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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .
COMMISSION FILE NUMBER
SYMYX TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 77-0397908
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3100 CENTRAL EXPRESSWAY,
SANTA CLARA, CALIFORNIA 95051 (408) 764-2000
(ADDRESS OF PRINCIPAL EXECUTIVE (REGISTRANT'S TELEPHONE NUMBER,
OFFICES INCLUDING ZIP CODE) INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.01 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of voting Common Stock held by non-affiliates of
the registrant (based on the closing price for the Common Stock on the Nasdaq
National Market on March 16, 2001) was approximately $372.3 million. As of March
16, 2001, 30,258,607 shares of Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
CERTAIN SECTIONS OF THE PROXY STATEMENT TO BE FILED IN CONNECTION WITH THE
2000 ANNUAL MEETING OF STOCKHOLDERS ARE INCORPORATED BY REFERENCE INTO PART III
OF THIS FORM 10-K REPORT WHERE INDICATED.
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INDEX
TABLE OF CONTENTS
ITEM PAGE
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PART I
1. Business.................................................... 1
2. Properties.................................................. 14
3. Legal Proceedings........................................... 14
4. Submission of Matters to a Vote of Security Holders......... 14
PART II
5. Market for Registrant's Common Equity and Related 15
Stockholder Matters.........................................
6. Selected Financial Data..................................... 16
7. Management's Discussion and Analysis of Financial Condition 17
and Results From Operations.................................
7A. Quantitative and Qualitative Disclosure About Market Risk... 22
8. Financial Statements and Supplementary Data................. 23
9. Changes in and Disagreements with Accountants on Accounting 42
and Financial Disclosure....................................
PART III
10. Directors and Executive Officers of Registrant.............. 42
11. Executive Compensation...................................... 42
12. Security Ownership of Certain Beneficial Owners and 42
Management..................................................
13. Certain Relationships and Related Transactions.............. 42
PART IV
14. Exhibits, Financial Statement Schedule, and Reports on Form 42
8-K Signatures..............................................
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PART I
ITEM 1. BUSINESS
This discussion and other parts of this Form 10-K contain forward-looking
statements that involve risks and uncertainties. These statements typically may
be identified by the use of forward-looking words or phrases such as "believe,"
"expect," "intend," "anticipate," "should," "planned," "estimated," and
"potential," among others. All forward-looking statements included in this
document are based on our current expectations, and we assume no obligation to
update any such forward-looking statements. The Private Securities Litigation
Reform Act of 1995 provides a "safe harbor" for such forward-looking statements.
In order to comply with the terms of the safe harbor, we note that a variety of
factors could cause actual results and experience to differ materially from the
anticipated results or other expectations expressed in such forward-looking
statements. The risks and uncertainties that may affect the operations,
performance, development, and results of our businesses include but are not
limited to (1) market acceptance of our products and services; (2) uncertainties
relating to the pace, quality or number of discoveries of new materials; (3) the
dependence on collaborators to successfully commercialize products; (4)
uncertainties of patent protection and litigation; (5) future growth strategy;
(6) general economic conditions in the United States and in major European and
Asian markets; (7) earthquakes, power failures and other disasters; and (8)
other factors that might be described from time to time in Symyx Technologies'
filings with the Securities and Exchange Commission and include those set forth
in this Annual Report on Form 10-K as "Risk Factors".
We are a pioneer of high-speed technologies for the discovery of new
materials. Our proprietary technologies, including instruments, software and
methods, represent complete processes designed to cost-effectively accelerate
and fundamentally change materials discovery. We are able to generate hundreds
to thousands of unique materials at a time and screen those materials rapidly
and automatically for desired properties. We believe our approach is up to 100
times faster than traditional research methods and reduces the cost per
experiment to as low as 1% of traditional research methods.
We are applying our technology to discover materials for industrial
customers in the life sciences, chemicals and electronic industries. Our
discovery efforts encompass a broad range of materials, from x-ray storage
phosphors for mammography to polymers to speed DNA separation, thermoelectric
materials for cooling computers and telecommunications equipment, polymers for
personal care applications, lighting phosphors, battery materials, catalysts for
the manufacture of pharmaceutical intermediates, commodity chemicals, plastics
and rubbers.
Our commercialization strategy is to apply our proprietary technologies to
discover materials under our Industry Collaboration and Symyx Proprietary
Materials businesses, and to commercialize select instruments and software
through our Discovery Tools Technology Access business.
In our Industry Collaborations we perform research for customers in
exclusive fields, for which we receive profitable research funding and
downstream royalties or other payments on materials we discover. This past year,
we extended our research collaborations with Celanese to discover catalysts for
the manufacture of commodity chemicals, and with Unilever to discover novel
polymers for home and personal care products. We also initiated four new
collaborations: with ABB to discover catalysts for cleaner automotive fuels,
with Energizer to discover new battery materials, with ExxonMobil Chemical to
discover catalysts for the production of olefins, and with ICI for the discovery
of a variety of industrial materials. Together, these agreements illustrate our
ability to address a surprisingly diverse mix of products and customers,
indicating the broad market opportunities available to us.
We have made considerable progress in our Proprietary Materials business in
2000 by building our product pipeline to fifteen development candidates from
seven at the end of 1999. Certain of these candidates could be introduced into
the market as early as 2002 or 2003, and include an X-ray storage phosphor
licensed to Agfa, a plant protection dispensing agent for BASF, polymers for
personal care applications for Unilever, a DNA separation polymer licensed to
Applied Biosystems, a polyolefin catalyst for Dow, lighting phosphors licensed
to Siemens, and battery materials for Energizer. It is not our expectation that
all of these materials will be commercialized, but we do expect product royalty
revenue to grow as a result of this pipeline.
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During 2000, we continued to expand our revenue pipeline by adding
additional research, license and tools purchase agreements. This revenue comes
from Symyx' partners and customers, which include Applied Biosystems Bayer,
Celanese, Dow, ExxonMobil, ICI and Unilever. The Company currently has a backlog
of over $40 million in committed future revenue.
One of our most advanced discovery efforts is the discovery of new x-ray
phosphors for mammography, achieved in our Agfa program. These materials have
been transferred to Agfa and it is their objective to have products based on
these materials on the market in 2001.
In January 2000, we signed a joint development and licensing agreement with
Applied Biosystems, a unit of Applera Corporation, to develop Symyx' proprietary
polymer synthesis materials and methods for use in the analysis of DNA. This
collaboration was the first to result from Symyx' internal efforts to discover,
develop and commercialize proprietary materials.
In our Discovery Tools business, we completed purchase agreements with five
different customers, including Dow, ExxonMobil, Aventis, the Mexican Petroleum
Institute and GIRSA, and delivered four systems to these customers. We expect to
deliver the remaining contracted systems to ExxonMobil and GIRSA in 2001, and
expand the receipt of license payments from the use of our installed systems.
In August 1999, we established a manufacturing and commercialization
agreement with Argonaut Technologies, Inc. to manufacture and commercialize
small, manual instruments capable of performing 5 - 10 experiments a day. The
first product offering of this collaboration is Endeavor(TM), an 8-cell
continuous-stirred parallel pressure reactor. We are earning royalties on the
sales of products by Argonaut incorporating our technology.
In December 2000, we entered into a license agreement with Zeton Inc., for
them to manufacture and commercialize a Multi-Channel Fixed-Bed Reactor Device.
We will earn royalties on the sales of products by Zeton which incorporate our
technology as well as a license fee over the term of the agreement.
During 2001, we expect to grow our Industry Collaborations, expand our
pipeline of development candidates in our Proprietary Materials business, and
increase our installed base of Discovery Tools.
INDUSTRY BACKGROUND
Materials and their diverse properties contribute in a vital way to many of
the products we use everyday. Examples include the catalysts used in the
manufacture of major chemicals, pharmaceuticals, plastics and rubbers, the
plastics in many of our household and office goods, and luminescent materials in
lighting and computer and television screens. The companies that produce these
materials are facing heightened pressure to achieve growth targets and increase
profitability. Traditional materials discovery relies on an expensive and
time-consuming process of trial and error: making one material; testing it; then
making a different material; testing it and so on. Traditional discovery methods
are not fast enough to keep pace with product life cycles and growth
expectations. As a result, many companies need to reduce costs, increase
innovation, and create new businesses based on proprietary materials.
