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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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Form 10-K



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|   |  |                                                                                                              
|-- |  | -------------------------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
	15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934                       
|  
|   |  | For the fiscal year ended December 31,
	2001                                                                 
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
	15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE
	REQUIRED)
|  
|   |  | For the transition period
	from           to                                                                 

Commission File
Number

Symyx Technologies, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                |  |                                      
|--------------------------------------------------------------- |  | -------------------------------------
|Delaware                                                        |  | 77-0397908                           
|(State or other jurisdiction of
	incorporation or organization) |  | (IRS Employer
	Identification Number)

|                                                             |  |                                                      
|------------------------------------------------------------ |  | -----------------------------------------------------
|3100 Central Expressway,
	Santa Clara, California 95051      |  | (408) 764-2000                                       
|(Address of principal executive offices
	including zip code) |  | (Registrants telephone number,
	including area code)

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

None


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

Common Stock, $0.01 Par Value


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     þ Yes          o 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 voting Common Stock
held by non-affiliates of the registrant (based on the closing
price for the Common Stock on the Nasdaq National Market on
March 14, 2002) was approximately $448.4 million. As
of March 14, 2002, 30,680,500 shares of Common Stock were
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Certain sections of the Proxy Statement to be
filed in connection with the 2002 Annual Meeting of Stockholders
are incorporated by reference into Part III of this
Form 10-K Report where indicated.



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TABLE OF CONTENTS



|                  |                                                                                                 |  |  |  |  |  |  | 
|----------------- | ----------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I           
|                  | Item 1. Business                                                                               
|                  | Item 2. Properties                                                                             
|                  | Item 3. Legal Proceedings                                                                      
|                  | Item 4. Submission of Matters to a Vote of Security Holders                                    
|PART II          
|                  | Item 5. Market for Registrants Common Equity and Related Stock Matters                        
|                  | Item 6. Selected Financial Data                                                                
|                  | Item 7. Managements Discussion and Analysis of Financial Condition and Results From Operations
|                  | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                            
|                  | Item 8. Financial Statements and Supplementary Data                                            
|                  | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure   
|PART III         
|                  | Item 10. Directors and Executive Officers of the Registrant                                    
|                  | Item 11. Executive Compensation                                                                
|                  | Item 12. Security Ownership of Certain Beneficial Owners and Management                        
|                  | Item 13. Certain Relationships and Related Transactions                                        
|PART IV          
|                  | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      
|SIGNATURES       
|INDEX TO EXHIBITS
|EXHIBIT 21       
|EXHIBIT 23.1     



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INDEX

TABLE OF CONTENTS

|         |     |  |  |                                                                                          |  |  |    | 
|-------- | --- |  |  | ---------------------------------------------------------------------------------------- |  |  | -- | 
|Item     |     |  |  | Page                                                                                    
|         |     |  |  |                                                                                         
|PART I  
|         | 1.  |  |  | Business                                                                                 |  |  | 2  | 
|         | 2.  |  |  | Properties                                                                               |  |  | 14 | 
|         | 3.  |  |  | Legal Proceedings                                                                        |  |  | 15 | 
|         | 4.  |  |  | Submission of Matters to a Vote of Security
	Holders                                     |  |  | 15 | 
|PART II 
|         | 5.  |  |  | Market for Registrants Common Equity and
	Related Stockholder Matters                   |  |  | 15 | 
|         | 6.  |  |  | Selected Financial Data                                                                  |  |  | 17 | 
|         | 7.  |  |  | Managements Discussion and Analysis of
	Financial Condition and Results From Operations |  |  | 18 | 
|         | 7A  |  |  | . Quantitative and Qualitative Disclosure About
	Market Risk                             |  |  | 26 | 
|         | 8.  |  |  | Financial Statements and Supplementary Data                                              |  |  | 28 | 
|         | 9.  |  |  | Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure    |  |  | 55 | 
|PART III
|         | 10. |  |  | Directors and Executive Officers of Registrant                                           |  |  | 55 | 
|         | 11. |  |  | Executive Compensation                                                                   |  |  | 55 | 
|         | 12. |  |  | Security Ownership of Certain Beneficial Owners
	and Management                          |  |  | 55 | 
|         | 13. |  |  | Certain Relationships and Related Transactions                                           |  |  | 55 | 
|PART IV 
|         | 14. |  |  | Exhibits, Financial Statement Schedules, and
	Reports on Form 8-K                        |  |  | 55 | 

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PART I




Item
1.     Business

This discussion and other parts of this
Form 10-K contain forward-looking statements that involve
risks and uncertainties. These statements typically may be
identified by the use of forward-looking words or phrases such
as believe, expect, intend,
anticipate, should, planned,
estimated, and potential, among others.
All forward-looking statements included in this document are
based on our current expectations, and we assume no obligation
to update any such forward-looking statements. The Private
Securities Litigation Reform Act of 1995 provides a safe
harbor for such forward-looking statements. In order to
comply with the terms of the safe harbor, we note that a variety
of factors could cause actual results and experience to differ
materially from the anticipated results or other expectations
expressed in such forward-looking statements. The risks and
uncertainties that may affect the operations, performance,
development, and results of our businesses include but are not
limited to (1) market acceptance of our products and
services; (2) uncertainties relating to the pace, quality
or number of discoveries of new materials; (3) the
dependence on collaborators to successfully commercialize
products; (4) uncertainties of patent protection and
litigation; (5) future growth strategy; (6) general
economic conditions in the United States and in major European
and Asian markets; (7) earthquakes, power failures and
other disasters; and (8) other factors that might be
described from time to time in Symyx Technologies filings
with the Securities and Exchange Commission and include those
set forth in this Annual Report on Form 10-K as Risk
Factors.

We are a pioneer of high-speed technologies for
the discovery of new materials. Our proprietary technologies,
including instruments, software and methods, represent complete
processes designed to cost-effectively accelerate and
fundamentally change materials discovery. Through a combination
of powerful miniaturization, automation and parallel processing
technologies, our scientists are able to generate hundreds to
thousands of materials at a time and screen these materials
rapidly and automatically for desired properties. This approach
can deliver experimental results hundreds to thousands of times
faster than traditional research methods, at a fraction of the
cost per experiment.

We are applying our technology to discover
materials for industrial customers in the chemicals, life
sciences and electronics industries. Our discovery efforts
encompass a broad range of materials, including catalysts for
the manufacturing of chemicals, polymers for life science
applications and phosphors and other materials for electronics
uses.

Our strategy is to apply our proprietary
technologies to discover materials under our Industry
Collaboration and Symyx® Proprietary Materials businesses,
and to commercialize select instruments and software through our
Discovery Tools® business.

The power and breadth of our discovery
technologies are evident in our Proprietary Materials business.
Proprietary materials are discovered through our Industry
Collaborations programs and through internal research programs,
and are licensed to commercialization partners for a range of
royalties and other payments. We currently have one
commercialized material and a product pipeline at the end of
2001 consisting of 12 development candidates 
materials that have completed the discovery phase and are in
various stages of development by either Symyx or a Symyx
licensee.

We have a strong base of corporate partners in
our Industry Collaborations business. In this area, we perform
research for clients in exclusive fields, for which we receive
profitable research funding and downstream royalties or other
payments on the commercialization of materials we discover.

To meet the increasing demand for combinatorial
discovery tools and methodologies, we sell some of our
proprietary synthesis and screening instruments and license the
associated software and intellectual property. To date, we have
completed agreements with seven companies for the purchase of
Discovery Tools systems with shipments completed to five of
these companies.

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Industry Background

Materials and their diverse properties contribute
in a vital way to many of the products we use every day.
Examples include the catalysts used in the manufacture of major
chemicals, pharmaceuticals, plastics and rubbers, the plastics
in many of our household and office goods, and luminescent
materials in lighting and computer and television screens.
Traditional materials discovery relies on an expensive and
time-consuming process of trial and error: making one material;
testing it; then making a different material; testing it and so
on. Traditional discovery methods are not fast enough to keep
pace with product life cycles and growth expectations.

We believe that we can assist chemical, life
science and electronics companies by discovering new materials
in a more productive and cost-effective manner than by using
traditional methods.

The development of combinatorial synthesis and
rapid screening methods has the potential to cost-effectively
accelerate materials discovery and fundamentally change the way
materials are discovered. We believe combinatorial technologies
leverage the full potential of personnel by increasing their
experimental productivity by a factor of 100 or more. This
promise of a far more efficient discovery method combined with a
greater opportunity for product innovation is attracting
increased attention from the chemical and electronics
industries. We believe that few chemical and electronics
companies employ combinatorial synthesis techniques or have the
necessary specialized equipment available for such activities.

Symyx Solution

Our technology provides complete platforms for
materials discovery. Using our miniaturized, automated
technology to execute hundreds to thousands of experiments at a
time, our scientists can dramatically increase the probability
of success and reduce the time and costs per experiment to
discover new materials. For example, using traditional trial and
error methods, a team consisting of a chemist plus a technician
could perform 500 to 1,000 experiments per year. In our labs,
that same team could perform up to 50,000 experiments per year.
As a result, our scientists would generate significantly more
data, increase the possibility of discoveries within that
timeframe, and reduce the associated costs per experiment
dramatically.

To achieve these efficiencies, we require
extensive capabilities in materials synthesis, screening and
data analysis. A particular challenge is the ability to screen
materials for a wide range of properties. For example, to
discover a new catalyst we need to screen how well it performs a
specific chemical reaction, to discover a new polymer we need to
screen for physical and mechanical properties such as molecular
weight and toughness.

As a pioneer in combinatorial materials science,
we found no existing technology capable of meeting our
synthesis, screening and data analysis requirements. To address
this challenge, we assembled a team of people who have expertise
in the fields of inorganic, physical, polymer and organic
chemistries, physics, engineering and software programming. This
team has successfully designed, built and validated a powerful
array of highly specialized proprietary instruments and
software. Our scientists can synthesize a wide range of
materials and screen for properties including catalytic,
chemical, physical, mechanical, electronic and optical
properties. In addition, we continue to expand our capabilities
through the development of new instruments and software and
enhanced versions of existing systems.

Symyx Strategy

Our objective is to be the leading company using
high-speed technologies for the discovery of new materials with
commercially valuable properties. We have developed a strategy
of three business approaches that we intend to follow in pursuit
of our objective:



| |   |                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Industry Collaborations, in which partners fund
	research and technology development programs in exchange for
	exclusive rights to commercialize materials discovered in these
	programs. Work under these research programs is profitable, and
	the materials we discover are Proprietary Materials;
|
| |  | Proprietary Materials, where we discover and
	commercialize materials discovered in our Industry
	Collaborations and internally funded research programs. These
	materials are commercialized under                                                                                                  

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| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |   | licensing arrangements, and we expect to receive
	higher royalties or payments on materials discovered through
	internally funded programs; and   
|
| |  | Discovery Tools, in which we sell and license
	selected equipment and software to chemical, pharmaceutical and
	other companies for their own use.

Industry Collaborations

In our Industry Collaborations, we perform
research for customers in exclusive fields, for which we receive
profitable research funding and downstream royalties or other
payments on materials we discover. In collaboration with major
chemical, life science and other industrial companies, we seek
to discover new polymers, catalysts, phosphors and other
materials for industrial applications.

We provide the platform technologies and effort,
and our partners have rights to develop and commercialize
resulting materials within their predefined field of
exclusivity. Typically, we enter into collaborative arrangements
to discover materials that require considerable investment in
product development and manufacturing, as well as extensive
marketing efforts. Our collaborative partners have already
developed the infrastructure to support these requirements, and
may therefore be in a strong position to commercialize our
discoveries.

We receive funding from our collaborative
partners through quarterly research payments. These payments are
made over the term of the research contract, which is generally
one to three years. If a new material is discovered and
commercialized, this is a Proprietary Material on which we will
typically receive either royalties or milestone payments.

In 2001, we broadened our research programs with
industry partners, adding new customers, renewing existing
agreements with Celanese and ICI, and expanding into the
pharmaceutical area for the first time. Selection of the correct
form of the drug for clinical trials is an important part of
drug development. Molecules often crystallize in more than one
polymorphic form depending on the specific crystallization and
purification conditions used. Each polymorph has a unique set of
physiochemical properties such as melting point, solubility,
stability, and bioavailability. It is critically important for
pharmaceutical companies to be able to identify as many
polymorphic forms of a drug candidate as early as possible to
better enable them to select the crystalline polymorph with the
best overall properties. This process helps ensure that the
pre-clinical, clinical and manufacturing processes are developed
using the same polymorph of a drug candidate. During 2001, we
announced a relationship with Merck & Co. to develop a
polymorph Discovery Tools system for use in rapidly determining
the optimal crystalline forms of drug candidates. In December
2001, Eli Lilly and Company also signed an agreement in the
field of drug polymorphs including Discovery Tools systems to be
delivered during 2002. In 2001, we also added collaborations
with ExxonMobil Chemical Company and Rhodia Specialty Chemicals,
and extended agreements with Celanese, ICI, Unilever, and two
undisclosed partners. These partnerships represent a diverse mix
of programs and customers, indicating the power of our
technology to address a wide range of market opportunities.

In order to maintain and grow our research and
product pipelines, we intend to continue to enter into new
collaborative arrangements. As a result of these new
arrangements, and the conclusion of existing collaborations upon
completion of research or transfer of development candidates to
our collaborative partners for commercialization, our portfolio
of collaborations will change over time. We expect that new
collaborations will come from existing collaborative partners
extending current programs and undertaking new research
initiatives as well as new collaborative partners.

Symyx Proprietary Materials

In October 2001, Prolinx Inc. introduced the
first commercial product to incorporate a Symyx
material  a novel polymer technology for proteomics
applications discovered through internal research efforts. This
achievement demonstrates our ability to quickly identify
high-value materials with near-term commercialization potential.
Our pipeline at the end of 2001 included 12 development
candidates, materials that Symyx has discovered that have met
the criteria specified by Symyx or its partner to complete the

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discovery phase and to be actively developed by
Symyx or by Symyx partner. These candidates include an
X-ray storage phosphor licensed to Agfa, a catalyst for the
production of pharmaceutical intermediates licensed to Dow
Chemical, a polymer to speed DNA separation licensed to Applied
Biosystems, a polymer for use in a personal care application
licensed to Unilever, a catalyst for the manufacture of
polyolefins for Dow, a battery material, a lighting phosphor
licensed to Osram, a polymer control agent, a catalyst for
commodity chemicals licensed to Celanese, two catalysts licensed
to undisclosed partners and an electronic material licensed to
an undisclosed partner for semiconductor applications.


In 2002, we expect to earn royalties resulting
from the commercialization of the Prolinx polymer.

In 2001, approximately 22% of our research effort
was on Symyx funded research. The focus of our Symyx funded
programs is largely on life sciences, such as materials for
genomics and pharmaceutical development, and on industrial
polymer applications as well as the next generation of our
Discovery Tools. We expect to receive higher royalties or
payments on materials discovered through internally funded
programs.

Discovery Tools

Our scientific and technical team has spent
considerable time and resources developing a broad array of
instruments, software and know-how in support of our research.
In addition to our alliances, we are seeking to meet the growing
demand for combinatorial technologies by offering access to some
of our equipment and technology. We believe that these programs
enhance our collaborative arrangement efforts by reinforcing our
position as the leading source for combinatorial technology in
materials science.

Revenues from our Discovery Tools business
increased significantly in 2001, as we increased our installed
base of systems among customers interested in using our
proprietary instrumentation, software and methods to speed their
research efforts. We signed purchase agreements with GIRSA,
Sumitomo Chemical, Merck & Co. and Eli Lilly and Company,
and shipped a total of five systems to ExxonMobil Chemical
Company, GIRSA and Sumitomo Chemical. Merck & ExxonMobil are
also companies that we performed research and development
activities for under our Industry Collaborations business.

In addition to the sale of Discovery Tools, we
also believe that there is significant commercial value in the
sale, through licensees, of both our software and the
non-automated laboratory instruments that we developed to
perform small scale parallel synthesis and screening of
materials. We have entered into licenses with Argonaut
Technologies, Inc., Zeton Inc., Zinsser Analytic GmbH, and
Polymer Laboratories, Ltd to capture this opportunity. We earn
royalties on the sale of instruments by these licensees.

Technology

Our scientists begin the discovery process by
working with our collaborative partners or our own business
development staff to define the research objective in terms of
the specific properties a new material should have to meet the
needs of a given application. We then apply the components of
our combinatorial process, synthesis, screening and informatics,
to discover materials that match these criteria.

Synthesis

The materials research process begins with
chemists theories about what elements from the periodic
table of elements might be combined to create new materials with
desired properties. However, while chemists working in
traditional labs have to choose the few experiments they will
perform on a given day, our chemists have the ability to perform
hundreds or thousands of experiments during the same time frame.
Our chemists are therefore able to pursue their theories both
broadly  across a wide range of elements 
and comprehensively  creating materials with the same
components in different ratios.

A Symyx chemist initiates the synthesis process
by using Library Studio®, a computer software package
created by our programmers to design the group, or
library, of materials to be synthesized. These
instructions, or recipes, are then relayed to
automated synthesis instruments. These instruments create the
library on a single substrate such as a three-inch diameter
silicon wafer or a 96-well plate. The quantity of each compound
synthesized is very small, generally ranging from micrograms to
hundreds of milligrams. This

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contrasts dramatically with traditional
synthesis, where gram to kilogram quantities of a material are
usually necessary. Libraries synthesized on silicon wafers may
range from a few hundred different candidate materials to as
many as 25,000, depending on the type of material and the type
of analysis to be done.


Each material synthesized represents a unique
experiment and potential discovery. The desired end result of
these experiments is defined at the outset of the experiment as
a target material having specific performance properties. Our
scientists, in conjunction with our collaborative partners, or
independently for our proprietary discovery programs, set the
specific performance properties and define the desired
performance attributes of the target material for a given
application or applications. Generally, these criteria are well
beyond the performance attributes of currently used materials.

Screening

Once created, the library is analyzed for desired
properties. As with synthesis, our technical staff has designed
and built a broad array of instruments and software to evaluate
different properties under a wide variety of process conditions.
These properties include catalytic, physical, mechanical,
thermal, chemical, electronic and optical properties. In
general, a Symyx chemist can design, synthesize and screen a
library in a single day.

To reach the point of commercialization, a
candidate material must progress through an increasingly
stringent set of requirements, progressing from a hit to a lead
to a development candidate. First, we screen materials to
identify those materials that have properties defined for the
target discovery, called hits. Hits are subjected to
additional testing and optimization, to find a larger number of
needed properties. Hits also identify areas that merit further
exploration, and new libraries are created using this
information. Candidate materials that continue to meet or exceed
the defined criteria are then classified as leads.
Leads are then transferred to a partner or processed internally
for additional testing and scale up. Leads are then tested on a
larger scale, as bulk samples of 1 to 100 grams, to confirm that
the materials still perform at this bench scale
level. Once a lead has passed this bench scale testing by either
a collaborative partner or Symyx, it may become a development
candidate. Finally, if all is successful, the decision may be
made to commercialize the material. Once a material has been
identified as a development candidate, the time to the first
sale or commercial usage may be as short as 1 to 2 years.
Industrial catalysts to produce high volume commodity chemicals,
on the other hand, may require 5 to 7 or more years to reach the
market because of the extensive process development and capital
investment involved.

Informatics

A critical factor in our discovery process is the
ability to retain and access the huge amounts of data generated
by our synthesis and screening activities. Given the broad
acceptance of high-speed combinatorial discovery in
pharmaceuticals, a number of software applications exist to
support organic chemistry. However, those software applications
were not sufficient to address the storage and retrieval needs
of our diverse array of inorganic, organometallic and polymer
chemistries. To that end, we have devoted considerable resources
to build a proprietary database capable of addressing our unique
needs. Our chemists can query this database to identify
materials screened in the past that possess the property or
properties specified. We believe that this database will emerge
as a powerful tool in accelerating materials discovery by
enabling our scientists to benefit from the cumulative effect of
all of our research.

Intellectual Property and Other Proprietary
Rights

Our success depends upon our proprietary
technology. There are five general areas that may be patented
using our combinatorial approach:



| |   |                                       
| | - | --------------------------------------
| |  | library synthesis methods;            
|
| |  | the libraries themselves;             
|
| |  | screening or characterization methods;

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| |   |                            
| | - | ---------------------------
| |  | equipment and software; and
|
| |  | new materials.             

During 2001, we were issued 24 patents including
our first in Europe. Our patent portfolio as of year end 2001
consisted of 40 issued patents, including
36 U.S. patents and four European patents, and more
than 330 patent applications pending worldwide. These
patents and applications cover composition of matter,
instruments, and methodology, and include issued patents with
broad claims in combinatorial methodologies. We co-own 4 of the
issued United States patents and a few of the pending patent
applications with Lawrence Berkeley National Laboratory, on
behalf of The Regents of the University of California. We have
an exclusive license to these patents and patent applications
from Lawrence Berkeley National Laboratory, which was agreed to
upon formation of the Company. In addition to patents, we rely
on copyright, trademark and trade secret rights, confidentiality
procedures and licensing arrangements to establish and protect
our proprietary rights.

As part of our confidentiality and trade secret
protection procedures, we enter into non-disclosure agreements
with our employees, consultants and potential collaborative
partners. Despite these precautions, third parties could obtain
and use our products or technology without authorization, or
develop similar technology independently. It is difficult for us
to police unauthorized use of our methods. Effective protection
of intellectual property rights is unavailable or limited in
some foreign countries. The protection of our proprietary rights
may be inadequate and our competitors could independently
develop similar technology, duplicate our products or design
around any patents or other intellectual property rights we hold.

Competition

We are aware of some chemical companies with
internal combinatorial programs. In addition, two European based
companies, Avantium and HTE may also use combinatorial
approaches to materials discovery. In addition, academic and
research institutions may seek to develop technologies that
would be competitive with our systems for materials discovery.
Because combinatorial materials science is an emerging field,
competition from additional entrants may increase.

Some of our competitors may be addressing the
same materials targets as Symyx or our collaborative partners.
Many of our current and potential competitors, either alone or
together with their collaborative partners, have greater
financial, manufacturing, marketing and sales resources than we
do. Accordingly, our competitors may succeed in obtaining patent
protection or commercializing products before us. If we commence
commercial product sales, we will be competing against companies
with greater marketing, sales and manufacturing capabilities,
areas in which we have limited or no experience.

Employees

As of December 31, 2001, we had a total of
204 employees, including 146 scientific and technical
employees and 58 people in business development, legal and
general and administrative services. None of our employees are
represented by a labor union, and we consider our employee
relations to be good.

Risk Factors

All statements in this annual report that do not
discuss past results are forward-looking statements.
Forward-looking statements are based on managements
current expectations and are therefore subject to certain risks
and uncertainties. Any of the following risks could seriously
harm our business, financial condition or results of operations.
As a result, these risks could cause the decline of the trading
price of our Common Stock. The risks described below, however,
are not the only ones that we face. You should also refer to the
other information set forth in this annual report, including our
financial statements and the related notes.

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| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | We are deploying new technology in a new
	business and, as a result, we may not be able to achieve
	continued or sustained profitability

Our combinatorial materials discovery
technologies and processes are new. To date, our partners have
only successfully commercialized as a product one material that
we have discovered using these technologies and processes.
Discovery and development of new materials is a highly uncertain
process. Accordingly, because of these uncertainties, our
discovery process may not result in the identification of
development candidates we or our partners will commercialize. If
we are not able to use our technologies to discover new
materials with significant commercial potential, we will be
unable to achieve our objectives or maintain a profitable
business.



| |                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are dependent on the development
	activities of companies in the chemical, life sciences and
	electronics industries, and declines or reductions in research
	and development activities in these industries could harm our
	business

The market for our discovery services and
instrumentation within the chemical, life sciences and
electronics industries depends on our customers ability
and willingness to invest in research and development. A
majority of our revenues are attributable to our research
collaborations. Our future revenues are dependent on funding of
our research collaborations, licensing of proprietary materials
and sales of Discovery Tools.

