<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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)
<TABLE>
<S>                                                       <C>
                   Delaware                                  52-1687783
       ----------------------------------                    ----------
(State or Other Jurisdiction of Incorporation or           (IRS Employer
                 Organization)                               ID Number)



 7600 Wisconsin Avenue, 11th Floor, Bethesda, MD               20814
-------------------------------------------------            --------
    (Address of Principal Executive Offices)                (Zip Code)
</TABLE>

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

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


The registrant had 24,335,258 shares of common stock outstanding as of November
1, 2001.

                                       1
<PAGE>



                                TABLE OF CONTENTS

                                 INFORMAX, INC.
                                    FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2001

<TABLE>
<S>                                                                                       <C>
           PART I -- CONDENSED CONSOLIDATED FINANCIAL INFORMATION                         PAGE
      Item 1. Unaudited Condensed Consolidated Financial Statements
              Condensed Consolidated Balance Sheets as of December 31, 2000 and
                  September  30, 2001                                                       3
              Condensed Consolidated Statements of Operations for the
                  Three-Month and Nine-Month Periods Ended September  30, 2000 and 2001     4
              Condensed Consolidated Statements of Cash Flows for the
                  Nine-Month Periods Ended September  30, 2000 and 2001                     5
              Notes to Condensed Consolidated Financial Statements                          6


      Item 2. Management's Discussion and Analysis of Financial Condition and
              Results of Operations                                                         8


      Item 3. Qualitative and Quantitative Discussion of Market Risk                       18

   PART II -- OTHER INFORMATION

      Item 2. Changes in Securities and Use of Proceeds                                    19
      Item 6. Exhibits and Reports on Form 8-K                                             19

   SIGNATURES
</TABLE>


                                       2
<PAGE>



             PART I -- CONDENSED CONSOLIDATED FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                 INFORMAX, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,      SEPTEMBER 30,
                                              ASSETS                              2000              2001
                          ----------------------------------------------      ------------      -------------
                                                                                  (DOLLARS IN THOUSANDS)
<S>                                                                          <C>                <C>
                          Current assets:
                             Cash and cash equivalents                           $  82,656         $  66,022
                             Accounts receivable (net of allowance
                             for doubtful accounts of $20 and $501
                             at December 31, 2000
                             at September 30, 2001, respectively)                    7,449             5,814
                             Unbilled Receivable                                     1,614             3,922
                             Prepaid expenses                                        1,188             1,266
                             Other current assets                                       56                44
                                                                                 ---------         ---------
                               Total current assets                                 92,963            77,068
                                                                                 ---------         ---------
                          Property and equipment, net                                4,539             9,286
                                                                                 ---------         ---------
                          Other assets:
                             Deposits                                                  574                75
                             Deferred tax asset, net                                 1,300             1,300
                             Restricted cash                                         1,574             1,667
                                                                                 ---------         ---------
                               Total other assets                                    3,448             3,042
                                                                                 ---------         ---------
                            Total assets                                         $ 100,950         $  89,396
                                                                                 ---------         ---------

                          LIABILITIES AND STOCKHOLDERS' EQUITY

                          Current liabilities:
                             Accounts payable                                    $     971         $     769
                             Accounts payable to related parties                       139                22
                             Accrued liabilities                                     1,270             1,766
                             Equipment loan facility -- current portion                854               755
                             Capital lease obligations -- current portion               78               241
                             Deferred revenue                                        4,148             3,512
                                                                                 ---------         ---------
                               Total current liabilities                             7,460             7,065
                                                                                 ---------         ---------
                          Long-term liabilities:
                             Other liabilities                                          --                 7
                             Equipment loan facility -- less current
                             portion                                                   688               147
                             Capital lease obligations -- less current
                             portion                                                    14               396
                             Deferred revenue                                        1,119             1,556
                                                                                 ---------         ---------
                               Total long-term liabilities                           1,821             2,106
                                                                                 ---------         ---------
                          Stockholders' equity:
                             Common stock, $0.001 par value -- authorized
                             100,000,000 shares; issued and outstanding
                             19,510,792 and 24,333,296
                          shares
                             for December 31, 2000
                             and September 30, 2001, respectively                       19                24
                           Additional paid-in capital                              105,917           107,169
                             Deferred compensation                                  (1,420)             (655)
                             Accumulated deficit                                   (12,847)          (26,313)
                                                                                 ---------         ---------
                               Total stockholders' equity                           91,669            80,225
                                                                                 ---------         ---------
                          Total liabilities and stockholders' equity             $ 100,950         $  89,396
                                                                                 =========         =========
</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                       3
<PAGE>



