<PAGE>


================================================================================

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


                                    FORM 10-K

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

                  FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2001
                        COMMISSION FILE NUMBER: 000-31577


                                 INFORMAX, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



               DELAWARE                                    52-1687783
   (STATE OR OTHER JURISDICTION OF                        (IRS EMPLOYER
    INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NO.)



                              7600 WISCONSIN AVENUE
                                   SUITE 1100
                               BETHESDA, MD 20814
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)


                                 (240) 747-4000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                                 ---------------

Securities registered pursuant to Section 12(b) of the Act: Not Applicable
Securities registered pursuant to Section 12(g) of the Act:


                     COMMON STOCK, PAR VALUE $.001 PER SHARE
                                (TITLE OF CLASS)

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

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

        The aggregate market value of the common stock held by non-affiliates of
the registrant, based upon the closing price of the registrant's common stock as
of March 1, 2002 is approximately $29.1 million. *

        As of March 1, 2002, there were 25,238,728 shares of the registrant's
common stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the definitive proxy statement for the Annual Meeting of
Stockholders to be held on May 16, 2002, to be filed within 120 days after the
end of the registrant's fiscal year, are incorporated by reference into Part
III, Items 10 - 13 of this Form 10-K.


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<PAGE>

-----------
* Solely for purposes of this calculation, directors, executive officers and
holders of 10% or more of the Registrant's outstanding common stock at
March 1, 2002 are deemed to be affiliates.

================================================================================





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<PAGE>

                                 INFORMAX, INC.
                                    FORM 10-K


                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                            PAGE
                                                                                                                            ----
<S>                   <C>       <C>
        PART I
                      Item 1.   Business.................................................................................     5
                      Item 2.   Properties...............................................................................    21
                      Item 3.   Legal Proceedings........................................................................    21
                      Item 4.   Submission of Matters to a Vote of Security Holders......................................    21
        PART II
                      Item 5.   Market for Registrant's Common Equity and Related Stockholders Matters...................    22
                      Item 6.   Selected Consolidated Financial Data.....................................................    24
                      Item 7.   Management's Discussion and Analysis of Financial Condition and Results of
                                Operations...............................................................................    26
                      Item 7A.  Quantitative and Qualitative Disclosures about Market Risk...............................    43
                      Item 8.   Consolidated Financial Statements and Supplementary Data.................................    44
                      Item 9.   Changes in and Disagreements with Accountants on Accounting and Financial
                                Disclosure...............................................................................    67
        PART III
                      Item 10.  Directors and Executive Officers of the Registrant.......................................    68
                      Item 11.  Executive Compensation...................................................................    68
                      Item 12.  Security Ownership of Certain Beneficial Owners and Management...........................    68
                      Item 13.  Certain Relationships and Related Transactions...........................................    68
        PART IV
                      Item 14.  Exhibits, Consolidated Financial Statement Schedules and Reports on
                                Form 8-K.................................................................................    68
        SIGNATURES.......................................................................................................    69
</TABLE>




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<PAGE>



              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

        Except for any historical information, the matters we discuss in this
Form 10-K concerning our company contain forward-looking statements. Any
statements in this Form 10-K that are not statements of historical fact, are
intended to be, and are, "forward-looking statements" under the safe harbor
provided by Section 27(a) of the Securities Act of 1933, as amended. Without
limitation, the words "anticipates," "believes," "estimates," "expects,"
"intends," "plans" and similar expressions are intended to identify
forward-looking statements. The important factors we discuss below and under
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," as well as other factors identified in our filings with the SEC
and those presented elsewhere by our management from time to time, could cause
actual results to differ materially from those indicated by the forward-looking
statements made in this Form 10-K. Such risks and uncertainties include those
set forth under Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Risk Factors" and elsewhere in this Form
10-K. The forward-looking statements contained in this Form 10-K represent our
outlook only as of the date hereof and we assume no obligation to update the
forward-looking information contained in this Form 10-K to reflect actual
results or changes in the factors affecting such forward-looking information.




                                       4
<PAGE>





                                 INFORMAX, INC.


                                     PART I


ITEM 1- BUSINESS

OVERVIEW

        We are a leading global provider of informatic software solutions to the
life sciences industry. Informatics applies the power and dramatic advances that
have taken place in mathematical, computer and life sciences to accelerate and
enhance the research of scientific communities. Our integrated solutions
strategy - called High-Throughput Research (HTR) - combines leading edge
software solutions, consulting services and scientific expertise to provide the
enabling technology for drug discovery and development customers. Our portfolio
of informatic software solutions help scientists manage, analyze and interpret
the enormous amount of genomic, proteomic and other biomolecular data generated
in recent years. Increased understanding of these data that form the genetic
blueprint of all living organisms could yield new ways to diagnose, treat and
ultimately prevent many of the thousands of disorders that affect humans. Our
HTR approach enables scientists to increase the effectiveness of their research
and reduce the time and cost of identifying and validating biological targets
for pharmaceutical, therapeutic and diagnostic development.

        Since introducing our market leading Vector NTI Suite of software
applications for desktop computers in 1993, our customer base has grown to
include over 31,000 individual scientists worldwide working in over 1,900
organizations, including over 800 biotechnology, pharmaceutical and agricultural
biotechnology and life science companies, and over 1,100 academic and government
research institutions. Our customers include:


        -       Merck & Company, Inc.,
        -       Pfizer, Inc.,
        -       Pharmacia & Upjohn Co.,
        -       Procter & Gamble,
        -       Johns Hopkins University,
        -       St. Jude Children's Hospital,
        -       University of Pennsylvania,
        -       University of North Carolina,
        -       University at Buffalo, The State University of New York,
        -       3M,
        -       Windber Research Institute,
        -       University of Georgia,
        -       BASF,
        -       Syngenta Biotechnology,
        -       Schering Plough Research, and
        -       The National Institutes of Health

        Our proprietary software solutions include Vector NTI Suite, the most
widely used desktop software application for enhancing laboratory productivity,
and GenoMax, a modular family of analytical programs on an enterprise platform
for the integrated analysis of larger amounts of genomic, proteomic and other
biomolecular data. Driven primarily by increased sales of Vector NTI Suite and
greater market penetration of GenoMax, which was introduced in late 1998 and
included 41 customers at December 31, 2001, our informatic products and related
professional services generated $25.2 million in revenues in 2001. This
represents a five-year compound annual growth rate of 90% and a 47 % increase
over 2000 revenues.

        As of March 1, 2002, we had 223 full time employees, including a 57
person sales and marketing team, a 79 person research and product development
team, a 29 person implementation, technical support and informatics scientists
staff of 29, and 21 programmers dedicated to provide professional services under
our relationship with the National Center for Biotechnology Information (NCBI),
part of the National Institutes of Health (NIH).


                                       5
<PAGE>


        Financial information prepared in accordance with generally accepted
accounting principles including information on revenues from external customers,
measures of profit and loss and total assets is included in our consolidated
financial statements in Item 8 of this report.

INDUSTRY BACKGROUND

        Life science informatics combines the fields of molecular biology and
information technology. Informatic software enables researchers, using automated
laboratory research techniques, to efficiently search, organize, share, analyze
and interpret genomic, proteomic and other biomolecular data. Genomic and
proteomic factors dictate cellular functions, susceptibility to disease and
physical characteristics. Researchers expect that analysis of such data will
lead to new ways to diagnose, treat and ultimately prevent many of the thousands
of disorders that affect humans. Genomic research involving other organisms,
including plants, animals, bacteria and viruses, could yield further advances
regarding human disorders, as well as improvements in agricultural production,
industrial processes and environmental management.

Research is Producing a Flood of Genomic and Other Biomolecular Data

        Around the world, researchers in industry, academia and government are
producing vast quantities of biomolecular data. Much of this data is related to:

        -       DNA sequence, which is the order of chemical sub-units, called
                nucleotide bases, that make up strands of DNA found in the cells
                of every living organism and which encode genetic information;

        -       gene variation, function and expression, which is the variation
                in specific sequences of nucleotide bases found on chromosomes,
                called genes, that control the presence of hereditary traits;
                the biological function of those sequences; and the degree to
                which a gene's information is translated into the production of
                proteins within a cell; and

        -       protein structure and function which is the sequence of chains
                of amino acids, the building blocks of proteins, their 3D
                structures and the means by which they direct the regulation,
                growth and repair of cells, tissues and organs.

        With the completion of a draft of the human genome last year the
acquisition of data only continues to increase. GenBank, a National Institutes
of Health sponsored public repository of genetic sequences of humans and over
55,000 other organisms, increased from approximately 555,000 complete sequences
in 1995, to 10.1 million complete sequences in 2000, to over 15.4 million
complete sequences as of February 2002. GenBank's database of nucleotide bases
increased from approximately 385 million bases in 1995, to 11.1 billion bases in
2000, to over 17.0 billion bases as of February 2002. As researchers seek to
further characterize and understand the catalogue of identified genes in a
functional sense, data available to researchers continues to grow in amount
and complexity.

Informatic Software Efficiently Stores, Organizes and Integrates Growing Volumes
of Biomolecular Data

        A central problem now facing researchers is how to store, organize and
integrate complex and rapidly growing data sets. Informatic software can
incorporate a relational database, enabling researchers to efficiently store,
organize and search genomic, proteomic and other biomolecular data according to
the properties of relevant data objects. Informatic software can also provide a
user-friendly interface for efficient access to numerous in-house and
Internet-based databases of biomolecular information.

Informatic Software Transforms Data into Useful Knowledge

        The true value of the rapidly growing mass of genomic and proteomic data
lies in the transformation of this data into advances in drug discovery and
development, clinical diagnostics, agricultural production, environmental
management and industrial processes. Informatic software allows researchers to
incorporate proprietary and third party analytical algorithms and analysis tools
to interpret and translate data into useful knowledge for application across a
variety of disciplines. Informatic software can also automate database queries,
analyses and reporting of research results. Automated analysis is important
because as biomolecular databases grow, researchers must continuously update
their analyses to reflect the new data that has been added. By understanding how
newly characterized biomolecular data fits into the whole cellular machine,
scientists can understand how the cell, tissue, organs, systems and humans
function normally and the causes of disease. Events this year have highlighted
the first broad efforts at characterization of systematic behavior in higher
organisms. Many new and previously known but improving laboratory technologies
have been used in this search for functional characterization including
biochips, microarrays and mass spectrometry. Recent examples of such data
generation, and how informatics solutions can help to understand this data
include:

        -       On January 10, 2002, the journal Nature published two papers
                detailing high throughput discovery of protein


                                       6
<PAGE>


                complexes in the budding yeast Saccharomyces cerevisiae, a first
                step in understanding the overall behavior of an organism. Using
                mass spectrometry, both papers independently identified close to
                15,000 different proteins and found protein associations
                totaling roughly 25% of the yeast genome. The two datasets did
                not completely agree even though similar approaches were used.
                This highlights both the ability to rapidly generate huge
                volumes of biologically relevant data but also the importance of
                informatics systems to interpret and reconcile complex
                conflicting datasets.

        -       On January 31, 2002 a paper published in the journal
                Nature reported a more robust method of classifying metastatic
                breast cancers using gene microarray analysis. In order to
                develop these methods, over 3 million data points (gene
                expression levels) were applied using tissue samples from 117
                patients. Without highly sophisticated informatics resources
                this discovery could not take place.

Informatic Software Facilitates Collaboration among Researchers

        Due to the volume and complexity of biomolecular data, efficient
collaboration among researchers within and across organizations is required to
accelerate productivity. Within large pharmaceutical companies, related research
efforts are often conducted across numerous research departments in different
locations. The Human Genome Project, an international collaboration of academic
and government research institutes, pursuing the goal of deciphering the human
genome, represents an example of inter-organizational collaboration that
informatic software can facilitate. Internet and intranet-enabled informatic
software solutions such as our Vector NTI Suite, Vector Enterprise and GenoMax
enterprise platform serve as an information bridge allowing researchers to share
data and results, collaborate in analyses and better coordinate their efforts.

Informatic Software Provides an Efficient Interface for Online Data Sources

        Researchers can currently access through the Internet over 500 databases
in the public domain that contain genomic, proteomic and other biomolecular
data. For example, the National Center for Biotechnology Information (NCBI)
provides access to GenBank, PubMed and its other databases, as well as
related tools, through its Internet website, which is used on average by more
than 250,000 users per weekday who in the aggregate initiate an average of over
5.0 million queries per day. In addition, commercial providers of genomic,
proteomic and other biomolecular data often provide customers with access to
proprietary data through the Internet. Informatic software can act as a
researcher's interface with diverse online databases. The Internet also enables
the distribution of informatic software, the use of informatic software
maintained on remote computers and the online purchase of products used in
laboratory experiments.

MARKET OPPORTUNITIES IN LIFE SCIENCE INFORMATICS

The Market for Life Science Informatics Software and Services is Large and
Growing Rapidly

        An August 2000 independent industry report by Front Line Strategic
Management Consulting estimates the world-wide life science informatics market,
consisting of sales by providers of analytical software, enterprise systems and
data, will grow from approximately $468.0 million in 2000 to approximately $2.0
billion in 2005 and approximately $5.4 billion in 2010. In the wake of the Human
Genome Project and other significant gene sequencing initiatives, researchers
are facing a flood of genomic data. Concurrently, traditional pharmaceutical
research processes -- ranging from discovery to development, and then on to
clinical trials, drugs and treatments -- are becoming more costly and less
efficient. As this data explosion continues, we believe that pharmaceutical and
biotech companies' drug discovery processes will struggle to maintain
productivity levels and keep up with demand. Informatic software and services
solutions can play a critical role to help address these challenges. We believe
that market growth for informatic software solutions is being driven by the
following factors:

        -       The increasing difficulty of managing, integrating and
                interpreting the rapidly increasing volumes of available
                biomolecular data and genomic information;

        -       The increased recognition by researchers of the utility of using
                technology and sophisticated and collaborative management
                processes in the drug discovery process to increase their
                productivity and cost efficiency; and

        -       The significant opportunity to claim valuable patent rights on
                biomolecular information underlying such areas as diseases,
                human behavior, agricultural productivity and environmental
                management.

        We believe that our informatic software and service solutions provide
researchers with an efficient means by which to access disparate data sources
and give them the tools to rapidly interpret, analyze and translate such data
for application in numerous disciplines. Given the market opportunities created
by the applications of genomic, proteomic and other biomolecular data, and the


                                       7
<PAGE>


efficiency and productivity gains that can be achieved through the use of
informatic software, we believe that the market for our informatic software and
service solutions will continue to grow.

TARGET MARKETS FOR INFORMATIC SOFTWARE APPLICATIONS AND SERVICES

        Life science informatic software and services facilitate increased
research efficiency, productivity and collaboration amongst the numerous
disciplines, teams of scientists and research efforts that apply a data driven,
informatic approach to biological discovery. Currently there are approximately
400,000 scientists and engineers from both commercial organizations and academic
and government research institutions engaged in research and development in the
life sciences and related science fields. We believe that the current and future
markets for informatic software and services solutions include the following
industries that are participating in the genomic revolution:

        Pharmaceutical and Biotechnology Companies. There are over 250
pharmaceutical companies and 2,500 biotechnology companies worldwide. Amongst
these companies, approximately $50.0 billion was spent in research and
development in 2000. Current estimates indicate that over 90% of potential drug
candidates fail at some point in the development process and that bringing a new
drug to market costs approximately $500 million and requires an average of 15
years in development. In an effort to increase the number and quality of
marketable drug candidates, we believe pharmaceutical and biotechnology
companies are increasingly shifting from more conventional laboratory techniques
to a more effective technology-based, data-intensive, approach to drug
discovery.

        Academic and Government Research Institutions. Academic and government
research institutions, including the international institutions that make up the
Human Genome Project, have been significant participants in biomolecular
research and the advancement of genomics. Public spending for such research is
expected to increase rapidly over the next several years on a global basis. The
budget of the National Institutes of Health is expected to grow to approximately
$27.0 billion by 2003, doubling the $13.6 billion budget in 1998. In 2002,
government funding for the National Institutes of Health is expected to be
approximately $25.0 billion with a majority of the funding earmarked for grants
to researchers and to support internal research efforts. A portion of this
funding has been earmarked for Biomedical Research Infrastructure Network (BRIN)
grants, which awards funds to institutions in states that have been
traditionally denied funding in competitive processes. These grants can be
utilized to establish basic infrastructure, including the purchase of equipment
and software, to support biomedical research.


        Agricultural, Environmental and Industrial Biotechnology Companies.
Greater knowledge about plant and animal genomes may enable researchers to
engineer stronger, more disease resistant plants and animals, resulting in
increased farming and livestock productivity. Researchers may use such knowledge
to develop more nutritious and pesticide free foods and cultivate enzymes that
aid in industrial processes and environmental management. By reducing discovery
and development costs, informatic software may facilitate the creation and
commercialization of agricultural, environmental and industrial products and
technologies that might otherwise be cost prohibitive and therefore not
explored.

        Emerging Clinical Genomics Industry. Industry participants expect
genomics and the study of genetic variation to play a central role in the market
for clinical diagnostics and the emerging market for customized drug therapies.
Through the analysis of genomic data, researchers are gaining greater
understanding of disease onset and progress and are working to translate these
findings into earlier-stage and more accurate diagnostic tests. In addition,
researchers engaged in the emerging field of pharmacogenomics are seeking to
determine how the millions of tiny genetic variations among individuals impact
drug response, so that they can subsequently develop a more personalized
approach to medicine and treatment of disease.

OUR SOLUTION

        In response to the challenges and market opportunities presented by the
genomic revolution, we develop and deliver to our customers an integrated
solutions strategy, including our portfolio of informatic software products and
complementary services.

        Our proprietary software products are flexible, scalable and designed to
integrate with one another. Our software products provide access to public and
commercial databases and are designed to provide e-commerce connectivity with
vendors of laboratory reagents for use in actual experiments. Our products are
designed to be stand-alone applications or Internet-hosted applications provided
through application service providers. Our current software portfolio includes:

        -       Vector NTI Suite, a comprehensive desktop analysis and
                visualization toolset for the laboratory scientist engaged in
                genomic and protein sequence research. Vector NTI Suite contains
                modules that enable researchers to store, manage, assemble and
                analyze biomolecular data and improve their productivity through
                the simulation of certain key laboratory processes. Launched in
                1993, Vector NTI Suite is offered for both Microsoft Windows and
                Apple Macintosh operating systems. To date we have more than
                31,000 estimated Vector NTI Suite users, working in over 1,900
                organizations, who are engaged in informatic-based life science
                research.

        -       Vector Enterprise, designed for researchers working in larger
                groups or who collaborate with others on sequence


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                analysis projects. Using a shared Oracle relational database,
                Vector Enterprise is an enhancement to the Vector NTI Suite that
                allows users to share data and results in a secure environment.
                We commercially released Vector Enterprise in the third quarter
                of 2000.

        -       GenoMax, a large-scale modular, enterprise-wide data mining
                application that integrates multiple genomic data types and
                enables researchers to automate complex analysis tasks. GenoMax
                enables researchers to efficiently store, search, manage and
                analyze large amounts of biomolecular data on a scale not
                possible at the desktop. GenoMax facilitates research
                collaboration and is designed for a coordinated effort by a
                diverse team of scientists within or across organizations. From
                its launch in late 1998 through December 31, 2001, we have sold
                GenoMax to 41 customers.

        In addition to our proprietary software solutions above, we are licensed
to distribute complementary informatic software and database products under
license from Biomax Informatics AG, Media Cybernetics L.P. and AxCell
Biosciences Corporation. These products complement our proprietary software
products and are a component of our comprehensive High Throughput Research
approach.

OUR CORE COMPETENCIES AND COMPETITIVE STRENGTHS

        We believe that our core competencies and competitive strengths,
including those summarized below, position us to continue to be a global leader
in life science informatic solutions.

Superior Products and a Broad Product Portfolio

        Our comprehensive portfolio of informatic software solutions reflects
the benefit of years of significant time and resources committed to research and
development that incorporates customer feedback, enabling our products to meet
current and anticipated needs and preferences of the scientific community. Our
software solutions are flexible and scalable for customers of varying size, with
the capability to integrate with each other and to incorporate proprietary and
third party analytical algorithms and data sets. Our products contain advanced
analysis, visualization and simulation tools and are designed to reflect the
natural workflow of the laboratory scientist. Our product portfolio includes
Vector NTI Suite, an integrated analysis and visualization software toolset for
laboratory scientists working with genomic and proteomic data. For larger
collaborative research efforts, Vector NTI Enterprise provides a Vector NTI
Suite user group with the additional advantages of a shared relational database
and features simultaneous multi-user access and search capabilities in a secure
environment. GenoMax is a modular enterprise platform and integrated system that
is designed to support coordinated research efforts by teams of scientists
working together locally or on a global basis. Its modular platform of powerful
analytical programs for genomic and proteomic applications enables functions not
possible at the desktop level and may be customized to meet a customer's
specific research and database requirements. In addition to our proprietary
software products described above, we market and distribute certain
complementary software products under license from Biomax Informatics AG and
Media Cybernetics L.P. as well as subscriptions to biomolecular databases. We
believe that our broad informatic software offering, a component of our High
Throughput Research approach, gives us a competitive advantage in the market for
informatic solutions.

Superior Informatic Software Development and Commercialization Capabilities

        Software engineering for commercial-grade informatic applications
requires a high level of understanding of software programming, molecular
biology, customer needs and preferences and market trends. Our development teams
are led by experts in molecular biology and include professional software
engineers trained in computer science, statistics, mathematics and physics. Our
product development staff has functional expertise in C/C++, Java, MS Windows,
Apple OS, UNIX, object-oriented design, system-level programming, relational
database design and development (including Oracle), graphical user interface
programming, informatics and molecular biology. Our product development staff
has played a significant role in developing a customized data delivery platform
for the NCBI's GenBank repository, ENTREZ and PubMed/MEDLINE online genomic
databases. As of March 1, 2002, we had 79 full-time employees dedicated
primarily to our research and product development team.

Deep Scientific Application Focus and Insight

        Our team of scientists, who have strong backgrounds in informatics and
bench science experience, are key assets and are actively involved in
our product development process. We also deploy our scientists to customer
locations in order to install


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and customize our software solutions. Our scientists can also work directly with
our customers to more effectively understand and analyze their data and develop
the workflows involved in their research and discovery processes. By utilizing
our scientists, customers can quickly develop and analyze critical data and
transfer knowledge of informatic software and scientific solutions more quickly
and effectively throughout their research team.

Large Existing Customer Franchise

        We are currently a leading provider of informatic solutions and have
attained significant industry acceptance for our software products, especially
for our market leading Vector NTI Suite desktop application. Introduced in 1993,
our Vector NTI Suite has an estimated 31,000 users at over 1,100 academic and
government research institutions and over 800 biotechnology, pharmaceutical and
agricultural biotechnology and life science companies. From the introduction of
our GenoMax enterprise application in late 1998 through year-end 2001, we sold
41 GenoMax enterprise platforms to pharmaceutical, biotechnology and academic
customers, including the University at Buffalo, State University of New York,
Windber Research Institute, Phylos, BASF AG, the University of North Carolina
and the University of Tokyo. Since October 1994, we have also provided software
development services to the National Center for Biotechnology Information (NCBI)
at the National Institutes of Health, the leading public sector provider of
primary genomic and biomolecular data.

Vector NTI's Strong Market Penetration Creates Opportunities for New Products
and Business Lines

        We believe that existing market penetration of our Vector NTI Suite
gives us an important strategic and competitive advantage. Our Vector NTI Suite
provides customers with a lower cost means to validate the quality and utility
of our informatic software solutions. Moreover, our desktop and enterprise
applications integrate with one another. We believe that connectivity between
desktop and enterprise solutions and vendor familiarity are important factors in
the selection of a larger, more costly enterprise solution. We believe that our
significant market penetration of Vector NTI Suite can be leveraged by our sales
force to drive the sale of our other software products and related professional
services to existing customers. Over one-half of the 41 GenoMax licenses sold
through December 31, 2001 have been to existing users of our Vector NTI Suite.

Superior Sales Capabilities

        We have built a 53 person sales organization, with experience in both
desktop and enterprise software sales, whose mission is to establish our
software products as the standard in the informatics industry. In an effort to
gain further market penetration and increase our brand awareness, we have also
co-marketed our products with technology leaders, including Compaq, Oracle and
Sun Microsystems. In August 2000, we entered into joint marketing and
development agreements with Amersham Biosciences, Corp., a life sciences
technology company with significant sales and distribution channels. We have
also established distributorships in major global markets including Korea,
Singapore, Japan, Taiwan, Latin America and Germany, in order to solidify our
global leadership position. This model has allowed our customer base to enjoy
native language, local sales and front line support capabilities.  In order to
ensure that our future product development pipeline will satisfy evolving market
needs and preferences, leaders from our product development, implementation and
support, and sales and marketing teams regularly share customer feedback.



