SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



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FORM 10-Q

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

For the quarterly period ended March 31, 2001

OR

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

Commission File No. 000-31577

INFORMAX, INC.
(Exact Name of Registrant as Specified in Its Charter)

|                                                               |  |                         
|-------------------------------------------------------------- |  | ------------------------
|Delaware                                                       |  | 52-1687783              
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|(State or Other Jurisdiction of Incorporation or Organization) |  | (IRS Employer ID Number)
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|7600 Wisconsin Avenue, 10th Floor, Bethesda, MD                |  | 20814                   
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|(Address of Principal Executive Offices)                       |  | (Zip Code)              

Registrants telephone number, including area code: (240) 747-4000

Former Address: 6010 Executive Boulevard 10th Floor, Rockville, MD 20852
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

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.

YESX   NO ___

The registrant had 20,709,238 shares of common stock outstanding as of April 30, 2001.



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TABLE OF CONTENTS

INFORMAX, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2001

|                                                      |                                                                           |      |                                                                     |                                                  
|----------------------------------------------------- | ------------------------------------------------------------------------- | ---- | ------------------------------------------------------------------- | -------------------------------------------------
|PART I
 CONDENSED CONSOLIDATED FINANCIAL INFORMATION |                                                                           | PAGE
|                                                      |                                                                           |      |                                                                     |                                                  
|                                                      | Item 1.  
Unaudited Condensed Consolidated Financial Statements           |      | 3                                                                  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                           |      | Condensed Consolidated Balance Sheets as of December 31, 2000 and  
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                           |      |                                                                     | March 31, 2001                                   
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                           |      | Condensed Consolidated Statements of Operations (unaudited) for the
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                           |      |                                                                     | Three-Month Period Ended March 31, 2000 and 2001 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                           |      | Condensed Consolidated Statements of Cash Flows (unaudited) for the
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                           |      |                                                                     | Three-Month Periods Ended March 31, 2000 and 2001
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                           |      | Notes to Condensed Consolidated Financial Statements                |                                                  
|                                                     
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|                                                      |                                                                           |      |                                                                     |                                                  
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|                                                     
|                                                      | Item 2.   Managements Discussion and Analysis of Financial Condition and
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                                                           |      | Results of Operations                                               |                                                  
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|                                                      |                                                                           |      |                                                                     |                                                  
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|                                                      | Item 3.   Quantitative and Qualitative Disclosures about Market Risk      | 18  
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|                                                      |                                                                           |      |                                                                     |                                                  
|PART II  OTHER INFORMATION                          
|                                                      |                                                                           |      |                                                                     |                                                  
|                                                      | Item 2.    Changes in Securities and Use of Proceeds                      |      | 19                                                                 
|                                                      |                                                                           |      |                                                                     |                                                  
|                                                      | Item 6.    Exhibits and Reports on Form 8-K                               |      | 19                                                                 
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|                                                      |                                                                           |      |                                                                     |                                                  
|SIGNATURES                                            |                                                                           | 20  
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|                                                      |                                                                           |      |                                                                     |                                                  
|EXHIBIT INDEX                                         |                                                                           | 21  

2



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PART I  CONDENSED CONSOLIDATED FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INFORMAX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

|                            |              |                                                    |                                                       |                      |            |              |            |            |            |             |            | 
|--------------------------- | ------------ | -------------------------------------------------- | ----------------------------------------------------- | -------------------- | ---------- | ------------ | ---------- | ---------- | ---------- | ----------- | ---------- | 
|                            |              |                                                    |                                                       |                      |            | DECEMBER 31, |            | MARCH 31, 
|ASSETS                      |              | 2000                                               |                                                       | 2001                
|                            |              |                                                    |                                                       |                     
|                            |              |                                                    |                                                       |                      |            |              |            |            |            | (unaudited)
|Current assets:            
|                           
|                           
|                           
|                           
|                            |              | Cash and cash equivalents                          |                                                       | $                    | 82,656,386 |              |            | $          | 75,475,536 |            
|                           
|                           
|                           
|                           
|                            |              | Accounts receivable (net of allowance for doubtful
|                           
|                           
|                           
|                           
|                            |              |                                                    | accounts of $20,000 and $320,100 at December 31, 2000
|                           
|                           
|                           
|                           
|                            |              |                                                    | at March 31, 2001, respectively)                      |                      |            | 9,063,015    |            |            |            | 10,200,901  |           
|                           
|                           
|                           
|                           
|                            |              | Prepaid expenses                                   |                                                       |                      | 1,187,588  |              |            |            | 1,270,855  |            
|                           
|                           
|                           
|                           
|                            |              | Other current assets                               |                                                       |                      | 56,278     |              |            |            | 615,904    |            
|                            |              |                                                    |                                                       |                      |            |              |            |           
|                            |              |                                                    |                                                       | Total current assets |            |              | 92,963,267 |            |            |             | 87,563,196 | 
|                            |              |                                                    |                                                       |                      |            |              |            |           
|Property and equipment, net |              |                                                    | 4,538,830                                             |                      |            |              | 7,653,903  |           
|                            |              |                                                    |                                                       |                      |            |              |            |           
|Other assets:              
|                           
|                           
|                           
|                           
|                            |              | Deposits                                           |                                                       |                      | 574,349    |              |            |            | 273,075    |            
|                           
|                           
|                           
|                           
|                            |              | Deferred tax asset, net                            |                                                       |                      | 1,300,000  |              |            |            | 1,300,000  |            
|                           
|                           
|                           
|                           
|                            |              | Restricted cash                                   
|                           
|                           
|                           
|                           
|                            |              |                                                    | 1,574,021                                             |                      |            |              | 1,667,325  |           
|                            |              |                                                    |                                                       |                      |            |              |            |           
|                            |              |                                                    |                                                       | Total other assets   |            |              | 3,448,370  |            |            |             | 3,240,400  | 
|                            |              |                                                    |                                                       |                      |            |              |            |           
|                            | Total assets |                                                    | $                                                     | 100,950,467          |            |              | $          | 98,457,499 |           
|                            |              |                                                    |                                                       |                      |            |              |            |           

|                                           |                                                                  |                                                                 |                             |             |              |            |            |             |             |            | 
|------------------------------------------ | ---------------------------------------------------------------- | --------------------------------------------------------------- | --------------------------- | ----------- | ------------ | ---------- | ---------- | ----------- | ----------- | ---------- | 
|                                           |                                                                  |                                                                 |                             |             | DECEMBER 31, |            | MARCH 31, 
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                  | 2000                                                            |                             | 2001       
|                                           |                                                                  |                                                                 |                             |            
|                                           |                                                                  |                                                                 |                             |             |              |            |            |             | (unaudited)
|Current liabilities:                      
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                                 |                                                                 | $                           | 971,534     |              |            | $          | 718,982     |            
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable to related parties                              |                                                                 |                             | 139,395     |              |            |            | 109,833     |            
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued liabilities                                              |                                                                 |                             | 1,269,891   |              |            |            | 1,695,628   |            
|                                          
|                                          
|                                          
|                                          
|                                           | Equipment loan facility  current portion                        |                                                                 |                             | 854,000     |              |            |            | 854,000     |            
|                                          
|                                          
|                                          
|                                          
|                                           | Capital lease obligations  current portion                      |                                                                 |                             | 77,729      |              |            |            | 269,962     |            
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred revenue                                                 |                                                                 |                             | 4,147,760   |              |            |            | 4,879,279   |            
|                                           |                                                                  |                                                                 |                             |             |              |            |            |            
|                                           |                                                                  |                                                                 | Total current liabilities   |             |              | 7,460,309  |            |             |             | 8,527,684  | 
|                                           |                                                                  |                                                                 |                             |             |              |            |            |            
|Long-term liabilities:                    
|                                          
|                                          
|                                          
|                                          
|                                           | Equipment loan facility  less current portion                   |                                                                 |                             | 688,307     |              |            |            | 474,807     |            
|                                          
|                                          
|                                          
|                                          
|                                           | Capital lease obligations  less current portion                 |                                                                 |                             | 13,988      |              |            |            | 504,842     |            
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred revenue                                                 |                                                                 |                             | 1,118,852   |              |            |            | 1,039,126   |            
|                                           |                                                                  |                                                                 |                             |             |              |            |            |            
|                                           |                                                                  |                                                                 | Total long-term liabilities |             |              | 1,821,147  |            |             |             | 2,018,775  | 
|                                           |                                                                  |                                                                 |                             |             |              |            |            |            
|Stockholders equity:                     
|                                          
|                                          
|                                          
|                                          
|                                           | Common stock  voting, $0.001 par value  authorized 100,000,000
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                  | shares; issued and outstanding 19,510,792 and 20,531,177 shares
|                                          
|                                          
|                                          
|                                          
|                                           |                                                                  | for December 31, 2000 and March 31, 2001, respectively          |                             |             | 19,511       |            |            |             | 20,531      |           
|                                          
|                                          
|                                          
|                                          
|                                           | Additional paid-in capital                                       |                                                                 |                             | 105,916,528 |              |            |            | 106,063,172 |            
|                                          
|                                          
|                                          
|                                          
|                                           | Deferred compensation                                            |                                                                 |                             | (1,420,354  | )            |            |            | (1,152,612  | )          
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated deficit                                              |                                                                 |                             | (12,846,674 | )            |            |            | (17,020,051 | )          
|                                           |                                                                  |                                                                 |                             |             |              |            |            |            
|                                           |                                                                  |                                                                 | Total stockholders equity  |             |              | 91,669,011 |            |             |             | 87,911,040 | 
|                                           |                                                                  |                                                                 |                             |             |              |            |            |            
|Total liabilities and stockholders equity |                                                                  | $                                                               | 100,950,467                 |             |              | $          | 98,457,499 |            
|                                           |                                                                  |                                                                 |                             |             |              |            |            |            