In particular, many companies in the chemical and
pharmaceutical industries have, in the past several years,
experienced declining profitability or even losses. In addition,
many chemical products have become commodity products which
compete primarily on the basis of price. As a result, some
chemical companies have reduced their research and development
activities. If commoditization of chemical products and other
pressures affecting the industry continue in the future, more
companies could adopt strategies that involve significant
reductions in their research and development programs. Although
we believe that our approach can help life science, chemical and
electronics companies increase the efficiency of their research
and development activities, our efforts to convince them of this
value may be unsuccessful. To the extent that life science,
chemical and electronics companies reduce their research and
development activities, they would be less likely to do business
with us. As a result of current negative economic conditions, a
number of these companies have recently both reduced the size of
their research and development budgets as well as the size of
their workforces. Decisions by these companies to reduce their
research and development activities could result in fewer or
smaller scale collaborations with us as well as fewer sales of
our Discovery Tools systems and related licenses and products,
any of which could reduce our revenues and harm our business and
operating results.



| |                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are dependent upon acceptance of our
	technology and approach by customers, and if we cannot achieve
	market acceptance from potential customers, we will be unable to
	develop a sustainable or profitable business

Our ability to succeed is also dependent upon the
acceptance by potential customers of our high throughput
screening technology as an effective tool in the discovery of
new materials. Historically, life science and chemical companies
have conducted materials research and discovery activities
internally using traditional manual discovery methods. In order
for us to achieve our business objectives, we must convince
these companies that our technology and capabilities justify
outsourcing part of their basic research and discovery programs.
If we cannot convince other companies of the effectiveness of
our automated discovery methods, we may be unable to keep our
existing customers or attract additional customers on acceptable
terms or develop a sustainable, profitable business.



| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We cannot predict the pace, quality or
	number of discoveries we may generate, and any inability of ours
	to generate a significant number of discoveries would reduce our
	revenues and harm our business

Our future revenues and profitability are
dependent upon our ability to achieve discoveries. Because of
the inherently uncertain nature of research activities, we
cannot predict with a high level of precision the pace with
which we may generate discoveries or the quality of any
discoveries that we may generate. Due to the uncertain nature of
materials discovery, in which several hundred thousand compounds
must often be

8



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screened to identify a single development
candidate, we may not generate the number of discoveries that we
would expect to generate from a given number of experiments. In
addition, our development candidates may not result in products
having the commercial potential we or our collaborators
anticipate. In either case, our future revenues from our
research collaborations and from commercialization of products
would likely decline. In addition, our existing and potential
new customers may become reluctant to renew or enter into new
agreements with us. As a result, our failure to generate
discoveries and development candidates would reduce our revenues
and harm our business and operating results.




| |                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We conduct proprietary research programs,
	and any conflicts with our collaborators or any inability to
	commercialize development candidates resulting from this
	research would harm our business

Our strategy involves conducting proprietary
research programs. These programs are focused on discovery of
products for specialty markets that have fewer barriers to entry
for an emerging company. A significant number of our
collaborative research programs are focused on commodity
chemical markets, which are larger than fine chemical and
specialty chemical markets that are the focus of our proprietary
programs. We believe that this differentiation of focus will
enable us to minimize conflicts with our collaborators relating
to rights to potentially overlapping leads developed through our
proprietary programs and through programs funded by a
collaborator. However, conflicts between us and a collaborator
could potentially arise, particularly if we were to discover a
material in one of our proprietary programs that was a potential
target of one of our collaborative programs. In this event, we
may become involved in a dispute with our collaborator regarding
the material. Disputes of this nature could harm the
relationship between us and our collaborator, and concerns
regarding our proprietary research programs could also affect
our ability to enter into new collaborative relationships. If
circumstances surrounding our proprietary research programs were
to affect our existing collaborative relationships or our
ability to enter into new relationships, our revenues and
operating results would decline.

In addition, we will either commercialize
development candidates resulting from our proprietary programs
directly or through licensing to other companies. In order for
us to commercialize these development candidates directly, we
would need to develop, or obtain through outsourcing
arrangements, the capability to manufacture, market and sell
products. We do not have this capability, and we may not be able
to develop or otherwise obtain the requisite manufacturing,
marketing and sales capabilities. If we are unable to
successfully commercialize products resulting from our
proprietary research efforts, our revenues and operating results
would decline.



| |                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We are dependent on our collaborations with
	major companies, and the failure of our collaborative partners
	to successfully commercialize products would reduce our revenues
	and harm our business

To date, the majority of our revenues have come
from collaborative arrangements with chemical, electronics and
life science companies. These contracts generally expire after a
fixed period of time. If they are not renewed or if we do not
enter into new collaborative arrangements, our business and
operating results may be harmed.

For us to achieve and sustain a significant level
of profitability, we must make discoveries with significant
commercial potential, and our collaborators must successfully
commercialize products based on our discoveries. Typically, we
do not receive royalties on sales of products by our
collaborators until the collaborator has commenced commercial
sales of a product resulting from the collaboration. The failure
of our partners to commercialize development candidates
resulting from our research efforts would reduce our revenues
and would harm our business and operating results.



| |                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have a limited number of contracts for
	Discovery Tools systems to date, and we cannot assure you that
	we will be able to build a sustainable business related to the
	sale of additional systems

To date, we have a limited number of contracts
for our Discovery Tools systems. Because of the high cost and
complexity of these systems, the sales cycle for them has been
and is likely to continue to be long. Sales of these systems
will require us to educate our potential customers about the
full benefits of these systems, which

9



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may require significant time. Due to these
factors, sales of Discovery Tools systems will be subject to a
number of significant risks over which we have little or no
control, including:




| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | customers budgetary constraints and
	internal acceptance review procedures;                                                                  
|
| |  | complexity of our systems and difficulties we may
	encounter in meeting individual customer specifications and
	commitments on a timely basis;
|
| |  | the fact that there may be only a limited number
	of customers that are willing to pay several million dollars for
	our systems;              
|
| |  | a long sales cycle that involves substantial
	human and capital resources; and                                                                
|
| |  | potential downturns in general or in industry
	specific economic conditions.                                                                  

Because we expect future revenue growth from the
sale of Discovery Tools, our revenues may decline or not grow as
anticipated if we are unable to build the infrastructure to
support this business or if the sales or build cycles for
Discovery Tools systems lengthens unexpectedly.



| |                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We depend on a limited number of suppliers
	and will be delayed in our manufacture or unable to manufacture
	our Discovery Tools if shipments from these suppliers are
	delayed or interrupted

Key parts of our Discovery Tools systems are
currently available only from a single source or a limited
number of sources. In addition, components of our capital
equipment are available from one of only a few suppliers. In the
event that supplies from these vendors were delayed or
interrupted for any reason, we may not be able to get equipment
or components for Discovery Tools systems or our own research
efforts in a timely fashion or in sufficient quantities or under
acceptable terms.

Even if alternative sources of supply are
available, it could be time consuming and expensive for us to
qualify new vendors. In addition, we are dependent on our
vendors to provide components of appropriate quality and
reliability. Consequently, in the event that supplies from these
vendors were delayed or interrupted for any reason, we could be
delayed in our ability to develop and deliver products to our
customers.



| |                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We commercialize certain manual laboratory
	instruments and sell licenses to our software through third
	party arrangements, and if these third parties do not perform
	effectively, our ability to generate revenue from the sale of
	these products will be harmed

We commercialize certain manual laboratory
instruments through our relationships with Argonaut
Technologies, Polymer Laboratories, Zeton Inc. and Zinsser
Analytic GmbH. The commercial success of these instruments and
software licenses will depend in large part on their features
and price as compared to competing products and on their ability
to achieve market acceptance. In addition, our ability to
realize significant commercial sales of these instruments and
software licenses will also depend on the efforts of these third
parties in promoting, marketing and selling these instruments.
These third parties efforts in this regard will be outside
of our control. Accordingly, to the extent that they fail to
effectively promote, market and sell our manual instruments and
software licenses, our revenues from the sales of these
instruments and software licenses, and therefore our operating
results, would be harmed.

Our ability to commercialize future manual
laboratory instruments or software is dependant upon securing
new partners with the appropriate expertise or extending
existing relationships. To the extent that we fail to secure new
partners or extend existing relationships, or these partners
fail to effectively promote, market and sell our manual
instruments or software licenses, our revenues from the sales of
these instruments and software licenses, and therefore our
operating results, would be harmed.



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | We expect that our quarterly results of
	operations will fluctuate, and this fluctuation could cause our
	stock price to decline, causing investor losses

Our quarterly operating results have fluctuated
in the past and are likely to do so in the future. These
fluctuations could cause our stock price to fluctuate
significantly or decline. Revenues in future fiscal periods

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may be greater or less than revenues in the
immediately preceding period or in the comparable period of the
prior year. Some of the factors which could cause our operating
results to fluctuate include:




| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | expiration of research contracts with major
	collaborative partners, which may not be renewed or replaced
	with contracts with other companies;
|
| |  | the success rate of our discovery efforts
	associated with milestones and royalties;                                                           
|
| |  | the timing and willingness of partners to
	commercialize our discoveries which would result in royalties;                                      
|
| |  | the size and timing of customer orders for
	shipments of, and payments related to Discovery Tools
	instrumentation;                            
|
| |  | the size and timing of royalties we receive from
	third parties who license our manual instruments and software
	for resale;                   
|
| |  | the size and timing of late stage licensing
	agreements we may enter into; and                                                                 
|
| |  | general and industry specific economic
	conditions, which may affect our customers capital
	investment levels.                                

A large portion of our expenses, including
expenses for facilities, equipment and personnel, are relatively
fixed in nature. Accordingly, in the event revenues decline or
do not grow as anticipated due to expiration of research
contracts, failure to obtain new contracts or other factors, we
may not be able to correspondingly reduce our operating
expenses. In addition, we plan to significantly increase
operating expenses in 2002. Failure to achieve anticipated
levels of revenues could therefore significantly harm our
operating results for a particular period.

Due to the possibility of fluctuations in our
revenues and expenses, we believe that quarter-to-quarter
comparisons of our operating results are not a good indication
of our future performance. Our operating results in some
quarters may not meet the expectations of stock market analysts
and investors. In that case, our stock price would probably
decline, and investors would experience a decline in the value
of their investment.



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | The loss of key personnel or the inability
	to attract and retain additional personnel could have a material
	adverse effect on our results of operations

We believe our future success will depend upon
our ability to attract and retain highly skilled personnel,
including W. Henry Weinberg, our Senior Vice President and Chief
Technical Officer, and other key scientific and managerial
personnel. We do not have any key-person life insurance relating
to our key personnel. These employees are at-will and not
subject to employment contracts. We may not be successful in
attracting and retaining key personnel in the future.

As we seek to expand our operations, the hiring
of qualified scientific and technical personnel will be
difficult due to the limited availability of qualified
professionals. The number of people with experience in the
fields of combinatorial materials science and combinatorial
chemistry is limited, and we face intense competition for these
types of employees. We have in the past experienced difficulty
in recruiting qualified personnel. Failure to attract and retain
personnel, particularly scientific and technical personnel,
would impair our ability to grow our business and pursue new
discovery initiatives and collaborative arrangements.



| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Competition could increase, and competitive
	developments could render our technologies obsolete or
	noncompetitive, which would reduce our revenues and harm our
	business

The field of combinatorial materials science is
increasingly competitive. We are aware of companies that may
apply their expertise in combinatorial chemistry to materials
research and development. We are also aware of some companies
that have internal combinatorial programs. In addition, there
are companies focusing on aspects of combinatorial chemistry for
the discovery of materials, including Avantium in The
Netherlands and HTE in Germany. In addition, academic and
research institutions may seek to develop technologies that
would be competitive with our systems for materials discovery.
Because combinatorial materials science is an emerging field,
competition from additional entrants may increase.

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Many of our current and potential competitors
have greater financial, manufacturing, marketing and sales
resources than we do. In addition, some of our existing
competitors may, individually or together with companies
affiliated with them, have greater human and scientific
resources than we do. Our competitors could develop technologies
and methods for materials research and discovery that render our
technologies and systems obsolete or less competitive. Any
competitive developments of this nature would make our
technologies and methodologies less competitive. Accordingly, if
competitors introduce new materials discovery technologies that
are faster or more cost-effective than our technologies,
customers may switch to these new technologies. We would then
experience a decline in our revenues and operating results.



| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | Any inability of ours to keep pace with
	technological advances and evolving industry standards would
	harm our business

The market for our products is characterized by
continuing technological development, evolving industry
standards and changing customer requirements. Due to increasing
competition in our field, it is likely that the pace of
innovation and technological change will increase. The
introduction of products by our direct competitors or others
embodying new technologies, the emergence of new industry
standards or changes in customer requirements could render our
existing products obsolete, unmarketable or less competitive.
Our success depends upon our ability to enhance existing
products and services and to respond to changing customer
requirements. Failure to develop and introduce new products and
services, or enhancements to existing products, in a timely
manner in response to changing market conditions or customer
requirements will harm our future revenues and our business and
operating results.



| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | Our inability to adequately protect our
	proprietary technology could have a material adverse effect on
	our business

The success of our business depends on our
ability to protect our intellectual property portfolio and
obtain patents without infringing the proprietary rights of
others. If we do not effectively protect our intellectual
property, our business and operating results could be harmed.

Patents may not issue from our applications. Even
if we are able to obtain patents covering our technology, the
patents may be challenged, circumvented, invalidated or
unenforceable. Competitors may develop similar technology or
design around any patents issued to us or our other intellectual
property rights. Our competitors would then be able to offer
research services and develop, manufacture and sell products
which compete directly with our research services and products.
In that case, our revenues and operating results would decline.

We also seek to protect our technology and
processes in part by confidentiality agreements with our
collaborators, employees and consultants. We also do not provide
broad access to our proprietary technologies and processes to
collaborators. However, confidentiality agreements might be
breached by collaborators, former employees or others, and in
that event, we might not have adequate remedies for the breach.
Further, our trade secrets might otherwise become known or be
independently discovered by competitors. Unauthorized disclosure
of our trade secrets could enable competitors to use some of our
proprietary technologies. This would harm our competitive
position and could cause our revenues and operating results to
decline.



| |                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| | Litigation or other proceedings or third
	party claims of infringement could require us to spend time and
	money and could shut down some of our operations

We may receive communications from others
asserting that our business or technologies infringe their
intellectual property rights. If we became involved in
infringement litigation or interference proceedings declared by
the United States Patent and Trademark Office, or oppositions or
other intellectual property proceedings outside of the United
States, to defend our intellectual property rights or as the
result of alleged infringement of the rights of others, we might
have to spend significant amounts of money to defend our
position. The litigation or proceedings could divert our
managements time and efforts. An adverse ruling, including
an adverse decision as to the priority of our inventions, would
undercut or invalidate our intellectual property position. An
adverse ruling could also subject us to significant liability
for damages or prevent us from

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using or marketing systems, processes or
products. Any of these events would have a negative impact on
our business and operating results. Even unsuccessful claims
could result in significant legal fees and other expenses,
diversion of managements time and disruptions in our
business. Uncertainties resulting from the initiation and
continuation of any patent or related litigation could harm our
ability to compete, pending resolution of the disputed matter.


We believe we have taken reasonable measures to
assess the validity of our intellectual property rights. We are
not currently involved in any litigation with third parties
regarding intellectual property rights. However, we may become
involved in intellectual property disputes or receive
communications from others in the future asserting that our
business or technologies infringe their intellectual property
rights. To settle these disputes, we may need to obtain licenses
to patents or other proprietary rights held by others. However,
these licenses might not be available on acceptable terms, or at
all. In that event, we could encounter delays in system, process
or product introductions while we attempt to design around the
patents. Our redesigned systems, processes or products may be
inferior to our original designs or we may be unable to continue
system, process or product development in the particular field.
In either case, our competitive position, business, revenues and
operating results would likely suffer.



| |                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We use hazardous materials in our business,
	and any claims relating to improper handling, storage or
	disposal of these materials could subject us to significant
	liabilities

Our business involves the use of a broad range of
hazardous chemicals and materials. Environmental laws impose
stringent civil and criminal penalties for improper handling,
disposal and storage of these materials. In addition, in the
event of an improper or unauthorized release of, or exposure of
individuals to, hazardous materials, we could be subject to
civil damages due to personal injury or property damage caused
by the release or exposure. A failure to comply with
environmental laws could result in fines and the revocation of
environmental permits, which could prevent us from conducting
our business. Accordingly, any violation of environmental laws
or failure to properly handle, store or dispose of hazardous
materials could result in restrictions on our ability to operate
our business and could require us to incur potentially
significant costs for personal injuries, property damage and
environmental cleanup and remediation.



| |                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our facilities are located near known
	earthquake fault zones, and the occurrence of an earthquake or
	other disaster could cause damage to our facilities and
	equipment and harm our business

Our facilities are located in the Silicon Valley
near known earthquake fault zones and are vulnerable to damage
from earthquakes. In October 1989, a major earthquake that
caused significant property damage and a number of fatalities
struck this area. We are also vulnerable to damage from other
types of disasters, including fire, floods, power loss,
communications failures and similar events. Recently, California
has been experiencing a shortage of electrical supply that has
resulted in intermittent loss of power in the form of rolling
blackouts. In the event these blackouts continue or increase in
severity, they could disrupt the operations of our facilities.
If any disaster were to occur, our ability to operate our
business at our facilities would be seriously, or potentially
completely, impaired. In addition, the unique nature of our
research activities and of much of our equipment could make it
difficult for us to recover from a disaster. The insurance we
maintain may not be adequate to cover our losses resulting from
disasters or other business interruptions. Accordingly, an
earthquake or other disaster could harm our business and
operating results.



| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | Some of our existing stockholders can exert
	control over us, and may not make decisions that are in the best
	interests of all stockholders

Our officers, directors and principal
stockholders (greater than 5% stockholders) together control a
significant percentage of our outstanding common stock. As a
result, these stockholders, if they act together, will be able
to exert a significant degree of influence over our management
and affairs and over matters requiring stockholder approval,
including the election of directors and approval of significant
corporate transactions. This concentration of ownership may have
the effect of delaying or preventing a change in control of
Symyx and might affect the market price of our common stock,
even when such a change may be in the best interests of all
stockholders.

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| |                                                          
| | ---------------------------------------------------------
| | Our stock price has been and may continue
	to be volatile

The market price of our common stock since our
initial public offering has been highly volatile. Volatility in
the market price for our common stock will be affected by a
number of factors, including the following:



| |   |                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the announcement of new products or services by
	us or our competitors;                                                                                 
|
| |  | quarterly variations in our or our
	competitors results of operations;                                                                                 
|
| |  | failure to achieve operating results projected by
	securities analysts;                                                                                 
|
| |  | changes in earnings estimates or recommendations
	by securities analysts;                                                                               
|
| |  | developments in our industry; and                                                                                                                       
|
| |  | general market conditions and other factors,
	including factors unrelated to our operating performance or the
	operating performance of our competitors.

These factors and fluctuations, as well as
general economic, political and market conditions, may
materially adversely affect the market price of our common stock.



| |                                                             
| | ------------------------------------------------------------
| | We are at risk of future securities class
	action litigation

In 2001, purported securities class action
lawsuits were filed against certain leading investment banks and
over 300 companies that completed public offerings in 1999 and
2000, including a lawsuit filed against certain of Symyx
officers in December, 2001, which was subsequently dismissed,
without prejudice, in March 2002. See Part I 
Item 3.  Legal Proceedings for a
description of this lawsuit. Securities litigation can result in
potential liability, cause us to incur litigation costs and
divert managements attention and resources, any of which
could harm our business. In addition, announcements of future
lawsuits of this or some other nature, whether with or without
merit, and announcements of events occurring during the course
of the current and any future lawsuits, could cause our stock
price to fall.



| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Provisions of our charter documents may
	have anti-takeover effects that could prevent a change in our
	control, even if this would be beneficial to
	stockholders

Provisions of our amended and restated
certificate of incorporation, bylaws and Delaware law could make
it more difficult for a third party to acquire us, even if doing
so would be beneficial to our stockholders. These provisions
include:



| |   |                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a classified board of directors, in which our
	board is divided into three classes with three year terms with
	only one class elected at each annual meeting of stockholders,
	which means that a holder of a majority of our common stock will
	need two annual meetings of stockholders to gain control of the
	board;
|
| |  | a provision which prohibits our stockholders from
	acting by written consent without a meeting;                                                                                                                                                                                                                         
|
| |  | a provision which permits only the board of
	directors, the president or the chairman to call special
	meetings of stockholders; and                                                                                                                                                                                    
|
| |  | a provision which requires advance notice of
	items of business to be brought before stockholders meetings.                                                                                                                                                                                                             

These provisions can be amended only with the
vote of the holders of 66 2/3% of our outstanding capital
stock.




Item 2.     Properties

Our facilities currently consist of an aggregate
of approximately 104,300 square feet of office, research and
laboratory space in several locations in Santa Clara and
Sunnyvale, California, pursuant to leases that expire from 2002
to 2010.

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Item 3.     Legal
Proceedings

On or about December 5, 2001, a securities
lawsuit, Meyers v. Credit Suisse First Boston Corporation, et
al., Case No. 01-CV-10981, was filed in the United States
District Court for the Southern District of New York purportedly
on behalf of all persons who acquired Symyx Technologies, Inc.
securities between November 18, 1999 and December 6,
2000. The complaint named as defendants Symyx Chief
Executive Officer and Chairman, Steven D. Goldby, Symyx
Senior Vice President and Chief Financial Officer, Jeryl L.
Hilleman, and Credit Suisse First Boston Corporation, the lead
underwriter of the Companys initial public offering in
November 1999. Symyx Technologies, Inc. was not named as a
defendant in the complaint.

On or about March 12, 2002, the plaintiffs
in this case filed a notice of voluntary dismissal, without
prejudice, in the United States District Court for the Southern
District of New York.

The complaint had asserted a claim for violation
of Section 10(b) and Rule 10b-5 of the Securities Exchange
Act of 1934, as amended, against all defendants. The complaint
alleged that the registration statement filed by Symyx with the
SEC for its November 1999 initial public offering of common
stock was materially false and misleading because it failed to
disclose that: (i) Credit Suisse First Boston obtained
excessive commissions from certain investors in exchange for
which Credit Suisse First Boston allocated to those investors
portions of the shares issued in the Symyx initial public
offering; and (ii) Credit Suisse First Boston had entered
into agreements whereby Credit Suisse First Boston agreed to
allocate shares in the Symyx initial public offering to certain
investors in exchange for which the investors agreed to purchase
additional Symyx shares in the aftermarket at pre-arranged
higher prices.

The complaint sought damages in an unspecified
amount. We continue to believe that the claims alleged against
our officers were without merit.

Symyx is not a party to any material pending
legal proceedings.




Item 4.     Submission
of Matters to a Vote of Security Holders

Not Applicable




PART II






|        |                                                                 
|------- | ----------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
	and Related Stock Matters

The Companys Common Stock is traded on the
Nasdaq National Market System under the symbol of SMMX. The
following table sets forth, for the period indicated, the low
and high bid prices per share for the Companys Common
Stock as reported by the Nasdaq National Market.

|               |  |     |       |      |  |   |       | 
|-------------- |  | --- | ----- | ---- |  | - | ----- | 
|               |  | Low |       | High
|               |  |     |       |     
|2000           |  |     |       |      |  |   |       | 
|First Quarter  |  | $   | 29.63 |      |  | $ | 80.00 | 
|Second Quarter |  | $   | 18.73 |      |  | $ | 47.75 | 
|Third Quarter  |  | $   | 33.75 |      |  | $ | 52.38 | 
|Fourth Quarter |  | $   | 28.13 |      |  | $ | 50.44 | 
|              
|2001           |  |     |       |      |  |   |       | 
|First Quarter  |  | $   | 11.81 |      |  | $ | 40.13 | 
|Second Quarter |  | $   | 11.75 |      |  | $ | 28.33 | 
|Third Quarter  |  | $   | 11.66 |      |  | $ | 25.10 | 
|Fourth Quarter |  | $   | 14.11 |      |  | $ | 21.83 | 

As of February 28, 2002, there were
approximately 236 holders of record of the Companys Common
Stock.

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No dividends have been paid on the Common Stock
since the Companys inception and the Company currently
intends to retain all future earnings, if any, for use in its
business and does not anticipate paying any cash dividends in
the foreseeable future.

Use of Proceeds

On November 18, 1999, a Registration
Statement on Form S-1 (No. 333-87453) was declared
effective by the Securities and Exchange Commission, pursuant to
which 6,368,700 shares of the Companys Common Stock, no
par value, were offered and sold for the account of the Company
at a price of $14.00 per share, generating gross offering
proceeds of $89.2 million for the account of the Company.
The managing underwriters for the offering were Credit Suisse
First Boston, Donaldson, Lufkin & Jenrette, Invemed
Associates and Schroder & Co. Inc.

From the effective date of the Registration
Statement to December 31, 1999, the Company incurred
$6.3 million in underwriting discounts and commissions and
$1.5 million in other related expenses. Total expenses
incurred in connection with the offering were $7.8 million.
The net proceeds of the offering, after deducting the foregoing
expenses, were $81.4 million. No direct or indirect
payments were made to directors, officers, or general partners
of the Company or their associates, or to persons owning 10% or
more of any class of equity securities of the Company and its
affiliates.