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OUR PRODUCT AND SERVICE LINES

<TABLE>
<CAPTION>

                                            SOFTWARE PRODUCTS
     ---------------------------------------------------------------------------------------------------
     VECTOR NTI SUITE:  suite of desktop applications designed to simulate key laboratory processes
                        for individual scientists engaged in genomic and proteomic research

     ---------------------------------------------------------------------------------------------------
     VERSION                           MODULES                       FUNCTIONS
     ---------------------------------------------------------------------------------------------------
<S>                                    <C>                           <C>

     VECTOR NTI SUITE 7.1              VECTOR NTI                    data analysis and visualization
     (released March 2002))            BIOPLOT                       sequence analysis
                                       ALIGNX                        multiple sequence alignments
                                       CONTIGEXPRESS                 sequence fragment assembly
                                       3D MOL                        structure analysis and
                                                                     visualization
                                       XPRESSION NTI                 desktop analysis of microarray
                                                                     expression data

     VECTOR NTI SUITE 8.0                                            new functionality for sequence
     (scheduled to be released second                                analysis and microarray
     half of 2002)                                                   expression analysis and functions
                                                                     based on emerging life science
                                                                     technologies to support systems
                                                                     biology
</TABLE>

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------------------------------
     VECTOR ENTERPRISE 1.1.2:           incorporates a shared relational database into a network of
     (released March 2002)              Vector NTI Suite applications to enable real-time collaboration
                                        among multiple researchers in a secure environment
     ---------------------------------------------------------------------------------------------------
     ---------------------------------------------------------------------------------------------------
     GENOMAX ENTERPRISE:                large-scale, modular, enterprise-wide data mining and analysis
                                        application
     ---------------------------------------------------------------------------------------------------
     VERSION                         MODULES                         FUNCTIONS
     ---------------------------------------------------------------------------------------------------
<S>                                  <C>                             <C>

     GENOMAX 3.3                     SEQUENCE AND GENOME ANALYSIS    similarity searches, sequence
     (released February 2002)                                        alignments and annotation,
                                                                     including annotation of
                                                                     chromosomes by population with
                                                                     expressed sequence tags (ESTs)
                                     PROTEIN-PROTEIN INTERACTION     display and analysis of networks
                                                                     of interacting proteins
                                     GENE EXPRESSION ANALYSIS II     management and visualization of
                                                                     microarray data
                                     PROTEIN 3-D STRUCTURE           prediction of protein molecular
                                                                     structure
</TABLE>

<TABLE>
<CAPTION>
     PRODUCTS DISTRIBUTED BY
     INFORMAX

<S>                                   <C>
     BIOMAX - BIORS                   Facilitates integration, management and querying of large
                                      heterogeneous databases irrespective of their original source
                                      formats.
            - PEDANT                  Genome database that includes a comprehensive collection of
                                      systematically annotated and classified genomes

     AXCELL - PROCHART                proprietary database of protein-protein interactions created
                                      using Axcell's patented high-throughput technology which can be
                                      stored and viewed using GenoMax

     MEDIA CYBERNETICS

     ARRAY PRO/                       image analysis applications
     GEL PRO
</TABLE>

<TABLE>
<CAPTION>
                                    PROFESSIONAL SERVICES
     --------------------------------------------------------------------------------------------------------------
<S>                                                    <C>
     TECHNOLOGY IMPLEMENTATION AND SUPPORT SERVICES    Software installation, integration and customization for
                                                       GenoMax customers
     INFORMATICS SERVICES                              Value-added services including: informatics workflow,
                                                       discovery research projects, data analysis and integration
                                                       and knowledge transformation
     SOFTWARE DEVELOPMENT                              Consulting and software development services provided under
                                                       contract
     --------------------------------------------------------------------------------------------------------------
</TABLE>





                                       11
<PAGE>


Software Products

        Our portfolio of proprietary software products currently includes our
Vector NTI Suite desktop application, our Vector Enterprise product and our
GenoMax enterprise platform.

        Vector NTI Suite

        Vector NTI Suite is a comprehensive, integrated analysis and
visualization software toolset for laboratory scientists working with genomic
and proteomic data. We launched our first desktop application in 1993 and
released Vector NTI Suite 7.1, our seventh generation desktop product, in March
2002. New functionality in Vector NTI Suite 7.1 includes improved integration
with Vector Enterprise, our shared relational database, and support of greater
connectivity with Xpression NTI, our desktop expression analysis module. Links
to genes annotated in GenBank can be imported into Xpresison NTI to enhance
analysis of expression data, and can be displayed in Vector NTI. Our Vector NTI
Suite currently consists of six modules, each of which is described below:

        -       Vector NTI. Vector NTI enhances the laboratory researcher's
                productivity by providing informatics tools to create, analyze,
                map, manage, and graphically represent biological data and
                simulate key laboratory processes. Vector NTI incorporates an
                object-oriented database for the storage and organization of DNA
                and protein sequence data and biomolecular materials used in the
                cloning of disparate DNA molecules called recombinant cloning.
                These recombinant cloning materials include vectors, plasmids,
                oligonucleotides, gel markers, and restriction enzymes, which
                can be organized and stored. The database can be sorted,
                customized and searched according to the properties of relevant
                data objects. Vector NTI has the ability to design recombinants,
                DNA molecules, based on built-in biological knowledge and
                selected user preferences which accelerate the complex and
                time-consuming process of designing cloning experiments. By
                developing cloning strategies before performing actual
                laboratory work, users save valuable research time, reduce
                reagent costs and enhance the prospects for a successful cloning
                experiment. Through its simulation function, Vector NTI
                recommends necessary protocols and reagents to complete the
                experiment. Vector NTI includes tools for cutting DNA sequences
                known as restriction enzyme analysis and for amplifying a DNA
                sequence called PCR primer design. The product also enables the
                study and induction of mutations known as mutagenesis analysis
                and the separation of DNA fragments and proteins through a
                process called gel electrophoresis. Through Vector NTI's
                sophisticated graphical user interface, researchers can
                visualize their data and results of analysis.

        -       BioPlot. BioPlot is a protein and nucleic acid sequence analysis
                tool that plots more than 50 different pre-defined physical and
                chemical protein analysis types and links them with feature maps
                and actual sequences. Amino acid scaling allows visualization of
                the distribution of the structural and chemical properties of
                amino acids along a molecular chain, providing clues as to the
                functional properties of protein regions or domains. These
                functional properties allow researchers to more quickly identify
                and understand regions of interest in molecules under study.

        -       AlignX. AlignX allows researchers to create and edit multiple
                sequence alignments of proteins or nucleotides. The multi-pane
                view allows relevant domains in individual sequences to be
                linked, localized and compared in their alignment and in plots
                of similarity and sequence complexity, referred to as homology.
                AlignX integrates actively with Vector NTI and can read a
                multitude of data formats, a capability common to every module
                in the Vector NTI Suite.

        -       ContigExpress. ContigExpress allows the user to take small,
                analyzed sequence fragments, either in text format or from
                sequencing chromatograms, the output from automated sequencing
                equipment), and visually assemble them together into a longer,
                contiguous sequence. ContigExpress further allows the user to
                edit the fragments directly, with the chromatograms in full
                view, while it tracks all the changes made. The ability to
                simultaneously show sequence and trace data allows the
                researcher to inspect the relative intensity of the sequencing
                chromatogram and modify the called base.

        -       3D MOL. 3D MOL enables researchers to analyze and visualize
                molecule structures using numerous display modes. 3D MOL enables
                researchers to manipulate the 3D structure of protein and DNA
                sequences correlated to their constituent amino acids and
                nucleotide sequences. The analytical features of 3D MOL enable
                researchers to measure distances and angles within molecules.

        -       XPRESSION NTI. Xpression NTI is a comprehensive desktop
                expression analysis software tool designed to


                                       12
<PAGE>


                efficiently store, process and analyze gene expression data from
                single or multiple expression experiments, enabling scientists
                working with microarray data to effectively manage and study the
                expression levels of thousands of genes simultaneously.
                Xpression NTI graphically displays large amounts of quantitative
                data illustrating inherent patterns of gene expression on a
                broad scale, with a "birds-eye" view, or on a finer scale, gene
                by gene. Filtering, sorting and clustering algorithms, as well
                as profiling and plotting methods, can be used to efficiently
                analyze and organize expression data. With Xpression NTI,
                scientists can import, normalize and merge primary expression
                run results obtained under a variety of experimental conditions.

        Features of Vector NTI Suite

        The benefits of our Vector NTI Suite include:

        -       Integrated Software Suite. Vector NTI Suite includes a fully
                searchable database template that allows researchers to store
                and manage DNA sequences, protein molecules, enzymes, and other
                biomolecular data. Vector NTI Suite allows users to perform
                analyses involving several integrated applications and to store
                and move data objects between the components of the desktop
                suite without reformatting between applications.

        -       Open Architecture. Vector NTI Suite is offered for both Windows
                and Macintosh operating systems and can accommodate data in
                numerous text formats used in the research community including
                FASTA, GenBank, EMBL, SWISS-PROT, GenPept and ASCII. The
                software can be used based on a single, static license for one
                machine or with our Dynamic License Server that can manage a
                pre-defined number of users running the software on a
                centralized server. The Dynamic License Server creates an easily
                scalable environment where the number of concurrent licenses can
                be set according to the expected usage.

        -       Research Logic System Reflects Scientists' Natural Workflow.
                Vector NTI Suite eliminates many of the time-consuming
                laboratory design and execution processes by generating
                protocols and suggestions for cloning strategies, PCR primers
                and DNA fragment assembly called oligo design, restriction
                fragment analysis, mutagenesis analysis, protein and DNA/RNA
                analyses, multiple sequence alignments, and contig assembly.
                Researchers are also able to use the graphical features of
                Vector NTI Suite to produce presentation quality materials
                describing the results of their research.

        -       Internet Connectivity. Vector NTI Suite provides connectivity to
                over 10 Internet sites for searching and importing fully
                annotated molecules back into Vector NTI Suite for further
                manipulation and analysis. Our Vector NTI Suite can analyze this
                data along with data collected from internal research as well as
                data from other publicly available sources. The Vector NTI Suite
                7.1 incorporates enhanced Internet connectivity, providing users
                with e-commerce capability directly through our software.

        -       Transparent Data Searching. Vector NTI Suite 7.1 allows
                researchers to conduct BLAST homology searches and query the
                ENTREZ and PubMed/MEDLINE databases at the NCBI through the
                desktop application without the need for a web browser. BLAST is
                the NCBI's basic local alignment search tool and involves the
                use of an algorithm to search online databases to compare any
                newly discovered DNA or protein sequence with known sequences.
                The results of this algorithm, which allows the identification
                of regions of similarity between sequence data, can be stored
                and managed by the Vector NTI Suite. The ENTREZ and
                PubMed/MEDLINE search system allows researchers to search the
                NCBI databases of biomolecular data and perform scientific
                literature searches. Results of such searches can be stored and
                managed by the Vector NTI Suite for later use or presentation.

        -       Application Facilitates Research Collaboration. Vector NTI Suite
                allows researchers to share and exchange data and research
                results from their individual databases between several
                installations of the Suite. In addition, the Vector NTI Suite
                supports special document types that can be used as "packagers"
                for heterogeneous data and research results. Geographically
                distributed users may exchange these documents and use the
                Vector NTI Suite's graphical viewers to visualize each other's
                research results.

        Vector NTI Suite 8.0

        Vector NTI Suite 8.0, our eighth generation desktop product, currently
scheduled for commercial release in the second half of 2002, is expected to
include new functionality for sequence analysis and microarray expression
analysis. Vector NTI Suite 8.0 is also expected to incorporate significant
feature enhancements in response to requests from scientists and researchers
based on emerging life science technologies to support systems biology.



                                       13
<PAGE>


        Vector Enterprise

        Our Vector Enterprise database software is designed for biologists
working in larger research groups, or those who need to work collaboratively
with others on sequence analysis projects. Vector Enterprise is an enhancement
to the basic Vector NTI Suite and relies on a shared Oracle relational database
to store user data and results. This product is coupled with the desktop
database already present in the Vector NTI Suite and permits multi-user access
and data sharing across entire companies or organizations by all researchers
using Vector NTI Suite. Vector Enterprise enables a collaborative research
environment with secure data storage and analysis. We commercially released the
first version of Vector Enterprise in the third quarter of 2000 and released
version 1.1.2 in March 2002.

        GenoMax Enterprise Solutions

        GenoMax is a large-scale, enterprise-wide, data mining and analysis
solution that enables research organizations to manage and analyze large amounts
of genomic and proteomic data from disparate sources. GenoMax incorporates
proprietary and third party analytical tools that perform complex integrated
analyses across multiple experiment types. GenoMax facilitates large-scale data
storage and management as well as an IT framework for computationally intensive
tasks that are not possible on desktop programs. GenoMax employs a scalable
client-server architecture that enables secure storage and management of data in
flat files as well as in an Oracle database. Data mining applications as well as
a variety of informatics analytical tools are provided and accessed through a
convenient web based interface consisting of Java applets. GenoMax enables
multiple users to collaborate in the design and execution of research ranging
from molecule analysis and annotation to analysis of complex microarray based
gene expression data and protein-protein interaction data. The combination of a
collaborative environment and sophisticated data-mining and analysis
capabilities makes GenoMax an effective tool for coordinated genomics research
and an efficient tool for determining targets for further expenditure of
research efforts and resources.

        GenoMax was originally launched under the brand name Software Solution
for Bio-Medicine in September 1998. The current GenoMax version 3.3, which was
commercially released in February 2002, features several enhancements to the
sequence analysis and gene expression analysis modules over version 3.2. The
sequence analysis module in GenoMax 3.3 allows import, management and
visualization of full genome data and facilitates feature search, browsing and
annotation of chromosome sized sequences from popular public domain genomic
databases such as UCSC GoldenPath, EnsEMBL, RefSeq and NCBI genomes. Automation
of key tasks such as clustering analysis using the built in scripting language
is also introduced in this version as is the ability across GenoMax modules of
running time consuming tools in the background with automatic, unattended saving
of results. GenoMax 3.3 includes the following modules:

        -       Sequence and Genome Analysis: This module provides for database
                similarity searches including BLAST and FASTA, multiple sequence
                alignments, sequence annotation and visualization extending to
                large chromosome sized sequences, restriction enzyme analysis,
                automated search agents and proprietary sequence comparison
                tools. Annotation of chromosomes is enabled through many tools
                including population with expressed sequence tags (ESTs) and
                transcript information.

        -       Gene Expression Analysis: This module provides for management,
                analysis and visualization of microarray data.

        -       Protein 3D Structure: This module provides for prediction and
                analysis of tertiary structures of proteins including molecular
                structure.

        -       Protein-Protein Interactions: This module provides for analysis
                of protein intracellular behavior. This module enables display
                and analysis of networks of interacting proteins and effectively
                handles the ProChart protein-protein interactions database
                product, co-developed with AxCell, as well as customer specific
                datasets.

        Features of GenoMax

        The features of our GenoMax enterprise solution include:

        -       Collaboration-Oriented Architecture. GenoMax is a client-server
                software solution that allows collaboration within and across
                organizations. Multiple users may simultaneously search and
                analyze large quantities of data and share their results.
                Computationally intensive algorithms run on the server side,
                while the results are delivered on the client side through an
                intuitive Java-based graphical user interface, enabling
                real-time feedback with the central server, other users and with
                third parties. GenoMax secures research analyses behind a
                corporate firewall and


                                       14
<PAGE>
                incorporates a flexible hierarchy of user rights, giving
                managers control of research projects and permitting
                administrators to customize their security needs by adding and
                deleting authorized users as necessary.

        -       Large-Scale Data Processing High Throughput Research. GenoMax is
                designed to accommodate the needs of research institutions that
                analyze large amounts of genomic data (e.g., sequence, gene
                expression, protein-protein interaction) from multiple sources.
                The Oracle(TM) relational database system that is integrated
                into GenoMax can be customized to automatically update databases
                from public and subscription sources and notify users when new
                data has been imported. Data can be accessed and analyzed by
                researchers manually or automatically through GenoMax's High
                Throughput Research system that allows researchers to create
                sophisticated analysis protocols and apply them to process data
                on a 24-hour basis.

        -       Flexible Informatics Framework. GenoMax supports a wide range of
                data-mining algorithms, including BLAST, FASTA, HMM, flexible
                pattern search, ORF analysis and homology blocks search.
                GenoMax's architecture is open, scalable, secure and easily
                extended so that our customers may incorporate several
                analytical tools of their choice. In order to enhance
                efficiency, GenoMax includes data management tools for organized
                storage and analysis and employs results filtering to select the
                most useful results according to user specifications.

        -       Advanced Data Integration Capabilities. Biomax's BioRS system
                integrates data from a variety of large, heterogeneous public
                and proprietary databases irrespective of their original
                formats. The system enables researchers to manage and query
                hundreds of biological databases through a user-friendly web
                interface. Our distribution of BioRS adds this important
                database cross linking ability to our GenoMax enterprise
                informatics solution and extends its data integration
                capabilities. GenoMax and BioRS can be integrated so that search
                query results from BioRS can be imported into GenoMax for
                analysis and searches originating in GenoMax can be extended
                across databases stored in BioRS. We distribute Biomax's BioRS
                system under the terms of our exclusive, four year worldwide
                license more fully described below.

Professional Services

        Our global services group is organized into two core groups,
Technology Solutions and Informatics Solutions.

        -       Our Technology Solutions team is comprised of dedicated
                technology professionals with considerable experience and
                training in information technology, systems architecture,
                database design and administration, software customization and
                project management. This specialized group works with both our
                informatics scientists and customers during every phase of the
                installation and implementation of our software. The Technology
                Solutions team offers a wide range of services in the following
                areas: software implementation, training, software customization
                and development, systems design and architecture, technology
                integration, remote managed services and maintenance and
                upgrades.

        -       Our Informatics Solutions team is comprised of Ph.D. scientists
                with significant experience and training in life science
                informatics as well as direct training and experience in
                laboratory and discovery research. We leverage the combined
                expertise of our scientists to provide significant additional
                value to our customers in the form of dedicated scientific and
                technical support and training, insight and know-how and
                value-added scientific and informatics services that
                specifically apply to our software products. Our Informatics
                Solutions team is capable of providing support in fields, such
                as genome assembly and annotation, expression and gene
                annotation discovery practices which includes array and chip
                design, simple and complex genetic linkage and mutation
                discovery and evaluation, proteomics, immunology, mass
                spectroscopy, pharmacology, drug discovery and assay
                development. Our Informatics Solutions team offers a range of
                value-added services in the following areas: informatics
                workflow, discovery research projects, data analysis and
                integration, informatics training, informatics outsourcing and
                knowledge transformation.

        In connection with our professional services we provide biomolecular
data providers with consulting and software development services on a contract
basis. Since October 1994, we have provided software development services to the
National Center for Biotechnology Information (NCBI), a division of the National
Library of Medicine at the National Institutes of Health. NCBI maintains the
world's largest public databases of genomic and other biomolecular data, which
are available via the Internet to all participants engaged in genetic and
biological research. We have played a significant role in the development of the
public content

                                       15
<PAGE>


delivery interfaces for the NCBI's databases, including GenBank, ENTREZ, and
PubMed/MEDLINE. Our relationship with NCBI allows us to work with the world's
largest public genomic and biomolecular databases, covering diverse sets of
information. NCBI contracts for these services through intermediaries for whom
we act as a subcontractor. These government contracts may be terminated on the
behalf of the NCBI at any time.

        A component of our professional services offering includes maintenance
support to our software customers. We respond to requests for customer support
through numerous channels. Our implementation and support services group also
provides training and educational programs to researchers using our products. We
anticipate expanding our professional service efforts, particularly as they
relate to contract development opportunities and value-added consulting services
related to informatics technology, including discovery strategy and IT
customization and implementation services.

STRATEGIC ALLIANCES.

        Channeling and Distribution Relationships. We have entered into and
intend to continue, where appropriate, to seek distribution or reselling
agreements with various biomolecular data content providers to sell
subscriptions to their data sets to our GenoMax and Vector NTI Suite customers.
We have also entered into and intend to continue, where appropriate, to seek
distribution agreements with various providers of complementary informatic
software solutions to license their products to our GenoMax and Vector NTI Suite
customers. We believe that these alliances can help us to leverage our market
presence, broaden our product offering and increase use our software as an
integration and analysis tool.

   To date, we have entered into alliances with the following organizations:

        -       AxCell Biosciences Corporation. In August 1999, we entered into
                an agreement with AxCell Biosciences, a wholly owned subsidiary
                of Cytogen Corporation, to market AxCell's proprietary
                protein-protein interaction database, ProChart, with our GenoMax
                enterprise product. Under this agreement, we developed and
                market, on a subscription basis, a Protein-Protein Interaction
                module that integrates AxCell's proprietary protein databases
                with our GenoMax enterprise platform, including data from the WW
                Domain, the first human protein family involved in signal
                transduction to be mapped successfully. Under this agreement, we
                will receive a portion of subscription revenues, and in some
                cases milestone payments and royalties associated with
                discoveries based on data delivered via our content platform.
                Our Protein-Protein Interaction module, which enables
                visualization and use of the ProChart database, was released in
                June 2001.

        -       Biomax Informatics AG. In January 2001, we entered into a
                strategic relationship with Biomax Informatics AG, a German
                company that develops software and customized informatic
                solutions. Under our agreement, we were granted a four-year,
                exclusive worldwide license to distribute Biomax's BioRS
                integration and retrieval system and PEDANT Genome Database.
                BioRS is a gene sequence and biological data retrieval system
                that allows researchers to query and manage hundreds of
                biological databases simultaneously through user friendly web
                interfaces. BioRS serves as an efficient tool for integrating
                and retrieving genomic data available from disparate sources and
                is a strong complement to our existing GenoMax and Vector NTI
                Suite products as well as the development of our High-Throughput
                Research environment. PEDANT Genome Database stores fully
                annotated genomes of over 90 organisms and has web based
                interface for browsing. Biomax is paid a fixed fee for each
                BioRS license sold. Continuation of our exclusive distribution
                right is contingent upon our satisfaction of certain minimum
                sales thresholds and our agreement does not restrict Biomax from
                distributing BioRS directly during the term of our agreement.
                Under our agreement, we have agreed to work with Biomax to
                integrate the capabilities of BioRS into our Vector NTI Suite
                and GenoMax products.

        -       Media Cybernetics L.P. In October 2000, we entered into an

                agreement with Media Cybernetics, a leading scientific image
                informatics software provider. Under this agreement, we were
                granted a two-year worldwide license to sell and distribute
                their Gel-Pro and Array-Pro analysis tools. Gel-Pro is a 1-D
                image analysis package that acquires and analyzes data from gel
                documentation system cameras or scanners and complements the
                functions of our Vector NTI Suite. Array-Pro allows acquisition,
                analysis and reporting of gene expression data from microarrays,
                and provides a key link between gene expression experiments,
                visualization and analysis using GenoMax. Under our agreement,
                we are permitted to distribute these software solutions in
                connection with our Vector NTI Suite or on a stand-alone basis.
                In January 2001, we began selling the Media Cybernetics products
                through our Vector NTI Suite sales team.


                                       16
<PAGE>


        To date none of the channeling and distribution alliances above have
generated material revenues for us.

        Technology Development Relationships. Through our technology development
relationships, we seek to partner with providers of complementary or emerging
technologies, in an effort to expand our informatic reach, broaden the
application of our software products and maximize the use of our research and
development resources.

        Amersham Biosciences Corp. In August 2000, we entered into a 20 year
strategic relationship with Amersham Biosciences Corp. (f/k/a Amersham Pharmacia
Biotech) under which we will jointly develop and market an expanded version of
GenoMax to provide an enterprise-wide data analysis system for pharmaceutical
and biotechnology companies for integrating and analyzing data from genomics,
proteomics and drug screening production laboratories. The primary use of the
data analysis system is to enable pharmaceutical and biotechnology companies to
accelerate and lower the cost of development of new drugs and therapies. Under
the agreement establishing this relationship, we will jointly own, with
Amersham, the jointly developed code for the data analysis system and all
related intellectual property rights. In connection with this relationship, we
have granted a license to Amersham for its internal use of our GenoMax software,
as part of the data analysis system. In connection with this strategic
relationship, Amersham purchased 950,747 shares of our Series B preferred stock
for aggregate proceeds to us of $10.0 million in cash. These shares converted
into 1,587,747 shares of our common stock upon the closing of our initial public
offering in October 2000.

        TissueInformatics, Inc. In January 2002, we entered into a scientific
and business collaboration with TissueInformatics, Inc., an innovative provider
of imaging and image analysis solution for pre-clinical and clinical pathology.
Under the 3-year collaboration agreement that was established, InforMax and
TissueInformatics will apply quantitative tissue data derived from digital
tissue images in conjunction with gene expression and protein function data to
understand the molecular toxicological effects of pharmaceutically relevant
compounds. InforMax and TissueInformatics will also collaborate on the
development and validation of software tools to integrate and analyze tissue and
genomic data. In addition to our scientific collaboration, we invested $1.5
million in a redeemable, convertible preferred stock financing completed by
TissueInformatics for an approximately 5% interest in TissueInformatics'
outstanding stock at the time of such financing. We also have observation rights
on TissueInformatics' board of directors and will participate on its scientific
advisory board.

        To date none of the technology alliances above have generated material
revenues for us.

CUSTOMERS

        We license our desktop and enterprise software and services solutions to
pharmaceutical, biotechnology and agricultural biotechnology companies, academic
and government research institutions, and individual researchers. Our Vector NTI
Suite has more than 31,000 estimated users working in over 1,900 organizations,
including over 800 pharmaceutical, biotechnology and agricultural biotechnology
companies and 1,100 academic and government research institutions. Our major
customers include:

<TABLE>
<CAPTION>
<S>                                                          <C>
      PHARMACEUTICAL AND AGRICULTURAL BIOTECHNOLOGY COMPANIES


             -       AstraZeneca UK Limited                  -            Johnson & Johnson

             -       E.I. du Pont de Nemours                 -            Eli Lilly and Company
                     and Company

             -       Pioneer Hi-Bred                         -            Bristol-Myers Squibb
                     International, Inc.                                  Company

             -       Aventis Pharmaceuticals,                -            Merck & Company, Inc.
                     Inc.

             -       Hoechst Marion Roussel                  -            Novartis Agribusiness
                                                                          Biotechnology
                                                                          Research, Inc.

             -       Procter & Gamble

             -       BASF AG                                 -            Pfizer, Inc.
</TABLE>

<TABLE>
<CAPTION>
<S>                                                          <C>
              BIOTECHNOLOGY COMPANIES

             -       Amgen Inc.                              -            Aurora Biosciences
                                                                          Corporation

             -       Biofrontera                             -            Diversa Corporation
                     Pharmaceuticals GmbH

             -       Genzyme Corporation                     -            Microbia Incorporated
</TABLE>

<TABLE>
<CAPTION>
<S>                                                          <C>
              ACADEMIC AND GOVERNMENT RESEARCH
              INSTITUTIONS

             -       Katholieke Universiteit                 -            Washington University in
                     Leuven                                               St. Louis
</TABLE>


                                       17
<PAGE>


<TABLE>
<S>                                                          <C>
             -       National Institutes of                  -            Windber Research Institute
                     Health

             -       University of Pennsylvania              -            University of Tokyo

             -       European Molecular Biology              -            University of Georgia

             -       University at Buffalo,
                     State University at New York

</TABLE>


SALES AND MARKETING

        Our marketing and sales force consists of 57 employees. Our marketing
team uses a variety of strategies to increase brand recognition for our products
and reach a broader base of potential customers for our informatic software and
services solutions. These programs include direct mail, advertising in
scientific journals, Web casting, presence at industry conferences and
exhibitions and partner marketing with our alliance partners. In addition, the
efforts of our services and implementation teams to educate, convert and train
researchers on our enterprise and desktop products support our product
marketing efforts.