See notes to condensed consolidated financial statements

3



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INFORMAX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

|                                             |                             |                                         |                              |           |                    |           |            |            |           |            | 
|-------------------------------------------- | --------------------------- | --------------------------------------- | ---------------------------- | --------- | ------------------ | --------- | ---------- | ---------- | --------- | ---------- | 
|                                             |                             |                                         |                              |           | THREE MONTHS ENDED
|                                             |                             |                                         |                              |           | MARCH 31,         
|                                             |                             |                                         |                              |           | 2000               |           | 2001      
|                                             |                             |                                         |                              |           |                    |           |           
|Revenues:                                   
|                                            
|                                            
|                                            
|                                            
|                                             |                             | Software license and customer support   |                              | $         | 2,411,476          |           |            | $          | 5,663,093 |           
|                                            
|                                            
|                                            
|                                            
|                                             |                             | Professional services                   |                              |           | 797,116            |           |            |            | 926,745   |           
|                                             |                             |                                         |                              |           |                    |           |            |           
|                                             |                             |                                         | Total revenues               |           |                    | 3,208,592 |            |            |           | 6,589,838  | 
|                                             |                             |                                         |                              |           |                    |           |            |           
|Cost of revenues:                           
|                                            
|                                            
|                                            
|                                            
|                                             |                             | Software license and customer support   |                              |           | 100,426            |           |            |            | 518,095   |           
|                                            
|                                            
|                                            
|                                            
|                                             |                             | Professional services (1)               |                              |           | 425,094            |           |            |            | 468,598   |           
|                                             |                             |                                         |                              |           |                    |           |            |           
|                                             |                             |                                         | Total cost of revenues       |           |                    | 525,520   |            |            |           | 986,693    | 
|                                             |                             |                                         |                              |           |                    |           |            |           
|Gross profit                                 |                             |                                         | 2,683,072                    |           |                    |           | 5,603,145  |           
|                                             |                             |                                         |                              |           |                    |           |            |           
|Operating expenses:                         
|                                            
|                                            
|                                            
|                                            
|                                             |                             | Selling, general and administrative (2) |                              |           | 3,423,604          |           |            |            | 8,208,204 |           
|                                            
|                                            
|                                            
|                                            
|                                             |                             | Research and development (3)            |                              |           | 961,305            |           |            |            | 1,978,436 |           
|                                            
|                                            
|                                            
|                                            
|                                             |                             | Other stock-based compensation          |                              |           | 556,291            |           |            |            | 266,996   |           
|                                            
|                                            
|                                            
|                                            
|                                             |                             | Depreciation and amortization           |                              |           | 148,284            |           |            |            | 441,579   |           
|                                             |                             |                                         |                              |           |                    |           |            |           
|                                             |                             |                                         | Total operating expenses     |           |                    | 5,089,484 |            |            |           | 10,895,215 | 
|                                             |                             |                                         |                              |           |                    |           |            |           
|Loss from operations                         |                             |                                         | (2,406,412                   | )         |                    |           | (5,292,070 | )         
|                                             |                             |                                         |                              |           |                    |           |            |           
|Other income (expense):                     
|                                            
|                                            
|                                            
|                                            
|                                             |                             | Investment earnings                     |                              |           | 6,503              |           |            |            | 1,162,854 |           
|                                            
|                                            
|                                            
|                                            
|                                             |                             | Interest expense                        |                              |           | (44,853            | )         |            |            | (37,364   | )         
|                                            
|                                            
|                                            
|                                            
|                                             |                             | Other                                   |                              |           | (5,315             | )         |            |            | (6,797    | )         
|                                             |                             |                                         |                              |           |                    |           |            |           
|                                             |                             |                                         | Total other income (expense) |           |                    | (43,665   | )          |            |           | 1,118,693  | 
|                                             |                             |                                         |                              |           |                    |           |            |           
|Loss before income taxes                     |                             |                                         | (2,450,077                   | )         |                    |           | (4,173,377 | )         
|                                            
|                                            
|                                            
|                                            
|Income tax expense                           |                             |                                         |                             |           |                    |           |           |           
|                                             |                             |                                         |                              |           |                    |           |            |           
|Net loss                                     |                             |                                         | (2,450,077                   | )         |                    |           | (4,173,377 | )         
|                                            
|                                            
|                                            
|                                            
|Increase in carrying value of redeemable    
|                                            
|                                            
|                                            
|                                            
|                                             | convertible preferred stock |                                         |                              | (84,070   | )                  |           |            |           |          
|                                             |                             |                                         |                              |           |                    |           |            |           
|Net loss applicable to common shares         |                             | $                                       | (2,534,147                   | )         |                    | $         | (4,173,377 | )         
|                                             |                             |                                         |                              |           |                    |           |            |           
|Basic and diluted net loss per common share  |                             | $                                       | (.61                         | )         |                    | $         | (0.21      | )         
|                                             |                             |                                         |                              |           |                    |           |            |           
|Weighted average common shares outstanding -
|                                            
|                                            
|                                            
|                                            
|                                             | Basic and diluted           |                                         |                              | 4,125,106 |                    |           |            | 20,396,461 |          
|                                             |                             |                                         |                              |           |                    |           |            |           



|(1) |  | Cost of revenues  professional services includes stock-based
compensation of $4,187 and $747 for the three months ended March 31, 2000
and 2001.                
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Selling, general and administrative expenses excludes other stock-based
compensation of $538,023 and $264,956 for the three months ended March 31,
2000 and 2001.
|   
|(3) |  | Research and development expenses excludes stock-based compensation of
$18,268 and $2,040 for the three months ended March 31, 2000 and 2001.                    

See notes to condensed consolidated financial statements

4



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INFORMAX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