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

 <TABLE>
 <CAPTION>
                                                              THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                 SEPTEMBER 30,                     SEPTEMBER 30,
                                                    --------------------------------      -------------------------------
                                                          2000              2001                2000           2001
                                                    ---------------    -------------      --------------  ---------------
                                                             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                   <C>               <C>               <C>               <C>
Revenues:
          Software license and customer support       $      4,071      $      3,762      $      8,925      $     15,949
          Professional services                                802               918             2,458             2,889
                                                      ------------      ------------      ------------      ------------
                     Total revenues                          4,873             4,680            11,383            18,838
                                                      ------------      ------------      ------------      ------------
Cost of revenues:
          Software license and customer support                190               359               423             1,327
          Professional services (1)                            435               478             1,315             1,445
                                                      ------------      ------------      ------------      ------------
                     Total cost of revenues                    625               837             1,738             2,772
                                                      ------------      ------------      ------------      ------------
Gross profit                                                 4,248             3,843             9,645            16,066
Operating expenses:
          Selling, general and administrative (2)            4,569             6,349            12,134            22,459
          Research and development (3)                       1,350             2,544             3,821             7,145
          Stock-based compensation                             233               277             1,208               787
          Depreciation and amortization                        246               657               589             1,665
                                                      ------------      ------------      ------------      ------------
                     Total operating expenses                6,398             9,827            17,752            32,056
                                                      ------------      ------------      ------------      ------------
Loss from operations                                        (2,150)           (5,984)           (8,107)          (15,990)
                                                      ------------      ------------      ------------      ------------
Other income (expense):
          Investment earnings                                   51               645                67             2,664
          Interest expense                                    (100)              (21)             (220)              (87)
          Other                                                (21)              (37)              (29)              (53)
                                                      ------------      ------------      ------------      ------------
                     Total other income (expense)              (70)              587              (182)            2,524
                                                      ------------      ------------      ------------      ------------
Loss before income taxes                                    (2,220)           (5,397)           (8,289)          (13,466)
Income tax benefit                                              --                --                --                --
                                                      ------------      ------------      ------------      ------------
Net loss                                                    (2,220)           (5,397)           (8,289)          (13,466)
Increase in carrying value of  redeemable
    convertible preferred stock                            (10,118)               --           (10,286)               --
Net loss applicable to common shares                  $    (12,338)     $     (5,397)     $    (18,575)     $    (13,466)
                                                      ============      ============      ============      ============
Basic and diluted net loss applicable per common
    share                                             $      (1.55)     $       (.22)     $      (3.00)     $       (.60)
                                                      ============      ============      ============      ============
 Weighted average common shares outstanding -
    Basic and Diluted                                    7,976,872        24,300,689         6,186,653        22,404,676
</TABLE>

             (1)  Cost of revenues - professional services includes stock-based
                  compensation of $0.1, $0, $0.6 and $0.2 for the three months
                  ended September 30, 2000 and 2001 and the nine months ended
                  September 30, 2000 and 2001, respectively.

             (2)  Selling, general and administrative expenses excludes
                  stock-based compensation of $230, $274, $1,076 and $780 for
                  the three months ended September 30, 2000 and 2001 and the
                  nine months ended September 30, 2000 and 2001, respectively.

             (3)  Research and development expenses excludes stock-based
                  compensation of $3, $3, $132 and $7 for the three months ended
                  September 30, 2000 and 2001 and the nine months ended
                  September 30, 2000 and 2001, respectively.

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                       4
<PAGE>



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

<TABLE>
<CAPTION>
                                                                                              NINE MONTHS ENDED
                                                                                                SEPTEMBER 30,
                                                                                           2000              2001
                                                                                        ----------         ---------
                                                                                           (DOLLARS IN THOUSANDS)

<S>                                                                                      <C>               <C>
     CASH FLOWS FROM OPERATING ACTIVITIES:
       Net loss                                                                          $ (8,289)         $(13,466)
       Adjustments to reconcile net loss to net cash
       used in operating activities:
         Depreciation expense                                                                 586             1,665
         Loss on disposal of property and equipment                                             8               177
         Expense related to stock options, restricted stock                                 1,233               785
         and warrants
         Changes in assets and liabilities:
           Accounts receivable                                                             (2,432)            1,635
           Unbilled receivable                                                                122            (2,308)
           Income tax receivable                                                             (293)               --
           Prepaid expenses                                                                    11               (78)
           Other current assets                                                               (15)               12
           Deposits                                                                           500                --
           Accounts payable                                                                   732              (321)
           Accrued liabilities                                                               (539)              504
           Deferred revenue                                                                 2,009              (198)
                                                                                         --------          --------
           CASH FLOWS FROM OPERATING ACTIVITIES                                            (6,867)          (11,093)