        Our sales force is divided into revenue teams assigned to specific
industry segments (e.g., pharmaceutical/biotech, academic) with each team headed
by an experienced sales executive. Sales of our GenoMax enterprise software
solution require a strong direct sales effort and involve a significantly longer
and more complex sales cycle than our desktop applications, often involving many
levels of procurement and purchasing decisions by a prospective customer.

        A tele-sales approach is used for our Vector NTI Suite desktop
application efforts. The typical sales cycle for Vector NTI ranges from 30 to 90
days following the initial indication of interest in the product to ultimately
signing a purchase order. In addition, Vector NTI Suite consists of a number of
component modules, which allows us to further penetrate an existing customer
through the sale of additional modules. We also offer flexible licensing
alternatives that allow us to price consistently across customer organizations
of different sizes.

        As a result of the academic calendar, European business practices and
commercial information technology procurement practices, we generally experience
a reduction in sales in the third quarter of each calendar year that typically
results in a corresponding reduction in operating revenues. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of fluctuation in our quarterly results.

        In an effort to expand the reach and methods of distribution for our
software solutions, we have also established strategic relationships with third
parties to distribute and co-market our products. We have established
distributorships in major global markets including Korea, Singapore, Japan,
Taiwan, Latin America and Germany, to better reach these markets and solidify
our global leadership position. This model has allowed our customer base to
enjoy native language, local sales and front line support capabilities.

        We have also established co-marketing relationships with the following
leaders in the technology industry:

        -       Compaq. We jointly market our software products with Compaq
                technology. As part of this arrangement, our customers benefit
                from a financing arrangement in which Compaq leases computer
                hardware that is combined with our software to Compaq customers.
                This turnkey approach reduces financial barriers, and
                streamlines the installation of our enterprise software
                solutions by pre-loading it onto Compaq servers. Compaq also has
                agreed to feature our GenoMax enterprise software in its Center
                for Excellence in Bioinformatics, one of its technology
                demonstration sites targeted to the biotechnology industry. We
                conducted a six-city, three continent seminar series with Compaq
                and AxCell Biosciences in March 2001.

        -       Oracle. We jointly market our software products with Oracle
                databases and cooperate in the re-selling of Oracle database
                technology. We are also working with Oracle to streamline the
                installation of our enterprise software solutions and maximize
                the functionality and cooperative features of our technologies.

        -       Sun Microsystems. We jointly market our software products in
                connection with the sale of Sun Microsystems servers to industry
                participants. Sun also has agreed to install our GenoMax
                enterprise platform in one of its key technology demonstration
                sites. We conducted a seven-city joint seminar series on
                data mining and integrated genomic analysis in October 2000.

                RESEARCH AND DEVELOPMENT

        Recruiting and retaining skilled personnel for our research and product
development group is a critical component of our


                                       18
<PAGE>


current and future competitive success. We currently have 79 employees dedicated
primarily to research and product development. Our research and development team
consists of applications and systems programmers, database administrators and
informatics designers, many of which have experience in both computer science
and molecular biology. Our research and development expenditures in, 1999, 2000
and 2001 were $2.6 million, $5.3 million and $9.6 million, respectively.

        Our research and product development group possesses core competencies
in C/C++, Java, MS Windows, Apple OS, UNIX, object-oriented design, system-level
programming, relational database design and development, including Oracle,
graphical user interface programming, informatics, and molecular biology. Our
team has a significant level of aptitude in working with a wide array of
biomolecular data, including DNA and protein sequences and structures, gene
expression, genetic maps, protein-protein interaction and SNPs. We continue to
enhance our existing products in an effort to expand their functionality and
utility, including the commercial release of Vector NTI Suite 8.0, scheduled for
the second half of 2002, and GenoMax 3.3, which was released in February 2002.
Our research and product development team seeks to develop new products that use
computational methods to further understand biological processes and enable
users of genomic data to realize greater efficiency and productivity gains.

COMPETITION

        We believe that the principal competitive factors in the evolving
informatic software industry include:

        -       Functionality and ease of use of software products;

        -       Rapid incorporation of technological and biomolecular
                innovations;

        -       Product flexibility, scalability and integration;

        -       Level of customer service, product implementation and support
                functions;

        -       Market penetration and brand awareness;

        -       Alliances with strategic partners and technology market leaders;
                and

        -       Competitive pricing.

        We face, or expect to face, competition for market leadership from
industry participants, including:

        -       Third party commercial software vendors;

        -       Informatic developers; and

        -       Internal informatics departments of some of our existing and
                potential customers.

        We believe that we compete most often with LION biosciences, Compugen,
DNA Star and GCG, a unit of Pharmacopeia acquired from Oxford Molecular. We
intend to compete with such organizations on the basis of scope of products and
services, functionality of products, quality of customer service, strength of
organization and support and training.

        In response to existing and future market opportunities, we believe that
there is a high likelihood of additional market participants. Many of our
current and potential competitors have longer operating histories, stronger name
recognition and significantly greater financial, technical and marketing
resources than we do. As a result of these advantages, some of these competitors
may be able to adopt more aggressive pricing policies and be better positioned
to respond to changes in customer preference or technology.

INTELLECTUAL PROPERTY

        We rely upon a combination of trade secret, patent, copyright and
trademark laws, license agreements, nondisclosure and other contractual
provisions to protect our proprietary rights in our products, technology, and
processes. To date, we have been issued U.S. trademark registrations for the
marks InforMax (word mark), InforMax and Double Helix Design, Vector NTI,
AlignX, BioPlot, ContigExpress and SSBM. We have filed trademark applications in
the U.S. for the


                                       19
<PAGE>


marks GenoMax, InforMax, HTR, HTR Partners Program, High-Throughput Research and
Software Solution for Bio-Medicine. We have been issued Community Trademark
("CTM") registrations in the European Union for AlignX (Stylized), BioPlot
(Stylized), ContigExpress (Stylized), Software Solution for Bio-Medicine (SSBM)
(Stylized) and Vector NTI Suite (Stylized). We have pledged our trademarks to
PNC Bank, National Association as a security for the facilities under our loan
agreement.

        An opposition has been filed by Informix Software, Inc. against our
pending application for INFORMAX for computer software. This opposition was
filed on October 26, 2000 and Informix believes that our pending application is
likely to be confused with its registrations for the mark "INFORMIX". An
extension of our time to answer has been granted and we are working to settle
this matter with Informix, who was recently acquired by IBM.

        Additional trademark registrations in France for the marks Align X,
Vector NTI, Software Solution For Bio-Medicine, BioSuite, Informodus and Seqen-I
have been assigned to us by our wholly-owned French subsidiary, Informodus SARL.
This subsidiary has no assets and is dormant.

        We believe that the source code for our proprietary software solutions
is protected under applicable copyright and trade secret law in the United
States. Comparable and effective copyright and trade secret protection may not
be available in each country where we distribute our products.

        We regularly enter into confidentiality agreements with our employees,
consultants and strategic partners and generally seek to control access to and
distribution of our software, documentation and other proprietary information.
Nevertheless we may be subject to unauthorized access to, and use of, our
software products. In addition, third parties may be able to develop technology
substantially similar to our existing and future software solutions. These
events could materially affect our business, financial condition and results of
operations.

EMPLOYEES

        As of March 1, 2002, we had 223 full time employees, including a sales
and marketing team of 57, a research and product development team of 79, an
implementation, technical support and informatics scientists staff of 29 and 21
programmers dedicated to work with the National Institutes of Health (NIH). We
believe that our future success will depend in part on our continued ability to
attract and retain qualified personnel. Competition for these personnel is
intense, and there can be no assurance that we will be successful in attracting
or retaining these personnel in the future. None of our employees is currently
represented under a collective bargaining agreement, and we consider relations
with our employees to be good.


                                       20
<PAGE>


ITEM 2 - PROPERTIES

        On September 21, 2000, we entered into a sublease for approximately
36,190 square feet of office space for our new headquarters in Bethesda,
Maryland. This agreement, which expires on October 31, 2012, requires us to make
rental payments of $1,357,125 a year, subject to a 2.5% annual escalation
clause. Rental payments may also be adjusted as a result of our pro rata share
of increases in building expenses as defined in the lease. The lease requires
that we maintain a security deposit of $1,380,600 which may be reduced subject
to our meeting certain minimum financial requirements. To satisfy the security
deposit requirement of the lease, PNC Bank, NA has issued irrevocable standby
letters of credit for a total of $1,380,600, which can be drawn in the event
that we are in default under the sublease. The amounts under the irrevocable
standby letters of credit are secured by our deposit with PNC Bank of an equal
amount of cash that is designated solely for use under the irrevocable standby
letter of credit. The irrevocable standby letters of credit expire on September
8, 2001 and November 22, 2001, respectively. We took possession of our new
headquarters facility and relocated our operations in March 2001.

        On March 1, 2001, we entered into a sublease for approximately 34,849
square feet of additional office space in Bethesda, Maryland. This agreement,
which expires on July 31, 2004, requires rental payments of $1,463,658 a year,
subject to a 3% annual escalation clause. Rental payments may also be adjusted
as a result of our pro rata share of increases in building expenses as defined
in the lease. The lease requires that we maintain a security deposit of $121,971
until one month after the expiration of the lease term. We took possession of
this space in March 2001.

        We leased approximately 24,400 square feet of office space for our
previous headquarters in Rockville, Maryland for approximately $620,000 per
year, subject to an annual three percent rent escalation. The term of this lease
expires in July 2006. We have subleased a portion of this facility and are
currently pursuing opportunities to sublease the remainder of the space to
another lessee.

        In addition to our facilities in Bethesda, Maryland, we have recently
leased space to establish offices in San Diego and Boston. We have subsequently
subleased the San Diego office and we maintain additional offices in Annapolis,
Golden, CO., San Francisco and Oxford, England.

ITEM 3 - LEGAL PROCEEDINGS

        Although we are a party to legal proceedings incidental to our business,
in the opinion of our management, the ultimate liability with respect to these
actions will not materially affect our operating results or financial position.

        On or about November 30, 2001, a shareholder class action suit was filed
in the United States District Court for the Southern District of New York naming
InforMax, Dr. Titomirov, our former Chairman and Chief Executive Officer, Mr.
Joseph Lehnen, our former Chief Financial Officer, and certain underwriters of
the our initial public offering as defendants. The complaint alleges, among
other things, violations of the securities laws by failing to disclose alleged
compensation arrangements (such as undisclosed commissions or stock
stabilization practices) in our initial public offering's registration
statement. Our officers, our underwriters and we are named in the complaint
pursuant to Section 11 of the Securities Act of 1933. The officers above are
named in the complaint under Section 15 of the Securities Act of 1933 under a
control person theory of liability. The underwriter defendants are named in the
complaint pursuant to Sections 10(b) and 12(a)(2) of the Securities Exchange Act
of 1934. No specific amount of damages has been claimed. Similar complaints have
been filed against more than 300 other issuers that have had initial public
offerings since 1998, and all of these actions have been included in a single
coordinated proceeding. We believe that the claims are without merit, that
meritorious defenses are available to us and we intend to defend these actions
vigorously. However, due to the inherent uncertainties of litigation, we cannot
accurately predict the ultimate outcome of this litigation. Any unfavorable
outcome of this litigation could have a negative impact on our business,
financial condition, results of operations or cash flows.

        We are party to a lawsuit brought against us and our former
Chairman and Chief Executive Officer, Alexander Titomirov by Ludwig & Robinson,
P.L.L.C. in D.C. Superior Court. The comlaint alleges that in or about March
1996, Ludwig & Robinson began to provide legal services to us. The complaint
further alleges that in mid 1998 Dr. Titomirov and Ludwig & Robinson reached an
oral agreement that Ludwig & Robinson would receive a flat commission of
$150,000 for introducing us to a venture capital firm in the event that such
introduction lead to a financing of between $3 million and $5 million. The
complaint alleges that we and Dr. Titomirov failed to honor the alleged oral
agreement. In addition to the breach of contract claim, the complaint raises a
fraudulent inducement claim and other common law claims. The complaint seeks a
judgment against us and any other appropriate relief and $2 million in punitive
damages. We are also a party to related litigation brought against us and Dr.
Titomirov by Robert W. Ludwig, Jr., a member of the firm of Ludwig & Robinson.
That complaint, filed in D.C. Superior Court in August 2001, alleges a second
oral agreement between Dr. Titomirov and Mr. Ludwig, by which Mr. Ludwig claims
he was promised shares of our common stock. The complaint raises a breach of
contract claim, a fraudulent inducement to contract claim, a common-law
equitable claim, and an abuse of process claim. Mr. Ludwig seeks $6.1 million
and 500,000 shares of our common stock. Both litigation matters are currently in
discovery. We believe that these claims are without merit, that we have
meritorious defenses and we intend to vigorously litigate these suits. However,
due to the inherent uncertainties of litigation, we cannot accurately predict
the ultimate outcome of this litigation. Any unfavorable outcome of this
litigation could have a negative impact on our business, financial condition,
results of operations or cash flows.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of security holders during the
fourth quarter of our fiscal year 2001.



                                       21
<PAGE>


                                 INFORMAX, INC.


                                     PART II


ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

A.      MARKET INFORMATION

        Our common stock has been quoted on the Nasdaq National Market under the
symbol "INMX" since our initial public offering on October 3, 2000. The
following table reflects the high and low sales prices reported on the Nasdaq
National Market for each quarter listed:

<TABLE>
<CAPTION>
    Fiscal Year 2000                                    High                  Low
    ----------------                                    ----                  ---
<S>                                                     <C>                  <C>
    Fourth Quarter Ended December  31 (beginning
    October 3, 2000)...................                 $31.75                $6.63

    Fiscal Year 2001                                    High                  Low
    ----------------                                    ----                  ---
    First Quarter Ended March 31.......                 $14.69                $4.38
    Second Quarter Ended June 30.......                 $8.19                 $2.85
    Third Quarter Ended September 30...                 $7.45                 $2.87
    Fourth Quarter Ended December 31...                 $3.68                 $2.26
</TABLE>

        The closing sale price for our common stock on March 1, 2002 was $1.60
per share.

        The market price of our common stock has fluctuated significantly and
may be subject to significant fluctuations in the future. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Risk Factors."

B.      RECENT SALES OF UNREGISTERED SECURITIES

        The information presented reflects our issuance of unregistered
securities during the period covered by this report:

        In March 2001, we issued warrants exercisable for 25,000 shares of our
common stock to an affiliate of Emerging Technology Partners LLC, for which Dr.
Wei-Wu He, one of our directors, serves as general partner. The warrants were
issued in consideration of strategic consulting services provided and are
exercisable for a five year term at $8.00 per share, the closing price on the
date of the grant. The sale and issuance of securities in the transactions
described above were exempt from registration in reliance upon Regulation D
promulgated under Section 4(2) of the Securities Act as a transaction not
involving a public offering, where the purchasers was a sophisticated investor
who represented its intention to acquire securities for investment only and not
with a view to distribution and received or had access to adequate information
about our company. The foregoing transaction was not effected with an
underwriter.

C.      HOLDERS

        As of March 1, 2002, there were approximately 3,670 holders of our
common stock and 25,238,728 shares of our common stock outstanding.

D.      DIVIDENDS

        We have never declared or paid any cash dividends on our common stock.
We intend to retain future earnings, if any, to finance the expansion of our
business, and do not expect to pay any cash dividends in the foreseeable future.
Please see Item 7, "Management's Discussion and Analysis of Financial Conditions
and Results of Operations -- Liquidity and Capital Resources" below. The
declaration of dividends is within the discretion of our Board of Directors and
subject to limitations set forth in the Delaware General Corporation Law and any
of our credit facilities. Our certificate of incorporation provides that if
dividends are paid, they must be paid equally on each share of outstanding
common stock. Payment of any dividends on our common stock is subject to the
rights of any preferred stock then outstanding.

E.      USE OF PROCEEDS FROM INITIAL PUBLIC OFFERING


                                       22
<PAGE>


        On October 2, 2000, our Registration Statement on Form S-1 (333-41194)
covering our initial public offering of 5,750,000 shares of common stock, par
value $.001 per share, was declared effective by the Securities and Exchange
Commission. On October 3, 2000, shares of our common stock began trading on the
Nasdaq National Market. On October 6, 2000, we completed our initial public
offering of 5,750,000 shares of common stock, including 750,000 shares purchased
by the underwriters pursuant to their exercise of an over allotment option on
October 5, 2000. The shares were sold to the public at $16.00 per share for
gross proceeds of approximately $92.0 million. Net proceeds to us from the
offering were approximately $84.0 million after deducting estimated expenses
associated with the issuance and distribution of the common stock of $8.3
million, including underwriting discounts and commissions of $6.4 million. The
managing underwriter of this offering was Bear, Stearns & Co. Inc.

        As of March 1, 2002, we have used approximately $20.0 million of our net
offering proceeds toward consideration of certain strategic relationships and
collaboration opportunities, the improvement of our resources and infrastructure
including new office space and additional satellite offices to support the
growth of our operations and personnel, and the recruitment and hiring of
additional personnel, particularly related to expansion of our research and
development and sales and marketing teams. We have placed the remaining net
proceeds from the offering principally in money market funds as well as other
interest bearing, investment-grade securities. We expect to use the net proceeds
from the offering to consider opportunities to expand our business through the
acquisition of additional businesses, products and technologies and to establish
joint ventures or other collaborative arrangements which we believe complement
our current or future business. We also expect to use net proceeds to expand our
research and development and sales and marketing efforts as well as for working
capital and general corporate purposes.




                                       23
<PAGE>


ITEM 6 - SELECTED CONSOLIDATED FINANCIAL DATA


<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                             -----------------------
                                                                      (IN THOUSANDS EXCEPT PER SHARE DATA)
                                                              1997        1998        1999        2000        2001
                                                            --------    --------    --------    --------    --------
<S>                                                         <C>         <C>         <C>         <C>         <C>
           CONSOLIDATED STATEMENT OF OPERATIONS DATA:
        Revenues:
               Software license and customer
               support (4).............................     $  1,335    $  2,732    $  7,277    $ 13,907    $ 21,425
               Professional services ..................          867       1,394       2,737       3,240       3,759
                                                            --------    --------    --------    --------    --------
                  Total revenues.......................        2,202       4,126      10,014      17,147      25,184
                                                            --------    --------    --------    --------    --------
        Cost of revenues:
               Software license and customer support...           38         190         405         697       1,827
               Professional services (1)...............          716       1,081       1,612       1,737       1,872
                                                            --------    --------    --------    --------    --------
                  Total cost of revenues...............          754       1,271       2,017       2,434       3,699
                                                            --------    --------    --------    --------    --------

        Gross profit...................................        1,448       2,855       7,997      14,713      21,485

        Operating expenses:

               Selling, general and administrative (2).        1,075       2,476       7,000      18,764      29,024
               Research and development (3)............          365       1,162       2,597       5,311       9,622
               Stock based compensation................          211          18         138       1,574       1,079
               Depreciation and amortization...........           18          94         273         940       2,375
               Executive Management Changes............            -           -           -           -       2,415
                                                            --------    --------    --------    --------    --------
                  Total operating expenses.............        1,669       3,750      10,008      26,589      44,515

        Income (loss) from operations..................         (221)       (895)     (2,011)    (11,876)    (23,030)
                                                            --------    --------    --------    --------    --------
        Other income (expense)
               Investment earnings.....................            -           -          66       1,476       3,066
               Interest and other expense..............          (31)        (63)        (96)       (325)       (160)
                                                            --------    --------    --------    --------    --------
                  Total other income (expense).........          (31)        (63)        (30)      1,151       2,906
                                                            --------    --------    --------    --------    --------

        Income (loss) before income taxes..............         (252)       (958)     (2,041)    (10,725)    (20,124)

        Income tax benefit (expense)...................          118         391         726          51      (1,300)
                                                            --------    --------    --------    --------    --------

        Net income (loss)..............................     $   (134)   $   (567)   $ (1,315)   $(10,674)    (21,424)

           Beneficial conversion.......................           -            -           -      (9,982)          -

           Increase to carrying value of redeemable
            convertible preferred stock................            -           -        (176)       (387)          -

        Net income (loss) applicable to common
             shares....................................     $   (134)   $   (567)   $ (1,491)   $(21,043)   $(21,424)
                                                            --------    --------    --------    --------    --------

        Basic and diluted net income (loss)
            per common share...........................     $  (0.04)   $  (0.16)   $  (0.38)   $  (2.25)   $  (0.93)
                                                            --------    --------    --------    --------    --------
</TABLE>

(1)     Cost of revenues - professional services includes stock-based
        compensation of $105, $-0-, $-0-, $5and $1 for the years ended December
        31, 1997, 1998, 1999, 2000 and 2001.

(2)     Selling, general and administrative expense excludes stock-based
        compensation of $76, $-0-, $111, $1,432 and $1,079 for the years ended
        December 31, 1997, 1998, 1999, 2000 and 2001.

(3)     Research and development expense excludes stock-based compensation of
        $134, $18, $27, $141 and $8 for the years ended December 31, 1997, 1998,
        1999, 2000, and 2001.

(4)     Includes related party revenue of $500, $-0-, and $-0- for 2001, 2000
        and 1999, respectively.


                                       24
<PAGE>

<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                             -----------------------
                                                              1997        1998        1999        2000        2001
                                                            --------    --------    --------    --------    --------
                                                                                 (IN THOUSANDS)
<S>                                                         <C>         <C>         <C>         <C>         <C>
  CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...........                        $    382    $    296    $  1,399    $ 82,656    $ 61,348
Working capital (deficit)...........                             371        (419)      1,040      85,503      62,413
Total assets........................                           1,114       2,883       7,265     100,950      84,478
Borrowings and capital lease
        obligations, less current
        Portion.....................                              55         182         715         702         405
Total liabilities...................                             974       3,288       4,887       9,281      12,033

Redeemable convertible preferred stock                            -            -       4,095           -           -
Common stock and additional paid-in
        Capital.....................                             550         588         975     105,936     107,231
Stockholders' equity (deficit)......                             139        (405)     (1,717)     91,669      72,445
</TABLE>

        See our consolidated financial statements and notes included elsewhere
in this report for a description of the computation of the net loss per share
and the number of shares used in the per share calculations in statement of
operations data above.


                                       25
<PAGE>


ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

        We are a leading global provider of informatics software solutions to
the life science industry. Our software solutions enable more efficient and
accelerated analysis and interpretation of genomic, proteomic and other
biomolecular data for application in pharmaceutical, therapeutic and diagnostic
development. As of December 31, 2001, we had more than 31,000 estimated users of
our market leading Vector NTI Suite of desktop software applications and had
sold 41 GenoMax enterprise platforms. As of December 31, 2001, our customer base
included over 1,900 organizations worldwide, including over 800 biotechnology,
pharmaceutical and agricultural biotechnology and life science companies, and
over 1,100 academic and government research institutions. Driven primarily by
increased sales of Vector NTI Suite and greater market penetration of GenoMax,
which was introduced in late 1998, our informatic software products and related
services generated $25.2 million in revenues in 2001. This represents a
five-year compound annual growth rate of 90% and a 47% increase over our 2000
revenues. Our 10 largest customers accounted for approximately 46% and 33% of
our total software license revenues for the years ended December 31, 2001 and
2000, respectively.

        Since beginning commercial operations in 1993, we have dedicated
substantial financial and personnel resources toward the expansion and
enhancement of our software product portfolio in an effort to provide customers
with the components necessary to achieve a comprehensive High Throughput
Research environment. In the third quarter of 2001, we commercially released
Vector NTI Suite 7.0, with enhanced database connectivity and functionality,
including improved utilities for sequence alignment and contig assembly, and our
desktop expression model Xpression NTI. In March 2002, we commercially released
Vector NTI Suite 7.1, which includes improved integration with Vector
Enterprise, our shared relational database, and support of greater connectivity
with Xpression NTI. In February 2002, we also commercially released GenoMax 3.3,
which includes enhanced features such as increased GenBank data storage,
accelerated initial data loading and indexing, improved administrative
capabilities and our Gene Expression Analysis II module. We intend to continue
to enhance and expand our life sciences informatic software products to meet
evolving customer needs and preferences.


        We have continued to execute our corporate strategy of evaluating and
establishing key alliances and marketing relationships with other leading
companies and providers of complementary products and services in an effort to
expand the scope of our product offerings and increase market penetration of our
software solutions. Our corporate strategy also includes collaborating with
customers and partners in the discovery services areas. We believe these
partnerships will also serve to accelerate our product development and service
expansion efforts as well as open up new sales channels for our business.

        In January 2002, we entered into a scientific and business collaboration
with TissueInformatics, Inc., an innovative provider of imaging and image
analysis solutions for pre-clinical and clinical pathology. Under the 3-year
collaboration agreement that was established, InforMax and TissueInformatics
will apply quantitative tissue data derived from digital tissue images in
conjunction with gene expression and protein function data to understand the
molecular toxicological effects of pharmaceutically relevant compounds. We will
also collaborate with TissueInformatics on the development and validation of
software tools to integrate and analyze tissue and genomic data. In addition to
our scientific collaboration, we invested $1.5 million in a redeemable
convertible preferred stock financing completed by TissueInformatics for an
approximately 5% interest in TissueInformatics' outstanding stock at the time of
such financing. We also have observation rights on TissueInformatics' Board of
Directors and will participate on their Scientific Advisory Board.