|                                              |                                                                |                                                                 |                                                 |                                      |         |                    |            |            |         |         |            |  
|--------------------------------------------- | -------------------------------------------------------------- | --------------------------------------------------------------- | ----------------------------------------------- | ------------------------------------ | ------- | ------------------ | ---------- | ---------- | ------- | ------- | ---------- | -
|                                              |                                                                |                                                                 |                                                 |                                      |         | THREE MONTHS ENDED
|                                              |                                                                |                                                                 |                                                 |                                      |         | MARCH 31,         
|                                              |                                                                |                                                                 |                                                 |                                      |         | 2000               |            | 2001      
|                                              |                                                                |                                                                 |                                                 |                                      |         |                    |            |           
|CASH FLOWS FROM OPERATING ACTIVITIES:        
|                                             
|                                             
|                                             
|                                             
|                                              | Net loss                                                       |                                                                 | $                                               | (2,450,077                           | )       |                    | $          | (4,173,377 | )      
|                                             
|                                             
|                                             
|                                             
|                                              | Adjustments to reconcile net loss to net cash                 
|                                             
|                                             
|                                             
|                                             
|                                              | used in operating activities:                                 
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                | Depreciation expense                                            |                                                 |                                      | 148,284 |                    |            |            | 441,579 |        
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                | Loss on disposal of property and equipment                      |                                                 |                                      | 4,312   |                    |            |            | 100,000 |        
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                | Expense related to stock options, restricted stock and warrants |                                                 |                                      | 560,478 |                    |            |            | 267,743 |        
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                | Changes in assets and liabilities:                             
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                |                                                                 |                                                 | Accounts receivable                  |         |                    | (902,197   | )          |         |         | (1,137,887 | )
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                |                                                                 |                                                 | Income tax receivable                |         |                    | 21,511     |            |         |         |           |  
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                |                                                                 |                                                 | Prepaid expenses                     |         |                    | 27,534     |            |         |         | (83,267    | )
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                |                                                                 |                                                 | Other current assets                 |         |                    | (25,559    | )          |         |         | (559,626   | )
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                |                                                                 |                                                 | Deposits                             |         |                    | (6,216     | )          |         |         | 301,274    |  
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                |                                                                 |                                                 | Accounts payable                     |         |                    | 508,908    |            |         |         | (282,114   | )
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                |                                                                 |                                                 | Accrued liabilities                  |         |                    | (180,095   | )          |         |         | 425,737    |  
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                |                                                                 |                                                 | Deferred revenue                     |         |                    | 898,317    |            |         |         | 651,793    |  
|                                              |                                                                |                                                                 |                                                 |                                      |         |                    |            |           
|                                              |                                                                |                                                                 |                                                 | CASH FLOWS FROM OPERATING ACTIVITIES |         |                    | (1,394,800 | )          |         |         | (4,048,145 | )
|                                             
|                                             
|                                             
|                                             
|CASH FLOWS FROM INVESTING ACTIVITIES:        
|                                             
|                                             
|                                             
|                                             
|                                              | Purchase of property and equipment                             |                                                                 |                                                 | (811,977                             | )       |                    |            | (2,918,434 | )      
|                                             
|                                             
|                                             
|                                             
|                                              | Proceeds from disposal of property and equipment               |                                                                 |                                                 | 3,629                                |         |                    |            |           |        
|                                              |                                                                |                                                                 |                                                 |                                      |         |                    |            |           
|                                              |                                                                |                                                                 |                                                 | CASH FOWS FROM INVESTING ACTIVITIES  |         |                    | (808,348   | )          |         |         | (2,918,434 | )
|                                             
|                                             
|                                             
|                                             
|CASH FLOWS FROM FINANCING ACTIVITIES:        
|                                             
|                                             
|                                             
|                                             
|                                              | Repayments on capital lease obligations                        |                                                                 |                                                 | (32,250                              | )       |                    |            | (55,131    | )      
|                                             
|                                             
|                                             
|                                             
|                                              | Proceeds from line of credit                                   |                                                                 |                                                 | 500,000                              |         |                    |            |           |        
|                                             
|                                             
|                                             
|                                             
|                                              | Proceeds from notes payable                                    |                                                                 |                                                 | 660,000                              |         |                    |            |           |        
|                                             
|                                             
|                                             
|                                             
|                                              | Repayments on equipment loan facility                          |                                                                 |                                                 |                                     |         |                    |            | (213,500   | )      
|                                             
|                                             
|                                             
|                                             
|                                              | Repayments on notes payable                                    |                                                                 |                                                 | (59,180                              | )       |                    |            |           |        
|                                             
|                                             
|                                             
|                                             
|                                              | Increase in Restricted cash                                    |                                                                 |                                                 |                                     |         |                    |            | (93,304    | )      
|                                             
|                                             
|                                             
|                                             
|                                              | Proceeds from share options exercised and issuance of warrants |                                                                 |                                                 | 624,875                              |         |                    |            | 266,361    |        
|                                             
|                                             
|                                             
|                                             
|                                              | Proceeds from issuance of common stock, net of offering costs  |                                                                 |                                                 | 125                                  |         |                    |            | (118,697   | )      
|                                              |                                                                |                                                                 |                                                 |                                      |         |                    |            |           
|                                              |                                                                |                                                                 |                                                 | CASH FLOWS FROM FINANCING ACTIVITIES |         |                    | 1,693,570  |            |         |         | (214,271   | )
|                                              |                                                                |                                                                 |                                                 |                                      |         |                    |            |           
|NET DECREASE IN CASH AND CASH EQUIVALENTS     |                                                                |                                                                 | (509,578                                        | )                                    |         |                    | (7,180,850 | )         
|                                             
|                                             
|                                             
|                                             
|BEGINNING CASH AND CASH EQUIVALENTS           |                                                                |                                                                 | 1,398,937                                       |                                      |         |                    | 82,656,386 |           
|                                              |                                                                |                                                                 |                                                 |                                      |         |                    |            |           
|ENDING CASH AND CASH EQUIVALENTS              |                                                                | $                                                               | 889,359                                         |                                      |         | $                  | 75,475,536 |           
|                                              |                                                                |                                                                 |                                                 |                                      |         |                    |            |           
|SUPPLEMENTAL INFORMATION ON NONCASH INVESTING
|                                             
|                                             
|                                             
|                                             
|                                              | AND FINANCING TRANSACTIONS:                                   
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                |                                                                 | Acquisition of equipment through capital leases |                                      | $       |                   |            |            | $       | 738,218 |           
|                                              |                                                                |                                                                 |                                                 |                                      |         |                    |            |           
|SUPPLEMENTAL CASH FLOW INFORMATION:          
|                                             
|                                             
|                                             
|                                             
|                                              |                                                                | Cash paid for interest                                          |                                                 | $                                    | 44,853  |                    |            | $          | 39,283  |        
|                                              |                                                                |                                                                 |                                                 |                                      |         |                    |            |           

See notes to condensed consolidated financial statements.

5



---



INFORMAX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 2001

NOTE 1  INTERIM FINANCIAL STATEMENTS

The accompanying consolidated financial statements of InforMax, Inc. (the
Company) have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial
information. These financial statements should be read together with the
audited financial statements and notes for the year ended December 31, 2000
contained in the Companys Annual Report on Form 10-K filed with the Securities and Exchange
Commission (SEC). Certain information and footnote disclosures normally
included in financial statements have been condensed or omitted. In the opinion
of the Companys management, the financial statements reflect all adjustments
necessary to present fairly the results of operations for the three months
periods ended March 31, 2001 and 2000, the Companys financial position at
March 31, 2001, and the cash flows for the three months periods ended March 31,
2001 and 2000. The results of operations for the interim periods are not
necessarily indicative of the results of the entire year.

NOTE 2  NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
133, Accounting for Derivative Investments and Hedging Activities, which
establishes accounting and reporting standards for derivative instruments and
hedging activities. As amended by Statement of Financial Accounting Standards
No. 137, this standard was adopted by the Company on January 1, 2001 and
requires recognition of derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
The adoption of this new standard does not have an impact on the Companys
financial position or results of operations.

NOTE 3  RELATED PARTY TRANSACTIONS

In March 2001, the Company issued a warrant exercisable for 25,000 shares to a
director for services. The warrant is exercisable for a five-year term at $8.00
per share, the closing price of the Companys common stock on the Nasdaq
National Market on the date of the grant. In relation to the issuance
of these warrants the Company recorded stock-based compensation of
approximately $35,000.

In March 2001, the Company recognized approximately $400,000
in revenue under a perpetual software license agreement
by which it granted a nonexclusive, nontransferable license for its GenoMax
enterprise product and certain modules thereof to Pluvita Corporation. In
connection with this agreement, the Company will receive an aggregate of
approximately $500,000 from the grant of this license and
related support fees. The fees shall be paid by Pluvita Corporation in monthly
installments over a one-year term. As of March 31, 2001, there is $500,000
outstanding in accounts receivable related to this transaction. Dr. Alexander Titomirov,
the Companys Chief Executive Officer, is also the Chairman and a significant
stockholder of Pluvita Corporation. Mr. Hooks Johnston, one of the Companys directors, was a managing
director of FBR Technology Venture Partners, a venture capital investment firm, at the time of this transaction.
Dr. Wei-Wu He, one of the Companys directors, serves as a general partner of Emerging Technology Partners, LLC.
An affiliate of FBR Technology Venture Partners and Emerging Technology Partners is a significant stockholder of
Pluvita and another managing director of FBR Technology Venture Partners was a director of Pluvita at the time of this transaction.

NOTE 4  COMMITMENTS AND CONTINGENCIES

Restricted Cash  The Company has cash that is restricted in use. The
restricted cash is collateral for letters of credit related to certain
operating leases. Accordingly, these amounts are classified as restricted cash
in the accompanying balance sheet.

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

Government Audits  Payments to the Company on subcontracts with prime U.S.
Government contracts are subject to adjustment upon audit by various agencies
of the U.S. Government. For the years ended 2000 no audit of costs and the
related payments have been performed by the various agencies. At December 31,
2000, there were no liabilities accrued related to the billing in excess of
cost. In the opinion of management, the final determination of these costs and
related payments will not have a material effect on the Companys financial
position, results of operations, or liquidity.

Litigation  In the ordinary course of conducting its business, the Company
becomes involved in litigation and administrative proceedings. It is the
opinion of the Companys management that the outcome of these proceedings,
individually, or in the aggregate,

6



---



will not have a material adverse effect on the business or consolidated
financial position of the Company.