     CASH FLOWS FROM INVESTING ACTIVITIES:
       Repayment of shareholder note receivable                                                69                --
       Purchase of property and equipment                                                  (2,416)           (5,872)
       Proceeds from disposal of property and equipment                                        95                20
                                                                                         --------          --------
         CASH FLOWS FROM INVESTING ACTIVITIES                                              (2,252)           (5,852)
                                                                                         --------          --------

     CASH FLOWS FROM FINANCING ACTIVITIES:
       Repayments on capital lease obligations                                                (88)             (192)
       Proceeds from line of credit                                                         1,500                --
       Proceeds from equipment loan facility                                                1,554                --
       Repayments on line of credit                                                          (650)               --
       Repayments on equipment loan facility                                                 (774)             (640)
       Increase in Restricted cash                                                             --               (93)
       Proceeds from sale of preferred stock, net of offering costs                         9,301                --
       Proceeds from share options exercised and issuance of Warrants                       1,153             1,207
       Proceeds from issuance of common stock, net of offering costs                        3,550                31
                                                                                         --------          --------
         CASH FLOWS FROM FINANCING ACTIVITIES                                              15,546               313
                                                                                         --------          --------
     NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                   6,427           (16,632)
     BEGINNING CASH AND CASH EQUIVALENTS                                                    1,399            82,656
                                                                                         --------          --------
     ENDING CASH AND CASH EQUIVALENTS                                                    $  7,826          $ 66,024
                                                                                         ========          ========
     SUPPLEMENTAL INFORMATION ON NONCASH INVESTING
       AND FINANCING TRANSACTIONS:
        Retirement of treasury stock                                                     $    119          $     --
                                                                                         ========          ========
        Deferral of offering costs                                                       $    786          $     --
                                                                                         ========          ========
        Stock purchase through subscription receivable                                   $     11          $     --
                                                                                         ========          ========
        Purchase of equipment through capital lease obligations                          $     --          $    738
                                                                                         ========          ========
     SUPPLEMENTAL CASH FLOW INFORMATION:
        Cash paid for interest                                                           $    214          $     68
                                                                                         ========          ========
</TABLE>

            SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

                                       5
<PAGE>



                                 INFORMAX, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2001

NOTE 1 - INTERIM FINANCIAL STATEMENTS

The accompanying condensed 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 and nine
month periods ended September 30, 2001 and 2000, the Company's financial
position at September 30, 2001, and the cash flows for the nine month periods
ended September 30, 2001 and 2000. The results of operations for the interim
periods are not necessarily indicative of the results of the entire year.

In June 2001, the FASB issued SFAS No. 143 (SFAS 143), "Accounting for Asset
Retirement Obligations". SFAS 143 addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. SFAS is effective for fiscal years
beginning after June 15, 2002. The Company is in the process of evaluating the
impact of implementing SFAS No. 143.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment of
Long-Lived Assets" which supersedes SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and the
accounting and reporting provisions of APB No. 30, "Reporting the Results of
Operations - Reporting and Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions" for
the disposal of a segment of a business. This statement is effective for fiscal
years beginning after December 15, 2001. SFAS No. 144 retains many of the
provisions of SFAS No. 121, but addresses certain implementation issues
associated with that Statement. The Company is currently evaluating the impact
of implementing SFAS No. 144.

NOTE 2 - COMMITMENTS AND CONTINGENCIES

Restricted Cash -- The Company has cash that is restricted as to use. The
restricted cash is collateral for letters of credit related to certain leases
for office space. 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
executive officers of the Company have employment agreements that entitles the
individuals to a specified amount 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 nine months ended September 30, 2001 no audit of
costs and the related payments has been performed by the various agencies. As a
result at September 30, 2001, there were no liabilities accrued related to the
billing in excess of cost. In the opinion of management, the final determination
of these costs and related payments will not have a material effect on the
Company's financial position, results of operations, or liquidity.

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

NOTE 3 - SUBSEQUENT EVENTS

In conjunction with the executive management changes announced in October 2001,
the Company anticipates charges of $2.4 million in the fourth quarter of 2001
relating to deferred compensation, retirement, and other payments. This charge
has a cash flow impact of approximately $0.6 million in the fourth quarter of
2001, with the balance of the payments to be made in subsequent periods.