        Over the last year, we have experienced significant turnover in our
executive management ranks. On March 13, 2002, we announced our hiring of Andrew
Whiteley, a member of our Board of Directors and the Vice President of
Bioinformatics of Amersham Biosciences Corp., to become our new Chief Executive
Officer, President and Chairman of the Board of Directors. Dr. Titomirov, our
founder, resigned as our Chief Executive Officer and Chairman upon Mr.
Whiteley's hiring. In the fall of 2001, we announced that James E. Bernstein,
M.D., retired as our President and Chief Operating Officer and resigned as a
member of the our Board of Directors, effective December 31, 2001. John Green,
who was previously Executive Vice President and Chief Financial Officer, also
became Chief Operating Officer in October 2001. These and other executive
management changes during the past year have served as a considerable
distraction of management's attention and our financial and administrative
resources. In conjunction with these executive management changes, we incurred a
charge of $2.4 million in the fourth quarter of 2001 primarily consisting of
deferred compensation, retirement and other payments.

        Over the past year, management has endeavored to assess the allocation
of resources across the organization, implement tighter cost controls and
improve our productivity. Consistent with our strategy to reduce costs and to
establish a high performance


                                       26
<PAGE>


organization, in January 2002, we announced that we had reduced our work force
by over 30 employees, or approximately 14% of our full-time staff. We anticipate
incurring charges of approximately $0.7 million related primarily to severance
and restructuring costs in the first quarter of 2002.




CRITICAL ACCOUNTING POLICIES

        Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the U.S., which require that we make
certain estimates and assumptions (see Note 1 to the consolidated financial
statements). Critical accounting policies are defined as those that are
reflective of significant judgments and uncertainties and may result in
materially different results under different assumptions and conditions. We
believe that of our significant accounting policies (see Note 1 to the
consolidated financial statements), the following may involve a higher degree of
judgment and complexity.

Revenue Recognition and Accounts Receivable

        We recognize software license revenues based on the provision of
Statement of Position No. 97-02, Software Revenue Recognition, as amended and
interpreted. Software segment sales consist of software license fees and
maintenance fees. Software segment sales have historically been made under both
perpetual and term license agreements. Under perpetual arrangements, the
customer assumes ownership of the software license, and upgrades and
enhancements are available provided that the customer's maintenance agreement is
current. It has been customary to include the maintenance renewal rate in our
perpetual arrangements. Under these circumstances, the revenue related to the
software element under a perpetual arrangement is recognized at the time of
delivery of the software, using the residual method, provided there are no other
elements bundled with the arrangement. We also generate software segment sales
under one-to-three year term arrangements. Under a term arrangement, the
customer does not assume ownership of the software license at delivery. Instead,
customers use the software over the term period and are required to return it
upon the non-renewal of the term arrangement. Term arrangements can include a
specified renewal rate for maintenance or the maintenance may be bundled in the
initial software license fee. Under a bundled arrangement, no separate renewal
rate for maintenance is stated. Instead, there is a bundled renewal rate for
both the software and maintenance. In these agreements, the revenue related to
the software element, as well as any bundled maintenance, is recognized evenly
over the term period. Under the specified renewal rate arrangement, the revenue
is recognized at the time of the delivery of the software using the residual
method. The nature of our software license arrangements will therefore affect
our recognition of software license revenues in a given fiscal quarter. We
expect that if our customers commit to more term arrangements, with bundled
maintenance renewal elements, than perpetual license arrangements or term
licenses with maintenance renewal rates, which have separate maintenance renewal
elements, we may encounter a reduction in near-term revenue. Bundled term
arrangements, however, will enable us to obtain the benefit from a consistent
stream of recurring revenue throughout the term of the license and in many cases
will serve to generate more longer-term economic value for our company.

        Our Vector NTI Suite, and Vector Enterprise software products are
considered off-the-shelf products that require only routine installation to be
fully functional by the end user. Our enterprise solution, GenoMax is also
considered an off the shelf product. GenoMax can be customized to meet customer
specific needs and may require a more involved implementation process.

        Included in our software segment sales are revenues from channeling and
distribution alliances with data content providers and providers of specialized
life science informatic tools that complement our proprietary software offering.
We market our Protein-Protein Interaction module that integrates AxCell
Bioscience's proprietary protein databases with our GenoMax enterprise platform.
We resell subscriptions for AxCell's databases along with our software and
receive a portion of subscription revenues, and in some cases, we are eligible
to receive milestone payments and royalties associated with discoveries based on
data delivered via our content platform. While we have not yet generated revenue
from our sales of AxCell's databases, such would be recognized as net software
revenue. Distribution alliances include agreements with providers of specialized
life science informatic products to integrate and resell their hardware and
software with our proprietary software products. Revenue generated from our
sales of BioMax's BioRS integration and retrieval system and Media Cybernetic's
software are also recognized as gross software revenue. To date none of the
channeling and distribution alliances above have generated material revenues.

        Often times our software licenses are included in bundled element
arrangements of software license, support maintenance, and professional
services. The various elements have to be separated for revenue recognition. In
order to separate the elements, we have established vendor-specific objective
evidence (VSOE) for our support maintenance and professional services. We have
established VSOE for our support maintenance by having consistent renewal rates.
The VSOE for our professional services has been established by charging standard
billing rates.


                                       27
<PAGE>

        Delivery of our software is established when we ship our licenses FOB
shipping point.

        Currently we do not have any non-monetary revenue exchanges.

        Some of our software license arrangements have payment terms that extend
past twelve months; therefore a portion of the revenue is deferred due to not
being able to determine if the fees are fixed and determinable. Although we have
a successful collection history on these long-term arrangements, we do not have
sufficient history to overcome the presumption that the fees are fixed and
determinable. Of our deferred revenue balance at December 31, 2001, $2.2 million
has been deferred on this basis.

        Our professional services segment has historically consisted primarily
of software development services provided under subcontracts to the National
Center for Biotechnology Information (NCBI) at the National Institutes of
Health. NCBI contracts for professional services through intermediaries for whom
we serve as a subcontractor. These agreements are generally for one-year terms
and may be terminated on behalf of NCBI at anytime; however, we have had a
successful and long standing service relationship with NCBI dating back to 1995.
In recent years, an increasing portion of our professional services segment has
also included customer-specified software installation, training, integration
and customization services related to our commercial software products. We
anticipate expanding our professional service efforts, particularly as they
relate to contract development opportunities and value-added consulting services
related to informatics technology, including discovery strategy and IT
customization and implementation services. Revenue under the NCBI contracts is
recognized based on contractual rates as the services are provided.

        We qualify our customer's creditworthiness and need for our software and
services before we complete our sales thereby determining the probability of the
collection of the fees. Because circumstances change we have an allowance for
doubtful accounts. In the regular course of business we evaluate the continued
collectibility of each customer's balance and maintain an allowance for smaller
account balances. We recorded a provision for doubtful accounts of $0.6 million
in fiscal 2001 compared to $0.02 million in fiscal 2000.


Income Taxes

        The income tax provision includes income taxes currently payable plus
the net change during the year in deferred tax assets or liabilities. Deferred
tax assets and liabilities reflect the differences between the carrying value in
conformity with accounting principles generally accepted in the United States of
America and tax values of assets and liabilities using enacted tax rates for the
period in which the differences are expected to reverse. We periodically
evaluate the likelihood of our realization of its net deferred tax assets and
records a valuation allowance if, based on the weight of available evidence, it
is more likely than not that some or all of the deferred tax assets will not be
realized. As of December 31, 2001, we have chosen to record a full valuation
allowance based on the level of recent taxable net loss and the nature of future
taxable income may not allow us to realize some of the benefits within the
carryforward period.

Stock-Based Compensation

        We account for stock-based compensation to employees in accordance with
APB Opinion No. 25, Accordingly, we recognize compensation expense for fixed
stock option grants only when there is an intrinsic value in the stock option
granted due to the fact the exercise price is less than the fair value of the
shares on the date of the grant. The compensation expense amount is the
intrinsic value, or the difference between the exercise price of the stock
option and the fair value of the shares on the date of the grant multiplied by
the number of shares granted. We account for options granted to non-employees in
accordance with SFAS 123. Accordingly, we recognize the related expense based
upon the fair value of the option. The fair value of the stock option is
calculated using the Black-Scholes pricing model. The Black-Scholes pricing
model requires management's assessment of certain variables, including the stock
volatility factor, dividend assumptions and expected life of the stock option.
Further, the Black-Scholes pricing model requires a risk-free rate of return in
the calculation. We evaluated these factors and developed our assumptions as
follows: 1) the volatility factor was based on the historical performance of our
stock and management's assessment of the expected stock performance in the
future, 2) the expected dividend yield was 0% based on historical payment of no
dividends, and 3) the expected life of the stock option was based on a
combination of factors including the vesting period and the contractual life of
the stock option granted. The risk-free rate of return was based on an
evaluation of U.S. Government securities with a constant maturity of three
months. Under both types of stock option grants, the resulting compensation
expense is amortized over the vesting period. Any unamortized amount of
stock-based compensation is classified as deferred compensation in the equity
section of our balance sheet.


                                       28
<PAGE>

QUARTERLY FLUCTUATIONS

        Our quarterly operating results have historically fluctuated and we
anticipate such results to continue to fluctuate significantly. Factors that may
cause our quarterly results to fluctuate include the timing, commencement,
delay, cancellation or completion of our:

        -       Software licensing agreements;

        -       Product delivery schedules;

        -       Strategic relationships; and

        -       Professional service activities, including installation and
                software modification.

Our results of operations may also fluctuate as a result of the number and
timing of orders for our GenoMax enterprise product, which may have a
significant effect on revenues for a particular quarter.

        The manner in which we recognize revenue, in accordance with generally
accepted accounting principles, including the way in which revenue recognition
relates to our mix of term and perpetual software arrangements in a given
quarter, may also cause our quarterly operating results to fluctuate
substantially. In accordance with these principles, we may be required to defer
all or a portion of the revenue from some of our software licenses sold in a
particular quarter to a later quarter. Expenses associated with software
licenses are not typically so deferred. For our maintenance contracts and
professional services, we typically recognize revenues over the term of the
contract.

        As a result of the academic calendar, European business practices and
commercial information technology procurement practices, we generally experience
a reduction in sales in the third quarter of each calendar year, which typically
results in a corresponding reduction in operating revenues. Due to the factors
described above and other risks, quarterly comparisons of our financial results
should not be relied upon as these comparisons are not necessarily meaningful
nor are they a reliable indicator of our future performance.

OPTIONS AND AMORTIZATION OF STOCK BASED COMPENSATION

        During 2001, we granted 1,720,155 qualified options to employees and
300,000 non-qualified options to non-employee advisors. We also granted 30,000
nonqualified options to non-employee directors and 6,000 non-qualified options
to non-employee advisors. There is no deferred compensation related to the
qualified and non-qualified options granted to the employees. The non- employee
director options vest monthly over a one-year period and there is no deferred
compensation related to these options.

 The non-employee advisor options vested immediately and had approximately
$10,000 in deferred compensation related to the grants. This expense was
recognized at the time of the grants. Additionally, during 2001, we issued a
warrant exercisable for 25,000 shares of common stock. This warrant was issued
for services rendered and was immediately vested. This warrant issuance had
related expense of approximately $35,000, which was recognized immediately.

RESULTS OF OPERATIONS

        The following table summarizes our consolidated results of operations
for the years ended December 31, 1999, 2000 and 2001, as a percentage of our
total revenue for the respective periods.

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                                    1999       2000       2001
                                                                 ---------  ---------  ---------
<S>                                                                <C>       <C>        <C>
                     Revenues
                        Software license and customer support..      73%        81%        85%
                        Professional services..................      27         19         15
                           Total revenues......................     100        100        100
                                                                 ------     ------     ------

                     Cost of revenues:
                        Software license and customer support..       4          4          7
                        Professional services..................      16         10          7
                           Total cost of revenues..............      20         14         14
                                                                 ------     ------     ------

                     Gross profit..............................      80         86         86
                                                                 ------     ------     ------

                     Operating expenses
</TABLE>


                                       29
<PAGE>


<TABLE>
<S>                                                                <C>       <C>        <C>
                        Selling, general and administrative....      70        109        115
                        Research and development...............      26         31         38
                        Stock based compensation...............       1          9          4
                        Depreciation and amortization..........       3          5          9
                                                                    ---        ---        ---
                        Executive Management Changes...........       -          -         10

                       Total operating expenses................     100        154        177
                     Loss from operations......................     (20)       (68)       (91)
                     Other income (expense)
                        Investment earnings....................       1          9         12
                        Interest and other expensee............      (1)        (2)        (-)
                                                                 -------    -------    ------
                           Total other income (expense)........       -          7         12

                     Loss before income taxes..................     (20)       (61)       (80)

                     Income tax (benefit) expense..............      (7)        (-)         5
                                                                     --         --         --

                     Net loss..................................     (13)%      (61)%      (85)%
                                                                    ---        ---        ---
</TABLE>

Year Ended December 31, 2001 Compared to 2000

        Revenues. For the year ended December 31, 2001, revenues increased 47%
to $25.2 million from $17.1 million in the corresponding period of 2000.

                Software segment sales revenue increased 54% to $21.4 million
for the year ended December 31, 2001 from $13.9 million in the corresponding
period of 2000. Vector NTI Suite sales revenue increased 28% to $12.1 million
for the year ended December 31, 2001 from $9.5 million in the corresponding
period of 2000. GenoMax sales revenue increased 109% to $9.3 million for the
year ended December 31, 2001 from $4.4 million in the corresponding period of
2000. Vector NTI Suite bookings increased 21% to $12.2 million for the year
ended December 31, 2001 from $10.1 million in the corresponding period of 2000.
GenoMax bookings increased 32% to $9.6 million for the year ended December 31,
2001 from $7.3 million for the corresponding period of 2000. Bookings represent
contracted sales of software products.

                Professional services segment revenue increased 16% to $3.8
million for the year ended December 31, 2001 from $3.2 million in the
corresponding period of 2000. Increased professional services revenue at
year-end resulted primarily from increased demand for services related to our
software products. In 2001, services provided to the NCBI under two separate
subcontracts accounted for 76% of professional services revenue and 11% of
consolidated revenues. In 2000, services provided to the NCBI under subcontracts
accounted for 88% of professional services revenue and 17% of consolidated
revenues.

        Cost of Revenues. For the year ended December 31, 2001, cost of revenues
increased 52% to $3.7 million from $2.4 million in the corresponding period of
2000.

                Costs of software license and customer support revenue increased
163% to $1.8 million for the year ended December 31, 2001 from $0.7 million in
the corresponding period of 2000. This increase resulted from our payments of
fees to Biomax associated with our distribution of the BioRS integration and
retrieval tool. In addition to these payments, costs of software license and
customer support revenue incrementally increased in 2001, reflecting slightly
higher manufacturing costs, cost of product resale, cost of shipping products
and the cost of providing training and customer services in support of our
increased software sales.

                Costs of professional services revenues increased 8% to $1.9
million for the year ended December 31, 2001 from $1.7 million in the
corresponding period of 2000. The increase at year-end resulted from increased
personnel providing ancillary implementation and support services for our
software products. Costs of professional services revenues consist primarily of
salaries, benefits, and related expenses of our professional services personnel.

                Software license and customer support margins decreased for the
year ended December 31, 2001 compared to the prior year primarily as a result of
the fees associated with our distribution of the BioRS integration and retrieval
tool. Professional services margins improved for the year ended December 31,
2001 compared to the prior year primarily as a result of economies of scale
related to the increasing size of our service customer base.

        Selling, General and Administrative Expenses. For the year ended
December 31, 2001, selling, general and administrative expenses increased 55% to
$29.0 million from $18.8 million in the corresponding period of 2000. This
increase primarily reflects salary and benefits expenses for additional
personnel, and related expenses including increased rent and travel costs to
support our business and revenue growth, along with costs associated with a
significantly increased marketing effort. We also incurred additional costs
during the twelve-month period as a result of management changes, recruiting and
the relocation of our corporate headquarters.


                                       30
<PAGE>

Headcount and resources related these management changes and headquarters
relocation comprised the largest portion of this increase. Overall headcount for
the year ended December 31, 2001 was 262 full time employees compared to 236
full time employees at December 31, 2000.

        Research and Development Expenses. For the year ended December 31, 2001,
research and development expenses increased 81% to $9.6 million from $5.3
million in the corresponding period of 2000. We expect this increase in research
and development cost to continue in 2002 as we seek to further expand and
enhance our software products. Overall research and development headcount for
the year ended December 31, 2001 was 93 full time employees compared to 95 full
time employees at December 31, 2000.

        Stock Based Compensation. For the year ended December 31, 2001, stock
based compensation expenses decreased 31% to $1.1 million from $1.6 million in
the corresponding period of 2000. The decrease reflects higher than typical
stock based compensation in the prior period related to discounted stock option
grants and restricted stock awards prior to our October 2000 initial public
offering.

        Depreciation and Amortization. For the year ended December 31, 2001
depreciation and amortization expenses increased 153% to $2.4 million from $0.9
million in the corresponding period of 2000. The increase reflects the
depreciation related to the building out of our new headquarter office space and
expansion of our network infrastructure.

        Other Income (Expense). For the year ended December 31, 2001, other
income increased 152% to $2.9 million from $1.2 million in the corresponding
period of 2000. The increase is a result of income on our investment of initial
public offering proceeds and the reduction in interest expense related to our
equipment loan and line of credit.

        Income Taxes. We incurred net losses for the years ended December 31,
2001 and 2000. Presently, we have an accumulated net operating loss carry
forward of $55 million of which $32 million is a result of the exercise of
non-qualified stock options. The tax expense for the year ended December 31,
2001 was $1.3 million, a change in our valuation allowance. The tax benefit
recognized for the year ended December 31, 2000 was $0.05 million, reflecting an
effective tax benefit rate of .50%. The provisions reflect a valuation allowance
recorded against the increase in net operating losses and the change in book
basis versus tax basis of deferred revenue and stock based compensation.

        Net Loss. We incurred a net loss of $21.4 million for the year ended
December 31, 2001, compared with a net loss of $10.7 million for the year ended
December 31, 2000.

Year Ended December 31, 2000 Compared to 1999

        Revenues. For the year ended December 31, 2000, revenues increased 71%
to $17.1 million from $10.0 million in the corresponding period of 1999.

                Software segment sales revenue increased 91% to $13.9 million
for the year ended December 31, 2000 from $7.3 million in the corresponding
period of 1999. Vector NTI Suite sales revenue increased 68% to $9.5 million for
the year ended December 31, 2000 from $5.6 million in the corresponding period
of 1999. GenoMax sales revenue increased 100% to $4.4 million for the year ended
December 31, 1999 from $1.2 million in the corresponding period of 1999. Vector
NTI Suite bookings increased 70% to $10.1 million for the year ended December
31, 2000 from $6.0 million in the corresponding period of 1999. GenoMax bookings
increased 418% to $7.3 million for the year ended December 3, 2000 from $1.4
million for the corresponding period of 1999.

                Professional services revenue increased 18% to $3.2 million for
the year ended December 31, 2000 from $2.7 million in the corresponding period
of 1999. Increased professional services revenue at year-end resulted primarily
from increased demand for services related to our software products. In 2000,
services provided to the NCBI under subcontracts accounted for 88% of
professional services revenue and 17% of consolidated revenues. In 1999,
services provided to the NCBI under subcontracts accounted for 100% of
professional services revenue and 27% of consolidated revenues.

        Cost of Revenues. For the year ended December 31, 2000, cost of revenues
increased 21% to $2.4 million from $2.0 million in the corresponding period of
1999.

                Costs of software license and customer support revenue increased
72% to $0.70 million for the year ended December 31, 2000 from $0.40 million in
the corresponding period of 1999. This increase resulted primarily from
increased sales of our Vector NTI Suite and sales of our GenoMax enterprise
system. Costs of software revenues consist primarily of manufacturing costs
incurred on an as needed basis, cost of shipping products and the cost of
providing training and customer support.


                                       31
<PAGE>


                Costs of professional services revenues increased 8.0% to $1.7
million for the year ended December 31, 2000 from $1.6 million in the
corresponding period of 1999. The increase at year-end resulted primarily from
increased personnel servicing our software products. Costs of professional
services revenues consist primarily of salaries, benefits and related expenses
of our professional services personnel.

                Margin on our software license and customer support and
professional services revenues improved for the year ended December 31, 2000
compared to the prior year primarily as a result of economies of scale related
to the increasing size of our customer base.

        Selling, General and Administrative Expenses. For the year ended
December 31, 2000, selling, general and administrative expenses increased 168%
to $18.8 million from $7.0 million in the corresponding period of 1999. This
increase primarily reflects salary and benefits expenses for additional
personnel, and related expenses including increased rent and travel costs to
support our business and revenue growth, along with costs associated with a
significantly increased marketing effort. Of this increase, headcount and
resources devoted to sales and marketing experienced a disproportionately larger
increase. Overall headcount for the year ended December 31, 2000 was 236
compared to 117 at December 31, 1999.

        Research and Development Expenses. For the year ended December 31, 2000,
research and development expenses increased 104% to $5.3 million from $2.6
million in the corresponding period of 1999. The increase reflects expense
associated with an increase in the headcount of our research and product
development team to support our expanded our product development efforts.
Overall research and development headcount for the year ended December 31, 2000
was 95 compared to 61 at December 31, 1999.

        Stock Based Compensation. For the year ended December 31, 2000, stock
based compensation expenses increased 1039% to $1.6 million from $0.14 million
in the corresponding period of 1999. The increase reflects compensation related
to discounted stock option grants and restricted stock awards.

        Depreciation and Amortization. For the year ended December 31, 2000
depreciation and amortization expenses increased 246% to $0.9 million from $0.3
million in the corresponding period of 1999. The increase reflects the
depreciation related to expansion of our network infrastructure and the
furnishing of our office space.

        Other Income (Expense). For the year ended December 31, 2000, other
income (expense) increased 3,813% to $1.2 million from ($0.03) million in the
corresponding period of 1999. The increase is a result of our investment of
initial public offering proceeds received in October 2000.

        Income Taxes. We incurred net losses for the years ended December 31,
2000 and 1999. At present, we have an accumulated net operating loss carry
forward of $28.0 million of which $21.0 million is a result of the exercise of
non-qualified stock options. The tax benefit recognized for the years ended
December 31, 2000 and 1999 was $0.05 million and $0.7 million, respectively,
reflecting an effective tax benefit rate of .50% and a tax rate of 35.6%,
respectively. The provisions reflect a valuation allowance recorded against the
increase in net operating losses and the change in book basis versus tax basis
of deferred revenue and stock based compensation.

        Net Loss. We incurred a net loss of $10.7 million for the year ended
December 31, 2000, compared with a net loss of $2.0 million for the year ended
December 31, 1999.

MARKETS

        Geographically, North America, Europe and Asia represent our largest
markets, accounting for 72%, 18% and 8%, respectively, of sales in 2001, and
76%, 18% and 2%, respectively, of sales in 2000. All sales to foreign-based
customers are invoiced and paid in U.S. Dollars. Our customer base is comprised
of companies in pharmaceutical, biotechnology and agricultural-life science
sectors, as well as academic and government research institutes.


LIQUIDITY AND CAPITAL RESOURCES

        From our commencement of commercial operations in 1993 until June 1999,
we funded our growth primarily with internally generated cash flow. On June 22,
1999, we entered into a purchase agreement with FBR Technology Venture Partners,
LP for the sale of 2,161,265 shares of our Series A redeemable convertible
preferred stock, $0.01 par value. The shares were sold for an aggregate price of
approximately $4.0 million, or $1.85 per share. In June 2000, we issued, in the
aggregate, 557,191 shares of our common stock in private sale transactions with
four accredited investors and received cash compensation totaling approximately
$3.6 million.


                                       32
<PAGE>

On August 16, 2000, we sold 950,747 shares of our Series B redeemable
convertible preferred stock to Amersham Biosciences Corp. for aggregate proceeds
of approximately $10.0 million in cash. At the time of issuance, the deemed fair
market value of the underlying common stock was $15.00 per share. Therefore, the
net proceeds of $9.9 million were allocated to additional paid-in capital as a
beneficial conversion feature and such entire amount was immediately accreted to
the Series B redeemable convertible preferred stock on August 16, 2000. On
October 6, 2000, we completed our initial public offering of common stock,
selling 5,750,000 shares of common stock at $16.00 per share, for net proceeds
to us, after deducting estimated expenses and underwriting discounts and
commissions, of approximately $84.0 million. All of our then outstanding shares
of preferred stock were converted into common stock upon the closing of our
initial public offering.

        At December 31, 2001, we had $61.3 million in cash and cash equivalents,
a net decrease of $21.3 million from December 31, 2000, and an increase of $59.9
million from December 31, 1999. Net cash provided by financing activities was
$0.1 million for the year ended December 31, 2001 compared to net cash provided
by financing activities of $96.8 million for the comparable period in 2000.

        We believe that the net proceeds from our initial public offering, our
cash flows from operations and our existing capital resources will be adequate
to fund our operations for the next 24 months, although we may seek to raise
additional capital during that period. We may require additional funding to
execute our business strategy. If that funding is not available, or not
available on terms acceptable to us, we may be required to curtail certain
marketing and product development efforts.

        During the years ended December 31, 2001 and 2000, we generated $27.3
million and $15.7 million of cash receipts from operating activity,
respectively. Gross cash used by operations for the year ended December 31, 2001
was $42.3 million compared to $27.1 million for the year ended December 31,
2000. The net increase in cash disbursements for costs of revenue and operating
expenses over these periods reflects the continued growth of our business,
particularly as related to personnel and related infrastructure expenses.

        Net cash used in investing activities was $6.5 million for the year
ended December 31, 2001 compared to net cash used in investing activities of
$4.0 million for the comparable period in 2000. The cash used in investing
activities over those periods were for the purchase of furniture and equipment.