From the effective date of the Registration
Statement to December 31, 2001, the Company estimates that
it has used a portion of the net proceeds of the offering as
follows:

|                                              |  |   |            | 
|--------------------------------------------- |  | - | ---------- | 
|Aggregate offering price                      |  | $ | 89,161,800 | 
|Expenses incurred in connection with offering |  |   | 7,741,326  | 
|                                              |  |   |            | 
|Net offering proceeds to issuer               |  |   | 81,420,474 | 
|Purchase of equipment                         |  |   | 21,174,325 | 
|Working capital                               |  |   | 60,246,149 | 

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Item
6.     Selected Financial
Data

The following selected historical information has
been derived from the audited financial statements of the
Company. The financial information as of December 31, 2001
and 2000 and for each of the three years in the period ended
December 31, 2001 are derived from audited financial
statements and are included elsewhere in this Form 10-K.
The table should be read in conjunction with Item 7.
Managements Discussion and Analysis of Financial
Condition and Results of Operations and Item 8.
Financial Statements and Supplementary Data.

|                                                              |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |        |        | 
|------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------- | ------ | ----- | ------ | ---- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                              |                                                 |                                      
|                                                              |                                                 | For the Years Ended December 31,     
|                                                              |                                                 |                                      
|                                                              |                                                 | 1997                                  |        | 1998  |        | 1999 |        | 2000   |        | 2001
|                                                              |                                                 |                                       |        |       |        |      |        |        |        |     
|                                                              |                                                 |                                      
|                                                              |                                                 | (In thousands, except per share data)
|Consolidated Statements of Operations
	Data:                  |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Revenues:                                                     |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                                              | Service revenues from collaborations and grants |                                       | $      | 4,806 |        |      | $      | 13,787 |        |      | $      | 30,497 |        |   | $      | 34,999 |        |   | $      | 42,629 |       
|                                                              | Product and license revenues                    |                                       |        |      |        |      |        |       |        |      |        |       |        |   |        | 8,319  |        |   |        | 17,391 |       
|                                                              |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                                              |                                                 | Total Revenues                        |        |       | 4,806  |      |        |        | 13,787 |      |        |        | 30,497 |   |        |        | 43,318 |   |        |        | 60,020 | 
|Operating expenses:                                           |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                                              | Cost of products sold                           |                                       |        |      |        |      |        |       |        |      |        |       |        |   |        | 2,775  |        |   |        | 6,591  |       
|                                                              | Research and development                        |                                       |        | 8,764 |        |      |        | 17,813 |        |      |        | 26,628 |        |   |        | 35,898 |        |   |        | 38,718 |       
|                                                              | Sales, general and administrative               |                                       |        | 2,129 |        |      |        | 4,515  |        |      |        | 7,624  |        |   |        | 11,798 |        |   |        | 12,524 |       
|                                                              |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|                                                              |                                                 | Total operating expenses              |        |       | 10,893 |      |        |        | 22,328 |      |        |        | 34,252 |   |        |        | 50,471 |   |        |        | 57,833 | 
|                                                              |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Income (loss) from operations                                 |                                                 |                                       | (6,087 | )     |        |      | (8,541 | )      |        |      | (3,755 | )      |        |   | (7,153 | )      |        |   | 2,187  |       
|Interest income                                               |                                                 |                                       | 843    |       |        |      | 1,117  |        |        |      | 2,542  |        |        |   | 7,155  |        |        |   | 6,117  |       
|Interest and other expense                                    |                                                 |                                       | (352   | )     |        |      | (731   | )      |        |      | (934   | )      |        |   | (924   | )      |        |   | (660   | )     
|                                                              |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Income (loss) before income tax expense                       |                                                 |                                       | (5,596 | )     |        |      | (8,155 | )      |        |      | (2,147 | )      |        |   | (922   | )      |        |   | 7,644  |       
|Income tax expense                                            |                                                 |                                       |       |       |        |      |       |        |        |      |       |        |        |   |       |        |        |   | 1,306  |       
|                                                              |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Net income (loss)                                             |                                                 | $                                     | (5,596 | )     |        | $    | (8,155 | )      |        | $    | (2,147 | )      |        | $ | (922   | )      |        | $ | 6,338  |       
|                                                              |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Basic net income (loss) per share                             |                                                 | $                                     | (1.97  | )     |        | $    | (2.13  | )      |        | $    | (0.27  | )      |        | $ | (0.03  | )      |        | $ | 0.21   |       
|                                                              |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Shares used in computing basic net income
	(loss) per share   |                                                 |                                       | 2,845  |       |        |      | 3,829  |        |        |      | 8,087  |        |        |   | 28,873 |        |        |   | 29,904 |       
|                                                              |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Diluted net income (loss) per share                           |                                                 | $                                     | (1.97  | )     |        | $    | (2.13  | )      |        | $    | (0.27  | )      |        | $ | (0.03  | )      |        | $ | 0.20   |       
|                                                              |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       
|Shares used in computing diluted net income
	(loss) per share |                                                 |                                       | 2,845  |       |        |      | 3,829  |        |        |      | 8,087  |        |        |   | 28,873 |        |        |   | 31,196 |       
|                                                              |                                                 |                                       |        |       |        |      |        |        |        |      |        |        |        |   |        |        |        |   |        |       

|                                                          |  |                |        |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |         | 
|--------------------------------------------------------- |  | -------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                          |  |               
|                                                          |  | December 31,  
|                                                          |  |               
|                                                          |  | 1997           |        | 1998 |  | 1999 |        | 2000 |  | 2001
|                                                          |  |                |        |      |  |      |        |      |  |     
|                                                          |  |               
|                                                          |  | (In thousands)
|Consolidated Balance Sheet Data:                          |  |                |        |      |  |      |        |      |  |      |         |  |  |   |         |  |  |   |         | 
|Cash, cash equivalents and available-for-sale
	securities |  | $              | 20,614 |      |  | $    | 35,121 |      |  | $    | 119,270 |  |  | $ | 111,040 |  |  | $ | 113,326 | 
|Working capital                                           |  |                | 9,860  |      |  |      | 15,701 |      |  |      | 102,093 |  |  |   | 98,139  |  |  |   | 101,925 | 
|Total assets                                              |  |                | 34,861 |      |  |      | 52,903 |      |  |      | 148,305 |  |  |   | 146,221 |  |  |   | 151,070 | 
|Long-term obligations, less current portion               |  |                | 4,455  |      |  |      | 7,591  |      |  |      | 6,729   |  |  |   | 3,010   |  |  |   |        | 
|Total stockholders equity                                |  |                | 25,030 |      |  |      | 36,166 |      |  |      | 119,943 |  |  |   | 123,651 |  |  |   | 134,497 | 

17



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##### Table of Contents






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

This Managements Discussion and Analysis
of Financial Condition and Results of Operations and other parts
of this Form 10-K contain forward-looking statements that
involve risks and uncertainties. These statements typically may
be identified by the use of forward-looking words or phrases
such as believe, expect,
intend, anticipate, should,
planned, estimated, and
potential, among others. All forward-looking
statements included in this document are based on our current
expectations, and we assume no obligation to update any such
forward-looking statements. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for such
forward-looking statements. In order to comply with the terms of
the safe harbor, we note that a variety of factors could cause
actual results and experience to differ materially from the
anticipated results or other expectations expressed in such
forward-looking statements. The risks and uncertainties that may
affect the operations, performance, development, and results of
our businesses include but are not limited to (1) market
acceptance of our products and services; (2) uncertainties
relating to the pace, quality or number of discoveries of new
materials; (3) the dependence on collaborators to
successfully commercialize products; (4) uncertainties of
patent protection and litigation; (5) future growth
strategy; (6) general economic conditions in the United
States and in major European and Asian markets;
(7) earthquakes, power failures and other disasters; and
(8) other factors that might be described from time to time
in our periodic filings with the Securities and Exchange
Commission and include those set forth under Risk
Factors and elsewhere in this Annual Report on
Form 10-K.

Overview

To date, our revenues and cash flows from
operations have come from research collaborations with large
chemical, life science and electronics companies, license of
proprietary materials, sale and license of instruments and
software, and government grants. We currently have approximately
25 life science, chemical and electronics collaborative
partners and customers worldwide, including such leading
companies as Celanese, Dow Chemical, Eli Lilly and Company,
ExxonMobil Chemical, Merck & Co., Unilever, and Sumitomo
Chemical. We expect that our cash flows and revenue for 2002
will be comprised in large part of payments to be made and
revenue to be earned under these and new agreements together
with product and license revenue particularly from our Discovery
Tools business.

We have invested heavily in establishing the
technology, instrumentation and informatics necessary to pursue
high throughput discovery for proprietary materials. These
materials include:



| |   |                                                                   
| | - | ------------------------------------------------------------------
| |  | polymers, phosphors and catalysts for life
	science applications; 
|
| |  | catalysts to manufacture commodity chemicals and
	polyolefins; and
|
| |  | new materials for electronics applications.                       

Despite challenges in the overall business
climate, we met our 2001 financial goals, achieving four
consecutive quarters of profitability and generating revenues of
$60.0 million, an increase of 39% over 2000. We ended the
year with net income of $6.3 million, or $0.20 per share on
a diluted basis. In addition, we generated positive cash flow,
ending the year with $113.3 million in cash, cash
equivalents and available-for-sale securities.

Our revenue increased from $30.5 million in
1999 to $43.3 million in 2000 to $60.0 million in
2001. Operating expenses increased from $34.3 million in
1999 to $50.5 million in 2000 to $57.8 million in
2001. Our total headcount increased from 170 employees at
the end of 1999 to 193 employees at the end of 2000 and to
204 employees at the end of 2001.

We expect to continue to make significant
investments in research and development, including the
development of new instruments and software, to enhance our
technologies. In addition, an important part of our strategy is
to expand our operations and employee base, and to build our
resources for research and development, business development and
marketing.

We have incurred significant losses since our
inception. As of December 31, 2001, our accumulated deficit
was approximately $13.7 million.

18



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##### Table of Contents



Sources of Revenue and Revenue Recognition
Policy

Revenue from collaborations and grants consists
of research and development funding received from collaborative
partners as well as government grants received for proprietary
materials research. Product and license revenue consists of
payments from customers for products including proprietary
materials, Discovery Tools systems and consumables as well as
license fees and royalties on manual laboratory instruments and
software sold under license by third parties.

We recognize revenue from the sale of Discovery
Tools, and all costs of manufacture are expensed, once customer
acceptance has been achieved. A warranty reserve is established
at the time of customer acceptance. If there are extended
payment terms, we recognize product and license revenue as these
payments become due. The Company considers all arrangements with
payment terms extending beyond 12 months not to be fixed or
determinable. Accordingly, the cost of products sold as a
percentage of product and license revenue will fluctuate from
one period to the next based on the timing of when extended
payments are due as well as the mix of products sold. We
recognize royalty revenues based on reported sales by third
party licensees of products containing the Companys
software, intellectual property and know-how. We recognize
revenue from research collaboration agreements and government
grants as earned upon performance of the services specified in
the agreements and grants. Payments received that are related to
future performance are deferred and recognized as revenue as the
performance requirements are achieved. As of December 31,
2001, we had deferred revenues of approximately
$6.6 million. The terms of our collaboration agreements
generally require us to perform minimum levels of research. Our
sources of potential revenue for the next several years are
likely to be:



| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | payments under existing and possible future
	collaborative arrangements;                                        
|
| |  | royalties from our partners based on revenues
	received from any products commercialized under those agreements;
|
| |  | sales of Discovery Tools and other instruments;                                                                 
|
| |  | licensing of software and intellectual property;
	and                                                           
|
| |  | government research grants.                                                                                     

See Notes 1 and 2 of Notes to Financial
Statements for a further discussion of our revenue recognition
policies and our collaborative agreements.

Management is required to exercise judgment in
establishing the appropriate level of warranty reserve for each
Discovery Tool system delivered. The actual results with regard
to warranty expenditures could have a material unfavorable
impact on the Company if system failures or the cost to repair a
system is greater than what the Company has used in estimating
the warranty expense accrual.

Deferred Compensation

Deferred compensation for options granted to
employees has been determined as the difference between the
deemed fair market value of our common stock on the date options
were granted and the exercise price. Deferred compensation for
options granted to consultants has been determined in accordance
with Statement of Financial Accounting Standards No. 123 as
the fair value of the equity instruments issued. Deferred
compensation for options granted to consultants is periodically
remeasured as the underlying options vest.

In connection with the grant of stock options to
employees and consultants, we recorded deferred stock
compensation of approximately $5.4 million in the year
ended December 31, 1999 and $760,000 in the year ended
December 31, 1998. These amounts were initially recorded as
a component of stockholders equity and are being amortized
by charges to operations over the vesting period of the options
using the graded vesting method. We recorded amortization of
deferred compensation of approximately $411,000 in 2001,
$760,000 in 2000 and $3.8 million in 1999. The amortization
expense relates to options awarded to employees and consultants
in all operating expense categories. See Note 4 of Notes to
Financial Statements.

19



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##### Table of Contents



Results of Operations



| |                                        
| | ---------------------------------------
| | Years Ended December 31, 2000 and
	2001



| |         
| | --------
| | Revenues

Our total revenues increased to
$60.0 million in 2001 up 39% from $43.3 million in
2000. This increase was due largely to the growth in our
Discovery Tools business which generated $15.4 million of
revenue in 2001 up from $6.3 million in 2000. The remainder
of the increase in revenue was attributable to the addition of
new research collaborations.

The Company segregates revenue by Industry
Collaborations, Proprietary Materials and Discovery Tools.
Industry Collaboration revenue is further segregated into four
categories for purposes of internal management reporting:
Chemicals, Industrial Polymers, Electronic Materials, and Life
Sciences and for 2001 includes a $300,000 license fee that is
included in product and license revenues in the consolidated
statement of operations.

|                         |                      |                |        |        |        |  |        |        |        | 
|------------------------ | -------------------- | -------------- | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                         |                      |               
|                         |                      | Years Ended   
|                         |                      | December 31,  
|                         |                      |               
|                         |                      | 2001           |        | 2000  
|                         |                      |                |        |       
|                         |                      |               
|                         |                      | (in thousands)
|Industry Collaborations: |                      |                |        |        |        |  |        |       
|                         | Chemicals            |                | $      | 26,200 |        |  | $      | 21,122 |       
|                         | Industrial polymers  |                |        | 5,519  |        |  |        | 6,965  |       
|                         | Electronic materials |                |        | 3,604  |        |  |        | 3,350  |       
|                         | Life sciences        |                |        | 7,606  |        |  |        | 3,560  |       
|                         |                      |                |        |        |        |  |        |       
|                         |                      |                | 42,929 |        |        |  | 34,997 |       
|Proprietary Materials:   |                      |                |        |        |        |  |        |       
|                         | Life sciences        |                |        | 2,000  |        |  |        | 2,000  |       
|Discovery Tools          |                      |                | 15,091 |        |        |  | 6,321  |       
|                         |                      |                |        |        |        |  |        |       
|                         |                      | Total          |        | $      | 60,020 |  |        | $      | 43,318 | 
|                         |                      |                |        |        |        |  |        |       

The increase in Industry Collaboration revenue
for the year ended December 31, 2001 was largely
attributable to new research collaborations initiated with
Chemical companies such as ExxonMobil and Life Science companies
such as Merck. Applied Biosystems, Bayer, Celanese, ExxonMobil
and The Dow Chemical Company accounted for 7%, 13%, 9%, 12% and
14% of total revenue for the 12 months ended
December 31, 2001, and 11%, 20%, 11%, 0% and 22% of revenue
for the same period in 2000.

Revenue from research collaborations exceeded
research and development costs for the year ended
December 31, 2001 primarily because of increasing research
contract profitability. The excess of research and development
costs over research revenue during the year ended
December 31, 2000 was primarily due to the research costs
associated with internal projects in our Proprietary Materials
business and the development costs associated with the
initiation of our Discovery Tools business.



| |                      
| | ---------------------
| | Cost of Products Sold

Cost of products sold was $6.6 million for
the twelve month period ended December 31, 2001 compared to
$2.8 million for the twelve month period ended
December 31, 2000.

The increase in cost of products sold in the
twelve month period ended December 31, 2001 was largely
attributable to the Discovery Tools Polyolefins systems
delivered to ExxonMobil Chemical Company, the Discovery Tools
RapidLGPCTM system delivered to GIRSA and the
Discovery Tools Polymerization systems delivered to both GIRSA
and Sumitomo Chemical Company, Ltd. We have had limited sales of
Discovery Tools systems and consumables to date, and the cost of
products sold is expected to fluctuate from period to period and
will be driven by the variability of product mix and sales
volumes in each period.

20



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##### Table of Contents





| |                                  
| | ---------------------------------
| | Research and Development Expenses

The Company has entered into a number of research
and development collaborations to perform research for customers
in exclusive fields. The major collaborative arrangements all
have similar contractual terms. Under the collaborative
arrangements, Symyx is responsible for performing research at
levels of either full time equivalent staffing or number of
experiments as defined in the agreements. The collaborative
partner is entitled to develop and commercialize materials
discovered in or under collaboration within the defined field.
Symyx typically receives research and development funding at
specified amounts per full time equivalent employee working on
the project or on a per experiment fee basis and is entitled to
receive royalties on the sale of any products commercialized
under the agreement or payments on the achievement of specified
research milestones by the Company or its collaborative
partners. The agreements also contain procedures by which the
Company and the customer will determine royalty rates for the
sale or license of products under the agreements.

The table below indicates the major collaborative
partners, defined as those contributing greater than 10% of
collaborative research revenue in 2001, for whom Symyx conducted
research and development, together with the primary focus of the
collaborations and the date upon which the current contract
ends. Contracts may only be extended by mutual agreement between
Symyx and the collaborative partner.

|             |  |                  |            |                                        |  |                                                                                                                                       
|------------ |  | ---------------- | ---------- | -------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------
|             |  | Current Research |            |                                       
|Partner      |  | Contract Ends    |            | Primary focus of collaborative efforts
|             |  |                  |            |                                       
|Bayer        |  |                  | 12/31/2001 |                                        |  | Polyolefins, commodity chemicals                                                                                                      
|Celanese     |  |                  | 12/31/2002 |                                        |  | Catalysts for Commodity chemicals                                                                                                     
|Dow Chemical |  |                  | 3/31/2002  |                                        |  | Polyolefins and pharmaceutical intermediates                                                                                          
|Merck        |  |                  | 3/31/2002  |                                        |  | Workflow for rapid discovery, identification and
	characterization of novel crystalline salt and polymorphic forms
	of drug candidates

We do not track fully burdened research and
development costs or capital expenditures by project. However,
we estimate based on Full Time Equivalent (FTE)
effort, that approximately 78% of research &
development efforts in 2001 were undertaken for collaborative
projects funded by our partners, and approximately 22% of
research effort was on our own internally funded research
including development costs related to our Discovery Tools
business. Due to the nature of our research and our dependence
on our collaborative partners to commercialize the results of
the research, we cannot predict with any certainty whether any
particular collaboration or research effort will ultimately
result in a commercial product and therefore whether we will
achieve future milestones or royalty payments under our various
collaborations.

Our research and development expenses consist
primarily of salaries and other personnel-related expenses,
facility costs, supplies, depreciation of facilities, and
laboratory equipment.

Research and development expenses increased 8%
from $35.9 million in 2000 to $38.7 million in 2001.
The increase in 2001 was due primarily to increases in salaries
and other personnel related costs, facilities costs and chemical
and scientific supplies costs to support our additional
collaborative and internal research efforts. These increases
were partially offset by decreases in outside research and
consultant costs and the deferred compensation charge.

Research and development expenses represented 91%
of service revenues in 2001 and 103% of service revenues in
2000. The decrease as a percentage of revenue was due primarily
to revenue increases associated with the addition of significant
contracts and a reduction in outside research and consultant
costs in 2001. Our core businesses are research to discover new
materials and the sale of instruments and related software
licenses. Accordingly, we expect to continue to devote
substantial resources to research and development, and we expect
that research and development expenses will continue to increase
in absolute dollars.



| |                                    
| | -----------------------------------
| | General and Administrative Expenses

Our general and administrative expenses consist
primarily of personnel costs for finance, human resources,
business development, legal and general management, as well as
professional expenses, such as legal

21



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##### Table of Contents



and accounting. General and administrative
expenses increased 6% from $11.8 million in 2000 to
$12.5 million in 2001. Expenses increased primarily due to
the addition of a number of business development personnel,
increased salaries and other personnel related costs due to
additional staffing necessary to manage and support our growth.
General and administrative expenses also increased due to an
increase in travel costs related mainly to business development
and sales efforts. These increases were partially offset by a
decrease in the deferred compensation charge.


General and administrative expenses represented
21% of total revenues in 2001 and 27% of total revenues in 2000.
We expect that our general and administrative expenses will
increase in absolute dollar amounts as we:



| |   |                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------
| |  | expand our business development and
	administrative staff;                                                                  
|
| |  | add facilities; and                                                                                                         
|
| |  | incur escalating costs related to being a public
	company such as directors and officers insurance and
	professional fees.



| |                              
| | -----------------------------
| | Net Interest Income (Expense)

Net interest income (expense) represents
interest income earned on our cash and available-for-sale
securities net of interest expense on equipment financing loans.
Interest income decreased from $7.2 million in 2000 to
$6.1 million in 2001. This decrease was due to lower
interest rates in 2001. We anticipate that our interest income
in 2002 will be significantly lower than 2001, due to our higher
yielding securities being progressively replaced, on either
maturity or sale, with securities yielding substantially lower
interest rates in 2002. Interest expense decreased from $924,000
in 2000 to $660,000 in 2001. This decrease was due to a
reduction in the outstanding balances of equipment financing
loans used to partially fund our original acquisition of
equipment. At December 31, 2001 we had fully repaid amounts
owed under these equipment financing loans.



| |                           
| | --------------------------
| | Provision for Income Taxes

We recorded an income tax provision of
$1.3 million for the year ended December 31, 2001. The
provision differs from the expected tax liability at a statutory
rate primarily due to the realization of previously unbenefited
deferred tax assets. We expect our average tax rate for 2002 to
be significantly higher than our 2001 average rate as we have
now realized the majority of the benefits related to previously
incurred net operating losses.

There was no provision for income taxes for the
year ended December 31, 2000 due to operating losses.

As of December 31, 2001, we had net deferred
tax assets of approximately $2.0 million. Our net deferred
tax assets primarily relate to revenue that has been recognized
for income tax purposes but deferred for financial reporting
purposes. At December 31, 2001, we had federal net
operating loss carryforwards of approximately $6.3 million.
The net operating loss carryforwards will expire in 2020, if not
utilized. The valuation allowance for deferred tax assets
includes approximately $2.4 million attributable to stock
option deductions, the benefit of which will be credited to
stockholders equity upon realization. Utilization of the
net operating loss and tax credit carryforwards may be subject
to a substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code of 1986, as
amended, and similar state provisions. The annual limitation may
result in the expiration of net operating loss and tax credit
carryforwards before utilization.

Years Ended
December 31, 1999 and 2000

Revenues

Our total revenues increased to
$43.3 million in 2000, up 42% from $30.5 million in 1999.
This increase was due primarily to the introduction of our
Discovery Tools business which generated $6.3 million of
revenue in 2000 together with a development candidate transfer
fee which provided revenue of $2 million in 2000. The

22



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##### Table of Contents



remainder of the increase in revenue was
attributable to the addition of new and expanded research
collaborations with companies in the Chemicals, Industrial
Polymers and Life Science industries, partially offset by the
conclusion of the Siemens Electronic Materials
collaboration and a lower level of funding received by our
Electronic Materials group from government grants.


|                         |                      |                |        |        |        |  |        |        |        | 
|------------------------ | -------------------- | -------------- | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                         |                      |               
|                         |                      | Years Ended   
|                         |                      | December 31,  
|                         |                      |               
|                         |                      | 2000           |        | 1999  
|                         |                      |                |        |       
|                         |                      |               
|                         |                      | (in thousands)
|Industry Collaborations: |                      |                |        |        |        |  |        |       
|                         | Chemicals            |                | $      | 21,122 |        |  | $      | 19,454 |       
|                         | Industrial polymers  |                |        | 6,965  |        |  |        | 4,834  |       
|                         | Electronic materials |                |        | 3,350  |        |  |        | 6,209  |       
|                         | Life sciences        |                |        | 3,560  |        |  |        |       |       
|                         |                      |                |        |        |        |  |        |       
|                         |                      |                | 34,997 |        |        |  | 30,497 |       
|Proprietary Materials:   |                      |                |        |        |        |  |        |       
|                         | Life sciences        |                |        | 2,000  |        |  |        |       |       
|Discovery Tools          |                      |                | 6,321  |        |        |  |       |       
|                         |                      |                |        |        |        |  |        |       
|                         |                      | Total          |        | $      | 43,318 |  |        | $      | 30,497 | 
|                         |                      |                |        |        |        |  |        |       

Applied Biosystems, Bayer, Celanese and The Dow
Chemical Company accounted for 11%, 20%, 11% and 22% of total
revenue for the 12 months ended December 31, 2000, and
0%, 32%, 12% and 18% of revenue for the same period in 1999.