NOTE 4 - SEGMENT INFORMATION

Management makes operating decisions and assesses performance of the Company's
operations based on the following reportable segments: professional services and
software.

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

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

                                       6
<PAGE>

The table below presents reported segment amounts in thousands for the quarters
and nine months ended September 30, 2000 and 2001.

<TABLE>
<CAPTION>
---------------------------------------------------------------------
                          PROFESSIONAL
                            SERVICES         SOFTWARE          TOTAL
                          ------------       --------          -----
<S>                       <C>               <C>              <C>
Quarter ended
September 30, 2000

Revenue                        802           4,071            4,873

Loss from
Operations                  (1,005)         (1,145)          (2,150)

Nine months ended
September 30, 2000

Revenue                      2,458           8,925           11,383

Loss from
Operations                  (2,409)         (5,697)          (8,106)

Quarter ended
September 30, 2001

Revenue                        918           3,762            4,680

Loss from
Operations                  (1,464)         (4,520)          (5,984)

Nine months ended
September 30, 2001

Revenue                      2,889          15,949           18,838

Loss from
Operations                  (3,661)        (12,329)         (15,990)
</TABLE>

The difference between loss from operations and net loss is attributable to
investment earnings, interest expense and other expense totaling, $(70) and $587
for the three months ended September 30, 2000 and 2001, respectively, and $(182)
and $2,523 for the nine months ended September 30, 2000 and 2001, respectively.

The table below presents asset allocation of reported segment amounts in
thousands for December 31, 2000 and September 30, 2001.

<TABLE>
<CAPTION>

       -----------------------------------------------------------------------
                                   DECEMBER 31, 2000       SEPTEMBER 30,  2001
                                   -----------------       -------------------
<S>                                <C>                     <C>
       Allocable Assets
         Professional Services             815                      748
         Software                        8,248                    8,988

       Non-Allocable Assets             91,887                   79,660
</TABLE>


                                       7
<PAGE>



NOTE 5 - CHANGES IN STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>

                                             COMMON STOCK           ADDITIONAL
                                        ISSUED AND OUTSTANDING        PAID-IN         DEFERRED
                                       SHARES             AMOUNT      CAPITAL       COMPENSATION
                                       ------             ------    ----------      ------------
<S>                            <C>                      <C>         <C>              <C>
Balance, December 31, 2000            19,511                  19      $105,917         $ (1,420)
Share options exercised                4,822                   5         1,202               --
Issuance of warrants                      --                  --            --               35
Amortization of deferred
  compensation on stock
  options and restricted
  stock                                   --                  --            19              730
Offering costs                            --                  --            31               --
Net loss                                  --                  --            --               --
                                    --------            --------      --------         --------
Balance, September 30, 2001           24,333            $     24      $107,169         $   (655)
                                    ========            ========      ========         ========
</TABLE>


<TABLE>
<CAPTION>
                                               ACCUMULATED
                                                 DEFICIT               TOTAL
                                              --------------         ---------
<S>                                           <C>                   <C>
             Balance, December 31, 2000         $(12,847)            $ 91,669
             Share options exercised                  --                1,207
             Issuance of warrants                     --                   35
             Deferred Compensation                    --                  749
             Offering costs                           --                   31
             Net loss                            (13,466)             (13,466)
                                                ---------            ---------

             Balance, September 30, 2001        $(26,313)            $ 80,225
                                                =========            ========
</TABLE>

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

        The following is a discussion of our financial condition and results of
operations. You should read this discussion together with our condensed
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.

WE MUST KEEP PACE WITH RAPID TECHNOLOGICAL ADVANCES AND DEVELOPMENTS 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

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

        In September 2001 we commercially released Vector NTI Suite 7.0
including enhanced design, analysis and visualization capabilities and improved
utilities for sequence alignment and contig assembly. In September, we also
introduced our new desktop expression analysis product--Xpression NTI. We are
currently scheduled to commercially release GenoMax 3.2 in the fourth quarter of
2001. 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 we might invest considerable resources in technologies
that could 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 functionality. If we do not keep pace with
technological change, our products and service will not be as attractive to our
customers and our competitive position and sales of our products would be
seriously harmed.

                                       8
<PAGE>

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 extensions and services that
respond to the evolving needs of the genomic and proteomics 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 enterprise 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-develop and 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. We are also seeking to develop customer
relationships and partnerships in the collaborative services areas and we only
have limited experience in such area. 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.