NOTE 5  CHANGES IN STOCKHOLDERS DEFICIT

|                           |                        |  |                       |   |             |  |            |   |         |   |              |   |          |   |             |   |  |   |            |         | 
|-------------------------- | ---------------------- |  | --------------------- | - | ----------- |  | ---------- | - | ------- | - | ------------ | - | -------- | - | ----------- | - |  | - | ---------- | ------- | 
|                           |                        |  | COMMON STOCK -
VOTING |   | ADDITIONAL 
|                           |                        |  | ISSUED                |   | OUTSTANDING |  |            |   |         |   | PAID-IN      |   | DEFERRED
|                           |                        |  | SHARES                |   | SHARES      |  | AMOUNT     |   | CAPITAL |   | COMPENSATION
|                           |                        |  |                       |   |             |  |            |   |         |   |             
|Balance, December 31, 2000 |                        |  | 19,510,792            |   |             |  | 19,510,792 |   |         | $ | 19,511       |   |          | $ | 105,916,528 |   |  | $ | (1,420,354 | )      
|                          
|                          
|                          
|                          
|Share options exercised    |                        |  | 1,020,385             |   |             |  | 1,020,385  |   |         |   | 1,020        |   |          |   | 265,341     |   |  |   |           |        
|                          
|                          
|                          
|                          
|Issuance of warrants       |                        |  |                      |   |             |  |           |   |         |   |             |   |          |   |            |   |  |   | 34,876     |        
|                          
|                          
|                          
|                          
|Amortization of deferred  
|                          
|                          
|                          
|                          
|                           | compensation on stock 
|                          
|                          
|                          
|                          
|                           | options and restricted
|                          
|                          
|                          
|                          
|                           | stock                  |  |                       |  |             |  |            |  |         |   |              |  |          |   |             |  |  |   |            | 232,866 | 
|                          
|                          
|                          
|                          
|Offering costs             |                        |  |                      |   |             |  |           |   |         |   |             |   |          |   | (118,697    | ) |  |   |           |        
|                          
|                          
|                          
|                          
|Net loss                   |                        |  |                      |   |             |  |           |   |         |   |             |   |          |   |            |   |  |   |           |        
|                           |                        |  |                       |   |             |  |            |   |         |   |              |   |          |   |             |   |  |   |            |        
|Balance, March 31, 2001    |                        |  | 20,531,177            |   |             |  | 20,531,177 |   |         | $ | 20,531       |   |          | $ | 106,063,172 |   |  | $ | (1,152,612 | )      
|                           |                        |  |                       |   |             |  |            |   |         |   |              |   |          |   |             |   |  |   |            |        

|                                         |                                    |   |             |   |       |   |             |         | 
|---------------------------------------- | ---------------------------------- | - | ----------- | - | ----- | - | ----------- | ------- | 
|                                         |                                    |   | ACCUMULATED
|                                         |                                    |   | DEFICIT     |   | TOTAL
|                                         |                                    |   |             |   |      
|Balance, December 31, 2000               |                                    | $ | (12,846,674 | ) |       | $ | 91,669,011  |        
|                                        
|                                        
|                                        
|                                        
|Share options exercised                  |                                    |   |            |   |       |   | 266,361     |        
|                                        
|                                        
|                                        
|                                        
|Issuance of warrants                     |                                    |   |            |   |       |   | 34,876      |        
|                                        
|                                        
|                                        
|                                        
|Amortization of deferred compensation on
|                                        
|                                        
|                                        
|                                        
|                                         | stock options and restricted stock |   |             |  |       |   |             | 232,866 | 
|                                        
|                                        
|                                        
|                                        
|Offering costs                           |                                    |   |            |   |       |   | (118,697    | )      
|                                        
|                                        
|                                        
|                                        
|Net loss                                 |                                    |   | (4,173,377  | ) |       |   | (4,173,377  | )      
|                                         |                                    |   |             |   |       |   |             |        
|Balance, March 31, 2001                  |                                    | $ | (17,020,051 | ) |       | $ | (87,911,040 | )      
|                                         |                                    |   |             |   |       |   |             |        

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion of our consolidated financial condition and
results of operations. You should read this discussion together with our
consolidated financial statements and the related notes, which we have included
elsewhere in this report.
Statements in this report that are not strictly historical are forward-looking  statements,
which involve a high degree of risk and uncertainty. Such statements are only predictions, and the
actual events or results may differ materially from those projected in such forward-looking
statements. Factors that could cause or contribute to differences include, but are not limited to, the risks detailed below.
These factors and others are more fully described in the Companys Annual Report on Form 10-K, as filed with the Securities and Exchange
Commission.

RISKS RELATED TO OUR BUSINESS

WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL ADVANCES AND DEVELOPMENTS NOW
OCCURRING IN BIOINFORMATIC SOFTWARE. IF WE ARE UNABLE TO DO SO, OUR PRODUCTS
AND SERVICES WILL BE LESS ATTRACTIVE TO CUSTOMERS AND OUR REVENUES AND
COMPETITIVE POSITION WILL SUFFER.

The market for our products and services is in the midst of rapid
technological change. In order for us to maintain a competitive position in our
industry and develop and market products that are attractive to customers, we
must:



| |  |  | continue to enhance and expand the functions of our existing
products; and
| | - |  | --------------------------------------------------------------------------

7



---





| |  |  | develop and introduce new software products and complementary
services that meet evolving customer needs and preferences and
incorporate new technologies.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

Our products and services may not be able to keep pace with technological
change. We may not be able to identify in a timely manner important evolving
industry standards and may invest considerable resources in technologies that
rapidly become obsolete. Our products or product versions may also become
obsolete due to our competitors introduction of products or services
containing advanced technology and functions. If we do not keep pace with
technological change, our products will not be as attractive to our customers
and our competitive position and sales of our products would be seriously
harmed.

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

In order to generate additional revenues sufficient to support our
continued growth, we must add new customers and retain, and expand upon, our
existing customer relationships. These efforts depend significantly upon our
successful development of new products, product versions and services that
respond to the evolving needs of the genomic research community, as well as the
success of our sales and marketing efforts. In addition, much of our
expectation for future growth of revenues is based upon continued and increased
sales of our GenoMax product and the establishment of our GenoMax brand. We
expect to continue to derive a significant portion of our future professional
services revenue from a relationship with the National Center for Biotechnology
Information (NCBI) at the National Institutes of Health and that relationship,
which is based on subcontractor arrangements, could be terminated in the
future.

THE CONTINUED ENHANCEMENT AND DEVELOPMENT OF OUR BIOINFORMATIC PRODUCTS AND
SERVICES DEPEND UPON THE RETENTION AND EXPANSION OF OUR RESEARCH AND PRODUCT
DEVELOPMENT GROUP.

The number of technical personnel with experience in the field of
bioinformatics is limited and competition for qualified employees is intense.
We may not be successful in
retaining our technical employees or recruiting and training additional skilled
personnel. The loss of a significant number of employees in our research and
product development group, occurring at one instance or over a period of time,
could seriously harm our product development and enhancement efforts. We could
also incur significant costs associated with any resulting litigation or
disputes to protect our proprietary information.

PART OF OUR BUSINESS STRATEGY IS TO DEVELOP STRATEGIC RELATIONSHIPS WITH LARGER
ORGANIZATIONS AND PROVIDERS OF COMPLEMENTARY PRODUCTS AND SERVICES. IF WE ARE
NOT SUCCESSFUL IN DOING SO OUR ABILITY TO COMPETE COULD BE HARMED.

A component of our business strategy is to develop strategic
relationships, including co-marketing arrangements, content channeling and
distribution alliances, e-commerce offerings and Internet-hosted delivery
partnerships. We believe that through such relationships we can add revenues,
expand our distribution channels, improve our competitive position and increase
market awareness and acceptance of our products. To date, we have entered into
only a few of these strategic relationships with providers of complementary
products and services. If we are unable to successfully develop these and other
similar relationships, or if these relationships do not yield the results we
anticipate, our ability to compete and to generate future revenues could be
materially harmed. In addition, many of our strategic relationships, including
our co-marketing relationships with Oracle, Compaq and Sun Microsystems, are
based on oral arrangements that are not enforceable and can be terminated by
either party at any time.

In August 2000, we entered into a long-term strategic relationship with
Amersham Pharmacia Biotech to jointly develop and market an expanded version of
GenoMax for pharmaceutical and biotech companies for integrating and analyzing
data from genomics, proteomics and drug screening production laboratories. The
agreement with Amersham can be terminated prior to the end of the term by
mutual agreement of the parties or by one party upon a breach by the other
party. In addition, if we do not use commercially reasonable efforts to develop
the data analysis system, Amersham can terminate the agreement. If the
agreement is terminated for any reason prior to the end of the term or if the
relationship otherwise does not result in the successful marketing of GenoMax
to new customer groups, we may be unable to recoup all of the substantial
investment we will be making in this collaboration and there would be a
material adverse impact on our anticipated future revenues.