Revenue from research collaborations was less
than research and development expense for the year ended
December 31, 2000 due primarily to the research costs
associated with internal projects primarily in our Proprietary
Materials business and the development costs associated with the
introduction of our Discovery Tools business. The excess of
revenue over research and development costs during the year
ended December 31, 1999 was primarily because we did not
incur significant costs in our Discovery Tools and Proprietary
Materials businesses.

Cost
of Products Sold

Cost of products sold was $2.8 million for
the twelve month period ended December 31, 2000. There was
no product revenue and therefore no cost of products sold for
the twelve month period ended December 31, 1999.

The increase in cost of products sold was due
directly to the introduction of the Discovery Tools business,
which first resulted in product revenue in the year 2000. The
Company has limited sales of Discovery Tools systems and
consumables to date, and the cost of products sold is expected
to fluctuate from period to period and will be driven by the
variability of product mix and sales volumes in each period.

Research
and Development Expenses

Our research and development expenses consist
primarily of salaries and other personnel-related expenses,
facility costs, supplies, depreciation of facilities, and
laboratory equipment.

Research and development expenses increased 35%
from $26.6 million in 1999 to $35.9 million in 2000.
The increase was due primarily to increases in salaries and
other personnel related costs, facilities costs, collaborative
research and consultant costs and chemical and scientific
supplies costs to support our additional collaborative and
internal research efforts. These increases were partially offset
by a decrease in the deferred compensation charge.

Research and development expenses represented 87%
of total revenues in 1999 and 83% of total revenues in 2000. The
decrease as a percentage of total revenues was due primarily to
revenue increases associated with

23



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the addition of significant contracts and the
addition of product and license revenues in 2000. Our core
businesses are research to discover new materials and the sale
of instruments and related software. Accordingly, we expect to
continue to devote substantial resources to research and
development, and we expect that research and development
expenses will continue to increase in absolute dollars.


General
and Administrative Expenses

Our general and administrative expenses consist
primarily of personnel costs for finance, human resources,
business development, legal and general management, as well as
professional expenses, such as legal and accounting. General and
administrative expenses increased 55% from $7.6 million in
1999 to $11.8 million in 2000. Expenses increased primarily
due to the addition of a number of business development
personnel, increased salaries, consultant and other personnel
related costs due to additional staffing necessary to manage and
support our growth. General and administrative expenses also
increased due to an increase in travel costs related mainly to
business development and sales efforts, an increase in public
relations costs associated with being a public company, an
increase in insurance and license costs and expenses related to
a proposed stock offering which was withdrawn during the three
months ended March 31, 2000. These increases were partially
offset by a decrease in the deferred compensation charge.

General and administrative expenses represented
25% of total revenues in 1999 and 27% of total revenues in 2000.
We expect that our general and administrative expenses will
increase in absolute dollar amounts as we:



| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | expand our business development and
	administrative staff;                                                                                                            
|
| |  | add facilities; and                                                                                                                                                   
|
| |  | incur additional costs related to being a public
	company, including directors and officers insurance,
	investor relations programs and increased professional fees.

Net
Interest Income (Expense)

Net interest income (expense) represents
interest income earned on our cash and available-for-sale
securities net of interest expense on equipment financing loans.
Interest income increased from $2.5 million in 1999 to $7.2
million in 2000. This increase was due to higher average cash
balances. Interest expense decreased from $934,000 in 1999 to
$924,000 in 2000. This decrease was due to a reduction in the
outstanding balances of equipment financing loans used to
partially fund our acquisition of equipment.

Provision
for Income Taxes

Due to operating losses, there was no provision
for income taxes for the years ended December 31, 2000 and
1999.

Liquidity and Capital Resources

Symyx was cash flow positive for the year ended
December 31, 2001, and finished the year with
$113.3 million in cash, cash equivalents and marketable
securities compared to $111.0 million at the end of 2000.
During 2001, the Company completely paid off the remaining
$6.7 million of debt that was incurred to fund capital
expenditures in the early years of operation.

In prior years, we had financed our operations
primarily through research and development funding from
collaborative partners, net proceeds from our initial public
offering of $81.4 million and, prior to the initial public
offering, private placements of preferred stock totaling
$52.2 million, and to a lesser extent, equipment financing
loans.

Our operating activities provided
$16.7 million, $1.7 million and $14.0 million of cash
in 2001, 2000 and 1999, respectively. The sources of cash for
the three years were primarily the receipt of research and
development funding from collaborative partners and revenue from
product sales, partially offset by operating expenses.

24



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##### Table of Contents



Net cash used in investing activities was
$8.6 million in 2001, $19.2 million in 2000 and
$81.2 million in 1999. The fluctuations from period to
period are due primarily to the timing of purchases, sales and
maturity of investment securities and purchases of property and
equipment. Purchases of property and equipment were
$11.0 million in 2001, $8.8 million in 2000 and
$11.5 million in 1999. We expect to continue to make
significant investments in the purchase of property and
equipment to support our expanding operations.

Financing activities used cash of
$3.2 million in 2001 and $806,000 in 2000, and provided
cash of $82.1 million in 1999. These amounts are primarily
the repayment of equipment and leasehold improvement loan
financings partially offset by proceeds from the exercise of
stock options in 2001 and 2000. The fluctuations from period to
period are due primarily to the proceeds from the exercise of
stock options. The source of cash in 1999 primarily represents
the proceeds we received from our initial public offering in
1999. At December 31, 2001 we have repaid all amounts
outstanding under loan financings.

Current liabilities decreased by approximately
$3.0 million at December 31, 2001 as compared to
December 31, 2000 and long term liabilities decreased by
approximately $3.0 million at December 31, 2001 as
compared to December 31, 2000. These decreases were both
due primarily to the repayment of all amounts owing under our
equipment and facility loans effective December 31, 2001.
Deferred revenue decreased at December 31, 2001 as compared
to December 31, 2000. This decrease was due to the timing
of the receipt of advance payments, including technology access
fees, under collaborative research programs and advance deposits
for Discovery Tools systems.

As of December 31, 2001, we had committed
funding of approximately $43.7 million including approximately
$31.3 million from existing collaborative partners,
excluding milestone payments which are contingent upon the
success of the research and approximately $12.4 million for
the sale of Discovery Tools systems.

As of December 31, 2001 and 2000, our
principal commitments were $17.2 million and $18.9 million,
respectively. Principal commitments consisted of our obligations
under operating leases. We will satisfy these obligations as
they become due over the next nine years.

We believe that our current cash balances and the
cash flows generated by operations will be sufficient to satisfy
our anticipated cash needs for working capital and capital
expenditures for at least the coming year. Nonetheless, we may
raise additional funds through public or private financing,
collaborative relationships or other arrangements. We cannot
assure you that additional funding, if sought, will be available
on terms favorable to us. Further, any additional equity
financing may be dilutive to stockholders, and debt financing,
if available, may involve restrictive covenants. Collaborative
arrangements may require us to relinquish our rights to some of
our technologies or products. Our failure to raise capital when
needed may harm our business and operating results.

A portion of our cash may be used to acquire or
invest in complementary businesses or products or to obtain the
right to use complementary technologies. From time to time, in
the ordinary course of business, we may evaluate potential
acquisitions of such businesses, products or technologies.

Symyx has not entered into any off-balance sheet
financing arrangements and has not established any special
purpose entities. Symyx has not guaranteed any debt or
commitments of other entities or entered into any options on
non-financial assets. The only transactions between Symyx and
related parties during 2001 were:



| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | receipts from partial repayments of loans
	originally provided to certain employees and executive officers
	for the exercise of stock options prior to the Companys
	initial public offering in 1999; and                                                                   
|
| |  | Mario M. Rosati, one of our directors, is also a
	member of Wilson Sonsini Goodrich & Rosati, Professional
	Corporation, which has served as our outside corporate counsel
	since our formation and has received compensation at normal
	commercial rates for these services.

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##### Table of Contents



Recent Accounting Pronouncements

In July 2001, the FASB issued Statement of
Financial Accounting Standards No. 141, Business
Combinations (Statement 141). This Statement addresses
financial accounting and reporting for business combinations.
Statement 141 supersedes APB Opinion No. 16, Business
Combinations, and amends or supersedes a number of
interpretations of that Opinion. Statement 141 requires that (1)
all business combinations be accounted for by a single
method  the purchase method, (2) all intangible
assets acquired in a business combination are to be recognized
as assets apart from goodwill if they meet one of two
criteria  the contractual-legal criterion or the
separability criterion and (3) in addition to the
disclosure requirements in Opinion 16, disclosure of the primary
reasons for a business combination and the allocation of the
purchase price paid to the assets acquired and liabilities
assumed by major balance sheet caption. When the amounts of
goodwill and intangible assets acquired are significant in
relation to the purchase price paid, disclosure of other
information about those assets is required, such as the amount
of goodwill by reportable segment and the amount of the purchase
price assigned to each major intangible asset class. The
provisions of Statement 141 apply to all business combinations
initiated after June 30, 2001. Statement 141 also applies
to all business combinations accounted for using the purchase
method for which the date of acquisition is July 1, 2001,
or later. The Company will adopt the provisions of Statement 141
for any business combinations that may be initiated.

In July 2001, the FASB issued Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangibles (Statement 142). Under
Statement 142, goodwill and indefinite lived intangible assets
are no longer amortized but are reviewed annually (or more
frequently if impairment indicators arise) for impairment.
Separable intangible assets that are not deemed to have an
indefinite life will continue to be amortized over their
estimated useful lives. Symyx has not recorded any goodwill or
indefinite lived intangible assets prior to December 31,
2001. The adoption of this statement as of January 1, 2002
is not expected to have a material impact on the Companys
financial position, results of operations or cash flow.

In October 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (Statement 144),
which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and supersedes
Statement 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 Opinion
No. 30, Reporting the Results of Operations for a
disposal of a segment of a business. Statement 144 is
effective for fiscal years beginning after December 15,
2001. The Company will adopt Statement 144 as of January 1,
2002 and it does not expect that the adoption of the Statement
will have a significant impact on the Companys financial
position and results of operations.

Dividend Policy

We have never declared or paid any dividends on
our capital stock. We currently expect to retain future
earnings, if any, to support the development of our business and
do not anticipate paying any cash dividends in the foreseeable
future.






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

Our exposure to market risk is principally
confined to our cash, cash equivalents and investments which
have maturities of less than two years. We maintain a
non-trading investment portfolio of investment grade, liquid
debt securities that limits the amount of credit exposure to any
one issue, issuer or type of instrument. At December 31,
2001 our investment portfolio comprised approximately
$15.7 million in money market funds and $97.7 million
in U.S. corporate debt and U.S. treasury securities. The
securities in our investment portfolio are not leveraged, are
classified as available for sale and are therefore subject to
interest rate risk. We currently do not hedge interest rate
exposure. If market interest rates were to increase by 100 basis
points, or 1%, from December 31, 2001 levels, the fair
value of our portfolio would decline by approximately $568,000.
The modeling technique used measures the change in fair values
arising from an immediate hypothetical shift in market interest
rates and assumes ending fair values include principal plus
accrued interest.

26



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##### Table of Contents



Interest Rate Sensitivity:

Principal Amount by Expected Maturity (in
thousands)


Average Interest Rate


|                              |  |      |        |      |  |       |        |            |  |   |        |   |  |   |        | 
|----------------------------- |  | ---- | ------ | ---- |  | ----- | ------ | ---------- |  | - | ------ | - |  | - | ------ | 
|                              |  |      |        |      |  |       |        | Fair Value
|                              |  | 2002 |        | 2003 |  | Total |        | 12/31/01  
|                              |  |      |        |      |  |       |        |           
|Available-for-sale securities |  | $    | 74,174 |      |  | $     | 23,214 |            |  | $ | 97,389 |   |  | $ | 97,705 | 
|Average interest rate         |  |      | 4.22   | %    |  |       | 4.29   | %          |  |   | 4.24   | % |  |   |        | 

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##### Table of Contents






Item
8.     Financial Statements and
Supplementary Data

|                                                                                                  |  |      |    | 
|------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|Index to Financial Statements                                                                     |  | Page
|                                                                                                  |  |     
|Report of Ernst & Young LLP, Independent
	Auditors                                                |  |      | 29 | 
|Consolidated Balance Sheets at December 31,
	2001 and 2000                                        |  |      | 30 | 
|Consolidated Statements of Operations for the
	years ended December 31, 2001, 2000 and 1999       |  |      | 31 | 
|Consolidated Statement of Stockholders
	Equity for the three year period ended December 31, 2001 |  |      | 32 | 
|Consolidated Statements of Cash Flows for the
	years ended December 31, 2001, 2000 and 1999       |  |      | 34 | 
|Notes to Consolidated Financial Statements                                                        |  |      | 35 | 

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##### Table of Contents



REPORT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS

The Board of Directors and Stockholders

Symyx Technologies, Inc.


We have audited the accompanying consolidated
balance sheets of Symyx Technologies, Inc. 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 financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of Symyx Technologies, Inc. at
December 31, 2001 and 2000, and the results of its
operations and its 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.



| |                  
| | -----------------
| | ERNST & YOUNG LLP

Palo Alto, California

January 25, 2002


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##### Table of Contents



SYMYX TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

|                                                                                                                                                                     |                                                 |                                            |         |        |         |  |         |         |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------------ | ------- | ------ | ------- |  | ------- | ------- | ------- | 
|                                                                                                                                                                     |                                                 |                                           
|                                                                                                                                                                     |                                                 | December 31,                              
|                                                                                                                                                                     |                                                 |                                           
|                                                                                                                                                                     |                                                 | 2001                                       |         | 2000  
|                                                                                                                                                                     |                                                 |                                            |         |       
|                                                                                                                                                                     |                                                 |                                           
|                                                                                                                                                                     |                                                 | (In thousands, except                     
|                                                                                                                                                                     |                                                 | share information)                        
|ASSETS                                                                                                                                                              
|Current assets:                                                                                                                                                      |                                                 |                                            |         |        |         |  |         |        
|                                                                                                                                                                     | Cash and cash equivalents                       |                                            | $       | 15,621 |         |  | $       | 10,624  |        
|                                                                                                                                                                     | Available-for-sale securities                   |                                            |         | 97,705 |         |  |         | 100,416 |        
|                                                                                                                                                                     | Accounts receivable                             |                                            |         | 454    |         |  |         | 993     |        
|                                                                                                                                                                     | Prepaid expenses                                |                                            |         | 955    |         |  |         | 967     |        
|                                                                                                                                                                     | Inventories                                     |                                            |         | 2,192  |         |  |         | 2,763   |        
|                                                                                                                                                                     | Interest receivable and other current assets    |                                            |         | 1,571  |         |  |         | 1,936   |        
|                                                                                                                                                                     |                                                 |                                            |         |        |         |  |         |        
|                                                                                                                                                                     |                                                 | Total current assets                       |         |        | 118,498 |  |         |         | 117,699 | 
|Property and equipment, net                                                                                                                                          |                                                 |                                            | 28,532  |        |         |  | 26,377  |        
|Deferred tax asset                                                                                                                                                   |                                                 |                                            | 2,046   |        |         |  |        |        
|Other assets                                                                                                                                                         |                                                 |                                            | 1,994   |        |         |  | 2,145   |        
|                                                                                                                                                                     |                                                 |                                            |         |        |         |  |         |        
|                                                                                                                                                                     |                                                 | Total assets                               |         | $      | 151,070 |  |         | $       | 146,221 | 
|                                                                                                                                                                     |                                                 |                                            |         |        |         |  |         |        
|LIABILITIES AND STOCKHOLDERS
	EQUITY                                                                                                                               
|                                                                                                                                                                    
|Current liabilities:                                                                                                                                                 |                                                 |                                            |         |        |         |  |         |        
|                                                                                                                                                                     | Accounts payable and other accrued liabilities  |                                            | $       | 3,934  |         |  | $       | 3,667   |        
|                                                                                                                                                                     | Accrued compensation and employee benefits      |                                            |         | 1,118  |         |  |         | 1,396   |        
|                                                                                                                                                                     | Income taxes payable                            |                                            |         | 3,068  |         |  |         |        |        
|                                                                                                                                                                     | Deferred rent                                   |                                            |         | 842    |         |  |         | 604     |        
|                                                                                                                                                                     | Deferred revenue                                |                                            |         | 6,637  |         |  |         | 9,734   |        
|                                                                                                                                                                     | Warranty reserve                                |                                            |         | 974    |         |  |         | 440     |        
|                                                                                                                                                                     | Current portion of equipment and facility loans |                                            |         |       |         |  |         | 3,719   |        
|                                                                                                                                                                     |                                                 |                                            |         |        |         |  |         |        
|                                                                                                                                                                     |                                                 | Total current liabilities                  |         |        | 16,573  |  |         |         | 19,560  | 
|Equipment and facility loans                                                                                                                                         |                                                 |                                            |        |        |         |  | 3,010   |        
|                                                                                                                                                                    
|Commitments and contingencies                                                                                                                                        |                                                 |                                            |         |        |         |  |         |        
|                                                                                                                                                                    
|Stockholders equity:                                                                                                                                                |                                                 |                                            |         |        |         |  |         |        
|Preferred stock, $0.001 par value, 10,000,000
	shares authorized, issuable in series; no shares issued and
	outstanding                                              |                                                 |                                            |        |        |         |  |        |        
|Common stock, $0.001 par value, 100,000,000
	shares authorized; 30,613,967 and 30,138,569 shares issued and
	outstanding at December 31, 2001 and 2000, respectively |                                                 |                                            | 31      |        |         |  | 30      |        
|Additional paid-in capital                                                                                                                                           |                                                 |                                            | 148,366 |        |         |  | 144,748 |        
|Stockholder notes receivable                                                                                                                                         |                                                 |                                            | (410    | )      |         |  | (621    | )      
|Deferred stock compensation                                                                                                                                          |                                                 |                                            | (335    | )      |         |  | (822    | )      
|Accumulated other comprehensive income                                                                                                                               |                                                 |                                            | 516     |        |         |  | 325     |        
|Accumulated deficit                                                                                                                                                  |                                                 |                                            | (13,671 | )      |         |  | (20,009 | )      
|                                                                                                                                                                     |                                                 |                                            |         |        |         |  |         |        
|                                                                                                                                                                     |                                                 | Total stockholders equity                 |         |        | 134,497 |  |         |         | 123,651 | 
|                                                                                                                                                                     |                                                 |                                            |         |        |         |  |         |        
|                                                                                                                                                                     |                                                 | Total liabilities and stockholders equity |         | $      | 151,070 |  |         | $       | 146,221 | 
|                                                                                                                                                                     |                                                 |                                            |         |        |         |  |         |        

See accompanying notes.

30



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SYMYX TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                              |                                                 |                                 |        |        |        |      |        |        |        |   |        |        |        | 
|------------------------------------------------------------- | ----------------------------------------------- | ------------------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                              |                                                 |                                
|                                                              |                                                 | Years Ended December 31,       
|                                                              |                                                 |                                
|                                                              |                                                 | 2001                            |        | 2000   |        | 1999
|                                                              |                                                 |                                 |        |        |        |     
|                                                              |                                                 |                                
|                                                              |                                                 | (In thousands, except per share
|                                                              |                                                 | amounts)                       
|Revenues:                                                     |                                                 |                                 |        |        |        |      |        |        |        |   |        |       
|                                                              | Service revenues from collaborations and grants |                                 | $      | 42,629 |        |      | $      | 34,999 |        |   | $      | 30,497 |       
|                                                              | Product and license revenues                    |                                 |        | 17,391 |        |      |        | 8,319  |        |   |        |       |       
|                                                              |                                                 |                                 |        |        |        |      |        |        |        |   |        |       
|                                                              |                                                 | Total Revenues                  |        |        | 60,020 |      |        |        | 43,318 |   |        |        | 30,497 | 
|Operating expenses:                                           |                                                 |                                 |        |        |        |      |        |        |        |   |        |       
|                                                              | Cost of products sold                           |                                 |        | 6,591  |        |      |        | 2,775  |        |   |        |       |       
|                                                              | Research and development                        |                                 |        | 38,718 |        |      |        | 35,898 |        |   |        | 26,628 |       
|                                                              | Sales, general and administrative               |                                 |        | 12,524 |        |      |        | 11,798 |        |   |        | 7,624  |       
|                                                              |                                                 |                                 |        |        |        |      |        |        |        |   |        |       
|                                                              |                                                 | Total operating expenses        |        |        | 57,833 |      |        |        | 50,471 |   |        |        | 34,252 | 
|                                                              |                                                 |                                 |        |        |        |      |        |        |        |   |        |       
|Income (loss) from operations                                 |                                                 |                                 | 2,187  |        |        |      | (7,153 | )      |        |   | (3,755 | )     
|Interest income                                               |                                                 |                                 | 6,117  |        |        |      | 7,155  |        |        |   | 2,542  |       
|Interest and other expense                                    |                                                 |                                 | (660   | )      |        |      | (924   | )      |        |   | (934   | )     
|                                                              |                                                 |                                 |        |        |        |      |        |        |        |   |        |       
|Income (loss) before income tax expense                       |                                                 |                                 | 7,644  |        |        |      | (922   | )      |        |   | (2,147 | )     
|Income tax expense                                            |                                                 |                                 | 1,306  |        |        |      |       |        |        |   |       |       
|                                                              |                                                 |                                 |        |        |        |      |        |        |        |   |        |       
|Net income (loss)                                             |                                                 | $                               | 6,338  |        |        | $    | (922   | )      |        | $ | (2,147 | )     
|                                                              |                                                 |                                 |        |        |        |      |        |        |        |   |        |       
|Basic net income (loss) per share                             |                                                 | $                               | 0.21   |        |        | $    | (0.03  | )      |        | $ | (0.27  | )     
|                                                              |                                                 |                                 |        |        |        |      |        |        |        |   |        |       
|Shares used in computing basic net income
	(loss) per share   |                                                 |                                 | 29,904 |        |        |      | 28,873 |        |        |   | 8,087  |       
|                                                              |                                                 |                                 |        |        |        |      |        |        |        |   |        |       
|Diluted net income (loss) per share                           |                                                 | $                               | 0.20   |        |        | $    | (0.03  | )      |        | $ | (0.27  | )     
|                                                              |                                                 |                                 |        |        |        |      |        |        |        |   |        |       
|Shares used in computing diluted net income
	(loss) per share |                                                 |                                 | 31,196 |        |        |      | 28,873 |        |        |   | 8,087  |       
|                                                              |                                                 |                                 |        |        |        |      |        |        |        |   |        |       

See accompanying notes.