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

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

        Our software sales have historically been made under both perpetual and
term license agreements. Under perpetual arrangements, the customer assumes
ownership of the software, and upgrades and enhancements are available provided
that the customer's maintenance agreement is current. The revenue related to the
software element under a perpetual arrangement is often recognized at the time
of delivery of the software. 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 may be recognized over the term period. As discussed more fully in
our revenue section below, our ability to recognize software license revenues
in a given fiscal quarter will be affected by the mix of perpetual and term
contracts entered into

                                       9
<PAGE>

during that period.

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

WE MAY HAVE DIFFICULTY MANAGING THE TRANSITION OF CERTAIN EXECUTIVE MANAGEMENT
POSITIONS.

        We have undergone a significant turnover in key executive management
positions in the past 12 months and are engaged in a search for a new Chief
Executive Officer. On October 17, 2001 we announced that Dr. Alexander
Titomirov, the Company's founder, will step down as Chief Executive Officer upon
the hiring of a new Chief Executive Officer. Dr. Titomirov will continue to
serve as Chairman on the Company's Board of Directors. We also announced the
retirement of Dr. James Bernstein as the Company's President effective December
31, 2001. The Duties of Chief Operating Officer have been assumed by John Green,
currently the Company's Chief Financial Officer. We have hired Heidrick &
Struggles to undertake a search for our new Chief Executive Officer. There can
be no assurance that these executive search efforts and the subsequent
management transition will not disrupt our operations and lead to deferral or
loss of revenues or increased administrative costs. The Company anticipates
charges of $2.4 million in the fourth quarter of 2001 in conjunction with the
management changes. This charge has a cash flow impact of approximately $0.6
million in the fourth quarter of 2001, with the balance of the payments to be
made in subsequent periods.

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. We are currently
in the process of expanding our professional service offerings to include
bioinformatic infrastructure assessment, customization and implementation
services, as well as collaborative discovery services. 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 to
provide resources, and an expanded infrastructure, sufficient to support the
growth of our personnel and operations. Our ability to manage our growth
effectively, 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. In addition, it will also be dependent upon our
ability to implement the 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, sales, and professional services efforts. Failure to
successfully manage this 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 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 customers' needs or expectations, our
reputation and results of operations will suffer.

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 are also seeking
to make strategic investments in the discovery space. 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.

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.


                                       10
<PAGE>


        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. Economic indicators
suggest that the U.S. economy may be experiencing a general national economic
downturn. There can be no assurance that such a downturn will not result in
adverse affects upon research and development expenditures and public funding of
life science initiatives. Any reductions in spending or public funding are
likely to have a direct negative affect on our business and results of
operations by reducing the demand for our products and services.

OUR STOCK PRICE MAY BE SUBJECT TO FLUCTUATIONS DUE TO MANY FACTORS, INCLUDING A
SUBSTANTIAL MARKET OVERHANG.

        The market price of our common stock may be volatile and subject to
fluctuations in response to quarterly variations in operating results, losses or
additions of significant customers, announcements of new technological
innovations, products, services, or affiliations by us or our competitors,
changes in financial estimates by securities analysts, lack of market acceptance
of our products and services, or other events or factors, including the risk
factors described herein. In addition, the stock market experiences significant
price and volume fluctuations that are often unrelated to a company's operating
performance. As with any public company, we may be subject to securities class
action litigation following periods of volatility in the market price of our
securities which could result in substantial costs and a diversion of
management's attention and resources.

        The sale of a substantial number of shares of common stock, or even the
potential of such sales, in the public market could deflate the market price for
our common stock and make it more difficult for us to raise additional capital
through the sale of our common stock. At November 1, 2001, outstanding options
to purchase shares of our common stock totaled approximately 10.2 million. The
holders of these options are likely to exercise them at times when the market
price of the shares of common stock exceeds their exercise price. Accordingly,
the issuance of shares of common stock upon exercise of the options may result
in dilution of the equity represented by the then outstanding shares of common
stock held by other stockholders. At November 1, 2001, holders of 7,905,286
shares of our common stock, or warrants exercisable for our common stock, were
entitled to certain registration rights. If these holders, by exercising their
registration rights, cause a large number of shares to be registered and sold in
the public market, these sales could cause a decline in the market price of our
common stock. If we were to include, in a registration statement initiated by
us, shares held by these holders in accordance with their registration rights,
the inclusion of such shares may reduce our ability to raise capital.

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.