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

8



---



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

Our software sales have historically been made under perpetual license
agreements. Under perpetual arrangements, the customer assumes ownership of the
software, and upgrades and enhancements are available provided that the
customers maintenance agreement is current. The revenue related to the
software element under a perpetual arrangement is recognized at the time of
delivery of the software. We also generate software
contracts under one to three-year term arrangements. Under a term arrangement,
our customer does not assume ownership of the software at delivery. Instead,
they use the software over the term period and are required to return it upon
the non-renewal of the term arrangement. The revenue related to the software
element under the term arrangement is recognized evenly over the term period.
Our ability to recognize software license revenues in a given fiscal quarter
will therefore be affected by the mix of perpetual and term contracts entered
into during that period. We expect that if our customers commit to more term
than perpetual license arrangements, we may encounter a reduction in the
near-term recognizable revenue, however, these term arrangements will enable us
to obtain the benefit of a consistent stream of recognizable revenue throughout
the term of the license.

Expenses associated with software licenses, unlike revenues, are not
typically deferred. The manner in which we recognize revenue, in accordance
with the revenue recognition rules applicable to software under generally
accepted accounting principles, may cause our quarterly operating results to
fluctuate substantially.

THE LOSS OF THE SERVICES OF, OR THE DEVELOPMENT OF SUBSTANTIAL EXTERNAL TIME
COMMITMENTS BY, OUR SENIOR MANAGEMENT COULD HAVE A NEGATIVE EFFECT ON OUR
GROWTH.

The continued growth of our business is substantially dependent on the
performance of our senior management and key employees. We carry key person
life insurance on only Dr. Titomirov, our Chief Executive Officer,
and have an employment agreement with only Mr. Green, our Chief Financial Officer
and Executive Vice President of Finance and Administration.
 The loss of the services of any
member of our senior management or key personnel may significantly delay or
prevent the implementation of our business strategy and could have a material
adverse effect on the growth of our business.

Dr. Titomirov is also the chairman and a significant stockholder of an
unrelated company named Pluvita Corporation (formerly RealTimeHealth.com,
Inc.). Pluvita is currently a development stage company that intends to allow
health care consumers to establish individual baseline genetic profiles and
then monitor them for a pattern variance over time through the Internet.
In August 2000,
we received a commitment letter regarding the continued services of Dr.
Titomirov. Although Dr. Titomirovs commitment letter states that he currently
intends to devote a majority of his professional working time to his duties as
our Chief Executive Officer, there could be periods where his activities with
Pluvita substantially reduce the time devoted to our operations.

IF WE CANNOT EFFECTIVELY MANAGE OUR GROWTH, AND SPECIFICALLY THE TRANSITION OF
OUR BUSINESS RELATED TO AN EMPHASIS ON THE SALE OF ENTERPRISE PRODUCTS, OUR
FUTURE PROSPECTS WOULD BE HARMED.

In recent years, we have experienced significant growth in the size of our
customer base and the scope of our products and services. We have also expanded
and intend to continue to expand our research and product development,
marketing and sales, and professional services organizations. These factors
have placed, and will continue to place, a significant strain on our management
systems and resources and have resulted in increased expenditures necessary
provide resources and an expanded infrastructure sufficient to support the
growth of our personnel and operations. We have only recently become a public
company, which will also place additional strain on our administrative,
financial and operational systems and may result in increased expenses. Our
ability to manage effectively our growth, and our expenses related to this
growth, will depend upon the ability of our officers and key employees to
continue to implement and improve our operational, administrative and financial
control systems and to expand, train and manage our workforce, and implement
necessary changes to our information systems, including our accounting
information system.

Historically, we have focused on the development and sale of our Vector
NTI Suite of desktop products. We are currently seeking to increase market
penetration and brand recognition of our GenoMax enterprise software platform
and, accordingly are devoting an increasing portion of our resources to GenoMax
related marketing and sales and professional services efforts. Failure to
successfully manage that transition effectively would materially and adversely
affect nearly every aspect of our business and cause our financial condition
and results of operations to suffer.

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

Our business and the level of customer acceptance of our bioinformatic
software products are dependent upon the continuous, effective and reliable
operation of our computer software and related tools and functions. Software
defects could occur in our current or future products. To the extent that our
software malfunctions or does not meet our customer's needs or expectations,
our reputation and results of operations will suffer.

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

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

9



---



foreign jurisdictions.

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

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

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

10



---



and business could suffer. We may also be subject to liability for the
defects and malfunctions of third party technology partners and others with
whom our products and services interoperate.

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

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

RISKS RELATED TO OUR INDUSTRY

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

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



| |  |  | third party commercial software vendors;                                               
| | - |  | ---------------------------------------------------------------------------------------
|
| |  |  | bioinformatics developers;                                                             
|
| |  |  | internal bioinformatics departments of some of our customers and
potential customers;  
|
| |  |  | organizations engaging in the provision of Internet-hosted,
bioinformatic software; and
|
| |  |  | companies facilitating Internet-based e-commerce between
participants in our industry. 

We believe that we competed most often with LION biosciences, NetGenics,
Compugen, Genomica, DNA Star, Rosetta Inpharmatics, DoubleTwist and GCG, a unit
of Pharmacopeia acquired from Oxford Molecular in 2000. Others, including
large, well-established software vendors and life sciences companies could readily enter this market
directly, or by acquisition of, or collaboration with existing market participants.
In May 2001, Merck & Co., a large pharmaceutical company, announced its acquisition of Rosetta Inpharmatics, one of our competitors.
 Many
of our competitors and potential competitors have longer operating histories, stronger name recognition
and significantly greater financial, technical and marketing resources than we
do. As a result of these advantages, our competitors may be better able to
adopt more aggressive pricing policies and better positioned to respond to
changes in customer preference or technology.

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

IF GROWTH IN THE USE OF GENOMIC DATA DOES NOT OCCUR AS WE EXPECT, THE TARGET
MARKETS FOR OUR PRODUCTS AND SERVICES MAY NOT BE AS LARGE AS EXPECTED.

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

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

Sales of our products and services could suffer as a result of reductions
in customer research and development expenditures and public funding related to
genomic research. Our continued services to the NCBI a division of
the National Library of Medicine at the National Institute of Health and sales of our products
to other government and academic institutions could be negatively affected by
reductions in such public funding.

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

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

11



---



biotechnology industries may result in fewer customers for our products
and services. If one of the parties to a consolidation uses the products or
services of our competitors, we may lose existing customers as a result of such
consolidation.

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

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

Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, our actual results may vary materially
from those anticipated.

OVERVIEW

We are a leading global provider of bioinformatic software solutions. Our
bioinformatic software enables the analysis and interpretation of genomic,
proteomic and other biomolecular data that form the genetic blueprint of all
living organisms. Since beginning commercial operations in 1993, we have
dedicated substantial resources toward the expansion and enhancement of our
software product lines in an effort to provide customers a single source to
acquire the components for a comprehensive High Throughput Research
environment. We have also significantly focused on increased sales and
marketing efforts, and growth and diversification of our customer base.

We believe that our position as a leading global provider of bioinformatic
software is based upon the scope of our software products and services
offering, the number of our customers, our revenues, and the size of our
organization.

In 1993, we commercially released our first desktop software product, the
current version of which is marketed as our Vector NTI Suite 6.0 for
collaborative sequence analysis projects. In September 1998, we commercially
released our GenoMax enterprise computing platform (formerly known as Software
Solution for Bio-Medicine), the version 3.0 of which was commercially released
on September 15, 2000, containing significant product enhancements to the prior
version. On September 30, 2000, we commercially released Vector Enterprise, a
networked version of our Vector NTI Suite that incorporates a shared relational
database. We intend to continue to enhance and expand our bioinformatic
software products and technology to meet evolving customer needs and
preferences. We are scheduled to commercially release Vector NTI Suite 7.0,
with enhanced database connectivity and functionality, and our Desktop
Expression model in the third quarter of 2001. We are scheduled to
commercially release GenoMax 3.1, our Protein-Protein Interaction module and
our Genome Analysis module, each in the second quarter of 2001. In addition
to our software products above, we market and distribute certain complementary
software products under license from Biomax Informatics AG and Media
Cybernetics L.P., discussed in more detail below.