We believe that we can assist chemical, life science and electronics
companies by discovering new materials in a more productive and cost-effective
manner than by using traditional methods.
The development of combinatorial synthesis and rapid screening methods have
the potential to cost-effectively accelerate materials discovery and
fundamentally change the way materials are discovered. We believe combinatorial
technologies leverage the full potential of personnel by increasing their
experimental productivity by a factor of 100 or more. This promise of a far more
efficient discovery method combined with a greater opportunity for product
innovation is attracting increased attention from the chemical and electronics
industries. We believe that few chemical and electronics companies employ
combinatorial synthesis techniques or have the necessary specialized equipment
available for such activities.
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SYMYX SOLUTION
Our technology provides complete platforms for materials discovery. Using
our miniaturized, automated technology to execute hundreds to thousands of
experiments at a time, our scientists can dramatically increase the probability
of success and reduce the time and costs per experiment to discover new
materials. Using traditional trial and error methods, a team consisting of a
chemist plus a technician could perform 500 to 1,000 experiments per year. In
our labs, that same team could perform up to 50,000 experiments per year. As a
result, our scientists would generate significantly more data, increase the
possibility of discoveries within that timeframe, and reduce the associated
costs per experiment dramatically.
To achieve these efficiencies, we require extensive capabilities in
materials synthesis, screening and data analysis. A particular challenge is the
ability to screen materials for a wide range of properties. For example, to
discover a new catalyst we need to screen how well it performs a specific
chemical reaction, to discover a new polymer we need to screen for physical and
mechanical properties such as molecular weight and toughness.
As a pioneer in combinatorial materials science, we found no existing
technology capable of meeting our synthesis, screening and data analysis
requirements. To address this challenge, we assembled a team of people who have
expertise in the fields of inorganic, physical, polymer and organic chemistries,
physics, engineering and software programming. This team has successfully
designed, built and validated a powerful array of highly specialized proprietary
instruments and software. Our scientists can now synthesize a wide range of
materials and screen for properties including catalytic, chemical, physical,
mechanical, electronic and optical properties.
In addition, we continue to expand our capabilities through the development
of new instruments and software and enhanced versions of existing systems.
Reflecting our position of pioneering the field of high-throughput
discovery of novel materials, we now have 17 issued U.S. patents covering our
methodology, instrumentation, and compositions of matter. We also continued to
aggressively submit new patent applications and have filed over 200 patent
applications worldwide. These patents and applications cover composition of
matter, instruments and methodology and include three issued patents with broad
claims in combinatorial methodologies.
SYMYX STRATEGY
Our objective is to be the leading company using high-speed technologies
for the discovery of new materials with commercially valuable properties. We
have developed a strategy of three business approaches that we intend to follow
in pursuit of our objective:
- Industry Collaborations, in which partners fund research and technology
development programs in exchange for exclusive rights to commercialize
materials discovered in these programs. Work under these research
programs is profitable, and the materials we develop are Proprietary
Materials;
- Symyx Proprietary Materials, where we discover and commercialize
materials discovered in our Industry Collaborations and internally funded
research programs. These materials are commercialized under licensing
arrangements, and we expect to receive higher royalties or payments on
materials discovered through internally funded programs; and
- Discovery Tools Technology Access, in which we sell and license selected
equipment and software to chemical, pharmaceutical and other companies
for their own use.
INDUSTRY COLLABORATIONS
In collaboration with major chemical and other industrial companies, we
seek to discover new polymer formulations, catalysts, pigments and phosphors for
industrial applications.
We provide the platform technologies and effort, and our partners have
rights to develop and commercialize resulting materials within their predefined
field of exclusivity. Typically, we enter into collaborative arrangements to
discover materials that require considerable investment in product development
and manufacturing, as well as extensive marketing efforts. Our collaborative
partners have already developed
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the infrastructure to support these requirements, and may therefore be in a
strong position to commercialize our discoveries.
We receive funding from our collaborative partners through profitable
annual research payments. These payments are made over the term of the research
contract, which is generally one to three years. If a new material is discovered
and commercialized, this is a Proprietary Material on which we will typically
receive either royalties or milestone payments.
The table below indicates some of our collaborative partners and the
primary focus of the collaborations,
PARTNER PRIMARY FOCUS OF COLLABORATIVE EFFORTS
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ABB Lumus Global...................... Environmentally improved automotive fuels
Agfa.................................. X-ray phosphors for radiography
Applied Biosystems.................... Polymers for DNA separation
BASF.................................. Specialty polymers for industrial formulations
Bayer................................. Polyolefins, commodity chemicals
Celanese.............................. Commodity chemicals
Ciba Specialty Chemicals.............. Pigments
Dow Chemical.......................... Polyolefins and pharmaceutical intermediates
Eveready.............................. Battery materials
ExxonMobil............................ Production of olefins
Imperial Chemical Industries (ICI).... High value specialty materials for high quality
industrial applications
Osram OS*............................. Phosphors for lighting
Unilever.............................. Polymers for product formulations used in home
and personal care products
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* an affiliate of Siemens
In order to maintain and grow our research and product pipelines, we intend
to continue to enter into new collaborative arrangements. As a result of these
new arrangements, and the conclusion of existing collaborations upon completion
of research or transfer of development candidates to our collaborative partners
for commercialization, our portfolio of collaborations will change over time. We
expect that new collaborations will come from existing collaborative partners
undertaking new research initiatives as well as new collaborative partners.
SYMYX PROPRIETARY MATERIALS
We have generated a pipeline of 15 development candidates in our
Proprietary Materials business, from our discovery efforts in Industry
Collaborations and our own internally funded programs. This represents a net
increase of 8 candidates during 2000. Our pipeline of 15 development candidates,
as of year end 2000, consisted of 9 which are for life science applications, 3
for commodity chemicals and 3 for electronics.
In 2000, approximately 25% of our research spending was on Symyx funded
research. The focus of our Symyx funded programs is largely on life sciences,
such as materials for genomics and pharmaceutical development, and on industrial
polymer applications. We expect to receive higher royalties or payments on
materials discovered through internally funded programs.
Our first agreement for Proprietary Materials discovered through our
internal efforts was with Applied Biosystems, for polymers to increase
resolution and speed DNA separation. Under this agreement, Applied Biosystems
made a payment for transfer of development candidates, and will also pay us
advance royalties and royalties upon commercialization of materials. We have
also licensed catalysts discovered in internal programs to Ciba Specialty
Chemicals, Lonza and the Dow Chemical Company.
One of our most advanced discovery efforts to date has resulted from our
collaboration with Agfa in the area of discovery of new x-ray phosphors for
radiography. Many groups have worked over the past fifteen years
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to find alternative materials that perform better than existing materials. Under
our collaboration, we have made and screened over 50,000 phosphors, and we
discovered several that have shown the potential to provide higher resolution,
be easier to manufacture and have a longer shelf life than existing materials.
These materials have been transferred to Agfa, and we have been advised by Agfa
that their objective is to have products based on these materials on the market
during late 2001.
DISCOVERY TOOLS TECHNOLOGY ACCESS
Our scientific and technical team has spent considerable time and resources
developing a broad array of instruments, software and know-how in support of our
research. In addition to our alliances, we are seeking to meet the growing
demand for combinatorial technologies by offering access to some of our
equipment and technology. We believe that these programs will enhance, not
detract from, our collaborative arrangement efforts by reinforcing our position
as the leading source for combinatorial technology in materials science.
In 2000, we completed sales agreements with five different customers,
including Dow, ExxonMobil, Aventis, the Mexican Petroleum Institute and GIRSA,
and delivered four systems to these customers. We expect to deliver the
remaining contracted systems to ExxonMobil and GIRSA in 2001, and expand the
receipt of license payments from the use of our installed systems.
