidly and
cost-effectively bring product to market. Among these challenges is the fact that scientific data is often found in disparate databases and that research, development and early manufacturing processes are disconnected, manually intensive,
inefficient and repetitive.

Our overall strategy is to help our customers address these challenges by offering them an open
enterprise-scale scientific software platform and a broad portfolio of scientific software applications leveraging our deep domain expertise in chemistry, biology and the materials sciences. We believe the combination of our enterprise R&D
platform and associated set of applications including the Electronic Lab Notebook (ELN), computer aided design modeling and simulation software, data management and informatics software, content databases, and professional services help
optimize our customers scientific value chain.



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Historically, we have had a strong presence in our customers research organizations.
Symyxs products have also had a presence in its customers development organizations. We believe that the combination of our products with the products we acquired as a result of the Merger (most significantly its ELN) enables us to
provide greater value to the development function of these organizations. Our strategy is to continue to integrate and enhance our offerings in order to further enhance the value of the products we acquired and the value of our products
collective portfolio to these organizations, thus enabling us to expand upon our presence in the research and development organizations of our existing customers. In addition, we believe such enhanced offerings will enable us to extend our presence
to new customers development organizations. We also intend to continue to develop advanced analysis, scientific and reporting component collections in order to extend our platforms value to and use by our customers.

Our strategy also includes offering professional services to further tailor our enterprise R&D platform to our customers
individual business needs, thereby increasing its utility and value. Because our enterprise R&D platform is the underlying operating platform for many products in our broad portfolio, and integration with the Symyx applications is a development
priority, we expect the use of these products to expand as the use of our platform grows, thus further increasing our sales and value to our customers.

Our enterprise R&D platform is an open platform. We partner with third party organizations and academic institutions which develop scientific software and services, and we enable and encourage these
companies to develop applications that operate on our platform, further proliferating its utility and value to our customers.

We also focus on industries in markets where scientific innovation is a key differentiator, but the use of scientific software solutions
has not been widely adopted. As we develop a greater presence in these markets, we believe our ability to attract additional customers will increase.

Products and Services

The following is a brief description of each of our
product lines:

Pipeline Pilot, Accelrys Enterprise R&D Platform. Our enterprise R&D platform forms the basis of
our software and services offerings. Its open service-oriented architecture allows users to aggregate, integrate, and mine the vast quantities of both structured and unstructured scientific data, such as chemical structures, biological sequences,
and complex digital images. It also filters, normalizes, and performs statistical analysis on this scientific data and provides interactive visual reports to both scientists and scientific managers. We continue to develop component collections that
operate with our enterprise R&D platform to offer our customers advanced scientific functions such as image, text and chemical analysis. In addition, our enterprise R&D platform provides the underlying platform on which we have built many of
our modeling and simulation and informatics solutions. We are integrating many of the products we acquired through the Merger in order to enhance the value of both these products and our platform. The openness of the enterprise R&D platform
allows our users to integrate not only Accelrys solutions, but best of breed scientific applications they have built themselves, or solutions they have acquired from academic collaborators or other commercial independent software vendors
(ISVs). Accelrys has built an ecosystem of scientific innovation by partnering with many ISVs who build scientific and technology solutions based on our enterprise R&D platform.

Computer Aided Design Modeling and Simulation Software. We have a broad array of software products based on proprietary and
licensed technologies that employ fundamental scientific principles, advanced computer visualization, molecular modeling techniques and computational chemistry. These products allow scientists to perform computations of chemical, biological and
materials properties, to simulate, visualize and analyze chemical and biological systems, and to communicate the results to other scientists. Our computer aided design modeling and simulation products are used by scientists in the life science
industry, primarily by pharmaceutical and biotechnology companies, and scientists in materials sciences industries, such as energy, chemicals, aerospace and consumer packaged goods companies.



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Our Discovery Studio life science modeling and simulation application features an open
architecture allowing users to plug and play best of breed computational solutions from Accelrys, academia, other ISVs or solutions the customers have developed themselves. This open architecture also helps expert modelers to connect and
communicate more effectively to the wider research organization. Our computer aided design modeling and simulation offerings are intended to assist our customers in the discovery of new materials or the enhancement of existing materials. Our
Materials Studio modeling and simulation application enables our customers to apply modeling and simulation capabilities to large and complex systems, and can be accessed from our enterprise R&D platform.

Enterprise Lab Notebook. The ELN replaces paper notebooks traditionally used by scientists, providing a digital environment in
which scientists can plan, execute, record, store, back-up and share their daily research activities. The ELN in combination with Pipeline Pilot, our enterprise R&D platform, offers scientists the opportunity to streamline the processes
associated with experiment planning, design, execution and analysis by standardizing on a single notebook that handles multiple scientific disciplines and bringing the scientific analysis and reporting capabilities from the Pipeline Pilot platform
into the notebook.

The ELN has a consistent back-end. We continue to develop domain-specific front-end capabilities for
scientists engaged in discovery, process, analytical, formulations and biology functions that are designed with their specific functions in mind. Our approach of delivering a customizable front-end that can be tailored to meet the needs of specific
scientists, while maintaining a common back-end, facilitates enterprise-wide adoption. This approach also enables optimal use of research data across the scientific enterprise, improves data and documentation quality and ensures compliance with
standard operating procedures.

Data Management & Informatics Software. We are a leading
provider of software-based solutions designed to capture, store, manage, and mine scientific data information. Our solutions in this area include Accelrys Isis, Accelrys Isentris, Accelrys Direct, Accelrys Draw, as well as the chemistry and
cheminformactics applications and scientific components built on the Pipeline Pilot enterprise R&D platform. Our data management and informatics software is based on standard database architectures such as Oracle®. As leaders in the space prior to the Merger, we have developed a go-forward roadmap that leverages the best
technology from each of the product portfolios. This roadmap preserves our customers investments, while offering a solution that addresses the needs of todays scientific organizations. Through this combined portfolio, we provide
comprehensive data visualization and analysis software components based on a services oriented architecture enabling users to search, retrieve, and use chemical structures, biological and chemical data, experimental data, and registration
information. Many of these tools use industry standard software components and are compliant with applications such as Microsoft Excel® and Microsoft SharePoint®,
allowing chemists to interact with chemical data within familiar productivity tools. We also use this component technology, combined with our enterprise R&D platform and our database architectures, to build enterprise-wide systems for our
clients.

Content Databases.To support their research activities, scientists can access our comprehensive, integrated
and cross-referenced collection of factual databases and reference works covering bioactivity, chemical sourcing, molecular properties, synthetic methodology, metabolism and toxicology information. These resources can be accessed easily through the
ELN, data management and informatics applications, or via the Internet through the Discovery Gate portal and chemicals marketplace.

Services.The value of our software is enhanced by robust service offerings that provide a variety of options to our clients and create greater returns on their investments.

Our professional services team delivers integrated scientific solutions and enhances the value of our software products by creating
extensions to functionality to address a clients specific business needs. Our scientific informatics platform is highlighted as one of the primary technologies used in these solutions. The group delivers a range of solutions, from software
wrappers that allow customers to run their own algorithms on our enterprise R&D platform to enterprise-wide informatics systems that integrate customers internal systems with software from many vendors, including Accelrys. The group
specializes in deploying systems for use by customers in all scientific domains, from early research to early product manufacturing.



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Our contract research services team provides solutions to clients proprietary
business-critical scientific problems. The world-wide client base for this service ranges from those who do not have expert modeling resources on staff to those who have expert modelers, but need to accommodate peaks in resource requirements or to
fill a special skill set. We work on a project by project basis, or provide longer term resources that are located at client sites for a year or more. This scientific collaboration enhances our partnerships with our clients and helps them achieve
their research goals. Our value is enhanced by the broad set of scientific domain expertise among our staff, our years of experience solving industrial real-world application problems, our commitment to maintaining confidentiality and to
protecting our clients intellectual property, the accessibility we offer to the extensive Accelrys ecosystem, and all of our modeling tools.

Both internally and through our distribution channels, we offer training conducted by staff knowledgeable in both the theory and application of our products. Our implementation and training services
ensure that our clients are able to quickly install our products and become expert users of our solutions. We offer onsite training and implementation services, web-based training, and data migration services.

Our support services give customers access to new releases, technical notes, documentation addenda and other support which collectively
enable customers to utilize our products more effectively, including access to our technical and scientific support personnel during extended business hours. Technical newsletters and bulletins are sent to customers to keep them informed and to help
them with resource allocation and scheduling. To maintain an ongoing understanding of customer requirements, we hold user group meetings throughout the year.

We are committed to providing customers with superior support, including: telephone, e-mail, fax and Internet-based technical support services; training; user group conferences; and targeted contract
services involving application of our technology and scientific expertise to particular research needs of customers. We believe that customer service, support and training are part of the successful adoption and utilization of our products.

Customers

Our customer base consists of companies that differentiate themselves from the competition on the basis of scientific innovation. These
customers include commercial, governmental and academic organizations, including many of the worlds largest pharmaceutical, biotechnology, energy, chemicals, aerospace, consumer packaged goods and industrial products companies. No single
customer accounted for more than 10% of our revenue during any of the three most recently completed fiscal years.

Strategic and Academic
Alliances

We have entered into a number of strategic alliances relating to product development, product distribution and
joint marketing. We plan to continue to cultivate relationships with academic, governmental and commercial research organizations for purposes of identifying and licensing new technology to use in product development. In addition, we plan to
maintain and expand our alliances focusing on the compatibility of our products with databases and database management systems, other computational chemistry and molecular simulation products, and products in related markets such as imaging and
clinical informatics. We also intend to continue to enter into integration and joint marketing arrangements with systems integrators and original equipment manufacturer partners.

Sales and Marketing

We market our products and services worldwide. During
the nine months ended December 31, 2010, we generated 49%, 28% and 23% of our revenues from the U.S., Europe and the Asia/Pacific region, respectively. Please refer to Note 2 to our consolidated financial statements included elsewhere in this
Report for a breakdown of revenues and long-lived assets by geographic region. Our continuing reliance on sales in international markets exposes us to risks attendant to foreign sales, as described more fully in Item 1A of this Report.



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We sell our products and services through our direct sales force, telesales and, in some
markets, arrangements with distributors. Our direct sales representatives focus on a defined list of customers or cover an assigned geographic territory. These direct sales representatives typically work closely with our pre-sales scientists in
order to demonstrate our products and their applicability to various research and development efforts. Our telesales effort is directed at smaller sized commercial accounts and academic institutions. Our distributor relationships primarily exist in
the Asia/Pacific region, specifically in Japan, China and Korea, and complement our direct sales force in those markets.

In
support of our sales activities, we participate in industry trade shows, publish our own newsletter, advertise in industry publications and via Internet search engines, publish articles in industrial and scientific publications, conduct direct
e-mail campaigns, sponsor industry conferences and seminars, and maintain a website that contains information about us and our product and service offerings.

Our products, together with the associated product literature, are generally delivered to our customers at the time of placing and processing their order. Our electronic software distribution program
allows our customers to download our products over the Internet.

Our customers buying habits have historically resulted
in a higher concentration of sales in the fourth quarter of the calendar year, due to traditionally higher purchasing activity in the month of December in many commercial organizations.

Product Development

Development of our software is focused on expanding
product lines, designing enhancements to our core technology and integrating existing and new products into our principal software architecture and platform technology. We intend to offer regular updates to our products and to continue to look for
opportunities to expand our existing product suite.

We develop most of our products internally and, during the nine months
ended December 31, 2010, we incurred product development expenses of $22.1 million, and during each of the years ended March 31, 2010 and 2009, we incurred product development expenses totaling approximately $16.0 million. We have also
licensed products or have otherwise acquired products, or portions of our products, from the open source community, as well as corporate, governmental and academic institutions. These arrangements sometimes involve joint development efforts and
frequently require the payment of royalties by us. The development and royalty obligations, scope of distribution rights, duration and other terms of these arrangements vary depending on the product, the market, resource requirements, the other
parties with which we contract and other factors. We intend to continue to license or otherwise acquire technology or products from third parties.

Competitors

We believe our scientific informatics platform is unique, and
that the market for the platform is at an early stage, with limited established competition from commercial software vendors. The competition for our enterprise R&D platform includes our customers own proprietary software, open source
software such as Knime, and workflow and data-pipeline applications of smaller commercial software vendors such as IDBS.

The
markets for our informatics software products and our computer aided design modeling and simulation products for the pharmaceutical and biotechnology industries are mature and intensely competitive, subject to rapid change and significantly affected
by new product introductions and other market activities of industry participants. Our competitors offer a variety of products and services to address this market. We believe that the principal competitive factors in this market are product quality,
flexibility, ease-of-use, scientific validation and performance, functionality and features, open architecture, quality of support and service, reputation and price. Competition currently comes from open source software, our customers internal
tools, as well as the following



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commercial software vendors (listed by product type and competitors that supply such products): other software packages for analysis of chemical and biological data (IDBS); desktop software
applications (CambridgeSoft, Tripos), including chemical drawing applications (CambridgeSoft); molecular modeling and analytical data simulation applications (Chemical Computing Group, OpenEye, Schrodinger, Tripos); and database management systems
and information technology (IDBS).

Our ELN faces competition from commercial software vendors in three primary areas:
enterprise-wide deployments (Cambridgesoft, IDBS); biology (Cambridgesoft, IDBS); and smaller, department-focused initiatives (Cambridgesoft, IDBS, Contur, Recentris).

The market for our computer aided design modeling and simulation offerings aimed at the energy, chemicals, aerospace and consumer packaged goods industries is in its early stages with limited and
fragmented competition from established software vendors. The industries that these offerings target generally rely on data from experiments, rather than utilizing computer aided design modeling and simulation software to obtain such data. Our
limited competition from commercial software vendors in these industries currently comes from smaller competitors such as Gaussian Inc., Atomistix and Scienomics.

Backlog of Committed Revenue

As of December 31, 2010, our backlog was
approximately $145.0 million, of which we expect to recognize approximately $102.6 million during fiscal 2011. Our backlog consists of contractual commitments from our customers for products to be shipped, research, consulting and maintenance
services to be provided, and license and content revenue to be recognized, in each case over the next twelve months. Because of the occasional customer-driven changes in delivery schedules or cancellation of orders without significant penalty, we do
not believe our backlog, as of any particular date, is necessarily indicative of actual revenue for any future period.

Intellectual
Property and Other Proprietary Rights

We rely primarily on a combination of copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions to protect our proprietary rights. We also have 230 U.S. and foreign patents and several pending patent applications. Some of our patents begin to expire as early as 2012. We believe that factors
such as the technological and creative skills of our personnel, new product development, frequent product enhancements, name recognition and reliable product maintenance are essential to establishing and maintaining a technological leadership
position. There can be no assurance that our means of protecting our proprietary rights in the U.S. or abroad will be adequate. We seek to protect our software, documentation and other written materials under trade secret and copyright laws, which
afford only limited protection. Further, there can be no assurance that our patents will offer any protection or that they will not be challenged, invalidated or circumvented.

Employees

As of December 31, 2010, we had 580 full-time employees.
None of our employees are covered by collective bargaining agreements. Substantially all of our employees, other than certain of our executive officers and employees with customary employment arrangements within Europe, are at will employees, which
means that each employee can terminate his or her relationship with us and we can terminate our relationship with him or her at any time. We offer industry competitive wages and benefits and are committed to maintaining a workplace environment that
promotes employee productivity and satisfaction. We believe our relations with our employees are good.

Website Access to SEC Filings

We are subject to the reporting requirements under the Securities Exchange Act of 1934, as amended (the Exchange
Act). Consequently, we are required to file reports and information with the SEC, including reports



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on the following forms: annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Exchange Act. These reports and other information concerning us may be accessed through the SECs website at http://www.sec.gov and on our website at www.accelrys.com. Such filings are placed on our website as soon
as reasonably practical after they are filed with the SEC. Any information contained in, or that can be accessed through our website, is not incorporated by reference into, nor is it in any way part of, this Report.



|Item 1A. | Risk Factors
|-------- | ------------

You
should carefully consider the risks described below before investing in our publicly traded securities. The risks described below are not the only ones facing us. Our business is also subject to the risks that affect many other companies, such as
competition, technological obsolescence, labor relations, general economic conditions, geopolitical changes and international operations. Additional risks not currently known to us or that we currently believe are immaterial also may impair our
business operations and our liquidity. The risks described below could cause our actual results to differ materially from those contained in the forward-looking statements we have made in this Report, the information incorporated herein by reference
and those forward-looking statements we may make from time to time.

Certain Risks Related to Our Marketplace and Environment

Our revenue from the sale of computer aided design modeling and simulation software to the life science discovery
research marketplace, which has historically constituted a significant portion of our overall revenue, has been declining over the past several years and may continue to decline in future years. Historically we have derived a significant
portion of our revenue from the sale of computer aided design modeling and simulation software to the discovery research departments in pharmaceutical and biotechnology companies. Based on recurring analyses of incoming orders typically conducted by
our sales and marketing departments, we estimate that orders for our computer aided design modeling and simulation software for the life science industry declined approximately 18% between fiscal year 2008 and 2009, approximately 16% between fiscal
year 2009 and 2010 and approximately 21% during the nine months ended December 31, 2009 and 2010. While there is not a linear correlation between product orders and resulting revenue, we believe that our estimates of decreased product orders
ultimately reflect a decline in revenue attributable to sales of our computer aided design modeling and simulation software products. We believe this decline is due to several factors, including industry consolidation, a general reduction in the
level of discovery research activity by our customers, increased competition, including competition from open source software, and reductions in profit and related information technology spending by our customers. If such declines continue and we do
not increase the revenue we derive from our other product and service offerings, our business could be adversely impacted.

Our ability to sustain or increase revenues will depend upon our success in entering new markets and in deriving additional
revenues from our existing customers. Our products are currently used primarily by molecular modeling and simulation specialists in discovery research organizations. One component of our overall business strategy is to derive more revenues
from our existing customers by expanding their usage of our products and services. Such strategy would have our customers utilize our scientific informatics platform and our tools and components to leverage vast amounts of information stored in both
corporate databases and public data sources in order to make informed scientific and business decisions during the research and development process. In addition, we seek to expand into new markets and new areas within our existing markets by
attracting and retaining personnel knowledgeable in these markets, identifying the needs of these markets and developing marketing programs to address these needs. If successfully implemented, these strategies would increase the usage of our
software and services by biologists, chemists, engineers and informaticians operating within our existing pharmaceutical and biotechnology customers, as well as by new customers in other industries. However, if our strategies are not successfully
implemented, our products and services may not achieve market acceptance or penetration in targeted new departments within our existing customers or in new industries. As a result, we may incur additional costs and expend additional resources
without being able to sustain or increase revenue.



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Our focus on offering scientific business intelligence solutions to both existing and
new customers and markets may make it more difficult for us to sustain our revenue from the sale of computer aided design modeling and simulation products to the life science discovery research marketplace. Our strategy involves transforming
our product and service offerings by utilizing our scientific informatics platform and our tools and components in order to enable our customers to more effectively utilize the vast amounts of information stored in both their databases and public
data sources in order to make informed scientific and business decisions during the research and development process. This strategy is intended to lead us to new and different markets and customers, as well as increase the usage of our offerings by
existing customers. Executing this strategy will require significant management focus and utilization of resources. Though we intend to continue to dedicate sufficient resources and management focus to our life science computer aided design modeling
and simulation products, it is possible that the strategy will result in loss of management focus and resources relating to these existing products and markets, thereby resulting in decreasing revenues from these markets. If these revenues are not
offset by increasing revenues from new markets and/or customers, our overall revenues will suffer.

We may be unable to
develop strategic relationships with our customers.Our overall business strategy is to expand usage of our products and services by expanding our current customers usage of our products and by marketing and distributing our solutions
to a broader, more diversified group of biologists, chemists, engineers and informaticians operating throughout our customers research and development organizations. A key component of this strategy is to become a preferred provider of
scientific software and solutions. Becoming a preferred provider will require substantial re-training and new skills development within our sales and service personnel and deployment of a successful account-management sales model. We believe that
developing strategic relationships with our customers may lead to additional revenue opportunities. However, executing this strategy may require significant expense, and there can be no assurance that any such relationships will develop or that such
relationships will produce additional revenue or profit opportunities.

Consolidation within the pharmaceutical and
biotechnology industries may continue to lead to fewer potential customers for our products and services. A significant portion of our customer base consists of pharmaceutical and biotechnology companies. Continued consolidation
within the pharmaceutical and biotechnology industries may result in fewer customers for our products and services. If one of the parties to a consolidation uses the products or services of our competitors, we may lose existing customers as a result
of such consolidation.

Increasing competition and increasing costs within the pharmaceutical and biotechnology
industries may affect the demand for our products and services, which may affect our results of operations and financial condition. Our pharmaceutical and biotechnology customers demand for our products is impacted by continued
demand for their products and by our customers research and development costs. Demand for our customers products could decline, and prices charged by our customers for their products may decline, as a result of increasing competition,
including competition from companies manufacturing generic drugs. In addition, our customers expenses could continue to increase as a result of increasing costs of complying with government regulations and other factors. A decrease in demand
for our customers products, pricing pressures associated with the sales of these products, and additional costs associated with product development could cause our customers to reduce research and development expenditures. Because our products
and services depend on such research and development expenditures, our revenues may be significantly reduced.

Health
care reform and restrictions on reimbursement may affect the pharmaceutical, biotechnology and industrial chemical companies that purchase or license our products or services, which may affect our results of operations and financial
condition. The continuing efforts of government and third party payers in the markets we serve to contain or reduce the cost of health care may reduce the profitability of pharmaceutical, biotechnology and industrial chemical
companies causing them to reduce research and development expenditures. Because some of our products and services depend on such research and development expenditures, our revenues may be significantly reduced. We cannot predict what actions
federal, state or private payers for health care goods and services may take in response to any health care reform proposals or legislation.



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We face strong competition in the life science market for computer aided design
modeling and simulation software and for cheminformatics products. The market for our computer aided design modeling and simulation software products for the life science market is intensely competitive. We currently face competition from
other scientific software providers, larger technology and solutions companies, in-house development by our customers, as well as academic and government institutions and the open source community.

Some of our competitors and potential competitors in this sector have longer operating histories than we do and could have greater
financial, technical, marketing, research and development and other resources. Many of our competitors offer products and services directed at more specific markets than those we target, enabling these competitors to focus a greater proportion of
their efforts and resources on these markets. Some offerings that compete with our products are developed and made available at lower cost by government organizations and academic institutions, and these entities may be able to devote substantial
resources to product development and also offer their products to users for little or no charge. We also face competition from open source software initiatives, in which developers provide software and intellectual property free over the Internet.
In addition, many of our customers spend significant internal resources in order to develop their own software. Moreover, we intend to leverage our scientific informatics platform in order to enable our customers to more effectively utilize the vast
amounts of information stored in both their databases and public data sources in order to make informed scientific and business decisions during the research and development process. This strategy could lead to competition from much larger companies
which provide general data storage and management software.

There can be no assurance that our current or potential
competitors will not develop products, services or technologies that are comparable to, superior to, or render obsolete, the products, services and technologies we offer. There can be no assurance that our competitors will not adapt more quickly
than us to technological advances and customer demands, thereby increasing such competitors market share relative to ours. Any material decrease in demand for our technologies or services may have a material adverse effect on our business,
financial condition and results of operations.

We are subject to pricing pressures in some of the markets we serve.The market for computer aided design modeling and simulation products for the life science industry is intensely competitive, which has led to significant pricing pressure and declines in average selling price over the past several years.
Based on recurring analyses of incoming orders typically conducted by our sales and marketing departments, we estimate that the average sales price of our computer aided design modeling and simulation products for the life science industry declined
approximately 10% between fiscal year 2008 and fiscal year 2009 and approximately 14% between fiscal year 2009 and fiscal year 2010. While there is not a linear correlation between our product pricing and competition in the marketplace, we believe
that our estimates of decreased prices ultimately reflect increased competition that has led and may continue to lead to pricing pressure with respect to sales of these products. In response to such increased competition and general adverse economic
conditions in this market, we may be required to further modify our pricing practices. Changes in our pricing model could adversely affect our revenue and earnings.

Revenue from our database content business has been declining and may continue to decline. As a result of the Merger, we have acquired a database content business. This business faces
intense competition from both third parties and the increasing availability of freely-available content databases. As a result, revenue from this database content business has been declining. If we are unable to reverse the decline in this business
or to increase revenues from our other businesses in order to offset the decline, our revenues and results of operations may suffer.

Our operations may be interrupted by the occurrence of a natural disaster or other catastrophic event at our primary facilities. Our research and development operations and administrative
functions are primarily conducted at our facilities in San Diego, California, San Ramon, California, Bend, Oregon, and Cambridge, United Kingdom. We also conduct sales and customer support activities at our facilities in Bedminster, New Jersey,
Burlington, Massachusetts, Paris, France, Basel, Switzerland, and Tokyo, Japan. Although we have contingency plans in effect for natural disasters or other catastrophic events, the occurrence of such events could



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still disrupt our operations. For example, our San Diego, San Ramon, Santa Clara and Tokyo facilities are located in areas that are particularly susceptible to earthquakes. Any natural disaster
or catastrophic event in our facilities or the areas in which they are located could have a significant negative impact on our operations.

Our insurance coverage may not be sufficient to avoid material impact on our financial position or results of operations resulting from claims or liabilities against us, and we may not be able to
obtain insurance coverage in the future. We maintain insurance coverage for protection against many risks of liability. The extent of our insurance coverage is under continuous review and is modified as we deem it necessary. Despite this
insurance, it is possible that claims or liabilities against us may have a material adverse impact on our financial position or results of operations. In addition, we may not be able to obtain any insurance coverage, or adequate insurance coverage,
when our existing insurance coverage expires. For example, we do not carry earthquake insurance for our facilities in Tokyo, Japan, San Ramon, California, Santa Clara, California or San Diego, California, because we do not believe the costs of such
insurance are reasonable in relation to the potential risk.

Certain Risks Related to Our Operations

Defects or malfunctions in our products could hurt our reputation among our customers, result in delayed or lost revenue and expose
us to liability. Our business and the level of customer acceptance of our products depend upon the continuous, effective and reliable operation of our software and related tools and functions. To the extent that defects cause our software to
malfunction and our customers use of our products is interrupted, our reputation could suffer and our revenue could decline or be delayed while such defects are remedied. We may also be subject to liability for the defects and malfunctions of
third party technology partners and others with whom our products and services are integrated.

Delays in the release of
new or enhanced products or services or undetected errors in our products or services may result in increased cost to us, delayed market acceptance of our products and delayed or lost revenue. To achieve market acceptance, new or enhanced
products or services can require long development and testing periods, which may result in delays in scheduled introduction. Any delays in the release schedule for new or enhanced products or services may delay market acceptance of these products or
services and may result in delays in new customer orders for these new or enhanced products or services or the loss of customer orders. In addition, new or enhanced products or services may contain a number of undetected errors or bugs
when they are first released. Although we test each new or enhanced software product or service before it is released to the market, there can be no assurance that significant errors will not be found in existing or future releases. As a result, in
the months following the introduction of certain releases, we may need to devote significant resources to correct these errors. There can be no assurance, however, that all of these errors can be corrected.

We are subject to risks associated with the operation of a global business. We derive a significant portion of our total
revenue from our operations in international markets. During the nine months ended December 31, 2010 and in fiscal years 2010 and 2009, 51%, 54% and 52%, respectively, of our total revenue was derived from our international operations. Our
global business may be affected by local economic conditions, including inflation, recession and currency exchange rate fluctuations. In addition, political and economic changes throughout the world may interfere with our or our customers
activities in particular locations and result in a material adverse effect on our business, financial condition and operating results. We anticipate that revenue from operations in international markets will continue to account for a significant
percentage of future revenue. The following table depicts our region-specific revenue as a percent of total revenue for each of the last three fiscal years:



|             |  |                  |    |   |               |  |    |               |  |  |    |  
|------------ |  | ---------------- | -- | - | ------------- |  | -- | ------------- |  |  | -- | -
|             |  | Nine MonthsEnded |    |   | Years Ended   | 
|Region       |  | December 31,2010 |    |   | March 31,2010 |  |    | March 31,2009 | 
|U.S.         |  |                  | 49 | % |               |  | 46 | %             |  |  | 48 | %
|Europe       |  |                  | 28 | % |               |  | 30 | %             |  |  | 28 | %
|Asia-Pacific |  |                  | 23 | % |               |  | 24 | %             |  |  | 24 | %



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Other potential risks inherent in our international business include:



| |  |  | unexpected changes in regulatory requirements;
| | - |  | ----------------------------------------------



| |  |  | longer payment cycles;
| | - |  | ----------------------



| |  |  | currency exchange rate fluctuations;
| | - |  | ------------------------------------



| |  |  | import and export license requirements;
| | - |  | ---------------------------------------



| |  |  | tariffs and other barriers;
| | - |  | ---------------------------



| |  |  | political unrest, terrorism and economic instability;
| | - |  | -----------------------------------------------------



| |  |  | disruption of our operations due to local labor conditions;
| | - |  | -----------------------------------------------------------



| |  |  | limited intellectual property protection;
| | - |  | -----------------------------------------



| |  |  | difficulties in collecting trade receivables;
| | - |  | ---------------------------------------------



| |  |  | difficulties in managing distributors or representatives;
| | - |  | ---------------------------------------------------------



| |  |  | difficulties in managing an organization spread over various countries;
| | - |  | -----------------------------------------------------------------------



| |  |  | difficulties in staffing foreign subsidiary or joint venture operations; and
| | - |  | ----------------------------------------------------------------------------



| |  |  | potentially adverse tax consequences.
| | - |  | -------------------------------------

Our success depends, in part, on our ability to anticipate and address these risks. There can be no assurance that we will do so effectively, or that these or other factors relating to our international
operations will not adversely affect our business or operating results.

In order to improve our financial position, we
have reduced our headcount, both prior to and as a result of the Merger, which could negatively impact our business. We have undergone several reductions-in-force over the past several years, and our workforce has declined approximately 25%
from March 31, 2006 to July 1, 2010 when we completed the Merger. In addition, as a result of the Merger, we implemented a reduction in force of approximately 15% of the combined employee workforce after the Merger. We do not believe that
these reductions have had a material adverse effect on our operations or our ability to generate revenue to date. However, while we believe we have sufficient staff to operate our business, we do not have duplicative or redundant resources in many
of our functions or operations. As a result, there can be no assurance that further attrition will not impact our ability to operate our business, or adversely impact our revenues.

Failure to attract and retain skilled personnel, could have a material adverse effect on us. Our success depends in part on
the continued service of key scientific, sales, business development, marketing, engineering, management and accounting personnel and our ability to identify, hire and retain additional personnel. There is intense competition for qualified
personnel. Immigration laws may further restrict our ability to attract or hire qualified personnel. We may not be able to continue to attract and retain the personnel necessary for the development of our business. Failure to attract and retain key
personnel could have a material adverse effect on our business, financial condition and results of operations. Further, we are highly dependent on the principal members of our technical, scientific and management staff and certain groups of
consultants. One or more of these key employees or consultants could retire or otherwise leave our employ within the foreseeable future, and the loss of any of these people could have a material adverse effect on our business, financial condition or
results of operations. We do not intend to maintain key person life insurance on the life of any employee.

Continued
turmoil in the worldwide financial markets may negatively impact our business, results of operations, and financial condition. As widely reported, financial markets in the U.S., Europe and Asia have been experiencing disruption in recent
years, including, among other things, volatility in security prices, declining valuations of certain investments, severely diminished liquidity and credit availability, the failure or



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sale of various financial institutions and an unprecedented level of government intervention. Many economists believe that the U.S. economy, and possibly the global economy, is in the midst of a
prolonged recession. This protracted downturn may hurt our business in a number of ways, including through general decreases in spending and the adverse impact on our customers ability to obtain financing, which may lead to delays or failures
in our signing customer agreements or signing customer agreements at reduced purchase levels. While we are unable to predict the likely duration and severity of the current disruption in the financial markets and the adverse economic conditions in
the U.S. and other countries, any of the circumstances mentioned above could have a material adverse effect on our revenues, financial condition and results of operations.

If we choose to acquire businesses, products or technologies instead of developing them ourselves, we may be unable to complete these acquisitions or to successfully integrate an acquired business
or technology in a cost-effective and non-disruptive manner. From time to time, we may choose to acquire businesses, products or technologies instead of developing them ourselves. We do not know if we will be able to complete any
acquisitions, or whether we will be able to successfully integrate any acquired businesses, operate them profitably or retain their key employees. Integrating any business, product or technology we acquire could be expensive and time-consuming,
disrupt our ongoing business and distract our management. In addition, in order to finance any acquisition, we may utilize our existing funds, thereby lowering the amount of funds we currently have, or might need to raise additional funds through
public or private equity or debt financings. Prolonged tightening of the financial markets may impact our ability to obtain financing to fund future acquisitions and we could be forced to obtain financing on less than favorable terms. Additionally,
equity financings may result in dilution to our stockholders. If we are unable to integrate any acquired entities, products or technologies effectively, our business could suffer. In addition, under certain circumstances, amortization of assets or
charges resulting from the costs of acquisitions could harm our business, financial condition, or operating results.

Certain Risks Related
To Our Financial Performance

We have a history of losses and our future profitability is uncertain. We
generated net losses for the nine months ended December 31, 2010, and the years ended March 31, 2007 and 2006. Although we generated net income for the years ended March 31, 2010, 2009 and 2008, we may experience future net losses
which may limit our ability to fund our operations and we may not generate income from operations in the future. Our future profitability depends upon many factors, including several that are beyond our control. These factors include without
limitation:



| |  |  | changes in the demand for our products and services;
| | - |  | ----------------------------------------------------



| |  |  | the introduction of competitive software;
| | - |  | -----------------------------------------



| |  |  | our ability to license desirable technologies;
| | - |  | ----------------------------------------------



| |  |  | changes in the research and development budgets of our customers and potential customers;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | our ability to successfully, cost effectively and timely develop, introduce and market new products, services and product enhancements; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the acquisition of any new entities or businesses which may have a dilutive effect upon our earnings.
| | - |  | -----------------------------------------------------------------------------------------------------

Our sales forecast and/or revenue projections may not be accurate. We use a pipeline system, a common industry
practice, to forecast sales and trends in our business. Our sales personnel monitor the status of proposals, including the date when they estimate a customer will make a purchase decision and the potential size of the order. We aggregate these
estimates on a quarterly basis in order to generate a sales pipeline. While the pipeline process provides us with some guidance in business planning and forecasting, it is based on estimates only and is therefore subject to risks and uncertainties.
Any variation in the conversion of the pipeline into revenue or the pipeline itself could cause us to improperly plan or budget and thereby adversely affect our business, results of operations and financial condition.



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If we are unable to license software to, or collect receivables from, our customers
our operating results may be adversely affected. While the majority of our current customers are well-established, large companies and universities, we also provide products and services to smaller companies. Our financial success depends
upon the creditworthiness and ultimate collection of amounts due from our customers, including our smaller customers with fewer financial resources. While we have not experienced significant customer defaults during the past three fiscal years, if
we are not able to collect from our customers, we may be required to write-off significant accounts receivable and recognize bad debt expenses which could materially and adversely affect our operating results.

Our quarterly operating results, particularly our quarterly cash flows, may fluctuate. Quarterly operating results may
fluctuate as a result of a number of factors, including lengthy sales cycles, market acceptance of new products and upgrades, timing of new product introductions, changes in pricing policies, changes in general economic and competitive conditions,
and the timing and integration of acquisitions. We may also experience fluctuations in quarterly operating results due to general and industry specific economic conditions that may affect the research and development expenditures of pharmaceutical
and biotechnology companies. In particular, historically we have received approximately two-thirds of our annual customer orders in the quaters ended December 31 and March 31. In accordance with our revenue recognition policies, the revenue
associated with these orders is generally recognized over the contractual license term. Therefore, because we accrue sales commissions and royalties upon the receipt of customer orders, we have generally experienced an increase in operating costs
and expenses during the quarters ended December 31 and March 31 with only a minimal corresponding incremental increase in revenue. Additionally, our cash flows from operations have historically been positive in the fiscal quarter ended
March 31 as we collect the accounts receivable generated from these customer orders, while we have historically experienced negative cash flows from operations in the other three fiscal quarters. As a result of these seasonal variations, we
believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance and that our interim financial results are not necessarily indicative of results for a full year or for any subsequent interim
period.