31



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS
EQUITY

|                                                                  |                                                          |                 |         |              |  |            |     |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |        |   |  |   |      |      |   |   |         |        |   |   |         |        |  
|----------------------------------------------------------------- | -------------------------------------------------------- | --------------- | ------- | ------------ |  | ---------- | --- | ----------- |  | -------- | ------ | ------------- |  | ------------ | -- | ------------- |  | ------- | ------- | ------ |  | - | ---- | - |  | - | ------ | - |  | - | ---- | ---- | - | - | ------- | ------ | - | - | ------- | ------ | -
|                                                                  |                                                          |                 |         |              |  |            |     |             |  |          |        | Accumulated   |  |              |    |              
|                                                                  |                                                          | Preferred Stock |         | Common Stock |  | Additional |     | Stockholder |  | Deferred |        | Other         |  |              |    | Total        
|                                                                  |                                                          |                 |         |              |  | Paid-In    |     | Notes       |  | Stock    |        | Comprehensive |  | Accumulated  |    | Stockholders
|                                                                  |                                                          | Shares          |         | Amount       |  | Shares     |     | Amount      |  | Capital  |        | Receivable    |  | Compensation |    | Income (Loss) |  | Deficit |         | Equity
|                                                                  |                                                          |                 |         |              |  |            |     |             |  |          |        |               |  |              |    |               |  |         |         |       
|                                                                  |                                                          |                
|                                                                  |                                                          | (In thousands) 
|Balance at January 1, 1999                                        |                                                          |                 | 20,561  |              |  | $          | 21  |             |  |          | 6,225  |               |  | $            | 6  |               |  | $       | 54,093  |        |  | $ | (398 | ) |  | $ | (572   | ) |  | $ | (44  | )    |   | $ | (16,940 | )      |   | $ | 36,166  |       
|Issuance of common stock net of issuance costs of
	$7,741         |                                                          |                 |        |              |  |            |    |             |  |          | 7,440  |               |  |              | 8  |               |  |         | 82,413  |        |  |   | (361 | ) |  |   |       |   |  |   |     |      |   |   |        |        |   |   | 82,060  |       
|Repurchase of common stock                                        |                                                          |                 |        |              |  |            |    |             |  |          | (43    | )             |  |              |   |               |  |         | (35     | )      |  |   | 28   |   |  |   |       |   |  |   |     |      |   |   |        |        |   |   | (7      | )     
|Issuance of common stock in exchange for services                 |                                                          |                 |        |              |  |            |    |             |  |          | 25     |               |  |              |   |               |  |         | 222     |        |  |   |     |   |  |   |       |   |  |   |     |      |   |   |        |        |   |   | 222     |       
|Conversion of preferred stock to common stock on
	a 7 for 9 basis |                                                          |                 | (20,561 | )            |  |            | (21 | )           |  |          | 15,992 |               |  |              | 16 |               |  |         | 5       |        |  |   |     |   |  |   |       |   |  |   |     |      |   |   |        |        |   |   |        |       
|Deferred stock compensation                                       |                                                          |                 |        |              |  |            |    |             |  |          |       |               |  |              |   |               |  |         | 5,350   |        |  |   |     |   |  |   | (5,350 | ) |  |   |     |      |   |   |        |        |   |   |        |       
|Amortization of deferred stock compensation                       |                                                          |                 |        |              |  |            |    |             |  |          |       |               |  |              |   |               |  |         |        |        |  |   |     |   |  |   | 3,794  |   |  |   |     |      |   |   |        |        |   |   | 3,794   |       
|Comprehensive income (loss):                                      |                                                          |                 |         |              |  |            |     |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |        |   |  |   |      |      |   |   |         |        |   |   |         |       
|                                                                  | Net income (loss) for the year ended
	December 31, 1999  |                 |         |             |  |            |     |            |  |          |        |              |  |              |    |              |  |         |         |       |  |   |      |  |  |   |        |  |  |   |      |     |   |   |         | (2,147 | ) |   |         | (2,147 | )
|                                                                  | Unrealized gain (loss) on available-for-sale
	securities |                 |         |             |  |            |     |            |  |          |        |              |  |              |    |              |  |         |         |       |  |   |      |  |  |   |        |  |  |   |      | (145 | ) |   |         |       |   |   |         | (145   | )
|                                                                  |                                                          |                 |         |              |  |            |     |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |        |   |  |   |      |      |   |   |         |        |   |   |         |       
|Comprehensive loss                                                |                                                          |                 |         |              |  |            |     |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |        |   |  |   |      |      |   |   |         |        |   |   | (2,292  | )     
|                                                                  |                                                          |                 |         |              |  |            |     |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |        |   |  |   |      |      |   |   |         |        |   |   |         |       
|Balance at December 31, 1999                                      |                                                          |                 |        |              |  |            |    |             |  |          | 29,639 |               |  | $            | 30 |               |  | $       | 142,048 |        |  | $ | (731 | ) |  | $ | (2,128 | ) |  | $ | (189 | )    |   | $ | (19,087 | )      |   | $ | 119,943 |       
|Repurchase of common stock                                        |                                                          |                 |        |              |  |            |    |             |  |          | (43    | )             |  |              |   |               |  |         | (50     | )      |  |   | 42   |   |  |   |       |   |  |   |     |      |   |   |        |        |   |   | (8      | )     
|Issuance of common stock on exercise of options                   |                                                          |                 |        |              |  |            |    |             |  |          | 436    |               |  |              |   |               |  |         | 1,356   |        |  |   |     |   |  |   |       |   |  |   |     |      |   |   |        |        |   |   | 1,356   |       
|Issuance of common stock under employee share
	purchase plan      |                                                          |                 |        |              |  |            |    |             |  |          | 91     |               |  |              |   |               |  |         | 1,125   |        |  |   |     |   |  |   |       |   |  |   |     |      |   |   |        |        |   |   | 1,125   |       
|Issuance of common stock in exchange for acquired
	technology     |                                                          |                 |        |              |  |            |    |             |  |          | 16     |               |  |              |   |               |  |         | 815     |        |  |   |     |   |  |   |       |   |  |   |     |      |   |   |        |        |   |   | 815     |       
|Repayment of notes receivable                                     |                                                          |                 |        |              |  |            |    |             |  |          |       |               |  |              |   |               |  |         |        |        |  |   | 68   |   |  |   |       |   |  |   |     |      |   |   |        |        |   |   | 68      |       
|Amortization of deferred stock compensation                       |                                                          |                 |        |              |  |            |    |             |  |          |       |               |  |              |   |               |  |         |        |        |  |   |     |   |  |   | 760    |   |  |   |     |      |   |   |        |        |   |   | 760     |       
|Deferred stock compensation related to terminated
	employees      |                                                          |                 |        |              |  |            |    |             |  |          |       |               |  |              |   |               |  |         | (546    | )      |  |   |     |   |  |   | 546    |   |  |   |     |      |   |   |        |        |   |   |        |       
|Comprehensive income (loss):                                      |                                                          |                 |         |              |  |            |     |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |        |   |  |   |      |      |   |   |         |        |   |   |         |       
|                                                                  | Net income (loss) for the year ended
	December 31, 2000  |                 |         |             |  |            |     |            |  |          |        |              |  |              |    |              |  |         |         |       |  |   |      |  |  |   |        |  |  |   |      |     |   |   |         | (922   | ) |   |         | (922   | )
|                                                                  | Unrealized gain (loss) on available-for-sale
	securities |                 |         |             |  |            |     |            |  |          |        |              |  |              |    |              |  |         |         |       |  |   |      |  |  |   |        |  |  |   |      | 514  |   |   |         |       |   |   |         | 514    |  
|                                                                  |                                                          |                 |         |              |  |            |     |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |        |   |  |   |      |      |   |   |         |        |   |   |         |       
|Comprehensive loss                                                |                                                          |                 |         |              |  |            |     |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |        |   |  |   |      |      |   |   |         |        |   |   | (408    | )     
|                                                                  |                                                          |                 |         |              |  |            |     |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |        |   |  |   |      |      |   |   |         |        |   |   |         |       
|Balance at December 31, 2000                                      |                                                          |                 |        |              |  |            |    |             |  |          | 30,139 |               |  | $            | 30 |               |  | $       | 144,748 |        |  | $ | (621 | ) |  | $ | (822   | ) |  | $ | 325  |      |   | $ | (20,009 | )      |   | $ | 123,651 |       

32



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS
EQUITY  (Continued)

|                                                             |                                                                                                  |                 |   |              |  |            |   |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |      |   |  |   |     |     |  |   |         |       |  |   |         |       | 
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------------ | --------------- | - | ------------ |  | ---------- | - | ----------- |  | -------- | ------ | ------------- |  | ------------ | -- | ------------- |  | ------- | ------- | ------ |  | - | ---- | - |  | - | ---- | - |  | - | --- | --- |  | - | ------- | ----- |  | - | ------- | ----- | 
|                                                             |                                                                                                  |                 |   |              |  |            |   |             |  |          |        |               |  |              |    | Accumulated   |  |         |         |       
|                                                             |                                                                                                  |                 |   |              |  |            |   |             |  |          |        | Other         |  |              |    |              
|                                                             |                                                                                                  | Preferred Stock |   | Common Stock |  | Additional |   | Stockholder |  | Deferred |        | Comprehensive |  |              |    | Total        
|                                                             |                                                                                                  |                 |   |              |  | Paid-In    |   | Notes       |  | Stock    |        | Income        |  | Accumulated  |    | Stockholders
|                                                             |                                                                                                  | Shares          |   | Amount       |  | Shares     |   | Amount      |  | Capital  |        | Receivable    |  | Compensation |    | (Loss)        |  | Deficit |         | Equity
|                                                             |                                                                                                  |                 |   |              |  |            |   |             |  |          |        |               |  |              |    |               |  |         |         |       
|                                                             |                                                                                                  |                
|                                                             |                                                                                                  | (In thousands) 
|Balance at December 31, 2000                                 |                                                                                                  |                 |  |              |  |            |  |             |  |          | 30,139 |               |  | $            | 30 |               |  | $       | 144,748 |        |  | $ | (621 | ) |  | $ | (822 | ) |  | $ | 325 |     |  | $ | (20,009 | )     |  | $ | 123,651 |      
|Repurchase of common stock                                   |                                                                                                  |                 |  |              |  |            |  |             |  |          | (12    | )             |  |              |   |               |  |         | (2      | )      |  |   |     |   |  |   |     |   |  |   |    |     |  |   |        |       |  |   | (2      | )    
|Issuance of common stock on exercise of options              |                                                                                                  |                 |  |              |  |            |  |             |  |          | 387    |               |  |              | 1  |               |  |         | 2,093   |        |  |   |     |   |  |   |     |   |  |   |    |     |  |   |        |       |  |   | 2,094   |      
|Issuance of common stock under employee share
	purchase plan |                                                                                                  |                 |  |              |  |            |  |             |  |          | 100    |               |  |              |   |               |  |         | 1,267   |        |  |   |     |   |  |   |     |   |  |   |    |     |  |   |        |       |  |   | 1,267   |      
|Repayment of notes receivable                                |                                                                                                  |                 |  |              |  |            |  |             |  |          |       |               |  |              |   |               |  |         |        |        |  |   | 211  |   |  |   |     |   |  |   |    |     |  |   |        |       |  |   | 211     |      
|Amortization of deferred stock compensation                  |                                                                                                  |                 |  |              |  |            |  |             |  |          |       |               |  |              |   |               |  |         |        |        |  |   |     |   |  |   | 411  |   |  |   |    |     |  |   |        |       |  |   | 411     |      
|Deferred stock compensation related to terminated
	employees |                                                                                                  |                 |  |              |  |            |  |             |  |          |       |               |  |              |   |               |  |         | (76     | )      |  |   |     |   |  |   | 76   |   |  |   |    |     |  |   |        |       |  |   |        |      
|Tax benefit from employee stock option plans                 |                                                                                                  |                 |  |              |  |            |  |             |  |          |       |               |  |              |   |               |  |         | 336     |        |  |   |     |   |  |   |     |   |  |   |    |     |  |   |        |       |  |   | 336     |      
|Comprehensive income (loss):                                 |                                                                                                  |                 |   |              |  |            |   |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |      |   |  |   |     |     |  |   |         |       |  |   |         |      
|                                                             | Net income (loss) for the year ended
	December 31, 2001                                          |                 |   |             |  |            |   |            |  |          |        |              |  |              |    |              |  |         |         |       |  |   |      |  |  |   |      |  |  |   |     |    |  |   |         | 6,338 |  |   |         | 6,338 | 
|                                                             | Unrealized gain (loss) on Foreign currency
	translation                                          |                 |   |             |  |            |   |            |  |          |        |              |  |              |    |              |  |         |         |       |  |   |      |  |  |   |      |  |  |   |     | 12  |  |   |         |      |  |   |         | 12    | 
|                                                             | Unrealized gain (loss) on available-for-sale
	securities, net of applicable income taxes of $336 |                 |   |             |  |            |   |            |  |          |        |              |  |              |    |              |  |         |         |       |  |   |      |  |  |   |      |  |  |   |     | 179 |  |   |         |      |  |   |         | 179   | 
|                                                             |                                                                                                  |                 |   |              |  |            |   |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |      |   |  |   |     |     |  |   |         |       |  |   |         |      
|Comprehensive income                                         |                                                                                                  |                 |   |              |  |            |   |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |      |   |  |   |     |     |  |   |         |       |  |   | 6,529   |      
|                                                             |                                                                                                  |                 |   |              |  |            |   |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |      |   |  |   |     |     |  |   |         |       |  |   |         |      
|Balance at December 31, 2001                                 |                                                                                                  |                 |  |              |  |            |  |             |  |          | 30,614 |               |  | $            | 31 |               |  | $       | 148,366 |        |  | $ | (410 | ) |  | $ | (335 | ) |  | $ | 516 |     |  | $ | (13,671 | )     |  | $ | 134,497 |      
|                                                             |                                                                                                  |                 |   |              |  |            |   |             |  |          |        |               |  |              |    |               |  |         |         |        |  |   |      |   |  |   |      |   |  |   |     |     |  |   |         |       |  |   |         |      

See accompanying notes.

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##### Table of Contents



SYMYX TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |       |        |  
|--------------------------------------------------------------------------------------------------- | ---------------------------------- | ---------------------------------------------- | ------- | ------ | ------ | ---- | ------- | ----- | ------ | - | ------- | ----- | ------ | -
|                                                                                                    |                                    |                                               
|                                                                                                    |                                    | Years Ended December 31,                      
|                                                                                                    |                                    |                                               
|                                                                                                    |                                    | 2001                                           |         | 2000   |        | 1999
|                                                                                                    |                                    |                                                |         |        |        |     
|                                                                                                    |                                    |                                               
|                                                                                                    |                                    | (In thousands)                                
|OPERATING ACTIVITIES                                                                                |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Net income (loss)                                                                                   |                                    | $                                              | 6,338   |        |        | $    | (922    | )     |        | $ | (2,147  | )    
|Adjustments to reconcile net income (loss) to net
	cash provided by (used in) operating activities: |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|                                                                                                    | Depreciation and amortization      |                                                |         | 9,807  |        |      |         | 6,477 |        |   |         | 4,248 |       
|                                                                                                    | Deferred compensation amortization |                                                |         | 411    |        |      |         | 760   |        |   |         | 3,794 |       
|                                                                                                    | Deferred tax benefit               |                                                |         | (2,046 | )      |      |         |      |        |   |         |      |       
|                                                                                                    | Changes in assets and liabilities: |                                                |         |        |        |      |         |       |        |   |         |       |       
|                                                                                                    |                                    | Accounts receivable                            |         |        | 539    |      |         |       | (31    | ) |         |       | (336   | )
|                                                                                                    |                                    | Prepaid expenses                               |         |        | 12     |      |         |       | 588    |   |         |       | (1,267 | )
|                                                                                                    |                                    | Inventories                                    |         |        | 571    |      |         |       | (2,301 | ) |         |       | (462   | )
|                                                                                                    |                                    | Other current assets                           |         |        | 365    |      |         |       | (459   | ) |         |       | (926   | )
|                                                                                                    |                                    | Accounts payable and other current liabilities |         |        | 267    |      |         |       | (1,284 | ) |         |       | 3,275  |  
|                                                                                                    |                                    | Accrued compensation and employee benefits     |         |        | (278   | )    |         |       | 685    |   |         |       | 295    |  
|                                                                                                    |                                    | Income taxes payable                           |         |        | 3,068  |      |         |       |       |   |         |       |       |  
|                                                                                                    |                                    | Deferred rent                                  |         |        | 238    |      |         |       | 126    |   |         |       | 31     |  
|                                                                                                    |                                    | Deferred revenue                               |         |        | (3,097 | )    |         |       | (2,455 | ) |         |       | 8,017  |  
|                                                                                                    |                                    | Warranty reserve                               |         |        | 534    |      |         |       | 440    |   |         |       |       |  
|                                                                                                    |                                    | Other long-term assets                         |         |        | 4      |      |         |       | 27     |   |         |       | (492   | )
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Net cash provided by (used in) operating
	activities                                                |                                    |                                                | 16,733  |        |        |      | 1,651   |       |        |   | 14,030  |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|INVESTING ACTIVITIES                                                                                |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Purchases of property and equipment, net                                                            |                                    |                                                | (10,980 | )      |        |      | (8,824  | )     |        |   | (11,535 | )    
|Purchases of investments                                                                            |                                    |                                                | (89,901 | )      |        |      | (63,165 | )     |        |   | (84,204 | )    
|Proceeds from sales of investments                                                                  |                                    |                                                | 14,727  |        |        |      |        |       |        |   |        |      
|Proceeds from maturities of investments                                                             |                                    |                                                | 77,839  |        |        |      | 53,825  |       |        |   | 14,550  |      
|Acquisition of technology                                                                           |                                    |                                                | (250    | )      |        |      | (1,000  | )     |        |   |        |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Net cash provided by (used in) investing
	activities                                                |                                    |                                                | (8,565  | )      |        |      | (19,164 | )     |        |   | (81,189 | )    
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|FINANCING ACTIVITIES                                                                                |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Proceeds from issuance of common stock, net of
	repurchases and issuance costs                      |                                    |                                                | 3,570   |        |        |      | 2,498   |       |        |   | 82,053  |      
|Principal payments on equipment and facility loans                                                  |                                    |                                                | (6,729  | )      |        |      | (3,304  | )     |        |   | (2,709  | )    
|Proceeds from equipment and facility loans                                                          |                                    |                                                |        |        |        |      |        |       |        |   | 2,715   |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Net cash provided by (used in) financing
	activities                                                |                                    |                                                | (3,159  | )      |        |      | (806    | )     |        |   | 82,059  |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Effect of foreign exchange rate changes in cash
	and cash equivalents                               |                                    |                                                | (12     | )      |        |      |        |       |        |   |        |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Net increase (decrease) in cash and cash
	equivalents                                               |                                    |                                                | 4,997   |        |        |      | (18,319 | )     |        |   | 14,900  |      
|Cash and cash equivalents at beginning of year                                                      |                                    |                                                | 10,624  |        |        |      | 28,943  |       |        |   | 14,043  |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Cash and cash equivalents at end of year                                                            |                                    | $                                              | 15,621  |        |        | $    | 10,624  |       |        | $ | 28,943  |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
	INFORMATION                                                   |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Interest paid                                                                                       |                                    | $                                              | 611     |        |        | $    | 925     |       |        | $ | 1,090   |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Income taxes paid                                                                                   |                                    | $                                              | 366     |        |        | $    |        |       |        | $ |        |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|SUPPLEMENTAL SCHEDULE OF NONCASH                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|                                                                                                    | INVESTING AND FINANCING ACTIVITIES |                                                |         |        |        |      |         |       |        |   |         |       |       
|Exercise of stock options for notes receivable                                                      |                                    | $                                              |        |        |        | $    |        |       |        | $ | 333     |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Common shares issued and contribution of capital
	in consideration of services rendered             |                                    | $                                              |        |        |        | $    |        |       |        | $ | 222     |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      
|Common shares issued and contribution of capital
	in consideration of technology acquisition        |                                    | $                                              |        |        |        | $    | 815     |       |        | $ |        |      
|                                                                                                    |                                    |                                                |         |        |        |      |         |       |        |   |         |      

See accompanying notes.

34



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

1.     Summary of
Significant Accounting Policies

Organization
and Business

Symyx Technologies, Inc. (the Company
or Symyx), was formed to research, develop,
manufacture and market products through the application of
combinatorial technologies in the area of materials science. To
date, the Companys operations have involved research and
development activities, a significant portion of which has been
funded by collaborative partners, and product and license
revenues related to the sale of Discovery Tools systems.

On November 18, 1999, the Company completed
an initial public offering of its shares pursuant to which it
issued 6,368,700 common shares for net proceeds of approximately
$81,420,000. Immediately prior to the closing of the initial
public offering, each outstanding share of preferred stock was
converted to common stock on a seven-for-nine shares basis.

Principles of
consolidation

These consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary,
Symyx Technologies AG, incorporated in Switzerland. All
significant intercompany balances and transactions have been
eliminated on consolidation.

Use of
Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements. Actual results could differ from these estimates.

The actual results with regard to warranty
expenditures could have a material unfavorable impact on the
Company if system failures or the cost to repair a system is
greater than what the Company has used in estimating the
warranty expense accrual.

Cash and Cash
Equivalents

The Company considers all highly liquid
investments, with maturities of three months or less on the date
of purchase, to be cash equivalents. Cash equivalents are
carried at cost, which approximates fair value.

Available-For-Sale
Investments

Management determines the appropriate
classification of debt securities at the time of purchase and
reevaluates such determination as of each balance sheet date.
Through December 31, 2001 the Company has classified its
entire investment portfolio as available-for-sale.
Available-for-sale securities are stated at fair value, with the
unrealized gains and losses, net of tax, reported in other
comprehensive income. Realized gains and losses and declines in
value judged to be other-than-temporary on available-for-sale
securities are included in interest income. The estimated fair
value amounts have been determined by the Company using
available market information.

The amortized cost of debt securities is adjusted
for amortization of premiums and accretion of discounts to
maturity. Such amortization is included in interest income. The
cost of securities sold is based on the specific identification
method. Interest and dividends are included in interest income.

The Company invests its excess cash primarily in
deposits with banks and short-term and medium-term marketable
securities. These investments primarily include corporate notes,
money market funds and U.S. treasury notes. By policy, the
Company restricts its investments to long-term bank obligations
rated A or higher and short-term obligations rated
P1 or higher by Moodys or A1 or
higher by Standard & Poors

35



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

(S&P), and corporate obligations,
including intermediate term notes rated A or higher
and commercial paper rated P1 or higher by
Moodys, or A1 or higher by S&P. By policy,
the Company restricts its investments to instruments with
maturities of less than twenty-four months.

The following is a summary of the fair value of
cash, cash equivalents and available-for-sale securities (in
thousands):

|                               |  |              |         |      |  |   |         | 
|------------------------------ |  | ------------ | ------- | ---- |  | - | ------- | 
|                               |  |             
|                               |  | December 31,
|                               |  |             
|                               |  | 2001         |         | 2000
|                               |  |              |         |     
|Money market funds             |  | $            | 15,621  |      |  | $ | 9,337   | 
|Cash and bank accounts         |  |              |        |      |  |   | 1,287   | 
|U.S. corporate debt securities |  |              | 75,773  |      |  |   | 100,416 | 
|U.S. Treasury securities       |  |              | 21,932  |      |  |   |        | 
|                               |  |              |         |      |  |   |         | 
|Total                          |  | $            | 113,326 |      |  | $ | 111,040 | 
|                               |  |              |         |      |  |   |         | 

Above amounts are included in the following:

|                              |  |              |         |      |  |   |         | 
|----------------------------- |  | ------------ | ------- | ---- |  | - | ------- | 
|                              |  |             
|                              |  | December 31,
|                              |  |             
|                              |  | 2001         |         | 2000
|                              |  |              |         |     
|Cash and cash equivalents     |  | $            | 15,621  |      |  | $ | 10,624  | 
|Available-for-sale securities |  |              | 97,705  |      |  |   | 100,416 | 
|                              |  |              |         |      |  |   |         | 
|Total                         |  | $            | 113,326 |      |  | $ | 111,040 | 
|                              |  |              |         |      |  |   |         | 

Following is a reconciliation of cash and cash
equivalents:

|                                |  |              |        |      |  |   |        | 
|------------------------------- |  | ------------ | ------ | ---- |  | - | ------ | 
|                                |  |             
|                                |  | December 31,
|                                |  |             
|                                |  | 2001         |        | 2000
|                                |  |              |        |     
|Money market funds              |  | $            | 15,621 |      |  | $ | 9,337  | 
|Cash and bank accounts          |  |              |       |      |  |   | 1,287  | 
|                                |  |              |        |      |  |   |        | 
|Total cash and cash equivalents |  | $            | 15,621 |      |  | $ | 10,624 | 
|                                |  |              |        |      |  |   |        | 

Unrealized gains and losses are not material, and
have, therefore, not been shown separately; however, they have
been included as a separate component in the statement of
stockholders equity. Gross realized gains and losses on
sales of available-for-sale securities were immaterial.

The fair value of the Companys investment
in debt securities, by contractual maturity, is as follows (in
thousands):

|                        |  |              |        |      |  |   |         | 
|----------------------- |  | ------------ | ------ | ---- |  | - | ------- | 
|                        |  |             
|                        |  | December 31,
|                        |  |             
|                        |  | 2001         |        | 2000
|                        |  |              |        |     
|Due in less than 1 year |  | $            | 74,271 |      |  | $ | 64,140  | 
|Due in 1 to 2 years     |  |              | 23,434 |      |  |   | 36,276  | 
|                        |  |              |        |      |  |   |         | 
|Total                   |  | $            | 97,705 |      |  | $ | 100,416 | 
|                        |  |              |        |      |  |   |         | 

Property and
Equipment

Property and equipment are stated at cost.
Depreciation is computed on the straight-line method using a
life of three to five years for financial reporting purposes and
by accelerated methods for income tax purposes. Leasehold
improvements are amortized over the shorter of the lease term or
the estimated useful life of the assets.