We have designed the Discovery Tools that we initially plan to sell to
perform an average of 100 experiments per day. We do not expect that our sale of
Discovery Tools will affect our ability to enter into new research
collaborations. Companies enter into collaborations with us to access all of our
tools including our highest throughput screening equipment designed for new
materials discovery, our scientific and technical staff and our libraries of
catalysts and materials. We do not plan to offer access to these resources as
part of our Discovery Tools program.
In addition to the sale of Discovery Tools, we also believe that there is
significant commercial value in the non-automated laboratory instruments that we
developed to perform small scale parallel synthesis and screening of materials.
We have formed collaborations with Argonaut Technologies, Inc. and Zeton Inc. to
capture this opportunity. We earn royalties on the sale of instruments by
Argonaut and Zeton.
TECHNOLOGY
Our scientists begin the discovery process working with our collaborative
partners or our own business development staff to define the research objective
in terms of the specific properties a new material should have to meet the needs
of a given application. We then apply the components of our combinatorial
process, synthesis, screening and informatics, to discover materials that match
these criteria.
SYNTHESIS
The materials research process begins with chemists' theories about what
elements from the periodic table of elements might be combined to create new
materials with desired properties. However, while chemists working in
traditional labs have to choose the few experiments they will perform on a given
day, our chemists have the ability to perform hundreds or thousands of
experiments at once. Our chemists are therefore able to pursue their theories
both broadly -- across a wide range of elements -- and
comprehensively -- creating materials with the same components in different
ratios.
A Symyx chemist initiates the synthesis process by using Library Studio, a
computer software package created by our programmers to design the group, or
"library," of materials to be synthesized. These instructions, or "recipes," are
then relayed to automated synthesis instruments. These instruments create the
library on a single substrate such as a three-inch diameter silicon wafer or a
96-well plate. The quantity of each compound synthesized is very small,
generally ranging from micrograms to hundreds of milligrams. This contrasts
dramatically with traditional synthesis, where gram to kilogram quantities of a
material are usually necessary. Libraries synthesized on silicon wafers may
range from a few hundred different candidate materials to as many as 25,000,
depending on the type of material and the type of analysis to be done.
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Each material synthesized represents a unique experiment and potential
discovery. The desired end result of these experiments is defined at the outset
of the experiment as a target material having specific performance properties.
Our scientists, in conjunction with our collaborative partners, or independently
for our proprietary discovery programs, set the specific performance properties
and define the desired performance attributes of the target material for a given
application or applications. Generally, these criteria are well beyond the
performance attributes of currently used materials.
SCREENING
Once created, the library is analyzed for desired properties. As with
synthesis, our technical staff has designed and built a broad array of
instruments and software to evaluate different properties under a wide variety
of process conditions. These properties include catalytic, physical, mechanical,
thermal, chemical, electronic and optical properties. In general, a Symyx
chemist can design, synthesize and screen a library in a single day.
To reach the point of commercialization, a candidate material must progress
through an increasingly exhaustive series of tests, or stages, known as hits,
leads and development candidates. First, we screen materials to identify those
materials that have properties defined for the target discovery, called "hits."
Hits are subjected to additional testing and optimization, to find a larger
number of needed properties. Hits also identify areas that merit further
exploration, and new libraries are created using this information. Candidate
materials that continue to meet or exceed the defined criteria are then
classified as "leads." Leads are then transferred to a partner or processed
internally for additional testing and scale up. Leads are then tested on a
larger scale, as bulk samples of 1 to 100 grams, to confirm that the materials
still perform at this "bench scale" level. Once a lead has passed this bench
scale testing by either a collaborative partner or Symyx, it becomes a
development candidate. Finally, if all is successful, the decision will be made
to commercialize the material. Once a material has been identified as a
development candidate, the time to the first sale or commercial usage may be as
short as 1 to 2 years for many pigments, specialty polymers, fine chemicals
catalysts or electronic materials, such as phosphors. Industrial catalysts to
produce high volume commodity chemicals, on the other hand, may require 5 to 7
or more years to reach the market because of the extensive process development
and capital investment involved.
INFORMATICS
A critical factor in our discovery process is the ability to retain and
access the huge amounts of data generated by our synthesis and screening
activities. Given the broad acceptance of high-speed combinatorial discovery in
pharmaceuticals, a number of applications exist to support organic chemistry.
However, those solutions were not sufficient to address the storage and
retrieval needs of our diverse array of inorganic, organometallic and polymer
chemistries. To that end, we have devoted considerable resources to build a
proprietary database capable of addressing our unique needs. Our chemists can
query this database to identify materials screened in the past that possess the
property or properties specified. We believe that this database will emerge as a
powerful tool in accelerating materials discovery by enabling our scientists to
benefit from the cumulative effect of all of our research. Although we typically
cannot use leads and development candidates identified in one collaborative
program for other collaborative programs or for our proprietary research,
materials screened in one program without success may have properties that make
them useful in other programs.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
Our success depends upon our proprietary technology. There are five general
areas that may be patented using our combinatorial approach:
- library synthesis methods;
- the libraries themselves;
- screening or characterization methods;
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- equipment and software; and
- new materials.
During 2000, we were issued 3 U.S. patents containing broad claims covering
our methodology. In addition, we were also issued U.S. patents for some of our
instrumentation and compositions of matter, and we continued to aggressively
submit new patent applications throughout the year 2000. As a result, we now
have 17 issued U.S. patents and over 200 patent applications on file worldwide.
We co-own 3 of the issued United States patents and some of the pending patent
applications with Lawrence Berkeley National Laboratory, on behalf of The
Regents of the University of California. We have an exclusive license to these
patents and patent applications from Lawrence Berkeley National Laboratory,
which was agreed to upon formation of the Company. In addition to patents, we
rely on copyright, trademark and trade secret rights, confidentiality procedures
and licensing arrangements to establish and protect our proprietary rights.
As part of our confidentiality and trade secret protection procedures, we
enter into non-disclosure agreements with our employees, consultants and
potential collaborative partners. Despite these precautions, third parties could
obtain and use our products or technology without authorization, or develop
similar technology independently. It is difficult for us to police unauthorized
use of our methods. Effective protection of intellectual property rights is
unavailable or limited in some foreign countries. The protection of our
proprietary rights may be inadequate and our competitors could independently
develop similar technology, duplicate our products or design around any patents
or other intellectual property rights we hold.
COMPETITION
We are aware of some chemical companies with internal combinatorial
programs. In addition, two European based companies, Avantium and HTE may also
use combinatorial approaches to materials discovery. In addition, academic and
research institutions may seek to develop technologies that would be competitive
with our systems for materials discovery. Because combinatorial materials
science is an emerging field, competition from additional entrants may increase.
Some of our competitors may be addressing the same materials targets as
Symyx or our collaborative partners. Many of our current and potential
competitors, either alone or together with their collaborative partners, have
greater financial, manufacturing, marketing and sales resources than we do.
Accordingly, our competitors may succeed in obtaining patent protection or
commercializing products before us. If we commence commercial product sales, we
will be competing against companies with greater marketing, sales and
manufacturing capabilities, areas in which we have limited or no experience.
EMPLOYEES
As of December 31, 2000, we had a total of 193 employees, including 153
scientific and technical employees and 40 people in business development, legal
and general and administrative services. None of our employees are represented
by a labor union, and we consider our employee relations to be good.
RISK FACTORS
All statements in this annual report that do not discuss past results are
forward-looking statements. Forward-looking statements are based on management's
current expectations and are therefore subject to certain risks and
uncertainties. Any of the following risks could seriously harm our business,
financial condition or results of operations. As a result, these risks could
cause the decline of the trading price of our Common Stock. The risks described
below, however, are not the only ones that we face. You should also refer to the
other information set forth in this annual report, including our financial
statements and the related notes.
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WE ARE DEPLOYING NEW TECHNOLOGY IN A NEW BUSINESS AND, AS A RESULT, WE MAY NOT
BE ABLE TO ACHIEVE PROFITABILITY
Our combinatorial materials discovery technologies and processes are new.
To date, our partners have not successfully commercialized as products any
materials that we have discovered using these technologies and processes.
Discovery and development of new materials is a highly uncertain process.