We may be required to indemnify Pharmacopeia Drug Discovery, Inc. (PDD), or may not be able to
collect on indemnification rights from PDD. On April 30, 2004, we spun-off our drug discovery subsidiary, PDD, into an independent, separately traded, publicly held company through the distribution to our stockholders of a dividend of
one share of PDD common stock for every two shares of our common stock. As part of the spin-off, we agreed to indemnify the indebtedness, liabilities and obligations of PDD. One such obligation includes a guarantee by us to the landlord of
PDDs obligations under certain facility leases, with respect to which PDD will indemnify us should we be required to make any payment under the guarantee. These indemnification obligations could be as significant as the remaining future
minimum lease payments, which totaled approximately $13.1 million as of December 31, 2010. PDDs ability to satisfy any such indemnification obligations (including, without limitation, PDDs commitment to indemnify us in the event of
our payment under our guarantee of its leases) will depend upon PDDs future financial strength. We cannot assure you that, if PDD becomes obligated to indemnify us for any substantial obligations, PDD will have the ability to do so. There also
can be no assurance that we will be able to satisfy any indemnification obligations to PDD. Any failure by PDD to satisfy its obligations and any required payment by us could have a material adverse effect on our business.

Enacted and proposed changes in securities laws and regulations have increased our costs and may continue to increase our costs in
the future. In recent years, there have been several changes in laws, rules, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the
Dodd-Frank Act), the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) and various other new regulations promulgated by the SEC and rules promulgated by the national securities exchanges.

The Dodd-Frank Act, enacted in July 2010, expands federal regulation of corporate governance matters and imposes requirements on
publicly-held companies, including us, to, among other things, provide stockholders with a periodic advisory vote on executive compensation and also adds compensation committee reforms and



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enhanced pay-for-performance disclosures. While some provisions of the Dodd-Frank Act are effective upon enactment, others will be implemented upon the SECs adoption of related rules and
regulations. The scope and timing of the adoption of such rules and regulations is uncertain and accordingly, the cost of compliance with the Dodd-Frank Act is also uncertain.

Sarbanes-Oxley Act required changes in some of our corporate governance and securities disclosure and compliance practices. Under Sarbanes-Oxley, publicly-held companies, including us, are required to,
among other things, furnish independent annual audit reports regarding the existence and reliability of their internal control over financial reporting and have their chief executive officer and chief financial officer certify as to the accuracy and
completeness of their financial reports.

These and other new or changed laws, rules, regulations and standards are, or will
be, subject to varying interpretations in many cases due to their lack of specificity. As a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing
uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased
general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. Further, compliance with new and existing laws, rules, regulations and standards may make it more
difficult and expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. Members of our board of directors and our principal
executive officer and principal financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified directors and executive
officers, which could harm our business. We continually evaluate and monitor regulatory developments and cannot estimate the timing or magnitude of additional costs we may incur as a result.

Our business, financial condition and results of operations may be adversely impacted by fluctuations in foreign currency exchange
rates. Our international sales generally are denominated in local currencies. Fluctuations in the value of currencies in which we conduct business relative to the U.S. dollar result in currency transaction gains and losses, and the impact of
future exchange rate fluctuations cannot be accurately predicted. Future fluctuations in currency exchange rates may have a material adverse impact on revenue from international sales, and thus on our business, financial condition and results of
operations. When deemed appropriate, we may engage in currency exchange rate hedging transactions in an attempt to mitigate the impact of adverse exchange rate fluctuations. However, currency hedging policies may not be successful, and they may
increase the negative impact of exchange rate fluctuations.

If we consume cash more quickly than expected, we may be
unable to raise additional capital and we may be forced to curtail operations. We anticipate that our existing capital resources will be adequate to fund our operations for at least the next twelve months. However, our capital requirements
will depend on many factors, including the potential acquisition of other businesses or technologies. If we determine that we must raise additional capital, we may attempt to do so through public or private financings involving debt or equity.
However, additional capital may not be available on favorable terms, or at all. If adequate funds are not available, we may be required to curtail operations significantly or to obtain funds by entering into arrangements with collaborative partners
or others that may require us to relinquish rights to certain of our technologies, products or potential markets that we would not otherwise relinquish.

Certain Risks Related to Owning Our Stock

We expect that our stock
price will fluctuate significantly, and as a result, our stockholders may not be able to resell their shares at or above their original investment price. The stock market, historically and in recent years, has experienced significant
volatility particularly with technology company stocks. The volatility of technology company stock prices often does not relate to the operating performance of the companies represented by the stock. Factors that could cause volatility in the price
of our common stock include without limitation:



| |  |  | actual and anticipated fluctuations in our quarterly financial and operating results;
| | - |  | -------------------------------------------------------------------------------------



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| |  |  | market conditions in the technology and software sectors;
| | - |  | ---------------------------------------------------------



| |  |  | issuance of new or changed securities analysts reports or recommendations;
| | - |  | ---------------------------------------------------------------------------



| |  |  | developments or disputes concerning our intellectual property or other proprietary rights or other legal claims;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | introduction of technological innovations or new commercial products by us or our competitors;
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | market acceptance of our products and services;
| | - |  | -----------------------------------------------



| |  |  | additions or departures of key personnel; and
| | - |  | ---------------------------------------------



| |  |  | the acquisition of new businesses or technologies
| | - |  | -------------------------------------------------

These and other external factors may cause the market price and demand for our common stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares of common
stock and may otherwise negatively affect the liquidity of our common stock.

As institutions hold the majority of our
common stock in large blocks, substantial sales by these stockholders could depress the market price for our shares. As of February 21, 2011, the top ten institutional holders of our common stock held approximately 48.9% of our
outstanding common stock. As a result, if one or more of these major stockholders were to sell all or a portion of their holdings, or if the market were to perceive that such sale or sales may occur, the market price of our common stock may fall
significantly.

Because we do not intend to pay dividends, our stockholders will benefit from an investment in our
common stock only if our stock price appreciates in value. We have never declared or paid any cash dividends on our common stock. We currently intend to retain our future earnings, if any, to finance the expansion of our business and do not
expect to pay any cash dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend entirely upon any future appreciation in its value. There is no guarantee that our common stock will appreciate in
value or even maintain the price at which it was purchased.

Anti-takeover provisions under the Delaware General
Corporation Law, provisions in our certificate of incorporation and bylaws, and our adoption of a stockholder rights plan may make the accomplishment of mergers or the assumption of control by a principal stockholder more difficult, thereby making
the removal of management more difficult. Certain provisions of the Delaware General Corporation Law may delay or deter attempts to secure control of our company without the consent of our management. Also, our governing documents provide
for a staggered board of directors, which will make it more difficult for a potential acquirer to gain control of our board of directors. In 2002, we adopted a stockholder rights plan, which is triggered upon commencement or announcement of a
hostile tender offer or when any one person or group acquires 15% or more of our common stock. The rights plan, once triggered, enables our stockholders (other than the stockholder responsible for triggering the rights plan) to purchase our common
stock at reduced prices. These provisions of our governing documents and stockholder rights plan, and of Delaware law, could have the effect of delaying, deferring or preventing a change of control, including without limitation a proxy contest,
making the acquisition of a substantial block of our common stock more difficult. The provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock. Further, the existence of these
anti-takeover measures may cause potential bidders to look elsewhere, rather than initiating acquisition discussions with us.

Certain
Risks Related to Intellectual Property

We may not be able to protect adequately the trade secrets and confidential
information that we disclose to our employees. We rely upon trade secrets, technical know-how and continuing technological innovation to develop and maintain our competitive position. Competitors through their independent discovery (or
improper means, such as unauthorized disclosure or industrial espionage) may come to know our proprietary information. We generally require employees and consultants to execute confidentiality and assignment-of-inventions



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agreements. These agreements typically provide that all materials and confidential information developed by or made known to the employee or consultant during his, her or its relationship with us
are to be kept confidential, and that all inventions arising out of the employees or consultants relationship with us are our exclusive property. Our employees and consultants may breach these agreements, and in some instances we may not
have an adequate remedy. Additionally, in some instances, we may have failed to require that employees and consultants execute confidentiality and assignment-of-inventions agreements.

Foreign laws may not afford us sufficient protections for our intellectual property, and we may not seek patent protection outside
the U.S. We believe that our success depends, in part, upon our ability to protect our intellectual property throughout the world. However, the laws of some foreign countries may not be as comprehensive as those of the U.S. and may not be
sufficient to protect our proprietary rights abroad. In addition, we generally do not pursue patent protection outside the U.S. because of cost and confidentiality concerns. Accordingly, our international competitors could obtain foreign patent
protection for, and market overseas, products and technologies for which we are seeking patent protection in the U.S.

A
patent issued to us may not be sufficiently broad to protect adequately our rights in intellectual property to which the patent relates. Due to cost and other considerations, we generally do not rely on patent protection to enforce our
intellectual property rights, and have filed only a limited number of patent applications. Even if patents are issued to us, these patents may not sufficiently protect our interest in our software or other technologies because the scope of
protection provided by any patents issued to or licensed by us are subject to the uncertainty inherent in patent law. Third parties may be able to design around these patents or develop unique products providing effects similar to our products. In
addition, others may discover uses for our software or technologies other than those uses covered in our patents, and these other uses may be separately patentable. A number of pharmaceutical and biotechnology companies, software organizations and
research and academic institutions, have developed technologies, filed patent applications or received patents on various technologies that may be related to our business. Some of these technologies, patent applications or patents may conflict with
our technologies, patent applications or patents. These conflicts could also limit the scope of patents, if any, that we may be able to obtain, or result in the denial of our patent applications.

We may be subject to claims of infringement by third parties. A number of patents may have been issued or may be issued in
the future that could cover certain aspects of our technology or functionality of our products and could prevent us from using technology that we use or expect to use, or making or selling certain of our products. In addition, to the extent our
employees are involved in research areas similar to those areas in which they were involved at their former employers, we may inadvertently use or disclose alleged trade secrets or other proprietary information of their former employer. Thus, our
products may infringe patent or other intellectual property rights of third parties, and we may be subject to infringement claims by third parties. Any such claims, with or without merit, could be time consuming to defend, result in costly
litigation, divert managements attention and resources, cause product shipment delays or require us to enter into royalty or licensing agreements. Such licenses may not be available on terms acceptable to us, if at all. In the event of a
successful claim of product infringement against us, our failure or inability to license or design around the infringed technology could have a material adverse effect on our business, financial condition and results of operations.

Third party software codes incorporated into our products could subject us to liability or limit our ability to sell such
products. Some of our products include software codes licensed from third parties, including the open source community. Some of these licenses impose certain obligations upon us, including royalty and indemnification obligations. In the case
of codes licensed from the open source community, the licenses may also limit our ability to sell products containing such code. Though we generally review the applicable licenses prior to incorporating third party code into our software products,
there can be no assurance that such third party codes incorporated into our products would not subject us to liability or limit our ability to sell the products containing such code, thereby having a material adverse affect upon our business.



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Certain Risks Resulting from the Merger

Any failure to integrate successfully the businesses of Accelrys and Symyx in the expected timeframe will adversely affect the
combined companys future results.The success of the Merger will depend, in large part, on the ability of the combined company to realize the anticipated benefits, including annual net operating synergies, from combining the businesses
of Accelrys and Symyx. To realize these anticipated benefits, the combined company must successfully integrate the businesses of Accelrys and Symyx. This integration will be complex and time-consuming.

The failure to integrate successfully and to manage successfully the challenges presented by the integration process may result in the
combined companys failure to achieve some or all of the anticipated benefits of the Merger.

Potential difficulties that
may be encountered in the integration process include the following:



| |  |  | lost sales and customers as a result of customers of either of the two companies deciding not to do business with the combined company;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | complexities associated with managing the larger, more complex, combined business;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | integrating personnel from the two companies while maintaining focus on providing consistent, high quality products;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | potential unknown liabilities and unforeseen expenses, delays or regulatory conditions associated with the Merger; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | performance shortfalls at one or both of the companies as a result of the diversion of managements attention caused by completing the Merger and
integrating the companies operations.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The combined companys future results will suffer if
the combined company does not effectively manage its expanded operations following the Merger.The size of the combined companys business is significantly larger than businesses of Accelrys and Symyx as stand-alone entities prior to
the Merger. The combined companys future success depends, in part, upon its ability to manage this expanded business, which will pose substantial challenges for the combined companys management, including challenges related to the
management and monitoring of new operations and associated increased costs and complexity. We cannot assure you that the combined company will be successful or will realize the expected operating efficiencies, annual net operating synergies, revenue
enhancements and other benefits currently anticipated to result from the Merger.

The Merger may not be accretive and
may cause dilution to the combined companys earnings per share, which may negatively impact the price of the common stock of the combined company following the completion of the Merger.We anticipate that the Merger will be accretive
to the earnings per share of the combined company for the first full calendar year following the completion of the Merger. This expectation is based on preliminary estimates and assumes certain synergies expected to be realized by the combined
company during such time. These estimates and assumptions could materially change due to additional transaction-related costs, the failure to realize any or all of the benefits expected in the Merger or other factors beyond the our control. All of
these factors could delay, decrease or eliminate the expected accretive effect of the Merger and cause resulting dilution to the combined companys earnings per share or to the price of the common stock of the combined company.

The Merger has resulted in changes to our board of directors that may affect the combined companys operations.Upon
completion of the Merger, the composition of our board of directors changed in accordance with the Merger Agreement. The combined companys board of directors now consists of 10 members, including the six directors of Accelrys prior to the
Merger and four of the individuals who served as directors of Symyx prior to the Merger. This new composition of our board of directors may affect the business strategy and operating decisions of the combined company.



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The success of the combined company will depend on relationships with third parties
and pre-existing customers of Accelrys and Symyx, which relationships may be adversely affected by customer preferences or public attitudes about the Merger.The combined companys success will be dependent on the ability to maintain
and renew relationships with pre-existing customers and other clients of both Accelrys and Symyx and to establish new client relationships. There can be no assurance that the business of the combined company will be able to maintain pre-existing
customer contracts and other business relationships, or enter into or maintain new customer contracts and other business relationships, on acceptable terms, if at all. The failure to maintain important customer relationships could have a material
adverse effect on the business, financial condition or results of operations of the combined company.

The combined
companys ability to utilize its net operating loss (NOL) and tax credit carryforwards in the future is limited by Sections 382 and 383 of the Code.In general, under Section 382 and 383 of the Code, a corporation that
undergoes an ownership change is subject to limitations on its ability to utilize its pre-change NOL and credit carryforwards to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of
certain stockholders increases by more than 50 percentage points over such stockholders lowest percentage ownership during the testing period (which is generally three years). The amount of the annual limitation is generally equal to the value
of the stock of the corporation immediately prior to the ownership change, multiplied by the adjusted federal tax-exempt rate set by the Internal Revenue Service.

As a result of the Merger, Accelrys and Symyx have undergone an ownership change for purposes of Section 382 of the Code. Accordingly, the combined companys ability to utilize
Accelryss and Symyxs NOLs and tax credit carryforwards will be limited as described in the preceding paragraph. These limitations could in turn result in increased future tax payments for the combined company, which could have a material
adverse effect on the business, financial condition or results of operations of the combined company.

The price of our
common stock following the Merger may be affected by factors different from those that affected the price of shares of Accelrys or Symyx prior to the Merger. The business of Accelrys differs from the business of Symyx in important respects
and, accordingly, the results of operations of the combined company and the price of our common stock following the completion of the Merger may be affected by factors different from those factors that affected the independent results of operations
of Accelrys and Symyx. As a result, the price of our common stock could fluctuate in a manner or based on factors not in keeping with the historical results of fluctuations in the stock prices of Accelrys or Symyx prior to the Merger.



|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

None



|Item 2. | Properties
|------- | ----------

The following
is a summary of our principal business locations:



|                          |  |                                                                                                    |  |           |      |  |            |  |        | 
|------------------------- |  | -------------------------------------------------------------------------------------------------- |  | --------- | ---- |  | ---------- |  | ------ | 
|Location                  |  | Principal activities                                                                               |  | LeaseEnds |      |  | SquareFeet | 
|U.S.                      |  |                                                                                                    |  |           |      |  |            |  |        | 
|San Diego, California,    |  | Corporate headquarters, sales, customer support, marketing, product development and administration |  |           | 2013 |  |            |  | 68,436 | 
|San Ramon, California     |  | Product development and administration                                                             |  |           | 2016 |  |            |  | 64,409 | 
|Santa Clara, California   |  | Finance and administration                                                                         |  |           | 2011 |  |            |  | 6,994  | 
|Bend, Oregon              |  | Product development and administration                                                             |  |           | 2014 |  |            |  | 7,292  | 
|Bedminster, New Jersey    |  | Product development and administration                                                             |  |           | 2015 |  |            |  | 7,855  | 
|Burlington, Massachusetts |  | Sales                                                                                              |  |           | 2014 |  |            |  | 4,830  | 



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|                   |  |                                                                            |  |           |      |  |            |  |        | 
|------------------ |  | -------------------------------------------------------------------------- |  | --------- | ---- |  | ---------- |  | ------ | 
|Location           |  | Principal activities                                                       |  | LeaseEnds |      |  | SquareFeet | 
|Europe             |  |                                                                            |  |           |      |  |            |  |        | 
|Cambridge, U.K.    |  | Sales, customer support, marketing, product development and administration |  |           | 2022 |  |            |  | 24,451 | 
|Paris, France      |  | Sales and administration                                                   |  |           | 2015 |  |            |  | 2,486  | 
|Basel, Switzerland |  | Sales, customer support                                                    |  |           | 2013 |  |            |  | 8,148  | 
|Cologne, Germany   |  | Sales, customer support                                                    |  |           | 2012 |  |            |  | 2,325  | 
|                   |  |                                                                            | 
|Asia               |  |                                                                            |  |           |      |  |            |  |        | 
|Tokyo, Japan       |  | Sales, customer support and administration                                 |  |           | 2012 |  |            |  | 9,001  | 
|Bangalore, India   |  | Sales and administration                                                   |  |           | 2013 |  |            |  | 2,500  | 

We believe our existing
properties are in good condition and are adequate to meet our current and reasonably foreseeable future requirements.



|Item 3. | Legal Proceedings
|------- | -----------------

Prior
to the completion of the Merger, several lawsuits were filed against Symyx, the members of the Symyx board of directors and certain executive officers of Symyx, Accelrys and Merger Sub in purported class action lawsuits brought by individual Symyx
stockholders challenging the Merger. The first of such lawsuits was a class action lawsuit filed in the Superior Court of the State of California, County of Santa Clara, purportedly on behalf of the stockholders of Symyx, against Symyx and its
directors and chief financial officer, as well as Accelrys and Merger Sub, alleging, among other things, that Symyxs directors breached their fiduciary duties to the stockholders of Symyx in connection with the proposed Merger. Subsequent to
the filing of such lawsuit, several additional suits were filed, also in Santa Clara County, each of which was substantially similar to the first lawsuit. The lawsuits were ultimately consolidated into a single action and on May 20, 2010, the
plaintiffs filed a single consolidated complaint (the Complaint). The Complaint serves as the only complaint in the combined litigation going forward (the Consolidated Action), which is pending in the Superior Court for the
County of Santa Clara (the Court). The Complaint, like the previously filed complaints, alleges, among other things, that Symyxs directors breached their fiduciary duties to the stockholders of Symyx in connection with the Merger,
and was seeking, among other things, to enjoin the defendants from completing the Merger pursuant to the terms of the Merger Agreement.

On June 22, 2010, the defendants entered into a memorandum of understanding (the MOU) with the plaintiffs, pursuant to which the defendants and the plaintiffs agreed to settle the
Consolidated Action. Subject to court approval and further definitive documentation the MOU resolves the allegations by the plaintiffs against the defendants made in connection with the Merger and the Merger Agreement, and provides a release and
settlement by the purported class of Symyx stockholders with prejudice of all asserted claims against the defendants without costs to any defendant (other than as expressly provided in the MOU), in exchange for Symyxs agreement to provide
additional supplemental disclosures to the joint proxy statement/prospectus issued by Accelrys and Symyx in connection with the Merger. Accelrys and Symyx made the appropriate supplemental disclosures on June 23, 2010. On January 28, 2011
the plaintiffs filed the Unopposed Notice of Motion for Preliminary Approval of a Class Action Settlement and supporting documents. On February 25, 2011, the Court signed a preliminary approval order, which granted preliminary certification of
a non-opt out class and set a settlement hearing for April 22, 2011 to determine whether a final order and judgment should be granted to settle this matter. Upon settlement, we will be obligated to pay any attorneys fees and expenses awarded to
the plaintiffs, if any. If the settlement is not approved or the conditions of the MOU are not satisfied, we intend to take all appropriate actions to defend against the allegations made in the Complaint.

In addition to the foregoing, we are subject to various claims and legal proceedings arising in the ordinary course of our business.
While any legal proceeding has an element of uncertainty, management believes that the disposition of such matters, in the aggregate, will not have a material effect on our results of operations.



|Item 4. | Removed and Reserved
|------- | --------------------



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PART II



|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------

Market for Common Stock

Our common stock trades on the NASDAQ Global Market under the symbol ACCL. The following table sets forth, for the periods
indicated, the range of high and low sale prices per share of our common stock:



|                                    |  |      |      |  |     |   |      | 
|----------------------------------- |  | ---- | ---- |  | --- | - | ---- | 
|                                    |  | High |      |  | Low |  
|Nine Months Ended December 31, 2010 |  |      |      |  |     |   |      | 
|Quarter Ended June 30, 2010         |  | $    | 7.55 |  |     | $ | 6.15 | 
|Quarter Ended September 30, 2010    |  | $    | 7.29 |  |     | $ | 5.96 | 
|Quarter Ended December 31, 2010     |  | $    | 8.95 |  |     | $ | 6.50 | 
|Year Ended March 31, 2010           |  |      |      |  |     |   |      | 
|First Quarter                       |  | $    | 6.25 |  |     | $ | 3.85 | 
|Second Quarter                      |  | $    | 6.28 |  |     | $ | 5.43 | 
|Third Quarter                       |  | $    | 5.88 |  |     | $ | 4.92 | 
|Fourth Quarter                      |  | $    | 6.75 |  |     | $ | 5.33 | 
|Year Ended March 31, 2009           |  |      |      |  |     |   |      | 
|First Quarter                       |  | $    | 7.03 |  |     | $ | 4.81 | 
|Second Quarter                      |  | $    | 5.73 |  |     | $ | 4.24 | 
|Third Quarter                       |  | $    | 5.63 |  |     | $ | 2.63 | 
|Fourth Quarter                      |  | $    | 4.56 |  |     | $ | 3.05 | 

From the date of our
initial public offering on December 5, 1995 until February 26, 2004, our stock traded under the symbol PCOP. Since February 27, 2004, our common stock has traded under the symbol ACCL.

Holders of Record

As of
February 21, 2011, there were 377 holders of record of our common stock.

Dividends

No cash dividends have been paid on the common stock to date, nor do we anticipate paying dividends in the foreseeable future.

Equity Compensation Plan Information

The information required by Item 201(d) of Regulation S-K will be included in the definitive proxy statement for our 2011 annual meeting of stockholders or an amendment to this Report (either of
the foregoing, a Subsequent Filing) to be filed with the SEC within 120 days after our fiscal period ended December 31, 2010, and is incorporated into this Report by reference.

Issuer Purchases of Equity Securities

On November 10, 2010, we entered into a Stock Repurchase Plan with a broker (the Repurchase Plan), in accordance with Rule 10b5-1 of the Exchange Act. Pursuant to the Repurchase Plan, and
subject to the conditions set forth therein and the provisions of Rule 10b-18 of the Exchange Act, we instructed the broker to purchase for our account up to $6.0 million worth of our common stock by March 31, 2011. On the basis of the
foregoing, we purchased $3.0 million worth of our common stock in the quarter ended December 31, 2010, and we purchased the remaining $3.0 million worth of our common stock in early 2011.



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On March 11, 2011, we entered into a second Stock Repurchase Plan with a broker (the
Second Repurchase Plan) in accordance with Rule 10b5-1 of Exchange Act. Pursuant to the Second Repurchase Plan, and subject to the conditions set forth therein and the provisions of Rule 10b-18 of the Exchange Act, we have instructed the
broker to purchase for our account up to an additional $4.0 million worth of our common stock by September 30, 2011.

The
following table sets forth information concerning purchases of our common stock, in each fiscal month during the three months ended December 31, 2010, which upon repurchase are classified as treasury shares available for general corporate
purposes:



|                       |  |                                 |         |  |                             |   |      |                                                                               |  |  |                                                                                    |  |  |   |       | 
|---------------------- |  | ------------------------------- | ------- |  | --------------------------- | - | ---- | ----------------------------------------------------------------------------- |  |  | ---------------------------------------------------------------------------------- |  |  | - | ----- | 
|                       |  | Total number ofshares purchased |         |  | Average pricepaid per share |   |      | Total number of sharespurchased as part ofpublicly announcedplans or
programs |  |  | Approximatedollar value ofshares that mayyet be purchasedunder
the planor programs | 
|                       |  |                                 |         |  |                             |   |      |                                                                               |  |  | (In thousands)                                                                     | 
|On November 2, 2010    |  |                                 |         |  |                             |   |      |                                                                               |  |  |                                                                                    |  |  | $ | 3,000 | 
|11/3/2010  11/30/2010 |  |                                 | 177,923 |  |                             | $ | 8.40 |                                                                               |  |  | 177,923                                                                            |  |  | $ | 1,505 | 
|12/1/2010  12/31/2010 |  |                                 | 176,032 |  |                             | $ | 8.50 |                                                                               |  |  | 176,032                                                                            |  |  |   |      | 



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Comparison of Stockholder Return

The following information shall not be deemed to be filed with the SEC nor shall this information be incorporated by
reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate it by reference into a filing.

The following graph compares the five-year cumulative total return through December 31, 2010 for our common stock, which is traded
under the symbol ACCL on the NASDAQ Global Market, to a broad market index, namely the NASDAQ U.S. Composite Index (the NASDAQ Index) and an industry index, namely the NASDAQ Computer and Data Processing Services Index (the
Industry Index). This graph assumes an investment of $100 was made in both our common stock and in each index on March 31, 2006 and further assumes that all dividends were reinvested. The stock price performance on the graph is not
necessarily indicative of future stock price performance.

LOGO



|                  |  |                |        |  |              |  |        |                |  |  |        | 
|----------------- |  | -------------- | ------ |  | ------------ |  | ------ | -------------- |  |  | ------ | 
|                  |  | Accelrys, Inc. |        |  | NASDAQ Index |  |        | Industry Index | 
|March 31, 2006    |  |                | 100.00 |  |              |  | 100.00 |                |  |  | 100.00 | 
|March 31, 2007    |  |                | 87.76  |  |              |  | 103.69 |                |  |  | 109.11 | 
|March 31, 2008    |  |                | 75.38  |  |              |  | 96.72  |                |  |  | 107.49 | 
|March 31, 2009    |  |                | 54.75  |  |              |  | 52.42  |                |  |  | 79.41  | 
|March 31, 2010    |  |                | 84.73  |  |              |  | 82.24  |                |  |  | 126.15 | 
|December 31, 2010 |  |                | 114.17 |  |              |  | 92.34  |                |  |  | 142.60 | 



|Item 6. | Selected Consolidated Financial Data
|------- | ------------------------------------

Change in Fiscal Year End

On August 3, 2010, our board of directors approved a change in our fiscal year end from March 31 to December 31. The fiscal
year end change was effective December 31, 2010 and resulted in a nine-month reporting period from April 1, 2010 to December 31, 2010. As a result, this Report is a transition report and



25



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includes financial information for the Transition Period. Subsequent to this Report, our annual reports on Form 10-K will cover the calendar year January 1 to December 31. All
references to years, unless otherwise noted, refer to the twelve-month fiscal year, which prior to April 1, 2010, ended on March 31, and beginning with January 1, 2011, ends on December 31, of each year.

The following selected consolidated financial data have been derived from our audited consolidated financial statements. This data should
be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes thereto included elsewhere in this Report. The following
table sets forth our selected consolidated financial data as of and for nine months ended December 31, 2010 and each of the years ended March 31, 2010, 2009, 2008 and 2007.



|                                                                                              |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|--------------------------------------------------------------------------------------------- |  | ---------------- | -------- | - | ------------- | - | -------- | ------------- |  | - | ------------- | - |  | ------------- | -------- | - |  | - | -------- | -
|                                                                                              |  | Nine MonthsEnded |          |   | Years Ended   |  
|                                                                                              |  | December 31,2010 |          |   | March 31,2010 |   |          | March 31,2009 |  |   | March 31,2008 |   |  | March 31,2007 |         
|Consolidated Statements of Operations:                                                        |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Revenue                                                                                       |  | $                | 80,205   |   |               | $ | 82,959   |               |  | $ | 80,981        |   |  | $             | 79,739   |   |  | $ | 80,955   |  
|Cost of revenue:                                                                              |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Cost of revenue                                                                               |  |                  | 23,528   |   |               |   | 14,136   |               |  |   | 14,749        |   |  |               | 14,376   |   |  |   | 14,704   |  
|Amortization of completed technology                                                          |  |                  | 4,887    |   |               |   | 844      |               |  |   | 1,524         |   |  |               | 1,524    |   |  |   | 1,533    |  
|                                                                                              |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Total cost of revenue                                                                         |  |                  | 28,415   |   |               |   | 14,980   |               |  |   | 16,273        |   |  |               | 15,900   |   |  |   | 16,237   |  
|                                                                                              |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Gross margin                                                                                  |  |                  | 51,790   |   |               |   | 67,979   |               |  |   | 64,708        |   |  |               | 63,839   |   |  |   | 64,718   |  
|Operating expenses:                                                                           |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Product development                                                                           |  |                  | 22,080   |   |               |   | 16,045   |               |  |   | 15,978        |   |  |               | 18,832   |   |  |   | 20,067   |  
|Sales and marketing                                                                           |  |                  | 34,848   |   |               |   | 38,042   |               |  |   | 36,083        |   |  |               | 34,552   |   |  |   | 32,356   |  
|General and administrative                                                                    |  |                  | 11,697   |   |               |   | 12,479   |               |  |   | 12,070        |   |  |               | 11,131   |   |  |   | 13,791   |  
|Business consolidation and restructuring costs (recoveries)                                   |  |                  | 16,493   |   |               |   | (86      | )             |  |   | 896           |   |  |               | 179      |   |  |   | 1,201    |  
|Purchased intangible asset amortization                                                       |  |                  | 2,712    |   |               |   |         |               |  |   |              |   |  |               |         |   |  |   |         |  
|                                                                                              |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Total operating expenses                                                                      |  |                  | 87,830   |   |               |   | 66,480   |               |  |   | 65,027        |   |  |               | 64,694   |   |  |   | 67,415   |  
|Operating income (loss)                                                                       |  |                  | (36,040  | ) |               |   | 1,499    |               |  |   | (319          | ) |  |               | (855     | ) |  |   | (2,697   | )
|Interest and other income, net                                                                |  |                  | 1,377    |   |               |   | 914      |               |  |   | 1,608         |   |  |               | 3,237    |   |  |   | 1,954    |  
|                                                                                              |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Income (loss) before taxes                                                                    |  |                  | (34,663  | ) |               |   | 2,413    |               |  |   | 1,289         |   |  |               | 2,382    |   |  |   | (743     | )
|Income tax expense (benefit)                                                                  |  |                  | (14,055  | ) |               |   | 1,218    |               |  |   | 1,195         |   |  |               | 1,061    |   |  |   | 782      |  
|                                                                                              |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Net income (loss)                                                                             |  | $                | (20,608  | ) |               | $ | 1,195    |               |  | $ | 94            |   |  | $             | 1,321    |   |  | $ | (1,525   | )
|                                                                                              |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Basic and diluted net income (loss) per share amounts:                                        |  | $                | (0.44    | ) |               | $ | 0.04     |               |  | $ | 0.00          |   |  | $             | 0.05     |   |  | $ | (0.06    | )
|Weighted average shares used to compute basic and diluted net income (loss) per share amounts |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Basic                                                                                         |  |                  | 46,446   |   |               |   | 27,504   |               |  |   | 27,093        |   |  |               | 26,692   |   |  |   | 26,351   |  
|Diluted                                                                                       |  |                  | 46,446   |   |               |   | 27,760   |               |  |   | 27,203        |   |  |               | 27,185   |   |  |   | 26,351   |  
|                                                                                              |  |                  |          |   |              
|                                                                                              |  | December 31,2010 |          |   | March 31,2010 |   |          | March 31,2009 |  |   | March 31,2008 |   |  | March 31,2007 |         
|Consolidated Balance Sheet Data:                                                              |  |                  |          |   |               |   |          |               |  |   |               |   |  |               |          |   |  |   |          |  
|Cash, cash equivalents, marketable securities and restricted cash and marketable securities   |  | $                | 141,052  |   |               | $ | 93,082   |               |  | $ | 81,769        |   |  | $             | 76,381   |   |  | $ | 70,757   |  
|Total assets                                                                                  |  |                  | 363,282  |   |               |   | 171,205  |               |  |   | 160,614       |   |  |               | 156,091  |   |  |   | 154,601  |  
|Total deferred revenue                                                                        |  |                  | 67,459   |   |               |   | 61,325   |               |  |   | 57,224        |   |  |               | 58,341   |   |  |   | 56,133   |  
|Noncurrent liabilities(1)                                                                     |  |                  | 11,331   |   |               |   | 6,953    |               |  |   | 7,204         |   |  |               | 8,140    |   |  |   | 8,342    |  
|Accumulated deficit                                                                           |  |                  | (199,973 | ) |               |   | (179,365 | )             |  |   | (180,560      | ) |  |               | (180,654 | ) |  |   | (182,681 | )
|Total stockholders equity                                                                    |  |                  | 247,646  |   |               |   | 86,104   |               |  |   | 80,759        |   |  |               | 74,882   |   |  |   | 68,990   |  



|(1) | Noncurrent liabilities primarily consist of long-term, lease-related liabilities and accrued income tax.
|--- | --------------------------------------------------------------------------------------------------------



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|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with
Selected Consolidated Financial Data and our consolidated financial statements and related notes thereto included elsewhere in this Report.

In addition to historical information, the following discussion contains forward-looking statements that are subject to certain risks and uncertainties, including those risks and uncertainties described
in Item 1A of this Report. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to those risks and uncertainties.

Overview

On July 1, 2010, pursuant to the terms of the Merger
Agreement, Merger Sub, our wholly-owned subsidiary, merged with and into Symyx, with Symyx surviving as our wholly-owned subsidiary. Symyxs operating results are included in our consolidated financial statements and results of operations
beginning July 1, 2010.

Our Business

We develop and commercialize scientific informatics software products and services for industries and organizations that rely on scientific innovation to differentiate themselves in the marketplace. In
July 2010, we completed the Merger, increasing the breadth and depth of our scientific product portfolio by adding a set of complementary scientific applications, content databases and technologies. Prior to the Merger, our products were primarily
utilized by our customers research organizations. As a result of the Merger we have expanded our focus to include products that are utilized by our customers development organizations. Collectively, therefore, our products and services
are intended to optimize our customers research and development value chain, from early research through development into early manufacturing. Our software is used by our customers scientists, biologists, chemists and information
technology professionals to design, execute and manage scientific experiments in-silico or in the lab and to aggregate, mine, manage, analyze and interactively report on the scientific data from those experiments. The ability to integrate and access
data from diverse data sources, and to make that information accessible throughout the scientific value chain, enables our customers to reduce costs, enhance productivity and more efficiently provide innovative and effective products to their
customers.

Our customers include leaders from a variety of industries, including pharmaceutical, biotechnology, agricultural,
energy, chemicals, aerospace, consumer packaged goods and industrial products, as well as various government and academic entities. We market our software products and services worldwide, principally through our direct sales force, augmented by the
use of third party distributors. We are headquartered in San Diego, California and were incorporated in Delaware in 1993.