36



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Property and equipment consists of the following
(in thousands):

|                                               |  |              |         |      |  |   |         |  
|---------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | -
|                                               |  |             
|                                               |  | December 31,
|                                               |  |             
|                                               |  | 2001         |         | 2000
|                                               |  |              |         |     
|Machinery and equipment                        |  | $            | 16,855  |      |  | $ | 15,955  |  
|Computers and software                         |  |              | 3,510   |      |  |   | 2,791   |  
|Leasehold improvements                         |  |              | 21,182  |      |  |   | 16,191  |  
|Construction in progress                       |  |              | 2,392   |      |  |   | 2,127   |  
|Furniture and fixtures                         |  |              | 1,005   |      |  |   | 898     |  
|                                               |  |              |         |      |  |   |         |  
|                                               |  |              | 44,944  |      |  |   | 37,962  |  
|Less accumulated depreciation and amortization |  |              | (16,412 | )    |  |   | (11,585 | )
|                                               |  |              |         |      |  |   |         |  
|Property and equipment, net                    |  | $            | 28,532  |      |  | $ | 26,377  |  
|                                               |  |              |         |      |  |   |         |  

At December 31, 2001, no property and
equipment was pledged as collateral against borrowings.
Amortization of leasehold improvements is included in
depreciation expense. Depreciation expense was $8,825,000,
$6,399,000 and $3,988,000 in 2001, 2000, and 1999, respectively.

Long-Lived
Assets

The Company routinely evaluates the carrying
value of its long-lived assets. The Company records impairment
losses on long-lived assets used in operations when events and
circumstances indicate that assets may be impaired and the
undiscounted cash flows estimated to be generated by the assets
are less than the carrying amount of those assets. To date, no
impairment charges have been recognized.

Revenue
Recognition

The Company recognizes revenues from research
collaboration agreements and government grants as earned based
upon the performance requirements of the agreements. Payments
received prior to performance are deferred and recognized as
revenue when earned over future performance periods.
Collaboration agreements generally specify minimum levels of
research effort required to be performed by the Company.
Payments received under research collaboration agreements are
not refundable if the research effort is not successful. Direct
costs associated with these contracts and grants are reported as
research and development expense.

Non-refundable up-front payments received in
connection with research and development collaboration
agreements, including technology access fees, are deferred and
recognized on a straight-line basis over the relevant periods
specified in the agreement, generally the research term. Revenue
from milestone payments, which are substantially at risk until
the milestones are completed, is recognized upon completion of
these milestone events. Milestone payments to date have been
immaterial.

Product and license revenues include sales of
Discovery Tools hardware, software licenses and maintenance
together with amounts earned for licenses to third parties
licensed under the Companys intellectual property. Revenue
from the sale of Discovery Tools systems is recognized when
earned. Revenue is earned when persuasive evidence of an
arrangement exists, delivery of the product has occurred, no
significant obligations with regard to implementation remain,
the fee is fixed or determinable, and collectibility is
probable. This is generally upon shipment, transfer of title to
and acceptance by the customer of the hardware, software and
licenses to intellectual property unless there are extended
payment terms. The Company considers all arrangements with
payment terms extending beyond 12 months not to be fixed or
determinable. If the fee is not fixed or determinable, revenue
is recognized as payments become due from the customer. In
multiple element arrangements, the Company uses the residual
method to allocate revenue to delivered

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SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

elements once it has established fair value for
all undelivered elements. Payments received in advance under
these arrangements are recorded as deferred revenue until earned.

Royalty revenues are recorded based on reported
sales by third party licensees of products containing the
Companys software, intellectual property and know-how.

The Companys software licenses may provide
for technical support, bug fixes and rights to unspecified
upgrades on a when-if-available basis for periods defined within
the contract. Revenue related to this post contract customer
support is deferred and recognized over the term of the
contracted support.

Reserves are provided for warranty expenses at
the time the associated revenue is recognized. Shipping and
insurance costs associated with the sale of discovery tools
systems are not material and are included in sales, general and
administrative costs.

Amounts received from third parties for licenses
to the Companys intellectual property are recognized when
earned under the terms of the related agreements. Generally
revenue is recognized upon transfer of the license unless the
Company has continuing obligations for which fair value cannot
be established, in which case the revenue is recognized over the
period of the obligation.

Amounts received from third parties for options
to license certain technology or enter collaborative
arrangements upon specified terms are deferred until either the
option is exercised or the option right expires.

Concentration
of Revenue

During the years ended December 31, 2001,
2000 and 1999 the following customers contributed more than 10%
of the Companys total revenue for the year (in thousands):

|                         |  |                          |       |      |  |      |       |  |  |   |       | 
|------------------------ |  | ------------------------ | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                         |  |                         
|                         |  | Years Ended December 31,
|                         |  |                         
|                         |  | 2001                     |       | 2000 |  | 1999
|                         |  |                          |       |      |  |     
|Applied Biosystems       |  | $                        | 4,400 |      |  | $    | 4,600 |  |  | $ |      | 
|Bayer AG                 |  |                          | 7,535 |      |  |      | 8,607 |  |  |   | 9,650 | 
|B.F. Goodrich Company    |  |                          |      |      |  |      |      |  |  |   | 1,935 | 
|Celanese Ltd.            |  |                          | 5,204 |      |  |      | 4,621 |  |  |   | 3,688 | 
|ExxonMobil               |  |                          | 7,309 |      |  |      | 118   |  |  |   |      | 
|The Dow Chemical Company |  |                          | 8,425 |      |  |      | 9,520 |  |  |   | 5,500 | 

The revenue from the above customers has been
included in the following reportable segments for the years
ended December 31, 2001, 2000 and 1999 (in thousands):

|                        |  |                          |        |      |  |      |        |  |  |   |        | 
|----------------------- |  | ------------------------ | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                        |  |                         
|                        |  | Years Ended December 31,
|                        |  |                         
|                        |  | 2001                     |        | 2000 |  | 1999
|                        |  |                          |        |      |  |     
|Industry Collaborations |  | $                        | 25,054 |      |  | $    | 22,396 |  |  | $ | 20,773 | 
|Proprietary Materials   |  |                          | 2,000  |      |  |      | 2,000  |  |  |   |       | 
|Discovery Tools         |  |                          | 5,819  |      |  |      | 3,070  |  |  |   |       | 

Inventories

Work in process is the only component of
inventories for all periods presented and comprises customized
Discovery Tool systems in the process of being built for
customers. Inventories are carried at the lower of cost or
market, determined on a specific identification basis.

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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Acquisition
of Technology

In February 2000, the Company exercised an option
to license certain patent rights and know-how relating to
synthesis and screening of diverse materials in connection with
combinatorial materials science research. Symyx paid an amount
of $750,000 and issued 16,262 shares of common stock to acquire
these rights. The License Agreement also provides for Symyx to
pay up to an additional $1,500,000 subject to the achievement of
certain milestones. Subsequently milestone payments of $250,000
were made in each of July 2000 and December 2001. The exercise
of this option and the subsequent milestone payments have been
accounted for as an acquisition of technology and the associated
costs are being amortized over the expected remaining useful
life of the technology.

Acquired technology consists of the following (in
thousands):

|                              |  |              |       |      |  |   |       |  
|----------------------------- |  | ------------ | ----- | ---- |  | - | ----- | -
|                              |  |             
|                              |  | December 31,
|                              |  |             
|                              |  | 2001         |       | 2000
|                              |  |              |       |     
|Acquired technology, at cost  |  | $            | 2,065 |      |  | $ | 1,815 |  
|Less accumulated amortization |  |              | (730  | )    |  |   | (335  | )
|                              |  |              |       |      |  |   |       |  
|Acquired technology, net      |  | $            | 1,335 |      |  | $ | 1,480 |  
|                              |  |              |       |      |  |   |       |  

Research and
Development

Symyx policy is to expense as incurred all
costs of research and development, including direct and
allocated expenses, related both to costs incurred on its own
behalf and on behalf of its customers. The types of costs
classified as research and development expense include salaries
of technical staff, consultant costs, chemical and scientific
supplies costs, facilities rental and utilities costs related to
laboratories and offices occupied by technical staff,
depreciation on equipment and facilities used by technical staff
and outside services such as machining and third-party research
and development costs.

Software
development costs

Statement of Financial Accounting Standards
No. 86, Accounting for the Costs of Computer Software to be
Sold, Leased or Otherwise Marketed, requires the capitalization
of certain software development costs subsequent to the
establishment of technological feasibility.

As the Companys business model has evolved,
it has commenced bundling with the Discovery Tools it sells,
licenses to software that was originally developed for internal
research & development purposes. Due to the unique nature of
the Discovery Tool systems, and the required product development
process, technological feasibility is established only upon the
completion of a working model. Costs incurred by the Company
between the completion of the working model and the point at
which the product is ready for general release have been
insignificant. Accordingly, the Company has charged all such
costs to research and development expense in the period incurred.

Foreign
Currency Translation

The financial statements of the Companys
wholly owned subsidiary, Symyx Technologies AG, are measured
using the local currency as the functional currency. Assets and
liabilities of the subsidiary are translated at the rates of
exchange at the balance sheet date. The resultant translation
adjustments are recorded as a separate component of
stockholders equity as other comprehensive income and have
not been significant to date. Income and expense items are
translated at average monthly rates of exchange.

39



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)



| |             
| | ------------
| | Income Taxes

Income taxes have been provided using the
liability method in accordance with FASB Statement 109,
Accounting for Income Taxes. In accordance with FASB
Statement 109, a deferred tax asset or liability is
determined based on the difference between the financial
statement and tax basis of assets and liabilities as measured by
the enacted tax rates which will be in effect when these
differences reverse. The Company provides a valuation allowance
against net deferred tax assets unless, based upon the available
evidence, it is more likely than not that the deferred tax
assets will be realized.



| |                         
| | ------------------------
| | Stock-Based Compensation

The Company generally grants stock options to its
employees for a fixed number of shares with an exercise price
equal to the fair value of the shares on the date of grant. As
allowed under the Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based
Compensation (SFAS 123), the Company has
elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to
Employees (APB 25) and related
interpretations in accounting for stock awards to employees.
Accordingly, no compensation expense is recognized in the
Companys financial statements in connection with stock
options granted to employees with exercise prices not less than
fair value. Deferred compensation for options granted to
employees is determined as the difference between the deemed
fair market value of the Companys common stock on the date
options were granted and the exercise price.

Compensation expense for options granted to
non-employees has been determined in accordance with
SFAS 123 as the fair value of the consideration received or
the fair value of the equity instruments issued, whichever is
more reliably measured. Compensation expense for options granted
to non-employees is periodically re-measured as the underlying
options vest.



| |                            
| | ---------------------------
| | Net Income (Loss) Per Share

Basic net income (loss) per share has been
computed using the weighted-average number of shares of common
stock outstanding during the period, less shares subject to
repurchase. Pro forma basic net income (loss) per common share,
as presented in the following table, has been computed for the
year ended December 31, 1999 as described above, and also
gives effect to the conversion of the convertible preferred
stock, which converted to common stock immediately prior to the
completion of the Companys initial public offering, (using
the if-converted method) from the original date of issuance.
Diluted net income (loss) per share has been calculated
based on the shares used in the calculation of basic net income
per share and the dilutive effect of stock options and shares
subject to repurchase.

40



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The following table presents the calculation of
basic, diluted, and pro forma basic and diluted net income
(loss) per share (in thousands, except per share data):

|                                                                               |                                                                                               |                          |        |      |  |      |        |   |  |   |        |        |  
|------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------ | ------ | ---- |  | ---- | ------ | - |  | - | ------ | ------ | -
|                                                                               |                                                                                               |                         
|                                                                               |                                                                                               | Years Ended December 31,
|                                                                               |                                                                                               |                         
|                                                                               |                                                                                               | 2001                     |        | 2000 |  | 1999
|                                                                               |                                                                                               |                          |        |      |  |     
|Net income (loss)                                                              |                                                                                               | $                        | 6,338  |      |  | $    | (922   | ) |  | $ | (2,147 | )     
|                                                                               |                                                                                               |                          |        |      |  |      |        |   |  |   |        |       
|Weighted-average shares of common stock
	outstanding                           |                                                                                               |                          | 30,413 |      |  |      | 29,884 |   |  |   | 9,599  |       
|Less: weighted-average shares subject to
	repurchase                           |                                                                                               |                          | (509   | )    |  |      | (1,011 | ) |  |   | (1,512 | )     
|                                                                               |                                                                                               |                          |        |      |  |      |        |   |  |   |        |       
|Weighted-average shares used in computing basic
	net income (loss) per share   |                                                                                               |                          | 29,904 |      |  |      | 28,873 |   |  |   | 8,087  |       
|Dilutive effect of employee stock options, using
	the treasury stock method    |                                                                                               |                          | 1,292  |      |  |      |       |   |  |   |       |       
|                                                                               |                                                                                               |                          |        |      |  |      |        |   |  |   |        |       
|Weighted-average shares used in computing diluted
	net income (loss) per share |                                                                                               |                          | 31,196 |      |  |      | 28,873 |   |  |   | 8,087  |       
|                                                                               |                                                                                               |                          |        |      |  |      |        |   |  |   |        |       
|Basic net income (loss) per share                                              |                                                                                               | $                        | 0.21   |      |  | $    | (0.03  | ) |  | $ | (0.27  | )     
|                                                                               |                                                                                               |                          |        |      |  |      |        |   |  |   |        |       
|Diluted net income (loss) per share                                            |                                                                                               | $                        | 0.20   |      |  | $    | (0.03  | ) |  | $ | (0.27  | )     
|                                                                               |                                                                                               |                          |        |      |  |      |        |   |  |   |        |       
|Pro forma (unaudited):                                                         |                                                                                               |                          |        |      |  |      |        |   |  |   |        |       
|                                                                               | Net loss                                                                                      |                          |        |      |  |      |        |   |  |   | $      | (2,147 | )
|                                                                               |                                                                                               |                          |        |      |  |      |        |   |  |   |        |       
|                                                                               | Shares used above                                                                             |                          |        |      |  |      |        |   |  |   |        | 8,087  |  
|                                                                               | Pro forma adjustment to reflect weighted effect
	of conversion of convertible preferred stock |                          |        |      |  |      |        |   |  |   |        | 14,080 |  
|                                                                               |                                                                                               |                          |        |      |  |      |        |   |  |   |        |       
|                                                                               | Shares used in computing pro forma basic and
	diluted net loss per share                      |                          |        |      |  |      |        |   |  |   |        | 22,167 |  
|                                                                               |                                                                                               |                          |        |      |  |      |        |   |  |   |        |       
|Pro forma basic and diluted net loss per share                                 |                                                                                               |                          |        |      |  |      |        |   |  | $ | (0.10  | )     
|                                                                               |                                                                                               |                          |        |      |  |      |        |   |  |   |        |       

The Company has excluded all convertible
preferred stock, outstanding stock options, and shares subject
to repurchase from the calculation of diluted loss per common
share in 1999 and 2000 because all such securities are
anti-dilutive for all those periods. The total number of shares
excluded from the calculations of diluted net loss per share,
prior to application of the treasury stock method for options,
was 5,083,787 and 4,218,304 for the years ended
December 31, 2000 and 1999, respectively. See Note 4
for further information on these securities.



| |                            
| | ---------------------------
| | Comprehensive Income (Loss)

The Company has adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive
Income. The only components of other comprehensive income
(loss) are unrealized gains and losses on
available-for-sale securities and a foreign currency translation
adjustment. Comprehensive income (loss) has been disclosed
in the statement of stockholders equity for all periods
presented.

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SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

The components of accumulated other comprehensive
income at December 31, 2001, 2000 and 1999 are as follows
(in thousands):

|                                                                      |  |             |    |            |  |       |      |   |  |   |      |  
|--------------------------------------------------------------------- |  | ----------- | -- | ---------- |  | ----- | ---- | - |  | - | ---- | -
|                                                                      |  |             |    | Unrealized |  |      
|                                                                      |  | Foreign     |    | Gains On   |  |      
|                                                                      |  | Currency    |    | Available- |  |      
|                                                                      |  | Translation |    | For-Sale   |  |      
|                                                                      |  | Adjustments |    | Securities |  | Total
|                                                                      |  |             |    |            |  |      
|Balance at January 1, 1999                                            |  | $           |   |            |  | $     | (44  | ) |  | $ | (44  | )
|Unrealized losses on available-for-sale securities                    |  |             |   |            |  |       | (145 | ) |  |   | (145 | )
|                                                                      |  |             |    |            |  |       |      |   |  |   |      |  
|Balance at December 31, 1999                                          |  |             |   |            |  |       | (189 | ) |  |   | (189 | )
|Unrealized gains on available-for-sale securities                     |  |             |   |            |  |       | 514  |   |  |   | 514  |  
|                                                                      |  |             |    |            |  |       |      |   |  |   |      |  
|Balance at December 31, 2000                                          |  |             |    |            |  |       | 325  |   |  |   | 325  |  
|Foreign currency translation adjustment                               |  |             | 12 |            |  |       |     |   |  |   | 12   |  
|Unrealized gains on available-for-sale
	securities, net of $336 taxes |  |             |   |            |  |       | 179  |   |  |   | 179  |  
|                                                                      |  |             |    |            |  |       |      |   |  |   |      |  
|Balance at December 31, 2001                                          |  | $           | 12 |            |  | $     | 504  |   |  | $ | 516  |  
|                                                                      |  |             |    |            |  |       |      |   |  |   |      |  



| |                  
| | -----------------
| | Reclassifications

Certain reclassifications have been made to prior
year amounts to conform with the current year presentation of
the Balance Sheet.



| |                                         
| | ----------------------------------------
| | Effect of New Accounting
	Pronouncements

In July 2001, the FASB issued Statement of
Financial Accounting Standards No. 141, Business
Combinations (Statement 141). This Statement
addresses financial accounting and reporting for business
combinations. Statement 141 supersedes APB Opinion
No. 16, Business Combinations, and amends or supersedes a
number of interpretations of that Opinion. Statement 141
requires that (1) all business combinations be accounted
for by a single method  the purchase method,
(2) all intangible assets acquired in a business
combination are to be recognized as assets apart from goodwill
if they meet one of two criteria  the
contractual-legal criterion or the separability criterion and
(3) in addition to the disclosure requirements in Opinion
16, disclosure of the primary reasons for a business combination
and the allocation of the purchase price paid to the assets
acquired and liabilities assumed by major balance sheet caption.
When the amounts of goodwill and intangible assets acquired are
significant in relation to the purchase price paid, disclosure
of other information about those assets is required, such as the
amount of goodwill by reportable segment and the amount of the
purchase price assigned to each major intangible asset class.
The provisions of Statement 141 apply to all business
combinations initiated after June 30, 2001.
Statement 141 also applies to all business combinations
accounted for using the purchase method for which the date of
acquisition is July 1, 2001, or later. The Company will
adopt the provisions of Statement 141 for any business
combinations that may be initiated.

In July 2001, the FASB issued Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangibles (Statement 142). Under
Statement 142, goodwill and indefinite lived intangible
assets are no longer amortized but are reviewed annually (or
more frequently if impairment indicators arise) for impairment.
Separable intangible assets that are not deemed to have an
indefinite life will continue to be amortized over their
estimated useful lives. Symyx has not recorded any goodwill or
indefinite lived intangible assets prior to December 31,
2001. The adoption of this statement as of January 1, 2002
is not expected to have a material impact on the Companys
financial position, results of operations or cash flow.

42



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

In October 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets
(Statement 144), which addresses financial
accounting and reporting for the impairment or disposal of
long-lived assets and supersedes Statement 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 Opinion No. 30,
Reporting the Results of Operations for a disposal of a
segment of a business. Statement 144 is effective for
fiscal years beginning after December 15, 2001. The Company
will adopt Statement 144 as of January 1, 2002 and it
does not expect that the adoption of the Statement will have a
significant impact on the Companys financial position and
results of operations.

2.     Research and
Development Arrangements

The Company has entered into a number of
multi-year research and development collaborations to perform
research for partners in exclusive fields over multiple years.
The major collaborative arrangements all have similar
contractual terms and are non-cancelable other than for material
breach or certain other conditions. Under the collaborative
arrangements, the Company is responsible for performing research
at levels defined in the agreement, including synthesis,
screening and informatics. The partner, in turn, is entitled to
develop and commercialize materials discovered in or under
collaboration within the defined field. The Company typically
receives research and development funding at specified amounts
per full time equivalent employee working on the project and is
entitled to receive royalties on the sale of any products
commercialized under the agreement or payments on the
achievement of specified research milestones. The agreements
also contain procedures by which the Company and the partner
will determine royalty rates for the sale or license of products
under the agreements.

The table below indicates some of the significant
collaborative partners for whom the Company conducted research
and development in 2001, together with the primary focus of the
collaborations. In addition to these partners we have a number
of undisclosed partners, none of which individually constituted
more than 6% of total revenue in 2001:

|                                   |  |                                                                                                                                       
|---------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------
|Partner                            |  | Primary focus of collaborative efforts                                                                                                
|                                   |  |                                                                                                                                       
|ABB Lumus Global                   |  | Environmentally improved automotive fuels                                                                                             
|Applied Biosystems                 |  | Polymers for DNA separation                                                                                                           
|BASF                               |  | Specialty polymers for industrial formulations                                                                                        
|Bayer                              |  | Polyolefins, commodity chemicals                                                                                                      
|Celanese                           |  | Catalysts for Commodity chemicals                                                                                                     
|Dow Chemical                       |  | Polyolefins and pharmaceutical intermediates                                                                                          
|Eveready                           |  | Battery materials                                                                                                                     
|ExxonMobil                         |  | Production of olefins                                                                                                                 
|Imperial Chemical Industries (ICI) |  | High value specialty polymers for high quality
	industrial applications                                                               
|Merck                              |  | Workflow for rapid discovery, identification and
	characterization of novel crystalline salt and polymorphic forms
	of drug candidates
|Rhodia                             |  | Specialty chemicals                                                                                                                   
|Unilever                           |  | Polymers for product formulations used in home
	and personal care products                                                            

Under the typical collaborative arrangement, the
Company owns all inventions conceived and reduced to practice
solely by the Company in connection with activities under the
agreements and all know-how and intellectual property rights
related thereto; and the Company and the collaborative partner
jointly own all

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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

inventions made, conceived, reduced to practice,
or otherwise developed jointly by employees or consultants of
the Company and those of the collaborative partner in connection
with activities under the agreement and all know-how and
intellectual property rights related thereto. The Companys
collaborative partner typically receives an exclusive license in
the defined field of the collaborative agreement.

The agreements are typically cancelable only in
the event of breach by either party. As of December 31,
2001, the Company had committed funding from existing
collaborative partners, excluding milestone payments which are
contingent upon the success of the research, of approximately
$31.3 million. Revenue from collaborative partners who
individually comprised more than 10% of revenue are included
within Note 1  Concentration of Revenue.

During 1999, the Company was awarded grants from
the U.S. Office of Naval Research Defense Advanced Research
Projects Agency (DARPA) and the U.S. Department of
Energy. During 2000, an extension to the 1999 grant was awarded
to the Company. Under these grants, the Company was reimbursed
for research costs over various periods as specified in the
awards. During the years ended December 31, 2001, 2000 and
1999, revenue recognized under these grants was approximately
$0, $1,596,000 and $2,811,000, respectively.

The Company does not track or allocate actual
costs by collaboration or project, as the requirement from its
collaborative partners is to staff the various projects on a
full-time-equivalent (FTE) employee basis.
Accordingly, the Company tracks the assignment of these
FTEs to each project over time. Based on the analysis of
these FTEs, for the twelve months ended December 31,
2001, approximately 78% of the Companys research
effort, determined based on employee hours charged to a project,
was on research for collaborative projects funded by our
partners. The remaining 22% of research effort was on Symyx
funded research and development. The focus of the Symyx funded
programs in 2001 was largely on life sciences, such as materials
for genomics and pharmaceutical development, and on industrial
polymer applications as well as the next generation of Discovery
Tools. In 2000 and 1999 approximately 75% and 86%,
respectively, of the Companys research effort was for
collaborative projects funded by our partners with approximately
25% and 14%, respectively, being Symyx funded research.

3.     Facility Lease
and Other Commitments

The Company entered into an 11 year
operating lease agreement for a facility commencing
February 1, 1997, with rent payments commencing
July 1, 1998. In May 1999, the Company entered into an
eight-and-a-half-year operating lease agreement for an
additional facility commencing October 1999. In February 2000,
the Company entered into an agreement to lease a third facility.
The lease commenced on October 1, 2000 and has an initial
term of ten years with an option to extend the initial term for
an additional five years.