To date, we have sold over 13,000 licenses for our Vector NTI Suite of
software applications for desktop computers, with more than 25,000 estimated
users. As of March 31, 2001, we have also made 32 sales of our GenoMax
enterprise platform for use by a network of computers linked together for
sharing data and computation. Our customer base includes over 1,700
organizations worldwide, including over 650 biotechnology, pharmaceutical and
agricultural biotechnology and life science companies and over 1,000 academic
and government research institutions. Our 10 largest customers
accounted approximately 50% and 37% of our total software license revenues for the quarters
ended March 31, 2001 and 2000, respectively.

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We have continued to execute our corporate strategy of establishing key
alliances and marketing relationships with other leading companies in an effort
to expand the scope of our product offerings and increase market penetration of
our software solutions.

In August 2000, we entered into a strategic relationship with Amersham
Pharmacia Biotech to jointly develop and market an expanded version of GenoMax
to provide an enterprise-wide data analysis system for pharmaceutical and
biotechnology companies, for integrating and analyzing data from genomics,
proteomics and drug screening production laboratories. In connection with this
relationship, Amersham purchased 950,747 shares of our preferred stock in
exchange for $10.0 million in cash. These shares were converted into 1,587,747
shares of our common stock upon the closing of our initial public offering.

In October 2000, we entered into an agreement with Media Cybernetics, a
leading scientific image informatics software provider. Under this agreement,
we were granted a two-year worldwide license to sell and distribute their
Gel-Pro and Array-Pro analysis tools. Gel-Pro enables acquisition, analysis and
reporting for electrophoretic images and complements the functions of our
Vector NTI Suite. Array-Pro allows, acquisition, analysis and reporting of gene
expression data from microarrays, and provides a key link between gene
expression experiments, visualization and analysis using GenoMax. Under our
agreement, we are permitted to distribute these software solutions in
connection with our Vector NTI Suite or on a stand-alone basis. In January
2001, we began selling these Media Cybernetics products through our Vector NTI
Suite sales team.

In January 2001, we entered into a strategic relationship with Biomax
Informatics AG, a German company that develops customized bioinformatic
solutions. Under our agreement, we were granted a four year, exclusive
worldwide license to distribute Biomaxs BioRS(TM) integration and retrieval
system. BioRS is an efficient tool for integrating and retrieving large amounts
of gnomic data available from heterogeneous public and private databases. The
addition of BioRS is a strong complement to our existing bioinformatic software
products and our development of a comprehensive High-Throughput Research
environment. Under our agreement, we have agreed to work with Biomax to
integrate the capabilities of BioRS into our Vector NTI Suite and GenoMax
products.

REVENUE

Our revenue has increased substantially in recent years. Revenue for the
year ended December 31, 2000 represents a five-year compound annual growth rate
of 98% and a 71% increase over the prior year. We provide sales, marketing,
implementation and support services for our products. Our Vector NTI Suite,
Vector Enterprise and GenoMax software products are considered off-the-shelf
products that require only routine installation to be fully functional by the
end user.

We currently generate revenues from software sales and software-related
professional services. Software sales consist of software license fees,
maintenance fees, and related customer training.

Software sales have historically been made under perpetual license
agreements. Under perpetual arrangements, the customer assumes ownership of the
software license, and upgrades and enhancements are available provided that the
customers maintenance agreement is current. It has been customary to include
the maintenance renewal rate in our perpetual arrangements. Under these
circumstances, provided there are no other elements bundled with the
arrangement, the revenue related to the software element under a perpetual
arrangement is recognized at the time of delivery of the software, using the
residual method. During 2000, we also began generating software sales under one
to three year term arrangements. Under a term arrangement, the customer does
not assume ownership of the software license at delivery. Instead, they use the
software over the term period and are required to return it upon the
non-renewal of the term arrangement. In these specific term arrangements, no
separate renewal rate for maintenance is stated, instead there is a bundled
renewal rate for both the software and maintenance. Under these circumstances,
the revenue related to the software element, as well as any bundled
maintenance, under term arrangements is recognized evenly over the term period.
The nature of software license arrangements will therefore affect our
recognition of software license revenues in a given fiscal quarter. We expect
that if our customers commit to more term arrangements having bundled elements
than perpetual license arrangements having separate elements, we may encounter
a reduction in near-term revenue. Term arrangements, however, will enable us to
obtain the benefit of a consistent stream of revenue throughout the term of the
license and in many cases will serve to generate more long-term economic value
for our company.

Professional services have historically consisted of software development
services provided under contracts to the National Center for Biotechnology
Information (NCBI) at the National Institutes of Health and beginning in 2000
have also included customer-specified software installation, integration and
customization services related to our commercial software products. NCBI
contracts for professional services through intermediaries for whom we serve as
a subcontractor. These agreements are generally for one year terms

13



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and may be terminated on behalf of NCBI at anytime, however, we have had a
successful and long standing service relationship with NCBI dating back to
1995. We anticipate significantly expanding our professional service efforts,
particularly as they relate to contract development opportunities and
value-added consulting services related to bioinformatics technology, including
discovery strategy services and IT implementation services.

We expect to generate future revenues from our channeling and distribution
alliances and from e-commerce offerings. Channeling alliances include
agreements with data content providers to integrate their biomolecular
databases with our software products and to resell subscriptions to these
databases to our customers. Distribution alliances include agreements with
providers of specialized bioinformatic hardware to integrate and resell their
hardware with our software products. Under our content channeling and hardware
distribution alliances, we intend to generate transaction fees and realize a
portion of the revenues for the products we resell. We will develop and market,
on a subscription basis, our Protein-Protein Interaction module that integrates
AxCells proprietary protein databases with our GenoMax enterprise platform,
including data from the WW Domain, the first human protein family to be mapped
successfully. Under this agreement, we will receive a portion of subscription
revenues, and in some cases milestone payments and royalties associated with
discoveries based on data delivered via our content platform. In March 2001, we
began a seminar series to introduce our GenoMax Protein-Protein Interaction
module along with Axcells ProChart proteomic database and we are scheduled to
commercially release this module in the second quarter of 2001.

E-commerce offerings will include incorporating Internet hyperlinks into
our Vector NTI Suite and entering into related partnerships with laboratory
reagent vendors to generate transaction fees on sales we facilitate. In
September 2000, we entered into an agreement with Incyte Genomics, Inc., a
manufacturer and provider of genomic and other biomolecular databases. Under
our agreement we will incorporate hyperlinks into Vector NTI Suite that will
direct researchers to Incytes website. These hyperlinks are intended to allow
researchers to register with Incyte and to purchase access to certain of its
genomic databases that can be used with the searching and analysis functions of
our Vector NTI Suite. These hyperlinks will also enable researchers to purchase
reagents from Incyte for their laboratory research. Under this agreement, we
will receive a portion of the net revenues associated with sales of Incytes
database and reagent products and a fee based on the number of registrations
with Incyte, each as generated through the hyperlinks to be contained in Vector
NTI Suite.

Revenue Recognition

We recognize software license revenues based on the provisions of
Statement of Position (SOP) No. 97-2, Software Revenue Recognition, as
amended and interpreted. Under our perpetual software license arrangements,
software license fees are recognized as revenue upon the customers execution
of a non-cancelable license agreement and delivery of the software, provided
that the license fee is fixed and determinable, collectibility is probable, and
no customization of the software is required. The revenue related to the
software element under our perpetual arrangements is recognized immediately at
the time of delivery of the software. Under our term software license
arrangements, software license fees are also recognized as revenue upon the
customers execution of a non-cancelable license agreement and delivery of the
software, provided that the license fee is fixed and determinable,
collectibility is probable, and no customization of the software is required.
However, software license revenue from our term license arrangements is
recognized evenly over the term period.

In circumstances where the above criteria were not met and the fair value
for undelivered elements of a multiple element contract were not determinable,
revenue on the contract was entirely deferred until either fair value was
determinable or when all elements were delivered. If we were unable to
establish vendor specific objective evidence of fair value on the undelivered
elements and the only undelivered element was maintenance, then all revenue was
recognized ratably over the maintenance period.

In connection with our software licenses, we also enter into maintenance
contracts that provide for technical support and periodic unspecified upgrades.

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Revenues from all software maintenance contracts were unbundled from software licenses based upon
vendor specific objective evidence of fair value and recognized ratably over
the maintenance period. Vendor specific objective evidence for maintenance
contracts is determined by the list price established by management of relevant
authority or by the renewal rate specified in the contract. We use the residual
method to recognize revenue on delivered elements when vendor specific
objective evidence of fair value has been determined for all undelivered
elements. Discounts, if any, are applied to the delivered elements if the
residual method is used. Amounts received in advance of the delivery of
products or performance of services are classified as deferred revenues.