Accordingly, because of these uncertainties, our discovery process may not
result in the identification of development candidates we or our partners will
commercialize. If we are not able to use our technologies to discover new
materials with significant commercial potential, we will be unable to achieve
our objectives or build a sustainable or profitable business.
WE ARE DEPENDENT ON THE DEVELOPMENT ACTIVITIES OF COMPANIES IN THE CHEMICAL,
LIFE SCIENCES AND ELECTRONICS INDUSTRIES, AND DECLINES OR REDUCTIONS IN RESEARCH
AND DEVELOPMENT ACTIVITIES IN THESE INDUSTRIES COULD HARM OUR BUSINESS
The market for our discovery services and instrumentation within the
chemical, life sciences and electronics industries depends on our customers'
ability and willingness to invest in research and development. A majority of our
revenues are attributable to our research collaborations. Our future revenues
are dependent on funding of our research collaborations, licensing of
proprietary materials and sales of Discovery Tools.
In particular, many companies in the chemical industry have, in the past
several years, experienced declining profitability. In addition, many chemical
products have become commodity products which compete primarily on the basis of
price. As a result, some chemical companies have reduced their research and
development activities. If commoditization of chemical products and other
pressures affecting the industry continue in the future, more companies could
adopt strategies that involve significant reductions in their research and
development programs. Although we believe that our approach can help life
science, chemical and electronic companies increase the efficiency of their
research and development activities, our efforts to convince them of this value
may be unsuccessful. To the extent that life science, chemical and electronic
companies reduce their research and development activities, they would be less
likely to do business with us. Decisions by these companies to reduce their
research and development activities could therefore reduce our revenues and harm
our business and operating results.
WE ARE DEPENDENT UPON ACCEPTANCE OF OUR TECHNOLOGY AND APPROACH BY CUSTOMERS,
AND IF WE CANNOT ACHIEVE MARKET ACCEPTANCE FROM POTENTIAL CUSTOMERS, WE WILL BE
UNABLE TO BUILD A SUSTAINABLE OR PROFITABLE BUSINESS
Our ability to succeed is also dependent upon the acceptance by potential
customers of our high throughput screening technology as an effective tool in
the discovery of new materials. Historically, life science and chemical
companies have conducted materials research and discovery activities internally
using traditional manual discovery methods. In order for us to achieve our
business objectives, we must convince these companies that our technology and
capabilities justify outsourcing part of their basic research and discovery
programs. If we cannot convince companies in the chemical industry of the
effectiveness of our automated discovery methods, we may be unable to keep our
existing customers or attract additional customers on acceptable terms or
develop a sustainable, profitable business.
WE CANNOT PREDICT THE PACE, QUALITY OR NUMBER OF DISCOVERIES WE MAY GENERATE,
AND ANY INABILITY OF OURS TO GENERATE A SIGNIFICANT NUMBER OF DISCOVERIES WOULD
REDUCE OUR REVENUES AND HARM OUR BUSINESS
Our future revenues and profitability are dependent upon our ability to
achieve discoveries. Because of the inherently uncertain nature of research
activities, we cannot predict with a high level of precision the pace with which
we may generate discoveries or the quality of any discoveries that we may
generate. Due to the uncertain nature of materials discovery, in which several
hundred thousand compounds must often be screened to identify a single
development candidate, we may not generate the number of discoveries that we
would expect to generate from a given number of experiments. In addition, our
development candidates may not result in products having the commercial
potential we or our collaborators anticipate. In either case, our future
revenues from our research collaborations and from commercialization of products
would likely decline.
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In addition, our existing and potential new customers may become reluctant to
renew or enter into new agreements with us. As a result, our failure to generate
discoveries and development candidates would reduce our revenues and harm our
business and operating results.
WE CONDUCT PROPRIETARY RESEARCH PROGRAMS, AND ANY CONFLICTS WITH OUR
COLLABORATORS OR ANY INABILITY TO COMMERCIALIZE DEVELOPMENT CANDIDATES RESULTING
FROM THIS RESEARCH WOULD HARM OUR BUSINESS
Our strategy involves conducting proprietary research programs. These
programs are focused on discovery of products for specialty markets that have
fewer barriers to entry for an emerging company. In general, our collaborative
research programs are focused on commodity chemical markets, which are larger
than fine chemical and specialty chemical markets that are the focus of our
proprietary programs. We believe that this differentiation of focus will enable
us to minimize conflicts with our collaborators relating to rights to
potentially overlapping leads developed through our proprietary programs and
through programs funded by a collaborator. However, conflicts between us and a
collaborator could potentially arise, particularly if we were to discover a
material in one of our proprietary programs that was a potential target of one
of our collaborative programs. In this event, we may become involved in a
dispute with our collaborator regarding the material. Disputes of this nature
could harm the relationship between us and our collaborator, and concerns
regarding our proprietary research programs could also affect our ability to
enter into new collaborative relationships. If circumstances surrounding our
proprietary research programs were to affect our existing collaborative
relationships or our ability to enter into new relationships, our revenues and
operating results would decline.
In addition, we will either commercialize development candidates resulting
from our proprietary programs directly or through licensing to other companies.
In order for us to commercialize these development candidates directly, we would
need to develop, or obtain through outsourcing arrangements, the capability to
manufacture, market and sell products. We do not have this capability, and we
may not be able to develop or otherwise obtain the requisite manufacturing,
marketing and sales capabilities. If we are unable to successfully commercialize
products resulting from our proprietary research efforts, our revenues and
operating results would decline.
WE ARE DEPENDENT ON OUR COLLABORATIONS WITH MAJOR COMPANIES, AND THE FAILURE OF
OUR COLLABORATIVE PARTNERS TO SUCCESSFULLY COMMERCIALIZE PRODUCTS WOULD REDUCE
OUR REVENUES AND HARM OUR BUSINESS
To date, substantially all of our revenues have come from collaborative
arrangements with chemical, electronics and life science companies. These
contracts generally expire after a fixed period of time. If they are not renewed
or if we do not enter into new collaborative arrangements, our business and
operating results may be harmed. For example, our contracts with the B.F.
Goodrich Company and Hoechst AG were terminated by mutual agreement as these
companies shifted their business away from chemicals.
For us to achieve and sustain a significant level of profitability, we must
achieve discoveries with significant commercial potential, and our collaborators
must successfully commercialize products based on our discoveries. We will not
receive royalties on sales of products by our collaborators until the
collaborator has commenced commercial sales of a product resulting from the
collaboration. We are dependent upon our collaborative partners to successfully
commercialize products resulting from our collaborations. The failure of our
partners to commercialize development candidates resulting from our research
efforts would reduce our revenues and would harm our business and operating
results.
WE HAVE A LIMITED NUMBER OF CONTRACTS FOR DISCOVERY TOOLS SYSTEMS TO DATE, AND
WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO BUILD A SUSTAINABLE BUSINESS
RELATED TO THE SALE OF ADDITIONAL SYSTEMS
To date, we have a limited number of contracts for our recently initiated
Discovery Tools systems. Because of the high cost and complexity of these
systems, the sales cycle for them has been and is likely to continue to be long.
Sales of these systems will require us to educate our potential customers about
the full
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benefits of these systems, which may require significant time. Due to these
factors, sales of Discovery Tools systems will be subject to a number of
significant risks over which we have little or no control, including:
- customers' budgetary constraints and internal acceptance review
procedures;
- complexity of our systems and difficulties we may encounter in meeting
individual customer specifications and commitments on a timely basis;
- the fact that there may be only a limited number of customers that are
willing to pay several million dollars for our systems;
- a long sales cycle that involves substantial human and capital resources;
and
- potential downturns in general or in industry specific economic
conditions.
Because we expect future revenue growth from the sale of Discovery Tools,
our revenues may decline or not grow as anticipated if we are unable to build
the infrastructure to support this business or if the sales or build cycles for
Discovery Tools systems lengthens unexpectedly.