Description
of Our Markets and Business

Our customers differentiate themselves through scientific innovation. As a result, innovation
in the discovery and development of new products, compliance with applicable regulations, rapid, cost-effective commercialization of such products and the ability to protect the intellectual property therein is crucial to our customers
success. Therefore, they invest considerable resources in technologies that help identify productive new pathways for research projects, help develop new materials, increase the efficiency of discovery and development processes, and otherwise enable
them to maximize the use of scientific data, information and knowledge. Our software solutions allow these companies to effectively design, plan and execute scientific experiments in a repeatable process and in compliance with regulations; leverage
the vast amounts of information stored in both corporate databases and public data sources to optimize their processes and accelerate innovation; model, predict and analyze potential scientific outcomes; and access comprehensive, integrated and
cross-referenced databases and reference works.



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The pharmaceutical and biotechnology industries are a very important part of our business.
Our products have been widely adopted within the research functions of businesses in these industries, but less widely adopted by the development functions of such businesses. In addition, these markets present challenges due to industry
consolidation, the maturity of these markets, patent expirations, reductions in the level of discovery research activity, increased competition, including competition from open source software and outsourcing of research to other entities. The other
industries to which we market our products, including energy, material, agricultural, aerospace and consumer packaged goods, are earlier in the adoption curve for such scientific software products, which we view as both a challenge and an
opportunity.

Business Strategy

Scientific research and development organizations face several challenges that impact their ability to comply with applicable regulations, protect their intellectually property and rapidly and
cost-effectively bring products to market. Among these challenges is the fact that scientific data is often found in disparate databases and that research, development and early manufacturing processes are disconnected, manually intensive,
inefficient and repetitive.

Our overall strategy is to help our customers address these challenges by offering them an open
enterprise-scale scientific software platform and a broad portfolio of scientific software applications leveraging our deep domain expertise in chemistry, biology and the materials sciences. We believe the combination of our enterprise R&D
platform and associated set of applications including the ELN, computer aided design modeling and simulation software, data management and informatics software, content databases, and professional services help optimize our customers
scientific value chain.

Historically, we have had a strong presence in our customers research organizations.
Symyxs products have also had a presence in its customers development organizations. We believe that the combination of our products with the products we acquired as a result of the Merger ( most significantly its ELN) enables us to
provide greater value to the development function of these organizations. Our strategy is to continue to integrate and enhance our offerings in order to further enhance the value of the products we acquired and the value of our products
collective portfolio to these organizations, thus enabling us to expand upon our presence in the research and development organizations of our existing customers. In addition, we believe such enhanced offerings will enable us to extend our presence
to new customers development organizations. We also intend to continue to develop advanced analysis, scientific and reporting component collections in order to extend our platforms value to and use by our customers.

Our strategy also includes offering professional services to further tailor our enterprise R&D platform to our customers
individual business needs, thereby increasing its utility and value. Because our enterprise R&D platform is the underlying operating platform for many products in our broad portfolio, and integration with the Symyx applications is a development
priority, we expect the use of these products to expand as the use of our platform grows, thus further increasing our sales and value to our customers.

Our enterprise R&D platform is an open platform. We partner with third party organizations and academic institutions which develop scientific software and services, and we enable and encourage these
companies to develop applications that operate on our platform, further proliferating its utility and value to our customers.

We also focus on industries in markets where scientific innovation is a key differentiator, but the use of scientific software solutions
has not been widely adopted. As we develop a greater presence in these markets, we believe our ability to attract additional customers will increase.

Critical Accounting Policies

Our discussion and analysis of our financial
condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally



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accepted in the U.S. (GAAP). The preparation of the consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities. We review our estimates on an on-going basis, including those related to income taxes and the valuation of goodwill, intangibles and other long-lived
assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities. Actual results may differ from these estimates under different assumptions or conditions. Our accounting policies are described in more detail in Note 2 to our consolidated financial statements included elsewhere in this Report. We have
identified the following as the most critical accounting policies and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

We generate revenue from the following primary
sources:



| |  |  | software licenses,
| | - |  | ------------------



| |  |  | post-contract customer support and maintenance services on licensed software, collectively referred to as PCS
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | database content access, and
| | - |  | ----------------------------



| |  |  | professional services.
| | - |  | ----------------------

Customer billings issued in connection with our revenue-generating activities are initially recorded as deferred revenue. We then recognize the revenue from these customer billings as set forth below and
when all of the following criteria are met:



| |  |  | a fully executed written contract or purchase order has been obtained from the customer (i.e., persuasive evidence of an arrangement exists),
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the contractual price of the product or services has been defined and agreed to in the contract or purchase order (i.e., price is fixed or
determinable),
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | delivery of the product or service has occurred and no material uncertainties regarding customer acceptance of the delivered product or service exist,
and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | collection of the purchase price from the customer is considered probable.
| | - |  | --------------------------------------------------------------------------

Software Licenses.We license software on a term and perpetual basis. When sold perpetually, our standard perpetual software
licensing arrangements generally include twelve months of bundled PCS, while our standard term-based software licensing arrangements typically include PCS for the full duration of the term license. Because we do not have vendor specific objective
evidence of the fair value of these undelivered elements, we recognize as revenue the entire fee for such perpetual and term-based licenses ratably over the term of the bundled PCS.

Renewal of PCS Under Perpetual Software Licenses.Our PCS includes the right to receive unspecified upgrades or enhancements and
technical support. Fees from customer renewals of PCS related to previously purchased perpetual licenses are recognized ratably over the term of the PCS.

Database Content. Database content is licensed on a term basis and provides customers with access to the licensed content over the term of the agreement. Revenue from these licensing arrangements
is recognized ratably over the term of the agreement, which is typically twelve months.

Professional Services.We
provide certain services to our customers, including non-complex product training, installation, implementation and other professional services which are non-essential to the operation of



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the software. We also perform professional services for our customers designed to enhance the value of our software products by creating extensions to functionality to address a clients
specific business needs. When sold separately, revenue from these services is recognized as the services are delivered under the proportional performance or completed performance method.

Multi-Element Arrangements.For multi-element arrangements which include software licenses, PCS and non-complex training,
installation and implementation services which are non-essential to the operation of the software, the entire fee for such arrangements is recognized as revenue ratably over the term of the PCS or delivery of the services, whichever is longer. For
multi-element arrangements which also include services that are essential to the operation of the software, the fee for such arrangements is generally deferred until the services essential to the operation of the software have been performed, at
which point the entire fee for such arrangements is recognized as revenue ratably over the remaining term of the PCS or the delivery of the non-essential services, whichever is longer.

Royalty Income

We recognize the royalty income based on reported sales by
third party licensees of products containing the applicable licensed materials and intellectual property. If there are extended payment terms, royalty revenue is recognized as these payments become due. Non-refundable royalties, for which there are
no further performance obligations, are recognized when due under the terms of the applicable agreements.

Valuation of Goodwill

Our goodwill resulted from acquisitions in fiscal years 1999 through 2010. In accordance with the Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) Topic 350, IntangiblesGoodwill and Other (ASC Topic 350), we review goodwill for impairment at least annually and more frequently if
events or changes in circumstances occur that indicate a potential reduction in the fair value of the reporting unit to which the goodwill has been assigned below its carrying value. Examples of such events or circumstances include: a significant
adverse change in legal factors or in the business climate, a significant decline in our stock price, a significant decline in our projected revenue or cash flows, an adverse action or assessment by a regulator, unanticipated competition, a loss of
key personnel, or the presence of other indicators that would indicate a reduction in the fair value of a reporting unit.

Our
goodwill is considered to be impaired if we determine that the carrying value of the reporting unit to which the goodwill has been assigned exceeds its estimated fair value. We completed our annual goodwill impairment test as of December 31,
2010 and concluded that our goodwill was not impaired. Based on the guidance provided by ASC Topic 350 and ASC Topic 280, Segment Reporting, management has determined that our company consists of one reporting unit given the similarities of
economic characteristics between our operations and the common nature of our products, services and customers. Because we have only one reporting unit, and because we are publicly traded, we determine the fair value of the reporting unit based on
our market capitalization as we believe this represents the best evidence of fair value. Our conclusion that goodwill was not impaired was based on a comparison of our net assets as of December 31, 2010 to our market capitalization.

Because we determine the fair value of our reporting unit based on our market capitalization, our future reviews of goodwill for
impairment may be impacted by changes in the price of our common stock. For example, a significant decline in the price of our common stock may cause the fair value of our goodwill to fall below its carrying value. Therefore, we cannot assure you
that when we complete our future reviews of goodwill for impairment a material impairment charge will not be recorded.



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Valuation of Indefinite-Lived Intangible Asset

In connection with our acquisition of SciTegic in September 2004, we acquired the SciTegic trade name which was determined to be
indefinitely lived. In accordance with ASC Topic 350, we review our indefinite-lived intangible asset for impairment at least annually in our fiscal fourth quarter and more frequently if events or changes in circumstances occur that indicate a
potential reduction in the fair value of the asset below its carrying value. Examples of such events or circumstances include: a significant adverse change in legal factors or in the business climate, a significant decline in our stock price, a
significant decline in our projected revenue or cash flows, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, or the presence of other indicators that would indicate a reduction in the fair value of
an asset.

Our indefinite-lived intangible asset is considered to be impaired if we determine that the carrying value of the
asset exceeds its estimated fair value. We completed our annual indefinite-lived intangible asset impairment test as of December 31, 2010 and concluded that our indefinite-lived intangible asset was not impaired. We estimated the fair value of
our indefinite-lived intangible asset utilizing a discounted cash flow analysis which considers the estimated future customer orders for our scientific informatics platform and the associated direct and incremental selling, marketing, and product
development costs. Key assumptions included in the discounted cash flow analysis include projections of future customer order growth for our scientific informatics platform and developing an appropriate discount rate.

We cannot assure you that the underlying assumptions used to forecast the cash flows will materialize as estimated. For example, if our
projections of future customer order growth do not materialize, the fair value of our indefinite-lived intangible asset may fall below its carrying value. Therefore, we cannot assure you that when we complete our future reviews of our
indefinite-lived intangible asset for impairment that a material impairment charge will not be recorded.

Impairment of Long-Lived Assets

In accordance with ASC Topic 350 and ASC Topic 360, Property, Plant and Equipment, we review long-lived assets to
be held and used, including acquired intangible assets subject to amortization and property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable.
Conditions that would necessitate an impairment assessment include a significant decline in the market price of an asset or asset group, a significant adverse change in the extent or manner in which an asset or asset group is being used, the loss of
legal ownership or title to the asset, significant negative industry or economic trends or the presence of other indicators that would indicate that the carrying amount of an asset or asset group is not recoverable.

A long-lived asset is considered to be impaired if the estimated undiscounted future cash flows resulting from the use of the asset and
its eventual disposition are not sufficient to recover the carrying value of the asset. In order to estimate an assets undiscounted future cash flows, we utilize our internal forecast of our future operating results and cash flows, our
strategic business plans and anticipated future economic and market conditions. There are inherent estimates and assumptions underlying this information and managements judgment is required in the application of this information to the
determination of an assets undiscounted future cash flows. No assurance can be given that the underlying estimates and assumptions utilized in our determination of an assets undiscounted future cash flows will materialize as anticipated.

Valuation of Marketable Securities

We assess our marketable securities for impairment under the guidance provided by ASC Topic 320, InvestmentsDebt and Equity Securities.Accordingly, we review the fair value of our marketable
securities at least quarterly to determine if declines in the fair value of individual securities are other-than-temporary in nature. If we believe the decline in the fair value of an individual security is other-than-temporary, we write-down the
carrying value of the security to its estimated fair value, with a corresponding charge against income.



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To determine if a decline in the fair value of an investment is other-than-temporary, we consider several factors including, among others, the period of time and extent to which the estimated
fair value has been less than cost, overall market conditions, the historical and projected future financial condition of the issuer of the security and our ability and intent to hold the security for a period of time sufficient to allow for a
recovery of the market value.

Valuation of Share-Based Awards

We account for our share-based awards in accordance with ASC Topic 718, CompensationStock Compensation(ASC Topic 718). We estimate the fair value of our share-based stock awards
on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of certain input variables, as follows:

Expected Volatility. Volatility is a measure of the amount the stock price will fluctuate during the expected life of an award. We determine volatility based on our historical stock price
volatility over the most recent period equivalent to the expected life of the award, giving consideration to company-specific events impacting our historical volatility that are unlikely to occur in the future, as well as anticipated future events
that may impact volatility. We also consider the historical stock price volatilities of comparable publicly traded companies.

Risk-Free Interest Rate.Our assumption of the risk-free interest rate is based on the interest rates on U.S. constant rate
treasury securities with contractual terms approximately equal to the expected life of the award.

Expected Dividend Yield.Because we have not paid any cash dividends since our inception and do not anticipate paying dividends in the foreseeable future, we assume a dividend yield of zero.

Expected Award Life.We determine the expected life of an award by considering various relevant factors, including the vesting period and contractual term of the award, our employees
historical exercise patterns and length of service and employee characteristics. We also consider the expected award lives of comparable publicly traded companies. For stock purchase plan purchase rights, the expected life is equal to the current
offering period under the stock purchase plan.

Under ASC Topic 718, we are also required to estimate at grant the likelihood
that the award will ultimately vest (the pre-vesting forfeiture rate), and to revise the estimate, if necessary, in future periods if the actual forfeiture rate differs. We determine the pre-vesting forfeiture rate of an award based on
our historical pre-vesting award forfeiture experience, giving consideration to company-specific events impacting historical pre-vesting award forfeiture experience that are unlikely to occur in the future as well as anticipated future events that
may impact forfeiture rates.

Our determination of the input variables used in the Black-Scholes option pricing model as well
as the pre-vesting forfeiture rate is based on various underlying estimates and assumptions that are highly subjective and are affected by our stock price, among other factors. Changes in these underlying estimates and assumptions could materially
affect the fair value of our share-based awards and, therefore, the amount of share-based compensation expense to be recognized in our results of operations.

Long Term Investments

We determine the accounting method used to account
for investments in equity securities of other business entities in which we do not have a controlling interest primarily based on our ownership of each such business entity and whether we have the ability to exercise significant influence over the
strategic, operating, investing, and financing activities of each such business entity. We monitor these investments for impairment by considering current factors including economic environment, market conditions and operational performance and
other specific factors relating to the business underlying the investment.



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Income Taxes

We account for income taxes in accordance with ASC Topic 740, Income Taxes(ASC Topic 740). Deferred tax assets and liabilities are recognized for the tax consequences of temporary
differences between the financial carrying amounts and the tax basis of existing assets and liabilities by applying enacted statutory tax rates applicable to future years. The provision for income taxes is based on our estimates for taxable income
of the various legal entities and jurisdictions in which we operate. As such, income tax expense may vary from the customary relationship between income tax expense and pre-tax income. We establish a valuation allowance against our net deferred tax
assets to reduce them to the amount expected to be realized.

We assess the recoverability of our deferred tax assets on an
ongoing basis. In making this assessment we are required to consider all available positive and negative evidence to determine whether, based on such evidence, it is more likely than not that some portion or all of our net deferred assets will be
realized in future periods. This assessment requires significant judgment. We do not recognize current and future tax benefits until it is more likely than not that our tax positions will be sustained. In general, any realization of our net deferred
tax assets will reduce our effective rate in future periods. However, the realization of deferred tax assets that are related to net NOLs that were generated by tax deductions resulting from the exercise of non-qualified stock options will be a
direct increase to stockholders equity.

We determine whether the benefits of our tax positions are more-likely-than-not
to be sustained upon audit based on the technical merits of the tax position. We recognize the impact of an uncertain income tax position taken on our income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by
the relevant taxing authority. An uncertain income tax position is not recognized if it has less than a 50% likelihood of being sustained.

Change in Fiscal Year and Comparative Financial Information

On August 3, 2010, our board of directors approved a change in our fiscal year end from March 31 to December 31. The fiscal year end change was effective December 31, 2010 and resulted
in a nine-month reporting period from April 1, 2010 to December 31, 2010. As a result, this Report is a transition report and includes financial information for the Transition Period. Subsequent to this Report, our annual reports on Form
10-K will cover the calendar year January 1 to December 31. All references to years, unless otherwise noted, refer to the twelve-month fiscal year, which prior to April 1, 2010, ended on March 31.

As a result of the fiscal year change, the unaudited comparative information for the nine months ended December 31, 2009 is
included in the consolidated statement of operations and consolidated statement of cash flows. The audited financial information for the nine months ended December 31, 2010 includes all normal recurring adjustments necessary for the fair
statement of the results for that period.



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Results of Operations

Comparison of the Nine Months Ended December 31, 2010 and 2009

The
following table summarizes our results of operations as a percentage of revenue for the respective periods:



|                                                            |  |                               |     |    |             |  |     |  
|----------------------------------------------------------- |  | ----------------------------- | --- | -- | ----------- |  | --- | -
|                                                            |  | Nine Months EndedDecember 31, |    
|                                                            |  | 2010                          |     |    | 2009        | 
|                                                            |  |                               |     |    | (unaudited) | 
|Revenue                                                     |  |                               | 100 | %  |             |  | 100 | %
|Cost of revenue:                                            |  |                               |     |    |             |  |     |  
|Cost of revenue                                             |  |                               | 29  | %  |             |  | 17  | %
|Amortization of completed technology                        |  |                               | 6   | %  |             |  | 1   | %
|                                                            |  |                               |     |    |             |  |     |  
|Total cost of revenue                                       |  |                               | 35  | %  |             |  | 18  | %
|                                                            |  |                               |     |    |             |  |     |  
|Gross margin                                                |  |                               | 65  | %  |             |  | 82  | %
|Operating expenses:                                         |  |                               |     |    |             |  |     |  
|Product development                                         |  |                               | 28  | %  |             |  | 19  | %
|Sales and marketing                                         |  |                               | 43  | %  |             |  | 42  | %
|General and administrative                                  |  |                               | 15  | %  |             |  | 14  | %
|Business consolidation and restructuring costs (recoveries) |  |                               | 21  | %  |             |  | *   | %
|Purchased intangible asset amortization                     |  |                               | 3   | %  |             |  |    | %
|                                                            |  |                               |     |    |             |  |     |  
|Total operating expenses                                    |  |                               | 110 | %  |             |  | 75  | %
|                                                            |  |                               |     |    |             |  |     |  
|Operating income (loss)                                     |  |                               | (45 | )% |             |  | 7   | %
|Interest and other income, net                              |  |                               | 2   | %  |             |  | 1   | %
|                                                            |  |                               |     |    |             |  |     |  
|Income (loss) before taxes                                  |  |                               | (43 | )% |             |  | 8   | %
|Income tax expense (benefit)                                |  |                               | (18 | )% |             |  | 2   | %
|                                                            |  |                               |     |    |             |  |     |  
|Net income (loss)                                           |  |                               | (25 | )% |             |  | 6   | %
|                                                            |  |                               |     |    |             |  |     |  



|* | Less than 1%.
|- | -------------

Revenue

Revenue increased 29% to $80.2 million for the nine months ended December 31, 2010 compared to $62.2 million for
the nine months ended December 31, 2009. The increase in revenue was primarily attributable to the Merger, and includes Symyx revenue of approximately $17.9 million.

Total Cost of Revenue

Cost of Revenue. Cost of revenue
increased to $23.5 million for the nine months ended December 31, 2010, as compared to $10.5 million for the nine months ended December 31, 2009. As a percentage of revenue, cost of revenue increased to 29% for the nine months ended
December 31, 2010 as compared to 17% for the nine months ended December 31, 2009. The increase in cost of revenue was primarily attributable to an increase in software and content royalties of approximately $3.9 million, an increase in
personnel and related expenses in our services department of approximately $4.8 million, an increase in professional fees of approximately $0.9 million and an increase in overhead allocated expense of approximately $3.4 million, each as a result of
the Merger.

Amortization of Completed Technology. Amortization of completed technology increased to $4.9 million for
the nine months ended December 31, 2010, as compared to $0.8 million for the nine months ended December 31,



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2009. As a percentage of revenue, amortization of completed technology increased to 6% for the nine months ended December 31, 2010 as compared to 1% for the nine months ended
December 31, 2009. The increase in amortization of completed technology was due to amortization of completed technology intangible assets acquired in the Merger.

Operating Expenses

Product Development Expenses.Product
development expenses increased to $22.1 million for the nine months ended December 31, 2010, as compared to $11.6 million for the nine months ended December 31, 2009. As a percentage of revenue, product development expenses increased
to 28% for the nine months ended December 31, 2010, as compared to 19% for the nine months ended December 31, 2009. The increase in product development expenses was primarily attributable to an increase in personnel and related expenses of
approximately $5.3 million, an increase in professional fees of approximately $2.3 million and an increase in overhead expense of approximately $2.9 million, each as a result of the Merger.

Sales and Marketing Expenses.Sales and marketing expenses increased to $34.8 million for the nine months ended
December 31, 2010, as compared to $26.3 million for the nine months ended December 31, 2009. As a percentage of revenue, sales and marketing expenses increased to 43% for the nine months ended December 31, 2010 as compared to 42% for
the nine months ended December 31, 2009. The increase in sales and marketing expenses was primarily attributable to an increase in personnel and related expenses of approximately $5.7 million, an increase in professional fees of approximately
$0.9 million and an increase in overhead expense of approximately $2.0 million, each as a result of the Merger.

General
and Administrative Expenses.General and administrative expenses increased to $11.7 million for the nine months ended December 31, 2010, as compared to $8.9 million for the nine months ended December 31, 2009. As a percentage of
revenue, general and administrative expenses increased to 15% for the nine months ended December 31, 2010, as compared to 14% for the nine months ended December 31, 2009. The increase in general and administrative expenses was primarily
attributable to an increase in personnel and related expenses of approximately $3.0 million and an increase in professional fees of approximately $1.5 million and an increase in overhead of approximately $1.8 million, each as a result of the Merger.

Business Consolidation and Restructuring Costs. Business consolidation and restructuring costs of $16.5 million for
nine months ended December 31, 2010, were comprised of $11.8 million in business consolidation costs and $4.7 million in restructuring costs. As a percentage of revenue, business consolidation and restructuring costs were 21% for the nine
months ended December 31, 2010. We have classified all transaction and integration related costs to business consolidation costs, which includes personnel costs of $5.4 million related to current employees who have been terminated or notified
they will be terminated from the Company and professional service and other costs of $6.4 million directly related to the Merger and integration of Symyx.

Purchased Intangible Asset Amortization. Purchased intangible asset amortization was $2.7 million for the nine months ended December 31, 2010. As a percentage of revenue, purchased intangible
asset amortization was 3% for the nine months ended December 31, 2010, and was related solely to the amortization of backlog, customer relationship and trademark intangible assets acquired in the Merger.

Net Interest and Other Income

Net interest and other income was $1.4 million for the nine months ended December 31, 2010, as compared to $0.6 million for the nine months ended December 31, 2009. Significant
components of net interest and other income for the nine months ended December 31, 2010 included interest income of $0.7 million, royalty income of $2.0 million, and a foreign currency exchange gain of $0.2 million, partially
offset by royalty expense of $0.3 million and amortization of purchased intangible assets of $1.2 million. Significant components of net interest and other income for the nine months ended December 31, 2009 included interest income of
$0.2 million, foreign currency exchange gain of $0.1 million and a gain on our auction rate securities of $0.2 million.



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Income Tax Expense (Benefit)

Income tax benefit was $14.1 million for the nine months ended December 31, 2010, as compared to income tax expense of $1.1 million
for the nine months ended December 31, 2009. In connection with the Merger, we released $14.9 million of our valuation allowance against our deferred tax assets, as we have concluded that our NOLs can be utilized against the deferred tax
liabilities assumed in connection with the Merger.

Comparison of the Years Ended March 31, 2010 and 2009

The following table summarizes our results of operations as a percentage of revenue for the respective periods:



|                                                            |  |                       |     |   |      |  |     |  
|----------------------------------------------------------- |  | --------------------- | --- | - | ---- |  | --- | -
|                                                            |  | Years Ended March 31, |    
|                                                            |  | 2010                  |     |   | 2009 | 
|Revenue                                                     |  |                       | 100 | % |      |  | 100 | %
|Cost of revenue:                                            |  |                       |     |   |      |  |     |  
|Cost of revenue                                             |  |                       | 17  | % |      |  | 18  | %
|Amortization of completed technology                        |  |                       | 1   | % |      |  | 2   | %
|                                                            |  |                       |     |   |      |  |     |  
|Total cost of revenue                                       |  |                       | 18  | % |      |  | 20  | %
|                                                            |  |                       |     |   |      |  |     |  
|Gross margin                                                |  |                       | 82  | % |      |  | 80  | %
|Operating expenses:                                         |  |                       |     |   |      |  |     |  
|Product development                                         |  |                       | 19  | % |      |  | 20  | %
|Sales and marketing                                         |  |                       | 46  | % |      |  | 45  | %
|General and administrative                                  |  |                       | 15  | % |      |  | 15  | %
|Business consolidation and restructuring costs (recoveries) |  |                       | *   | % |      |  | 1   | %
|Purchased intangible asset amortization                     |  |                       |    | % |      |  |    | %
|                                                            |  |                       |     |   |      |  |     |  
|Total operating expenses                                    |  |                       | 80  | % |      |  | 80  | %
|                                                            |  |                       |     |   |      |  |     |  
|Operating income (loss)                                     |  |                       | 2   | % |      |  | *   | %
|Interest and other income, net                              |  |                       | 1   | % |      |  | 2   | %
|                                                            |  |                       |     |   |      |  |     |  
|Income before taxes                                         |  |                       | 3   | % |      |  | 2   | %
|Income tax expense                                          |  |                       | 1   | % |      |  | 1   | %
|                                                            |  |                       |     |   |      |  |     |  
|Net income                                                  |  |                       | 1   | % |      |  | *   | %
|                                                            |  |                       |     |   |      |  |     |  



|* | Less than 1%.
|- | -------------

Revenue

Revenue increased 2% to $83.0 million for the year ended March 31, 2010 compared to $81.0 million for the year
ended March 31, 2009. The increase was due to an increase in software revenue of approximately $2.4 million and an increase in service revenue of approximately $0.3 million, partially offset by a decrease in maintenance and other revenue of
approximately $0.7 million.

Total Cost of Revenue

Cost of Revenue. Cost of revenue decreased 4% to $14.1 million for the year ended March 31, 2010, as compared to $14.7 million for the year ended March 31, 2009. As a percentage of
revenue, cost of revenue was 17% and 18% for the years ended March 31, 2010 and 2009, respectively. The decrease in cost of revenue was primarily attributable to a decrease in distributor commissions of $0.4 million and lower personnel costs in
our service departments of $0.4 million primarily, partially offset by an increase in professional fees of $0.3 million.



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Amortization of Completed Technology. Amortization of completed technology decreased
to $0.8 million for the year ended March 31, 2010, as compared to $1.5 million for the year ended March 31, 2009. As a percentage of revenue, amortization of completed technology decreased to 1% for the year ended March 31, 2010 as
compared to 2% for the for the year ended March 31, 2009. The decrease in amortization of completed technology was due solely to amortization of completed technology intangible assets during the year ended March 31, 2010.

Operating Expenses

Product Development Expenses. Product development expenses were consistent at approximately $16.0 million for each of the years
ended March 31, 2010 and 2009. As a percentage of revenue, product development expenses decreased to 19% for the year ended March 31, 2010, as compared to 20% for the year ended March 31, 2009. The slight increase in product
development expenses was attributable to an increase in personnel related costs of approximately $0.4 million, partially offset by a decrease in consulting costs of $0.1 million and overhead costs of $0.2 million.

Sales and Marketing Expenses. Sales and marketing expenses increased 5% to $38.0 million for the year ended March 31,
2010, as compared to $36.1 million for the year ended March 31, 2009. As a percentage of revenue, sales and marketing expenses increased to 46% for the year ended March 31, 2010, as compared to 45% for the year ended March 31, 2009.
The increase in sales and marketing expense is primarily attributable to additional personnel and incentive compensation of approximately $1.3 million, as well as an increase in professional fees of $0.6 million related to new marketing initiatives.

General and Administrative Expenses. General and administrative expenses increased 3% to $12.5 million for the year
ended March 31, 2010, as compared to $12.1 million for the year ended March 31, 2009. As a percentage of revenue, general and administrative expenses were consistent at 15% for both the years ended March 31, 2010 and March 31,
2009. The increase in general and administrative expenses was primarily attributable to an increase in merger and acquisition related costs of $0.7 million, partially offset by a decrease in personnel related costs of $0.4 million.

Net Interest and Other Income

Net interest and other income was $0.9 million for the year ended March 31, 2010, as compared to $1.6 million for the year ended March 31, 2009. Net interest and other income were primarily
affected by a decrease in interest income of $1.0 million, as well as a decrease in other income of $0.2 million. These items were partially offset by a prior year unrealized loss on our ARS portfolio of $0.2 million turning to an unrealized gain of
$0.2 million during the year ended March 31, 2010.

Income Tax Expense

Income tax expense was consistent at $1.2 million for each of the years ended March 31, 2010 and 2009.

Liquidity and Capital Resources

We had cash, cash equivalents, marketable securities, and restricted cash of $141.1 million as of December 31, 2010, as compared to $93.1 million as of March 31, 2010, an increase of $48.0
million. The increase cash, cash equivalents, marketable securities and restricted cash during the nine months ended December 31, 2010 was primarily attributable to cash acquired in the Merger of $74.5 million, an increase in the fair value of
our marketable securities balance of $1.3 million and proceeds from the sale of common stock of $2.3 million, net of shares tendered for payment of withholding tax. These items were partially offset by cash used in operations of $24.1 million,
purchases of capital equipment of $3.1 million, repurchases of common stock of $3.0 million and equity issuance costs of $0.8 million. Our quarterly operating cash flows are



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significantly impacted by changes in accounts receivable balances. Due to the seasonality of our business, accounts receivable balances have historically increased significantly in the quarter
ended December 31 as a result of higher order intake and bookings. The collection of these accounts receivable balances has generally resulted in positive cash flows from operations in the quarter ended March 31, while we have historically
experienced negative cash flows from operations in the other three fiscal quarters.

Net cash used in operating activities was
$24.1 million for the nine months ended December 31, 2010, as compared to $5.5 million for the nine months ended December 31, 2009. The increase in cash used in operating activities was primarily attributable to our net loss, as well as
changes in working capital for the nine months ended December 31, 2010.

Net cash provided by investing activities was
$33.1 million for the nine months ended December 31, 2010, as compared to $24.3 million for the nine months ended December 31, 2009. Significant components of cash flows from investing activities for the nine months ended December 31,
2010 included cash of $74.5 million acquired in the Merger, a net increase in our marketable securities portfolio of $37.6 million, net purchases of property and equipment of $3.1 million and equity issuance costs of $0.8 million. Significant
components of cash flows from investing activities for the nine months ended December 31, 2009 included a reduction in our marketable securities portfolio of approximately $24.8 million, offset by net purchases of property and equipment of $0.5
million.

Net cash used by financing activities was $0.7 million for the nine months ended December 31, 2010 as compared
to net cash provided by financing activities of $0.1 million for the nine months ended December 31, 2009. Significant components of cash flows from financing activities for the nine months ended December 31, 2010 included repurchases of
the Companys common stock of $3.0 million, offset by $2.3 million of proceeds from the issuance of our common stock under employee stock plans, reduced by payments made to taxing authorities on behalf of our employees when tendering stock to
us for settlement of minimum income tax liability upon vesting of restricted stock units (RSUs). Cash flows from financing activities for the nine months ended December 31, 2009 consisted solely of proceeds from the issuance of our
common stock under employee stock plans, reduced by the aforementioned payments to taxing authorities on behalf of our employees upon vesting of RSUs.

We have funded our activities to date primarily through the sales of software licenses and related services and the issuance of equity securities.

We anticipate that our capital requirements may increase in future periods as a result of seasonal sales trends, additional product
development activities and the acquisition of additional equipment. Our capital requirements may also increase in future periods as we seek to expand our technology platform through investments, licensing arrangements, technology alliances or
acquisitions.

On November 10, 2010, we entered into the Repurchase Plan in accordance with Rule 10b-5 of the Exchange
Act. Pursuant to the Repurchase Plan, and subject to the conditions set forth therein and the provisions of Rule 10b-18 of the Exchange Act, we instructed the broker to purchase for our account up to $6.0 million worth of our common stock by
March 31, 2011. On the basis of the foregoing, we purchased $3.0 million worth of our common stock in the quarter ended December 31, 2010, and we purchased the remaining $3.0 million worth of our common stock in early 2011.

On March 11, 2011, we entered into the Second Repurchase Plan in accordance with Rule 10b5-1 of Exchange Act. Pursuant to the Second
Repurchase Plan, and subject to the conditions set forth therein and the provisions of Rule 10b-18 of the Exchange Act, we have instructed the broker to purchase for our account up to an additional $4.0 million worth of our common stock by
September 30, 2011.



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We anticipate that our existing capital resources will be adequate to fund our operations
for at least the next twelve months. However, there can be no assurance that changes will not occur that would consume available capital resources before then. Our capital requirements depend on numerous factors, including our ability to continue to
generate software sales, the purchase of additional capital equipment and acquisitions of other businesses or technologies. There can be no assurance that additional funding, if necessary, will be available to us on favorable terms, if at all. Our
forecast for the period of time through which our financial resources will be adequate to support our operations is forward-looking information, and actual results could vary.

Contractual Obligations

Our long-term contractual obligations as of
December 31, 2010 are as follows (in thousands):



|                                   |  |       |        |  |                       |   |       |             |  |   |             |  |  |              |       |  |  |   |        | 
|---------------------------------- |  | ----- | ------ |  | --------------------- | - | ----- | ----------- |  | - | ----------- |  |  | ------------ | ----- |  |  | - | ------ | 
|                                   |  |       |        |  | Payment Due by Period |  
|Contractual Obligations            |  | Total |        |  | Less than1 Year       |   |       | 1 to3 Years |  |   | 3 to5 Years |  |  | After5 Years |      
|Operating leases, net of subleases |  | $     | 35,197 |  |                       | $ | 7,274 |             |  | $ | 12,461      |  |  | $            | 6,934 |  |  | $ | 8,528  | 
|Minimum royalty payments(1)        |  |       | 4,858  |  |                       |   | 1,639 |             |  |   | 822         |  |  |              | 822   |  |  |   | 1,575  | 
|                                   |  |       |        |  |                       |   |       |             |  |   |             |  |  |              |       |  |  |   |        | 
|Total                              |  | $     | 40,055 |  |                       | $ | 8,913 |             |  | $ | 13,283      |  |  | $            | 7,756 |  |  | $ | 10,103 | 
|                                   |  |       |        |  |                       |   |       |             |  |   |             |  |  |              |       |  |  |   |        | 



|(1) | For purposes of the contractual obligations table, we have included indefinite-lived contractual minimum royalty payments due in the ten fiscal years following
December 31, 2010.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We are obligated to pay royalties for licenses to enhance and market certain software
used in connection with our product offerings. In addition to the contractual minimum royalties included in the table above, we have several royalty agreements that are long term or perpetual in nature with royalty obligations that are generally
based on a percentage of revenues derived from certain software license sales and associated sales of PCS. The royalty agreements require quarterly payments and generally do not limit the maximum royalties owed. We incurred royalty related expenses
of $4.6 million and $1.8 million for the nine months ended December 31, 2010 and 2009, respectively, and $2.2 million in each of the years ended March 31, 2010 and 2009. Our future annual royalty obligations will vary based on the volume
and mix of our product sales and, as a result, may increase in the future.

On April 30, 2004, in connection with the
spin-off of PDD, the landlords of our New Jersey facilities, which were used by our PDD operations, consented to the assignment of the leases to PDD. Despite the assignment, the landlords required us to guarantee the remaining lease obligations,
which totaled approximately $13.1 million as of December 31, 2010. In accordance with ASC Topic 460, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, we
recognized a liability and corresponding charge to stockholders equity for the probability-weighted fair market value of the guarantee. Changes to the fair market value of the liability are recognized in stockholders equity. The
liability for our guarantee of the lease obligation was $0.3 million and $0.4 million as of December 31, 2010 and March 31, 2010, respectively.

Off-Balance Sheet Arrangements and Related Party Transactions

As of
December 31, 2010, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose
of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

We do not have relationships or transactions with persons or entities that derive benefits from their non-independent
relationship with us or our related parties.