        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 intend to continue to enhance and expand our
bioinformatic software products to meet evolving customer needs and preferences.
We commercially released Vector NTI Suite 7.0, with enhanced database
connectivity and functionality, including improved utilities for sequence
alignment and contig assembly, and our Desktop Expression model Xpression NTI in
the third quarter of 2001. GenoMax 3.2 is scheduled to be released in the fourth
quarter of 2001. GenoMax version 3.2 includes enhanced features such as high
performance engine for GenBank data storage, accelerated initial data loading
and indexing, improved administrative capabilities and Gene Expression Analysis
II. We released GenoMax 3.1, our Protein-Protein Interaction module and our
Genome Analysis module, in the second quarter of 2001. In addition to our
proprietary software products above, we market and distribute certain
complementary software products under license from Biomax Informatics AG and
Media Cybernetics L.P. We also plan to leverage our software, science, and
bioinformatic expertise to increase our professional services practice. We
anticipate expanding our professional services to include implementation and
customization services to our installed software customer base as well as
collaborative services with discovery partners. As of September
30, 2001, we have more than 28,000 estimated users on our Vector NTI Suite of
software applications for desktop computers. As of September 30, 2001, we have
also sold 36 GenoMax enterprise platforms. Our customer base includes over 1,870
organizations worldwide, including over 700 biotechnology, pharmaceutical, and
agricultural biotechnology and life science

                                       11
<PAGE>

companies and over 1,100 academic and government research institutions. Our 10
largest customers accounted for approximately 20% and 30% of our total software
license revenues for the quarters ended September 30, 2001 and 2000,
respectively.

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

        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 genomic
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. In October 2001, we
announced an exclusive distribution agreement under which Amersham Biosciences
will distribute our Vector NTI Suite in Latin America. We believe that this
agreement will facilitate building our customer base in these expanding markets
for the Company's products and services.

        On October 1, 2001, we announced that we had hired Heidrick & Struggles
to undertake a search for a new Chief Executive Officer. Alexander Titomirov,
Ph.D., our Chief Executive Officer and Chairman, announced that he will step
down as Chief Executive Officer but remain as our Chairman effective upon the
hiring of a new Chief Executive Officer. We hope to complete our search for a
new Chief Executive Officer by the first quarter of 2002. We also announced that
James E. Bernstein, M.D., will retire as our President and Chief Operating
Officer and as a member of the Company's Board of Directors, effective December
31, 2001. The duties of Chief Operating Officer have been assumed by John Green,
currently our Executive Vice President and Chief Financial Officer. In
conjunction with these executive management changes, we anticipate a charge of
$2.4 million in the fourth quarter primarily consisting of deferred
compensation, retirement, and other payments.

REVENUE

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


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

        The Company's revenue generated from the sale of BioRS integration and
retrieval system is also recognized as gross software

                                       12
<PAGE>
revenue. Included in some of our software segment sales are channeling alliances
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. We will market 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.

        Our professional services segment has historically consisted of software
development services provided under subcontracts 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,
training, 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 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 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 and IT customization and implementation services.

                               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. 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 bundled term license arrangements is
recognized evenly over the term period.



                                       13
<PAGE>

        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.

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

        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.


QUARTERLY FLUCTUATIONS

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

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

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

        The manner in which we recognize revenue, in accordance with generally
accepted accounting principles, including as such, revenue recognition that
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.

                                       14
<PAGE>



                    RESULTS OF OPERATIONS FOR THREE AND NINE
                         MONTHS ENDED SEPTEMBER 30, 2001

        The following table summarizes our results of operations for the three
and nine months ended September 30, 2001, compared to the same period of 2000,
as a percentage of our total revenue for the respective period.

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                  SEPTEMBER 30                 SEPTEMBER 30
                                                            -----------------------       -----------------------
                                                              2000           2001           2000           2001
                                                            --------       --------       --------       --------
        Revenues:
<S>                                                         <C>            <C>            <C>            <C>
               Software license and customer support           84%            80%            78%            85%
               Professional services                           16             20             22             15
                                                             ----           ----           ----           ----
                  Total revenues                              100            100            100            100

        Cost of revenues:
               Software license and customer support            4              8              4              7
               Professional services                            9             10             11              8
                                                             ----           ----           ----           ----
                  Total cost of revenues                       13             18             15             15


        Gross profit                                           87             82             85             85