WE DEPEND ON A LIMITED NUMBER OF SUPPLIERS AND WILL BE DELAYED IN OUR
MANUFACTURE OR UNABLE TO MANUFACTURE OUR DISCOVERY TOOLS IF SHIPMENTS FROM THESE
SUPPLIERS ARE DELAYED OR INTERRUPTED
Key parts of our Discovery Tools systems are currently available only from
a single source or a limited number of sources. In addition, components of our
capital equipment are available from one of only a few suppliers. In the event
that supplies from these vendors were delayed or interrupted for any reason, we
may not be able to get equipment or components for Discovery Tools systems or
our own research efforts in a timely fashion or in sufficient quantities or
under acceptable terms.
Even if alternative sources of supply are available, it could be time
consuming and expensive for us to qualify new vendors. In addition, we are
dependent on our vendors to provide components of appropriate quality and
reliability. Consequently, in the event that supplies from these vendors were
delayed or interrupted for any reason, we could be delayed in our ability to
develop and deliver products to our customers.
WE COMMERCIALIZE CERTAIN MANUAL LABORATORY INSTRUMENTS THROUGH THIRD PARTY
ARRANGEMENTS, AND IF THESE THIRD PARTIES DO NOT PERFORM EFFECTIVELY, OUR ABILITY
TO GENERATE REVENUE FROM THE SALE OF THESE PRODUCTS WILL BE HARMED
We commercialize certain manual laboratory instruments through our
relationships with Argonaut Technologies and Zeton Inc. The commercial success
of these instruments will depend in large part on their features and price as
compared to competing products and on their ability to achieve market
acceptance. In addition, our ability to realize significant commercial sales of
these instruments will also depend on the efforts of Argonaut and Zeton in
promoting, marketing and selling these instruments. Zeton and Argonaut's efforts
in this regard will be outside of our control. Accordingly, to the extent that
they fail to effectively promote, market and sell our manual instruments, our
revenues from the sales of these instruments, and therefore our operating
results, would be harmed.
Our ability to commercialize future manual laboratory instruments is
dependant upon securing new partners with the appropriate expertise or extending
existing relationships. To the extent that we fail to secure new partners or
extend existing relationships, or these partners fail to effectively promote,
market and sell our manual instruments, our revenues from the sales of these
instruments, and therefore our operating results, would be harmed.
WE EXPECT THAT OUR QUARTERLY RESULTS OF OPERATIONS WILL FLUCTUATE, AND THIS
FLUCTUATION COULD CAUSE OUR STOCK PRICE TO DECLINE, CAUSING INVESTOR LOSSES
Our quarterly operating results have fluctuated in the past and are likely
to do so in the future. These fluctuations could cause our stock price to
fluctuate significantly or decline. Revenues in future fiscal periods
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may be greater or less than revenues in the immediately preceding period or in
the comparable period of the prior year. Some of the factors which could cause
our operating results to fluctuate include:
- expiration of research contracts with major chemical companies, which may
not be renewed or replaced with contracts with other companies;
- the success rate of our discovery efforts associated with milestones and
royalties;
- the timing and willingness of partners to commercialize our discoveries
which would result in royalties;
- the size and timing of customer orders for, and shipments of, Discovery
Tools instrumentation;
- the size and timing of late stage licensing agreements we may enter into;
and
- general and industry specific economic conditions, which may affect our
customers' capital investment levels.
A large portion of our expenses, including expenses for facilities,
equipment and personnel, are relatively fixed in nature. Accordingly, in the
event revenues decline or do not grow as anticipated due to expiration of
research contracts, failure to obtain new contracts or other factors, we may not
be able to correspondingly reduce our operating expenses. In addition, we plan
to significantly increase operating expenses in 2001. Failure to achieve
anticipated levels of revenues could therefore significantly harm our operating
results for a particular fiscal period.
Due to the possibility of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. Our operating results in some
quarters may not meet the expectations of stock market analysts and investors.
In that case, our stock price would probably decline, and investors would
experience a decline in the value of their investment.
THE LOSS OF KEY PERSONNEL OR THE INABILITY TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS
We believe our future success will depend upon our ability to attract and
retain highly skilled personnel, including W. Henry Weinberg, our Senior Vice
President and Chief Technical Officer, and other key scientific and managerial
personnel. We do not have any key-person life insurance relating to our key
personnel. These employees are at-will and not subject to employment contracts.
We may not be successful in attracting and retaining key personnel in the
future.
As we seek to expand our operations, the hiring of qualified scientific and
technical personnel will be difficult due to the limited availability of
qualified professionals. The number of people with experience in the fields of
combinatorial materials science and combinatorial chemistry is limited, and we
face intense competition for these types of employees. We have in the past
experienced difficulty in recruiting qualified personnel. Failure to attract and
retain personnel, particularly scientific and technical personnel, would impair
our ability to grow our business and pursue new discovery initiatives and
collaborative arrangements.
COMPETITION COULD INCREASE, AND COMPETITIVE DEVELOPMENTS COULD RENDER OUR
TECHNOLOGIES OBSOLETE OR NONCOMPETITIVE, WHICH WOULD REDUCE OUR REVENUES AND
HARM OUR BUSINESS
The field of combinatorial materials science is increasingly competitive.
We are aware of companies that may apply their expertise in combinatorial
chemistry to materials research and development. We are also aware of some
companies that have internal combinatorial programs. In addition, there are
companies focusing on aspects of combinatorial chemistry for the discovery of
materials, including Avantium in The Netherlands and HTE in Heidelberg, Germany.
In addition, academic and research institutions may seek to develop technologies
that would be competitive with our systems for materials discovery. Because
combinatorial materials science is an emerging field, competition from
additional entrants may increase.
Many of our current and potential competitors have greater financial,
manufacturing, marketing and sales resources than we do. In addition, some of
our existing competitors may, individually or together with companies affiliated
with them, have greater human and scientific resources than we do. Our
competitors
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could develop technologies and methods for materials research and discovery that
render our technologies and systems obsolete or less competitive. Any
competitive developments of this nature would make our technologies and
methodologies less competitive. Accordingly, if competitors introduce new
materials discovery technologies that are faster or more cost-effective than our
technologies, customers may switch to these new technologies. We would then
experience a decline in our revenues and operating results.
ANY INABILITY OF OURS TO KEEP PACE WITH TECHNOLOGICAL ADVANCES AND EVOLVING
INDUSTRY STANDARDS WOULD HARM OUR BUSINESS
The market for our products is characterized by continuing technological
development, evolving industry standards and changing customer requirements. Due
to increasing competition in our field, it is likely that the pace of innovation
and technological change will increase. The introduction of products by our
direct competitors or others embodying new technologies, the emergence of new
industry standards or changes in customer requirements could render our existing
products obsolete, unmarketable or less competitive. Our success depends upon
our ability to enhance existing products and services and to respond to changing
customer requirements. Failure to develop and introduce new products and
services, or enhancements to existing products, in a timely manner in response
to changing market conditions or customer requirements will harm our future
revenues and our business and operating results.
OUR INABILITY TO ADEQUATELY PROTECT OUR PROPRIETARY TECHNOLOGY COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS
The success of our business depends on our ability to protect our
intellectual property portfolio and obtain patents without infringing the
proprietary rights of others. If we do not effectively protect our intellectual
property, our business and operating results could be harmed.
Patents may not issue from our applications. Even if we are able to obtain
patents covering our technology, the patents may be challenged, circumvented,
invalidated or unenforceable. Competitors may develop similar technology or
design around any patents issued to us or our other intellectual property
rights. Our competitors would then be able to offer research services and
develop, manufacture and sell products which compete directly with our research
services and products. In that case, our revenues and operating results would
decline.
We also seek to protect our technology and processes in part by
confidentiality agreements with our collaborators, employees and consultants. We
also do not provide broad access to our proprietary technologies and processes
to collaborators. However, confidentiality agreements might be breached by
collaborators, former employees or others, and in that event, we might not have
adequate remedies for the breach. Further, our trade secrets might otherwise
become known or be independently discovered by competitors. Unauthorized
disclosure of our trade secrets could enable competitors to use some of our
proprietary technologies. This would harm our competitive position and could
cause our revenues and operating results to decline.