Rent expense, which is being recognized on a
straight-line basis over the lease terms, was approximately
$2,230,000, $1,160,000 and $426,000, for the years ended
December 31, 2001, 2000, and 1999, respectively. Future
commitments under the operating leases for the facilities are as
follows (in thousands):

|             |  |   |        | 
|------------ |  | - | ------ | 
|Years Ending |  |  
|December 31, |  |  
|             |  |  
|2002         |  | $ | 2,021  | 
|2003         |  |   | 1,992  | 
|2004         |  |   | 2,064  | 
|2005         |  |   | 2,148  | 
|2006         |  |   | 2,234  | 
|Thereafter   |  |   | 6,708  | 
|             |  |   |        | 
|             |  | $ | 17,167 | 
|             |  |   |        | 

44



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

In connection with the build out of the
Companys facility, the Company entered into a loan and
security agreement in January 1997 for up to $6,000,000. Amounts
drawn under the loan bear a weighted-average interest rate of
13.9%, have a term of 48 months and are secured by the
building improvements financed. The Company issued 155,555
shares of common stock to the lender at $0.19 per share in
January 1997 in connection with this arrangement. As of
December 31, 1998, the Company had drawn the full amount
available under the arrangement.

In December 1998, the Company entered into loan
and security arrangements for up to $10,000,000 with
Transamerica Business Credit and LMSI Venture Finance. Amounts
drawn under the loans bear interest rates of approximately 8.5%
to 10.0%, have a term of 48 months, and are secured by
equipment financed by proceeds under the agreements. Under these
agreements, $5,624,000 was drawn in 1998 and an additional
$2,715,000 was drawn in 1999. No additional amounts are
available for draw down under these loan and security
arrangements as they expired during 2000.

As of December 31, 2001 all principle and
interest owing under these loan agreements had been repaid in
full.

4.     Stockholders
Equity

Convertible
Preferred Stock

In September 1999, the board of directors
approved an amendment to the Companys articles of
incorporation to authorize 10,000,000 shares of undesignated
preferred stock, for which the board of directors is authorized
to fix the designation, powers, preferences and rights and an
increase in the authorized number of shares of common stock to
100,000,000 shares.

Immediately prior to closing of the initial
public offering in November 1999, all 20,561,156 outstanding
shares of Series A,B,C and D Convertible preferred stock of
the Company were converted into 15,991,849 shares of Common
Stock.

Common
Stock

Included in the common shares outstanding at
December 31, 2001 and 2000 are 283,727 and 750,821 shares
of common stock subject to repurchase rights, which generally
expire ratably over four or five years from date of issuance.
Certain of these shares were issued pursuant to full-recourse
notes receivable, which bear interest at rates between 4.6% and
6.0% per annum and are due and payable on the earlier of
120 days after termination of the participants
employment with the Company, or on various dates beginning in
February 2003 and ending in August 2004  see
Note 7. In 1998, the Company sold 525,000 shares of common
stock to its Chief Executive Officer concurrent with the
commencement of his employment. The shares are subject to the
Companys right of repurchase at the original purchase
price, in the event of termination, which lapses over a four
year period and unvested shares have been included above in the
reported common stock subject to repurchase rights at
December 31, 2001 and 2000.

As of December 31, 2001, the Company has
reserved 6,296,858 shares of common stock for future issuance in
relation to the Companys Stock Option Plans.

Stock
Purchase Plan

In October 1999, the Companys shareholders
approved the adoption of the 1999 Employee Stock Purchase Plan
(the Purchase Plan). A total of 300,000 shares of
the Companys common stock were initially reserved for
issuance under the Purchase Plan. The Purchase Plan permits
eligible employees to purchase common stock at a discount, but
only through payroll deductions, during concurrent 24-month
offering periods. Each offering period will be divided into four
consecutive six-month purchase periods. The

45



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

price at which stock is purchased under the
Purchase Plan is equal to 85% of the fair market value of the
common stock on the first or last day of the offering period,
whichever is lower. In addition, the Purchase Plan provides for
annual increases in the number of shares available for issuance
under the Purchase Plan on the first day of each fiscal year,
equal to the lessor of 1% of the outstanding shares of common
stock on the first day of the fiscal year, 350,000 shares, or a
lesser amount as determined by the board of directors. At
December 31, 2001, shares of common stock available for
future issue under the Stock Purchase Plan are 797,617.

Stock Option
Plans

The Companys 1996 Stock Option Plan was
adopted in March 1996 and provided for the issuance of options
for up to 1,153,444 shares of common stock to employees,
directors and consultants.

During 1997, the Companys board of
directors approved the adoption of the 1997 Stock Option Plan
with terms and conditions the same as those of the 1996 Stock
Option Plan (collectively, the Qualified Plans). The
1997 Stock Option Plan provides for the issuance of options for
up to 5,346,556 shares of common stock to employee and
consultants. The Qualified Plan provides for an annual increase
in the number of shares of common stock reserved for issuance
equal to the lesser of 1,500,000 shares, 4% of the outstanding
shares on the date of the annual increase, or a lesser amount as
determined by the board of directors.

In October 2001, the Companys board of
directors approved the adoption of the 2001 Nonstatutory Stock
Option Plan (the NSO Plan). The NSO Plan provides
for the issuance of options for up to 1,000,000 shares of common
stock to non-executive employees and consultants.

Stock options granted under the Qualified Plans
may be either incentive stock options or nonstatutory stock
options, whereas stock options granted under the NSO Plan are
nonstatutory stock options. Options are generally granted with
exercise prices equal to the fair value of the common stock on
the grant date, as determined by the board of directors. The
options expire no more than 10 years after the date of
grant or earlier if employment or relationship as a director or
consultant is terminated. The board of directors shall determine
the times during the term when the options may be exercised and
the number of shares for which an option may be granted. Options
may be granted with different vesting terms from time to time
but will provide for annual vesting of at least 20% of the total
number of shares subject to the option. The Company allows early
exercise of options, subject to repurchase rights until such
options are fully vested.

46



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

No options have been granted under the 2001 NSO
Plan as of December 31, 2001. A summary of activity under
the 1996 and 1997 Stock Option Plans is as follows:

|                             |  |                           |            |           |  |          |                 |  |  |   |       | 
|---------------------------- |  | ------------------------- | ---------- | --------- |  | -------- | --------------- |  |  | - | ----- | 
|                             |  |                          
|                             |  | Outstanding Stock Options
|                             |  |                          
|                             |  |                           |            | Weighted-
|                             |  |                           |            | Average  
|                             |  | Number of                 |            | Exercise  |  | Exercise
|                             |  | Shares                    |            | Price     |  | Price   
|                             |  |                           |            |           |  |         
|Balance at January 1, 1999   |  |                           | 1,954,220  |           |  |          | $ 0.19 - $ 0.96 |  |  | $ | 0.54  | 
|Options granted              |  |                           | 2,209,817  |           |  |          | $ 0.96 - $33.00 |  |  | $ | 7.50  | 
|Options exercised            |  |                           | (1,071,580 | )         |  |          | $ 0.19 - $12.00 |  |  | $ | 0.93  | 
|Options canceled             |  |                           | (253,959   | )         |  |          | $ 0.19 - $ 1.93 |  |  | $ | 0.64  | 
|                             |  |                           |            |           |  |          |                 |  |  |   |       | 
|Balance at December 31, 1999 |  |                           | 2,838,498  |           |  |          | $ 0.01 - $33.00 |  |  | $ | 5.80  | 
|Options granted              |  |                           | 2,054,105  |           |  |          | $24.13 - $62.63 |  |  | $ | 47.83 | 
|Options exercised            |  |                           | (418,669   | )         |  |          | $ 0.19 - $31.88 |  |  | $ | 3.24  | 
|Options canceled             |  |                           | (592,228   | )         |  |          | $ 0.19 - $57.00 |  |  | $ | 17.23 | 
|                             |  |                           |            |           |  |          |                 |  |  |   |       | 
|Balance at December 31, 2000 |  |                           | 3,881,706  |           |  |          | $ 0.01 - $62.63 |  |  | $ | 26.57 | 
|Options granted              |  |                           | 1,705,387  |           |  |          | $12.13 - $31.25 |  |  | $ | 22.64 | 
|Options exercised            |  |                           | (386,910   | )         |  |          | $ 0.19 - $25.50 |  |  | $ | 5.16  | 
|Options canceled             |  |                           | (400,864   | )         |  |          | $ 0.19 - $62.63 |  |  | $ | 30.28 | 
|                             |  |                           |            |           |  |          |                 |  |  |   |       | 
|Balance at December 31, 2001 |  |                           | 4,799,319  |           |  |          | $ 0.19 - $58.25 |  |  | $ | 26.59 | 
|                             |  |                           |            |           |  |          |                 |  |  |   |       | 

At December 31, 2001, 2000 and 1999, vested
and outstanding options for 2,056,819, 2,200,389 and 580,476
shares were exercisable at weighted-average exercise prices of
$13.33, $9.95 and $1.84, respectively. The weighted-average
grant date fair value of options granted during the years ended
December 31, 2001, 2000 and 1999 was $13.62, $28.77 and
$4.01, respectively. At December 31, 2001, options for
shares of common stock available for future grants under the
1997 Stock Option Plan are 497,539 and under the 2001 NSO Plan
are 1,000,000.

An analysis of options outstanding at
December 31, 2001 is as follows:

|               |                 |             |  |             |           |           |  |                |     |           |  |   |       |  |  |  |           |  |  |   |       | 
|-------------- | --------------- | ----------- |  | ----------- | --------- | --------- |  | -------------- | --- | --------- |  | - | ----- |  |  |  | --------- |  |  | - | ----- | 
|               |                 |             |  |             |           |           |  |               
|               |                 |             |  |             |           |           |  | Options Vested
|               |                 |             |  | Weighted-   |           | Options   |  |               
|               |                 | Options     |  | Average     |           | Weighted- |  |                |     | Weighted-
|               |                 | Outstanding |  | Remaining   |           | Average   |  | Vested at      |     | Average  
|               |                 | at December |  | Contractual |           | Exercise  |  | December 31,   |     | Exercise 
|Exercise Price |                 | 31, 2001    |  | Life        |           | Price     |  | 2001           |     | Price    
|               |                 |             |  |             |           |           |  |                |     |          
|               |                 |             |  | (In years)  |           |           |  |                |     |          
|               | $ 0.19 - $ 0.39 |             |  |             | 206,209   |           |  |                | 5.6 |           |  | $ | 0.34  |  |  |  | 206,209   |  |  | $ | 0.34  | 
|               | $ 0.96 - $ 0.96 |             |  |             | 322,854   |           |  |                | 6.9 |           |  | $ | 0.96  |  |  |  | 322,854   |  |  | $ | 0.96  | 
|               | $ 1.93 - $ 6.43 |             |  |             | 347,213   |           |  |                | 7.4 |           |  | $ | 3.86  |  |  |  | 347,213   |  |  | $ | 3.86  | 
|               | $11.57 - $17.12 |             |  |             | 1,008,869 |           |  |                | 8.4 |           |  | $ | 12.60 |  |  |  | 628,718   |  |  | $ | 11.98 | 
|               | $17.43 - $25.50 |             |  |             | 1,261,616 |           |  |                | 9.1 |           |  | $ | 25.06 |  |  |  | 238,533   |  |  | $ | 25.05 | 
|               | $26.51 - $38.13 |             |  |             | 450,844   |           |  |                | 8.7 |           |  | $ | 31.96 |  |  |  | 199,206   |  |  | $ | 31.41 | 
|               | $39.81 - $58.25 |             |  |             | 1,201,714 |           |  |                | 8.2 |           |  | $ | 55.90 |  |  |  | 114,086   |  |  | $ | 52.08 | 
|               |                 |             |  |             |           |           |  |                |     |           |  |   |       |  |  |  |           |  |  |   |       | 
|               |                 |             |  |             | 4,799,319 |           |  |                | 8.3 |           |  | $ | 26.59 |  |  |  | 2,056,819 |  |  | $ | 13.33 | 
|               |                 |             |  |             |           |           |  |                |     |           |  |   |       |  |  |  |           |  |  |   |       | 

Pro forma net loss information is required by
SFAS 123, computed as if the Company had accounted for its
employee stock options granted under the fair value method of
that Statement. The fair value for options granted prior to the
Companys initial public offering in November 1999 were
estimated at the date of grant

47



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

using the minimum value method. Options granted
following the Companys November 1999 initial public
offering have been valued using the Black-Scholes method with an
expected stock volatility of 0.84 in 2001, 0.84 in 2000 and 0.70
in 1999. Other valuation assumptions are as follows:

|                        |  |      |     |      |  |      |     |   |  |  |     |  
|----------------------- |  | ---- | --- | ---- |  | ---- | --- | - |  |  | --- | -
|                        |  | 2001 |     | 2000 |  | 1999
|                        |  |      |     |      |  |     
|Expected dividend yield |  |      | 0   | %    |  |      | 0   | % |  |  | 0   | %
|Risk-free interest rate |  |      | 4.6 | %    |  |      | 6.4 | % |  |  | 5.5 | %
|Expected life (years)   |  |      | 3.5 |      |  |      | 3.5 |   |  |  | 3.5 |  

The fair value of issuances under the Employee
Stock Purchase Plan is estimated on the issuance date using the
Black-Scholes model assuming no expected dividends and the
following weighted average assumptions for issuance made in 2001
and 2000. No issuances were made in 1999.

|                                |  |      |      |      |  |  |      |  
|------------------------------- |  | ---- | ---- | ---- |  |  | ---- | -
|                                |  | 2001 |      | 2000
|                                |  |      |      |     
|Expected stock price volatility |  |      | 0.84 |      |  |  | 0.84 |  
|Risk-free interest rate         |  |      | 4.70 | %    |  |  | 6.40 | %
|Expected life (years)           |  |      | 0.62 |      |  |  | 0.50 |  

Had the Company valued its stock options and
stock purchase rights according to the fair value provisions of
SFAS 123, pro forma net income (loss) and pro forma net
income (loss) per share would have been as follows (in
thousands):

|                                     |                        |                          |   |         |   |      |   |         |   |  |   |        |  
|------------------------------------ | ---------------------- | ------------------------ | - | ------- | - | ---- | - | ------- | - |  | - | ------ | -
|                                     |                        |                         
|                                     |                        | Years Ended December 31,
|                                     |                        |                         
|                                     |                        | 2001                     |   | 2000    |   | 1999
|                                     |                        |                          |   |         |   |     
|Net income (loss):                   |                        |                          |   |         |   |      |   |         |   |  |   |       
|                                     | As reported            |                          | $ | 6,338   |   |      | $ | (922    | ) |  | $ | (2,147 | )
|                                     |                        |                          |   |         |   |      |   |         |   |  |   |       
|                                     | Pro forma for SFAS 123 |                          | $ | (18,359 | ) |      | $ | (19,419 | ) |  | $ | (3,031 | )
|                                     |                        |                          |   |         |   |      |   |         |   |  |   |       
|Basic net income (loss) per share:   |                        |                          |   |         |   |      |   |         |   |  |   |       
|                                     | As reported            |                          | $ | 0.21    |   |      | $ | (0.03   | ) |  | $ | (0.27  | )
|                                     |                        |                          |   |         |   |      |   |         |   |  |   |       
|                                     | Pro forma for SFAS 123 |                          | $ | (0.61   | ) |      | $ | (0.67   | ) |  | $ | (0.37  | )
|                                     |                        |                          |   |         |   |      |   |         |   |  |   |       
|Diluted net income (loss) per share: |                        |                          |   |         |   |      |   |         |   |  |   |       
|                                     | As reported            |                          | $ | 0.20    |   |      | $ | (0.03   | ) |  | $ | (0.27  | )
|                                     |                        |                          |   |         |   |      |   |         |   |  |   |       
|                                     | Pro forma for SFAS 123 |                          | $ | (0.61   | ) |      | $ | (0.67   | ) |  | $ | (0.37  | )
|                                     |                        |                          |   |         |   |      |   |         |   |  |   |       

During the years ended December 31, 1999 and
1998, in connection with the grant of certain share options to
employees, the Company recorded deferred stock compensation of
$4,070,000 and $605,000, respectively, representing the
difference between the exercise price and the deemed fair value
of the Companys common stock on the date such stock
options were granted. During the years ended December 31,
1999 and 1998, the Company also recorded deferred compensation
with respect to stock options granted to consultants totaling
$1,502,000 and $155,000, respectively. Options granted to
consultants are generally variable awards and are revalued at
the end of each accounting period in accordance with
SFAS 123 and EITF 96-18 using a Black-Scholes model
and the following weighted-average assumptions for 1998 and
1999: estimated volatility of 0.5, risk-free interest rate of
5.0%, no dividend yield; and an expected life of the option
equal to the full term, generally ten years from the date of
grant. The resulting values are charged to expense as they are
earned. All consultant awards were fully vested during 1999 and
no additional awards to consultants were granted in 2001 or
2000. Deferred compensation is included as a reduction of
stockholders equity and is being amortized to expense on a
graded vesting method. During the years ended December 31,

48



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##### Table of Contents



SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

2001, 2000 and 1999, the Company recorded
amortization of deferred stock compensation expense of
approximately $411,000, $760,000 and $3,794,000, respectively.
At December 31, 2001, the Company had a total of
approximately $335,000 remaining to be amortized over the
corresponding vesting period of each respective option.

The amortization of deferred stock compensation,
combined with the expense associated with stock options granted
to non-employees, has been included in the following items in
the accompanying statements of operations (in thousands):

|                                |       |                          |     |      |  |      |     |     |  |   |       |       | 
|------------------------------- | ----- | ------------------------ | --- | ---- |  | ---- | --- | --- |  | - | ----- | ----- | 
|                                |       |                         
|                                |       | Years Ended December 31,
|                                |       |                         
|                                |       | 2001                     |     | 2000 |  | 1999
|                                |       |                          |     |      |  |     
|Research & development          |       | $                        | 308 |      |  | $    | 588 |     |  | $ | 2,664 |      
|Sales, general & administrative |       |                          | 103 |      |  |      | 172 |     |  |   | 1,130 |      
|                                |       |                          |     |      |  |      |     |     |  |   |       |      
|                                | Total |                          | $   | 411  |  |      | $   | 760 |  |   | $     | 3,794 | 
|                                |       |                          |     |      |  |      |     |     |  |   |       |      

5.     Income
Taxes

The provision for (benefit from) income taxes
consisted of the following (in thousands):

|                           |         |                          |       |        |       |      |   |   |   |   |   |   |   | 
|-------------------------- | ------- | ------------------------ | ----- | ------ | ----- | ---- | - | - | - | - | - | - | - | 
|                           |         |                         
|                           |         | Years Ended December 31,
|                           |         |                         
|                           |         | 2001                     |       | 2000   |       | 1999
|                           |         |                          |       |        |       |     
|Current:                   |         |                          |       |        |       |      |   |   |   |   |   |  
|                           | Federal |                          | $     | 2,437  |       |      | $ |  |   |   | $ |  |  
|                           | State   |                          |       | 905    |       |      |   |  |   |   |   |  |  
|                           | Foreign |                          |       | 10     |       |      |   |  |   |   |   |  |  
|                           |         |                          |       |        |       |      |   |   |   |   |   |  
|                           |         | Total                    |       |        | 3,352 |      |   |   |  |   |   |   |  | 
|Deferred:                  |         |                          |       |        |       |      |   |   |   |   |   |  
|                           | Federal |                          |       | (2,046 | )     |      |   |  |   |   |   |  |  
|                           |         |                          |       |        |       |      |   |   |   |   |   |  
|Provision for income taxes |         | $                        | 1,306 |        |       | $    |  |   |   | $ |  |  
|                           |         |                          |       |        |       |      |   |   |   |   |   |  

The reconciliation of federal statutory income
tax rate to the Companys effective income tax rate is as
follows (in thousands):

|                                                        |  |                          |        |      |  |      |      |   |  |   |      |  
|------------------------------------------------------- |  | ------------------------ | ------ | ---- |  | ---- | ---- | - |  | - | ---- | -
|                                                        |  |                         
|                                                        |  | Years Ended December 31,
|                                                        |  |                         
|                                                        |  | 2001                     |        | 2000 |  | 1999
|                                                        |  |                          |        |      |  |     
|Expected provision (benefit) at federal
	statutory rate |  | $                        | 2,676  |      |  | $    | (323 | ) |  | $ | (751 | )
|State taxes, net of federal benefit                     |  |                          | 588    |      |  |      |     |   |  |   |     |  
|Research & development credits                          |  |                          | (207   | )    |  |      |     |   |  |   |     |  
|Valuation allowance (utilized)/provided                 |  |                          | (1,990 | )    |  |      | 323  |   |  |   | 751  |  
|Other individually immaterial items                     |  |                          | 239    |      |  |      |     |   |  |   |     |  
|                                                        |  |                          |        |      |  |      |      |   |  |   |      |  
|Provision for income taxes                              |  | $                        | 1,306  |      |  | $    |     |   |  | $ |     |  
|                                                        |  |                          |        |      |  |      |      |   |  |   |      |  

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SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
Companys deferred tax assets and liabilities are as
follows (in thousands):

|                                            |                                     |                           |        |       |       |   |        |       |       | 
|------------------------------------------- | ----------------------------------- | ------------------------- | ------ | ----- | ----- | - | ------ | ----- | ----- | 
|                                            |                                     |                          
|                                            |                                     | December 31,             
|                                            |                                     |                          
|                                            |                                     | 2001                      |        | 2000 
|                                            |                                     |                           |        |      
|Deferred tax assets:                        |                                     |                           |        |       |       |   |        |      
|                                            | Net operating loss carryforwards    |                           | $      | 2,213 |       |   | $      | 6,609 |      
|                                            | Research & development tax credits  |                           |        | 480   |       |   |        | 1,448 |      
|                                            | Deferred revenue                    |                           |        | 2,046 |       |   |        |      |      
|                                            | Capitalized research & development  |                           |        | 367   |       |   |        | 432   |      
|                                            | Depreciation                        |                           |        | 2,988 |       |   |        |      |      
|                                            | Other individually immaterial items |                           |        | 1,497 |       |   |        | 718   |      
|                                            |                                     |                           |        |       |       |   |        |      
|                                            |                                     | Total deferred tax assets |        |       | 9,591 |   |        |       | 9,207 | 
|Valuation allowance for deferred tax assets |                                     |                           | (7,209 | )     |       |   | (9,207 | )    
|                                            |                                     |                           |        |       |       |   |        |      
|Total deferred tax assets                   |                                     |                           | 2,382  |       |       |   |       |      
|Deferred tax liabilities:                   |                                     |                           |        |       |       |   |        |      
|                                            | Investment holdings                 |                           |        | (336  | )     |   |        |      |      
|                                            |                                     |                           |        |       |       |   |        |      
|Net deferred tax assets                     |                                     | $                         | 2,046  |       |       | $ |       |      
|                                            |                                     |                           |        |       |       |   |        |      

SFAS No. 109 provides for the recognition of
deferred tax assets if realization of such assets is more likely
than not. Based upon the weight of available evidence, which
includes the Company historical operating performance, the
Company has provided a valuation allowance against deferred tax
assets that it determined may not be realizable as of
December 31, 2001.

The net valuation allowance decreased by
approximately $2.0 million, increased by approximately
$2.2 million and decreased by approximately $400,000 during
the years ended December 31, 2001, 2000 and 1999,
respectively.

The valuation allowance for deferred tax assets
includes approximately $2.4 million attributable to stock
option deductions, the benefit of which will be credited to
stockholders equity upon realization.

As of December 31, 2001, the Company had a
federal net operating loss carryforward of approximately
$6.3 million. The net operating loss carryforward will
expire in 2020, if not utilized.

Utilization of the net operating loss
carryforwards and credits may be subject to a substantial annual
limitation due to the ownership change limitations provided by
the Internal Revenue Code of 1986, as amended, and similar state
provisions. The annual limitation may result in the expiration
of net operating losses and credits before utilization.

6.     Segment
Disclosure

Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and
Related Information (SFAS 131), requires disclosures of certain
information regarding operating segments, products and services,
geographic areas of operation and major customers. The method
for determining what information to report under SFAS 131 is
based upon the management approach, or the way that
management organizes the operating segments within a company,
for which separate financial information is available that is
evaluated regularly by the Chief Operating Decision Maker
(CODM) in deciding how to allocate resources and in
assessing performance. Symyx CODM is the Chief Executive
Officer. The CODM

50



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SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

evaluates the performance of the Company based on
consolidated profit or loss from operations before income taxes.
For the purpose of making operating decisions, the CODM
primarily considers financial information presented on a
consolidated basis accompanied by disaggregated information
about revenues. Revenue is defined as revenues from external
customers.

Symyx allocates research personnel time to each
collaboration arrangement on a full-time-equivalent basis but
does not allocate actual research and development expenses to
each collaboration or business segment. The Company does not
assess segment performance below the revenue level or allocate
sales, general or administrative expenses or assets to the
individual segments and, therefore, financial performance
including depreciation and amortization and capital expenditures
is not reported on a segment basis.

Symyx provides research services to its partners
through its Industry Collaborations business, seeks to license
discovered materials through its Proprietary Materials programs,
and offers selective access to its proprietary technologies,
including instruments, software and intellectual property,
through its Discovery Tools business.