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New Accounting Standards

In January 2010, the FASB issued ASC 820-10-65-7, Improving Disclosures about Fair Value Measurements. This guidance requires additional disclosures for fair value measurements including the
following: (1) amounts transferred in and out of Level 1 and 2 fair value measurements, which is effective for interim and annual reporting periods beginning after December 15, 2009 and (2) activities in Level 3 fair value
measurements including purchases, sales, issuances, and settlements, which is effective for interim and annual reporting periods beginning after December 15, 2010. The adoption of the revised guidance related to amounts transferred in and out
of Level 1 and 2 fair value measurements did not have a significant impact on our financial statement disclosures, and we do not believe that the adoption of the revised guidance related to Level 3 activities will have a material impact on our
financial statement disclosures.

In January 2010, the FASB issued ASU 2009-17, Improvements to Financial Reporting by
Enterprises Involved with Variable Interest Entities (FASB Statement No. 167, Amendments to FASB Interpretation No. 46 (R)), which revises the analysis for identifying the primary beneficiary of a variable interest entity
(VIE) by replacing the previous quantitative-based analysis with a framework that is based more on qualitative judgments. The new guidance requires the primary beneficiary of a VIE to be identified as the party that both (i) has the
power to direct the activities of a VIE that most significantly impact its economic performance and (ii) has an obligation to absorb losses or a right to receive benefits that could potentially be significant to the VIE. This guidance is
effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after November 15, 2009. The adoption of this guidance did not have a significant impact on our financial position or results
of operations.

In September 2009, the FASB issued ASC 605-25-65-1, Multiple-Deliverable Revenue Arrangements. The new
guidance states that if vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, companies will be required to develop a best estimate of the selling price to separate deliverables and
allocate arrangement consideration using the relative selling price method. The new guidance is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. We are currently evaluating the impact this guidance may have on our results of operations, financial position and cash flows.

In September 2009, the FASB issued ASC 985-605-65-1, Certain Revenue Arrangements That Include Software Elements.Previously, companies that sold tangible products with more than
incidental software were required to apply software revenue recognition guidance. This guidance often delayed revenue recognition for the delivery of the tangible product. Under the new guidance, tangible products that have software components
that are essential to the functionality of the tangible product will be excluded from the software revenue recognition guidance. The new guidance will include factors to help companies determine what is essential to the
functionality of the tangible product. Software-enabled products will now be subject to other revenue guidance and will likely follow the guidance for multiple deliverable arrangements issued by the FASB in September 2009. The new guidance is
effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. We believe this guidance will not have a material impact on our financial position or
results of operations.

Common Stock Repurchases

On November 10, 2010, we entered into the Repurchase Plan, in accordance with Rule 10b5-1 of the Exchange Act. Pursuant to the Repurchase Plan, and subject to the conditions set forth therein and the
provisions of Rule 10b-18 of the Exchange Act, we instructed the broker to purchase for our account up to $6.0 million worth of our common stock by March 31, 2011. As of December 31, 2010, we had repurchased 353,955 shares of our common
stock for approximately $3.0 million at an average cost of $8.40 per share, and we completed the repurchase of the remaining $3.0 million of our common stock in early 2011. All of the shares repurchased have been recorded as treasury stock.



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On March 11, 2011, we entered into the Second Repurchase Plan in accordance with Rule
10b5-1 of Exchange Act. Pursuant to the Second Repurchase Plan, and subject to the conditions set forth therein and the provisions of Rule 10b-18 of the Exchange Act, we have instructed the broker to purchase for our account up to an additional $4.0
million worth of our common stock by September 30, 2011.



|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk
|-------- | ----------------------------------------------------------

In addition to our U.S. operations, we have operations in Europe and the Asia/Pacific region. As a result, our financial position, results of operations and cash flows can be affected by fluctuations in
foreign currency exchange rates, particularly fluctuations in the pound sterling, euro and yen exchange rates. Many of our reporting entities conduct a portion of their business in currencies other than the entitys functional currency. These
transactions give rise to receivables and payables that are denominated in currencies other than the entitys functional currency. The value of these receivables and payables is subject to changes in exchange rates because the receivables and
payables may become worth more or less than they were worth at the time we entered into the transaction due to changes in currency exchange rates. Both realized and unrealized gains or losses on the value of these receivables and payables, along
with the settlement of certain intercompany transactions, are included in the determination of net income. We analyze our exposure to currency fluctuations and may engage in financial hedging techniques in the future to reduce the effect of these
potential fluctuations. We do not currently have hedging contracts in effect since, historically, exchange rate fluctuations have had little impact on our operating results and cash flows. The majority of our software license agreements are
denominated in U.S. dollars.

Our investment portfolio is maintained in accordance with our investment policy that defines
allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer. None of our investments are held for trading or speculative purposes. The fair value of our cash equivalents and marketable securities is
subject to change as a result of changes in market interest rates and investment risk related to the issuers credit worthiness. We do not utilize financial contracts to manage our exposure in our investment portfolio to changes in interest
rates. A hypothetical 100 basis point increase or decrease in market interest rates would not have a material impact on the fair value of our cash equivalents and marketable securities due to the relatively short maturities of these investments.
While changes in interest rates may affect the fair value of our investment portfolio, any gains or losses will not be recognized in our results of operations until the investment is sold or if the reduction in fair value was determined to be an
other-than-temporary impairment.



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|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and
Stockholders

Accelrys, Inc.

We have audited the accompanying consolidated balance sheets of Accelrys, Inc. as of December 31, 2010 and March 31, 2010, and the related consolidated statements of operations,
stockholders equity, and cash flows for the nine month period ended December 31, 2010 and for each of the two years in the period ended March 31, 2010. Our audits also included the financial statement schedule listed in the index at
Item 15(a)(2). These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Accelrys, Inc. at December 31, 2010 and March 31, 2010, and the consolidated results of its operations and its cash flows for the nine month period ended December 31, 2010
and for each of the two years in the period ended March 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We have
also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Accelrys, Inc.s internal control over financial reporting as of December 31, 2010, based on the criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 14, 2011 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

San Diego, California

March 14, 2011



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Accelrys, Inc.

Consolidated Balance Sheets

(In thousands, except par value amounts)



|                                                                                                                                                                 |  |                  |          |   |               |   |          |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | -------- | - | ------------- | - | -------- | -
|                                                                                                                                                                 |  | December 31,2010 |          |   | March 31,2010 |  
|Assets                                                                                                                                                           |  |                  |          |   |               |   |          |  
|Current assets:                                                                                                                                                  |  |                  |          |   |               |   |          |  
|Cash and cash equivalents                                                                                                                                        |  | $                | 86,316   |   |               | $ | 77,121   |  
|Marketable securities                                                                                                                                            |  |                  | 27,975   |   |               |   | 10,461   |  
|Trade receivables, net of allowance for doubtful accounts of $163 as of December 31, 2010 and March 31,
2010                                                     |  |                  | 29,489   |   |               |   | 22,745   |  
|Prepaid expenses, deferred tax asset and other current assets                                                                                                    |  |                  | 10,709   |   |               |   | 5,201    |  
|                                                                                                                                                                 |  |                  |          |   |               |   |          |  
|Total current assets                                                                                                                                             |  |                  | 154,489  |   |               |   | 115,528  |  
|Marketable securities, net of current portion                                                                                                                    |  |                  | 21,236   |   |               |   |         |  
|Restricted cash and marketable securities                                                                                                                        |  |                  | 5,525    |   |               |   | 5,500    |  
|Property and equipment, net                                                                                                                                      |  |                  | 11,969   |   |               |   | 2,324    |  
|Goodwill                                                                                                                                                         |  |                  | 69,356   |   |               |   | 42,663   |  
|Purchased intangible assets, net                                                                                                                                 |  |                  | 70,748   |   |               |   | 4,515    |  
|Long-term investments                                                                                                                                            |  |                  | 18,510   |   |               |   |         |  
|Other assets                                                                                                                                                     |  |                  | 11,449   |   |               |   | 675      |  
|                                                                                                                                                                 |  |                  |          |   |               |   |          |  
|Total assets                                                                                                                                                     |  | $                | 363,282  |   |               | $ | 171,205  |  
|                                                                                                                                                                 |  |                  |          |   |               |   |          |  
|Liabilities and stockholders equity                                                                                                                             |  |                  |          |   |               |   |          |  
|Current liabilities:                                                                                                                                             |  |                  |          |   |               |   |          |  
|Accounts payable                                                                                                                                                 |  | $                | 4,124    |   |               | $ | 1,823    |  
|Accrued liabilities                                                                                                                                              |  |                  | 16,849   |   |               |   | 4,684    |  
|Accrued compensation and benefits                                                                                                                                |  |                  | 12,239   |   |               |   | 10,207   |  
|Current portion of accrued restructuring charges                                                                                                                 |  |                  | 3,634    |   |               |   | 109      |  
|Current portion of deferred revenue                                                                                                                              |  |                  | 63,888   |   |               |   | 58,403   |  
|                                                                                                                                                                 |  |                  |          |   |               |   |          |  
|Total current liabilities                                                                                                                                        |  |                  | 100,734  |   |               |   | 75,226   |  
|Deferred revenue, net of current portion                                                                                                                         |  |                  | 3,571    |   |               |   | 2,922    |  
|Accrued income tax                                                                                                                                               |  |                  | 7,220    |   |               |   | 2,309    |  
|Accrued restructuring charges, net of current portion                                                                                                            |  |                  | 472      |   |               |   | 531      |  
|Lease-related liabilities, net of current portion                                                                                                                |  |                  | 3,639    |   |               |   | 4,113    |  
|Stockholders equity:                                                                                                                                            |  |                  |          |   |               |   |          |  
|Preferred stock, $.0001 par value; 2,000 shares authorized; no shares issued and outstanding                                                                     |  |                  |         |   |               |   |         |  
|Common stock, $.0001 par value; 100,000 shares authorized; 56,733 and 28,409 shares issued and outstanding at December 31,
2010 and March 31, 2010, respectively |  |                  | 6        |   |               |   | 3        |  
|Additional paid-in capital                                                                                                                                       |  |                  | 457,883  |   |               |   | 272,726  |  
|Lease guarantee                                                                                                                                                  |  |                  | (336     | ) |               |   | (383     | )
|Treasury stock; 998 and 644 shares at December 31, 2010 and March 31, 2010, respectively                                                                         |  |                  | (11,340  | ) |               |   | (8,340   | )
|Accumulated deficit                                                                                                                                              |  |                  | (199,973 | ) |               |   | (179,365 | )
|Accumulated other comprehensive income                                                                                                                           |  |                  | 1,406    |   |               |   | 1,463    |  
|                                                                                                                                                                 |  |                  |          |   |               |   |          |  
|Total stockholders equity                                                                                                                                       |  |                  | 247,646  |   |               |   | 86,104   |  
|                                                                                                                                                                 |  |                  |          |   |               |   |          |  
|Total liabilities and stockholders equity                                                                                                                       |  | $                | 363,282  |   |               | $ | 171,205  |  
|                                                                                                                                                                 |  |                  |          |   |               |   |          |  

See accompanying notes to these consolidated financial statements.



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##### Table of Contents

Accelrys, Inc.

Consolidated Statements of Operations

(In thousands, except per share amounts)



|                                                                     |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|-------------------------------------------------------------------- |  | ------------------------- | ------- | - | ------------------- | - | ------ | ------------- |  | - | ------------- | - |  | - | ------ | -
|                                                                     |  | For the Nine Months Ended |         |   | For the Years Ended |  
|                                                                     |  | December 31,2010          |         |   | December 31,2009    |   |        | March 31,2010 |  |   | March 31,2009 |  
|                                                                     |  |                           |         |   | (Unaudited)         |   |        |               |  |   |               |  
|Revenue                                                              |  | $                         | 80,205  |   |                     | $ | 62,200 |               |  | $ | 82,959        |   |  | $ | 80,981 |  
|Cost of revenue:                                                     |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|Cost of revenue                                                      |  |                           | 23,528  |   |                     |   | 10,524 |               |  |   | 14,136        |   |  |   | 14,749 |  
|Amortization of completed technology                                 |  |                           | 4,887   |   |                     |   | 803    |               |  |   | 844           |   |  |   | 1,524  |  
|                                                                     |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|Total cost of revenue                                                |  |                           | 28,415  |   |                     |   | 11,327 |               |  |   | 14,980        |   |  |   | 16,273 |  
|                                                                     |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|Gross margin                                                         |  |                           | 51,790  |   |                     |   | 50,873 |               |  |   | 67,979        |   |  |   | 64,708 |  
|Operating expenses:                                                  |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|Product development                                                  |  |                           | 22,080  |   |                     |   | 11,633 |               |  |   | 16,045        |   |  |   | 15,978 |  
|Sales and marketing                                                  |  |                           | 34,848  |   |                     |   | 26,338 |               |  |   | 38,042        |   |  |   | 36,083 |  
|General and administrative                                           |  |                           | 11,697  |   |                     |   | 8,946  |               |  |   | 12,479        |   |  |   | 12,070 |  
|Business consolidation and restructuring costs (recoveries)          |  |                           | 16,493  |   |                     |   | (90    | )             |  |   | (86           | ) |  |   | 896    |  
|Purchased intangible asset amortization                              |  |                           | 2,712   |   |                     |   |       |               |  |   |              |   |  |   |       |  
|                                                                     |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|Total operating expenses                                             |  |                           | 87,830  |   |                     |   | 46,827 |               |  |   | 66,480        |   |  |   | 65,027 |  
|                                                                     |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|Operating income (loss)                                              |  |                           | (36,040 | ) |                     |   | 4,046  |               |  |   | 1,499         |   |  |   | (319   | )
|Interest and other income, net                                       |  |                           | 1,377   |   |                     |   | 620    |               |  |   | 914           |   |  |   | 1,608  |  
|                                                                     |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|Income (loss) before taxes                                           |  |                           | (34,663 | ) |                     |   | 4,666  |               |  |   | 2,413         |   |  |   | 1,289  |  
|Income tax expense (benefit)                                         |  |                           | (14,055 | ) |                     |   | 1,097  |               |  |   | 1,218         |   |  |   | 1,195  |  
|                                                                     |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|Net income (loss)                                                    |  | $                         | (20,608 | ) |                     | $ | 3,569  |               |  | $ | 1,195         |   |  | $ | 94     |  
|                                                                     |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|Net income (loss) per share amounts:                                 |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|Basic                                                                |  | $                         | (0.44   | ) |                     | $ | 0.13   |               |  | $ | 0.04          |   |  | $ | 0.00   |  
|Diluted                                                              |  | $                         | (0.44   | ) |                     | $ | 0.13   |               |  | $ | 0.04          |   |  | $ | 0.00   |  
|                                                                     |  |                           |         |  
|Weighted average shares used to compute net income (loss) per share: |  |                           |         |   |                     |   |        |               |  |   |               |   |  |   |        |  
|Basic                                                                |  |                           | 46,446  |   |                     |   | 27,470 |               |  |   | 27,504        |   |  |   | 27,093 |  
|Diluted                                                              |  |                           | 46,446  |   |                     |   | 27,704 |               |  |   | 27,760        |   |  |   | 27,203 |  



See accompanying notes to these consolidated financial statements.



44



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##### Table of Contents

Accelrys, Inc.

Consolidated Statements of Stockholders Equity

(In thousands)



|                                                                                                                       |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ |  | ------------------------ | - | - | -------------- |  | ------ | -------------- | - | ------ | ------------------ | ---- | - | ----------------------------------------- |  | --- | ------------------------ |  | - | ------- | - |  | - | -------- | - |  | - | ------ | - |  | - | ------- | -
|                                                                                                                       |  | Common Stock |        |  | AdditionalPaid-InCapital |   |   | LeaseGuarantee |  |        | Treasury Stock |   |        | AccumulatedDeficit |      |   | AccumulatedOtherComprehensiveIncome(Loss) |  |     | TotalStockholdersEquity | 
|                                                                                                                       |  | Shares       |        |  | Amount                   |   |   |                |  | Shares |                |   | Amount |                    |      |   |                                          
|Balance at March 31, 2008                                                                                              |  |              | 27,436 |  |                          | $ | 3 |                |  | $      | 264,018        |   |        | $                  | (509 | ) |                                           |  | 644 |                          |  | $ | (8,340  | ) |  | $ | (180,654 | ) |  | $ | 364    |   |  | $ | 74,882  |  
|Comprehensive income:                                                                                                  |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Net income                                                                                                             |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   | 94       |   |  |   |       |   |  |   | 94      |  
|Foreign currency translation adjustment                                                                                |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   | 887    |   |  |   | 887     |  
|Unrealized loss on marketable securities                                                                               |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   | (2,219 | ) |  |   | (2,219  | )
|Reclassification of unrealized loss on marketable securities to net income                                             |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   | 2,876  |   |  |   | 2,876   |  
|                                                                                                                       |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Total comprehensive income                                                                                             |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 1,638   |  
|                                                                                                                       |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Change in value of lease guarantee                                                                                     |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    | 63   |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 63      |  
|Stock-based compensation expense                                                                                       |  |              |       |  |                          |   |  |                |  |        | 3,460          |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 3,460   |  
|Issuance of common stock upon exercise of stock options and under employee stock purchase plan                         |  |              | 435    |  |                          |   |  |                |  |        | 716            |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 716     |  
|                                                                                                                       |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Balance at March 31, 2009                                                                                              |  |              | 27,871 |  |                          |   | 3 |                |  |        | 268,194        |   |        |                    | (446 | ) |                                           |  | 644 |                          |  |   | (8,340  | ) |  |   | (180,560 | ) |  |   | 1,908  |   |  |   | 80,759  |  
|Comprehensive income:                                                                                                  |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Net income                                                                                                             |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   | 1,195    |   |  |   |       |   |  |   | 1,195   |  
|Foreign currency translation adjustment                                                                                |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   | (470   | ) |  |   | (470    | )
|Realized gain on marketable securities                                                                                 |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   | 25     |   |  |   | 25      |  
|                                                                                                                       |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Total comprehensive income                                                                                             |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 750     |  
|                                                                                                                       |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Change in value of lease guarantee                                                                                     |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    | 63   |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 63      |  
|Stock-based compensation expense                                                                                       |  |              |       |  |                          |   |  |                |  |        | 3,932          |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 3,932   |  
|Issuance of common stock upon exercise of stock options and under employee stock purchase plan, net of shares
tendered |  |              | 538    |  |                          |   |  |                |  |        | 600            |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 600     |  
|                                                                                                                       |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Balance at March 31, 2010                                                                                              |  |              | 28,409 |  |                          |   | 3 |                |  |        | 272,726        |   |        |                    | (383 | ) |                                           |  | 644 |                          |  |   | (8,340  | ) |  |   | (179,365 | ) |  |   | 1,463  |   |  |   | 86,104  |  
|Comprehensive income:                                                                                                  |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Net loss                                                                                                               |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   | (20,608  | ) |  |   |       |   |  |   | (20,608 | )
|Foreign currency translation adjustment                                                                                |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   | (28    | ) |  |   | (28     | )
|Unrealized loss on marketable securities                                                                               |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   | (29    | ) |  |   | (29     | )
|                                                                                                                       |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Total comprehensive loss                                                                                               |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | (20,665 | )
|                                                                                                                       |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Change in value of lease guarantee                                                                                     |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    | 47   |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 47      |  
|Stock-based compensation expense                                                                                       |  |              |       |  |                          |   |  |                |  |        | 4,298          |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 4,298   |  
|Equity instruments issued in connection with the Merger                                                                |  |              | 27,502 |  |                          |   | 3 |                |  |        | 179,294        |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 179,297 |  
|Equity issuance costs                                                                                                  |  |              |       |  |                          |   |  |                |  |        | (783           | ) |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | (783    | )
|Repurchase of common stock                                                                                             |  |              |       |  |                          |   |  |                |  |        |               |   |        |                    |     |   |                                           |  | 354 |                          |  |   | (3,000  | ) |  |   |         |   |  |   |       |   |  |   | (3,000  | )
|Issuance of common stock upon exercise of stock options and under employee stock purchase plan, net of shares
tendered |  |              | 822    |  |                          |   |  |                |  |        | 2,348          |   |        |                    |     |   |                                           |  |    |                          |  |   |        |   |  |   |         |   |  |   |       |   |  |   | 2,348   |  
|                                                                                                                       |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  
|Balance at December 31, 2010                                                                                           |  |              | 56,733 |  |                          | $ | 6 |                |  | $      | 457,883        |   |        | $                  | (336 | ) |                                           |  | 998 |                          |  | $ | (11,340 | ) |  | $ | (199,973 | ) |  | $ | 1,406  |   |  | $ | 247,646 |  
|                                                                                                                       |  |              |        |  |                          |   |   |                |  |        |                |   |        |                    |      |   |                                           |  |     |                          |  |   |         |   |  |   |          |   |  |   |        |   |  |   |         |  



45



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##### Table of Contents

Accelrys, Inc.

Consolidated Statements of Cash Flows

(In thousands)



|                                                                                     |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | ------------------------- | ------- | - | ------------------- | - | ------- | ------------- |  | - | ------------- | - |  | - | ------- | -
|                                                                                     |  | For the Nine Months Ended |         |   | For the Years Ended |  
|                                                                                     |  | December 31,2010          |         |   | December 31,2009    |   |         | March 31,2010 |  |   | March 31,2009 |  
|                                                                                     |  |                           |         |   | (Unaudited)         |   |         |               |  |   |               |  
|Cash flows from operating activities:                                                |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Net (loss) income                                                                    |  | $                         | (20,608 | ) |                     | $ | 3,569   |               |  | $ | 1,195         |   |  | $ | 94      |  
|Adjustments to reconcile net (loss) income to net cash used in operating activities: |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Depreciation and amortization                                                        |  |                           | 11,376  |   |                     |   | 2,269   |               |  |   | 2,755         |   |  |   | 3,766   |  
|Share-based compensation                                                             |  |                           | 4,298   |   |                     |   | 2,916   |               |  |   | 3,932         |   |  |   | 3,460   |  
|Release of valuation allowance against deferred tax assets                           |  |                           | (14,921 | ) |                     |   |        |               |  |   |              |   |  |   |        |  
|Deferred income taxes                                                                |  |                           | 213     |   |                     |   |        |               |  |   | 586           |   |  |   | 707     |  
|Other                                                                                |  |                           | (527    | ) |                     |   | (408    | )             |  |   | (1,138        | ) |  |   | (547    | )
|Changes in operating assets and liabilities:                                         |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Trade receivables                                                                    |  |                           | 8,022   |   |                     |   | (8,646  | )             |  |   | (233          | ) |  |   | (2,136  | )
|Prepaid expense and other current assets                                             |  |                           | 1,619   |   |                     |   | (309    | )             |  |   | (418          | ) |  |   | 368     |  
|Other assets                                                                         |  |                           | (453    | ) |                     |   | (77     | )             |  |   | 2,002         |   |  |   | 361     |  
|Accounts payable                                                                     |  |                           | 1,187   |   |                     |   | (1,020  | )             |  |   | 423           |   |  |   | 290     |  
|Accrued liabilities, compensation and benefits                                       |  |                           | (4,371  | ) |                     |   | (895    | )             |  |   | 719           |   |  |   | 1,665   |  
|Deferred revenue                                                                     |  |                           | (9,968  | ) |                     |   | (2,889  | )             |  |   | 2,642         |   |  |   | 3,836   |  
|                                                                                     |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Net cash provided by (used in) operating activities                                  |  |                           | (24,133 | ) |                     |   | (5,490  | )             |  |   | 12,465        |   |  |   | 11,864  |  
|Cash flows from investing activities:                                                |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Purchases of property and equipment, net                                             |  |                           | (3,061  | ) |                     |   | (472    | )             |  |   | (665          | ) |  |   | (920    | )
|Purchases of software license                                                        |  |                           |        |   |                     |   |        |               |  |   | (113          | ) |  |   | (1,885  | )
|Purchases of marketable securities                                                   |  |                           | (49,312 | ) |                     |   | (19,192 | )             |  |   | (19,192       | ) |  |   | (20,979 | )
|Proceeds from maturities of marketable securities                                    |  |                           | 11,750  |   |                     |   | 43,966  |               |  |   | 42,977        |   |  |   | 1,147   |  
|Acquisition of business, net of cash acquired                                        |  |                           | 74,497  |   |                     |   |        |               |  |   |              |   |  |   |        |  
|Equity issuance costs in connection with the Merger                                  |  |                           | (783    | ) |                     |   |        |               |  |   |              |   |  |   |        |  
|                                                                                     |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Total cash provided by (used in) investing activities                                |  |                           | (33,091 | ) |                     |   | 24,302  |               |  |   | 23,007        |   |  |   | (22,637 | )
|Cash flows from financing activities                                                 |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Proceeds from issuance of common stock                                               |  |                           | 3,027   |   |                     |   | 615     |               |  |   | 1,140         |   |  |   | 984     |  
|Common stock tendered for payment of withholding taxes                               |  |                           | (679    | ) |                     |   | (541    | )             |  |   | (540          | ) |  |   | (268    | )
|Repurchases of common stock                                                          |  |                           | (3,000  | ) |                     |   |        |               |  |   |              |   |  |   |        |  
|                                                                                     |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Net cash provided by (used in) financing activities                                  |  |                           | (652    | ) |                     |   | 74      |               |  |   | 600           |   |  |   | 716     |  
|Effect of changes in exchange rates on cash and cash equivalents                     |  |                           | 889     |   |                     |   | 948     |               |  |   | 454           |   |  |   | (2,474  | )
|                                                                                     |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Increase (decrease) in cash and cash equivalents                                     |  |                           | 9,195   |   |                     |   | 19,834  |               |  |   | 36,526        |   |  |   | (12,531 | )
|Cash and cash equivalents at beginning of period                                     |  |                           | 77,121  |   |                     |   | 40,595  |               |  |   | 40,595        |   |  |   | 53,126  |  
|                                                                                     |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Cash and cash equivalents at end of period                                           |  | $                         | 86,316  |   |                     | $ | 60,429  |               |  | $ | 77,121        |   |  | $ | 40,595  |  
|                                                                                     |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Supplemental cash flow information:                                                  |  |                           |         |   |                     |   |         |               |  |   |               |   |  |   |         |  
|Cash paid during the year for income taxes, net of refunds                           |  | $                         | 280     |   |                     | $ | 770     |               |  | $ | 831           |   |  | $ | 603     |  
|Equity instruments issued in connection with Merger                                  |  | $                         | 179,297 |   |                     | $ |        |               |  | $ |              |   |  | $ |        |  

See accompanying notes
to these condensed consolidated financial statements.



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Accelrys, Inc.

Notes to Consolidated Financial Statements



|1. | Organization and Description of Business
|-- | ----------------------------------------

Accelrys, Inc. (we, our, or us) develops and commercializes scientific business intelligence software and solutions that enable our customers to accelerate the
discovery and development of new drugs and materials. Our customers include pharmaceutical, biotechnology and other life science companies, as well as companies that are in the energy, chemicals, aerospace and consumer packaged goods markets. Our
software and service solutions are used by our customers scientists, biologists, chemists and information technology professionals in order to aggregate, mine, integrate, analyze, simulate, manage and interactively report scientific data. On
July 1, 2010, Alto Merger Sub, Inc., our wholly-owned subsidiary (Merger Sub), merged with and into Symyx Technologies, Inc. (Symyx), with Symyx surviving as our wholly-owned subsidiary (the Merger).
Symyxs results of operations are included in the Companys consolidated financial statements beginning July 1, 2010.



|2. | Significant Accounting Policies
|-- | -------------------------------

Principles of Consolidation

These consolidated financial statements include our accounts and those of our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Fiscal Year

On
August 3, 2010, our board of directors approved a change in our fiscal year end from March 31 to December 31. The fiscal year end change was effective December 31, 2010 and resulted in a nine month reporting period from
April 1, 2010 to December 31, 2010. As a result, the financial information set forth herein is for the transition period from April 1, 2010 through December 31, 2010. Subsequent to this report, our reports on Form 10-K will cover
the calendar year January 1 to December 31. All references to years, unless otherwise noted, refer to the twelve-month fiscal year, which prior to April 1, 2010, ended on March 31, and beginning with January 1,
2011, ends on December 31, of each year.

As a result of the fiscal year change, the unaudited comparative information
for the nine months ended December 31, 2009 is included in the consolidated statement of operations and consolidated statement of cash flows. The audited financial information for the nine months ended December 31, 2010 includes all
normal recurring adjustments necessary for the fair statement of the results for that period.

Prior Period Reclassifications

We have reclassified a portion of our information technology overhead costs out of general and administrative expenses
into cost of revenue, product development, and sales and marketing in our previously issued consolidated statements of operations to conform to current period presentation. We believe that the allocation of these costs based on headcount as overhead
costs provides a more accurate depiction of the costs associated with cost of revenue, research and development, sales and marketing and general and administrative costs.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Information technology costs for the nine months ended December 31, 2009 and the
years ended March 31, 2010 and March 31, 2009 have been reclassified in our consolidated statements of operations as follows (in thousands):



|                                                    |  |                                    |        |   |                 |   |        |  
|--------------------------------------------------- |  | ---------------------------------- | ------ | - | --------------- | - | ------ | -
|                                                    |  | Nine Months EndedDecember 31, 2009 |       
|                                                    |  | As originallyreported              |        |   | As reclassified |  
|                                                    |  | (Unaudited)                        |       
|Revenue                                             |  | $                                  | 62,200 |   |                 | $ | 62,200 |  
|Cost of revenue                                     |  |                                    | 10,896 |   |                 |   | 11,327 |  
|                                                    |  |                                    |        |   |                 |   |        |  
|Gross margin                                        |  |                                    | 51,304 |   |                 |   | 50,873 |  
|Operating expenses:                                 |  |                                    |        |   |                 |   |        |  
|Product development                                 |  |                                    | 10,980 |   |                 |   | 11,633 |  
|Sales and marketing                                 |  |                                    | 25,342 |   |                 |   | 26,338 |  
|General and administrative                          |  |                                    | 11,026 |   |                 |   | 8,946  |  
|Business consolidation and restructuring recoveries |  |                                    | (90    | ) |                 |   | (90    | )
|                                                    |  |                                    |        |   |                 |   |        |  
|Total operating expenses                            |  |                                    | 47,258 |   |                 |   | 46,827 |  
|                                                    |  |                                    |        |   |                 |   |        |  
|Operating income                                    |  | $                                  | 4,046  |   |                 | $ | 4,046  |  
|                                                    |  |                                    |        |   |                 |   |        |  



|                                                            |  |                           |        |   |                           |   |        |                       |  |   |                 |   |  |   |        |  
|----------------------------------------------------------- |  | ------------------------- | ------ | - | ------------------------- | - | ------ | --------------------- |  | - | --------------- | - |  | - | ------ | -
|                                                            |  | Year Ended March 31, 2010 |        |   | Year Ended March 31, 2009 |  
|                                                            |  | As 
originallyreported    |        |   | As reclassified           |   |        | As originallyreported |  |   | As reclassified |  
|Revenue                                                     |  | $                         | 82,959 |   |                           | $ | 82,959 |                       |  | $ | 80,981          |   |  | $ | 80,981 |  
|Cost of revenue                                             |  |                           | 14,381 |   |                           |   | 14,980 |                       |  |   | 15,671          |   |  |   | 16,273 |  
|                                                            |  |                           |        |   |                           |   |        |                       |  |   |                 |   |  |   |        |  
|Gross margin                                                |  |                           | 68,578 |   |                           |   | 67,979 |                       |  |   | 65,310          |   |  |   | 64,708 |  
|Operating expenses:                                         |  |                           |        |   |                           |   |        |                       |  |   |                 |   |  |   |        |  
|Product development                                         |  |                           | 15,131 |   |                           |   | 16,045 |                       |  |   | 15,053          |   |  |   | 15,978 |  
|Sales and marketing                                         |  |                           | 36,658 |   |                           |   | 38,042 |                       |  |   | 34,718          |   |  |   | 36,083 |  
|General and administrative                                  |  |                           | 15,376 |   |                           |   | 12,479 |                       |  |   | 14,962          |   |  |   | 12,070 |  
|Business consolidation and restructuring costs (recoveries) |  |                           | (86    | ) |                           |   | (86    | )                     |  |   | 896             |   |  |   | 896    |  
|                                                            |  |                           |        |   |                           |   |        |                       |  |   |                 |   |  |   |        |  
|Total operating expenses                                    |  |                           | 67,079 |   |                           |   | 66,480 |                       |  |   | 65,629          |   |  |   | 65,027 |  
|                                                            |  |                           |        |   |                           |   |        |                       |  |   |                 |   |  |   |        |  
|Operating income (loss)                                     |  | $                         | 1,499  |   |                           | $ | 1,499  |                       |  | $ | (319            | ) |  | $ | (319   | )
|                                                            |  |                           |        |   |                           |   |        |                       |  |   |                 |   |  |   |        |  

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to share-based compensation, income taxes and the valuation of goodwill,
intangibles and other long-lived assets. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual future results could differ from those estimates.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We invest our cash
with financial institutions in money market funds and other investment grade securities such as certificates of deposits, commercial paper, corporate and municipal bonds and obligations of U.S. government sponsored enterprises.

Marketable Securities

Our marketable securities consist of debt securities with original maturities of greater than three months and include obligations of U.S.
government sponsored enterprises, commercial paper, certificates of deposits, corporate and municipal debt, and auction rate securities (ARS). We account for our investments in marketable securities in accordance with Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 320, InvestmentsDebt and Equity Securities (ASC Topic 320). Accordingly, our marketable securities have been classified as
available-for-sale and are recorded at their estimated fair value, with unrealized gains and losses recorded in stockholders equity and included in accumulated other comprehensive income. Realized gains and losses on the sale of
available-for-sale marketable securities are recorded in interest and other income, net. Available-for-sale marketable securities with original maturities greater than three months and remaining maturities of one year or less are classified as
short-term available-for-sale marketable securities. Available-for-sale marketable securities with remaining maturities of greater than one year are classified as long-term available-for-sale marketable securities as we intend to hold these
securities until maturity. Unrealized losses which are not considered other than temporary and unrealized gains are included in accumulated other comprehensive income in stockholders equity. Unrealized losses which are determined to be other
than temporary are recorded as a charge against income. The cost of marketable securities sold is determined based on the specific identification method.

Marketable securities consist of the following:



|                                             |  |                |        |  |                      |   |   |                       |  |   |            |   |  |   |        | 
|-------------------------------------------- |  | -------------- | ------ |  | -------------------- | - | - | --------------------- |  | - | ---------- | - |  | - | ------ | 
|                                             |  | AmortizedCost  |        |  | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |  |   | Fair Value |  
|                                             |  | (In thousands) |       
|December 31, 2010:                           |  |                |        |  |                      |   |   |                       |  |   |            |   |  |   |        | 
|Short-Term Marketable Securities:            |  |                |        |  |                      |   |   |                       |  |   |            |   |  |   |        | 
|U.S. Treasury securities                     |  | $              | 5,519  |  |                      | $ |  |                       |  | $ |           |   |  | $ | 5,519  | 
|U.S. government and agency securities        |  |                | 6,348  |  |                      |   |  |                       |  |   | (2         | ) |  |   | 6,346  | 
|Commercial paper and certificate of deposits |  |                | 9,268  |  |                      |   | 1 |                       |  |   | (1         | ) |  |   | 9,268  | 
|Corporate debt securities                    |  |                | 6,243  |  |                      |   | 2 |                       |  |   | (3         | ) |  |   | 6,242  | 
|Municipal debt securities                    |  |                | 600    |  |                      |   |  |                       |  |   |           |   |  |   | 600    | 
|                                             |  |                |        |  |                      |   |   |                       |  |   |            |   |  |   |        | 
|Total Short-Term Marketable Securities       |  | $              | 27,978 |  |                      | $ | 3 |                       |  | $ | (6         | ) |  | $ | 27,975 | 
|                                             |  |                |        |  |                      |   |   |                       |  |   |            |   |  |   |        | 
|Long-Term Marketable Securities:             |  |                |        |  |                      |   |   |                       |  |   |            |   |  |   |        | 
|U.S. Treasury securities                     |  | $              | 798    |  |                      | $ |  |                       |  | $ | (1         | ) |  | $ | 797    | 
|U.S. government and agency securities        |  |                | 4,610  |  |                      |   |  |                       |  |   | (7         | ) |  |   | 4,603  | 
|Corporate debt securities                    |  |                | 11,554 |  |                      |   | 1 |                       |  |   | (19        | ) |  |   | 11,536 | 
|Municipal debt securities                    |  |                | 4,300  |  |                      |   |  |                       |  |   |           |   |  |   | 4,300  | 
|                                             |  |                |        |  |                      |   |   |                       |  |   |            |   |  |   |        | 
|Total Long-Term Marketable Securities        |  | $              | 21,262 |  |                      | $ | 1 |                       |  | $ | (27        | ) |  | $ | 21,236 | 
|                                             |  |                |        |  |                      |   |   |                       |  |   |            |   |  |   |        | 



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



|                        |  |                |        |  |                      |   |   |                       |  |   |            |  |  |   |        | 
|----------------------- |  | -------------- | ------ |  | -------------------- | - | - | --------------------- |  | - | ---------- |  |  | - | ------ | 
|                        |  | AmortizedCost  |        |  | GrossUnrealizedGains |   |   | GrossUnrealizedLosses |  |   | Fair Value | 
|                        |  | (In thousands) |       
|March 31, 2010:         |  |                |        |  |                      |   |   |                       |  |   |            |  |  |   |        | 
|Auction rate securities |  | $              | 10,461 |  |                      | $ |  |                       |  | $ |           |  |  | $ | 10,461 | 
|                        |  |                |        |  |                      |   |   |                       |  |   |            |  |  |   |        | 
|                        |  | $              | 10,461 |  |                      | $ |  |                       |  | $ |           |  |  | $ | 10,461 | 
|                        |  |                |        |  |                      |   |   |                       |  |   |            |  |  |   |        | 

As of December 31, 2010 and March 31, 2010, we did not have any investments in marketable
securities that were in an unrealized loss position for twelve months or greater.