LITIGATION OR OTHER PROCEEDINGS OR THIRD PARTY CLAIMS OF INFRINGEMENT COULD
REQUIRE US TO SPEND TIME AND MONEY AND COULD SHUT DOWN SOME OF OUR OPERATIONS
We may receive communications from others in the future asserting that our
business or technologies infringe their intellectual property rights. If we
became involved in litigation or interference proceedings declared by the United
States Patent and Trademark Office, or oppositions or other intellectual
property proceedings outside of the United States, to defend our intellectual
property rights or as the result of alleged infringement of the rights of
others, we might have to spend significant amounts of money. The litigation or
proceedings could divert our management's time and efforts. An adverse ruling,
including an adverse decision as to the priority of our inventions, would
undercut or invalidate our intellectual property position. An adverse ruling
could also subject us to significant liability for damages or prevent us from
using or marketing systems, processes or products. Any of these events would
have a negative impact on our business and operating results. Even unsuccessful
claims could result in significant legal fees and other expenses, diversion of
management's
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time and disruptions in our business. Uncertainties resulting from the
initiation and continuation of any patent or related litigation could harm our
ability to compete, pending resolution of the disputed matter.
We believe we have taken adequate measures to assess the validity of our
intellectual property rights. We are not currently involved in any disputes with
third parties regarding intellectual property rights. However, we may become
involved in intellectual property disputes or receive communications from others
in the future asserting that our business or technologies infringe their
intellectual property rights. To settle these disputes, we may need to obtain
licenses to patents or other proprietary rights held by others. However, these
licenses might not be available on acceptable terms, or at all. In that event,
we could encounter delays in system, process or product introductions while we
attempt to design around the patents. Our redesigned systems, processes or
products may be inferior to our original designs or we may be unable to continue
system, process or product development in the particular field. In either case,
our competitive position, business, revenues and operating results would likely
suffer.
WE USE HAZARDOUS MATERIALS IN OUR BUSINESS, AND ANY CLAIMS RELATING TO IMPROPER
HANDLING, STORAGE OR DISPOSAL OF THESE MATERIALS COULD SUBJECT US TO SIGNIFICANT
LIABILITIES
Our business involves the use of a broad range of hazardous chemicals and
materials. Environmental laws impose stringent civil and criminal penalties for
improper handling, disposal and storage of these materials. In addition, in the
event of an improper or unauthorized release of, or exposure of individuals to,
hazardous materials, we could be subject to civil damages due to personal injury
or property damage caused by the release or exposure. A failure to comply with
environmental laws could result in fines and the revocation of environmental
permits, which could prevent us from conducting our business. Accordingly, any
violation of environmental laws or failure to properly handle, store or dispose
of hazardous materials could result in restrictions on our ability to operate
our business and could require us to incur potentially significant costs for
personal injuries, property damage and environmental cleanup and remediation.
OUR FACILITIES ARE LOCATED NEAR KNOWN EARTHQUAKE FAULT ZONES, AND THE OCCURRENCE
OF AN EARTHQUAKE OR OTHER DISASTER COULD CAUSE DAMAGE TO OUR FACILITIES AND
EQUIPMENT AND HARM OUR BUSINESS
Our facilities are located in the Silicon Valley near known earthquake
fault zones and are vulnerable to damage from earthquakes. In October 1989, a
major earthquake that caused significant property damage and a number of
fatalities struck this area. We are also vulnerable to damage from other types
of disasters, including fire, floods, power loss, communications failures and
similar events. Recently, California has been experiencing a shortage of
electrical supply that has resulted in intermittent loss of power in the form of
rolling blackouts. In the event these blackouts continue or increase in
severity, they could disrupt the operations of our facilities. If any disaster
were to occur, our ability to operate our business at our facilities would be
seriously, or potentially completely, impaired. In addition, the unique nature
of our research activities and of much of our equipment could make it difficult
for us to recover from a disaster. The insurance we maintain may not be adequate
to cover our losses resulting from disasters or other business interruptions.
Accordingly, an earthquake or other disaster could harm our business and
operating results.
SOME OF OUR EXISTING STOCKHOLDERS CAN EXERT CONTROL OVER US, AND MAY NOT MAKE
DECISIONS THAT ARE IN THE BEST INTERESTS OF ALL STOCKHOLDERS
Our officers, directors and principal stockholders (greater than 5%
stockholders) together control a significant percentage of our outstanding
common stock. As a result, these stockholders, if they act together, will be
able to exert a significant degree of influence over our management and affairs
and over matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions. This concentration
of ownership may have the effect of delaying or preventing a change in control
of Symyx and might affect the market price of our common stock, even when such a
change may be in the best interests of all stockholders.
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OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE
The market price of our common stock since our initial public offering has
increased dramatically and has been highly volatile. Volatility in the market
price for our common stock will be affected by a number of factors, including
the following:
- the announcement of new products or services by us or our competitors;
- quarterly variations in our or our competitors' results of operations;
- failure to achieve operating results projected by securities analysts;
- changes in earnings estimates or recommendations by securities analysts;
- developments in our industry; and
- general market conditions and other factors, including factors unrelated
to our operating performance or the operating performance of our
competitors.
These factors and fluctuations, as well as general economic, political and
market conditions, may materially adversely affect the market price of our
common stock.
PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD
PREVENT A CHANGE IN OUR CONTROL, EVEN IF THIS WOULD BE BENEFICIAL TO
STOCKHOLDERS
Provisions of our amended and restated certificate of incorporation, bylaws
and Delaware law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. These provisions
include:
- a classified board of directors, in which our board is divided into three
classes with three year terms with only one class elected at each annual
meeting of stockholders, which means that a holder of a majority of our
common stock will need two annual meetings of stockholders to gain
control of the board;
- a provision which prohibits our stockholders from acting by written
consent without a meeting;
- a provision which permits only the board of directors, the president or
the chairman to call special meetings of stockholders; and
- a provision which requires advance notice of items of business to be
brought before stockholders meetings.
These provisions can be amended only with the vote of the holders of
66 2/3% of our outstanding capital stock.
ITEM 2. PROPERTIES
Our facilities currently consist of an aggregate of approximately 104,300
square feet of office, research and laboratory space in several locations in
Santa Clara and Sunnyvale, California, pursuant to leases that expire from 2002
to 2010. These facilities include a building of approximately 36,500 square
feet, which we began to occupy early in the first quarter of 2001.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK MATTERS
The Company's Common Stock is traded on the Nasdaq National Market System
under the symbol of SMMX. The following table sets forth, for the period
indicated, the low and high bid prices per share for the Company's Common Stock
as reported by the Nasdaq National Market.
LOW HIGH
------ ------
1999
Fourth Quarter........................................... $18.00 $35.81
2000
First Quarter............................................ $29.63 $80.00
Second Quarter........................................... $18.73 $47.75
Third Quarter............................................ $33.75 $52.38
Fourth Quarter........................................... $28.13 $50.44
As of February 28, 2001, there were approximately 297 holders of record of
the Company's Common Stock.
No dividends have been paid on the Common Stock since the Company's
inception and the Company currently intends to retain all future earnings, if
any, for use in its business and does not anticipate paying any cash dividends
in the foreseeable future.
USE OF PROCEEDS
On November 18, 1999, a Registration Statement on Form S-1 (No. 333-87453)
was declared effective by the Securities and Exchange Commission, pursuant to
which 6,368,700 shares of the Company's Common Stock, no par value, were offered
and sold for the account of the Company at a price of $14.00 per share,
generating gross offering proceeds of $89.2 million for the account of the
Company. The managing underwriters for the offering were Credit Suisse First
Boston, Donaldson, Lufkin & Jenrette, Invemed Associates and Schroder & Co. Inc.
From the effective date of the Registration Statement to December 31, 1999,
the Company incurred $6.3 million in underwriting discounts and commissions and
$1.5 million in other related expenses. Total expenses incurred in connection
with the offering were $7.8 million. The net proceeds of the offering, after
deducting the foregoing expenses, were $81.4 million. No direct or indirect
payments were made to directors, officers, or general partners of the Company or
their associates, or to persons owning 10% or more of any class of equity
securities of the Company and its affiliates.