        In May 1999, we entered into a loan agreement and a security agreement
with PNC Bank, National Association, in connection with the creation of a credit
facility consisting of a secured revolving credit line and an equipment line of
credit. We repaid the principal and accrued interest outstanding under the
revolving credit line in October 2000 following our initial public offering. At
December 31, 2001, approximately $688,000 remained outstanding and payable under
our equipment line of credit. We did not borrow any amounts under these
facilities in 2001. Moreover, we voluntarily allowed our borrowing capacity
under these facilities to expire in 2001. Amounts outstanding under the
equipment line of credit accrue interest at the prime rate as reported in the
Wall Street Journal plus one and one-quarter percent. With respect to advances
made prior to November 6, 1999, principal and interest accrued thereon are
payable in monthly principal amounts of $19,727 through and including April 15,
2002. For advances made after November 6, 1999, principal and interest accrued
thereon shall be made in monthly principal payments of $35,607 through October
15, 2002 and $15,833 through March 15, 2003. We have pledged our personal
property, including our equipment, trademarks and accounts receivable, to PNC
Bank as security for any amounts owed by us under these facilities. Under the
loan agreement, we are generally restricted from incurring additional
indebtedness without the consent of PNC Bank. We must also maintain various
financial covenants, including minimum cash balance and certain financial
ratios. In addition, we may not declare or pay dividends or make any
distribution with respect to any equity security during the term of the loan
agreement without the consent of PNC Bank.

        On September 21, 2000, we entered into a sublease for approximately
36,190 square feet of office space for our new headquarters in Bethesda,
Maryland. This agreement, which expires on October 31, 2012, requires us to make
rental payments of $1,357,125 a year, subject to a 2.5% annual escalation
clause. Rental payments may also be adjusted as a result of our pro rata share
of increases in building expenses as defined in the lease. The lease requires
that we maintain a security deposit of $1,380,600, which may be reduced subject
to our meeting certain minimum financial requirements. To satisfy the security
deposit requirement of the lease, PNC Bank, NA has issued irrevocable standby
letters of credit for a total of $1,380,600, which can be drawn in the event
that we are in default under the sublease. The amounts under the irrevocable
standby letters of credit are secured by our deposit with PNC Bank of an equal
amount of cash that is designated solely for use under the irrevocable standby
letter of credit. These amounts are reflected as restricted cash our balance
sheet at December 31, 2000 and 2001. The irrevocable standby letters of credit
expire on September 8, 2002 and November 22, 2002, respectively. We took
possession of our new headquarters facility and relocated our operations in
March 2001.

        On March 1, 2001, we entered into a sublease for approximately 34,849
square feet of additional office space in Bethesda, Maryland. This agreement,
which expires on July 31, 2004, requires rental payments of $1,463,658 a year,
subject to a 3% annual


                                       33
<PAGE>

escalation clause. Rental payments may also be adjusted as a result of our pro
rata share of increases in building expenses as defined in the lease. The lease
requires that we maintain a security deposit of $121,971 until one month after
the expiration of the lease term. We took possession of this space in March
2001.

        The following are our contractual obligations associated with lease
commitments and debt obligations:

<TABLE>
<CAPTION>
                                   2002       2003       2004       2005      2006     Thereafter
                                   ----       ----       ----       ----      ----     ----------
                                                   (amounts in thousands)

<S>                              <C>        <C>        <C>        <C>       <C>         <C>
Contractual Obligations:

Capital Lease Obligations (1)    $   227    $   216    $   126    $     -   $     -     $     -

Operating Leases (2)               4,028      4,092      3,576      2,568     2,121      10,257

Equipment Line of Credit             625         63          -          -         -           -

                                -------------------------------------------------------------------
Total Contractual Obligations:   $ 4,880    $ 4,371    $ 3,702    $ 2,568   $ 2,121     $10,257
                                ===================================================================
</TABLE>

        (1)     Capital lease obligations relate primarily to office furniture
                leased in conjunction with our headquarters office space in
                Bethesda, Maryland.

        (2)     Operating leases include our headquarters office space in
                Bethesda, Maryland and sales offices located in San Francisco,
                Denver, Boston and Oxford, England. Total rental expense under
                all office leases for fiscal year 2001 was approximately $3.8
                million, including rental expense related to our San Diego sales
                office, which was closed in September 2001.

RELATED PARTY TRANSACTIONS

        In 2001, we recognized approximately $500,000 in revenue under a
perpetual software license agreement under which we granted a nonexclusive,
nontransferable license for our GenoMax enterprise product and certain modules
thereof to Pluvita Corporation. Pluvita Corporation pays the license fees in
monthly installments over a one-year term. As of December 31, 2001, there was
$200,000 outstanding in accounts receivable related to this transaction. Dr.
Alexander Titomirov, our former Chief Executive Officer and Chairman, was the
Chairman and a significant stockholder of Pluvita Corporation at the time of the
transaction. Mr. Hooks Johnston, one of our directors, was a managing director
of FBR Technology Venture Partners, a venture capital investment firm, at the
time of this transaction. An affiliate of FBR Technology Venture Partners was a
stockholder of Pluvita, and another managing director of FBR Technology Venture
Partners was a director of Pluvita, at the time of this transaction.


QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK

        Our exposure to market risk for changes in interest rates relates
primarily to the increase or decrease in the amount of interest income we can
earn on our initial public offering proceeds and any investment portfolio. Our
exposure to changes in interest rates also relates to the increase or decrease
in the amount of interest expense we must pay with respect to our various
outstanding debt instruments. Our risk associated with fluctuating interest
expense is limited, however, to credit facilities that are closely tied to
market rates. Under our current policies, we do not use interest rate derivative
instruments to manage exposure to interest rate changes. We ensure the safety
and preservation of our invested principal funds by limiting default risks,
market risk and reinvestment risk. We reduce default risk by investing in
investment grade securities. A hypothetical 100 basis point drop in interest
rates along the entire interest rate yield curve would not significantly affect
the fair value of our interest sensitive financial instruments at December 31,
2000 and 2001. Declines in interest rates over time will, however, reduce our
interest income and expense while increases in interest rates over time will
increase our interest income and expense. All sales to foreign-based customers
are invoiced and paid in U.S. Dollars. We do not believe that we are exposed to
any material foreign currency exchange rate risk.



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                                  RISK FACTORS


                          RISKS RELATED TO OUR BUSINESS


OUR SOFTWARE PRODUCTS MUST KEEP PACE WITH RAPID TECHNOLOGICAL ADVANCES AND
DEVELOPMENTS OCCURRING IN GENOMIC RESEARCH AND IN THE MARKET FOR LIFE SCIENCE
INFORMATIC SOFTWARE. IF WE ARE UNABLE TO KEEP PACE, OUR SOFTWARE PRODUCTS WILL
BE LESS ATTRACTIVE TO CUSTOMERS AND OUR REVENUES AND COMPETITIVE POSITION WILL
SUFFER.

        The market for our life science informatic products is in the midst of
rapid technological change. Advances in life science research include the
expanded use and application of proteomic data and its increasing availability
to researchers. In order for us to maintain a competitive position in our
industry and develop and market life science informatic software products that
are attractive to customers, we must:

        -       Continue to enhance the analytical functions, versatility and
                ease of use of our existing software products;

        -       Expand the functions of our existing software products to ensure
                that they enable researchers to work with new biomolecular data,
                including proteomic data, in various formats;

        -       Continue to be involved with and receive feedback from our
                customer relating to their life science informatic and discovery
                needs and preferences; and

        -       Develop and introduce new software products and complementary
                services that meet evolving customer needs and preferences and
                incorporate new life science and information technology
                advances.

        Our informatic software products may not be able to keep pace with
technological change. We may not be able to identify in a timely manner
important evolving industry standards and may invest considerable financial
resources and research and development time in technologies that rapidly become
obsolete or for which there is a waning, or no, commercial market. Our products
or product versions may also become obsolete due to our competitors'
introduction of products containing advanced technology, applications and
functionality. If we do not keep pace with technological change, our software
products will not be as attractive to our customers and our competitive position
and revenue from software sales would be seriously harmed.

WE MUST ADD NEW CUSTOMERS AND RETAIN AND EXPAND UPON EXISTING CUSTOMER
RELATIONSHIPS IN ORDER TO GENERATE REVENEUES TO SUPPORT THE GROWTH OF OUR
BUSINESS.

        In order to generate additional revenues sufficient to support research
and development for new products, expanded professional services and continued
growth, we must add new customers and retain, and expand upon, our existing
customer relationships. These efforts depend significantly upon our successful
development of new products, product versions and complementary professional
services that respond to the evolving needs of the genomic research community,
as well as the success of our sales and marketing efforts. In addition, future
growth of our revenues is dependent upon continued and increased sales of our
GenoMax enterprise product and the further establishment of our GenoMax brand.
At December 31, 2001, we had 41 customers of our GenoMax product, which we began
selling in late 1998. Increased GenoMax sales are significantly dependent upon
the continued enhancement and improvement of our enterprise product and the
ability of our sales force to leverage our existing Vector NTI franchise. We
also expect to continue to derive a significant portion of our future
professional services revenue from our relationship with the National Center for
Biotechnology Information (NCBI) at the National Institutes of Health and that
relationship, which is based on subcontractor arrangements, could be terminated
in the future. If we are unable to add revenues from additional or expanded
customer relationships, we may not be able to execute our business strategy and
growth of our business would suffer.

THE CONTINUED ENHANCEMENT AND DEVELOPMENT OF OUR LIFE SCIENCE INFORMATIC
PRODUCTS AND RELATED SERVICES DEPEND UPON THE RETENTION OF OUR RESEARCH AND
PRODUCT DEVELOPMENT GROUP AND OUR ABILITY TO RECRUIT, MOTIVATE AND RETAIN HIGHLY
SKILLED RESEARCH AND DEVELOPMENT PERSONNEL.

        The number of technical personnel with experience in the field of life
science informatics is limited and competition for qualified employees is
intense. In connection with our January 2002 headcount reduction, we reduced the
size of our research and development staff by 18%. There can be no assurance
that such reduction will not be disruptive to or negatively impact our product


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<PAGE>

development efforts. We are also unsure of the effect that such reduction may
have on our personnel retention efforts or the continuity of our development
efforts. We may not be successful in motivating or retaining our technical
employees or recruiting and training additional skilled personnel. The loss of a
significant number of employees in our research and product development group,
occurring at one instance or over a period of time, could seriously harm our
product development and enhancement efforts.

WE HAVE EXPERIENCED SIGNIFICANT COSTS ASSOCIATED WITH TURNOVER IN OUR SENIOR
EXECUTIVE MANAGEMENT. THE CONTINUED LOSS OF THE SERVICES OF OUR SENIOR
MANAGEMENT COULD HAVE A NEGATIVE EFFECT ON THE GROWTH OF OUR BUSINESS AND HARM
OUR RESULTS OF OPERATIONS.

        Since our initial public offering in October 2000, we have experienced
significant turnover in our senior management personnel. In 2001, employment
relationships with our Chief Executive Officer, President, Chief Financial
Officer, Senior Vice President of Sales and Marketing, and Chief Technology
Officer were ended. In October 2001, we entered into separation agreements with
Dr. Titomirov and Dr. Bernstein, then our Chief Executive Officer and President,
respectively, providing for termination of their services as executive officers.
In connection with these terminations, we incurred related charges of
approximately $2.4 million in the fourth quarter of 2001. In early 2002, our
employment relationship with Richard Melzer, our Senior Vice President of Sales
and Marketing, was terminated. In addition to the financial costs of severance
payments and other related and administrative expenses associated with such
turnover, these executive management transitions have served as a significant
distraction and diversion of management resources and have made it difficult to
execute our business plan. Our results of operations and the continued growth of
our business is substantially dependent on the performance of our senior
management and key employees. The continued loss of the services of any member
of our senior management or key personnel may would further disrupt our
operations and could significantly delay or prevent the implementation of our
business strategy. Further turnover could have a material adverse effect on the
growth of our business and negatively impact our results of operations.

IF WE ARE UNABLE TO COLLECT RECEIVABLES FROM OUR DEVELOPMENT STAGE BIOTECH AND
LIFE SCIENCE CUSTOMERS, OUR OPERATING RESULTS MAY BE MATERIALLY HARMED.

        We frequently license our informatic software to smaller, development
stage biotech and life sciences customers. Often these customers have a limited,
or no operating history and require considerable funding to launch their
business. As a result, transactions with these customers carry a higher degree
of financial risk. Our customers, particularly our development stage customers,
are also vulnerable to, and may be impacted by, the current tightening of
available credit and general economic slowdown occurring in the United States.
As a result of these conditions, our customers may be unable to pay, or may
delay payment, for software products purchased from us. If we are not able to
collect such amounts, we may be required to write-off significant accounts
receivable and recognize bad debt expense. We recorded a provision for doubtful
accounts of $0.6 million in fiscal 2001 compared to $0.02 million in fiscal
2000. Write-offs and difficulties associated with collection of receivables from
these customers could materially harm our operating results.

IF WE CANNOT EFFECTIVELY MANAGE OUR GROWTH, OUR FUTURE PROSPECTS AND RESULTS OF
OPERATIONS WOULD BE HARMED.

        In recent years, we have experienced significant growth in the size of
our customer base and the scope of our products and services. During this same
period, we have also experienced an increase in our headcount and significant
turnover in our senior management personnel. These factors have placed, and will
continue to place a significant strain on our management and our administrative,
financial and operational systems. Efforts to more efficiently manage the growth
of our business or reduce expenses, including restructuring our organization,
reducing our headcount, closing offices or reducing or eliminating certain
administrative functions, often result in increased near-term expenses. In
January 2002, in an effort to streamline our organization and reduce costs, we
reduced our headcount by 31 employees, or approximately 14% of our work force.
As a result of this reduction, we expect to incur an accounting charge of
approximately $.7 million in the first quarter of 2002. Our ability to manage
our growth, and our expenses related to this growth, will depend upon the
ability of our officers and key employees to continue to implement and improve
our operational, administrative and financial control systems and to expand,
train and manage our workforce. Our inability to manage this growth effectively
would negatively impact our future prospects and results of operations.

PART OF OUR BUSINESS STRATEGY IS TO DEVELOP STRATEGIC RELATIONSHIPS WITH LARGER
LIFE SCIENCES OR TECHNOLOGY COMPANIES, AS WELL AS PROVIDERS OF COMPLEMENTARY
PRODUCTS AND SERVICES. IF WE ARE NOT SUCCESSFUL IN DOING SO, OUR RESULTS OF
OPERATIONS COULD SUFFER.

        A component of our business strategy is to develop strategic
relationships with larger life sciences or technology companies as well as
providers of complementary products and services. We believe that through such
relationships we can add revenues, expand our distribution channels, maximize
our research and development resources, improve our competitive position and
increase market awareness and acceptance of our life science informatic software
products. We have limited experience in engaging in and managing such
relationships and have entered into only a few of these strategic relationships.
To date, we have not recognized significant


                                       36
<PAGE>

revenues as a result of any such relationship. In January 2002, we entered into
scientific collaboration with TissueInformatics, Inc. in which we will seek to
collaborate on the development and validation of software tools to integrate and
analyze genomic and tissue data from digital tissue images. In connection with
this collaboration, we invested $1.5 million in Tissue Informatics for an
approximately 5% ownership interest at the time of our investment. We also
received observation rights on the board of directors of TissueInformatics and
will serve on their scientific advisory board. We have no prior experience in
assessing, making or managing investments in other companies and there can be no
assurance that our investment in TissueInformatics will prove to be successful.
If we are unable to successfully develop and effectively manage our strategic
relationships, including our current investment or similar future investments,
we could experience increased costs and distraction of our management team that
could harm our results of operations. There can be no assurance that such
relationships or collaborations will ever yield the desired financial or
competitive results sought by our management. In addition, many of our strategic
relationships, including our co-marketing relationships with Oracle, Compaq and
Sun Microsystems, are based on oral arrangements that are not enforceable and
can be terminated by either party at any time.

WE HAVE INCURRED OPERATING LOSSES IN THE PAST RESULTING IN AN ACCUMULATED
DEFICIT. WE MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY IN THE FUTURE.

        We have incurred operating losses in most periods since our inception.
We incurred net losses of approximately $21 million for the year ended December
31, 2001 and approximately $10.7 million for the year ended December 31, 2000.
As of December 31, 2001, we had an accumulated deficit of approximately $34
million. For expense analysis see the year-end comparison of our results of
operations under Item 7, "Management Discussion and Analysis of Financial
Condition and Results of Operations" included in this report. We expect to
invest substantial financial and other resources to:

        -       Develop and introduce new products, product versions and
                services;

        -       Expand our professional service offerings; and

        -       Consider appropriate acquisitions and strategic relationships.

        As a result, we expect that our expenses will continue to increase. We
cannot assure that we will be able to generate sufficient additional revenues
stemming from these investments in new products and services in order to achieve
profitability. Even if we are able to achieve profitability, we may not be able
to sustain profitability on a quarterly or annual basis. Failure to achieve
consistent profitability may limit the growth potential of our business and the
trading price of our common stock.

REVENUE RECOGNITION RULES APPLICABLE TO SOFTWARE MAY REQUIRE THAT WE DEFER
RECOGNIZING REVENUES UNDER CERTAIN LICENSES UNTIL QUARTERS AFTER LICENSES ARE
EXECUTED OR FEES ARE RECEIVED. THIS CAN CAUSE OUR QUARTERLY RESULTS TO FLUCTUATE
SUBSTANTIALLY.

        We may not be able to recognize revenue associated with a particular
software license in the same quarter in which we enter into the agreement or in
which we collect licensing fees. Under some of our licenses we must deliver to a
customer an enhanced product version or additional module, and therefore we must
defer recognizing any payment previously received until delivery of all contract
elements are made. If we are not able to release future modules as scheduled, we
will be required to defer the recognition of a significant amount of revenues to
quarters after those in which we collect licensing fees.

        Our software sales have historically been made under perpetual and term
license agreements. Under perpetual arrangements, the customer assumes ownership
of the software, and upgrades and enhancements are available provided that the
customer's maintenance agreement is current. The revenue related to the software
element under a perpetual arrangement is often recognized at the time of
delivery of the software. Under our term arrangements, which typically run one
to three years, our customer does not assume ownership of the software at
delivery. Instead, customers use the software over the term period and are
required to return it upon the non-renewal of the term arrangement. The revenue
related to the software element under the term arrangement may be recognized
over the term period. As discussed more fully in the revenue section of Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," our ability to recognize software license revenues in a given
fiscal quarter will be affected by the mix of perpetual and term contracts
entered into during that period.

        Expenses associated with software licenses, unlike revenues, are not
typically deferred. The manner in which we recognize revenue, in accordance with
the revenue recognition rules applicable to software under generally accepted
accounting principles, may therefore cause us to incur a disproportionate amount
of expense related to the software revenue that may be recognized, and as a
result our quarterly operating results to fluctuate substantially.

WE EXPECT OUR RESULTS OF OPERATIONS TO VARY FROM QUARTER TO QUARTER IN 2002 AND
FUTURE PERIODS AS A RESULT OF THE TIMING AND


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<PAGE>

SEASONALITY OF OUR SOFTWARE SALES, PARTICULARLY OUR GENOMAX ENTERPRISE SALES.
THESE FLUCTUATIONS MAKE IT DIFFICULT TO EVALUATE OUR BUSINESS, MANAGE OUR COSTS
AND COULD CAUSE INSTABILITY IN OUR STOCK PRICE.

        Our quarterly operating results have varied considerably in the past and
we anticipate that our operating results will fluctuate on a quarterly basis in
2002 and in the future as a result of a number of factors, many of which are
outside of our control. Factors that may cause our quarterly results to
fluctuate include the following:

        -       The number and timing of orders for our higher priced GenoMax
                enterprise product;

        -       The seasonal fluctuations of software procurement, particularly
                for life science informatics software;

        -       The timing of, commencement, delay, cancellation or completion
                of our software licensing agreements, strategic relationships
                and professional service activities;

        -       The changes in the level of research and development expenses or
                public funding for genomic research;

        -       The timing of license and other payments received under our
                agreements and applicable revenue recognition rules; and

        -       The introduction or cancellation of products and services by us
                and our competitors.

        In particular, as a result of the academic calendar, European business
practices and commercial information technology procurement practices, we
generally experience a reduction in sales in the third quarter of each calendar
year that typically results in a corresponding reduction in operating revenues.
We generally establish expenditure levels for future operating expenses,
including research and development and personnel related expenses, based in
large part on expected future revenues. If revenues fall below expectations in a
given quarter, our expenses would disproportionately increase and our operating
results would be adversely affected.

        Due to the factors described above and other risks discussed herein, you
should not rely upon quarterly comparisons of our financial results. These
comparisons are not necessarily meaningful nor are they a reliable indicator of
our future performance. As a result of fluctuations in our quarterly results,
the market price of our common stock may be subject to significant fluctuation
and volatility.

OUR SOFTWARE PRODUCTS AND SERVICES, PARTICULARLY OUR GENOMAX ENTERPRISE
SOFTWARE, INVOLVE A LENGTHY SALES CYCLE AND OFTEN REQUIRE US TO EXPEND
CONSIDERABLE FINANCIAL AND PERSONNEL RESOURCES. IF WE DEVOTE SIGNIFICANT
RESOURCES TO SALES THAT DO NOT MATERIALIZE, OUR RESULTS OF OPERATIONS AND
ABILITY TO ACHIEVE PROFITABILITY WOULD BE HARMED.

        The sales cycle for our products and services, particularly our GenoMax
enterprise software solution, is often a lengthy and involved process. Our sales
cycle is typically long for a number of reasons, including:

        -       The decision to license and deploy enterprise-wide software, by
                its nature, is an organization-wide procurement decision, often
                requiring an evaluation by a significant number of
                constituencies in various functional and geographic areas, each
                often having specific and possibly conflicting requirements; and

        -       The significant resources that are committed to an evaluation of
                our software solutions by a potential customer organization
                require us to expend substantial time, effort and money
                educating them about the value and comparative advantages of our
                products.

        In addition, our agreements with GenoMax customers and strategic
partners often contain terms that are unique to that customer or partner and
require extensive negotiation. As a result, we may expend substantial funds and
effort to negotiate agreements for these products, but may ultimately be unable
to consummate a sale of our products and services. If we devote our resources
to, and incur significant expenses for, sales that do not materialize, our
results of operations and ability to achieve profitability would be harmed.

WE MAY INCUR SIGNIFICANT COSTS IN PROTECTING OUR INTELLECTUAL PROPERTY RIGHTS OR
RESPONDING TO CLAIMS OF INFRINGEMENT FROM OTHERS.

        We currently rely upon a combination of trademark, patent, copyright and
trade secret laws, employee and third party non-


                                       38
<PAGE>

disclosure agreements and other contracts to protect our proprietary rights.
Nevertheless, our efforts to protect our intellectual property may be inadequate
and we may be unable to prevent others from offering products and services
substantially similar to ours. We also need to secure and maintain adequate
protection of our intellectual property outside of the United States because our
sales are global. The laws of some foreign countries do not protect proprietary
rights to the same extent as the laws of the United States, and many companies
engaging in international business have encountered considerable difficulties in
safeguarding their proprietary rights in foreign jurisdictions.

        Moreover, third parties may claim that our current or future products or
services infringe upon their intellectual property. Litigation over these issues
could be a significant distraction and we may incur significant costs, including
related damages. In the event that it is determined that one of our products
infringe upon another's proprietary rights, we may be required to obtain a
license in order to continue selling our products. That license may not be
available to us on favorable terms, or at all.

OUR SOFTWARE FACILITATES RESEARCH COLLABORATION AND THEREFORE SECURITY IS
IMPORTANT TO OUR CUSTOMERS. WE COULD BE EXPOSED TO LIABILITY AND A LOSS IN
CUSTOMER CONFIDENCE IF OUR PRODUCTS FAIL TO PROVIDE THAT SECURITY.

        Our software facilitates collaboration among researchers and the sharing
of research results in a secure environment. If there is a breach or failure of
the security functions in our software, researchers' proprietary work product
and data may be compromised and our customers would lose confidence in our
software. We could be exposed to liability from defects or breaches of security
in our products.

WE SIGNIFICANTLY DEPEND UPON HOLDERS OF H-1B NON-IMMIGRANT VISAS TO STAFF OUR
RESEARCH AND PRODUCT DEVELOPMENT TEAM. OUR PRODUCT DEVELOPMENT AND ENHANCEMENT
EFFORTS COULD BE HARMED IF WE ARE NOT ABLE TO ADEQUATELY STAFF OUR TEAM BECAUSE
OF THE LIMITATIONS OF U.S. IMMIGRATION LAWS.

        We recruit professionals to staff our research and product development
group on an international basis and, therefore, must comply with the immigration
laws of the United States. Most of our research and product development team are
citizens of other countries, with most of those working in the U.S. under H-1B
temporary visas. Under the American Competitiveness in the 21st Century Act of
2000, there is a statutory limit of 195,000 new H-1B visas that may be issued in
fiscal years 2002 and 2003, with such limits decreasing in future periods
beginning in fiscal year 2004. In any year in which this limit is reached, we
may be unable to obtain a sufficient number of H-1B visas to employ those
persons we would like to add to our research and product development group.
Moreover, legislators have recently made public statements regarding the
possibility of further reduction to H1-B visa limit. If we are unable to obtain
H1-B visas for our employees in sufficient quantities or in a timely manner, our
product development and enhancement efforts could be hampered. As a result, we
may be unable to deliver products that satisfy customer preferences and keep
pace with technological change.

WE MAY CONSIDER ACQUISITIONS OR STRATEGIC INVESTMENTS. WE HAVE LIMITED
EXPERIENCE WITH THESE ACTIVITIES AND THE COSTS AND DISTRACTIONS FROM THESE
ACTIVITIES COULD HARM OUR FUTURE GROWTH.

        We may consider acquiring businesses, technologies or products that we
believe are a strategic fit with our business and strategy. We only have limited
experience with these activities and our assessment of such opportunities could
cause us to incur increased expenditures. If appropriate opportunities become
available, we could also issue additional equity securities that would dilute
current stockholders' ownership, or incur substantial debt to finance such
transactions. Methods of financing any acquisitions or strategic investments
could result in a negative impact on our financial condition. We may have
difficulties integrating the businesses, products, technologies or personnel
involved in any acquisition or strategic investment. Our integration efforts may
result in significant expenditures of operating, financial and management
resources that could materially and adversely affect our business. Acquisitions
involve many other risks, including potential loss of key employees or
customers, the assumption of significant liabilities, and the amortization of
the intangible assets of acquired companies. As a result of these and other
risks, any acquisitions or strategic investments may ultimately have a negative
impact on our business, results of operation and financial condition.