The disaggregated financial information reviewed
by the CODM is as follows. During the fourth quarter of fiscal
2001, the Company began segregating Industry Collaboration
revenue into four categories for purposes of internal management
reporting: Chemicals, Industrial Polymers, Electronic Materials,
and Life Sciences. The CODM began reviewing this revenue
information on an industry basis as well as by Business Unit.

|                         |                      |                          |        |        |        |      |        |        |        |  |        |        |        | 
|------------------------ | -------------------- | ------------------------ | ------ | ------ | ------ | ---- | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                         |                      |                         
|                         |                      | Years Ended December 31,
|                         |                      |                         
|                         |                      | 2001                     |        | 2000   |        | 1999
|                         |                      |                          |        |        |        |     
|                         |                      |                         
|                         |                      | (in thousands)          
|Industry Collaborations: |                      |                          |        |        |        |      |        |        |        |  |        |       
|                         | Chemicals            |                          | $      | 26,200 |        |      | $      | 21,122 |        |  | $      | 19,454 |       
|                         | Industrial polymers  |                          |        | 5,519  |        |      |        | 6,965  |        |  |        | 4,834  |       
|                         | Electronic materials |                          |        | 3,604  |        |      |        | 3,350  |        |  |        | 6,209  |       
|                         | Life sciences        |                          |        | 7,606  |        |      |        | 3,560  |        |  |        |       |       
|                         |                      |                          |        |        |        |      |        |        |        |  |        |       
|                         |                      |                          | 42,929 |        |        |      | 34,997 |        |        |  | 30,497 |       
|Proprietary Materials:   |                      |                          |        |        |        |      |        |        |        |  |        |       
|                         | Life sciences        |                          |        | 2,000  |        |      |        | 2,000  |        |  |        |       |       
|Discovery Tools          |                      |                          | 15,091 |        |        |      | 6,321  |        |        |  |       |       
|                         |                      |                          |        |        |        |      |        |        |        |  |        |       
|                         |                      | Total                    |        | $      | 60,020 |      |        | $      | 43,318 |  |        | $      | 30,497 | 
|                         |                      |                          |        |        |        |      |        |        |        |  |        |       

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SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

All revenue is generated in the United States for
all periods presented. All significant long-lived assets were
geographically located in the United States for all periods
presented.

Geographic
Area Data

|               |       |                          |        |        |  |      |        |        |  |   |        |        | 
|-------------- | ----- | ------------------------ | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|               |       |                         
|               |       | Years Ended December 31,
|               |       |                         
|               |       | 2001                     |        | 2000   |  | 1999
|               |       |                          |        |        |  |     
|               |       |                         
|               |       | (in thousands)          
|United States  |       | $                        | 34,926 |        |  | $    | 17,510 |        |  | $ | 10,246 |       
|Germany        |       |                          | 13,222 |        |  |      | 17,277 |        |  |   | 17,336 |       
|France         |       |                          | 1,000  |        |  |      |       |        |  |   |       |       
|Switzerland    |       |                          |       |        |  |      | 1,100  |        |  |   | 1,080  |       
|United Kingdom |       |                          | 2,033  |        |  |      | 4,717  |        |  |   | 1,835  |       
|Mexico         |       |                          | 3,221  |        |  |      | 2,712  |        |  |   |       |       
|Japan          |       |                          | 5,618  |        |  |      | 2      |        |  |   |       |       
|               |       |                          |        |        |  |      |        |        |  |   |        |       
|               | Total |                          | $      | 60,020 |  |      | $      | 43,318 |  |   | $      | 30,497 | 
|               |       |                          |        |        |  |      |        |        |  |   |        |       

Revenues are attributed to the above geographic
locations based on the physical location of Symyx
customers, notwithstanding, all revenue is actually generated in
the United States for all periods presented.

All significant long-lived assets were
geographically located in the United States for all periods
presented.

7.     Related Party
Transactions

Prior to its initial public offering, the Company
implemented a program under which directors, executive officers
and certain other employees were permitted to purchase
restricted stock or to exercise stock options pursuant to full
recourse promissory notes. The notes bear interest between 4.6%
and 6.0% per annum and are due and payable on the earlier of
120 days after termination of employment or on various
dates beginning in February 2003 and ending in August 2004. In
1999 and 1998, loans were made in the amount of $361,000 and
$398,000, respectively, pursuant to this program. During 2001,
2000 and 1999, $211,000, $68,000 and $0 of these promissory
notes were repaid, respectively and $0, $42,000 and $27,000
respectively, were cancelled due to repurchase of the underlying
stock. In addition, in 1998, the Company loaned $300,000 to an
officer in connection with certain relocation expenses. This
loan was repaid in full in July 1999.

8.     Financial
Instruments

The Company has not entered into any derivative
contracts at December 31, 2001. The following is a summary
of the Companys risk management strategies and the effect
of these strategies on the Companys consolidated financial
statements.

Concentrations
of Credit Risk

Financial instruments that potentially subject
the Company to significant concentrations of credit risk consist
principally of cash and investments. The Company does not carry
a significant trade accounts receivable balance. The Company
maintains cash and cash equivalents and available-for-sale
investments in various corporate debt securities, money market
funds and U.S. Treasury notes. The Companys policy is
designed to limit exposure to any one institution or company.
The relative credit standing of the note holders is monitored to
ensure compliance with the Companys investment strategy.
The Company does not require collateral on these financial
instruments.

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SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Investments

The following methods and assumptions were used
by the Company in estimating its fair value disclosures for
financial instruments:



| |                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cash and cash
	equivalents:The carrying amount
	reported in the balance sheet for cash and cash equivalents
	approximates its fair value.                                                                                                                                                          
|
| | Accounts receivable and accounts
	payable:The carrying amounts reported
	in the balance sheet for accounts receivable and accounts
	payable approximate their fair value.                                                                                                                          
|
| | Available-for-sale
	securities:The fair values for
	available-for-sale equity securities are based on quoted market
	prices. The fair values for available-for-sale securities
	together with information in relation to their maturity dates is
	included in Note 1 to these financial statements.

9.     Quarterly
Results of Operations (Unaudited)

The following is a summary of the quarterly
results of operations for the years ended December 31, 2001
and 2000 (in thousands, except per share amounts).

|                                 |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |       |        | 
|-------------------------------- | --------------------------------- | ------------------------ | ------ | ------- | ------ | ------------ | ------ | ----------- | ------ | - | ------ | ----- | ------ | - | ------ | ----- | ------ | 
|                                 |                                   |                         
|                                 |                                   | Three Months Ended      
|                                 |                                   |                         
|                                 |                                   | March 31                 |        | June 30 |        | September 30 |        | December 31
|                                 |                                   |                          |        |         |        |              |        |            
|2001                             |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|Total revenues                   |                                   | $                        | 14,013 |         |        | $            | 15,370 |             |        | $ | 15,856 |       |        | $ | 14,781 |      
|Operating expenses:              |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|                                 | Cost of products sold             |                          |        | 2,286   |        |              |        | 1,829       |        |   |        | 1,609 |        |   |        | 867   |       
|                                 | Research and development          |                          |        | 10,305  |        |              |        | 9,998       |        |   |        | 9,752 |        |   |        | 8,663 |       
|                                 | Sales, general and administrative |                          |        | 2,874   |        |              |        | 3,003       |        |   |        | 3,306 |        |   |        | 3,341 |       
|                                 |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|                                 |                                   | Total operating expenses |        |         | 15,465 |              |        |             | 14,830 |   |        |       | 14,667 |   |        |       | 12,871 | 
|Interest income (expense), net   |                                   |                          | 1,667  |         |        |              | 1,426  |             |        |   | 1,468  |       |        |   | 896    |      
|                                 |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|Income before income tax expense |                                   |                          | 215    |         |        |              | 1,966  |             |        |   | 2,657  |       |        |   | 2,806  |      
|Income tax expense               |                                   |                          | 35     |         |        |              | 259    |             |        |   | 457    |       |        |   | 555    |      
|                                 |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|Net income                       |                                   | $                        | 180    |         |        | $            | 1,707  |             |        | $ | 2,200  |       |        | $ | 2,251  |      
|                                 |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|Basic net income per share       |                                   | $                        | 0.01   |         |        | $            | 0.06   |             |        | $ | 0.07   |       |        | $ | 0.07   |      
|                                 |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|Diluted net income per share     |                                   | $                        | 0.01   |         |        | $            | 0.05   |             |        | $ | 0.07   |       |        | $ | 0.07   |      
|                                 |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      

53



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SYMYX TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

|                                    |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |       |        | 
|----------------------------------- | --------------------------------- | ------------------------ | ------ | ------- | ------ | ------------ | ------ | ----------- | ------ | - | ------ | ----- | ------ | - | ------ | ----- | ------ | 
|                                    |                                   |                         
|                                    |                                   | Three Months Ended      
|                                    |                                   |                         
|                                    |                                   | March 31                 |        | June 30 |        | September 30 |        | December 31
|                                    |                                   |                          |        |         |        |              |        |            
|2000                                |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|Total revenues                      |                                   | $                        | 12,051 |         |        | $            | 11,047 |             |        | $ | 8,817  |       |        | $ | 11,403 |      
|Operating expenses:                 |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|                                    | Cost of products sold             |                          |        | 196     |        |              |        | 1,533       |        |   |        | 29    |        |   |        | 1,017 |       
|                                    | Research and development          |                          |        | 8,581   |        |              |        | 8,871       |        |   |        | 8,657 |        |   |        | 9,789 |       
|                                    | Sales, general and administrative |                          |        | 3,093   |        |              |        | 3,152       |        |   |        | 2,723 |        |   |        | 2,830 |       
|                                    |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|                                    |                                   | Total operating expenses |        |         | 11,870 |              |        |             | 13,556 |   |        |       | 11,409 |   |        |       | 13,636 | 
|Interest income (expense), net      |                                   |                          | 1,493  |         |        |              | 1,534  |             |        |   | 1,587  |       |        |   | 1,617  |      
|                                    |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|Net income (loss)                   |                                   | $                        | 1,674  |         |        | $            | (975   | )           |        | $ | (1,005 | )     |        | $ | (616   | )    
|                                    |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|Basic net income (loss) per share   |                                   | $                        | 0.06   |         |        | $            | (0.03  | )           |        | $ | (0.03  | )     |        | $ | (0.02  | )    
|                                    |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      
|Diluted net income (loss) per share |                                   | $                        | 0.05   |         |        | $            | (0.03  | )           |        | $ | (0.03  | )     |        | $ | (0.02  | )    
|                                    |                                   |                          |        |         |        |              |        |             |        |   |        |       |        |   |        |      

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

None




PART III




Item
10.     Directors and Executive
Officers of the Registrant

The information required by this item is hereby
incorporated by reference from the information under the
captions Election of Directors and Executive
Officers contained in the Companys definitive Proxy
Statement, to be filed with the Securities and Exchange
Commission no later than 120 days from the end of the
Companys last fiscal year in connection with the
solicitation of proxies for its 2002 Annual Meeting of
Stockholders (the Proxy Statement). The information
required by Section 16(a) is incorporated by reference from
the information under the caption Compliance with
Section 16(a) of the Securities Exchange Act of 1934
in the Proxy Statement.




Item
11.     Executive
Compensation

The information required by this item is
incorporated by reference from the information under the caption
Executive Officer Compensation in the Proxy
Statement.




Item
12.     Security Ownership of
Certain Beneficial Owners and Management

The information required by this item is
incorporated by reference to the information under the caption
Security Ownership of Certain Beneficial Owners and
Management in the Proxy Statement.




Item
13.     Certain Relationships and
Related Transactions

The information required by this item is
incorporated by reference to the information under the caption
Certain Relationships and Related Transactions in
the Proxy Statement.




PART IV




Item
14.     Exhibits, Financial
Statement Schedules, and Reports on Form 8-K

(A) 1. Financial Statements

The following Financial Statements of Symyx
Technologies, Inc. and Report of Ernst & Young LLP, have
been filed as part of this Form 10-K. See index to
Financial statements under Item 8, above:

Index to Consolidated Financial
Statements



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Report of Ernst & Young LLP, Independent
	Auditors                                               
| | Consolidated Balance Sheets at December 31,
	2001 and 2000                                       
| | Consolidated Statements of Operations for the
	years ended December 31, 2001, 2000 and 1999      
| | Consolidated Statement of Stockholders
	Equity for the three year period ended December 31, 2001
| | Consolidated Statements of Cash Flows for the
	years ended December 31, 2001, 2000 and 1999      
| | Notes to Consolidated Financial Statements                                                       

(A) 2. Financial Statement
Schedules

All schedules are omitted because they are not
applicable or the required information is shown in the Financial
Statements or the notes thereto.

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(A) 3. Exhibits

Refer to (C) below.

(B) Reports on Form 8-K

The Company was not required to and did not file
any reports on Form 8-K during the period from
September 30, 2001 to date of filing.

(C) Exhibits

|           |  |                                                                                                                                                                                                                                                                           
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit    |  |                                                                                                                                                                                                                                                                           
|Number     |  | Description of Document                                                                                                                                                                                                                                                   
|           |  |                                                                                                                                                                                                                                                                           
|3.1(1)     |  | Amended and Restated Certificate of Incorporation                                                                                                                                                                                                                         
|3.2(2)     |  | Bylaws of Symyx                                                                                                                                                                                                                                                           
|4.1(3)     |  | Specimen Common Stock Certificate                                                                                                                                                                                                                                         
|5.1(3)     |  | Opinion of Wilson Sonsini Goodrich & Rosati,
	Professional Corporation                                                                                                                                                                                                    
|10.1(3)    |  | Restated Investors Rights Agreement dated
	March 27, 1998                                                                                                                                                                                                                 
|10.2(3)    |  | 1996 Stock Plan and forms of agreements thereunder                                                                                                                                                                                                                        
|10.3(3)    |  | 1997 Stock Plan and forms of agreements thereunder                                                                                                                                                                                                                        
|10.4(3)    |  | 1999 Employee Stock Purchase Plan                                                                                                                                                                                                                                         
|10.5(3)    |  | Form of Director and Executive Officer
	Indemnification Agreement                                                                                                                                                                                                         
|10.6(3)    |  | Form of Change of Control Agreement between Symyx
	and the following individuals: Steven D. Goldby, Isy Goldwasser,
	Jeryl L. Hilleman, and W. Henry Weinberg                                                                                                             
|10.7(3)    |  | Standard Industrial/ Commercial Single-Tenant
	Lease dated November 15, 1996 between Symyx and Patrick and
	Bette Ng, Co-Trustees for The Ng Living Trust, for office space
	located at 3100 Central Expressway, Santa Clara, California, and
	addenda and inserts thereto
|10.7(a)(3) |  | First Amendment to Lease between Symyx and
	Patrick and Bette Ng, Co-Trustees for The Ng Living Trust                                                                                                                                                                     
|10.8(3)    |  | Collaboration Agreement dated March 1, 1998
	between Symyx and Bayer AG                                                                                                                                                                                                   
|10.8(a)(3) |  | Amendment No. 1 dated May 1, 1998 to
	Collaboration Agreement between Symyx and Bayer AG                                                                                                                                                                                  
|10.8(b)(3) |  | Amendment No. 2 dated November 1, 1998
	to Collaboration Agreement between Symyx and Bayer AG                                                                                                                                                                             
|10.8(c)(3) |  | Amendment No. 3 dated January 1, 1999
	to Collaboration Agreement between Symyx and Bayer AG                                                                                                                                                                              
|10.8(d)(3) |  | Amendment No. 4 dated September 15,
	1999 to Collaboration Agreement between Symyx and Bayer AG                                                                                                                                                                           
|10.9(3)    |  | Celanese-Symyx Collaboration Agreement dated
	August 1, 1998 between Symyx and Celanese Ltd.                                                                                                                                                                              
|10.10(3)   |  | Collaborative Research and License Agreement
	dated January 1, 1999 between Symyx and The Dow Chemical
	Company                                                                                                                                                           
|10.11(3)   |  | License Agreement dated June 22, 1995
	between Symyx and Lawrence Berkeley Laboratory, on behalf of The
	Regents of the University of California                                                                                                                          
|10.12(3)   |  | License and Supply Agreement effective
	August 6, 1999 between Symyx and Argonaut Technologies, Inc.                                                                                                                                                                      
|10.13(4)   |  | Lease by and between East Arques Sunnyvale, LLC
	and Symyx Technologies, Inc. for the premises at 1263 E. Arques,
	Sunnyvale, California, and addenda and inserts thereto                                                                                                 
|10.14(5)   |  | 2001 Nonstatutory Stock Option Plan                                                                                                                                                                                                                                       
|21(6)      |  | List of Subsidiaries                                                                                                                                                                                                                                                      
|23.1(6)    |  | Consent of Ernst & Young LLP, Independent
	Auditors                                                                                                                                                                                                                       

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---



|    |                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to exhibit 3.1(b) filed
	with Registrants Registration Statement on Form S-1
	(File No. 333-87453), as amended.         
|   
|(2) | Incorporated by reference to exhibit 3.2(b) filed
	with Registrants Registration Statement on Form S-1
	(File No. 333-87453), as amended.         
|   
|(3) | Incorporated by reference to the same number
	exhibit filed with Registrants Registration Statement on
	Form S-1 (File No. 333-87453), as amended.
|   
|(4) | Incorporated by reference to the same number
	exhibit filed with Registrants Annual Report on
	Form 10-K for the year ended December 31, 2000.    
|   
|(5) | Incorporated by reference to exhibit 4.1 filed
	with Registrants Registration Statement on Form S-8
	(File No. 333-82166).                        
|   
|(6) | Filed herewith                                                                                                                                     

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SIGNATURES

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

|               |  |                                                                                             
|-------------- |  | --------------------------------------------------------------------------------------------
|               |  | SYMYX TECHNOLOGIES, INC.
	(Registrant)                                                      
|              
|March 19, 2002 |  | By: /s/ STEVEN D. GOLDBYSteven D. GoldbyChief Executive Officer and
	Chairman of the Board  
|              
|March 19, 2002 |  | By: /s/ JERYL L. HILLEMANJeryl L. HillemanSenior Vice President and
	Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints
Steven D. Goldby and Jeryl L. Hilleman, or either of
them, each with the power of substitution, his attorney-in-fact,
to sign any amendments to this Form 10-K (including
post-effective amendments), and to file the same, with exhibits
thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue
hereof.

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

|                                          |  |                                                                                                |  |               
|----------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | --------------
|Signature                                 |  | Title                                                                                          |  | Date          
|                                          |  |                                                                                                |  |               
|                                         
|By /s/ STEVEN D. GOLDBYSteven D. Goldby   |  | Chief Executive Officer and Chairman of the Board
	(Principal Executive Officer)               |  | March 19, 2002
|                                         
|By /s/ JERYL L. HILLEMANJeryl L. Hilleman |  | Senior Vice President and Chief Financial
	Officer(Principal Financial and Accounting Officer) |  | March 19, 2002
|                                         
|By /s/ THOMAS R. BARUCHThomas R. Baruch   |  | Director                                                                                       |  | March 19, 2002
|                                         
|By /s/ SAMUEL D. COLELLASamuel D. Colella |  | Director                                                                                       |  | March 19, 2002

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|                                                            |  |          |  |               
|----------------------------------------------------------- |  | -------- |  | --------------
|Signature                                                   |  | Title    |  | Date          
|                                                            |  |          |  |               
|By /s/  MARTIN GERSTELMartin Gerstel                        |  | Director |  | March 19, 2002
|                                                           
|By /s/  FRANCOIS A.
	LEPLATTENIERFrancois A. LEplattenier |  | Director |  | March 19, 2002
|                                                           
|By /s/  KENNETH J. NUSSBACHERKenneth J. Nussbacher          |  | Director |  | March 19, 2002
|                                                           
|By /s/  MARIO M. ROSATIMario M. Rosati                      |  | Director |  | March 19, 2002
|                                                           
|By /s/  PETER G. SCHULTZPeter G. Schultz                    |  | Director |  | March 19, 2002

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INDEX TO EXHIBITS

|           |  |                                                                                                                                                                                                                                                                           
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit    |  |                                                                                                                                                                                                                                                                           
|Number     |  | Description of Document                                                                                                                                                                                                                                                   
|           |  |                                                                                                                                                                                                                                                                           
|3.1(1)     |  | Amended and Restated Certificate of Incorporation                                                                                                                                                                                                                         
|3.2(2)     |  | Bylaws of Symyx                                                                                                                                                                                                                                                           
|4.1(3)     |  | Specimen Common Stock Certificate                                                                                                                                                                                                                                         
|5.1(3)     |  | Opinion of Wilson Sonsini Goodrich & Rosati,
	Professional Corporation                                                                                                                                                                                                    
|10.1(3)    |  | Restated Investors Rights Agreement dated
	March 27, 1998                                                                                                                                                                                                                 
|10.2(3)    |  | 1996 Stock Plan and forms of agreements thereunder                                                                                                                                                                                                                        
|10.3(3)    |  | 1997 Stock Plan and forms of agreements thereunder                                                                                                                                                                                                                        
|10.4(3)    |  | 1999 Employee Stock Purchase Plan                                                                                                                                                                                                                                         
|10.5(3)    |  | Form of Director and Executive Officer
	Indemnification Agreement                                                                                                                                                                                                         
|10.6(3)    |  | Form of Change of Control Agreement between Symyx
	and the following individuals: Steven D. Goldby, Isy Goldwasser,
	Jeryl L. Hilleman, and W. Henry Weinberg                                                                                                             
|10.7(3)    |  | Standard Industrial/ Commercial Single-Tenant
	Lease dated November 15, 1996 between Symyx and Patrick and
	Bette Ng, Co-Trustees for The Ng Living Trust, for office space
	located at 3100 Central Expressway, Santa Clara, California, and
	addenda and inserts thereto
|10.7(a)(3) |  | First Amendment to Lease between Symyx and
	Patrick and Bette Ng, Co-Trustees for The Ng Living Trust                                                                                                                                                                     
|10.8(3)    |  | Collaboration Agreement dated March 1, 1998
	between Symyx and Bayer AG                                                                                                                                                                                                   
|10.8(a)(3) |  | Amendment No. 1 dated May 1, 1998 to
	Collaboration Agreement between Symyx and Bayer AG                                                                                                                                                                                  
|10.8(b)(3) |  | Amendment No. 2 dated November 1, 1998
	to Collaboration Agreement between Symyx and Bayer AG                                                                                                                                                                             
|10.8(c)(3) |  | Amendment No. 3 dated January 1, 1999
	to Collaboration Agreement between Symyx and Bayer AG                                                                                                                                                                              
|10.8(d)(3) |  | Amendment No. 4 dated September 15,
	1999 to Collaboration Agreement between Symyx and Bayer AG                                                                                                                                                                           
|10.9(3)    |  | Celanese-Symyx Collaboration Agreement dated
	August 1, 1998 between Symyx and Celanese Ltd.                                                                                                                                                                              
|10.10(3)   |  | Collaborative Research and License Agreement
	dated January 1, 1999 between Symyx and The Dow Chemical
	Company                                                                                                                                                           
|10.11(3)   |  | License Agreement dated June 22, 1995
	between Symyx and Lawrence Berkeley Laboratory, on behalf of The
	Regents of the University of California                                                                                                                          
|10.12(3)   |  | License and Supply Agreement effective
	August 6, 1999 between Symyx and Argonaut Technologies, Inc.                                                                                                                                                                      
|10.13(4)   |  | Lease by and between East Arques Sunnyvale, LLC
	and Symyx Technologies, Inc. for the premises at 1263 E. Arques,
	Sunnyvale, California, and addenda and inserts thereto                                                                                                 
|10.14(5)   |  | 2001 Nonstatutory Stock Option Plan                                                                                                                                                                                                                                       
|21(6)      |  | List of Subsidiaries                                                                                                                                                                                                                                                      
|23.1(6)    |  | Consent of Ernst & Young LLP, Independent
	Auditors                                                                                                                                                                                                                       



---



|    |                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to exhibit 3.1(b) filed
	with Registrants Registration Statement on Form S-1
	(File No. 333-87453), as amended.         
|   
|(2) | Incorporated by reference to exhibit 3.2(b) filed
	with Registrants Registration Statement on Form S-1
	(File No. 333-87453), as amended.         
|   
|(3) | Incorporated by reference to the same number
	exhibit filed with Registrants Registration Statement on
	Form S-1 (File No. 333-87453), as amended.

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|    |                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Incorporated by reference to the same number
	exhibit filed with Registrants Annual Report on
	Form 10-K for the year ended December 31, 2000.
|   
|(5) | Incorporated by reference to exhibit 4.1 filed
	with Registrants Registration Statement on Form S-8
	(File No. 333-82166).                    
|   
|(6) | Filed herewith                                                                                                                                 

61