From the effective date of the Registration Statement to December 31, 2000,
the Company estimates that it has used a portion of the net proceeds of the
offering as follows:
Aggregate offering price.................................... $89,161,800
Expenses incurred in connection with offering............... 7,741,326
-----------
Net offering proceeds to issuer............................. 81,420,474
Purchase of equipment....................................... 12,488,019
Temporary investment in marketable securities............... 23,407,647
Working capital............................................. 45,524,808
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ITEM 6. SELECTED FINANCIAL DATA
The following selected historical information has been derived from the
audited financial statements of the Company. The financial information as of
December 31, 2000 and 1999 and for each of the three years in the period ended
December 31, 2000 are derived from audited financial statements and are included
elsewhere in this Form 10-K. The table should be read in conjunction with Item
7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Item 8. "Financial Statements and Supplementary Data."
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------
1996 1997 1998 1999 2000
------- ------- ------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENTS OF OPERATIONS DATA:
Revenues:
Revenue from collaborations.................. $ -- $ 4,806 $13,787 $ 30,497 $ 34,999
Product and license revenues................. -- -- -- -- 8,319
------- ------- ------- -------- --------
Total revenues....................... -- 4,806 13,787 30,497 43,318
Operating expenses:
Cost of products sold........................ -- -- -- -- 2,775
Research and development..................... 2,483 8,764 17,813 26,628 35,898
General and administrative................... 567 2,129 4,515 7,624 11,798
------- ------- ------- -------- --------
Total operating expenses............. 3,050 10,893 22,328 34,252 50,471
------- ------- ------- -------- --------
Loss from operations........................... (3,050) (6,087) (8,541) (3,755) (7,153)
Interest income................................ 375 843 1,117 2,542 7,155
Interest and other expense..................... (6) (352) (731) (934) (924)
------- ------- ------- -------- --------
Net loss....................................... $(2,681) $(5,596) $(8,155) $ (2,147) $ (922)
======= ======= ======= ======== ========
Basic and diluted net loss per share........... $ (1.24) $ (1.97) $ (2.13) $ (0.27) $ (0.03)
======= ======= ======= ======== ========
Shares used in computing basic and diluted net
loss per share............................... 2,168 2,845 3,829 8,087 28,873
======= ======= ======= ======== ========
DECEMBER 31,
-------------------------------------------------
1996 1997 1998 1999 2000
------- ------- ------- -------- --------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash, cash equivalents and marketable
securities................................... $ 9,349 $20,614 $35,121 $119,270 $111,040
Working capital................................ 8,789 9,860 15,701 33,299 9,633
Total assets................................... 10,674 34,861 52,903 148,305 146,221
Long-term obligations, less current portion.... -- 4,455 7,591 6,729 3,010
Total stockholders' equity..................... 10,283 25,030 36,166 119,943 123,651
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
FROM OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Form 10-K contain forward-looking
statements that involve risks and uncertainties. These statements typically may
be identified by the use of forward-looking words or phrases such as "believe,"
"expect," "intend," "anticipate," "should," "planned," "estimated," and
"potential," among others. All forward-looking statements included in this
document are based on our current expectations, and we assume no obligation to
update any such forward-looking statements. The Private Securities Litigation
Reform Act of 1995 provides a "safe harbor" for such forward-looking statements.
In order to comply with the terms of the safe harbor, we note that a variety of
factors could cause actual results and experience to differ materially from the
anticipated results or other expectations expressed in such forward-looking
statements. The risks and uncertainties that may affect the operations,
performance, development, and results of our businesses include but are not
limited to (1) market acceptance of our products and services; (2) uncertainties
relating to the pace, quality or number of discoveries of new materials; (3) the
dependence on collaborators to successfully commercialize products; (4)
uncertainties of patent protection and litigation; (5) future growth strategy;
(6) general economic conditions in the United States and in major European and
Asian markets; (7) earthquakes, power failures and other disasters; and (8)
other factors that might be described from time to time in our periodic filings
with the Securities and Exchange Commission and include those set forth under
"Risk Factors" and elsewhere in this Annual Report on Form 10-K.
OVERVIEW
Symyx was founded in September 1994 and began significant operations in
April 1996. To date, our revenues and cash flows from operations have come from
research collaborations with large chemical, life science and electronics
companies, license of proprietary materials, sale and license of instruments and
software, and government grants. Our partners and customers include ABB Lumus
Global, Applied Biosystems, BASF AG, Bayer AG, Celanese Ltd., The Dow Chemical
Company, Eveready, ExxonMobil, GIRSA, ICI, Instituto Mexicano Del Petroleo,
Unilever UK Central Resources Ltd. and a number of undisclosed Partners. We
expect that our cash flows and revenue for 2001 will be comprised in large part
of payments to be made and revenue to be earned under these and new agreements
together with product and license revenue particularly from our Discovery Tools
business.
We have invested heavily in establishing the technology, instrumentation
and informatics necessary to pursue high throughput discovery for proprietary
materials. These materials include:
- polymers, phosphors and catalysts for life science applications;
- catalysts to manufacture commodity chemicals and polyolefins; and
- new materials for electronic applications.
These investments contributed to revenue increases from $13.8 million in
1998 to $30.5 million in 1999 to $43.3 million in 2000. Operating expenses
increased from $22.3 million in 1998 to $34.3 million in 1999 to $50.5 million
in 2000. Our total headcount increased from 108 employees at the end of 1998 to
170 employees at the end of 1999 and to 193 employees at the end of 2000.
We expect to continue to make significant investments in research and
development, including the development of new instruments and software, to
enhance our technologies. In addition, an important part of our strategy is to
expand our operations and employee base, and to build our resources for research
and development, business development and marketing.
We have incurred significant losses since our inception. As of December 31,
2000, our accumulated deficit was approximately $20.0 million.
SOURCES OF REVENUE AND REVENUE RECOGNITION POLICY
We recognize revenue from the sale of Discovery Tools once customer
acceptance has been achieved. If there are extended payment terms, we recognize
revenue as the payments become due. We recognize revenue
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from research collaboration agreements and government grants as earned upon
achievement of the performance requirements of the agreements and grants.
Payments received that are related to future performance are deferred and
recognized as revenue as the performance requirements are achieved. As of
December 31, 2000, we had deferred revenues of approximately $9.7 million. The
terms of our collaboration agreements generally require us to perform minimum
levels of research. Our sources of potential revenue for the next several years
are likely to be:
- payments under existing and possible future collaborative arrangements;
- government research grants;
- royalties from our partners based on revenues received from any products
commercialized under those agreements;
- sales of Discovery Tools and other instruments; and
- sales of any products discovered in our internal research programs.
See Notes 1 and 2 of Notes to Financial Statements.
DEFERRED COMPENSATION
Deferred compensation for options granted to employees has been determined
as the difference between the deemed fair market value of our common stock on
the date options were granted and the exercise price. Deferred compensation for
options granted to consultants has been determined in accordance with Statement
of Financial Accounting Standards No. 123 as the fair value of the equity
instruments issued. Deferred compensation for options granted to consultants is
periodically remeasured as the underlying options vest.
In connection with the grant of stock options to employees and consultants,
we recorded deferred stock compensation of approximately $5.4 million in the
year ended December 31, 1999 and $760,000 in the year ended December 31, 1998.
These amounts were initially recorded as a component of stockholders' equity and
are being amortized by charges to operations over the vesting period of the
options using the graded vesting method. We recorded amortization of deferred
compensation of approximately $760,000 for 2000, $3.8 million for 1999 and
$188,000 in 1998. The amortization expense relates to options awarded to
employees and consultants in all operating expense categories. See Note 4 of
Notes to Financial Statements.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 2000
Revenues
Our total revenues increased to $43.3 million in 2000, up 42% from $30.5
million in 1999. This increase was due primarily to the introduction of our
Discovery Tools business which generated $6.3 million of revenue in 2000
together with a development candidate transfer fee which provided revenue of $2
million in 2000. The remainder of the increase in revenue was attributable to
the addition of new research collaborations and the expansion of existing
government grants. Applied Biosystems, Bayer, Celanese and The Dow Chemical
Company accounted for 11%, 20%, 11% and 22% of total revenue for the 12 months
ended December 31, 2000, and 0%, 32%, 12% and 18% of revenue for the same period
in 1999.