The contractual maturities of our
marketable securities at December 31, 2010 are as follows (in thousands):



|                         |  |   |        | 
|------------------------ |  | - | ------ | 
|Due within one year      |  | $ | 27,975 | 
|Due in one to five years |  |   | 21,236 | 
|Due in five to ten years |  |   |       | 
|Due after ten years      |  |   |       | 
|                         |  |   |        | 
|                         |  | $ | 49,211 | 
|                         |  |   |        | 

As of March 31, 2010, we held $11.8 million in ARS at par value, which were collateralized by student
loans, most of which were originated under the Federal Family Education Loan Program and are guaranteed by the U.S. Federal Department of Education. All of our ARS are AAA rated (or equivalent) by one or more of the major credit rating agencies.

On November 11, 2008 (the Acceptance Date), we entered into an agreement (the ARS Agreement)
with an Investment Firm pursuant to which the Investment Firm agreed to repurchase all of our ARS at par value. By accepting the ARS Agreement, we (1) received the right to sell our ARS at par value to the Investment Firm between June 30,
2010 and July 2, 2012 (the Put Option) and (2) gave the Investment Firm the right to purchase the ARS from us at any time after the Acceptance Date as long as we receive par value.

The ARS Agreement covered ARS with a par value of $11.8 million and a fair value of $10.5 million as of March 31, 2010. We accounted
for the Put Option as a freestanding financial instrument and elected to record the value under the fair value option of ASC Topic 825, Financial Instruments. This resulted in our recording a $1.3 million asset with a corresponding credit to
income for the value of the Put Option during the year ended March 31, 2010. We estimated the fair value of the Put Option utilizing a discounted cash flow analysis as of March 31, 2010. The analysis considered, among other items, the
collateralization underlying the security investments, the creditworthiness of the issuer, expected future cash flows and the remaining life of the ARS Agreement with the Investment Firm. The combined gain on the ARS and Put Option of $0.2 million
for the year ended March 31, 2010 is recorded in the Interest and other income, net line in the accompanying consolidated statements of operations.

During the nine months ended December 31, 2010, we exercised the Put Option with respect to $2.7 million of par value ARS with the remaining $9.1 million of ARS called by the issuer at par value.

We assess our marketable securities for impairment under the guidance provided by ASC Topic 320. Accordingly, we review the
fair value of our marketable securities at least quarterly to determine if declines in the fair value of individual securities are other-than-temporary in nature. If we believe the decline in the fair value of an individual security is
other-than-temporary, we write-down the carrying value of the security to its



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



estimated fair value, with a corresponding charge against income. To determine if a decline in the fair value of an investment is other-than-temporary, we consider several factors including,
among others, the period of time and extent to which the estimated fair value has been less than cost, overall market conditions, the historical and projected future financial condition of the issuer of the security and our ability and intent to
hold the security for a period of time sufficient to allow for a recovery of the market value. The unrealized losses related to our marketable securities held as of December 31, 2010 were primarily caused by recent fluctuations in market
interest rates, and not the credit quality of the issuer, and we have the ability and intent to hold these securities until a recovery of fair value, which may be at maturity. As a result, we do not believe these securities to be
other-than-temporarily impaired as of December 31, 2010.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required
payments on accounts receivable. This estimate is based on a specific customer analysis and an analysis of our historical write-offs as a percent of outstanding accounts receivable balances. If the financial condition of a customer were to
deteriorate, resulting in an impairment of its ability to make payments against outstanding balances owed to us, an additional allowance may be required.

Fair Value of Financial Instruments

We carry our cash equivalents,
marketable securities and restricted marketable securities at market value. The carrying amount of accounts receivable, accounts payable and accrued liabilities are considered to be representative of their respective fair values due to their
short-term nature. Our investments in privately-held companies and our note receivable from a privately-held company are carried at cost. It is impracticable for us to estimate the fair value of these instruments on a recurring basis if there are no
identified events or changes in circumstances that may have a significant adverse effect on their fair value.

Property and Equipment

Property and equipment, stated at cost, consists of the following:



|                                               |  |                   |      |  |                  |   |         |               |  |   |         |  
|---------------------------------------------- |  | ----------------- | ---- |  | ---------------- | - | ------- | ------------- |  | - | ------- | -
|                                               |  | Useful Life (Yrs) |      |  | December 31,2010 |   |         | March 31,2010 | 
|                                               |  |                   |      |  | (In thousands)   |  
|Land                                           |  |                   |      |  |                  | $ | 1,959   |               |  | $ |        |  
|Buildings                                      |  |                   | 20   |  |                  |   | 2,351   |               |  |   |        |  
|Computers and software                         |  |                   | 1-3  |  |                  |   | 12,595  |               |  |   | 10,954  |  
|Furniture and fixtures                         |  |                   | 1-3  |  |                  |   | 1,124   |               |  |   | 860     |  
|Leasehold improvements                         |  |                   | 1-10 |  |                  |   | 5,746   |               |  |   | 3,492   |  
|                                               |  |                   |      |  |                  |   |         |               |  |   |         |  
|                                               |  |                   |      |  |                  |   | 23,775  |               |  |   | 15,306  |  
|Less accumulated depreciation and amortization |  |                   |      |  |                  |   | (11,806 | )             |  |   | (12,982 | )
|                                               |  |                   |      |  |                  |   |         |               |  |   |         |  
|                                               |  |                   |      |  |                  | $ | 11,969  |               |  | $ | 2,324   |  
|                                               |  |                   |      |  |                  |   |         |               |  |   |         |  

During the nine months ended December 31, 2010 we wrote off the cost and associated accumulated
depreciation of approximately $3.6 million of fully depreciated assets which were no longer in use. Depreciation is recorded on the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over
the shorter of their estimated useful lives or the remaining lease term. Repair and maintenance costs are charged to expense as incurred. Depreciation expense was $2.2 million and



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



$1.2 million for the nine months ended December 31, 2010 and December 31, 2009, respectively. Depreciation expense was $1.5 million and $1.9 million for the years ended
March 31, 2010 and 2009, respectively.

Software Development Costs

We account for costs incurred for computer software to be sold in accordance with ASC Topic 985, Software. Accordingly, costs
incurred internally in the research and development of new software products and significant enhancements to existing software products are expensed as incurred until the technological feasibility of the product has been established. Technological
feasibility occurs shortly before our internally developed software products are available for general release. We have determined that the internal costs eligible for capitalization are not material. Costs paid to third parties for products in
which technological feasibility has been established are capitalized upon purchase of the software.

At both December 31,
2010 and March 31, 2010 we had $2.0 million of capitalized software purchased from third parties. This amount is included in purchased intangible assets, net, in the accompanying consolidated balance sheet. These costs are being amortized to
cost of revenue on a straight-line basis over their estimated useful life of five years. Amortization expense was $0.3 million for the nine months ended December 31, 2010 and 2009 and the year ended March 31, 2009, and $0.4 million for the
year ended March 31, 2010.

Goodwill and Purchased Intangible Assets

Intangible assets consist of the following:



|                                               |  |                          |   |  |                     |   |        |                         |  |   |                          |  |  |                     |      |  |                         |   |        |  |  |   |       | 
|---------------------------------------------- |  | ------------------------ | - |  | ------------------- | - | ------ | ----------------------- |  | - | ------------------------ |  |  | ------------------- | ---- |  | ----------------------- | - | ------ |  |  | - | ----- | 
|                                               |  | December 31, 2010        |   |  | March 31, 2010      |  
|                                               |  | WeightedAverageLife(yrs) |   |  | GrossCarryingAmount |   |        | AccumulatedAmortization |  |   | WeightedAverageLife(yrs) |  |  | GrossCarryingAmount |      |  | AccumulatedAmortization |  
|                                               |  |                          |   |  | (In thousands)      |   |        |                         |  |   | (In thousands)           | 
|Intangible assets subject to amortization:     |  |                          |   |  |                     |   |        |                         |  |   |                          |  |  |                     |      |  |                         |   |        |  |  |   |       | 
|Purchased technology                           |  |                          | 8 |  |                     | $ | 52,650 |                         |  | $ | 12,668                   |  |  |                     | 5    |  |                         | $ | 6,750  |  |  | $ | 6,750 | 
|Purchased customer relationships               |  |                          | 7 |  |                     |   | 19,750 |                         |  |   | 2,953                    |  |  |                     | 10   |  |                         |   | 1,650  |  |  |   | 907   | 
|Purchased backlog                              |  |                          | 3 |  |                     |   | 6,340  |                         |  |   | 852                      |  |  |                     | 2.25 |  |                         |   | 550    |  |  |   | 550   | 
|Purchased contract base                        |  |                          | 5 |  |                     |   | 50     |                         |  |   | 50                       |  |  |                     | 5    |  |                         |   | 50     |  |  |   | 50    | 
|Purchased intellectual property                |  |                          | 5 |  |                     |   | 1,998  |                         |  |   | 1,028                    |  |  |                     | 5    |  |                         |   | 1,998  |  |  |   | 726   | 
|Purchased trademark/tradename                  |  |                          | 5 |  |                     |   | 5,600  |                         |  |   | 589                      |  |  |                     |     |  |                         |   |       |  |  |   |      | 
|                                               |  |                          |   |  |                     |   |        |                         |  |   |                          |  |  |                     |      |  |                         |   |        |  |  |   |       | 
|                                               |  |                          |   |  |                     | $ | 86,388 |                         |  | $ | 18,140                   |  |  |                     |      |  |                         | $ | 10,998 |  |  | $ | 8,983 | 
|                                               |  |                          |   |  |                     |   |        |                         |  |   |                          |  |  |                     |      |  |                         |   |        |  |  |   |       | 
|Intangible assets not subject to amortization: |  |                          |   |  |                     |   |        |                         |  |   |                          |  |  |                     |      |  |                         |   |        |  |  |   |       | 
|Purchased trademark/tradename                  |  |                          |   |  |                     | $ | 2,500  |                         |  |   |                          |  |  |                     |      |  |                         | $ | 2,500  |  |  |   |       | 
|                                               |  |                          |   |  |                     |   |        |                         |  |   |                          |  |  |                     |      |  |                         |   |        |  |  |   |       | 

Intangible assets are amortized over their estimated useful lives either on a straight-line or
accelerated basis that reflects the pattern in which the economic benefits of the intangible assets are expected to be realized, which range from two to fifteen years, with no residual value. Intangible asset amortization expense was $9.2 million
and $1.1 million for the nine months ended December 31, 2010 and December 31, 2009, respectively. Intangible asset amortization expense was $1.2 million and $1.9 million for the years ended March 31, 2010 and 2009, respectively.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Future estimated amortization expense for intangible assets as of December 31, 2010
for each of the succeeding five years is as follows (in thousands):



|                 |  |   |        | 
|---------------- |  | - | ------ | 
|Fiscal Year 2011 |  | $ | 20,492 | 
|Fiscal Year 2012 |  |   | 16,974 | 
|Fiscal Year 2013 |  |   | 11,696 | 
|Fiscal Year 2014 |  |   | 8,547  | 
|Fiscal Year 2015 |  |   | 4,617  | 
|                 |  |   |        | 
|Total            |  |   | 62,326 | 
|                 |  |   |        | 

The changes in the carrying amount of goodwill for the year ended December 31, 2010, are as follows (in
thousands):



|                                  |  |   |        | 
|--------------------------------- |  | - | ------ | 
|Balance at March 31, 2010         |  | $ | 42,663 | 
|Goodwill acquired during the year |  |   | 26,693 | 
|                                  |  |   |        | 
|                                  |  | $ | 69,356 | 
|                                  |  |   |        | 

In accordance with ASC Topic 350, IntangiblesGoodwill and Other (ASC Topic 350), we
review our goodwill and indefinite-lived intangible asset for impairment at least annually in our fiscal fourth quarter and more frequently if events or changes in circumstances occur that indicate a potential reduction in the fair value of our
reporting unit and/or our indefinite-lived intangible asset below their respective carrying values. Examples of such events or circumstances include: a significant adverse change in legal factors or in the business climate, a significant decline in
our stock price, a significant decline in our projected revenue or cash flows, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, or the presence of other indicators that would indicate a reduction in
the fair value of a reporting unit.

Our goodwill is considered to be impaired if we determine that the carrying value of the
reporting unit to which the goodwill has been assigned exceeds managements estimate of its fair value. Based on the guidance provided by ASC Topic 350 and ASC Topic 280, Segment Reporting, (ASC Topic 280) management has
determined that our company consists of one reporting unit given the similarities in economic characteristics between our operations and the common nature of our products, services and customers. Because we have only one reporting unit, and because
we are publicly traded, we determine the fair value of the reporting unit based on our market capitalization as we believe this represents the best evidence of fair value. In the fourth quarter of calendar year 2010, we completed our annual goodwill
impairment test for the nine months ended December 31, 2010 and concluded that our goodwill was not impaired. Our conclusion that goodwill was not impaired was based on a comparison of our net assets as of December 31, 2010 to our market
capitalization.

Our indefinite-lived intangible asset is considered to be impaired if we determine that the carrying value of
the asset exceeds its estimated fair value. In the fourth quarter of calendar year 2010, we completed our annual indefinite-lived intangible asset impairment test and concluded that our indefinite-lived intangible asset was not impaired. We
estimated the fair value of our indefinite-lived intangible asset utilizing a discounted cash flow analysis which considers the estimated future customer orders for our scientific informatics platform product line and the associated direct and
incremental selling, marketing and development costs. Key assumptions included in the discounted cash flow analysis include projections of future customer order growth for our scientific informatics platform product line and developing an
appropriate discount rate.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Impairment of Long-Lived Assets

In accordance with ASC Topic 350 and ASC Topic 360, Property, Plant and Equipment, we review long-lived assets to be held and used,
including acquired intangible assets subject to amortization and property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. Conditions that would
necessitate an impairment assessment include a significant decline in the market price of an asset or asset group, a significant adverse change in the extent or manner in which an asset or asset group is being used, the loss of legal ownership or
title to the asset, significant negative industry or economic trends or the presence of other indicators that would indicate that the carrying amount of an asset or asset group is not recoverable. An asset is considered to be impaired if
managements estimate of the undiscounted future cash flows anticipated to result from the use of the asset and its eventual disposition are not sufficient to recover the carrying value of the asset.

Long Term Investments

Our long term investments consist of equity investments in privately held companies. We determine the accounting method used to account
for investments in equity securities of other business entities in which we do not have a controlling interest primarily based on our ownership of each such business entity and whether we have the ability to exercise significant influence over the
strategic, operating, investing, and financing activities of each such business entity. As we do not have a controlling interest or have the ability to exercise significant influence over the companies, we account for our investments using the cost
method of accounting. We monitor these investments for impairment by considering current factors including economic environment, market conditions and operational performance and other specific factors relating to the business underlying the
investment. We have determined that as of December 31, 2010, these investments were not impaired.

We have determined
that one of the entities, Freeslate Inc. (Freeslate), in which we carry an approximately 19.5% equity interest, is a variable interest entity in which we are not the primary beneficiary. The key factors in our assessment were that
Freeslates management team and board of directors were solely responsible for all economic aspects of the entity, including key business decisions that impact Freeslates economic performance and we do not have power, through our variable
interest, to direct the activities that most significantly impact the economic performance of Freeslate. We also do not hold any seats on Freeslates board of directors. Accordingly, we account for our investment in Freeslate as a cost method
investment. The carrying value of our investment in Freeslate was $1.0 million as of December 31, 2010. In addition to our equity interest, we have a warrant allowing us to retain our 19.5% interest in the event of dilution through future stock
issuances under Freeslates existing stock plans.

We also hold an unsecured promissory note receivable with a face value
of $10.0 million from Freeslate, which bears interest at 8% per annum payable annually in arrears. The note requires principal payments in the amount of $1.0 million starting on March 1, 2014 and continuing annually until
March 1, 2019, with the final principal payment of $4.0 million due on March 1, 2020. As the note receivable was acquired in the Merger with Symyx (see note 3 below), it was revalued in purchase accounting to its fair value of $8.8
million and is included in other non-current assets in the consolidated balance sheet as of December 31, 2010. The note receivable is not measured at fair value on a recurring basis, but is periodically reviewed for possible impairment.

Our maximum exposure to loss as a result of our interests in Freeslate is limited to the aggregate of the carrying value of
our equity investment and promissory note receivable. There were no future funding commitments as of December 31, 2010 related to Freeslate.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Revenue Recognition

We generate revenue from the following primary sources:



| |  |  | software licenses,
| | - |  | ------------------



| |  |  | post-contract customer support and maintenance services on licensed software, collectively referred to as PCS
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | database content access, and
| | - |  | ----------------------------



| |  |  | professional services.
| | - |  | ----------------------

Customer billings issued in connection with our revenue-generating activities are initially recorded as deferred revenue. We then recognize the revenue from these customer billings as set forth below and
when all of the following criteria are met:



| |  |  | a fully executed written contract or purchase order has been obtained from the customer (i.e., persuasive evidence of an arrangement exists),
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the contractual price of the product or services has been defined and agreed to in the contract or purchase order (i.e., price is fixed or
determinable),
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | delivery of the product or service has occurred and no material uncertainties regarding customer acceptance of the delivered product or service exist,
and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | collection of the purchase price from the customer is considered probable.
| | - |  | --------------------------------------------------------------------------

Software Licenses.We license software on a term and perpetual basis. When sold perpetually, our standard perpetual software
licensing arrangements generally include twelve months of bundled PCS, while our standard term-based software licensing arrangements typically include PCS for the full duration of the term license. Because we do not have vendor specific objective
evidence of the fair value of these undelivered elements, we recognize as revenue the entire fee for such perpetual and term-based licenses ratably over the term of the bundled PCS.

Renewal of PCS Under Perpetual Software Licenses.Our PCS includes the right to receive unspecified upgrades or enhancements and
technical support. Fees from customer renewals of PCS related to previously purchased perpetual licenses are recognized ratably over the term of the PCS.

Database Content. Database content is licensed on a term basis and provides customers with access to the licensed content over the term of the agreement. Revenue from these licensing arrangements
is recognized ratably over the term of the agreement, which is typically twelve months.

Professional Services.We
provide certain services to our customers, including non-complex product training, installation, implementation and other professional services which are non-essential to the operation of the software. We also perform professional services for our
customers designed to enhance the value of our software products by creating extensions to functionality to address a clients specific business needs. When sold separately, revenue from these services is recognized as the services are
delivered under the proportional performance or completed performance method.

Multi-Element Arrangements.For
multi-element arrangements which include software licenses, PCS and non-complex training, installation and implementation services which are non-essential to the operation of the software, the entire fee for such arrangements is recognized as
revenue ratably over the term of the PCS or



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



delivery of the services, whichever is longer. For multi-element arrangements which also include services that are essential to the operation of the software, the fee for such arrangements is
generally deferred until the services essential to the operation of the software have been performed, at which point the entire fee for such arrangements is recognized as revenue ratably over the remaining term of the PCS or the delivery of the
non-essential services, whichever is longer.

Sales Taxes Collected

Sales taxes collected from customers and remitted to various governmental agencies are excluded from revenues in our consolidated
statements of operations.

Shipping Costs

The costs of shipping products to our customers are expensed as incurred and are included in cost of revenue in our consolidated statements of operations. We incurred shipping cost of $0.6 million, $0.3
million, $0.3 million and $0.4 million during the nine months ended December 31, 2010 and December 31, 2009, and the years ended March 31, 2010 and 2009, respectively.

Advertising Costs

The costs of advertising are expensed as incurred and
are included in sales and marketing expenses in our consolidated statements of operations. We incurred advertising costs of $0.1 million during the nine months ended December 31, 2010 and December 31, 2009, and the year ended
March 31, 2009. We incurred advertising costs of $0.3 million during the year ended March 31, 2010.

Foreign Currency Translation

In accordance with ASC Topic 830, Foreign Currency Matters, we translate the financial statements of our foreign
subsidiaries into U.S. dollars using period-end exchange rates for assets and liabilities and average exchange rates during each reporting period for results of operations. Gains and losses resulting from foreign currency translation are excluded
from results of operations and recorded as accumulated other comprehensive income in stockholders equity.

Gains and
losses resulting from the cash settlement of certain intercompany transactions as well as transactions with customers and vendors that are denominated in currencies other than the functional currency of each entity give rise to foreign exchange
gains or losses. We realized foreign exchange gains of $0.2 million and $0.1 million during the nine months ended December 31, 2010 and 2009, respectively, and, $0.4 million, and $0.3 million during the years ended March 31, 2010 and 2009,
respectively. These amounts are included in interest and other income, net in our consolidated statements of operations.

Royalty Income

We recognize royalty income based on reported sales by third party licensees of products containing the applicable
licensed materials and intellectual property. If there are extended payment terms, royalty revenue is recognized as these payments become due. Non-refundable royalties, for which there are no further performance obligations, are recognized when due
under the terms of the applicable agreements.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Deferred Costs

Occasionally we enter into professional service arrangements under which all the revenue is deferred until certain elements of the arrangements are delivered. As a result, we defer the direct variable
expense, not exceeding the revenue deferred, in other current assets on the balance sheet until the period when revenue is recognized. Direct and incremental variable expenses include direct labor costs and direct services contracts with third
parties working on the software service arrangements. As of December 31, 2010 and March 31, 2010, we deferred approximately $0.5 million and $0.8 million, respectively, of direct and incremental variable expenses related to software
service arrangements where the revenue is deferred until future periods.

Concentrations of Risk

We maintain deposits in federally insured financial institutions in excess of federally insured limits. We do not believe we are exposed
to significant credit risk due to the financial position of the depository institutions in which those deposits are held. Additionally, we have established guidelines regarding diversification of our investment portfolio, credit quality of issuers
and maturities of investments, which are designed to maintain the safety and liquidity of our deposits and investments.

In
addition to our U.S. operations, we conduct business in Europe and in the Asia/Pacific region, primarily in Japan. Any significant decline in the economies or the value of the currencies in these regions could have a material adverse impact on us.

Income Taxes

We account for income taxes in accordance with ASC Topic 740, Income Taxes(ASC Topic 740). Deferred tax assets and
liabilities are recognized for the tax consequences of temporary differences between the financial carrying amounts and the tax basis of existing assets and liabilities by applying enacted statutory tax rates applicable to future years. The
provision for income taxes is based on our estimates for taxable income of the various legal entities and jurisdictions in which we operate. As such, income tax expense may vary from the customary relationship between income tax expense and pre-tax
income. We establish a valuation allowance against our net deferred tax assets to reduce them to the amount expected to be realized.

We assess the recoverability of our deferred tax assets on an ongoing basis. In making this assessment we are required to consider all available positive and negative evidence to determine whether, based
on such evidence, it is more likely than not that some portion or all of our net deferred assets will be realized in future periods. This assessment requires significant judgment. We do not recognize current and future tax benefits until it is more
likely than not that our tax positions will be sustained. In general, any realization of our net deferred tax assets will reduce our effective rate in future periods. However, the realization of deferred tax assets that are related to net operating
losses (NOLs) that were generated by tax deductions resulting from the exercise of non-qualified stock options will be a direct increase to stockholders equity.

We determine whether the benefits of our tax positions are more-likely-than-not to be sustained upon audit based on the technical merits
of the tax position. We recognize the impact of an uncertain income tax position taken on our income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax
position is not recognized if it has less than a 50% likelihood of being sustained.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Interest and penalties related to income tax matters are recognized in income tax
expense. During the nine months ended December 31, 2009 and the years ended March 31, 2010 and March 31, 2009 we did not incur any expense related to interest or penalties for income tax matters. During the nine months ended
December 31, 2010 we have recorded approximately $0.5 million in interest and penalties, which remained accrued as of December 31, 2010.

Net Income (Loss) Per Share

We compute net income (loss) per share
pursuant to ASC Topic 260, Earnings Per Share. Accordingly, basic net income (loss) per share and diluted net loss per share are computed by dividing the net income (loss) for the period by the weighted average number of common shares
outstanding during the period, without consideration for common stock equivalents. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common stock and common stock equivalents
outstanding during the period. Potentially dilutive common stock equivalents consist of common stock options and unvested restricted stock units (RSUs).



|                                                             |  |                                          |         |   |                       |   |        |      |  |   |        |  |  |   |        | 
|------------------------------------------------------------ |  | ---------------------------------------- | ------- | - | --------------------- | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                                             |  | Nine Months Ended December 31,           |         |   | Years Ended March 31, |  
|                                                             |  | 2010                                     |         |   | 2009(unaudited)       |   |        | 2010 |  |   | 2009   | 
|                                                             |  | (In thousands, except per share amounts) |        
|Numerator:                                                   |  |                                          |         |   |                       |   |        |      |  |   |        |  |  |   |        | 
|Net income (loss)                                            |  | $                                        | (20,608 | ) |                       | $ | 3,569  |      |  | $ | 1,195  |  |  | $ | 94     | 
|Denominator:                                                 |  |                                          |         |   |                       |   |        |      |  |   |        |  |  |   |        | 
|Weighted average common shares outstanding                   |  |                                          | 46,446  |   |                       |   | 27,470 |      |  |   | 27,504 |  |  |   | 27,093 | 
|Dilutive potential common stock equivalents                  |  |                                          |        |   |                       |   | 234    |      |  |   | 256    |  |  |   | 110    | 
|                                                             |  |                                          |         |   |                       |   |        |      |  |   |        |  |  |   |        | 
|Weighted average shares and dilutive potential common shares |  |                                          | 46,446  |   |                       |   | 27,704 |      |  |   | 27,760 |  |  |   | 27,203 | 
|                                                             |  |                                          |         |   |                       |   |        |      |  |   |        |  |  |   |        | 
|Net income (loss) per share:                                 |  |                                          |         |   |                       |   |        |      |  |   |        |  |  |   |        | 
|Basic                                                        |  | $                                        | (0.44   | ) |                       | $ | 0.13   |      |  | $ | 0.04   |  |  | $ | 0.00   | 
|Diluted                                                      |  | $                                        | (0.44   | ) |                       | $ | 0.13   |      |  | $ | 0.04   |  |  | $ | 0.00   | 
|                                                             |  |                                          |         |   |                       |   |        |      |  |   |        |  |  |   |        | 

As we reported a net loss for the nine months ended December 31, 2010, basic and diluted net loss per share
were the same. Potentially dilutive securities outstanding totaling 6.9 million shares were not included in the computation of diluted net loss per share for the nine months ended December 31, 2010 because to do so would have been anti-dilutive.
Potentially dilutive common stock equivalents that were excluded from the diluted net income per share calculations since their effect would be anti-dilutive totaled approximately 3.1 million shares for the nine months ended December 31,
2009 and for each of the years ended March 31, 2010 and 2009.

Share Based Compensation

We account for our share-based awards in accordance with ASC Topic 718, CompensationStock Compensation(ASC Topic
718). We estimate the fair value of our share-based stock awards on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of certain input variables, which are further discussed
in Note 4.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Segment and Geographic Information

In accordance with ASC Topic 280, our operations have been aggregated into one reportable segment given the similarities in economic
characteristics between our operations and the common nature of our products, services and customers.

Financial information
by geographic region is as follows:



|             |  |                                    |        |  |                    |  |     |                |  |   |                    |  |  |        |     |   |                    |   |        |        |  |  |                    |   |  |   |        |  |  |  |     |  
|------------ |  | ---------------------------------- | ------ |  | ------------------ |  | --- | -------------- |  | - | ------------------ |  |  | ------ | --- | - | ------------------ | - | ------ | ------ |  |  | ------------------ | - |  | - | ------ |  |  |  | --- | -
|             |  | Nine Months Ended                  |        |  | Years Ended        | 
|             |  | December 31, 2010                  |        |  | December 31, 2009  |  |     | March 31, 2010 |  |   | March 31, 2009     | 
|             |  | Amount                             |        |  | Percentageof Total |  |     | Amount         |  |   | Percentageof Total |  |  | Amount |     |   | Percentageof Total |   |        | Amount |  |  | Percentageof Total |  
|             |  |                                    |        |  |                    |  |     | (unaudited)    |  |   |                    |  |  |        |     |   |                    |   |        |        | 
|             |  | (In thousands, except percentages) |       
|Revenues:    |  |                                    |        |  |                    |  |     |                |  |   |                    |  |  |        |     |   |                    |   |        |        |  |  |                    |   |  |   |        |  |  |  |     |  
|U.S.         |  | $                                  | 39,271 |  |                    |  | 49  | %              |  | $ | 28,480             |  |  |        | 46  | % |                    | $ | 38,208 |        |  |  | 46                 | % |  | $ | 39,126 |  |  |  | 48  | %
|Europe       |  |                                    | 22,679 |  |                    |  | 28  | %              |  |   | 19,276             |  |  |        | 31  | % |                    |   | 25,001 |        |  |  | 30                 | % |  |   | 22,754 |  |  |  | 28  | %
|Asia-Pacific |  |                                    | 18,255 |  |                    |  | 23  | %              |  |   | 14,444             |  |  |        | 23  | % |                    |   | 19,750 |        |  |  | 24                 | % |  |   | 19,101 |  |  |  | 24  | %
|             |  |                                    |        |  |                    |  |     |                |  |   |                    |  |  |        |     |   |                    |   |        |        |  |  |                    |   |  |   |        |  |  |  |     |  
|Total        |  | $                                  | 80,205 |  |                    |  | 100 | %              |  | $ | 62,200             |  |  |        | 100 | % |                    | $ | 82,959 |        |  |  | 100                | % |  | $ | 80,981 |  |  |  | 100 | %
|             |  |                                    |        |  |                    |  |     |                |  |   |                    |  |  |        |     |   |                    |   |        |        |  |  |                    |   |  |   |        |  |  |  |     |  



|                   |  |                                    |         |  |                    |  |     |                |  |   |                    |  |  |        |     |   |                    |   |        |  |  |  |     |  
|------------------ |  | ---------------------------------- | ------- |  | ------------------ |  | --- | -------------- |  | - | ------------------ |  |  | ------ | --- | - | ------------------ | - | ------ |  |  |  | --- | -
|                   |  | December 31, 2010                  |         |  | March 31, 2010     |  |     | March 31, 2009 | 
|                   |  | Amount                             |         |  | Percentageof Total |  |     | Amount         |  |   | Percentageof Total |  |  | Amount |     |   | Percentageof Total |  
|                   |  | (In thousands, except percentages) |        
|Long-lived assets: |  |                                    |         |  |                    |  |     |                |  |   |                    |  |  |        |     |   |                    |   |        |  |  |  |     |  
|U.S.               |  | $                                  | 149,952 |  |                    |  | 98  | %              |  | $ | 48,195             |  |  |        | 97  | % |                    | $ | 50,005 |  |  |  | 97  | %
|Europe             |  |                                    | 1,619   |  |                    |  | 1   | %              |  |   | 1,285              |  |  |        | 3   | % |                    |   | 1,325  |  |  |  | 3   | %
|Asia-Pacific       |  |                                    | 1,913   |  |                    |  | 1   | %              |  |   | 363                |  |  |        |    | % |                    |   | 399    |  |  |  |    | %
|                   |  |                                    |         |  |                    |  |     |                |  |   |                    |  |  |        |     |   |                    |   |        |  |  |  |     |  
|Total              |  | $                                  | 153,484 |  |                    |  | 100 | %              |  | $ | 49,843             |  |  |        | 100 | % |                    | $ | 51,729 |  |  |  | 100 | %
|                   |  |                                    |         |  |                    |  |     |                |  |   |                    |  |  |        |     |   |                    |   |        |  |  |  |     |  

Comprehensive Income

In accordance with ASC Topic 220, Comprehensive Income, we report the components of comprehensive income, including net income, in the financial statements in the period in which they are
recognized. Comprehensive income is defined as all changes in equity during a period from non-owner sources, including foreign currency translation adjustments and unrealized gains and losses on marketable securities. We present comprehensive income
in our consolidated statements of stockholders equity. Accumulated other comprehensive income in stockholders equity consists of the following:



|                                                    |  |                  |       |   |               |   |       |               |  |   |        |  
|--------------------------------------------------- |  | ---------------- | ----- | - | ------------- | - | ----- | ------------- |  | - | ------ | -
|                                                    |  | December 31,2010 |       |   | March 31,2010 |   |       | March 31,2009 | 
|                                                    |  | (In thousands)   |      
|Foreign currency translation adjustment             |  | $                | 1,435 |   |               | $ | 1,463 |               |  | $ | 1,933  |  
|Unrealized loss on marketable securities            |  |                  | (29   | ) |               |   |      |               |  |   | (2,901 | )
|Reclassification of unrealized losses to net income |  |                  |      |   |               |   |      |               |  |   | 2,876  |  
|                                                    |  |                  |       |   |               |   |       |               |  |   |        |  
|                                                    |  | $                | 1,406 |   |               | $ | 1,463 |               |  |   | 1,908  |  
|                                                    |  |                  |       |   |               |   |       |               |  |   |        |  



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Guarantees

We account for guarantees in accordance with ASC Topic 460, Guarantees(ASC Topic 460). ASC Topic 460 requires that a guarantor recognize, at the inception of a guarantee, a liability
for the fair value of certain guarantees and requires certain disclosures to be made by a guarantor about its obligations under certain guarantees that it has issued.

Effect of New Accounting Standards

In January 2010, the FASB issued ASC
820-10-65-7, Improving Disclosures about Fair Value Measurements. This guidance requires additional disclosures for fair value measurements including the following: 1) amounts transferred in and out of Level 1 and 2 fair value measurements,
which is effective for interim and annual reporting periods beginning after December 15, 2009 and 2) activities in Level 3 fair value measurements including purchases, sales, issuances, and settlements, which is effective for interim and annual
reporting periods beginning after December 15, 2010. The adoption of the revised guidance related to amounts transferred in and out of Level 1 and 2 fair value measurements did not have a significant impact on our financial statement
disclosures, and we do not believe that the adoption of the revised guidance related to Level 3 activities will have a material impact on our financial statement disclosures.

In January 2010, the FASB issued ASU 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (FASB Statement No. 167, Amendments to FASB
Interpretation No. 46 (R)), which revises the analysis for identifying the primary beneficiary of a variable interest entity (VIE) by replacing the previous quantitative-based analysis with a framework that is based more on
qualitative judgments. The new guidance requires the primary beneficiary of a VIE to be identified as the party that both (i) has the power to direct the activities of a VIE that most significantly impact its economic performance and
(ii) has an obligation to absorb losses or a right to receive benefits that could potentially be significant to the VIE. This guidance is effective for financial statements issued for fiscal years, and interim periods within those fiscal years,
beginning after November 15, 2009. The adoption of this guidance did not have a significant impact on our financial position or results of operations.