Training is provided on a daily fee basis and we recognize revenue as the
services are provided.

Beginning in 2000, we have provided customer-specified software
installation, integration and customization services related to our commercial
software products on a time and materials basis and recognize revenue as the
services are provided. During 1997, 1998 and 1999 our professional services
revenue was derived from contracts related to software development services
provided to NCBI under time and materials subcontracts and a
cost-plus-fixed-fee subcontract. During 1999 the cost-plus-fixed-fee
subcontract was converted upon its renewal to a time and materials contract. We
recognize revenue under the time and materials subcontracts as the services are
provided based upon contractual rates. We recognized revenue under the
cost-plus-fixed-fee subcontract as recoverable costs were incurred, including a
proportionate amount of the fixed fee.

Quarterly Fluctuations

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



| |  |  | software licensing agreements;                                                    
| | - |  | ----------------------------------------------------------------------------------
|
| |  |  | product delivery schedules;                                                       
|
| |  |  | strategic relationships; and                                                      
|
| |  |  | professional service activities, including installation and
software modification.

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

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

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

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RESULTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 2001

The following table summarizes our results of operations for the three
months ended March 31, 2001, compared to the same period of 2000, as a
percentage of our total revenue for the respective period.

|                         |                                       |                              |     |                    |     |      |     |     |     | 
|------------------------ | ------------------------------------- | ---------------------------- | --- | ------------------ | --- | ---- | --- | --- | --- | 
|                         |                                       |                              |     | THREE MONTHS ENDED
|                         |                                       |                              |     | MARCH 31          
|                         |                                       |                              |     | 2000               |     | 2001
|                         |                                       |                              |     |                    |     |     
|Revenues                
|                        
|                        
|                        
|                        
|                         | Software license and customer support |                              |     | 75                 | %   |      |     | 86  | %  
|                        
|                        
|                        
|                        
|                         | Professional services                 |                              |     | 25                 |     |      |     | 14  |    
|                         |                                       |                              |     |                    |     |      |     |    
|                         |                                       | Total revenues               |     |                    | 100 |      |     |     | 100 | 
|                        
|                        
|                        
|                        
|Cost of revenues:       
|                        
|                        
|                        
|                        
|                         | Software license and customer support |                              |     | 3                  |     |      |     | 8   |    
|                        
|                        
|                        
|                        
|                         | Professional services                 |                              |     | 13                 |     |      |     | 7   |    
|                         |                                       |                              |     |                    |     |      |     |    
|                         |                                       | Total cost of revenues       |     |                    | 16  |      |     |     | 15  | 
|                        
|                        
|                        
|                        
|Gross profit             |                                       |                              | 84  |                    |     |      | 85  |    
|                        
|                        
|                        
|                        
|Operating expenses      
|                        
|                        
|                        
|                        
|                         | Selling, general and administrative   |                              |     | 107                |     |      |     | 125 |    
|                        
|                        
|                        
|                        
|                         | Research and development              |                              |     | 30                 |     |      |     | 30  |    
|                        
|                        
|                        
|                        
|                         | Stock based compensation              |                              |     | 17                 |     |      |     | 4   |    
|                        
|                        
|                        
|                        
|                         | Depreciation and amortization         |                              |     | 5                  |     |      |     | 7   |    
|                         |                                       |                              |     |                    |     |      |     |    
|                         |                                       | Total operating expenses     |     |                    | 159 |      |     |     | 166 | 
|                        
|                        
|                        
|                        
|Loss from operations     |                                       |                              | (75 | )                  |     |      | (81 | )  
|                        
|                        
|                        
|                        
|Other income (expense)  
|                        
|                        
|                        
|                        
|                         | Investment earnings                   |                              |     |                   |     |      |     | 18  |    
|                        
|                        
|                        
|                        
|                         | Interest expense                      |                              |     | (1                 | )   |      |     | (1  | )  
|                        
|                        
|                        
|                        
|                         | Other                                 |                              |     |                   |     |      |     |    |    
|                         |                                       |                              |     |                    |     |      |     |    
|                         |                                       | Total other income (expense) |     |                    | (1  | )    |     |     | 17  | 
|                        
|                        
|                        
|                        
|Loss before income taxes |                                       |                              | (76 | )                  |     |      | (64 | )  
|                        
|                        
|                        
|                        
|Income tax benefit       |                                       |                              |    |                    |     |      |    |    
|                         |                                       |                              |     |                    |     |      |     |    
|Net loss                 |                                       |                              | (76 | )%                 |     |      | (64 | )% 
|                         |                                       |                              |     |                    |     |      |     |    

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE SAME PERIOD ENDED MARCH 31,
2000.

Revenues. For the quarter ended March 31, 2001, revenues increased 105%
to $6.6 million from $3.2 million in the corresponding period of 2000.

Software sales revenue increased 135% to $5.7 million for the quarter
ended March 31, 2001 from $2.4 million in the corresponding period of 2000.
Vector NTI Suite sales revenue increased 51% to $2.9 million for the quarter ended March
31, 2001 from $1.9 million in the corresponding period of 2000. GenoMax
sales revenue increased 474% to $2.8 million for the quarter ended March 31,
2001 from $0.5 million in the corresponding period of 2000.  Vector NTI Suite bookings
increased 48% to $3.2 million for the quarter ended March 31, 2001 from $2.2
million in the corresponding period of 2000. GenoMax bookings increased 172%
to $2.9 million for the quarter ended March 31, 2001 from $1.0 million for the
corresponding period of 2000. This increase is attributable to continued
increase in Vector NTI Suite sales and increased demand for our GenoMax
enterprise product.

Professional services revenue increased 16% to $0.9 million for the
quarter ended March 31, 2001 from $0.8 million in the corresponding period of
2000. Increased professional services revenue at quarter-end resulted primarily
from increased demand for services related to our software products. In the
first quarter of 2001, services provided to the NCBI under subcontracts
accounted for 72% of professional services revenue and 10% of consolidated
revenues.

Cost of Revenues. For the quarter ended March 31, 2001, cost of revenues
increased 88% to $1.0 million from $0.5 million in the corresponding period of
2000.

Costs of software license and customer support revenue increased 416% to
$0.5 million for the quarter ended March 31, 2001 from $0.1 million in the
corresponding period of 2000. This increase resulted primarily from increased
sales of our Vector NTI Suite and sales of our GenoMax enterprise system. We
sold 6 licenses for GenoMax and 1,600 licenses for Vector NTI Suite in the
first quarter of 2001, compared to 2 and 1,000, respectively, in the
corresponding period of 2000. Costs of software revenues consist primarily of
manufacturing costs incurred on an as needed basis, cost of shipping products,
and the cost of providing training and customer

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support.

Costs of professional services revenues increased 10% to $0.5 million for
the quarter ended March 31, 2001 from $0.4 million in the corresponding period
of 2000. The increase at quarter-end resulted primarily from increased
personnel supporting customer service of our software products. Costs of
professional services revenues consist primarily of salaries, benefits, and
related expenses of our professional services personnel.

Margins on our software license and customer support and professional
services revenues improved for the quarter ended March 31, 2001 compared to the
prior quarter primarily as a result of economies of scale related to the
increasing size of our customer base.

Selling, General and Administrative Expenses. For the quarter ended March
31, 2001, selling, general and administrative expenses increased 140% to $8.2
million from $3.4 million in the corresponding period of 2000. This increase
primarily reflects salary and benefits expenses for additional personnel, and
related expenses including increased rent and travel costs to support our
business and revenue growth, along with costs associated with an increased
marketing effort. The Company also incurred additional costs in the quarter as
a result of management changes, recruiting and the relocation of its corporate
headquarters. Of this increase, headcount and resources devoted to sales and
marketing comprised the largest portion of this increase. We expect this
increase of investment in our sales and marketing force to continue in 2001 in
support of the companys sales growth objectives. Overall selling, general and
administration headcount for quarter ended March 31, 2001 was 154 compared to
75 at March 31, 2000.

Research and Development Expenses. For the quarter ended March 31, 2001,
research and development expenses increased 106% to $2.0 million from $1.0
million in the corresponding period of 2000. The increase reflects expenses
associated with an increase in the headcount of our research and product
development team to support our expanded our product development efforts. We
expect this increase in research and development costs to continue in 2001 as
we expand and enhance our software products. Overall research and development
headcount for the quarter ended March 31, 2001 was 96compared to 72 at March
31, 2000.

Stock Based Compensation. For the quarter ended March 31, 2001, stock
based compensation expenses decreased 52% to $0.3 million from $0.6 million in
the corresponding period of 2000. The decrease reflects compensation related to
discounted stock option grants and restricted stock awards.