DEFECTS OR MALFUNCTIONS IN OUR SOFTWARE PRODUCTS, OR IN THE PRODUCTS OF OUR
TECHNOLOGY PARTNERS, COULD HURT OUR REPUTATION AMONG CUSTOMERS AND EXPOSE US TO
LIABILITY.

        Our business and the level of customer acceptance of our life science
informatic software products are dependent upon the continuous, effective and
reliable operation of our computer software and related tools and functions.
Software defects could occur in our current or future products. To the extent
that our software malfunctions and our customers' use of our products is
interrupted, our reputation, competitive position and business could suffer. 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 interoperate.


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WE MAY REQUIRE ADDITIONAL FUNDING TO EXECUTE OUR BUSINESS STRATEGY. IF THAT
FUNDING IS NOT AVAILABLE, OR NOT AVAILABLE ON TERMS ACCEPTABLE TO US, WE MAY BE
REQUIRED TO CURTAIL CERTAIN MARKETING AND PRODUCT DEVELOPMENT EFFORTS.

        We expect that the proceeds from our initial public offering, our cash
flow from operations and our existing capital resources will be sufficient to
fund our operations for the next 24 months but it is possible that our growth
will require us to seek additional financing during this period. We may seek to
satisfy any additional capital needs through public or private equity offerings,
debt financings and other means. If we raise capital through the issuance of
additional equity securities, our existing stockholders' ownership may be
diluted. We may not be able to obtain additional financing when we need capital
on terms favorable to us, if at all. If we cannot obtain such financing, we may
be required to curtail our marketing and sales activities and product
development efforts.

                          RISKS RELATED TO OUR INDUSTRY

THE MARKET FOR INFORMATIC PRODUCTS AND SERVICES IS INTENSELY COMPETITIVE AND
EVOLVING AND WE MAY NOT ACHIEVE OR MAINTAIN MARKET LEADERSHIP FOR A VARIETY OF
REASONS.

        We face, or expect to face, intense competition from:

        -       Third party commercial software vendors;

        -       Informatics developers;

        -       Internal informatics departments of some of our customers and
                potential customers;

        -       Organizations engaging in the provision of Internet-hosted,
                informatic software; and

        -       Companies facilitating Internet-based e-commerce between
                participants in our industry.

        We believe that we compete most often with LION biosciences, NetGenics,
Compugen, Genomica, DNA Star, Rosetta Inpharmatics (acquired by Merck in 2001),
DoubleTwist and GCG, a unit of Pharmacopeia acquired from Oxford Molecular in
2000. Others, including large, well-established software vendors, could readily
enter this market. Many of our competitors have longer operating histories,
stronger name recognition and significantly greater financial, technical and
marketing resources than we do. As a result of these advantages, our competitors
may be better able to adopt more aggressive pricing policies and better
positioned to respond to changes in customer preference or technology.

        In order to remain competitive, we believe that we must continue to
expand and enhance the functionality of our informatic software products and
respond timely and effectively to evolving industry standards or technology. In
an intensely competitive, technology driven business like ours, there is no
certainty that market leadership can be obtained or maintained for any
sustainable period.

NUMEROUS EXISTING CUSTOMERS AND POTENTIAL CUSTOMERS FOR OUR LIFE SCIENCE
INFORMATIC SOFTWARE MAY ELECT TO INTERNALLY DEVELOP, OR USE OTHER COMPANIES TO
DEVELOP THEIR OWN SOFTWARE, WHICH COULD HURT OUR SALES EFFORTS.

        Our customers and potential customers, including pharmaceutical
companies, biotech firms, government and academic institutions and providers of
genomic and proteomic data, may elect to internally develop, or continue to
develop their own life science informatic software. Potential customers for our
products may be unwilling to abandon their prior internal efforts to look to an
outside, third party source to provide their software solutions. Even if
potential customers look to an outside, third party source, there can be no
assurance that they will choose us to provide their software solutions. The
market to provide life science informatic software solutions and related
professional services is highly competitive. As a result our efforts to add new
customers could be hampered.

IF GROWTH IN THE USE OF GENOMIC DATA IN PHARMACEUTICAL DISCOVERIES, AGRICULTURAL
PRODUCTION, ENVIRONMENTAL MANAGEMENT AND INDUSTRIAL PROCESSES DOES NOT OCCUR AS
WE EXPECT, THE TARGET MARKETS FOR OUR PRODUCTS AND SERVICES MAY NOT MATERIALIZE
OR CONTINUE TO GROW.

        The application of genomic information to pharmaceutical discoveries,
agricultural production, environmental management and industrial processes is an
evolving and unproven practice. Few products have been developed and
commercialized resulting from recent genomic discoveries. If researchers do not
use genomic information in their discovery and development efforts at the level
we project, the target markets for our products and services will not
materialize and our prospects would be materially harmed.


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<PAGE>

OUR SALE OF LIFE SCIENCE INFORMATIC SOFTWARE PRODUCTS AND SERVICES COULD SUFFER
IF THERE ARE REDUCTIONS IN RESEARCH AND DEVELOPMENT EXPENDITURES OF OUR
CUSTOMERS AND PUBLIC FUNDING RELATED TO GENOMIC RESEARCH.

        Sales of our products and services could suffer as a result of
reductions in customer research and development expenditures and public funding
related to genomic research. State and federal government budgets, including
academic and research institutes supported thereby, have experienced an increase
in allocations and spending related to genomic research in recent years.
Shifting budget priorities, specifically related to recent defense efforts,
could result in the reduction or elimination of certain publicly funded research
efforts. Our continued services to the NCBI and sales of our informatic software
products to other government and academic institutions could be negatively
affected by reductions in such public funding.

THE PRODUCTS AND THE ACTIVITIES OF OUR CUSTOMERS, INCLUDING THOSE IN THE
PHARMACEUTICAL AND BIOTECHNOLOGY INDUSTRIES, MAY BE SUBJECT TO CHANGING
REGULATION THAT COULD ADVERSELY AFFECT GENOMIC RESEARCH AND REDUCE MARKET DEMAND
FOR OUR PRODUCTS.

        Because certain of our customers' products potentially touch on areas
involving human health, they are affected by current or future government
regulation, including regulation by the U.S. Food and Drug Administration. In
addition, numerous laws covering genetic testing of humans, the privacy and
security of human genetic information, and the storage and transmission of
individually identifiable health care information have been introduced or passed
at the state and federal levels. Our sales may indirectly be affected by changes
in government regulation covering our customers in these industries, including
regulation relating to drug development, genomic research, genetic testing,
healthcare reform and the sale of products and transfer of healthcare data over
the Internet.

        We cannot assure you that customers and potential customers for our
informatic software products and related services will not curtail or defer
technology investments in response to the proposal or institution of
governmental efforts. Moreover, any exposure by us to liability or increased
government scrutiny resulting from regulatory or legal changes would distract
the efforts of our organization and require us to spend significant time and
resources in connection with any resulting litigation or regulatory compliance.

OUR BUSINESS MAY BE MATERIALLY AND ADVERSELY AFFECTED AS A RESULT OF ETHICAL,
LEGAL AND SOCIAL CONCERNS SURROUNDING THE USE OF GENOMIC INFORMATION.

        A number of ethical, legal and social concerns, including issues related
to privacy, confidentiality and fairness have arisen as a result of the
increased availability of genomic information. Government and private entities
are currently exploring issues related to the ownership and control of genomic
information and access rights to related technologies.

        As a result of these and numerous other ethical, legal and social
issues, government authorities may limit, or increasingly regulate biomolecular
research and the use of products resulting from such research. Such restrictions
could reduce the number of markets and potential customers for our products and
could materially and adversely affect our business.

CONSOLIDATION WITHIN THE PHARMACEUTICAL AND BIOTECHNOLOGY INDUSTRIES MAY LEAD TO
FEWER CUSTOMERS FOR OUR PRODUCTS AND SERVICES. CONSOLIDATION COULD INCREASE
COMPETITION AND HARM OUR MARKETING AND SALES EFFORTS.

        A significant portion of our customer base consists of pharmaceutical
and biotechnology companies. Mergers between large multinational pharmaceutical
companies have accelerated in recent years. 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.

WE INTEGRATE THIRD PARTY DATABASES INTO OUR INFORMATIC SOFTWARE PRODUCTS AND
COULD BE EXPOSED TO LIABILITY FOR CONTENT ERRORS IN THOSE DATABASES.

        Available genomic, proteomic and other biomolecular data is vast and
complex, and errors in databases containing this information are inevitable. We
integrate data housed on public and private content databases into our
informatic software products. We could be subject to claims of liability
associated with damages resulting from any erroneous third party data that we
integrate into our products or for which we facilitate delivery and analysis,
even if not integrated into our products.

            RISKS RELATED TO OUR CORPORATION AND HOLDERS OF OUR STOCK

THE TRADING PRICE OF OUR COMMON STOCK MAY FLUCTUATE WIDELY.


                                       41
<PAGE>

        The trading price of our common stock has experienced significant
fluctuations, from a high sales price of $14.69 to a low sales price of $2.26 in
2001. The closing price of our common stock on the Nasdaq National Market was
$1.60 at March 1, 2002. Our common stock may continue to fluctuate widely as a
result of a large number of factors, many of which are beyond our control,
including:

        -       Announcements of technological innovations, new customers or
                strategic relationships by our competitors or us;
        -       Changes in research and development and government spending on
                genomic research;
        -       Failure to meet previously announced guidance or analysts'
                expectations of our quarterly results;
        -       Period to period fluctuations in our financial results; and
        -       General economic and other external factors.

The stock market has experienced extreme price and volume fluctuations that have
affected the market prices of many companies involved in the software and
biotechnology industries, which have often been unrelated to the operating
performance of these companies. As a result of these fluctuations, you may not
be able to sell your common stock at a price above your purchase price.

SUBSTANTIAL SALES OF OUR COMMON STOCK COULD DEPRESS OUR MARKET PRICE.

        If our stockholders sell substantial amounts of our common stock,
including shares issuable upon the exercise of outstanding options or warrants,
or if the market perceives that such sales may occur, the market price of our
common stock may fall. In connection with our significant executive management
turnover, we experienced considerable sales activity on the part of former
executives subsequent to their departure. Certain former executives continue to
hold common stock as well as options exercisable for common stock, which if sold
in significant amounts, could depress the market price of our common stock. We
had 25,238,728 shares outstanding as of March 1, 2002. This includes the
5,750,000 shares of common stock that were registered for sale in our initial
public offering and approximately 5,768,416 shares of stock that have been
issued pursuant to our registration statement covering shares issuable under our
Amended Equity Incentive Compensation Plan. The remaining shares of common stock
are not registered but are eligible for resale in the public marked subject to
compliance with Rule 144 or Rule 701 under the Securities Act of 1933, as
amended. In connection with the potential exhaust of available options under our
Equity Incentive Compensation Plan, in December 2001 our Board of Directors
approved the adoption of our 2001 Employee Stock Option Plan, under which
options exercisable for up to 1.5 million shares were made available for grants.
At March 1, 2001, options exercisable for 9,469,284 shares were outstanding
under our two option plans. In addition, holders of 7,905,286 shares of our
common stock, or warrants exercisable for our common stock, are entitled to
certain registration rights. If these holders, by exercising their registration
rights, cause a large number of shares to be registered and sold in the public
market, these sales could cause a decline in the market price of our common
stock. If we were to include, in a registration statement initiated by us,
shares held by these holders in accordance with their registration rights, the
inclusion of such shares may reduce our ability to raise capital.

OUR CHARTER AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS THAT COULD DISCOURAGE
A TAKEOVER EVEN IF BENEFICIAL TO STOCKHOLDERS.

        Our restated certificate of incorporation and bylaws, our shareholder
rights plan adopted in June 2001 and portions of Delaware law, contain
provisions that could make it more difficult for a third party to obtain control
of our company, even if doing so would be beneficial to stockholders. For
example, our restated certificate of incorporation provides for a classified
Board of Directors, allows the Board of Directors to expand its size and fill
any vacancies without stockholder approval and allows the Board of Directors to
classify and issue preferred stock without stockholder approval. Our bylaws
restrict the ability of stockholders to call a special meeting and require
advance notice of stockholder proposals. Delaware law makes it difficult for us
to be acquired by a significant stockholder that is not approved in advance by
our Board of Directors. In June 2001, we adopted a shareholder 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 shareholders to purchase our common stock,
and the stock of the entity acquiring us, at reduced prices. These provisions of
our charter, bylaws, shareholder rights plan and Delaware law could have the
effect of delaying, deferring or preventing a change of control, including
without limitation a proxy contest, making more difficult the acquisition of a
substantial block of our common stock. The provisions could also limit the price
that investors might be willing to pay in the future for shares of our common
stock.

SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD
UNDERLYING ASSUMPTIONS PROVE INCORRECT, OUR ACTUAL RESULTS MAY VARY MATERIALLY
FROM THOSE ANTICIPATED.




                                       42
<PAGE>




ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

        Information responsive to this Item is incorporated herein by reference
to Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," of this report.






                                       43
<PAGE>

ITEM 8 - CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


INFORMAX, INC.

TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                   PAGE

<S>                                                                                            <C>
INDEPENDENT AUDITORS' REPORT                                                                        45

CONSOLIDATED FINANCIAL STATEMENTS AS OF
 DECEMBER 31, 2001 AND 2000, AND FOR EACH OF THE THREE
 YEARS ENDED DECEMBER 31, 2001:

   Consolidated Balance Sheets                                                                      46

   Consolidated Statements of Operations                                                            47

   Consolidated Statements of Stockholders' Equity                                                  48

   Consolidated Statements of Cash Flows                                                          49 - 50

   Notes to Consolidated Financial Statements                                                     51 - 65
</TABLE>



                                       44
<PAGE>







INDEPENDENT AUDITORS' REPORT


To the Board of Directors of
   InforMax, Inc., and Subsidiary
Bethesda, Maryland

We have audited the accompanying consolidated balance sheets of InforMax, Inc.,
and subsidiary (the Company) as of December 31, 2001 and 2000, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2001. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the consolidated
financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of InforMax, Inc. and
subsidiary as of December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001, in conformity with accounting principles generally accepted in the
United States of America.

/s/ Deloitte & Touche LLP

February 4, 2002
McLean, Virginia







                                       45
<PAGE>


INFORMAX, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

ASSETS                                                                                            2001           2000
<S>                                                                                            <C>             <C>
CURRENT ASSETS:
    Cash and cash equivalents                                                                  $ 61,348        $ 82,656
    Accounts receivable (net of allowance for doubtful accounts
        of $557 and $20 for 2001 and 2000, respectively)                                          9,672           9,063
    Prepaid expenses and other current assets                                                     1,253           1,244
                                                                                               --------        --------

                      Total current assets                                                       72,273          92,963

Property and equipment - net                                                                      9,205           4,539
Deposits and other assets                                                                         1,333             574
Deferred tax asset - net                                                                              -           1,300
Restricted cash                                                                                   1,667           1,574
                                                                                               --------        --------

TOTAL ASSETS                                                                                   $ 84,478        $100,950
                                                                                               ========        ========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                                                           $    408        $    971
    Accounts payable to related parties                                                               3             139
    Accrued liabilities                                                                           4,408           1,270
    Borrowings and capital lease obligation - current portion                                       852             932
    Deferred revenue                                                                              4,189           4,148
                                                                                               --------        --------

                      Total current liabilities                                                   9,860           7,460

Borrowings and capital lease obligations - less current portion                                     405             702
Deferred revenue - less current portion                                                           1,739           1,119
Other liabilities                                                                                    29               -
                                                                                               --------        --------

                      Total liabilities                                                         12,033           9,281
                                                                                               --------        --------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
    Common stock, voting; $.001 par value - authorized 100,000
        shares; issued and outstanding 24,506 and 19,511
        shares for 2001 and 2000, respectively                                                       24              19
    Additional paid-in capital                                                                  107,207         105,917
    Deferred compensation                                                                          (515)         (1,420)
    Accumulated deficit                                                                         (34,271)        (12,847)
                                                                                               --------        --------

                      Total stockholders' equity                                                 72,445          91,669
                                                                                               --------        --------

TOTAL LIABILITIES AND STOCKHOLDERS'
    EQUITY                                                                                     $ 84,478        $100,950
                                                                                               ========        ========
</TABLE>

See notes to consolidated financial statements.



                                       46
<PAGE>


INFORMAX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                    2001          2000           1999
<S>                                                                              <C>           <C>             <C>
REVENUES:
    Software license and customer support (4)                                     $ 21,425      $ 13,907        $ 7,277
    Professional services                                                            3,759         3,240          2,737
                                                                                  ----------    ----------     ----------

                      Total revenues                                                25,184        17,147         10,014
                                                                                  ----------    ----------     ----------

COST OF REVENUES:
    Software license and customer support                                            1,827           697            405
    Professional services (1)                                                        1,872         1,737          1,612
                                                                                  ----------    ----------     ----------

                      Total cost of revenues                                         3,699         2,434          2,017
                                                                                  ----------    ----------     ----------

GROSS PROFIT                                                                        21,485        14,713          7,997
                                                                                  ----------    ----------     ----------

OPERATING EXPENSES:
    Selling, general and administrative (2)                                         29,024        18,764          7,000
    Research and development (3)                                                     9,622         5,311          2,597
    Stock-based compensation                                                         1,079         1,574            138
    Depreciation and amortization                                                    2,375           940            273
    Executive management changes                                                     2,415             -              -
                                                                                  ----------    ----------     ----------

                      Total operating expenses                                      44,515        26,589         10,008
                                                                                  ----------    ----------     ----------

LOSS FROM OPERATIONS                                                               (23,030)      (11,876)        (2,010)
                                                                                  ----------    ----------     ----------

OTHER INCOME (EXPENSE):
    Investment earnings                                                              3,066         1,476             66
    Interest and other expense                                                        (160)         (325)           (96)
                                                                                  ----------    ----------     ----------

                      Total other income (expense)                                   2,906         1,151            (30)
                                                                                  ----------    ----------     ----------

LOSS BEFORE INCOME TAXES                                                           (20,124)      (10,725)        (2,041)

INCOME TAX BENEFIT (EXPENSE)                                                        (1,300)           51            726
                                                                                  ----------    ----------     ----------

NET LOSS                                                                           (21,424)      (10,674)        (1,315)

    Beneficial conversion                                                                -        (9,982)             -

    Increase in carrying value of redeemable
        convertible preferred stock                                                      -          (387)          (176)
                                                                                  ----------    ----------     ----------

NET LOSS APPLICABLE TO COMMON
  SHARES                                                                          $(21,424)     $(21,043)       $(1,491)
                                                                                  ==========    ==========     ==========

BASIC AND DILUTED NET LOSS
     PER COMMON SHARE                                                             $  (0.93)     $  (2.25)       $ (0.38)
                                                                                  ==========    ==========     ==========

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING - Basic and diluted                                                   22,947         9,337          3,874
                                                                                  ==========    ==========     ==========
</TABLE>


(1)     Cost of revenues - professional services includes stock-based
        compensation of $1, $5, and $-0- for 2001, 2000, and 1999, respectively.
(2)     Selling, general and administrative expenses include related party legal
        expenses of $644, $397, and $21, and excludes stock-based compensation
        of $1,070, $1,433, and $110 for 2001, 2000, and 1999, respectively.
(3)     Research and development expenses excludes stock-based compensation of
        $8, $142, and $227, for 2001, 2000, and 1999, respectively.
(4)     Includes related party revenue of $500, $-0-, and $-0- for 2001, 2000,
        and 1999, respectively.


See notes to consolidated financial statements.




                                       47
<PAGE>



INFORMAX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                         COMMON STOCK - VOTING   COMMON STOCK - NONVOTING  ADDITIONAL
                                                        -----------------------  ------------------------    PAID-IN     DEFERRED
                                                           SHARES     AMOUNT        SHARES     AMOUNT        CAPITAL   COMPENSATION

<S>                                                      <C>         <C>          <C>         <C>         <C>           <C>
BALANCE, JANUARY 1, 1999                                   1,915      $     2       2,387      $     2     $    584      $   (16)

    Conversion - non-voting shares to voting                 590           --        (590)          --           --           --
    Issuance of common stock                                  --           --         100           --          102          (87)
    Stock options exercised                                   --           --         137           --           26           --
    Issuance of stock options                                 --           --          --           --          435         (435)
    Stock-based compensation                                  --           --          --           --           --          138
    Increase in carrying value of
        preferred stock                                       --           --          --           --         (176)          --
    Net loss                                                  --           --          --           --           --           --
                                                         --------     --------    --------     --------    --------      --------

BALANCE, DECEMBER 31, 1999                                 2,505            2       2,034            2          971         (400)

    Conversion - nonvoting shares to voting                6,206            6      (6,206)          (6)          --           --
    Issuance of common stock, net of offering costs        5,750            6         557           --       87,237           --
    Stock options exercised                                  103           --       3,932            4        1,197           --
    Issuance of stock options                                 --           --          --           --          713         (713)
    Issuance of warrants                                      --           --          --           --           13           --
    Conversion of preferred stock                          5,197            5          --           --       14,396           --
    Beneficial conversion feature of preferred stock          --           --          --           --        9,982           --
    Accretion of beneficial conversion feature of
        preferred stock                                       --           --          --           --       (9,982)          --
    Warrant interest amortization                             --           --          --           --           10           --
    Adjustment of deferred stock compensation                 --           --          --           --        1,886       (1,886)
    Amortization of deferred stock compensation               --           --          --           --           --        1,579
    Increase in carrying value of preferred stock             --           --          --           --         (387)          --
    Retirement of treasury stock                            (250)          --        (317)          --         (119)          --
    Net loss                                                  --           --          --           --           --           --
                                                         --------     --------    --------     --------    --------      --------

BALANCE, DECEMBER 31, 2000                                19,511           19          --           --      105,917       (1,420)

    Stock options exercised                                4,995            5          --           --        1,303           --
    Issuance of warrants                                      --           --          --           --           --           35
    Adjustment of deferred stock compensation                 --           --          --           --           18          (18)
    Amortization of deferred stock compensation               --           --          --           --           --          888
    Offering costs                                            --           --          --           --          (31)          --
    Net loss                                                  --           --          --           --           --           --
                                                         --------     --------    --------     --------    --------      --------

BALANCE, DECEMBER 31, 2001                                24,506      $    24          --      $    --     $107,207      $  (515)
                                                         ========     ========    ========     ========    ========      ========
</TABLE>


<TABLE>
<CAPTION>
                                                                           TREASURY STOCK
                                                         ACCUMULATED     --------------------
                                                           DEFICIT        SHARES     AMOUNT       TOTAL

<S>                                                      <C>              <C>     <C>          <C>
BALANCE, JANUARY 1, 1999                                 $    (858)         567    $    (119)   $    (405)

    Conversion - non-voting shares to voting                    --           --           --           --
    Issuance of common stock                                    --           --           --           15
    Stock options exercised                                     --           --           --           26
    Issuance of stock options                                   --           --           --           --
    Stock-based compensation                                    --           --           --          138
    Increase in carrying value of
        preferred stock                                         --           --           --         (176)
    Net loss                                                (1,315)          --           --       (1,315)
                                                         ----------      -------   ----------   ----------

BALANCE, DECEMBER 31, 1999                                  (2,173)         567         (119)      (1,717)

    Conversion - nonvoting shares to voting                     --           --           --           --
    Issuance of common stock, net of offering costs             --           --           --       87,243
    Stock options exercised                                     --           --           --        1,201
    Issuance of stock options                                   --           --           --           --
    Issuance of warrants                                        --           --           --           13
    Conversion of preferred stock                               --           --           --       14,401
    Beneficial conversion feature of preferred stock            --           --           --        9,982
    Accretion of beneficial conversion feature of
        preferred stock                                         --           --           --       (9,982)
    Warrant interest amortization                               --           --           --           10
    Adjustment of deferred stock compensation                   --           --           --           --
    Amortization of deferred stock compensation                 --           --           --        1,579
    Increase in carrying value of preferred stock               --           --           --         (387)
    Retirement of treasury stock                                --         (567)         119           --
    Net loss                                               (10,674)          --           --      (10,674)
                                                         ----------      -------   ----------   ----------

BALANCE, DECEMBER 31, 2000                                 (12,847)          --           --       91,669

    Stock options exercised                                     --           --           --        1,308
    Issuance of warrants                                        --           --           --           35
    Adjustment of deferred stock compensation                   --           --           --           --
    Amortization of deferred stock compensation                 --           --           --          888
    Offering costs                                              --           --           --          (31)
    Net loss                                               (21,424)          --           --      (21,424)
                                                         ----------      -------   ----------   ----------

BALANCE, DECEMBER 31, 2001                               $ (34,271)          --    $      --    $  72,445
                                                         ==========      =======   ==========   ==========
</TABLE>


See notes to consolidated financial statements




                                       48
<PAGE>


INFORMAX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                   2001           2000           1999
<S>                                                                              <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                     $(21,424)       $(10,673)      $(1,315)
    Adjustments to reconcile net loss to net cash
        used in operating activities:
        Depreciation expense                                                        2,375             940           273
        Loss on sale of property and equipment                                        150               6             9
        Stock-based compensation                                                      923           1,601           138
        Deferred income taxes                                                       1,300             (22)         (623)
        Provision for bad debt                                                        537               5           -
        Changes in assets and liabilities:
            Accounts receivable                                                    (1,146)         (6,428)       (1,090)
            Prepaid expenses and other current assets                                  (9)           (870)         (368)
            Deposits and other assets                                                (759)           (506)          (57)
            Accounts payable                                                         (700)            685            11
            Accrued liabilities                                                     3,167             337           360
            Deferred revenue                                                          661           3,455            72
                                                                                 --------        --------       -------

                      Cash flows from operating activities                        (14,925)        (11,470)       (2,590)
                                                                                 --------        --------       -------

CASH FLOW FROM INVESTING ACTIVITIES:
    Purchase of property and equipment                                             (6,476)         (4,054)       (1,343)
    Proceeds from sale of property and equipment                                       23               6            10
    Decrease (increase) in loan to shareholder                                       -                 69           (65)
                                                                                 --------        --------       -------

                      Cash flows from investing activities                         (6,453)         (3,979)       (1,398)
                                                                                 --------        --------       -------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Repayments on capital lease obligations                                          (260)           (114)         (106)
    Proceeds from borrowings                                                            -           2,635         1,671
    Repayments on borrowings                                                         (854)         (2,603)         (425)
    Proceeds from stock issuance                                                       31          97,162         3,934
    Restricted cash                                                                   (93)         (1,574)          -
    Proceeds from share options exercised                                           1,246           1,201            17
                                                                                 --------        --------       -------

                      Cash flows from financing activities                             70          96,707         5,091
                                                                                 --------        --------       -------
</TABLE>

                                                                     (Continued)


                                       49
<PAGE>

INFORMAX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(In thousands, Except Per Share Data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                       2001             2000           1999
<S>                                                                                 <C>               <C>            <C>
NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                                                               (21,308)          81,258         1,103

CASH AND CASH EQUIVALENTS, BEGINNING
    OF YEAR                                                                            82,656            1,398           295
                                                                                     ---------        ---------       ------

CASH AND CASH EQUIVALENTS, END OF YEAR                                               $ 61,348         $ 82,656        $1,398
                                                                                     =========        =========       ======

SUPPLEMENTAL INFORMATION ON NONCASH
    INVESTING AND FINANCING TRANSACTIONS:
    Acquisition of equipment through capital
        leases                                                                       $    738         $   -           $   15
                                                                                     =========        =========       ======

SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash paid for income taxes                                                       $    -           $   -           $  151
                                                                                     =========        =========       ======


    Cash paid for interest                                                           $    100         $    280        $   84
                                                                                     =========        =========       ======
</TABLE>

                                                                     (Concluded)
See notes to consolidated financial statements.