In September 2009, the FASB issued ASC 605-25-65-1, Multiple-Deliverable Revenue Arrangements. The new guidance states that if vendor specific objective evidence or third party evidence for
deliverables in an arrangement cannot be determined, companies will be required to develop a best estimate of the selling price to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance
is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. We are currently evaluating the impact this guidance may have on our results of
operations or financial position.

In September 2009, the FASB issued ASC 985-605-65-1, Certain Revenue Arrangements That
Include Software Elements. Previously, companies that sold tangible products with more than incidental software were required to apply software revenue recognition guidance. This guidance often delayed revenue recognition for the
delivery of the tangible product. Under the new guidance, tangible products that have software components that are essential to the functionality of the tangible product will be excluded from the software revenue recognition guidance.
The new guidance will include factors to help companies determine what is essential to the functionality of the tangible product. Software-enabled products will now be subject to other revenue guidance and will likely follow the guidance
for multiple deliverable arrangements issued by the FASB in September 2009. The new guidance is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted. We believe this guidance will not have a significant impact on our financial position or results of operations.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



|3. | Business Combinations
|-- | ---------------------

On
July 1, 2010, we completed the Merger, whereby Symyx became our wholly-owned subsidiary. Pursuant to the terms of the Agreement and Plan of Merger and Reorganization, dated April 5, 2010, by and among Accelrys, Merger Sub and Symyx (the
Merger Agreement), Symyx stockholders received 0.7802 shares of our common stock (the Exchange Ratio) for each share of Symyx common stock held on July 1, 2010. As a result, we issued an aggregate of approximately
27.5 million shares of our common stock to Symyx stockholders on July 1, 2010. In addition, outstanding options to purchase Symyx common stock were assumed by us and converted into options to purchase 2,441,274 shares of our common stock
based on the Exchange Ratio. Based on criteria under business combination accounting guidance, Accelrys was deemed to be the accounting acquirer.

As a result of the Merger, our U.S. federal deferred tax assets related to NOL carryforwards of $114.0 million as of December 31, 2010 are subject to limitations under Section 382 of the
Internal Revenue Code of 1986, as amended (the Code).

Fair Value of Consideration Transferred



|                                                                                                   |  |   |         |    
|-------------------------------------------------------------------------------------------------- |  | - | ------- | ---
|(in thousands except exchange ratio, share and per share amounts )                                 |  |   |         |    
|Symyx common stock outstanding on June 30, 2010                                                    |  |   | 35,118  |    
|Accelerated vesting of Symyx restricted stock units (Symyx RSUs) immediately prior to the Merger |  |   | 132     | (1)
|                                                                                                   |  |   |         |    
|Symyx common stock outstanding on June 30, 2010 (including Symyx RSUs)                             |  |   | 35,250  |    
|                                                                                                   |  |   |         |    
|Exchange ratio                                                                                     |  |   | 0.7802  |    
|                                                                                                   |  |   |         |    
|Number of shares of Accelrys stock issued in connection with the Merger                            |  |   | 27,502  |    
|Per share closing price of Accelrys common stock on June 30, 2010                                  |  | $ | 6.45    |    
|                                                                                                   |  |   |         |    
|Fair value of estimated shares of Accelrys common stock to be issued in connection with the Merger |  | $ | 177,384 |    
|Fair value of exchanged equity awards                                                              |  | $ | 1,913   | (2)
|                                                                                                   |  |   |         |    
|Value of consideration transferred                                                                 |  | $ | 179,297 |    
|                                                                                                   |  |   |         |    



|(1) | Represents unvested Symyx RSUs as of June 30, 2010. Pursuant to the Symyx 2007 Stock Incentive Plan, as amended (the 2007 Plan) and associated grant
agreements, unvested Symyx RSUs accelerated vesting upon a change of control (including the Merger).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes: (a) $1.5 million which represents the fair value of Symyx stock options, granted to Symyx employees in connection with services provided prior to the
Merger, exchanged for options to acquire 2,441,274 shares of Accelrys common stock in connection with the Merger and (b) $0.4 million which represents the fair value of the Symyx stock options which became fully vested on June 30, 2010 in
accordance with change of control provisions included in the stock option agreements. The fair value of the vested stock options exchanged is included in the calculation of purchase consideration and was determined using the Black-Scholes option
pricing model using an Accelrys share price of $6.45. The assumptions used were as follows:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                              |  |  |             |  
|----------------------------- |  |  | ----------- | -
|Expected volatility           |  |  | 32%  65    | %
|Risk-free interest rate       |  |  | 0.22%  1.4 | %
|Expected option life in years |  |  | 0.5  4.0   |  
|Expected dividend yield       |  |  | 0           | %



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Recording of Assets Acquired and Liabilities Assumed

The Company has not yet finalized the determination of the fair values of the assets acquired and liabilities assumed in connection with
the Merger with respect to our evaluation of income tax, including uncertain tax positions, accrued liabilities, and a potential legal contingency. As a result, the fair values set forth below are considered preliminary and subject to potential
adjustments.

The following table summarizes the preliminary acquisition-date fair value of the identifiable assets acquired
and liabilities assumed, including an amount for recognized goodwill:



|                                                                                  |  |                |         |  
|--------------------------------------------------------------------------------- |  | -------------- | ------- | -
|                                                                                  |  | (in thousands) |        
|Fair Value of Consideration Transferred                                           |  | $              | 179,297 |  
|Less: Recognized amounts of identifiable assets acquired and liabilities assumed: |  |                |         |  
|Cash and cash equivalents                                                         |  |                | 74,497  |  
|Accounts receivable                                                               |  |                | 14,234  |  
|Other current assets                                                              |  |                | 8,193   |  
|Property, plant and equipment                                                     |  |                | 8,735   |  
|Intangible assets                                                                 |  |                | 75,390  |  
|Long-term investments                                                             |  |                | 18,510  |  
|Other assets                                                                      |  |                | 10,223  |  
|Other current liabilities                                                         |  |                | (24,487 | )
|Deferred revenue                                                                  |  |                | (14,559 | )
|Other long-term liabilities                                                       |  |                | (18,132 | )
|                                                                                  |  |                |         |  
|Goodwill                                                                          |  | $              | 26,693  |  
|                                                                                  |  |                |         |  

During the fourth quarter of calendar year 2010, we recorded a pre-acquisition legal contingency in our
preliminary purchase price allocation based on available information obtained as of the acquisition date. We believe we may obtain certain additional information, that existed as of the acquisition date, during the allocation period that will
allow us to finalize the fair value of the acquired legal contingency, as well as the fair values of accrued liabilities and income tax, including uncertain tax positions.

The goodwill resulting from the Merger consists largely of the synergies expected from combining the operations of Accelrys and Symyx. The anticipated synergies primarily relate to redundant staffing and
related internal support costs, redundant locations, redundant systems and IT costs and purchasing economies of scale as well as an assembled workforce. Management has concluded that there is one reportable segment for the combined company and
therefore all goodwill is allocated to the one reporting segment. There is no tax deductible goodwill as a result of the Merger.

Below is a summary of the methodologies and significant assumptions used in estimating the fair value of purchased intangible assets.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Intangible assetsThe fair value of the purchased intangible assets was
determined using the below valuation approaches. In estimating the fair value of the purchased intangible assets, the Company utilized the valuation methodology determined to be most appropriate for the individual intangible asset being valued as
described below. The purchased intangible assets include the following:



|                                  |  |                                 |  |                     |        |  |                          |  |        | 
|--------------------------------- |  | ------------------------------- |  | ------------------- | ------ |  | ------------------------ |  | ------ | 
|                                  |  | Valuation Method                |  | EstimatedFair Value |        |  | RemainingUseful Lives(1) | 
|                                  |  |                                 |  | (in thousands)      |        |  | (years)                  | 
|Completed Technology              |  | Multi-Period Excess Earnings(2) |  | $                   | 46,000 |  |                          |  | 2.5-15 | 
|Backlog                           |  | Multi-Period Excess Earnings(2) |  |                     | 5,690  |  |                          |  | 3.5    | 
|Customer Contracts/Relationships  |  | With and Without(3)             |  |                     | 18,100 |  |                          |  | 7      | 
|Trademarks and trade names        |  | Relief from Royalty(4)          |  |                     | 5,600  |  |                          |  | 5      | 
|                                  |  |                                 |  |                     |        |  |                          |  |        | 
|Total purchased intangible assets |  |                                 |  | $                   | 75,390 |  |                          |  |        | 
|                                  |  |                                 |  |                     |        |  |                          |  |        | 



|(1) | Determination of the estimated useful lives of the individual categories of purchased intangible assets was based on the nature of the applicable intangible asset and
the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the shorter of the respective lives of the agreement or the period of time the assets are expected to
contribute to future cash flows.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The multi-period excess earnings method estimates a purchased intangible assets value based on the present value of the prospective net cash flows (or excess
earnings) attributable to it. The value attributed to these intangibles was based on projected net cash inflows from existing contracts or relationships.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The with and without method is a differential earnings method where the first scenario assumes the asset is being used by the entity to generate cash flows and second
scenario assumes the asset is not available for use by the entity.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The relief from royalty method is an earnings approach which assesses the royalty savings an entity realizes since it owns the asset and doesnt have to pay a
third party a license fee for its use.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Some of the more significant estimates and assumptions inherent in the
estimate of the fair value of the identifiable purchased intangible assets include all assumptions associated with forecasting cash flows and profitability. The primary assumptions used for the determination of the fair value of the purchased
intangible assets were generally based upon the present value of anticipated cash flows discounted at rates ranging from 13% to 26%. Estimated years of projected earnings generally follow the range of estimated remaining useful lives for each
intangible asset class, with no residual value.

Actual and Pro Forma Impact of the Merger

The amounts of revenue and net loss of Symyx included in the Companys consolidated statement of operations from the acquisition
date, through December 31, 2010, are as follows:



|         |  |                |         |  
|-------- |  | -------------- | ------- | -
|         |  | (in thousands) |        
|Revenue  |  | $              | 17,927  |  
|Net loss |  | $              | (30,468 | )

The following unaudited
pro forma information presents the consolidated results of Accelrys and Symyx for the nine months ended December 31, 2010 and December 31, 2009 and the year ended March 31, 2010, with adjustments to give effect to pro forma events
that are directly attributable to the Merger and have a continuing impact, but exclude the impact of pro forma events that are directly attributable to the Merger and are one-time occurrences. The unaudited pro forma information is presented for
illustrative purposes only and is not



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



necessarily indicative of the results of operations of future periods, the results of operations that actually would have been realized had the entities been a single company during the periods
presented or the results of operations that the combined company will experience after the Merger. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters or any
anticipated synergies, operating efficiencies or cost savings that may be associated with the Merger. The unaudited pro forma information also does not include any integration costs, dis-synergies or remaining future transaction costs that the
companies may incur as a result of the Merger and combining the operations of the companies.

The unaudited pro forma
consolidated results of operations, assuming the Merger had occurred on April 1, 2009 are as follows:



|                                             |  |                   |         |   |                  |   |         |               |  |   |         | 
|-------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------- | ------------- |  | - | ------- | 
|                                             |  | Nine Months Ended |         |   | YearEnded        |  
|                                             |  | December 31,2010  |         |   | December 31,2009 |   |         | March 31,2010 | 
|                                             |  | (In thousands)    |        
|Unaudited pro forma consolidated results:    |  |                   |         |   |                  |   |         |               |  |   |         | 
|Revenue                                      |  | $                 | 100,162 |   |                  | $ | 129,058 |               |  | $ | 171,567 | 
|Net income (loss) from continuing operations |  | $                 | (30,031 | ) |                  | $ | 12,379  |               |  | $ | 10,923  | 

Symyx operating
results are included in our consolidated statements of operations from July 1, 2010 through December 31, 2010. As a result of fair value purchase accounting adjustments, the revenue and net income from continuing operations attributable to
Symyx have been substantially reduced during this period as compared to previous periods.

We have incurred a total of $7.1
million of transaction expenses to date relating to the Merger, with $6.4 million incurred during the nine months ended December 31, 2010 and $0.7 million incurred during the year ended March 31, 2010. Transaction expenses related to the
Merger are included in the Business consolidation and restructuring costs (recoveries) line in our consolidated statement of operations and consist of accounting, legal, and banking costs directly related to the Merger. In addition, we
recorded approximately $0.8 million of equity issuance costs which are recorded in additional paid-in capital in connection with the issuance of our common stock to Symyx stockholders in connection with the Merger.

Income tax impact of business combination

During the nine months ended December 31, 2010, as a result of the Merger, we released $14.9 million of our valuation allowance against our deferred tax assets, as we have concluded that our NOLs can
be utilized against the assumed deferred tax liabilities of Symyx. We do not anticipate any further release of the valuation allowance against our deferred tax assets in the near future.

4.    Share-Based Payments

Share-Based Compensation Plans

On August 2, 2005, our stockholders approved the Amended and Restated 2004 Stock Incentive Plan (the 2004
Plan). The 2004 Plan authorizes the grant of equity awards to purchase the number of shares of our common stock equal to the sum of (i) 1,900,000 shares and (ii) the number of shares of common stock underlying any stock awards
granted under certain prior share-based compensation plans that expire or are cancelled or forfeited without having been exercised in full or that are repurchased by us. Potential types of equity awards that may be granted under the 2004 Plan to our
officers, directors, employees and consultants include stock options, RSUs, restricted stock awards, common stock awards, stock appreciation rights, performance awards and deferred stock units. Pursuant to the 2004 Plan, any shares of common stock
that are awarded under the 2004 Plan as RSUs, restricted stock awards, common stock awards, performance awards or deferred stock units (but not as stock options or stock appreciation rights) are counted against the maximum number of shares of common



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



stock available for issuance under the 2004 Plan based on a 1.15-to-1 ratio. The terms and conditions of specific awards are set at the discretion of our board of directors although generally
awards vest over not more than four years, expire no later than ten years from the date of grant and do not have exercise prices less than the fair market value of the underlying common stock on the date of grant. At December 31, 2010,
approximately 662,000 shares of our common stock remain available for issuance pursuant to awards granted under the 2004 Plan.

On August 2, 2005, our stockholders also approved the 2005 Employee Stock Purchase Plan (the ESPP), under which we have
reserved 1,000,000 shares of our common stock for issuance. Under the ESPP, employees may defer up to 10% of their base salary to purchase shares of our common stock, up to a maximum of 1,000 shares per offering period. The purchase price
of the common stock is equal to 85% of the lower of the fair market value per share of our common stock on the commencement date of the applicable offering period or the applicable purchase date. To date, we have issued 650,000 shares under the ESPP
and 350,000 shares remain available for future issuance under the ESPP as of December 31, 2010.

Upon completion of the
Merger, all options to purchase Symyx common stock that were outstanding immediately prior to the Merger were assumed by us and converted into options to purchase our common stock (with the number of shares subject to each such option and the
exercise price applicable to each such option adjusted based on the Exchange Ratio). We assumed each such stock option in accordance with the terms and conditions of the applicable Symyx stock option plan and stock option agreement, subject to the
adjustments described in the preceding sentence. We also assumed the 2007 Plan, pursuant to which any shares of common stock that are awarded as RSUs, restricted stock awards, common stock awards, performance awards or deferred stock units (but not
as stock options or stock appreciation rights) are counted against the maximum number of shares of common stock available for issuance under the 2007 Plan based on a 1.65-to-1 ratio. The terms and conditions of specific awards are set at the
discretion of our board of directors although generally awards vest over not more than four years, expire no later than seven years from the date of grant and have exercise prices equal to or greater than the fair market value of the underlying
common stock on the date of grant. As of December 31, 2010, there are approximately 4,707,000 shares of our common stock available for issuance under the 2007 Plan. These shares are available to grant to any employee, director or consultant who
was not an employee, director or consultant of Accelrys prior to the Merger.

Share-Based Award Activity

Our stock options generally vest over four years and have a contractual term of seven to ten years. A summary of stock option activity
under our share-based compensation plans is as follows:



|                                                                |  |                                                    |       |   |                              |   |       |                         |  |   |                                         |  |  |  |      | 
|--------------------------------------------------------------- |  | -------------------------------------------------- | ----- | - | ---------------------------- | - | ----- | ----------------------- |  | - | --------------------------------------- |  |  |  | ---- | 
|                                                                |  | Number ofShares                                    |       |   | WeightedAverageExercisePrice |   |       | AggregateIntrinsicValue |  |   | WeightedAverageRemainingContractualLife | 
|                                                                |  | (In thousands, except per share amounts and years) |      
|Outstanding at April 1, 2010                                    |  |                                                    | 3,544 |   |                              | $ | 6.39  |                         |  |   |                                         |  |  |  |      | 
|Exchanged for Symyx stock options assumed as part of the Merger |  |                                                    | 2,441 |   |                              |   | 14.92 |                         |  |   |                                         |  |  |  |      | 
|Granted                                                         |  |                                                    | 980   |   |                              |   | 6.74  |                         |  |   |                                         |  |  |  |      | 
|Exercised                                                       |  |                                                    | (431  | ) |                              |   | 5.50  |                         |  |   |                                         |  |  |  |      | 
|Expired/Forfeited                                               |  |                                                    | (676  | ) |                              |   | 12.04 |                         |  |   |                                         |  |  |  |      | 
|                                                                |  |                                                    |       |   |                              |   |       |                         |  |   |                                         |  |  |  |      | 
|Outstanding at December 31, 2010                                |  |                                                    | 5,858 |   |                              | $ | 9.42  |                         |  | $ | 9,635                                   |  |  |  | 5.45 | 
|                                                                |  |                                                    |       |   |                              |   |       |                         |  |   |                                         |  |  |  |      | 
|Exercisable at December 31, 2010                                |  |                                                    | 3,461 |   |                              | $ | 11.51 |                         |  | $ | 4,683                                   |  |  |  | 3.78 | 
|                                                                |  |                                                    |       |   |                              |   |       |                         |  |   |                                         |  |  |  |      | 



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



The aggregate intrinsic value of stock options outstanding and exercisable at
December 31, 2010 was based on the closing price of our common stock on December 31, 2010 of $8.30 per share. The total intrinsic value of stock options exercised during the nine months ended December 31, 2010 and 2009 was $1.0
million and $26,000, respectively and was $0.1 million for both the years ended March 31, 2010 and 2009.

RSUs granted
under the 2004 Plan and 2007 Plan generally vest annually over three years and, once vested, do not expire. Upon vesting of an RSU, employees are generally issued an equivalent number of shares of our common stock. A summary of RSU activity under
our share-based compensation plans is as follows:



|                              |  |                                         |       |   |                                              |   |      | 
|----------------------------- |  | --------------------------------------- | ----- | - | -------------------------------------------- | - | ---- | 
|                              |  | Number ofShares                         |       |   | WeightedAverageGrant DateFair Valueper Share |  
|                              |  | (In thousands, exceptper share amounts) |      
|Unvested at April 1, 2010     |  |                                         | 950   |   |                                              | $ | 5.60 | 
|Granted                       |  |                                         | 557   |   |                                              |   | 6.94 | 
|Vested                        |  |                                         | (344  | ) |                                              |   | 5.72 | 
|Forfeited                     |  |                                         | (143  | ) |                                              |   | 5.35 | 
|                              |  |                                         |       |   |                                              |   |      | 
|Unvested at December 31, 2010 |  |                                         | 1,020 |   |                                              | $ | 6.32 | 
|                              |  |                                         |       |   |                                              |   |      | 

Included in the vested shares for the period are approximately 98,000 shares tendered to us by employees for
payment of minimum income tax obligations upon vesting of RSUs.

Valuation Assumptions of Share-Based Awards

We estimate the fair value of our share-based awards on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes
option-pricing model requires the use of certain input variables, as follows:

Expected Volatility. Volatility is a
measure of the amount the stock price will fluctuate during the expected life of an award. We determine volatility based on our historical stock price volatility over the most recent period equivalent to the expected life of the award, giving
consideration to company-specific events impacting historical volatility that are unlikely to occur in the future, as well as anticipated future events that may impact volatility. We also consider the historical stock price volatilities of
comparable publicly traded companies.

Risk-Free Interest Rate.Our assumption of the risk-free interest rate is based
on the interest rates on U.S. constant rate treasury securities with contractual terms approximately equal to the expected life of the award.

Expected Dividend Yield.Because we have not paid any cash dividends since our inception and do not anticipate paying dividends in the foreseeable future, we assume a dividend yield of zero.

Expected Award Life.We determine the expected life of an award by considering various relevant factors, including the
vesting period and contractual term of the award, our employees historical exercise patterns and length of service and employee characteristics. We also consider the expected terms of comparable publicly traded companies. For ESPP purchase
rights, the expected life is equal to the current offering period under the ESPP.

Under ASC Topic 718, we are also required
to estimate at grant the likelihood that the award will ultimately vest (the pre-vesting forfeiture rate) and revise the estimate, if necessary, in future periods if the actual



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



forfeiture rate differs. We determine the pre-vesting forfeiture rate of an award based on our historical pre-vesting award forfeiture experience, giving consideration to company-specific events
impacting our historical pre-vesting award forfeiture experience that are unlikely to occur in the future as well as anticipated future events that may impact forfeiture rates.

Our determination of the input variables used in the Black-Scholes option pricing model as well as the pre-vesting forfeiture rate is
based on various underlying estimates and assumptions that are highly subjective and are affected by our stock price, among other factors. Changes in these underlying estimates and assumptions could materially affect the fair value of our
share-based awards and, therefore, the amount of share-based compensation expense to be recognized in our results of operations.

The fair value of stock options and ESPP purchase rights granted during the nine months ended December 31, 2010 and December 31, 2009, and the years ended March 31, 2010 and 2009 was
estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:



|                                                 |  |                   |      |   |                    |   |      |                |  |   |                    |   |  |              |      |   |                    |   |      |              |  |   |                    |   |  |   |      |   |  |   |      |  
|------------------------------------------------ |  | ----------------- | ---- | - | ------------------ | - | ---- | -------------- |  | - | ------------------ | - |  | ------------ | ---- | - | ------------------ | - | ---- | ------------ |  | - | ------------------ | - |  | - | ---- | - |  | - | ---- | -
|                                                 |  | Nine Months Ended |      |   | Years Ended        |  
|                                                 |  | December 31, 2010 |      |   | December 31, 2009  |   |      | March 31, 2010 |  |   | March 31, 2009     |  
|                                                 |  | StockOptions      |      |   | ESPPPurchaseRights |   |      | StockOptions   |  |   | ESPPPurchaseRights |   |  | StockOptions |      |   | ESPPPurchaseRights |   |      | StockOptions |  |   | ESPPPurchaseRights |  
|                                                 |  |                   |      |   |                    |   |      | (unaudited)    |  |   |                    |   |  |              |      |   |                    |   |      |              | 
|Expected volatility                              |  |                   | 51   | % |                    |   | 28   | %              |  |   | 58                 | % |  |              | 64   | % |                    |   | 58   | %            |  |   | 64                 | % |  |   | 54   | % |  |   | 68   | %
|Risk-free interest rate                          |  |                   | 1.5  | % |                    |   | 0.2  | %              |  |   | 2.5                | % |  |              | 0.3  | % |                    |   | 2.5  | %            |  |   | 0.3                | % |  |   | 2.9  | % |  |   | 1.1  | %
|Expected option life in years                    |  |                   | 5    |   |                    |   | 0.5  |                |  |   | 5                  |   |  |              | 0.5  |   |                    |   | 5    |              |  |   | 0.5                |   |  |   | 5    |   |  |   | 0.5  |  
|Expected dividend yield                          |  |                   | 0    | % |                    |   | 0    | %              |  |   | 0                  | % |  |              | 0    | % |                    |   | 0    | %            |  |   | 0                  | % |  |   | 0    | % |  |   | 0    | %
|Weighted average per share grant date fair value |  | $                 | 3.06 |   |                    | $ | 1.64 |                |  | $ | 2.92               |   |  | $            | 1.22 |   |                    | $ | 2.91 |              |  | $ | 1.22               |   |  | $ | 2.72 |   |  | $ | 1.46 |  

The fair value of
RSUs granted during the nine months ended December 31, 2010 and December 31, 2009, and the years ended March 31, 2010 and 2009 was based on the market price of our common stock on the date of grant.

Share-Based Compensation Expense

The estimated fair value of our share-based awards is recognized as a charge against income on a straight-line basis over the requisite service period, which is typically the vesting period of the award.
Total share-based compensation expense recognized in our consolidated statements of operations for the nine months ended December 31, 2010 and 2009 and the years ended March 31, 2010 and 2009 was as follows:



|                                                              |  |                               |       |  |                      |   |       |      |  |   |       |  |  |   |       | 
|------------------------------------------------------------- |  | ----------------------------- | ----- |  | -------------------- | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                                              |  | Nine Months EndedDecember 31, |       |  | Years EndedMarch 31, |  
|                                                              |  | 2010                          |       |  | 2009                 |   |       | 2010 |  |   | 2009  | 
|                                                              |  |                               |       |  | (unaudited)          |   |       |      |  |   |       | 
|                                                              |  | (In thousands)                |      
|Cost of revenue                                               |  | $                             | 179   |  |                      | $ | 198   |      |  | $ | 276   |  |  | $ | 264   | 
|Product development                                           |  |                               | 794   |  |                      |   | 704   |      |  |   | 930   |  |  |   | 859   | 
|Sales and marketing                                           |  |                               | 940   |  |                      |   | 763   |      |  |   | 1,052 |  |  |   | 952   | 
|General and administrative                                    |  |                               | 1,506 |  |                      |   | 1,251 |      |  |   | 1,674 |  |  |   | 1,385 | 
|Business consolidation and restructuring charges (recoveries) |  |                               | 879   |  |                      |   |      |      |  |   |      |  |  |   |      | 
|                                                              |  |                               |       |  |                      |   |       |      |  |   |       |  |  |   |       | 
|Total stock-based compensation expense                        |  | $                             | 4,298 |  |                      | $ | 2,916 |      |  | $ | 3,932 |  |  | $ | 3,460 | 
|                                                              |  |                               |       |  |                      |   |       |      |  |   |       |  |  |   |       | 



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



No share-based compensation expense was capitalized in the periods presented. At
December 31, 2010, the gross amount of unrecognized share-based compensation expense relating to unvested share-based awards was approximately $11.3 million, which we anticipate recognizing as a charge against income over a weighted average
period of 2.4 years. The total fair value of RSUs vested was $2.3 million, $1.8 million, $1.9 million and $1.5 million for the nine months ended December 31, 2010 and 2009, and for the years ended March 31, 2010 and 2009,
respectively.

Stock Repurchases

On November 10, 2010, we entered into a Stock Repurchase Plan with a broker (the Repurchase Plan), in accordance with Rule 10b5-1 of the Exchange Act. Pursuant to the Repurchase Plan, and
subject to the conditions set forth therein and the provisions of Rule 10b-18 of the Exchange Act, we instructed the broker to purchase for our account up to $6.0 million worth of our common stock by March 31, 2011. As of December 31,
2010, we had repurchased 353,955 shares of our common stock for approximately $3.0 million at an average cost of $8.40 per share, and we completed the repurchase of the remaining $3.0 million of our common stock in early 2011. All shares repurchased
are recorded as treasury stock.

We have entered into a new arrangement pursuant to which we have committed up to an
additional $4.0 million for future repurchases (refer to Note 11 for details).

5. Income Taxes

Income (loss) from continuing operations before taxes was as follows:



|        |  |                   |         |   |                  |   |       |               |  |   |               |  |  |   |       | 
|------- |  | ----------------- | ------- | - | ---------------- | - | ----- | ------------- |  | - | ------------- |  |  | - | ----- | 
|        |  | Nine Months Ended |         |   | Years Ended      |  
|        |  | December 31,2010  |         |   | December 31,2009 |   |       | March 31,2010 |  |   | March 31,2009 | 
|        |  |                   |         |   | (unaudited)      |   |       |               |  |   |               | 
|        |  | (In thousands)    |        
|U.S.    |  | $                 | (32,841 | ) |                  | $ | 3,668 |               |  | $ | 1,083         |  |  | $ | 1,131 | 
|Foreign |  |                   | (1,822  | ) |                  |   | 998   |               |  |   | 1,330         |  |  |   | 158   | 
|        |  |                   |         |   |                  |   |       |               |  |   |               |  |  |   |       | 
|Total   |  | $                 | (34,663 | ) |                  | $ | 4,666 |               |  | $ | 2,413         |  |  | $ | 1,289 | 
|        |  |                   |         |   |                  |   |       |               |  |   |               |  |  |   |       | 

Income tax expense consists of the following:



|                                            |  |                   |         |   |                  |   |       |               |  |   |               |   |  |   |       | 
|------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ----- | ------------- |  | - | ------------- | - |  | - | ----- | 
|                                            |  | Nine Months Ended |         |   | Years Ended      |  
|                                            |  | December 31,2010  |         |   | December 31,2009 |   |       | March 31,2010 |  |   | March 31,2009 |  
|                                            |  |                   |         |   | (unaudited)      |   |       |               |  |   |               |  
|                                            |  | (In thousands)    |        
|Current:                                    |  |                   |         |   |                  |   |       |               |  |   |               |   |  |   |       | 
|Federal                                     |  | $                 |        |   |                  | $ | (15   | )             |  | $ | (15           | ) |  | $ |      | 
|State                                       |  |                   | (336    | ) |                  |   | 129   |               |  |   | 172           |   |  |   | 90    | 
|Foreign                                     |  |                   | 454     |   |                  |   | 419   |               |  |   | 431           |   |  |   | 308   | 
|                                            |  |                   |         |   |                  |   |       |               |  |   |               |   |  |   |       | 
|Total current income tax expense (benefit)  |  |                   | 118     |   |                  |   | 533   |               |  |   | 588           |   |  |   | 398   | 
|                                            |  |                   |         |   |                  |   |       |               |  |   |               |   |  |   |       | 
|Deferred:                                   |  |                   |         |   |                  |   |       |               |  |   |               |   |  |   |       | 
|Federal                                     |  |                   | (14,035 | ) |                  |   | 530   |               |  |   | 585           |   |  |   | 707   | 
|State                                       |  |                   |        |   |                  |   |      |               |  |   |              |   |  |   |      | 
|Foreign                                     |  |                   | (138    | ) |                  |   | 34    |               |  |   | 45            |   |  |   | 90    | 
|                                            |  |                   |         |   |                  |   |       |               |  |   |               |   |  |   |       | 
|Total deferred income tax expense (benefit) |  |                   | (14,173 | ) |                  |   | 564   |               |  |   | 630           |   |  |   | 797   | 
|                                            |  |                   |         |   |                  |   |       |               |  |   |               |   |  |   |       | 
|Total income tax expense (benefit)          |  | $                 | (14,055 | ) |                  |   | 1,097 |               |  | $ | 1,218         |   |  | $ | 1,195 | 
|                                            |  |                   |         |   |                  |   |       |               |  |   |               |   |  |   |       | 



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



The following reconciles income taxes computed at the U.S. statutory federal tax rate to
income tax expense (benefit):



|                                                                          |  |                   |         |   |                  |   |        |               |  |   |               |   |  |   |        |  
|------------------------------------------------------------------------- |  | ----------------- | ------- | - | ---------------- | - | ------ | ------------- |  | - | ------------- | - |  | - | ------ | -
|                                                                          |  | Nine Months Ended |         |   | Years Ended      |  
|                                                                          |  | December 31,2010  |         |   | December 31,2009 |   |        | March 31,2010 |  |   | March 31,2009 |  
|                                                                          |  |                   |         |   | (unaudited)      |   |        |               |  |   |               |  
|                                                                          |  | (In thousands)    |        
|Income tax at U.S. statutory rate                                         |  | $                 | (11,786 | ) |                  | $ | 1,586  |               |  | $ | 821           |   |  | $ | 439    |  
|State income taxes, net of federal benefit                                |  |                   | (1,692  | ) |                  |   | 187    |               |  |   | 97            |   |  |   | 77     |  
|Foreign taxes                                                             |  |                   | (49     | ) |                  |   | 178    |               |  |   | 189           |   |  |   | 166    |  
|Transaction Costs                                                         |  |                   | 894     |   |                  |   |       |               |  |   |              |   |  |   |       |  
|Indefinite life goodwill                                                  |  |                   |        |   |                  |   | 439    |               |  |   | 585           |   |  |   | 707    |  
|Research and Developmental Credits                                        |  |                   | (1,072  | ) |                  |   | (674   | )             |  |   | (898          | ) |  |   | (1,262 | )
|Equity compensation                                                       |  |                   | (83     | ) |                  |   | 35     |               |  |   | 46            |   |  |   | 156    |  
|Change in state rate                                                      |  |                   | (300    | ) |                  |   | 2,125  |               |  |   | 2,834         |   |  |   |       |  
|Expired/Section382 limited net operating losses & credits                 |  |                   | 9,383   |   |                  |   |       |               |  |   | 3,790         |   |  |   | 3,832  |  
|Other                                                                     |  |                   | 747     |   |                  |   | 2      |               |  |   | 2             |   |  |   | (275   | )
|Reduction in valuation allowance  expired net operating losses & credits |  |                   | (9,383  | ) |                  |   |       |               |  |   | (3,790        | ) |  |   | (3,832 | )
|Tax benefit from business combination  reduction in valuation allowance  |  |                   | (14,921 | ) |                  |   |       |               |  |   |              |   |  |   |       |  
|Change in valuation allowance  current year operating loss               |  |                   | 14,207  |   |                  |   | (2,781 | )             |  |   | (2,458        | ) |  |   | 1,187  |  
|                                                                          |  |                   |         |   |                  |   |        |               |  |   |               |   |  |   |        |  
|Income tax expense (benefit)                                              |  | $                 | (14,055 | ) |                  | $ | 1,097  |               |  | $ | 1,218         |   |  | $ | 1,195  |  
|                                                                          |  |                   |         |   |                  |   |        |               |  |   |               |   |  |   |        |  

Significant components of our deferred tax assets and liabilities are as follows:



|                                            |  |                  |         |   |               |   |         |  
|------------------------------------------- |  | ---------------- | ------- | - | ------------- | - | ------- | -
|                                            |  | December 31,2010 |         |   | March 31,2010 |  
|                                            |  | (In thousands)   |        
|Deferred tax assets:                        |  |                  |         |   |               |   |         |  
|Net operating loss carryforwards            |  | $                | 43,565  |   |               | $ | 44,124  |  
|Goodwill and intangibles                    |  |                  | 4,385   |   |               |   | 4,402   |  
|Property and equipment                      |  |                  | 5,117   |   |               |   | 331     |  
|Unused tax credits                          |  |                  | 8,135   |   |               |   | 6,885   |  
|Accruals and reserves                       |  |                  | 18,388  |   |               |   | 7,424   |  
|                                            |  |                  |         |   |               |   |         |  
|Gross deferred tax assets                   |  |                  | 79,590  |   |               |   | 63,166  |  
|                                            |  |                  |         |   |               |   |         |  
|Deferred tax liabilities:                   |  |                  |         |   |               |   |         |  
|Intangible assets                           |  |                  | 26,867  |   |               |   | 1,051   |  
|Other deferred tax liabilities              |  |                  | 24      |   |               |   |        |  
|Indefinite lived intangible assets          |  |                  | 2,877   |   |               |   | 2,309   |  
|Land and Other Long Term Investments        |  |                  | 1,666   |   |               |   |        |  
|                                            |  |                  |         |   |               |   |         |  
|Gross deferred tax liabilities              |  |                  | 31,434  |   |               |   | 3,360   |  
|Total net deferred tax assets               |  |                  | 48,156  |   |               |   | 59,806  |  
|                                            |  |                  |         |   |               |   |         |  
|Valuation allowance for deferred tax assets |  |                  | (51,230 | ) |               |   | (61,326 | )
|                                            |  |                  |         |   |               |   |         |  
|Net deferred taxes                          |  | $                | (3,074  | ) |               | $ | (1,520  | )
|                                            |  |                  |         |   |               |   |         |  



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



At December 31, 2010 and March 31, 2010, we had $2.9 million and $2.3 million,
respectively, of net deferred tax liabilities in the U.S. related to indefinite-lived goodwill and intangible assets that are amortized for income tax purposes. For book purposes, the indefinite-lived goodwill and intangible assets will be charged
to results of operations when they are determined to be impaired in accordance with ASC Topic 350. Because we cannot predict when these assets will be impaired and when the associated deferred tax liabilities will reverse, the deferred tax
liabilities related to these assets are not considered a source of income to support the realization of our deferred tax assets. Additionally, we have deferred tax liabilities of $1.7 million related to the acquisition of Symyx for purchase price
adjustments associated with land and other investments. Upon disposition, we will have a lower tax basis in these assets. As we cannot predict when these assets will be disposed of, the deferred tax liabilities associated with these assets are also
not considered a source of income to support the realization of our deferred tax assets. We have provided a full valuation allowance for our remaining net U.S. deferred tax assets as we do not believe that the ultimate realization of such deferred
tax assets is more-likely-than-not.