        Operating expenses:
               Selling, general and administrative             94            136            107            119
               Research and development                        28             54             34             38
               Stock based compensation                         5              6             11              4
               Depreciation and amortization                    5             14              5              9
                                                             ----           ----           ----           ----
                  Total operating expenses                    132            210            157            170
                                                             ----           ----           ----           ----
        Loss from operations                                  (45)          (128)           (72)           (85)
        Other income (expense):
               Investment earnings                              1             14              1             14
               Interest expense                                (2)             0             (2)             0
               Other                                            0             (1)             0              0
                                                             ----           ----           ----           ----
                  Total other income (expense)                 (1)            13             (1)            14
                                                             ----           ----           ----           ----
        Loss before income taxes                              (46)          (115)           (73)           (71)
                                                                                           ----           ----
        Income tax benefit                                     --             --             --             --
                                                             ----           ----           ----           ----
        Net loss                                              (46)%         (115)%          (73)%          (71)%
                                                             ====           ====           ====           ====
</TABLE>

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE SAME PERIODS
ENDED SEPTEMBER 30, 2000.

        Revenues. For the quarter ended September 30, 2001, revenues decreased
4% to $4.7million from $4.9 million in the corresponding period of 2000. For the
nine months ended September 30, 2001, revenue increased 65% to $18.8 million
from $11.3 million in the same period in 2000.

        Software segment sales revenue decreased 8% to $3.8 million for the
quarter ended September 30, 2001 from $4.1 million in the corresponding period
of 2000. For the nine months ended September 30, 2000, software segment sales
revenue increased 79% to $15.9 million from $8.9 million in the corresponding
period in 2000. Vector NTI Suite sales revenue increased 9% to $2.5 million for
the quarter ended September 30, 2001 from $2.3 million in the corresponding
period of 2000. GenoMax sales revenue decreased 29% to $1.3 million for the
quarter ended September 30, 2001 from $1.8 million in the corresponding period
of 2000. Vector NTI Suite bookings decreased 29% to $1.8 million for the quarter
ended September 30, 2001 from $2.5 million in the corresponding period of 2000.
GenoMax bookings decreased 48% to $0.6 million for the quarter ended September
30, 2001 from $1.2 million for the corresponding period of 2000. Our revenue
shortfall is attributed primarily to customers delaying purchase decisions for
both our Vector and GenoMax applications as well as the impact of the current
economic downturn.

        Professional services segment revenue increased 14% to $0.9 million for
the quarter ended September 30, 2001 from $0.8 million in the corresponding
period of 2000. For the nine months ended September 30, 2001, professional
services segment revenue increased 18% to $2.9 million from $2.5 million in the
corresponding period in 2000. Increased professional services segment revenue at
quarter-end resulted primarily from increased demand for implementation services
related to our software products. In the third quarter of 2001, services
provided to the NCBI under subcontracts accounted for 79% of professional
services revenue and 15% of consolidated revenues.



                                       15
<PAGE>


        Cost of Revenues. For the quarter ended September 30, 2001, cost of
revenues increased 34% to $0.8 million from $0.6 million in the corresponding
period of 2000. For the nine months ended September 30, 2001, cost of revenue
increased 60% to $2.8 from $1.7 million in the corresponding period in 2000.

        Costs of software license and customer support segment revenue increased
89% to $0.4 million for the quarter ended September 30, 2001 from $0.2 million
in the corresponding period of 2000. For the nine months ended September 30,
2001, costs of software license and customer support segment revenue increased
214% to $1.3 million from $0.4 million in the corresponding period in 2000. This
increase resulted primarily from our payment of fees to BioMax associated with
our distribution of the BioRS integration and retrieval tool. Costs of software
segment revenues also include manufacturing costs incurred on an as needed
basis, cost of product resale, cost of shipping products, and the cost of
providing training and customer support.

        Costs of professional services segment revenues increased 10% to $0.5
million for the quarter ended September 30, 2001 from $0.4 million in the
corresponding period of 2000. For the nine months ended September 30, 2001 costs
of professional services revenues increased 10% to $1.4 million from $1.3
million in the corresponding period in 2000. The increase at quarter-end
resulted primarily from increased personnel supporting customer service of our
software products. Costs of professional services segment revenues consist
primarily of salaries, benefits, and related expenses of our professional
services personnel. We expect the cost of professional services to increase
substantially as we increase our infrastructure to expand our professional
service to include contract development opportunities and value-added consulting
services related to bioinformatics technology, including IT customization and
implementation services and collaborative discovery.

        Margins on our software license and customer support and professional
services revenues improved for the nine month period ended September 30, 2001
compared to the prior period primarily as a result of economies of scale related
to the increasing deal size of our average software sale.