                                       50
<PAGE>

INFORMAX, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
--------------------------------------------------------------------------------

1.      ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

        Nature of the Business - InforMax, Inc., ("InforMax" or the "Company")
        is a global provider of life science informatic software solutions for
        genomic and biomolecular research. InforMax was incorporated in Delaware
        in May 1990 and its subsidiary, InforModus SARL, was organized under the
        tax laws of France in 1997. The Company is headquartered in Bethesda,
        Maryland, and has sales offices in Bethesda, Maryland; San Francisco,
        California; Denver, Colorado; Boston, Massachusetts; and Oxford,
        England.

        In October 2000, the Company completed its initial public offering (IPO)
        and realized proceeds of approximately $84 million, net of underwriting
        discounts and commissions and related expenses, from the sale of
        5,750,000 shares of its common stock.

        Principles of Consolidation - The consolidated financial statements
        include the accounts of InforMax, Inc., and its wholly owned subsidiary.
        All significant intercompany accounts and transactions have been
        eliminated.

        Revenue Recognition - The Company derives revenue principally from four
        sources: software licensing, maintenance fees, training, and consulting
        services primarily under government contracts. Software licensing,
        maintenance fees, and training are presented as software license and
        customer support on the Consolidated Statements of Operations.
        Consulting services are presented as professional services on the
        Consolidated Statements of Operations.

        The Company recognizes revenue based on the provisions of Statement of
        Position (SOP) No. 97-2, Software Revenue Recognition (as amended and
        interpreted). Software license fees are recognized as revenue upon the
        customer's execution of a noncancelable license agreement and delivery
        of the software, provided that the fee is fixed and determinable,
        collectibility is probable, and no customization of the software is
        required. Customer support and maintenance revenue, such as telephone
        support and product enhancements, is unbundled from the software license
        based upon vendor specific objective evidence of fair value (VSOE) and
        is recognized ratably over the maintenance period. VSOE for maintenance
        contracts is determined by the list price established by management with
        the relevant authority or by the renewal rate specified by the contract.

        In circumstances where fair market values for undelivered elements of a
        multiple element contract are not determinable, revenue on the contract
        is deferred until either fair value is determinable or when all elements
        are delivered, unless the only undelivered element is maintenance, in
        which case the total arrangement of fee is recognized ratably over the
        remaining maintenance period. Amounts received in advance of the
        delivery of products or performances of services are classified as
        deferred revenues in the consolidated balance sheet.

        Training is provided on a daily fee basis with revenue recognized as the
        services are provided.

        Revenue under the time-and-materials contracts are recognized based on
        contractual rates as the services are provided. Revenue under
        cost-plus-fixed-fee subcontract is recognized as recoverable costs are





                                       51
<PAGE>

        incurred, including a proportionate amount of the fixed fee. Billings
        under cost reimbursement contracts are based on provisional rates.

        Cost of Revenue - The primary component of the Company's cost of revenue
        for software licensing are packaging and distribution costs. The primary
        component of the Company's cost of revenue for customer support and
        professional services are compensation and related expenses.

        Cash and Cash Equivalents - Cash and cash equivalents consist of cash,
        money market accounts, and highly liquid investments with original
        maturities of three months or less to be cash equivalents.

        Restricted Cash - The restricted cash consists of deposits serving as
        collateral for letters of credit related to certain operating leases.
        Accordingly, these amounts are classified as restricted cash in the
        consolidated balance sheet.

        Unbilled Receivables - The Company has unbilled receivables of
        approximately $3.9 million and $1.6 million of which $2.7 million and
        $1.6 million is included in accounts receivable and $1.2 and $-0- is
        included in deposits and other assets at December 31, 2001 and 2000,
        respectively. Unbilled receivables consist of amounts owed to InforMax
        for which product has been delivered; but for which contractual billing
        criteria have not yet been met.

        Property and Equipment - Property and equipment are stated at cost, less
        accumulated depreciation and amortization. Depreciation is computed on a
        straight-line basis over the following estimated useful lives:

<TABLE>
<CAPTION>
<S>                                                                        <C>
           Computer equipment                                                                        3 years
           Furniture, fixtures, and other equipment                                            3 to 10 years
           Leasehold improvements                                           Lesser of lease term or 12 years
           Purchased software                                                                        3 years
</TABLE>

        Repairs and maintenance are expensed as incurred; major improvements and
        betterments are capitalized.

        Software Development Costs - Development costs incurred in the research
        and development of new software products and enhancements to existing
        software products are expensed as incurred until technological
        feasibility has been established. The Company considers technological
        feasibility to be established when all planning, designing, coding, and
        testing has been completed according to design specifications. After the
        technological feasibility has been established, any additional costs
        would be capitalized in accordance with Statement of Financial
        Accounting Standards No. 86, Accounting for the Costs of Computer
        Software to be Sold, Leased or Otherwise Marketed. Through December 31,
        2001, software development has been substantially completed concurrently
        with the establishment of technological feasibility, and accordingly, no
        costs have been capitalized to date.

        Income Taxes - The income tax provision includes income taxes currently
        payable plus the net change during the year in deferred tax assets or
        liabilities. Deferred tax assets and liabilities reflect the differences
        between the carrying value in conformity with accounting principles
        generally accepted in the United States of America and tax values of
        assets and liabilities using enacted tax rates for the period in which
        the differences are expected to reverse. Valuation allowances are
        provided when the expected realization of tax assets does not meet a
        more likely than not criterion.

        Concentration of Credit Risk - Financial instruments that potentially
        subject the Company to a concentration of credit risks consist
        principally of cash, cash equivalents, and accounts receivable. The





                                       52
<PAGE>

        Company generally does not require collateral on accounts receivable, as
        the majority of its customers are well-established companies, colleges,
        universities, and government entities.

        Stock-Based Compensation - The Company accounts for stock-based
        compensation to employees in accordance with APB Opinion No. 25, and
        accordingly, recognizes compensation expense for fixed stock option
        grants when the exercise price is less than the fair value of the shares
        on the date of the grant. Pro forma information is provided for employee
        stock option grants, as if the fair value based method defined in SFAS
        No. 123 had been applied.

        Evaluation of Long-lived Assets - The Company evaluates the potential
        impairment of long-lived assets based upon projections of undiscounted
        cash flows whenever events or changes in circumstances indicate that the
        carrying amount of an asset may not be fully recoverable. Management
        believes no impairment of these assets exists at December 31, 2001 and
        2000.

        Fair Value of Financial Instruments - The following disclosures of
        estimated fair value were determined by management using available
        market information and appropriate valuation methodologies. The fair
        values of the Company's financial instruments, including cash
        equivalents, accounts receivable, accounts payable, accrued expenses,
        and borrowings approximate their carrying values. Disclosure about fair
        values of financial instruments is based on pertinent information
        available to management as of December 31, 2001 and 2000. Although
        management is not aware of any factors that would significantly affect
        the reasonable fair value amounts, current estimates of fair value may
        differ significantly from the amounts presented herein.

        Advertising - The Company expenses all advertising costs as incurred.
        Total advertising expense was approximately $0.9 million, $0.8 million,
        and $0.6 million for the years ended December 31, 2001, 2000, and 1999,
        respectively.

        Common Stock - In February 1999, the Board of Directors approved a 100:1
        stock split of all of the shares of the common stock of the Company
        issued and outstanding. Further, the Board of Directors approved the
        exchange of 590,178 shares of nonvoting common stock for 590,178 shares
        of voting common stock by the Chief Executive Officer. In September
        2000, the Board of Directors approved a 1.67:1 stock split of all of the
        shares of the common stock of the Company issued and outstanding. In
        connection with this stock split, the Board of Directors approved the
        increase in the number of authorized shares of voting common stock to
        100 million shares. Shares issued and outstanding have been adjusted
        retroactively for all periods presented to reflect the stock splits.

        Estimates and Assumptions - The preparation of financial statements in
        conformity with accounting principles generally accepted in the United
        States of America requires management to make estimates and assumptions.
        These estimates and assumptions affect the reported amounts of assets
        and liabilities, the disclosure of contingent assets and liabilities at
        the date of the financial statements, as well as the reported amounts of
        revenues and expenses during the year. Actual results could vary from
        the estimates that were used.

        Reclassifications - Certain reclassifications have been made to the
        prior-year financial statements to conform to the current-year
        presentation.

        Comprehensive Income - The Company has no significant elements of
        comprehensive income other than net loss.

        Net Loss Per Share - Basic earnings per share is computed by dividing
        net income available to common shareholders by the weighted average
        number of common shares outstanding for the period. Diluted earnings per
        share reflects the potential dilution that could occur if securities or
        other contracts to issue






                                       53
<PAGE>

        common shares were exercised or converted into common shares for all
        periods presented. The weighted average number of common shares
        outstanding and potential dilutive shares were 32,845,477 18,133,304,
        and 17,261,716 relating to stock options and redeemable convertible
        preferred stock in 2001, 2000, and 1999, respectively. For the years
        ended December 31, 2001, 2000, and 1999, the Company incurred a net
        loss; therefore, potential common shares are not included in the
        calculation of the diluted net loss per common share.

        New Accounting Pronouncements - In June 1998, SFAS No. 133, Accounting
        for Derivatives Instruments and Hedging Activities, was issued. SFAS No.
        133 requires the recognition of qualifying derivatives at fair value as
        either assets or liabilities in the financial statements. The adoption
        of SFAS No. 133 on January 1, 2001, did not have an impact on the
        Company's financial position or results of operations.

        In June 2001, the Financial Accounting Standards Board issued Statement
        of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset
        Retirement Obligations, which addresses financial accounting and
        reporting for obligations associated with the retirement of tangible
        long-lived assets and the associated asset retirement costs. SFAS is
        effective for fiscal years beginning after June 15, 2002.

        In October 2001, the FASB issued SFAS No. 144, Accounting for the
        Impairment of Long-Lived Assets which supersedes SFAS No. 121,
        Accounting for the Impairment of Long-Lived Assets and for Long-Lived
        Assets to be Disposed Of, and the accounting and reporting provisions
        of APB No. 30, Reporting the Results of Operations - Reporting and
        Effects of Disposal of a Segment of a Business, and Extraordinary,
        Unusual and Infrequently Occurring Events and Transactions for the
        disposal of a segment of a business. This statement is effective for
        fiscal years beginning after December 15, 2001. SFAS No. 144 retains
        many of the provisions of SFAS No. 121, but addresses certain
        implementation issues associated with that Statement. The Company has
        not completed the process of evaluating the impact that will result
        from adopting SFAS 143 and SFAS 144. The Company is therefore unable to
        disclose the impact that adapting these pronouncements will have on its
        financial position and results of operations when the statements is
        adopted.

2.      PROPERTY AND EQUIPMENT

        Property and equipment consist of the following at December 31 (in
        thousands):

<TABLE>
<CAPTION>
                                                                                            2001          2000
<S>                                                                                       <C>           <C>
Computer equipment                                                                        $ 6,018       $ 3,874
Furniture, fixtures, and office equipment                                                   4,116         1,285
Leasehold improvements                                                                      1,875           408
Purchased software                                                                            855           281
                                                                                          --------      -------

                                                                                           12,864         5,848

Less:  Accumulated depreciation and amortization                                           (3,659)       (1,309)
                                                                                          --------      -------

Property and equipment, net                                                               $ 9,205       $ 4,539
                                                                                          ========      =======
</TABLE>

        Depreciation and amortization expense was approximately $2.4 million,
        $0.9 million, and $0.3 million for the years ended December 31, 2001,
        2000, and 1999, respectively.




                                       54
<PAGE>

        The following is a summary of assets under capital leases included in
        property and equipment at December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                                              2001        2000
<S>                                                                                           <C>         <C>
Computer equipment                                                                            $ 197       $ 343
Office furniture                                                                                738          16
                                                                                             ------       -----

           Total                                                                                935         359

Less:  Accumulated depreciation and amortization                                               (255)       (295)
                                                                                             ------       -----

Assets under capital lease - net                                                              $ 680        $ 64
                                                                                             ======       =====
</TABLE>


        Depreciation or amortization of assets under capital lease was
        approximately $0.1 million, $0.1 million, and $0.1 million for the years
        ended December 31, 2001, 2000, and 1999, respectively.

3.      BORROWINGS

        The Company has a Term Loan which provides for repayments of principal
        and interest in thirty equal monthly installments. The Company must also
        maintain various financial covenants, including minimum cash balance and
        certain financial ratios. As collateral for the loan, the Company has
        pledged property and equipment, trademarks and accounts receivable. In
        addition, the Company cannot declare or pay dividends on, or make any
        distribution with respect to, any class of its equity during the term of
        this facility. Borrowings under the term loan equipment bear interest at
        prime plus 1.25% (6.00% at December 31, 2001).

        Interest expense was approximately $0.2 million, $0.3 million, and
        $43,000 for the years ended December 31, 2001, 2000, and 1999,
        respectively.

        The following represents the scheduled maturities of the borrowings at
        December 31, 2001 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,                                                                      PRINCIPAL DUE
<S>                                                                                               <C>
       2002                                                                                        $625
       2003                                                                                          63
                                                                                                   ----

           Total                                                                                   $688
                                                                                                   ====
</TABLE>


4.      REDEEMABLE CONVERTIBLE PREFERRED STOCK

        On June 22, 1999, the Company entered into a Series A Preferred Stock
        Purchase Agreement (the Agreement) with a purchaser. The Company
        authorized, issued, and sold 2,161,265 shares of Series A






                                       55
<PAGE>

        Redeemable Convertible Preferred Stock (Series A Shares), $.01 par
        value, for approximately $3.9 million, net of expenses.

        The holder of any of such Series A Shares had the right, at its option
        at any time, to convert any such shares into the same number of fully
        paid and nonassessable shares of Common Stock. Each Series A Share was
        convertible into the number of shares of the Common Stock that would
        result from dividing the original issue price of the Series A Shares by
        the conversion price for the Series A Shares in effect at the time of
        the conversion.

        The holders of the Series A Shares were entitled to receive, out of
        funds legally available when and if declared by the Board of Directors,
        cumulative dividends at the annual dividend rate $.148 per share. Upon
        any liquidation, dissolution, or winding up of the Company, whether
        voluntary or involuntary, or upon redemption, the holders of the Series
        A Shares would have be entitled first, before any distribution or
        payment was made on the Common Stock or any other series of capital
        stock, to be paid out of available funds and assets an amount equal to
        the "Original Issue Price" for each Series A Share as adjusted for
        common stock events plus, in the case of each share, an amount equal to
        all accrued dividends unpaid thereon (whether or not declared) and any
        other dividends declared but unpaid thereon. The undeclared dividends
        were being accreted to the redemption value. The 2000 and 1999, accrued
        dividend of approximately $0.2 million and $0.2 million, respectively,
        are presented on the Consolidated Statements of Operations as a
        component of increase in carrying value of redeemable convertible
        preferred stock as an additional charge to net loss applicable to common
        shareholders.

        The difference between the carrying amounts of the Series A Shares and
        the redemption amount, based upon the liquidation amount, represents the
        cost of issuance, which was accreted pro rata over the period beginning
        on June 22, 1999, issuance date and ending on the prescribed redemption
        date, June 22, 2004. The 2000 and 1999 accretion of approximately
        $12,000 and $8,000, respectively, is presented on the Consolidated
        Statements of Operations as a component of increase in carrying value of
        redeemable convertible preferred stock as an additional charge to net
        loss applicable to common shareholders.

        On August 16, 2000, the Company entered into a Series B Redeemable
        Convertible Preferred Stock Purchase Agreement with a purchaser. The
        Company authorized, issued, and sold 950,747 shares of Series B
        redeemable Convertible Preferred Stock (Series B Shares), $.01 par
        value, for approximately $9.9 million, net of expenses. The Series B
        Shares contained similar rights and privileges as the Company's Series A
        Shares and were convertible into 1,587,747 shares of common stock of the
        Company at any time at a conversion price of $6.30. At the time of
        issuance of the Series B Shares, the deemed fair market value of the
        underlying common stock was $15.00 per share. Approximately $9,982 was
        allocated to additional paid-in capital as a presumed beneficial
        conversion feature. As the Series B Shares were convertible at any time,
        the entire beneficial conversion feature was immediately accreted to the
        Series B Shares on August 16, 2000. In connection with the issuance of
        the Series B Shares, the Company entered into joint development and
        marketing agreements. The accreted costs of issuance and the accrued
        dividend for 2000, of approximately $3,000 and $0.1 million,
        respectively, are presented on the Consolidated Statements of Operations
        as a component of increase in carrying value of redeemable convertible
        preferred stock as an additional charge to net loss applicable to common
        shareholders.

        Immediately prior to the closing of the IPO, all of the Company's
        outstanding shares of preferred stock were converted into shares of the
        Company's common stock.

5.      STOCK-BASED COMPENSATION

        Stock Options - On February 10, 1999, the Board of Directors instituted
        an Equity Incentive Plan (the 1999 Plan). The 1999 Plan, as amended,
        provides for up to 8,179,000 shares of common stock of the





                                       56
<PAGE>

        Company for the granting of restricted stock and incentive stock options
        to purchase common stock. The exercise price per share for an incentive
        stock option must be equal to or greater than the estimated fair market
        value, as determined by the closing price on the trade day preceding the
        date of grant.

        On December 20, 2001, the Board of Directors instituted the 2001 Stock
        Option Plan (the 2001 Plan). The 2001 Plan provides for up to 1,500,000
        shares of common stock of the Company for the granting of nonqualified
        stock options to purchase common stock. The exercise price per share is
        determined by the closing price on the trade day preceding the date of
        grant.

        Unless otherwise approved by the Board of Directors, all stock options
        and other stock equivalents issued to employees, directors and
        consultants shall be subject to vesting as follows: (a) twenty-five
        percent (25%) of such stock shall vest at the end of the first year
        following the earlier of the date of issuance or such person's service
        commencement date with the Company, and (b) seventy-five percent (75%)
        of such stock shall vest ratably over the remaining three-year period
        subsequent to the end of the first year described in (a).

        A summary of the status of the Company's stock options as of December 31
        and changes during the years then ended as presented below (in
        thousands, except per share data):

<TABLE>
<CAPTION>
                                             2001                    2000                     1999
                                    ----------------------  -----------------------  -----------------------
                                                 Weighted                Weighted                 Weighted
                                                 Average                  Average                  Average
                                                 Exercise                Exercise                 Exercise
                                      Shares      Price       Shares      Price        Shares      Price
<S>                                    <C>       <C>           <C>       <C>             <C>      <C>
Outstanding at beginning of year       13,666    $ 1.480       15,793    $ 0.280         1,109    $ 0.006

  Granted - exercise price equals
      fair value                        2,056      3.955        1,339     11.989        14,174      0.299
  Granted - exercise price greater
      than fair value                     -          -            712      1.618          759       0.299
  Exercised                            (4,995)     0.262       (4,035)     0.300         (137)      0.128
  Canceled/forefeited                    (577)     8.880         (143)     1.260         (112)      0.299
                                      -------                 -------                  -------

Outstanding at year-end                10,150    $ 2.160       13,666    $ 1.480        15,793    $ 0.280
                                      =======                 =======                  =======

Options exercisable at year-end         7,297                  11,314                   13,176
Options available for future grant      2,360                   2,338                      922

Weighted average fair value of
   options granted during the year:
   Exercise price equals fair value at
       grant date                                $ 3.955                $ 11.989                   $ 0.299
   Exercise price less than fair value
       at grant date                             $  -                   $  4.196                   $ 0.968
</TABLE>



                                       57
<PAGE>

        At December 31, 2001, options outstanding were as follows (in
        thousands):

<TABLE>
<CAPTION>
                                         OPTIONS OUTSTANDING                        OPTIONS EXERCISABLE
                           ------------------------------------------------    -----------------------------
                                             WEIGHTED
                                              AVERAGE         WEIGHTED                        WEIGHTED
                                             REMAINING         AVERAGE                        AVERAGE
         RANGE OF               NUMBER      CONTRACTUAL       EXERCISE           NUMBER       EXERCISE
   EXERCISE PRICE             OUTSTANDING       LIFE            PRICE          EXERCISABLE     PRICE
<S>                                <C>           <C>        <C>                 <C>        <C>
    $0.006                             146           5.2        $ 0.006              146        $ 0.006
    $0.300                           6,990           7.4           0.30            6,584           0.30
    $1.00 - $1.99                       91           8.1           1.79               44           1.79
    $2.00 - $2.99                      334           9.1           2.74               30           2.96
    $3.00 - $3.99                    1,460           9.4           3.61              176           3.66
    $4.00 - $6.99                      405           9.0           6.30               97           6.19
    $7.00 - $9.99                       75           9.3           7.47               18           8.03
    $10.00 - $14.99                     29           9.0          11.40                5          11.36
    $15.00 - $15.99                    430           8.7          15.00              135          15.00
    $16.00 - $29.38                    190           8.8          19.03               62          19.66
                                    ------                       ------            -----         ------
                                    10,150                       $ 2.16            7,297         $ 2.78
                                    ======                       ======            =====         ======
</TABLE>


        The weighted average assumptions used for options granted during fiscal
        years ended December 31, were as follows:

<TABLE>
<CAPTION>
                                                                           2001       2000       1999
<S>                                                                     <C>        <C>        <C>
Risk-free interest rate                                                    4.4 %      5.9 %      5.2 %
Expected dividend yield                                                    0.0 %      0.0 %      0.0 %
Expected life                                                            4 years    4 years    4 years
Volatility factor                                                           54%         80%      71%
</TABLE>


        The pro forma effects of applying SFAS No. 123 for fiscal years ended
        December 31, would be as follows (in thousands):

<TABLE>
<CAPTION>
                                                                           2001           2000           1999

<S>                                                                      <C>             <C>            <C>
Pro forma net loss                                                       $(26,298)       $(12,590)      $(2,266)
Pro forma net loss applicable to
    common shares                                                        $(26,298)       $(22,959)      $(2,442)
Pro forma net loss per common share -
    basic and diluted                                                     $ (1.15)        $ (2.46)      $ (0.63)
</TABLE>

        The effects of applying SFAS No. 123 in the pro forma disclosures are
        not indicative of future amounts, and additional awards in the future
        years are anticipated.

        The Company recorded compensation expense of approximately $0.8 million,
        $1.6 million and $0.1 million related to issuance of the stock options,
        warrants, and restricted stock discussed below for the years ended
        December 31, 2001, 2000, and 1999, respectively. Deferred compensation
        of approximately $0.5 million and $1.4 million, related to the issuance
        of these options, warrants, and restricted stock, is included in
        stockholders' equity at December 31, 2001 and 2000, respectively.





                                       58
<PAGE>

        In 2001 and 2000, the Company granted 6,000 and 30,000, respectively,
        fully vested, nonforfeitable, and fully exercisable nonqualified stock
        options to certain nonemployee advisors of approximately $0.1 million in
        2001 and 2000, respectively.

        In 2001, the Company granted 30,000 nonqualified stock options to
        nonemployee directors. These grants vest over one year, which coincides
        with the period of performance.

        During 1999, the Company granted 175,350 nonqualified stock options to
        one nonemployee director and two nonemployee advisors. The nonemployee
        director compensation expense was determined based upon the difference
        between the exercise price and the estimated fair market value of the
        common stock at the date of grant. The Company recognized compensation
        expense related to the nonemployee advisors nonqualified stock options
        on a monthly basis as the options are earned and vest, based upon the
        fair value of the options earned. Deferred compensation expense is
        adjusted monthly to reflect the amount of compensation expense
        recognized and the change in the estimated fair value for the unvested
        nonqualified stock options. Changes in the fair value of the unvested
        nonqualified stock options result in changes in future compensation
        charges. All of these options were granted for a ten-year period and
        vest over either three, four, or five years which coincides with the
        period of performance. During 2000, both of the nonemployee advisors
        terminated their service agreements; 95,080 options were forfeited and
        55,220 options were exercised.

        Warrants - In 2000 in connection with the Bridge Loan, the Company
        issued 15,030 fully vested warrants for right to purchase 15,030 shares
        of common stock at an exercise price of $5.99 per share, until the
        warrant's expiration in 2007. The fair value of the warrant was
        amortized to additional paid-in capital over the period of the bridge
        loan with a corresponding charge to interest expense. Also in 2000, the
        Company issued for services fully vested warrant exercisable for 25,050
        shares to a non employee advisor for the right to purchase 25,050 shares
        of common stock at an exercise price of $6.37 per share, until the
        warrant's expiration in 2005. The fair value of the warrant was charged
        to additional paid-in capital with a corresponding charge to selling,
        general and administrative expense.