At December 31, 2010 and March 31, 2010, we also had $1.0 million and $0.8
million, respectively, of net deferred tax assets related to Accelrys, K.K. As of December 31, 2010, we also have $0.1 million and $0.3 million of deferred tax assets for Symyx UK and Symyx Switzerland, respectively. We believe that the
ultimate realization of these deferred tax assets is more-likely-than-not since our intercompany transfer pricing arrangements provide for Accelrys, K.K., Symyx UK and Symyx Switzerland to achieve an annual operating profit margin.

Due to uncertainties surrounding our ability to generate future taxable income, a valuation allowance has been established against our
domestic deferred tax assets. As of December 31, 2010 the valuation allowance was $51.2 million. For the nine months ended December 31, 2010, the valuation allowance decreased by $14.9 million as a result of net deferred tax liabilities
recorded for the Symyx acquisition which were considered a source of income to reduce the valuation allowance on our existing deferred tax assets. In addition, during the nine months ended December 31, 2010, the valuation allowance increased by
$14.2 million as a result of operating losses for which no tax benefit was recorded and decreased by $9.4 million related to NOLs and tax credits which either expired of were limited under Internal Revenue Code section 382. For the year ended
March 31, 2010, the valuation allowance decreased by $5.5 million principally as a result of the utilization of domestic NOL carryovers, the expiration of domestic NOL carryovers and a reduction in the state tax rate applied to deferred tax
assets.

As of December 31, 2010, we had U.S. federal NOLs of approximately $114.0 million and tax credit
carryforwards of approximately $2.3 million. We also had California NOLs of approximately $57.0 million and tax credit carryforwards of approximately $8.8 million. We also have approximately $9.0 million of UK NOLs. Approximately $46.7 million of
the federal NOLs relate to stock option deductions which, upon realization, will result in an increase to paid-in capital and a decrease in income taxes payable. Approximately $8.0 million U.S. federal NOLs expired as of December 31, 2010. If
not fully utilized, portions of our U.S. federal NOLs and tax credit carryforwards will expire in varying amounts from 2011 through 2027, and portions of our California NOLs will expire in varying amounts from 2011 through 2019. The California tax
credit carryforwards do not expire. Realization of our NOLs and credits is dependent upon our generating sufficient taxable income prior to expiration of those attributes.

In addition to the NOLs reflected above, as of December 31, 2010, we had pre-acquisition NOLs of $39.5 million from acquisitions outside the U.S. which have been reserved as unrecognized tax
benefits. The pre- acquisition NOLs, if ultimately realized, will result in an increase to income tax benefit. No pre-acquisition NOLs were utilized during the nine months ended December 31, 2010 or the years ended, March 31, 2010 or
March 31, 2009.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



We recognize windfall tax benefits associated with the exercise of stock options
directly to stockholders equity only when realized. Accordingly, deferred tax assets are not recognized for NOLs resulting from windfall tax benefits. At December 31, 2010, deferred tax assets do not include $0.2 million of excess tax
benefits from share-based compensation.

The future utilization of our NOLs to offset future taxable income may be subject to
a substantial annual limitation as a result of changes in ownership by our stockholders that hold 5% or more of our common stock. An assessment of such ownership changes under Sections 382 and 383 of the Internal Revenue Code was completed through
December 31, 2010. As a result of this assessment, we determined that we experienced an ownership change during 2010 related to the acquisition of Symyx which will limit the future utilization of our NOLs and credit carryforwards. U.S. federal
and California NOLs of approximately $15.0 million and $0.7 million, respectively, will expire due to limitations under Sections 382 and U.S. federal R&D credits of approximately $2.2 million will expire due to limitations under
Section 383. Future ownership changes may further impact the utilization of existing NOLs and tax credit carryforwards.

Upon the adoption of new accounting principles relating to uncertain tax positions as of April 1, 2007, Accelrys did not record any
reserves for uncertain tax positions. In the third quarter for the year ended March 31, 2010 Accelrys identified an uncertain tax position of $10.8 million relating to the NOL carryovers obtained in connection with the acquisition of one of our
foreign subsidiaries. Additionally, during the nine months ended December 31, 2010 we identified an additional $7.3 million in uncertain tax positions.

Following is a tabular reconciliation of the Unrecognized Tax Benefits (UTB) activity during the year ended December 31, 2010 (excluding interest and penalties):



|                                                                                      |  |                |        |  
|------------------------------------------------------------------------------------- |  | -------------- | ------ | -
|                                                                                      |  | (In thousands) |       
|Beginning balance, April 1, 2009                                                      |  | $              |       |  
|Additions based on tax positions related to prior years                               |  |                | 10,800 |  
|                                                                                      |  |                |        |  
|Balance at March 31, 2010, excluding interest and penalties of $0                     |  | $              | 10,800 |  
|Additions based on tax positions related to the current year                          |  |                | 7,259  |  
|Reductions for tax positions of prior year                                            |  |                |       |  
|Settlements                                                                           |  |                |       |  
|Reductions due to lapse of applicable statute of limitations                          |  |                | (584   | )
|Impact of foreign currency fluctuations                                               |  |                | 286    |  
|                                                                                      |  |                |        |  
|Ending Balance at December 31, 2010, excluding interest and penalties of $0.5 million |  | $              | 17,761 |  

Included in the
balance of unrecognized tax benefits as of December 31, 2010, are $14.5 million of tax benefits that, if recognized, would affect the effective tax rate. Also included in the balance of unrecognized tax benefits at December 31, 2010, are
$3.3 million of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.

The Company recognized interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company has
approximately $0.5 million of accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes at December 31, 2010.

We are subject to taxation in the U.S. and various state and foreign jurisdictions. Our tax years from 1996 forward are subject to examination by the U.S. and various other state jurisdictions due to the
carryforward of



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



unutilized NOLs and research and development credits. With respect to significant foreign jurisdictions, tax years from 2005 and forward are subject to examinations by various foreign tax
authorities in the United Kingdom, Sweden, Switzerland, and Japan and tax years from 2006 and forward are subject to examination by foreign tax authorities in Germany and France.

6.    Retirement Savings Plans

U.S. Based Employees

We have an employee savings and retirement plan (the 401(K) Plan). The 401(K) Plan is intended to be a tax-qualified
plan covering substantially all U.S.-based employees. Under the terms of the 401(K) Plan, employees may elect to contribute up to 20% of their compensation, or the statutory prescribed limit, if less. We may, at our discretion, match employee
contributions up to a maximum of 4% of the employees compensation. Employer matching contributions totaled $0.8 million and $0.5 million for the nine months ended December 31, 2010 and 2009, respectively, and $0.6 million and
$0.7 million for the years ended March 31, 2010 and 2009, respectively.

Non-U.S. Based Employees

We provide retirement benefits for employees located outside the U.S. commensurate with other similar companies in those respective
locations. Employer contributions, in the form of cash, totaled $0.6 million for the nine months ended December 31, 2010 and the year ended March 31, 2010 and $0.5 million and $0.7 million for the nine months ended
December 31, 2009 and the year ended March 31, 2009, respectively.

7.    Fair Value

Financial Assets and Liabilities

We carry our cash equivalents and marketable securities at fair value. Cash equivalents are comprised of short-term, highly liquid investments including money market funds and other investment grade
securities such as certificates of deposits, commercial paper, corporate and municipal bonds and obligations of U.S. government sponsored enterprises. Our marketable securities consist of debt securities with original maturities of greater than
three months and include obligations of U.S. government sponsored enterprises, commercial paper, certificates of deposits, corporate and municipal debt, and auction rate securities (ARS).

Fair value accounting provides a definition of fair value, establishes acceptable methods of measuring fair value and expands disclosures
for fair value measurements. The principles apply under accounting pronouncements which require measurement of fair value and do not require any new fair value measurements in accounting pronouncements where fair value is the relevant measurement
attribute. Fair value accounting also specifies a fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable
inputs (lowest level) reflect internally developed market assumptions.

In accordance with fair value accounting, fair value
measurements are classified under the following hierarchy:

Level 1Quoted prices for identical instruments in active
markets.

Level 2Inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by
market data by correlation or other means.

Level 3Model-derived valuations in which one or more significant inputs or
significant value-drivers are unobservable.

Fair value measurements are classified according to the lowest level input or
value-driver that is significant to the valuation. A measurement may therefore be classified within Level 3 even though there may be significant inputs that are readily observable.

Where applicable, the determination of fair values is based on unadjusted quoted prices that are available in active markets for the
identical assets or liabilities at the measurement date. This pricing methodology applies to our Level 1 investments. To the extent quoted prices in active markets are not available at the measurement date, fair values can be based on usage of
observable market prices in less active markets, use of broker/dealer quotes and alternative pricing sources with reasonable levels of price transparency. Because many fixed income securities do not trade on a daily basis or have market prices from
multiple sources, the pricing applications may apply available information as applicable to determine the fair value as of the measurement date. This methodology applies to our Level 2 investments. We classify our investments in ARS within
Level 3 because they are valued using valuation techniques. We estimated the fair value of the ARS we held as of March 31, 2010 utilizing a discounted cash flow analysis. The analysis considered, among other items, the collateralization
underlying the security investments, the creditworthiness of the issuer, expected future cash flows and the estimated weighted average life of the contractual maturity of the underlying assets.

The following table summarizes our assets and liabilities that require fair value measurements on a recurring basis and their respective
input levels based on the fair value hierarchy:



|                                             |  |                                  |         |  |                                                |   |        |                                           |  |   |                                        |  |  |  |   | 
|-------------------------------------------- |  | -------------------------------- | ------- |  | ---------------------------------------------- | - | ------ | ----------------------------------------- |  | - | -------------------------------------- |  |  |  | - | 
|                                             |  | CarryingValue atDecember 31,2010 |         |  | QuotedMarketPrices forIdenticalAssets(Level 1) |   |        | SignificantOtherObservableInputs(Level 2) |  |   | SignificantUnobservableInputs(Level 3) | 
|                                             |  | (In thousands)                   |        
|December 31, 2010:                           |  |                                  |         |  |                                                |   |        |                                           |  |   |                                        |  |  |  |   | 
|Cash equivalents(1)                          |  | $                                | 59,751  |  |                                                | $ | 53,146 |                                           |  | $ | 6,605                                  |  |  |  |  | 
|Short-Term Marketable Securities:            |  |                                  |         |  |                                                |   |        |                                           |  |   |                                        |  |  |  |   | 
|U.S. Treasury securities                     |  |                                  | 5,519   |  |                                                |   | 5,519  |                                           |  |   |                                       |  |  |  |  | 
|U.S. government and agency securities        |  |                                  | 6,346   |  |                                                |   |       |                                           |  |   | 6,346                                  |  |  |  |  | 
|Commercial paper and certificate of deposits |  |                                  | 9,268   |  |                                                |   |       |                                           |  |   | 9,268                                  |  |  |  |  | 
|Corporate debt securities                    |  |                                  | 6,242   |  |                                                |   |       |                                           |  |   | 6,242                                  |  |  |  |   | 
|Municipal debt securities                    |  |                                  | 600     |  |                                                |   |       |                                           |  |   | 600                                    |  |  |  |   | 
|Long-Term Marketable Securities:             |  |                                  |         |  |                                                |   |        |                                           |  |   |                                        |  |  |  |   | 
|U.S. Treasury securities                     |  |                                  | 797     |  |                                                |   | 797    |                                           |  |   |                                       |  |  |  |  | 
|U.S. government and agency securities        |  |                                  | 4,603   |  |                                                |   |       |                                           |  |   | 4,603                                  |  |  |  |  | 
|Corporate debt securities                    |  |                                  | 11,536  |  |                                                |   |       |                                           |  |   | 11,536                                 |  |  |  |  | 
|Municipal debt securities                    |  |                                  | 4,300   |  |                                                |   |       |                                           |  |   | 4,300                                  |  |  |  |  | 
|                                             |  |                                  |         |  |                                                |   |        |                                           |  |   |                                        |  |  |  |   | 
|Total                                        |  | $                                | 108,962 |  |                                                |   | 59,462 |                                           |  |   | 49,500                                 |  |  |  |  | 
|                                             |  |                                  |         |  |                                                |   |        |                                           |  |   |                                        |  |  |  |   | 



|(1) | Cash equivalents are included in the Cash and cash equivalents line in the consolidated balance sheet.
|--- | ------------------------------------------------------------------------------------------------------



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



There were no transfers between Level 1 and Level 2 securities during the nine months
ended December 31, 2010.



|                                   |  |                               |        |  |                                                |  |   |                                           |  |  |                                        |  |  |   |        | 
|---------------------------------- |  | ----------------------------- | ------ |  | ---------------------------------------------- |  | - | ----------------------------------------- |  |  | -------------------------------------- |  |  | - | ------ | 
|                                   |  | CarryingValue atMarch 31,2010 |        |  | QuotedMarketPrices forIdenticalAssets(Level 1) |  |   | SignificantOtherObservableInputs(Level 2) |  |  | SignificantUnobservableInputs(Level 3) | 
|                                   |  | (In thousands)                |       
|March 31, 2010:                    |  |                               |        |  |                                                |  |   |                                           |  |  |                                        |  |  |   |        | 
|Auction rate securities            |  | $                             | 10,461 |  |                                                |  |  |                                           |  |  |                                       |  |  | $ | 10,461 | 
|Auction rate securities put option |  |                               | 1,289  |  |                                                |  |  |                                           |  |  |                                       |  |  |   | 1,289  | 
|                                   |  |                               |        |  |                                                |  |   |                                           |  |  |                                        |  |  |   |        | 
|Total                              |  | $                             | 11,750 |  |                                                |  |  |                                           |  |  |                                       |  |  | $ | 11,750 | 
|                                   |  |                               |        |  |                                                |  |   |                                           |  |  |                                        |  |  |   |        | 

The following table summarizes the assets and liabilities measured at fair value on a recurring basis using
significant unobservable inputs (Level 3):



|                                      |  |                                                                                           |         |  
|------------------------------------- |  | ----------------------------------------------------------------------------------------- | ------- | -
|                                      |  | Fair Value MeasurementsUsing
SignificantUnobservable Level
3InputsAuction Rate Securities |        
|                                      |  | (In thousands)                                                                            |        
|Balance at April 1, 2010              |  | $                                                                                         | 11,750  |  
|Redemption of auction rate securities |  |                                                                                           | (11,750 | )
|                                      |  |                                                                                           |         |  
|Balance at December 31, 2010          |  | $                                                                                         |        |  
|                                      |  |                                                                                           |         |  

There were no transfers out of Level 3 during the year.

The carrying amount of accounts receivable, accounts payable and accrued liabilities are considered to be representative of their
respective fair values due to their short-term nature. Our investments in privately-held companies and our note receivable from a privately-held company are carried at cost. It is impracticable for us to estimate the fair value of these instruments
on a recurring basis if there are no identified events or changes in circumstances that may have a significant adverse effect on their fair value.

Non-Financial Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The non-financial assets and liabilities are recognized at fair value subsequent to initial recognition when they are deemed to be other-than-temporarily impaired. There were no non-financial assets and
liabilities deemed to be other-than-temporarily impaired and measured at fair value on a nonrecurring basis for the periods presented.

8.    Commitments and Contingencies

Operating Leases

We lease office space in several facilities under
operating leases that expire through 2022. Certain of our lease agreements contain renewal options, rent holidays or rent escalation clauses. In accordance with ASC Topic 840, Leases, we recognize rent expense on a straight-line basis over
the term of the related operating leases, accounting for scheduled rent escalation clauses during the lease terms or for rental payments commencing at a date other than the date of initial occupancy and including any cancelable option periods where
failure to



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



exercise such options would result in economic penalty. Rent expense recognized in excess of rent paid is reflected as a deferred rent liability, which is included in lease-related liabilities in
the accompanying consolidated balance sheets. Rent expense under our operating leases was $3.9 million and $2.5 million for the nine months ended December 31, 2010 and 2009, respectively. Rent expense under our operating leases for each of the
years ended March 31, 2010 and 2009, was $3.3 million.

Additionally, under the terms of the lease for our San Diego,
California corporate office, we were required to obtain an irrevocable letter of credit for $6.6 million to ensure our performance under the lease agreement. On September 1, 2009, the letter of credit requirement decreased to $4.4 million. If
we are not in default under the lease, the letter of credit requirement will decrease to $3.0 million on September 1, 2011 and will expire upon termination of the lease on September 1, 2013. The letter of credit is fully secured by cash
and cash equivalents, which are included in restricted cash and marketable securities in the accompanying consolidated balance sheets.

We sublease certain facilities abandoned in connection with previous restructuring activities, and sublease income is recorded as a reduction of the restructuring liability and related restructuring
expense upon abandonment of the facility. Accordingly, no sublease income was recognized in our consolidated statements of operations for the nine months ended December 31, 2010 and 2009 and the years ended March 31, 2010 and 2009.

Future minimum lease commitments and future committed sublease income as of December 31, 2010 are as follows:



|                 |  |                           |        |  |                |   |       |     |  |   |        | 
|---------------- |  | ------------------------- | ------ |  | -------------- | - | ----- | --- |  | - | ------ | 
|                 |  | OperatingLeaseCommitments |        |  | SubleaseIncome |   |       | Net | 
|                 |  | (In thousands)            |       
|Fiscal year 2011 |  | $                         | 8,227  |  |                | $ | 953   |     |  | $ | 7,274  | 
|Fiscal year 2012 |  |                           | 7,798  |  |                |   | 660   |     |  |   | 7,138  | 
|Fiscal year 2013 |  |                           | 5,960  |  |                |   | 637   |     |  |   | 5,323  | 
|Fiscal year 2014 |  |                           | 4,220  |  |                |   | 656   |     |  |   | 3,564  | 
|Fiscal year 2015 |  |                           | 3,989  |  |                |   | 619   |     |  |   | 3,370  | 
|Thereafter       |  |                           | 8,528  |  |                |   |      |     |  |   | 8,528  | 
|                 |  |                           |        |  |                |   |       |     |  |   |        | 
|                 |  | $                         | 38,722 |  |                | $ | 3,525 |     |  | $ | 35,197 | 
|                 |  |                           |        |  |                |   |       |     |  |   |        | 

Lease Guarantee

On April 30, 2004, we spun-off our drug discovery subsidiary, Pharmacopeia Drug Discovery, Inc. (PDD), into an independent, separately traded, publicly held company through
the distribution to our stockholders of a dividend of one share of PDD common stock for every two shares of our common stock. The landlords of our New Jersey facilities, which were used by our PDD operations, consented to the assignment of the
leases to PDD. Despite the assignment, the landlords required us to guarantee the remaining lease obligations, which totaled approximately $13.1 million as of December 31, 2010. In the event that PDD defaults on their lease obligation, we are
permitted under the guarantee to sublease the facility in order to mitigate our lease obligation. In accordance with ASC Topic 460, we recognized a liability and corresponding charge to stockholders equity for the probability-weighted fair
market value of the guarantee. Changes to the fair market value of the liability are recognized in stockholders equity. The liability for our guarantee of the lease obligation was $0.3 million and $0.4 million as of December 31, 2010
and March 31, 2010, respectively.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



Royalties

We are obligated to pay royalties for licenses to enhance and market certain software used in connection with our product offerings. Annual contractual minimum royalty payments as of December 31,
2010 are as follows (in thousands):



|                 |  |   |       | 
|---------------- |  | - | ----- | 
|Fiscal year 2011 |  | $ | 1,639 | 
|Fiscal year 2012 |  |   | 411   | 
|Fiscal year 2013 |  |   | 411   | 
|Fiscal year 2014 |  |   | 411   | 
|Fiscal year 2015 |  |   | 411   | 
|Thereafter(1)    |  |   | 1,575 | 
|                 |  |   |       | 
|                 |  | $ | 4,858 | 
|                 |  |   |       | 



|(1) | For purposes of the contractual minimum royalty payments table, we have included indefinite-lived contractual minimum royalty payments due in the ten fiscal years
following December 31, 2010.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to the contractual minimum royalties included in the table above,
we have several royalty agreements that are long term or perpetual in nature and the royalty obligations are generally based on a percentage of revenues derived from certain software license sales and associated sales of PCS. The royalty agreements
require quarterly payments and generally do not limit the maximum royalties owed. We incurred royalty related expenses of $4.6 million and $1.8 million for the nine months ended December 31, 2010 and 2009, respectively, and $2.2 million in each
of the years ended March 31, 2010 and 2009.

Litigation

We are subject to various claims and legal proceedings arising in the ordinary course of our business. While any legal proceeding has an element of uncertainty, management believes that the disposition of
such matters, in the aggregate, will not have a material effect on our results of operations.

Other Guarantees and Indemnifications

We provide indemnifications of varying scope and size to certain customers against claims of intellectual property
infringement made by third parties arising from the use of our products. We have also entered into indemnification agreements with our officers and directors. Although the maximum potential amount of future payments we could be required to make
under these indemnifications is unlimited, to date we have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. Additionally, we have insurance policies that, in most cases, would limit our
exposure and enable us to recover a portion of any amounts paid. Therefore, we believe the estimated fair value of these agreements is minimal and the likelihood of incurring an obligation is remote. Accordingly, we have not accrued any liabilities
in connection with these indemnification obligations as of December 31, 2010.



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Accelrys, Inc.

Notes to Consolidated Financial Statements (Continued)



9.    Restructuring Activities

The following summarizes the changes in our accrued restructuring charges liability:



|                                                   |  |                            |        |   |                                               |   |        |       |  |   |        |  
|-------------------------------------------------- |  | -------------------------- | ------ | - | --------------------------------------------- | - | ------ | ----- |  | - | ------ | -
|                                                   |  | Severance andRelated Costs |        |   | LeaseObligation Exitand FacilityClosure Costs |   |        | Total | 
|                                                   |  | (In thousands)             |       
|Balance at March 31, 2008                          |  | $                          | 137    |   |                                               | $ | 1,397  |       |  | $ | 1,534  |  
|Additional severance and lease abandonment charges |  |                            | 896    |   |                                               |   |       |       |  |   | 896    |  
|Adjustments to liability                           |  |                            |       |   |                                               |   | 78     |       |  |   | 78     |  
|Cash payments                                      |  |                            | (835   | ) |                                               |   | (302   | )     |  |   | (1,137 | )
|Effect of foreign exchange                         |  |                            | (23    | ) |                                               |   | (356   | )     |  |   | (379   | )
|                                                   |  |                            |        |   |                                               |   |        |       |  |   |        |  
|Balance at March 31, 2009                          |  | $                          | 175    |   |                                               | $ | 817    |       |  | $ | 992    |  
|Additional severance and lease abandonment charges |  |                            | (74    | ) |                                               |   | (12    | )     |  |   | (86    | )
|Adjustments to liability                           |  |                            | (61    | ) |                                               |   | 142    |       |  |   | 81     |  
|Cash payments                                      |  |                            | (43    | ) |                                               |   | (370   | )     |  |   | (413   | )
|Effect of foreign exchange                         |  |                            | 3      |   |                                               |   | 63     |       |  |   | 66     |  
|                                                   |  |                            |        |   |                                               |   |        |       |  |   |        |  
|Balance at March 31, 2010                          |  |                            |       |   |                                               |   | 640    |       |  |   | 640    |  
|Symyx acquired balance                             |  |                            | 138    |   |                                               |   | 5,860  |       |  |   | 5,998  |  
|Additional severance and lease abandonment charges |  |                            | 4,500  |   |                                               |   | 230    |       |  |   | 4,730  |  
|Adjustments to liability                           |  |                            |       |   |                                               |   | 40     |       |  |   | 40     |  
|Cash payments                                      |  |                            | (1,763 | ) |                                               |   | (5,549 | )     |  |   | (7,312 | )
|Effect of foreign exchange                         |  |                            | (9     | ) |                                               |   | 20     |       |  |   | 11     |  
|                                                   |  |                            |        |   |                                               |   |        |       |  |   |        |  
|Balance at December 31, 2010                       |  | $                          | 2,866  |   |                                               | $ | 1,241  |       |  | $ | 4,107  |  
|                                                   |  |                            |        |   |                                               |   |        |       |  |   |        |  

In July 2010, as a result of the Merger, we implemented a plan to terminate the employment of approximately
80 employees in the U.S., the United Kingdom , France and Japan. In connection with the termination, we incurred severance charges of approximately $4.5 million during the fiscal period ended December 31, 2010. As of December 31, 2010,
$1.8 million in cash payments had been made, and the remaining $2.7 million will be paid during the year ending December 31, 2011.

In August 2010, we bought out our remaining commitment under an operating lease under which we were contractually obligated through 2015 for approximately $4.7 million, net of our deposit of $0.1 million.
A liability of approximately $5.3 million for this lease termination was recorded in our preliminary purchase price allocation upon completion of the Merger, which included the gross buyout obligation of $4.9 million and operating expense
obligations through the date of the buyout of $0.4 million. As of December 31, 2010 we have no further obligations under such lease.

Prior to the Merger, Symyx had implemented various restructuring plans under which lease obligations of approximately $0.6 million and severance obligations of approximately $0.1 million remained as of
the completion of the Merger. Additionally, prior to 2007, we had implemented a restructuring plan under which our lease obligation remains. Our obligations under the aforementioned lease agreements terminate in 2012, 2016 and 2022.

All amounts incurred in connection with the above activities are recorded in the Business consolidation and restructuring costs
(recoveries) line in the accompanying consolidated statements of operations, with the exception of the acquired balance of $6.0 million that was recorded in our preliminary purchase price allocation upon completion of the Merger, as further
described in Note 3.



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Notes to Consolidated Financial Statements (Continued)



10.    Interest and Other Income, Net

Interest and other income, net includes non-operating items such as interest income, realized investment gains and losses, unrealized
investment gains and losses related to securities determined to be other-than-temporarily impaired and foreign currency exchange gains and losses. It also includes royalty income, royalty expense and amortization of purchased intangible assets
related to products that are not part of current operations. As part of the Merger with Symyx, we have retained the rights to receive royalty income related to the divestiture of the High Productivity Research business unit previously owned by
Symyx. This royalty income is recorded in other income as it is not part of current operations.

Interest and other income,
net consisted of the following:



|                                         |  |                   |        |   |                  |   |     |               |  |   |               |   |  |   |       |  
|---------------------------------------- |  | ----------------- | ------ | - | ---------------- | - | --- | ------------- |  | - | ------------- | - |  | - | ----- | -
|                                         |  | Nine Months Ended |        |   | Years Ended      |  
|                                         |  | December 31,2010  |        |   | December 31,2009 |   |     | March 31,2010 |  |   | March 31,2009 |  
|                                         |  |                   |        |   | (unaudited)      |   |     |               |  |   |               |  
|                                         |  | (In thousands)    |       
|Royalty income                           |  | $                 | 1,998  |   |                  | $ |    |               |  | $ |              |   |  | $ |      |  
|Interest Income                          |  |                   | 739    |   |                  |   | 237 |               |  |   | 314           |   |  |   | 1,348 |  
|Realized gain on investments             |  |                   |       |   |                  |   | 248 |               |  |   | 248           |   |  |   | (248  | )
|Foreign currency transaction gain        |  |                   | 171    |   |                  |   | 145 |               |  |   | 361           |   |  |   | 321   |  
|Purchased intangible assets amortization |  |                   | (1,246 | ) |                  |   |    |               |  |   |              |   |  |   |      |  
|Royalty expense                          |  |                   | (276   | ) |                  |   |    |               |  |   |              |   |  |   |      |  
|Other                                    |  |                   | (9     | ) |                  |   | (10 | )             |  |   | (9            | ) |  |   | 187   |  
|                                         |  |                   |        |   |                  |   |     |               |  |   |               |   |  |   |       |  
|Total interest and other income, net     |  | $                 | 1,377  |   |                  | $ | 620 |               |  | $ | 914           |   |  | $ | 1,608 |  
|                                         |  |                   |        |   |                  |   |     |               |  |   |               |   |  |   |       |  

Under our royalty income agreements, we have contractual minimum receivables as follows (in

thousands):



|                 |  |   |        | 
|---------------- |  | - | ------ | 
|Fiscal year 2011 |  | $ | 3,556  | 
|Fiscal year 2012 |  |   | 4,500  | 
|Fiscal year 2013 |  |   | 6,000  | 
|Fiscal year 2014 |  |   | 5,000  | 
|Fiscal year 2015 |  |   | 5,000  | 
|                 |  |   |        | 
|                 |  | $ | 24,056 | 
|                 |  |   |        | 

As these amounts are related to intellectual property acquired in the Merger as described above, they will
be offset by amortization expense related to this intellectual property. The income related to these agreements for the nine months ended December 31, 2010 is included in the $2.0 million of royalty income presented above.

11.    Subsequent Events

During January and February 2011, we purchased an additional 350,553 shares of our common stock for $3.0 million pursuant to the Repurchase Plan. All of the shares repurchased have been recorded as
treasury stock.

On March 11, 2011, we entered into a second Stock Repurchase Plan with a broker in accordance with
Rule 10b5-1 of Exchange Act. Pursuant to the Second Repurchase Plan, and subject to the conditions set forth therein and the provisions of Rule 10b-18 of the Exchange Act, we have instructed the broker to purchase for our account up to an
additional $4.0 million worth of our common stock by September 30, 2011.



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Notes to Consolidated Financial Statements (Continued)



12. Selected Quarterly Financial Information (unaudited)

The following quarterly financial data, in the opinion of management, reflects all adjustments, consisting of normal recurring adjustments
necessary for a fair presentation of results for the periods presented (in thousands, except per share amounts).



|                                                            |  |                                     |        |   |                       |   |         |                      |  |   |         |  
|----------------------------------------------------------- |  | ----------------------------------- | ------ | - | --------------------- | - | ------- | -------------------- |  | - | ------- | -
|                                                            |  | Nine Months Ended December 31, 2010 |       
|                                                            |  | QuarterEndedJune(1)                 |        |   | QuarterEndedSeptember |   |         | QuarterEndedDecember | 
|Revenue                                                     |  | $                                   | 19,761 |   |                       | $ | 29,114  |                      |  | $ | 31,330  |  
|Cost of revenue:                                            |  |                                     |        |   |                       |   |         |                      |  |   |         |  
|Cost of revenue                                             |  |                                     | 3,955  |   |                       |   | 9,117   |                      |  |   | 10,456  |  
|Amortization of completed technology                        |  |                                     | 41     |   |                       |   | 2,373   |                      |  |   | 2,473   |  
|                                                            |  |                                     |        |   |                       |   |         |                      |  |   |         |  
|Total cost of revenue                                       |  |                                     | 3,996  |   |                       |   | 11,490  |                      |  |   | 12,929  |  
|                                                            |  |                                     |        |   |                       |   |         |                      |  |   |         |  
|Gross margin                                                |  |                                     | 15,765 |   |                       |   | 17,624  |                      |  |   | 18,401  |  
|Operating expenses:                                         |  |                                     |        |   |                       |   |         |                      |  |   |         |  
|Product development                                         |  |                                     | 3,982  |   |                       |   | 9,208   |                      |  |   | 8,890   |  
|Sales and marketing                                         |  |                                     | 8,740  |   |                       |   | 12,171  |                      |  |   | 13,937  |  
|General and administrative                                  |  |                                     | 2,580  |   |                       |   | 4,635   |                      |  |   | 4,482   |  
|Business consolidation and restructuring costs (recoveries) |  |                                     | 1,686  |   |                       |   | 10,683  |                      |  |   | 4,124   |  
|Purchased intangible asset amortization                     |  |                                     |       |   |                       |   | 1,356   |                      |  |   | 1,356   |  
|                                                            |  |                                     |        |   |                       |   |         |                      |  |   |         |  
|Total operating expenses                                    |  |                                     | 16,988 |   |                       |   | 38,053  |                      |  |   | 32,789  |  
|Operating loss                                              |  |                                     | (1,223 | ) |                       |   | (20,429 | )                    |  |   | (14,388 | )
|Interest and other (expense) income, net                    |  |                                     | (134   | ) |                       |   | 934     |                      |  |   | 577     |  
|                                                            |  |                                     |        |   |                       |   |         |                      |  |   |         |  
|Loss before taxes                                           |  |                                     | (1,357 | ) |                       |   | (19,495 | )                    |  |   | (13,811 | )
|Income tax expense (benefit)                                |  |                                     | 225    |   |                       |   | (16,116 | )                    |  |   | 1,836   |  
|                                                            |  |                                     |        |   |                       |   |         |                      |  |   |         |  
|Net loss                                                    |  |                                     | (1,582 | ) |                       |   | (3,379  | )                    |  |   | (15,647 | )
|                                                            |  |                                     |        |   |                       |   |         |                      |  |   |         |  
|Basic and diluted net loss per share                        |  | $                                   | (0.06  | ) |                       | $ | (0.06   | )                    |  | $ | (0.28   | )
|                                                            |  |                                     |        |   |                       |   |         |                      |  |   |         |  



|(1) | As previously described in Note 2, we have reclassified a portion of our information technology overhead costs, in all historical periods presented, out of general and
administrative expenses into cost of revenue, product development, and sales and marketing in our previously issued consolidated statements of operations to conform to current period presentation. We believe that the allocation of these costs based
on headcount as overhead costs provides a more accurate depiction of the costs associated with cost of revenue, research and development, sales and marketing and general and administrative costs.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Notes to Consolidated Financial Statements (Continued)



|                                                            |  |                              |        |   |               |   |        |              |  |   |               |   |  |   |        |  
|----------------------------------------------------------- |  | ---------------------------- | ------ | - | ------------- | - | ------ | ------------ |  | - | ------------- | - |  | - | ------ | -
|                                                            |  | Year Ended March 31, 2010(1) |       
|                                                            |  | FirstQuarter                 |        |   | SecondQuarter |   |        | ThirdQuarter |  |   | FourthQuarter |  
|Revenue                                                     |  | $                            | 20,141 |   |               | $ | 19,988 |              |  | $ | 22,071        |   |  | $ | 20,759 |  
|Cost of revenue:                                            |  |                              |        |   |               |   |        |              |  |   |               |   |  |   |        |  
|Cost of revenue                                             |  |                              | 3,219  |   |               |   | 3,112  |              |  |   | 4,193         |   |  |   | 3,611  |  
|Amortization of completed technology                        |  |                              | 381    |   |               |   | 381    |              |  |   | 41            |   |  |   | 42     |  
|                                                            |  |                              |        |   |               |   |        |              |  |   |               |   |  |   |        |  
|Total cost of revenue                                       |  |                              | 3,600  |   |               |   | 3,493  |              |  |   | 4,234         |   |  |   | 3,653  |  
|                                                            |  |                              |        |   |               |   |        |              |  |   |               |   |  |   |        |  
|Gross margin                                                |  |                              | 16,541 |   |               |   | 16,495 |              |  |   | 17,837        |   |  |   | 17,106 |  
|Operating expenses:                                         |  |                              |        |   |               |   |        |              |  |   |               |   |  |   |        |  
|Product development                                         |  |                              | 4,133  |   |               |   | 3,768  |              |  |   | 3,733         |   |  |   | 4,412  |  
|Sales and marketing                                         |  |                              | 8,483  |   |               |   | 8,148  |              |  |   | 9,706         |   |  |   | 11,704 |  
|General and administrative                                  |  |                              | 2,938  |   |               |   | 2,716  |              |  |   | 3,292         |   |  |   | 3,533  |  
|Business consolidation and restructuring costs (recoveries) |  |                              | (91    | ) |               |   | 17     |              |  |   | (16           | ) |  |   | 4      |  
|                                                            |  |                              |        |   |               |   |        |              |  |   |               |   |  |   |        |  
|Total operating expenses                                    |  |                              | 15,463 |   |               |   | 14,649 |              |  |   | 16,715        |   |  |   | 19,653 |  
|Operating income (loss)                                     |  |                              | 1,078  |   |               |   | 1,846  |              |  |   | 1,122         |   |  |   | (2,547 | )
|Interest and other (expense) income, net                    |  |                              | (5     | ) |               |   | 273    |              |  |   | 352           |   |  |   | 294    |  
|                                                            |  |                              |        |   |               |   |        |              |  |   |               |   |  |   |        |  
|Income (loss) before taxes                                  |  |                              | 1,073  |   |               |   | 2,119  |              |  |   | 1,474         |   |  |   | (2,253 | )
|Income tax expense                                          |  |                              | 329    |   |               |   | 273    |              |  |   | 495           |   |  |   | 121    |  
|                                                            |  |                              |        |   |               |   |        |              |  |   |               |   |  |   |        |  
|Net income (loss)                                           |  |                              | 744    |   |               |   | 1,846  |              |  |   | 979           |   |  |   | (2,374 | )
|                                                            |  |                              |        |   |               |   |        |              |  |   |               |   |  |   |        |  
|Basic and diluted net income (loss) per share               |  | $                            | 0.03   |   |               | $ | 0.07   |              |  | $ | 0.04          |   |  | $ | (0.09  | )
|                                                            |  |                              |        |   |               |   |        |              |  |   |               |   |  |   |        |  



|                                               |  |                              |        |  |               |   |        |              |  |   |               |  |  |   |        |  
|---------------------------------------------- |  | ---------------------------- | ------ |  | ------------- | - | ------ | ------------ |  | - | ------------- |  |  | - | ------ | -
|                                               |  | Year Ended March 31, 2009(1) |       
|                                               |  | FirstQuarter                 |        |  | SecondQuarter |   |        | ThirdQuarter |  |   | FourthQuarter | 
|Revenue                                        |  | $                            | 20,300 |  |               | $ | 20,112 |              |  | $ | 20,609        |  |  | $ | 19,960 |  
|Cost of revenue:                               |  |                              |        |  |               |   |        |              |  |   |               |  |  |   |        |  
|Cost of revenue                                |  |                              | 3,242  |  |               |   | 3,317  |              |  |   | 4,143         |  |  |   | 4,047  |  
|Amortization of completed technology           |  |                              | 381    |  |               |   | 381    |              |  |   | 381           |  |  |   | 381    |  
|                                               |  |                              |        |  |               |   |        |              |  |   |               |  |  |   |        |  
|Total cost of revenue                          |  |                              | 3,623  |  |               |   | 3,698  |              |  |   | 4,524         |  |  |   | 4,428  |  
|                                               |  |                              |        |  |               |   |        |              |  |   |               |  |  |   |        |  
|Gross margin                                   |  |                              | 16,677 |  |               |   | 16,414 |              |  |   | 16,085        |  |  |   | 15,532 |  
|Operating expenses:                            |  |                              |        |  |               |   |        |              |  |   |               |  |  |   |        |  
|Product development                            |  |                              | 4,543  |  |               |   | 4,065  |              |  |   | 3,636         |  |  |   | 3,734  |  
|Sales and marketing                            |  |                              | 8,496  |  |               |   | 8,547  |              |  |   | 9,108         |  |  |   | 9,932  |  
|General and administrative                     |  |                              | 2,654  |  |               |   | 2,516  |              |  |   | 2,577         |  |  |   | 4,323  |  
|Business consolidation and restructuring costs |  |                              | 842    |  |               |   | 8      |              |  |   |              |  |  |   | 46     |  
|                                               |  |                              |        |  |               |   |        |              |  |   |               |  |  |   |        |  
|Total operating expenses                       |  |                              | 16,535 |  |               |   | 15,136 |              |  |   | 15,321        |  |  |   | 18,035 |  
|Operating income (loss)                        |  |                              | 142    |  |               |   | 1,278  |              |  |   | 764           |  |  |   | (2,503 | )
|Interest and other income, net                 |  |                              | 273    |  |               |   | 350    |              |  |   | 423           |  |  |   | 562    |  
|                                               |  |                              |        |  |               |   |        |              |  |   |               |  |  |   |        |  
|Income (loss) before taxes                     |  |                              | 415    |  |               |   | 1,628  |              |  |   | 1,187         |  |  |   | (1,941 | )
|Income tax expense                             |  |                              | 329    |  |               |   | 401    |              |  |   | 177           |  |  |   | 288    |  
|                                               |  |                              |        |  |               |   |        |              |  |   |               |  |  |   |        |  
|Net income (loss)                              |  |                              | 86     |  |               |   | 1,227  |              |  |   | 1,010         |  |  |   | (2,229 | )
|                                               |  |                              |        |  |               |   |        |              |  |   |               |  |  |   |        |  
|Basic and diluted net income (loss) per share  |  | $                            |       |  |               | $ | 0.05   |              |  | $ | 0.04          |  |  | $ | (0.08  | )
|                                               |  |                              |        |  |               |   |        |              |  |   |               |  |  |   |        |  



|(1) | As previously described in Note 2, we have reclassified a portion of our information technology overhead costs, in all historical periods presented, out of general and
administrative expenses into cost of revenue, product development, and sales and marketing in our previously issued consolidated statements of operations to conform to current period presentation. We believe that the allocation of these costs based
on headcount as overhead costs provides a more accurate depiction of the costs associated with cost of revenue, research and development, sales and marketing and general and administrative costs.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

None



|Item 9A. | Controls and Procedures
|-------- | -----------------------

Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), that are designed to provide reasonable assurance that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosures.