Income Taxes. We incurred net losses for the quarters ended March 31, 2001
and 2000. At present, we have an accumulated net operating loss carryforward of
$30.9 million of which $21.0 million is a result of the exercise of
non-qualified stock options. There was no tax benefit recognized for the
quarters ended March 31, 2001 and 2000. The provisions reflect a valuation
allowance recorded against the increase in net operating losses and the change
in book basis versus tax basis of deferred revenue and stock based
compensation.

Net Loss. We incurred a net loss of $4.2 million for the quarter ended
March 31, 2001, compared with a net loss of $2.5 million for the quarter ended
March 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

On July 11, 2000, we filed a registration statement on Form S-1 (File No.
333-41194) to register our initial public offering, on a firm commitment basis,
of up to 5,750,000 shares of our common stock, par value $.001 per share,
including 750,000 shares covered by an overallotment option granted to our
underwriters. Our registration statement was declared effective with the
Securities and Exchange Commission on October 2, 2000. On October 5, 2000, our
underwriters informed us of their intention to exercise their overallotment
option to purchase an additional 750,000 shares. On October 6, 2000, we
completed our initial public offering of common stock, selling 5,750,000 shares
of common stock at $16.00 per share, for net proceeds to us, after deducting
estimated expenses and underwriting discounts and commissions, of approximately
$84.0 million. All of our then outstanding shares of preferred stock were
converted into common stock upon the closing of our initial public offering.

At March 31, 2001, we had $75.5 million in cash and cash equivalents, a
net increase of $74.6 million from March 31, 2000, and

17



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an increase of $75.0 million from March 31, 1999. Net cash used by
financing activities was $0.2 million for the quarter ended March 31, 2001
compared to net cash provided by financing activities of $1.7 million for the
comparable period in 2000.

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

During the quarters ended March 31, 2001 and 2000, we generated $7.2
million and $3.2 million of cash receipts from revenue collections,
respectively. Gross cash used by operations for the quarter ended March 31,
2001 was $11.2 million compared to $4.6 million for the quarter ended March 31,
2000. The net increase in cash disbursements for costs of revenue and operating
expenses over these periods reflects the continued growth of our business,
particularly as related to personnel and related infrastructure expenses.

Net cash used in investing activities was $2.9 million for the quarter
ended March 31, 2001 compared to net cash used in investing activities of $0.8
million for the comparable period in 2000. The cash used in investing
activities over those periods were for the purchase of furniture and equipment.

In May 1999, we entered into a loan agreement and a security agreement
with PNC Bank, National Association, in connection with the creation of a
credit facility consisting of a secured revolving credit line and an equipment
line of credit. In February 2000, we entered into a fourth amendment to such
loan agreement increasing the maximum availability under each of the secured
revolving credit line and equipment line of credit to $3.0 million, for a total
of $6.0 million. As of the period ending March 31, 2001, the revolving credit
line and equipment line of credit had available facilities of $3.0 million and
$1.7 million, respectively. In connection with this amendment, we entered into
an amended and restated revolving credit note and an amended and restated
equipment line of credit note. We repaid the principal and accrued interest
outstanding under the revolving credit note in October 2000. The equipment line
of credit note allowed us to borrow the principal amount thereunder until
February 2, 2001. Amounts outstanding under the equipment line of credit note
accrue interest at the prime rate as reported in the Wall Street Journal plus
one and one-quarter percent. With respect to advances made prior to November 6,
1999, principal and interest accrued thereon are payable in monthly principal
amounts of $19,727 through and including April 15, 2002. For advances made
after November 6, 1999, principal and interest accrued thereon shall be made in
monthly principal payments of $35,607 through October 15, 2002 and $15,833
through March 15, 2003.

We have pledged our personal property, including our equipment, trademarks
and accounts receivable, to PNC Bank as security for any amounts owed by us
under these facilities. Under the loan agreement, we are generally restricted
from incurring additional indebtedness without the consent of PNC Bank. We must
also maintain various financial covenants, including minimum cash balance and
certain financial ratios. In addition, we may not declare or pay dividends or,
make any distribution with respect to any equity security during the term of
the loan agreement without the consent of PNC Bank.

In September and November 2000 respectively, PNC Bank established
irrevocable standby letters of credit in favor of Pacific Gas & Electric
Generating Company, in connection with our execution of a sublease with Pacific
Gas & Electric for our new Bethesda, Maryland headquarters. The amounts of the
irrevocable standby letter of credits will not exceed $460,200 and $920,400,
and such amounts can be drawn in the event that we are in default under the
sublease. The amounts of the irrevocable standby letters of credit are secured
by our deposit with PNC Bank of an equal amount of cash that is designated
solely for use under the irrevocable standby letter of credits. The irrevocable
standby letters of credit expire on September 8, 2001 and November 22, 2001,
respectively.

On September 21, 2000, we entered into a sublease for approximately 36,190
square feet of office space for our new headquarters in Bethesda, Maryland.
This agreement, which expires on October 31, 2012, does not require rental
payments during the initial 90 days of possession after which we are required
to make rental payments of $1,357,125 a year, subject to a 2.5% annual
escalation clause. Rental payments may also be adjusted as a result of our pro
rata share of increases in building expenses as defined in the lease. The lease
requires that we maintain a security deposit of $1,380,600 for which we have
established irrevocable standby letters of credit described above. This
security deposit may be reduced subject to our meeting certain minimum
financial requirements. We took possession of our new headquarters facility
and relocated our operations in March 2001.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCUSSION OF MARKET RISK

Our exposure to market risk for changes in interest rates relates
primarily to the increase or decrease in the amount of interest income we can
earn on our initial public offering proceeds and any investment portfolio.

18



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Our risk
associated with fluctuating interest expense is limited, however, to credit
facilities that are closely tied to market rates. Under our current policies,
we do not use interest rate derivative instruments to manage exposure to
interest rate changes. We ensure the safety and preservation of our invested
principal funds by limiting default risks, market risk and reinvestment risk.
We reduce default risk by investing in investment grade securities. Declines in
interest rates over time will, however, reduce our interest income and expense
while increases in interest rates over time will increase our interest income
and expense.

PART II OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

In March 2001,we issued a warrant exercisable for 25,000 shares of our Common
Stock to Emerging Technology Partners, LLC in consideration for strategic
consulting services. The warrant is exercisable for a five-year term at $8.00
per share, the closing price of our common stock on the Nasdaq National Market
on the date of the grant. Dr. He, one of our directors, is the General Partner
of Emerging Technology Partners, LLC. This warrant was issued without
registration in reliance upon an exemption from
registration under Rule 506 of Regulation D promulgated under the Securities
Act of 1933, as amended.

As of March 31, 2001, we have used approximately $5.0 million of our net
offering proceeds toward consideration of certain strategic relationships and
collaboration opportunities, the improvement of our resources and
infrastructure including new office space and additional satellite offices to
support the growth of our operations and personnel, and the recruitment and
hiring of additional personnel, particularly related to expansion of our
research and development and sales and marketing teams. We have placed the
remaining net proceeds from the offering principally in money market funds as
well as other interest bearing, investment-grade securities. We
expect to use net proceeds to expand our research and development and
sales and marketing efforts as well as for working capital and general
corporate purposes.
 We also expect to use
the net proceeds from the offering to consider opportunities to expand our
business through the acquisition of additional businesses, products and
technologies and to establish joint ventures or other collaborative
arrangements which we believe complement our current or future business.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits

|             |  |                                                                                                                 
|------------ |  | ----------------------------------------------------------------------------------------------------------------
|Exhibit 10.1 |  | Amendment No. 1 to Employment Agreement between the Company
and Dr. Vadim Babenko effective as of March 1, 2001.
|            
|            
|            
|            

b. Reports on Form 8-K:   None.

19



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SIGNATURES

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

Dated this 15th day of May 2001.

| |                                                                                             
| | --------------------------------------------------------------------------------------------
| | INFORMAX, INC                                                                               
|
| | By: /s/ Dr. Alexander Titomirov
Dr. Alexander Titomirov
Chairman and Chief Executive Officer
|
| | By: /s/ John M. Green
John M. Green
Chief Financial Officer                                 

20



---



INDEX TO EXHIBITS

|             |  |                                                                                                                  |  |          |  |  |  | 
|------------ |  | ---------------------------------------------------------------------------------------------------------------- |  | -------- |  |  |  | 
|Exhibit No.  |  | Exhibit Name                                                                                                     |  | Page No.
|             |  |                                                                                                                  |  |         
|Exhibit 10.1 |  | Amendment No. 1 to Employment Agreement between the Company
and Dr. Vadim Babenko effective as of March 1, 2001. |  | 22      
|            
|            
|            
|            

21