        In 2001, the Company issued a fully vested warrant exercisable for
        25,000 shares to a venture fund (one of the Company's directors serves
        as managing director) in exchange for strategic advisory services
        provided for the right to purchase 25,000 shares of common stock at an
        exercise price of $8.00 per share, until the warrant's expiration in
        2006. The fair value of the warrant was charged to additional paid-in
        capital with a corresponding charge to selling, general and
        administrative expense.

        At December 31, 2001, all of the 65,080 warrants were outstanding.

        Restricted Stock - In 1999, the Board of Directors granted 100,200
        shares of restricted stock to certain consultants of the Company. The
        restricted stock vests over a four-year period and is subject to service
        and performance requirements. At the time of grant, the restricted stock
        and deferred compensation relating to the issuance of the restricted
        stock was recorded based on the estimated fair market value of the
        Company's common stock. The Company recognizes compensation expense
        related to the restricted stock on a monthly basis as the stock is
        earned and vests, based upon the difference between the price paid at
        the original date of issuance and the estimated fair market value of the
        common stock at the end






                                       59
<PAGE>

        of each subsequent month. Deferred compensation expense is adjusted
        monthly to reflect the amount of compensation expense recognized and the
        change in the estimated fair market value of the Company's common stock
        with respect to the unvested restricted stock. In 2001, in accordance
        with certain terms of one of the restricted stock agreements, vesting
        was accelerated and 50,100 shares were issued without restriction.

6.      INCOME TAXES

        The components of the expense (benefit) for income taxes for the years
        ended December 31 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31,
                                                                           -------------------------------------
                                                                                 2001         2000       1999
<S>                                                                             <C>        <C>         <C>
Current expense (benefit):
    Federal                                                                      $  -          $(22)      $ (86)
    State                                                                           -            (7)        (17)
                                                                                 ------        ----       -----

           Total current expense (benefit)                                          -           (29)       (103)
                                                                                 ------        ----       -----

Deferred expense (benefit):
    Federal                                                                       1,300         (22)       (504)
    State                                                                           -            -         (119)
                                                                                 ------        ----       -----

           Total deferred benefit                                                 1,300         (22)       (623)
                                                                                 ------        ----       -----

Total expense (benefit) for income taxes                                         $1,300        $(51)      $(726)
                                                                                 ======        ====       =====
</TABLE>


        At December 31 the components of the Company's deferred taxes were as
        follows (in thousands):

<TABLE>
<CAPTION>
                                                                           2001           2000           1999
<S>                                                                       <C>             <C>             <C>
Deferred tax assets:
    Net operating losses                                                  $ 21,475        $ 10,863        $ 493
    Deferred revenue                                                         2,133           2,034          700
    Compensation relating to stock options                                      86             148           85
    Other assets                                                             1,180              84           36
                                                                          --------        --------        -----

           Total deferred tax assets                                        24,874          13,129        1,314
                                                                          --------        --------        -----

Deferred tax liabilities:
    Accelerated depreciation                                                   (91)            (65)         (36)
                                                                          --------        --------        -----

           Total deferred tax liabilities                                      (91)            (65)         (36)
                                                                          --------        --------        -----

Net deferred tax assets before
    valuation allowance                                                     24,783          13,065        1,278

Valuation allowance                                                        (24,783)        (11,765)          -
                                                                          --------        --------        -----

Net deferred tax assets                                                   $    -          $  1,300       $1,278
                                                                          ========        ========        =====
</TABLE>





                                       60
<PAGE>

        At December 31, 2001, the Company had net federal operating loss
        carryforwards of approximately $27 million expiring in 2021, $26.8
        million expiring in 2020, and $1.3 million expiring in 2019.
        Approximately $11.1 million and $21 million of net operating loss
        carryforwards that expire in 2021 and 2020 are the result of the
        exercise of non-qualified stock options. Management believes that, based
        on a number of factors, the available objective evidence creates
        sufficient uncertainty regarding the relizability of the deferred tax
        assets, such that a full valuation allowance is required for 2001. A
        valuation allowance was provided in 2001 and 2000 to account for
        deferred tax assets for which realization does not meet more likely than
        not criterion.

        The provision for income taxes differs from the amount computed by
        applying the statutory U.S. Federal income taxes as a result of the
        following:

<TABLE>
<CAPTION>
                                                                                   2001        2000        1999
<S>                                                                               <C>         <C>         <C>
Statutory U.S. Federal rate                                                       (34.0)%     (34.0)%     (34.0)%

    (Increase) decrease in taxes resulting from:
        State income taxes - net of Federal benefit                                (7.0)       (4.6)       (4.3)
        Stock options                                                             (18.7)      (66.8)          -
        Other                                                                       1.4        (4.8)        2.8
        Valuation allowance                                                        64.8       109.7           -
                                                                                   ----        ----       -----

Effective tax rate                                                                  6.5 %      (0.5)%     (35.5)%
                                                                                   ====        ====       =====
</TABLE>

7.     RETIREMENT PLAN

        The Company maintains a 401(k) retirement plan (the Plan) covering all
        eligible employees, as defined. Under the terms of the Plan,
        participants may defer a portion of their salaries as employee
        contributions and are immediately 100% vested. The Company may make
        matching, nonelective or discretionary contributions to the Plan. In
        general, matching and discretionary contributions made by the Company
        vest ratably over a three-year period. The Company did not make a
        contribution under this Plan for 2001 and 2000.

8.      RELATED PARTY TRANSACTIONS

        The Company had an arrangement with another company, the president of
        which was a former member of the Company's Board of Directors, whereby
        the other company provides advisory and fiduciary oversight services to
        the Company at an average monthly fee of $2,500. This arrangement ended
        and was paid in full during 1999. Total fees paid to the other company
        under this arrangement totaled $50,000 for the year ended 1999.

        The Company engaged a law firm during 2001, 2000, and 1999. An attorney
        at the firm is also a shareholder of the Company. The Company incurred
        approximately $0.6 million, $0.4 million, and $0.2 million in expense to
        the firm and the Company's accrued liability to the firm was
        approximately $0.1 million and $0.1 million at 2001 and 2000,
        respectively.

        The Company had an arrangement with a shareholder of the Company whereby
        the shareholder provides consulting services to the Company. Total fees
        paid to the shareholder under this arrangement totaled approximately
        $38,000 and $50,000 for the years ended 2000 and 1999, respectively.
        This arrangement ended and was paid in full during September 2000.





                                       61
<PAGE>

        Beginning in 2000, the Company had an arrangement with a nonqualified
        stock option holder of the Company whereby the option-holder provides
        consulting services to the Company. Total fees paid to the option-holder
        under this arrangement totaled approximately $38,000 and $21,000 for the
        years ended 2000 and 1999, respectively. This arrangement ended and was
        paid in full during 2000.

        In 1999, the Company loaned the president of the Company $65,000 which
        was due in full with all unpaid, accrued interest by April 2004. The
        interest rate of this note is prime plus 1% (9.5% at December 31, 1999).
        Interest income earned during 2000 and 1999 was approximately $4,000,
        respectively. In 2000, the president of the Company paid the interest
        and principal outstanding under the loan in full.

        In 2001, the Company entered into a perpetual software license agreement
        with a related Company in which InforMax's former Chief Executive
        Officer is also the Chairman and a significant stockholder of the
        related Company purchasing the software. In connection with this
        agreement the Company has recognized approximately $0.5 million in
        revenue. As of December 31, 2001, there is approximately $0.2 million in
        accounts receivable related to this transaction.

9.      COMMITMENTS AND CONTINGENCIES

        Lease Commitment - The Company has noncancelable operating leases
        primarily for office facilities. The Company leases some of its computer
        and office equipment under capital leases. The following is a schedule
        of future minimum lease payments for capital and operating leases as of
        December 31, 2001 (in thousands):

<TABLE>
<CAPTION>
                                                                                          CAPITAL     OPERATING
YEAR ENDED DECEMBER 31,                                                                    LEASE       LEASES
<S>                                                                                         <C>        <C>
       2002                                                                                  $227       $ 4,028
       2003                                                                                   216         4,092
       2004                                                                                   126         3,576
       2005                                                                                    -          2,568
       2006                                                                                    -          2,121
       Thereafter                                                                              -         10,257
                                                                                             ----       -------

           Total future minimum lease payments                                                569       $26,642
                                                                                                        =======

Less:  Current portion                                                                        227
                                                                                             ----

Capital lease obligation - net of current portion                                            $342
                                                                                             ====
</TABLE>

        Total rental expense under all office leases for fiscal years 2001,
        2000, and 1999, was approximately $3.8 million, $0.8 million, and $0.3
        million, respectively.

        The rental agreements require that the Company maintain certain letters
        of credit totaling $1.7 million. The irrevocable standby letters of
        credit are secured by the Company's restricted cash and expire September
        8, 2002.

        Employment Agreements - Certain employees have employment agreements
        that entitle them to two weeks of severance in case of termination. In
        addition, three senior executive officers and two executive officers of
        the Company have employment agreements that entitle these individuals to
        specified amounts of severance if such individuals are terminated.



                                       62
<PAGE>

        Government Audits - Payments to the Company on subcontracts with prime
        U.S. Government contracts are subject to adjustment upon audit by
        various agencies of the U.S. Government. No audits of costs and the
        related payments have been performed by the various agencies. At
        December 31, 2001, there were no liabilities accrued related to the
        billing in excess of cost. In the opinion of management, the final
        determination of these costs and related payments will not have a
        material effect on the Company's financial position, results of
        operations, or liquidity.

        Litigation - In the ordinary course of conducting its business, the
        Company becomes involved in litigation and administrative proceedings.
        It is the opinion of the Company's management that the outcome of these
        proceedings, individually, or in the aggregate, will not have a material
        adverse effect on the business or consolidated financial position of the
        Company.

        On November 28, 2001, the Company received notice that Barry S.
        Kantrowitz initiated a securities class action lawsuit for and on behalf
        of himself and all others similarly situated in the United States
        District Court, Southern District of New York against eight underwriters
        and two executive officers, and the Company as a nominal defendant. In
        the complaint, Barry S. Kantrowitz stated he purchased shares of the
        Company issued in connection, with and traceable to, the offering and
        alleged the offering contained material misrepresentations and
        omissions.

        The Company believes that the claim is wholly without merit, that
        meritorious defenses are available and has every intention to vigorously
        contest and defend against these claims. Further, the Company  intends
        to assert all of its legal rights in this matter, including all
        counterclaims. However, due to the inherent uncertainties of litigation,
        the Company cannot accurately predict the ultimate outcome of this
        litigation. Any unfavorable outcome of this litigation could have a
        negative impact on the Company's business, financial condition, results
        of operations or cash flows.

        The Company and its former chairman are also parties to lawsuits and
        claims which allege a commission and other consideration were payable
        for an introduction to a venture capital firm and that the Company
        failed to honor these agreements.

        The Company believes that these claims are wholly without merit, that
        meritorious defenses are available and that there is every intention to
        vigorously contest and defend against these claims.  Further, the
        Company intends to assert all of its legal rights in this matter,
        including all counterclaims.  However, due to the inherent uncertainties
        of litigation, the Company cannot accurately predict the ultimate
        outcome of the litigation. Any unfavorable outcome of this litigation
        could have a negative impact on the Company's business, financial
        condition, results of operations or cash flows.

10.     VALUATION AND QUALIFYING ACCOUNTS

        The following table sets forth activity in the Company's allowance for
        doubtful accounts receivable for the years ended December 31 (in
        thousands):

<TABLE>
<CAPTION>
                                                        BALANCE AT                                  BALANCE AT
                                                        BEGINNING     CHARGES TO                      END OF
                                                        OF PERIOD       EXPENSE      DEDUCTIONS       PERIOD
<S>                                                      <C>            <C>            <C>           <C>
1999                                                     $15            $  -           $  -           $ 15
2000                                                      15               5              -             20
2001                                                      20             908            (371)          557
</TABLE>

11.     SEGMENT INFORMATION

        The Company has two reportable segments, professional services and
        software.

        The principal products in the software segment are our Vector NTI Suite
        and our GenoMax enterprise platform. Software segment revenues are
        generated from software license fees and maintenance fees. Our
        professional services segment consists of services rendered under our
        government subcontracts with NCBI and provided to our software customers
        including installation, training, and customization of our software
        products.

        Segment data includes an allocation of all general and administrative
        expenses to each of its operating segments based on each segment's
        proportionate share of salary expense.



                                       63
<PAGE>

        The table below presents reported segment amounts in thousands for the
        years ended December 31 (in thousands):

<TABLE>
<CAPTION>
                                                                                    PROFESSIONAL
                                                                    SOFTWARE          SERVICES          TOTAL
<S>                                                                 <C>              <C>             <C>
2000:
    Revenue                                                         $ 13,907         $  3,240         $ 17,147
    Cost of revenue                                                      697            1,737            2,434
    Loss from operations                                              (4,080)          (7,796)         (11,876)

2001:
    Revenue                                                           21,425            3,759           25,184
    Cost of revenue                                                    1,827            1,872            3,699
    Loss from operations                                             (10,623)         (12,767)         (23,030)
</TABLE>

        The table below presents asset allocation of reported segment amounts at
        December 31 (in thousands):

        The difference between loss from operations and net loss is attributable
        to investment earnings, interest and other expense totaling $1.2 million
        and $2.9 million for the years ended December 31, 2000 and 2001,
        respectively.

 <TABLE>
<CAPTION>
                                                                                           2001            2000
<S>                                                                                      <C>            <C>
Allocable assets:
    Professional services                                                                $   656        $   815
    Software                                                                              10,224          8,248

Nonallocable assets                                                                       73,598         91,887
</TABLE>

        Significant Customers - Two customers accounted for approximately 19%
        and 10% of total accounts receivable at 2001, two customers accounted
        for approximately 14% and 10% of total accounts receivable at 2000, and
        another customer accounted for approximately 14% of total accounts
        receivable at 1999.

        There were no sales to any individual customer that accounted for 10% or
        more of the total revenue for 2001. One customer accounted for
        approximately 10% and 19% of total revenue for the years ended 2000 and
        1999, respectively. There were no sales to any individual country except
        for the United States where such sales accounted for 10% or more of
        total revenue.



                                       64
<PAGE>

        Geographic Information - Revenues by geographic destination and as a
        percentage of total revenues for the years ended December 31 are as
        follows (in thousands):

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED
                                                                    --------------------------------------------
                                                                           2001           2000          1999
<S>                                                                       <C>            <C>           <C>

    United States                                                         $18,241        $12,799       $ 8,514
    International                                                           6,943          4,348         1,500
                                                                          -------        -------       -------

                                                                          $25,184        $17,147       $10,014
                                                                          =======        =======       =======
</TABLE>

        Substantially all assets are held in the United States at December 31,
        2001.




                                       65
<PAGE>



12.     QUARTERLY INFORMATION (UNAUDITED)

        The following are the unaudited quarterly results of operations for the
        fiscal years ended December 31:

<TABLE>
<CAPTION>
                                                                      QUARTER ENDED
                                         ----------------------------------------------------------------------
                                               MARCH 31        JUNE 30           SEPTEMBER 30       DECEMBER 31
                                                        (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>             <C>               <C>                <C>
2001:
    Revenues                                    $ 6,590         $ 7,568           $  4,680           $ 6,346
    Gross profit                                  5,603           6,620              3,843             5,419
    Operating expenses                           10,895          11,333              9,827            12,460
    Net loss                                     (4,173)         (3,896)            (5,397)           (7,958)
    Net loss applicable to
        common shares                            (4,173)         (3,896)            (5,397)           (7,958)
    Basic net loss per
        common share                              (0.21)          (0.17)             (0.22)            (0.33)
    Diluted net loss per common
        share                                     (0.21)          (0.17)             (0.22)            (0.33)

2000:
    Revenues                                    $ 3,208         $ 3,301           $  4,873           $ 5,765
    Gross profit                                  2,683           2,714              4,248             5,069
    Operating expenses                            5,089           6,264              6,398             8,838
    Net loss                                     (2,450)         (3,619)            (2,220)           (2,385)
    Net loss applicable to
        common shares                            (2,534)         (3,703)           (12,338)           (2,468)
    Basic net loss per
        common share                              (0.61)          (0.59)             (1.55)            (0.13)
    Diluted net loss per common
        share                                     (0.61)          (0.59)             (1.55)            (0.13)
</TABLE>

13.     SUBSEQUENT EVENTS

        In January 2002, the Company made a $1.5 million investment in Tissue
        Informatics, a company that develops automated digital microscopy tissue
        imaging systems and analysis software to generate novel tissue
        information.




                                       66
<PAGE>



ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE


        Not applicable.






                                       67
<PAGE>




                                 INFORMAX, INC.


                                    PART III


ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        Information responsive to this Item is incorporated herein by reference
to our definitive proxy statement for the 2002 Annual Meeting of Stockholders to
be filed within 120 days after the end of our fiscal year.

ITEM 11 - EXECUTIVE COMPENSATION

        Information responsive to this Item is incorporated herein by reference
to our definitive proxy statement for the 2002 Annual Meeting of Stockholders to
be filed within 120 days after the end of our fiscal year.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        Information responsive to this Item is incorporated herein by reference
to our definitive proxy statement for the 2002 Annual Meeting of Stockholders to
be filed within 120 days after the end of our fiscal year.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Information responsive to this Item is incorporated herein by reference
to our definitive proxy statement for the 2002 Annual Meeting of Stockholders to
be filed within 120 days after the end of our fiscal year.

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

A)      1.      FINANCIAL STATEMENTS:

   The information required by this item is included in Item 8 of Part II of
this Form 10-K.


        2.      FINANCIAL STATEMENTS SCHEDULES:

        None.

B)      REPORTS ON FORM 8-K:

        None.

C)      EXHIBITS:

        See Exhibit Index attached. The exhibits listed in the attached Exhibit
Index are filed or incorporated by reference as part of this report.




                                       68
<PAGE>



                                   SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this annual report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the city
of Bethesda, State of Maryland, on April 1, 2002.


                                 INFORMAX, INC.

                                 By: /s/ ANDREW P. WHITELEY
                                    ---------------------------------
                                    Andrew P. Whiteley
                                    Chairman of the Board of Directors,
                                    Chief Executive Officer and President



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


<TABLE>
<CAPTION>
                   SIGNATURE                               TITLE                  DATE
                   ---------                               -----                  ----
<S>                                              <C>                       <C>
                                                 Chairman of the Board,
                                                 Chief Executive Officer
                                                 and President
/s/ ANDREW P. WHITELEY                           (Principal Executive
---------------------------------
Andrew P. Whiteley                               Officer)                  April 1, 2002



/s/ JOHN M. GREEN                                Chief Financial Officer
---------------------------------                and Chief Operating
John M. Green                                    Officer                   April 1, 2002
                                                 (Principal Financial
                                                 Officer)

/s/ HARRY D'ANDREA
---------------------------------                Director                  April 1, 2002
Harry D'Andrea

/s/ HOOKS JOHNSTON
---------------------------------                Director                  April 1, 2002
Hooks Johnston

/s/ WEI-WU HE, PH.D.
---------------------------------                Director                  April 1, 2002
Wei-Wu He, Ph.D.
</TABLE>




                                       69
<PAGE>



                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>
               EXHIBIT
               NUMBER                                   DESCRIPTION
               ------     ---------------------------------------------------------------
<S>                       <C>
                3.1 (1)   Restated Certificate of Incorporation

                3.2 (6)   Restated Bylaws

                4.1 (1)   Specimen Common Stock Certificate

                4.2 (5)   Rights Agreement dated June 4, 2001 between InforMax, Inc. and
                          American Stock Transfer & Trust Company as Rights Agent.

               10.1 (2)   Amended Equity Incentive Compensation Plan

               10.2 (7)   2001 Employee Stock Option Plan

               10.3 (1)   Amended and Restated Investor Rights Agreement between InforMax,
                          Inc., FBR Technology Venture Partners II, L.P. and Amersham Pharmacia
                          Biotech, Inc. dated August 16, 2000

               10.4 (1)   Non-Preferred Holder Rights Agreement between InforMax, Inc. and each
                          of the Weiss, Peck & Greer entities noted in the Principal Stockholders
                          table dated March 29, 2000

               10.5 (1)   Loan Agreement between InforMax, Inc. and PNC Bank, National
                          Association dated May 6, 1999, Amendment No. 1 thereto dated August 6,
                          1999, Amendment No. 2 thereto dated November 30, 1999, Amendment No. 3
                          thereto dated February 7, 2000, Amendment No. 4 thereto dated February
                          29, 2000 and Amendment No. 5 thereto dated June 19, 2000

               10.6 (1)   Second Amended and Restated Revolving Credit Note dated February 7, 2000

               10.7 (1)   Third Amended and Restated Line of Credit Note dated February 7, 2000

               10.8 (1)   Security Agreement between InforMax, Inc. and PNC Bank, National
                          Association dated May 6, 1999

               10.9 (1)   Office Lease Agreement between InforMax, Inc. and Jemal Cayre 6010
                          Executive Blvd. L.L.C. dated March 31, 1999, Addendum No. 1 thereto
                          dated July 8, 1999 and Addendum No. 2 thereto dated February 1, 2000 and
                          Addendum No. 3 thereto dated May 19, 2000

               10.10(1)   Letter Agreement between InforMax, Inc. and Management System Designers,
                          Inc. dated July 9, 1999, in connection with services to be provided to the
                          National Center for Biotechnology Information (NCBI), addendum thereto
                          dated November 22, 1999, addendum thereto dated November 22, 1999, addendum
                          dated July 26, 2000, and addendum dated as of September 18, 2000***

               10.11 (3)  Letter Agreement dated October 10, 2000 and Letter Agreement dated
                          November 7, 2000, between InforMax, Inc. and Management System Designers,
                          Inc., amending the Letter Agreement between the parties dated July 9, 1999,
                          as amended***

               10.12 (1)  Technical Services Agreement between InforMax, Inc. and Unisys Corporation
                          dated April 18, 2000 in connection with services to be provided to the
                          National Center for Biotechnology Information (NCBI)***

               10.13 (1)  Warrant Purchase Agreement between InforMax, Inc and PNC Bank, National
                          Association dated June 19, 2000

               10.14 (1)  Joinder Agreement between InforMax, Inc. and Paul Capital Partners VI
                          Holdings dated June 13, 2000

               10.15 (1)  Joinder Agreement between InforMax, Inc. and Cogene Biotech Ventures,
                          L.P. dated June 29, 2000

               10.16 (1)  Joinder Agreement between InforMax, Inc. and Gene Fund, LP, Kenson
                          Venture, LLC and VitalBio Holdings, Inc. dated June 23, 2000

               10.17 (1)  Data Analysis Products Development and Distribution Agreement dated
                          August 16, 2000 between InforMax, Inc. and Amersham Pharmacia Biotech, Inc.

               10.18 (3)  Addendum to Data Analysis Product Development and Distribution Agreement
                          dated February 9, 2001 between InforMax, Inc. and Amersham Pharmacia Biotech, Inc.

               10.19 (1)  Sublease between PG&E Generating Company and InforMax, Inc. dated as of
                          September 21, 2000

               10.20 (1)  Commitment letter dated August 14, 2000 from Dr. Alex Titomirov to InforMax, Inc.

               10.21 (1)  Joinder Agreement between InforMax, Inc. and Gene Fund, LP dated
                          August 16, 2000

               10.22 (1)  Joinder Agreement between InforMax, Inc. and Gene Fund, LP dated as
                          of September 8, 2000

</TABLE>


                                       70
<PAGE>

<TABLE>
<S>                       <C>
               10.23 (1)  Employment Agreement between Timothy Sullivan and InforMax, Inc.
                          dated April 1, 1999

               10.24 (3)  Employment Agreement between John Green and InforMax, Inc. dated as
                          of March 2, 2001

               10.25 (3)  Sublease Agreement between Discovery Communications, Inc. and
                          InforMax, Inc. dated as of February 22, 2001

               10.26 (7)  Warrant dated March 8, 2001 to Emerging Technology Partners LLC

               10.27 (7)  Executive Employment Agreement of Andrew Whiteley dated March 13, 2002

               10.28 (7)  Letter Agreement dated February 14, 2002 concerning services of John
                          Green

               10.29 (7)  Employment Letter dated April 8, 1999 between InforMax, Inc. and Richard
                          Melzer

               10.30 (1)  Employment Agreement dated July 14, 2000 between InforMax, Inc. and
                          Vadim Babenko

               10.31 (4)  Amendment No. 1 to Employment Agreement of Vadim Babenko

               10.32 (7)  Separation Agreement and General Mutual Release of All Claims dated
                          October 12, 2001 between InforMax, Inc. and James Bernstein, M.D.

               10.33 (7)  Separation Agreement, General Mutual Release of All Claims and Consulting
                          Agreement dated October 17, 2001 between InforMax, Inc. and Alexander
                          Titomirov, Ph.D.

               10.34 (7)  Employment Letter dated October 18, 2000 between InforMax, Inc. and
                          Stephen Lincoln

               21.1  (7)  Subsidiaries of InforMax, Inc.
               23.1  (3)  Consent of Deloitte & Touche LLP
</TABLE>
----------
(1) Incorporated by reference from InforMax, Inc.'s Registration Statement on
Form S-1 (333-41194).

(2) Incorporated by reference from InforMax, Inc.'s Registration Statement on
Form S-8 (333-51658).

(3) Incorporated by reference from InforMax, Inc.'s 2000 Form 10-K.

(4) Incorporated by reference from InforMax's Form 10-Q filed May 15, 2001.

(5) Incorporated by reference from InforMax's Form 8-K filed on June 7, 2001.

(6) Incorporated by reference from InforMax's Form 10-Q filed November 14, 2001.

(7) Filed herewith.

*** Pursuant to the Commission's Orders granting confidential treatment under
Rule 406 of the Securities Act of 1933 or Rule 24(b)-2 under the Securities
Exchange Act or 1934, certain confidential portions of this Exhibit were omitted
by redaction of text.


                                       71