        Selling, General and Administrative Expenses. For the three months ended
September 30, 2001, selling, general and administrative expenses increased 39%
to $6.3 million from $4.6 million in the corresponding period of 2000. For the
nine months ended September 30, 2001, selling, general and administrative
expenses increased 85% to $22.4 million from $12.1 million in the corresponding
period in 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 during the nine-month period as a result of management changes,
recruiting, and the relocation of its corporate headquarters. Headcount and
resources related thereto comprised of the largest portion of this increase.
Overall selling, general and administration headcount for quarter ended
September 30, 2001 was 169 compared to 110 in September 30, 2000.

        Research and Development Expenses. For the three months ended September
30, 2001, research and development expenses increased 89% to $2.5 million from
$1.3 million in the corresponding period of 2000. For the nine months ended
September 30, 2001, research and development expenses increased 87% to $7.1
million from $3.8 million in the corresponding period in 2000. 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 September 30, 2001 was 88 compared to 95 in September 30,
2000.

        Stock Based Compensation. For the three months ended September 30, 2001,
stock based compensation expenses increased 19% to $0.3 million from $0.2
million in the corresponding period of 2000. For the nine months ended September
30, 2001, stock based compensation decreased 35% to $0.8 million from $1.2
million in the corresponding period in 2000. The decrease reflects higher than
typical stock based compensation in the prior period related to discounted stock
option grants and restricted stock awards.

        Income Taxes. We incurred net losses for the three months ended
September 30, 2001 and 2000. We currently have an accumulated net operating loss
carryforward of $43 million of which $31.5 million is a result of the exercise
of non-qualified stock options. There was no tax benefit recognized for the
losses incurred during the quarters ended September 30, 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 $5.4 million for the three months
ended September 30, 2001, compared with a net loss of $2.2 million for the three
months ended September 30, 2000. For the nine months ended September 30, 2001,
we incurred a net loss of $13.5 million compared with a net loss of $8.3 million
for the nine months ended September 30, 2000.



                                       16
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

        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.

        At September 30, 2001, we had $66 million in cash and cash equivalents,
a net increase of $58.2 million from September 30, 2000. Net cash provided by
financing activities was $0.3 million for the nine months ended September 30,
2001 compared to net cash provided by financing activities of $15.5 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 or consider appropriate alliance or acquisition
opportunities. 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 nine months ended September 30, 2001 we generated $20.8
million of cash receipts from operations compared to $11 million for the nine
months ended September 30, 2000. Gross cash used by operations for the nine
months ended September 30, 2001 was $31.6 million compared to $18.6 million for
the nine months ended September 30, 2000. The net increase in cash disbursements
for costs of revenue and operating expenses over the nine month period reflects
the continued growth of our business, particularly as related to personnel and
related infrastructure expenses.

        Net cash used in investing activities was $5.9 million for the nine
months ended September 30, 2001 compared to net cash used in investing
activities of $2.3 million for the comparable period in 2000. The cash used in
investing activities over those periods were primarily for the purchase of
furniture and equipment for our new headquarters.

        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. The Company is in the process of renegotiating the terms of
these agreements. As of the period ending September 30, 2001, the revolving
credit line and equipment line of credit had available facilities of $3.0
million and $2.1 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. 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 $35,610 through October 15, 2002 and $15,830 through March 15,
2003.

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


        On September 21, 2000, we entered into a sublease for approximately
36,190 square feet of office space for our new headquarters in Bethesda,
Maryland. This agreement, which expires on October 31, 2012, requires us to make
rental payments of $1.3 million 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 $1.4 million for which we have
established irrevocable standby letters of credit described below. 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.

          In September and November 2000, respectively, PNC Bank established
irrevocable standby letters of credit in favor of

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<PAGE>

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 letters of
credit. The irrevocable standby letters of credit expire on September 8, 2002
and November 22, 2002, respectively.

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 currently invested in Blackrock
Provident institutional funds.

        Our risk associated with fluctuating interest expense is limited to the
equipment loan facility amount of $900,000 and 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.

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<PAGE>



                          PART II -- OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

        As of September 30, 2001, we have used approximately $18 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, launch our expanded professional services 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

      3.1 Amended Bylaws of the Registrant



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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 12th day of November 2001.

                                                   INFORMAX, INC

                                                   By:
                                                      --------------------
                                                   John M. Green
                                                   Chief Operating Officer and
                                                   Chief Financial Officer



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<PAGE>

EXHIBIT TABLE

3.1   Amended Bylaws of the Registrant









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