As of the end of the period covered by this Report, we conducted an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal
financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based on this evaluation, our principal executive officer and principal financial
officer concluded that our disclosure controls and procedures were effective as of December 31, 2010.

Managements Report on
Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and
procedures may deteriorate.

Under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal ControlIntegrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal ControlIntegrated Framework, our management concluded that our internal control over financial reporting was
effective as of December 31, 2010.

Managements assessment of and conclusion on the effectiveness of internal
controls over financial reporting did not include the internal controls of the recent acquisition of Symyx Technologies, Inc. which merged with Accelrys, Inc. on July 1, 2010 and which was included in the 2010 consolidated financial statements
of Accelrys, Inc. and constituted $22.2 million and $12.4 million of total assets and net liabilities, respectively, as of December 31, 2010 and $17.9 million and $29.5 million of revenues and net loss before income taxes, respectively, for the nine
month period then ended.

Ernst & Young LLP, the independent registered public accounting firm that audited the
consolidated financial statements included in this Transition Report on Form 10-K, has also audited our internal control over financial reporting as of December 31, 2010, as stated in their report which is included herein.

Changes in Internal Control Over Financial Reporting

Except as disclosed below, there were no changes in our internal control over financial reporting during the nine months ended December 31, 2010 that materially affected, or are reasonably likely to
materially affect, those controls.



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Scope of Managements Report on Internal Control over Financial Reporting

As described throughout this Report, on July 1, 2010, Symyx merged with and into Merger Sub and became our wholly-owned subsidiary.
While our financial statements for the quarter ended December 31, 2010 include the results of Symyx from the July 1, 2010 acquisition date through December 31, 2010, as permitted by the rules and regulations of the SEC, our
managements assessment of our internal control over financial reporting did not include an evaluation of Symyxs internal control over financial reporting. Further, our managements conclusion regarding the effectiveness of our
internal control over financial reporting as of December 31, 2010 does not extend to Symyxs internal control over financial reporting.

We are currently integrating policies, processes, technology and operations for the combined company and will continue to evaluate our internal control over financial reporting as we develop and execute
our integration plans. Until the companies are fully integrated, we will maintain the operational integrity of each companys legacy internal control over financial reporting. Symyx constituted $22.2 million and $12.4 million of total assets
and net liabilities, respectively, as of December 31, 2010 and $17.9 million and $29.5 million of revenues and net loss before income taxes, respectively, for the nine month period then ended.



|Item 9B. | Other Information
|-------- | -----------------

None



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

Accelrys, Inc.

We have audited Accelrys Inc.s internal control over
financial reporting as of December 31, 2010, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Accelrys, Inc.s
management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the companys internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could
have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

As indicated in the accompanying Managements Report on Internal
Control over Financial Reporting, managements assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Symyx Technologies, Inc., which is included in the 2010
consolidated financial statements of Accelrys, Inc. and constituted $22.2 million and $12.4 million of total assets and net liabilities, respectively, as of December 31, 2010 and $17.9 million and $29.5 million of revenues and net loss before income
taxes , respectively, for the nine month period then ended. Our audit of internal control over financial reporting of Accelrys, Inc. also did not include an evaluation of the internal control over financial reporting of Symyx Technologies, Inc.

In our opinion, Accelrys, Inc. maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2010, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance sheets of Accelrys, Inc. as of December 31, 2010 and March 31, 2010, and the related consolidated statements of operations, stockholders equity, and cash
flows for the nine months ended December 31, 2010 and each of the two years in the period ended March 31, 2010 of Accelrys, Inc. and our report dated March 14, 2011 expressed an unqualified opinion thereon.

/s/ ERNST & YOUNG LLP

San Diego, California

March 14, 2011



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PART III



|Item 10. | Directors, Executive Officers and Corporate Governance
|-------- | ------------------------------------------------------

The information required by this item will be included in the applicable Subsequent Filing to be filed within 120 days of our fiscal year ended December 31, 2010.



|Item 11. | Executive Compensation
|-------- | ----------------------

The information required by this item will be included in the applicable Subsequent Filing to be filed within 120 days of our fiscal year
ended December 31, 2010.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------

The information required by this item will be included in the applicable Subsequent Filing to be filed within 120 days of our fiscal year
ended December 31, 2010.



|Item 13. | Certain Relationships and Related Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------

The information required by this item will be included in the applicable Subsequent Filing to be filed within 120 days of our fiscal year ended December 31, 2010.



|Item 14. | Principal Accountant Fees and Services
|-------- | --------------------------------------

The information required by this item will be included in the applicable Subsequent Filing to be filed within 120 days of our fiscal year ended December 31, 2010.



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PART IV



|Item 15. | Exhibits, Financial Statement Schedules
|-------- | ---------------------------------------

(a)(1) Financial Statements

The following Consolidated Financial Statements are included:



|                                                                                                                                        |  |  |    | 
|--------------------------------------------------------------------------------------------------------------------------------------- |  |  | -- | 
|Report of Independent Registered Public Accounting Firm                                                                                 |  |  | 42 | 
|Consolidated Balance Sheets as of December 31, 2010 and March 31, 2010                                                                  |  |  | 43 | 
|Consolidated Statements of Operations for the nine months ended December 31, 2010 and 2009 and the years ended
March 31, 2010 and 2009  |  |  | 44 | 
|Consolidated Statements of Stockholders Equity for the nine months ended December 31, 2010 and the years ended
March 31, 2010 and 2009 |  |  | 45 | 
|Consolidated Statements of Cash Flows for the nine months ended December 31, 2010 and 2009 and the years ended
March 31, 2010 and 2009  |  |  | 46 | 
|Notes to Consolidated Financial Statements                                                                                              |  |  | 47 | 

(a)(2) Financial Statement
Schedules

Schedule IIValuation and Qualifying Accounts



|                                    |  |                            |     |  |                                      |   |   |               |  |   |                      |  |  |   |     | 
|----------------------------------- |  | -------------------------- | --- |  | ------------------------------------ | - | - | ------------- |  | - | -------------------- |  |  | - | --- | 
|Description                         |  | Balance atBeginning ofYear |     |  | AdditionsCharged toCosts andExpenses |   |   | Deductions(1) |  |   | Balance atEnd ofYear | 
|                                    |  | (In thousands)             |    
|Allowance for doubtful accounts:    |  |                            |     |  |                                      |   |   |               |  |   |                      |  |  |   |     | 
|Nine months ended December 31, 2010 |  | $                          | 163 |  |                                      | $ |  |               |  | $ |                     |  |  | $ | 163 | 
|Year ended March 31, 2010           |  | $                          | 172 |  |                                      | $ |  |               |  | $ | 9                    |  |  | $ | 163 | 
|Year ended March 31, 2009           |  | $                          | 200 |  |                                      | $ |  |               |  | $ | 28                   |  |  | $ | 172 | 



|(1) | Represents write-offs, net of recoveries.
|--- | -----------------------------------------

All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the financial statements or notes thereto.

(a)(3) Exhibits:



|              |  |                                                                                                                                                                                                                                                                                                                                                                                    
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                        
|2.1           |  | Agreement and Plan of Merger and Reorganization dated September 13, 2004 by and among Accelrys, Inc., Nashville Acquisition Corporation, SciTegic, Inc., Mathew Hahn and David Rogers
as Principal Shareholders, and Mathew Hahn as Shareholder Representative (incorporated by reference to Exhibit 2.1 to Accelrys, Inc.s Current Report on Form 8-K filed on September 16, 2004
|              | 
|2.2           |  | Agreement and Plan of Merger and Reorganization, dated April 5, 2010, by and among Accelrys, Inc., Alto Merger Sub, Inc. and Symyx Technologies, Inc. (incorporated by reference to
Exhibit 2.1 of Accelrys, Inc.s Current Report on Form 8-K filed on April 6, 2010).                                                                                                            
|              | 
|2.3*          |  | Asset Purchase Agreement, dated February 11, 2010, by and among HPR Global, Inc., Symyx Technologies, Inc., and Symyx Solutions, Inc.                                                                                                                                                                                                                                              
|              | 
|3.1           |  | Restated Certificate of Incorporation of Pharmacopeia, Inc., as amended (including a Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred
Stock) (incorporated by reference to Exhibit 3.2 to Accelrys, Inc.s Annual Report on Form 10-K for the year ended March 31, 2005).                                                             



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|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3.2           |  | Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Accelrys, Inc. (incorporated by reference to Exhibit 3.4 to Accelrys, Inc.s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2007).                                                                                                                                                                                                                     
|              | 
|3.3           |  | Certificate of Amendment of the Restated Certificate of Incorporation of Accelrys, Inc. (incorporated by reference to Exhibit 3.1 to Accelrys, Inc.s Current Report on Form 8-K
filed on July 2, 2010).                                                                                                                                                                                                                                                       
|              | 
|3.4           |  | Amended and Restated Bylaws of Accelrys, Inc. (incorporated by reference to Exhibit 3.3 to Accelrys, Inc.s Annual Report on Form 10-K for the year ended March 31,
2005).                                                                                                                                                                                                                                                                                     
|              | 
|4.1           |  | Rights Agreement, dated as of September 6, 2002, between Pharmacopeia, Inc. and American Stock Transfer & Trust Company, as Rights Agent, which includes as Exhibit A thereto the
Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock and Exhibit B thereto the Form of Right Certificate (incorporated by reference to Exhibit 4.1 to Accelrys, Inc.s Current Report on Form
8-K filed on September 4, 2002).
|              | 
|4.2           |  | First Amendment to Rights Agreement, dated as of April 5, 2010, by and between Accelrys, Inc. and American Stock Transfer & Trust Company, as Rights Agent (incorporated by
reference to Exhibit 4.1 to Accelrys, Inc.s Current Report on Form 8-K filed on April 6, 2010).                                                                                                                                                                                   
|              | 
|10.1#         |  | Amended 1994 Incentive Stock Plan (incorporated by reference to Exhibit 10.5 to Accelrys, Inc.s Annual Report on Form 10-K for the year ended December 31,
1995).                                                                                                                                                                                                                                                                                             
|              | 
|10.1(a)#      |  | Amendment No. 1 to the 1994 Incentive Stock Plan (incorporated by reference to Exhibit 10.1(a) to Accelrys, Inc.s Annual Report on Form 10-K for the year ended December 31,
2000).                                                                                                                                                                                                                                                                           
|              | 
|10.1(b)#      |  | Amendment No. 2 to the 1994 Incentive Stock Plan (incorporated by reference to Exhibit 10.1(b) to Accelrys, Inc.s Annual Report on Form 10-K for the year ended December 31,
2000).                                                                                                                                                                                                                                                                           
|              | 
|10.1(c)#      |  | Amendment No. 3 to the 1994 Incentive Stock Plan (incorporated by reference to Exhibit 10.5(a) to Accelrys, Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30,
1997).                                                                                                                                                                                                                                                                         
|              | 
|10.1(d)#      |  | Amendment No. 4 to the 1994 Incentive Stock Plan (incorporated by reference to Exhibit 10.1(d) to Accelrys, Inc.s Annual Report on Form 10-K for the year ended December 31,
2000).                                                                                                                                                                                                                                                                           
|              | 
|10.1(e)#      |  | Amendment No. 5 to the 1994 Incentive Stock Plan (incorporated by reference to Exhibit 10.1(e) to Accelrys, Inc.s Annual Report on Form 10-K for the year ended December 31,
2000).                                                                                                                                                                                                                                                                           
|              | 
|10.1(f)#      |  | Amendment No. 6 to the 1994 Incentive Stock Plan (incorporated by reference to Exhibit 10.1(f) to Accelrys, Inc.s Annual Report on Form 10-K for the year ended December 31,
2000).                                                                                                                                                                                                                                                                           
|              | 
|10.1(g)#      |  | Amendment No. 7 to the 1994 Incentive Stock Plan (incorporated by reference to Exhibit 10.1(g) to Accelrys, Inc.s Annual Report on Form 10-K for the year ended December 31,
2000).                                                                                                                                                                                                                                                                           
|              | 
|10.1(h)#      |  | Amendment No. 8 to the 1994 Incentive Stock Plan (incorporated by reference to Exhibit 10.54 to Accelrys, Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30,
2000).                                                                                                                                                                                                                                                                           
|              | 
|10.1(i)#      |  | Amendment No. 9 to the 1994 Incentive Stock Plan (incorporated by reference to Exhibit 10.1(i) to Accelrys, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31,
2002).                                                                                                                                                                                                                                                                        
|              | 
|10.2#         |  | 1995 Director Option Plan (incorporated by reference to Exhibit 10.7 to Accelrys, Inc.s Registration Statement on Form S-1 (Reg. No. 33-98246)).                                                                                                                                                                                                                                                                                                              
|              | 
|10.2(a)#      |  | Amendment No. 1 to 1995 Director Option Plan (incorporated by reference to Exhibit 10.3(a) to Accelrys, Inc.s Annual Report on form 10-K for the year ended December 31,
2000).                                                                                                                                                                                                                                                                               
|              | 
|10.2(b)#      |  | Amendment No. 2 to the 1995 Director Option Plan (incorporated by reference to Exhibit 10.3(b) to Accelrys, Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31,
2001).                                                                                                                                                                                                                                                                        



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|              |  |                                                                                                                                                                                                                                                              
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                  
|10.3#         |  | Accelrys, Inc. 2000 Stock Option Plan (incorporated by reference to Exhibit 10.23 to Accelrys, Inc.s Annual Report on form 10-K for the year ended December 31,
2000).                                                                                      
|              | 
|10.4#         |  | Accelrys, Inc. 2004 New Hire Equity Incentive Plan (incorporated by reference to Exhibit 10.3(c) to Accelrys, Inc.s Annual Report on Form 10-K for the year ended March 31,
2005).                                                                          
|              | 
|10.5#         |  | Accelrys, Inc. Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 4.2 to Accelrys, Inc.s Registration Statement on Form S-8 filed on August
26, 2005).                                                                    
|              | 
|10.5(a)#      |  | Accelrys, Inc. Amendment to Amended and Restated 2004 Stock Incentive Plan, dated August 28, 2008 (incorporated by reference to Exhibit 10.2 to Accelrys, Inc.s Quarterly
Report on Form 10-Q for the quarter ended September 30, 2008).                    
|              | 
|10.6#         |  | Form of Stock Option Award Agreement pursuant to Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 4.3 to Accelrys, Inc.s Registration
Statement on Form S-8 filed on August 26, 2005).                                  
|              | 
|10.7#         |  | Form of SAR Award Agreement pursuant to Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 4.4 to Accelrys, Inc.s Registration Statement on
Form S-8 filed on August 26, 2005).                                           
|              | 
|10.8#         |  | Form of Restricted Stock Award Agreement pursuant to Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 4.5 to Accelrys, Inc.s Registration
Statement on Form S-8 filed on August 26, 2005).                              
|              | 
|10.9#         |  | Form of Restricted Stock Unit Award Agreement pursuant to Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 4.6 to Accelrys, Inc.s
Registration Statement on Form S-8 filed on August 26, 2005).                         
|              | 
|10.10#        |  | Form of Director Restricted Stock Unit Award Agreement pursuant to Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 99.1 to Accelrys, Inc.s
Current Report on Form 8-K filed on August 21, 2007).                       
|              | 
|10.11#        |  | Form of Performance Based Restricted Stock Unit Award Agreement pursuant to Amended and Restated 2004 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to Accelrys,
Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
|              | 
|10.12#        |  | Stock Option Agreement, dated June 15, 2009, between Max Carnecchia and Accelrys, Inc. (incorporated by reference to Exhibit 10.4 to Accelrys, Inc.s Current Report on Form 8-K
filed on June 16, 2009).                                                    
|              | 
|10.13#        |  | Symyx Technologies, Inc. 2007 Stock Incentive Plan, as amended, and the forms of agreement related thereto (incorporated by reference to Exhibit 4.3 to Accelrys, Inc.s
Registration Statement on Form S-8 filed on August 9, 2010).                        
|              | 
|10.14#        |  | Intellichem, Inc. 2003 Stock Option Plan, as amended (incorporated by reference to Exhibit 4.4 to Accelrys, Inc.s Registration Statement on Form S-8 filed on August 9,
2010).                                                                              
|              | 
|10.15#        |  | Symyx Technologies, Inc. 2001 Nonstatutory Stock Option Plan, as amended (incorporated by reference to Exhibit 4.5 to Accelrys, Inc.s Registration Statement on Form S-8 filed
on August 9, 2010).                                                          
|              | 
|10.16#        |  | Synthematix, Inc. Amended and Restated 2000 Equity Compensation Plan (incorporated by reference to Exhibit 4.6 to Accelrys, Inc.s Registration Statement on Form S-8 filed on
August 9, 2010).                                                              
|              | 
|10.17#        |  | Symyx Technologies, Inc. 1997 Stock Plan, as amended (incorporated by reference to Exhibit 4.7 to Accelrys, Inc.s Registration Statement on Form S-8 filed on August 9,
2010).                                                                              



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|              |  |                                                                                                                                                                                                                                         
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                             
|10.18#        |  | Fiscal year 2010 Management Incentive Plan (incorporated by reference to Exhibit 10.36 to Accelrys, Inc.s Annual Report on Form 10-K for the year ended March 31,
2009).                                                               
|              | 
|10.19#        |  | First Quarter Fiscal Year 2011 Management Incentive Plan (incorporated by reference to Exhibit 10.1 to Accelrys, Inc.s Current Report on Form 8-K filed on April 15,
2010).                                                            
|              | 
|10.20#        |  | 2010 Management Incentive Plan for the period of July 1, 2010 through December 31, 2010 (incorporated by reference to Exhibit 10.7 to Accelrys, Inc.s Quarterly Report on Form
10-Q for the quarter ended June 30, 2010).              
|              | 
|10.21         |  | Lease, dated August 20, 2003, between Accelrys, Inc. and Eastpark at 8A (Building 1000) (incorporated by reference to Exhibit 10.35 to Accelrys, Inc.s Quarterly Report on Form
10-Q for the quarter ended September 30, 2003).        
|              | 
|10.22         |  | Lease, dated August 20, 2003, between Accelrys, Inc. and Eastpark at 8A (Building 3000) (incorporated by reference to Exhibit 10.36 to Accelrys, Inc.s Quarterly Report on Form
10-Q for the quarter ended September 30, 2003).        
|              | 
|10.23         |  | Sublease, dated May 18, 2004, between Accelrys, Inc. and Pfizer Inc. (incorporated by reference to Exhibit 10.18 to Accelrys, Inc.s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2004).                            
|              | 
|10.24         |  | Lease, dated May 18, 2004, between Accelrys, Inc. and AGRRI Seaview, L.LC. (incorporated by reference to Exhibit 10.19 to Accelrys, Inc.s Quarterly Report on Form 10-Q for the
quarter ended December 31, 2004).                      
|              | 
|10.25         |  | Sublease, dated May 10, 2006, between Accelrys, Inc., Accelrys, Ltd., QUALCOMM Inc., and QUALCOMM UK Ltd. (incorporated by reference to Exhibit 10.33 to Accelrys, Inc.s Annual
Report on Form 10-K for the year ended March 31, 2006).
|              | 
|10.26*        |  | Lease, dated February 29, 2000, by and between East Arques Sunnyvale, LLC and Symyx Technologies, Inc. for the premises at 1263 E. Arques, Sunnyvale, California, and addenda and
inserts thereto, as amended.                          
|              | 
|10.27*        |  | Lease by and between Oakmead Ventures LLC and Symyx Technologies, Inc. for the premises at 415 Oakmead Parkway, Sunnyvale, California, and addenda and inserts
thereto.                                                                 
|              | 
|10.28#        |  | Form of Indemnity Agreement for Directors and Executive Officers (incorporated by reference to Exhibit 10.48 to Accelrys, Inc.s Annual Report on Form 10-K for the year ended
December 31, 1998).                                      
|              | 
|10.29#        |  | Letter of Employment, dated September 29, 2005, between Accelrys, Inc. and Richard Murphy (incorporated by reference to Exhibit 99.1 to Accelrys, Inc.s Current Report on Form
8-K filed on October 19, 2005).                         
|              | 
|10.30#        |  | Terms of continuing employment of Matthew Hahn, dated as of August 12, 2005 (incorporated by reference to Exhibit 10.3 to Accelrys, Inc.s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2005).                     
|              | 
|10.31#        |  | Letter of Employment, dated September 1, 2006, between Accelrys, Inc. and Rick E. Russo (incorporated by reference to Exhibit 99.1 to Accelrys, Inc.s Current Report on Form
8-K filed on September 6, 2006).                          
|              | 
|10.32#        |  | Letter of Employment, dated September 6, 2006, between Accelrys, Inc. and Frank K. Brown, Ph.D. (incorporated by reference to Exhibit 99.3 to Accelrys, Inc.s Current Report on
Form 8-K filed on September 28, 2006).                 



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|              |  |                                                                                                                                                                                                                                                                           
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                               
|10.33#        |  | Second Amendment to Employment Agreement, dated September 26, 2006, between Accelrys, Inc. and Mathew Hahn, Ph.D. (incorporated by reference to Exhibit 99.2 to Accelrys, Inc.s
Current Report on Form 8-K filed on September 28, 2006).                                 
|              | 
|10.34#        |  | Form of Employment Agreement between Accelrys, Inc. and certain of its executives (incorporated by reference to Exhibit 10.5 to Accelrys, Inc.s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2006).                                                 
|              | 
|10.35#        |  | Letter of Employment, dated January 5, 2009, between Accelrys, Inc. and Todd Johnson (incorporated by reference to Exhibit 10.2 to Accelrys, Inc.s Current Report on Form 8-K
filed on January 5, 2009).                                                                 
|              | 
|10.36         |  | Agreement between Accelrys and UBS dated November 11, 2008 (incorporated by reference to Exhibit 10.1 to Accelrys, Inc.s Current Report on Form 8-K filed on November 11,
2008).                                                                                         
|              | 
|10.37#        |  | Employment Agreement, dated June 15, 2009, between Max Carnecchia and Accelrys, Inc. (incorporated by reference to Exhibit 10.2 to Accelrys, Inc.s Current Report on Form 8-K
filed on June 16, 2009).                                                                   
|              | 
|10.38#        |  | Letter of Employment, dated June 15, 2009, between Max Carnecchia and Accelrys, Inc. (incorporated by reference to Exhibit 10.3 to Accelrys, Inc.s Current Report on Form 8-K
filed on June 16, 2009).                                                                   
|              | 
|10.39#        |  | Letter Agreement, dated July 15, 2009, between Todd Johnson and Accelrys, Inc. (incorporated by reference to Exhibit 10.1 to Accelrys, Inc.s Current Report on Form 8-K filed
on July 20, 2009).                                                                         
|              | 
|10.40#        |  | Separation Agreement and Release, dated December 31, 2009, between Rick Russo and Accelrys, Inc. (incorporated by reference to Exhibit 10.4 to Accelrys, Inc.s Current Report
on Form 8-K filed on January 5, 2010).                                                     
|              | 
|10.41#        |  | Letter of Employment, dated December 23, 2009, between Accelrys, Inc. and Michael Piraino (incorporated by reference to Exhibit 10.2 to Accelrys, Inc.s Current Report on Form
8-K filed on January 5, 2010).                                                            
|              | 
|10.42#        |  | Employment Agreement, dated January 5, 2010, between Michael Piraino and Accelrys, Inc. (incorporated by reference to Exhibit 10.3 to Accelrys, Inc.s Current Report on Form
8-K filed on January 5, 2010).                                                              
|              | 
|10.43#        |  | Separation Agreement and Release, dated as of April 21, 2010, by and between the Accelrys, Inc. and Ilene Vogt (incorporated by reference to Exhibit 10.3 to Accelrys, Inc.s
Current Report on Form 8-K filed on April 22, 2010).                                        
|              | 
|10.44#        |  | Offer Letter from Accelrys, Inc. to Todd Johnson (incorporated by reference to Exhibit 10.1 to Accelrys, Inc.s Current Report on Form 8-K filed on April 22,
2010).                                                                                                      
|              | 
|10.45#        |  | Employment Agreement, dated as of April 21, 2010, by and between the Accerlys, Inc. and Todd Johnson (incorporated by reference to Exhibit 10.2 to Accelrys, Inc.s Current
Report on Form 8-K filed on April 22, 2010).                                                  
|              | 
|10.46#        |  | Employment Agreement, dated as of April 4, 2010, by and between Accelrys, Inc. and Isy Goldwasser (incorporated by reference to Annex E to the joint proxy statement/prospectus
forming part of Accelrys, Inc.s Registration Statement on Form S-4 filed on May 5, 2010).
|              | 
|10.47#        |  | Employment Agreement, dated as of April 4, 2010, by and between Accelrys, Inc. and Rex Jackson (incorporated by reference to Annex F to the joint proxy statement/prospectus forming
part of Accelrys, Inc.s Registration Statement on Form S-4 filed on May 5, 2010).   



89



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|              |  |                                                                                                                                                                                                                                                                           
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                               
|10.48#        |  | Employment Agreement, dated as of April 4, 2010, by and between Accelrys, Inc. and Rick Rosenthal (incorporated by reference to Annex G to the joint proxy statement/prospectus
forming part of Accelrys, Inc.s Registration Statement on Form S-4 filed on May 5, 2010).
|              | 
|10.49#        |  | Employment Agreement, dated as of April 4, 2010, by and between Accelrys, Inc. and Charles Haley (incorporated by reference to Annex H to the joint proxy statement/prospectus
forming part of Accelrys, Inc.s Registration Statement on Form S-4 filed on May 5, 2010). 
|              | 
|10.50#        |  | Separation Agreement and Release, dated as of July 19, 2010, by and between the Accelrys, Inc. and Paul Burrin (incorporated by reference to Exhibit 10.1 to Accelrys,
Inc.s Current Report on Form 8-K filed on July 23, 2010).                                         
|              | 
|10.51#*       |  | Offer Letter, dated October 1, 2007, from Symyx Technologies, Inc.s to Trevor Heritage.                                                                                                                                                                                  
|              | 
|10.52*        |  | Collaborative Research and License Agreement, dated January 1, 1999, by and between Symyx Technologies, Inc. and The Dow Chemical Company.                                                                                                                                
|              | 
|10.53±*       |  | Alliance Agreement, effective as of January 1, 2005, between Symyx Technologies, Inc., Symyx Discovery Tools, Inc. and The Dow Chemical Company.                                                                                                                          
|              | 
|10.54±*       |  | Supplemental Agreement, dated November 29, 2007, by and between Symyx Technologies, Inc. and The Dow Chemical Company.                                                                                                                                                    
|              | 
|10.55*        |  | License Agreement, dated June 22, 1995, between Symyx Technologies, Inc. and Lawrence Berkeley Laboratory, on behalf of The Regents of the University of California.                                                                                                      
|              | 
|10.56±*       |  | Alliance, Technology Transfer, and License Agreement, effective April 1, 2003, by and between Symyx Technologies, Inc., Symyx Discovery Tools, Inc. and ExxonMobil Research and
Engineering Company.                                                                      
|              | 
|10.57*        |  | Sale Agreement, dated August 9, 2007, by and among Elsevier Inc., Elsevier Swiss Holdings S.A., Elsevier Japan KK, Elsevier Limited, MDL Information Systems (UK) Limited and Symyx
Technologies, Inc.                                                                    
|              | 
|10.58*        |  | Symyx Technologies, Inc. Executive Change in Control and Severance Benefit Plan, including a list of participating executives.                                                                                                                                            
|              | 
|14.1          |  | Code of Ethics (incorporated by reference to Exhibit 14.1 to Accelrys, Inc.s Current Report on Form 8-K filed on February 5, 2005).                                                                                                                                      
|              | 
|21.1*         |  | Subsidiaries of Accelrys, Inc.                                                                                                                                                                                                                                            
|              | 
|23.1*         |  | Consent of Independent Registered Public Accounting Firm                                                                                                                                                                                                                  
|              | 
|31.1*         |  | Section 302 Certification of the Principal Executive Officer                                                                                                                                                                                                              
|              | 
|31.2*         |  | Section 302 Certification of the Principal Financial Officer                                                                                                                                                                                                              
|              | 
|32.1*         |  | Section 906 Certification of the Chief Executive Officer and Chief Financial Officer                                                                                                                                                                                      



|# | Represents a management contract or compensatory plan or arrangement.
|- | ---------------------------------------------------------------------

|± | The SEC has granted confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|* | Filed herewith
|- | --------------



|(b) | Exhibits
|--- | --------

See
Item 15(a)(3) above.



|(c) | Financial Statement Schedules
|--- | -----------------------------

See Item 15(a)(2) above.



90



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##### Table of Contents

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.



ACCELRYS, INC.By:

/s/    MICHAEL A.
PIRAINOMichael A. Piraino Executive Vice President andChief Financial OfficerDate: March 14, 2011




91



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##### Table of Contents

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Max Carnecchia and Michael A.
Piraino, jointly and severally, as his or her attorney-in-fact, each with full power of substitution, for him or her, in any and all capacities, to sign each amendment to this report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or his or her substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

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 and on the dates indicated:



|                                                     |  |                                                                                                   |  |              
|---------------------------------------------------- |  | ------------------------------------------------------------------------------------------------- |  | -------------
|Signatures                                           |  | Title                                                                                             |  | Date         
|                                                     |  |                                                                                                  
|/s/    MAX
CARNECCHIA Max Carnecchia                 |  | President and Chief Executive Officer (Principal Executive Officer)                               |  | March 1, 2011
|                                                     |  |                                                                                                  
|/s/    MICHAEL A.
PIRAINO Michael A. Piraino         |  | Executive Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) |  | March 1, 2011
|                                                     |  |                                                                                                  
|/s/    KENNETH L.
COLEMAN Kenneth L. Coleman         |  | Chairman of the Board of Directors                                                                |  | March 1, 2011
|                                                     |  |                                                                                                  
|/s/    JEFFREY
RODEK Jeffrey Rodek                   |  | Director                                                                                          |  | March 1, 2011
|                                                     |  |                                                                                                  
|/s/    RICARDO B. LEVY,
Ph.D. Ricardo B. Levy, Ph.D. |  | Director                                                                                          |  | March 1, 2011
|                                                     |  |                                                                                                  
|/s/    TIMOTHY
HARKNESS Timothy Harkness             |  | Director                                                                                          |  | March 1, 2011
|                                                     |  |                                                                                                  
|Steven Goldby                                        |  | Director                                                                                          |  |              
|                                                     |  |                                                                                                  
|/s/    CHRIS VAN
INGEN Chris van Ingen               |  | Director                                                                                          |  | March 1, 2011
|                                                     |  |                                                                                                  
|/s/    BRUCE
PASTERNACK Bruce Pasternack             |  | Director                                                                                          |  | March 1, 2011
|                                                     |  |                                                                                                  
|/s/    CHRISTOPHER J.
STEFFEN Christopher J. Steffen |  | Director                                                                                          |  | March 1, 2011
|                                                     |  |                                                                                                  
|/s/    LARRY
FERGUSON Larry Ferguson                 |  | Director                                                                                          |  | March 1, 2011