Revenue from research collaborations was less than research and development
expense for the year ended December 31, 2000 due primarily to the research costs
associated with internal projects primarily in our Proprietary Materials
business and the development costs associated with our recently initiated
Discovery Tools business. The excess of revenue over research and development
costs during the year ended December 31, 1999 was primarily because we did not
incur significant costs in our Discovery Tools and Proprietary Materials
businesses.
18
21
Cost of Products Sold
Cost of products sold was $2.8 million for the twelve month period ended
December 31, 2000. There was no cost of products sold in the twelve month period
ended December 31, 1999.
The increase in cost of products sold was due directly to the introduction
of the Discovery Tools business, which first resulted in product revenue in the
year 2000. The Company has limited sales of Discovery Tools systems and
consumables to date, and the cost of products sold is expected to fluctuate from
period to period and will be driven by the variability of product mix and sales
volumes in each period.
Research and Development Expenses
Our research and development expenses consist primarily of salaries and
other personnel-related expenses, facility costs, supplies, depreciation of
facilities, and laboratory equipment.
Research and development expenses increased 35% from $26.6 million in 1999
to $35.9 million in 2000. The increase was due primarily to increases in
salaries and other personnel related costs, facilities costs, collaborative
research and consultant costs and chemical and scientific supplies costs to
support our additional collaborative and internal research efforts. These
increases were partially offset by a decrease in the deferred compensation
charge.
Research and development expenses represented 87% of total revenues in 1999
and 83% of total revenues in 2000. The decrease as a percentage of total
revenues was due primarily to revenue increases associated with the addition of
significant contracts and the addition of product and license revenues in 2000.
Our core businesses are research to discover new materials and the sale of
instruments and related software. Accordingly, we expect to continue to devote
substantial resources to research and development, and we expect that research
and development expenses will continue to increase in absolute dollars.
We do not track fully burdened research and development costs by project
however, we estimate that approximately 75% of research and development efforts
in 2000 were undertaken for collaborative projects and approximately 25% of
research spending was on our own internally funded research.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel
costs for finance, human resources, business development, legal and general
management, as well as professional expenses, such as legal and accounting.
General and administrative expenses increased 55% from $7.6 million in 1999 to
$11.8 million in 2000. Expenses increased primarily due to the addition of a
number of business development personnel, increased salaries, consultant and
other personnel related costs due to additional staffing necessary to manage and
support our growth. General and administrative expenses also increased due to an
increase in travel costs related mainly to business development and sales
efforts, an increase in public relations costs associated with being a public
company, an increase in insurance and license costs and expenses related to a
proposed stock offering which was withdrawn during the three months ended March
31, 2000. These increases were partially offset by a decrease in the deferred
compensation charge.
General and administrative expenses represented 25% of total revenues in
1999 and 27% of total revenues in 2000. We expect that our general and
administrative expenses will increase in absolute dollar amounts as we:
- expand our business development and administrative staff;
- add facilities; and
- incur additional costs related to being a public company, including
directors' and officers' insurance, investor relations programs and
increased professional fees.
19
22
Net Interest Income (Expense)
Net interest income (expense) represents interest income earned on our cash
and cash equivalents net of interest expense on equipment financing loans.
Interest income increased from $2.5 million in 1999 to $7.2 million in 2000.
This increase was due to higher average cash balances. Interest expense
decreased from $934,000 in 1999 to $924,000 in 2000. This decrease was due to a
reduction in the outstanding balances of equipment financing loans used to
partially fund our acquisition of equipment.
Provision for Income Taxes
Due to operating losses and the inability to recognize the benefits
therefrom, there is no provision for income taxes for the years ended December
31, 1999 and 2000.
As of December 31, 2000, we had a federal net operating loss carryforward
of approximately $18.5 million. We also had federal research and development
credit carryforwards of approximately $900,000. If not utilized, the net
operating losses and credit carryforwards will expire at various dates beginning
in 2010 through 2020. Utilization of the net operating losses and credits may be
subject to a substantial annual limitation due to the "change in the ownership"
provisions of the Internal Revenue Code of 1986, as amended, and similar state
provisions. The annual limitation may result in the expiration of net operating
losses and credit before utilization. See Note 5 of Notes to Financial
Statements.
YEARS ENDED DECEMBER 31, 1998 AND 1999
Revenues
Our total revenues increased to $30.5 million in 1999, up 121% from $13.8
million in 1998. This increase was due primarily to the addition of new research
collaborations and the expansion of existing government grants. Bayer, Celanese
and The Dow Chemical Company accounted for 38%, 35% and no amount of total
revenue in 1998, and 32%, 12% and 18% of revenue in 1999, respectively. B.F.
Goodrich accounted for 6% of revenue in 1999. Our collaboration with B.F.
Goodrich was terminated by mutual agreement in April 1999 after B.F. Goodrich
merged with another company and changed its business focus from chemicals to
aerospace. B.F. Goodrich has returned to us all of the intellectual property
that was the subject of the collaboration agreement and has made termination
payments through December 1999 amounting to $1,273,000, which have been
recognized as revenue in 1999.
Revenue from research collaborations exceeded research and development
expense for the year ended December 31, 1999. This increase in revenue was
primarily due to Technology Access Fees, which are being recognized over the
term of the agreements, and higher reimbursement rates under certain
collaboration agreements.
Research and Development Expenses
Research and development expenses increased 49% from $17.8 million in 1998
to $26.6 million in 1999. The increase was due primarily to an increase in
salaries and other personnel costs to support our additional collaborative and
internal research efforts.
Research and development expenses represented 129% of total revenues in
1998 and 87% of total revenues in 1999. The decrease as a percentage of total
revenues was due primarily to the addition of significant contracts in 1999.
General and Administrative Expenses
General and administrative expenses increased 69% from $4.5 in 1998 to $7.6
million in 1999. Expenses increased primarily due to increased staffing
necessary to manage and support our growth. General and administrative expenses
represented 33% of total revenues in 1998 and 25% of total revenues in 1999. The
decrease as a percentage of our total revenues was due primarily to the growth
in our total revenues.
20
23
Net Interest Income (Expense)
Interest income increased from $1.1 million in 1998 to $2.5 million in
1999. This increase was due to higher average cash balances. Interest expense
increased from $731,000 in 1998 to $934,000 in 1999. This increase was due to
additional equipment financing loans used to partially fund our acquisition of
equipment.
Provision for Income Taxes
We incurred net operating losses in 1998 and 1999 and consequently we did
not pay any significant federal, state or foreign income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Since 1996, we have financed our operations primarily through net proceeds
from our initial public offering of $81.4 million and, prior to the initial
public offering, private placements of preferred stock totaling $52.2 million,
research and development funding from collaborative partners and, to a lesser
extent, equipment financing loans. As of December 31, 2000, we had $111.0
million in cash, cash equivalents and investments and $3.3 million available
under an equipment financing line of credit.
Our operating activities provided $1.7 million and $14.0 million of cash in
2000 and 1999, respectively. The sources of cash for 2000 and 1999 were
primarily the receipt of research and development funding from collaborative
partners, partially offset by operating expenses. Cash used in our operating
activities was $2.9 million for 1998. Uses of cash in operating activities were
primarily to fund net operating losses.
Net cash used in investing activities was $19.2 million in 2000, $81.2
million in 1999 and $10.2 million in 1998. The fluctuations from period to
period are due primarily to the timing of purchases, sales and maturity of
investment securities and the purchase of property and equipment. Purchases of
property and equipment were $8.8 million in 2000, $11.5 million in 1999 and $5.8
million in 1998. We expect to continue to make significant investments in the
purchase of property and equipment to support our expanding operations.
Financing activities used cash of $806,000 in 2000, and provided cash of
$82.1 million in 1999 and $23.3 million in 1998, respectively. These amounts
primarily represent the proceeds we received from our initial public offering in
1999 and the sale of preferred stock in 1998, equipment and leasehold
improvement loan financings and proceeds from the exercise of stock options. We
will repay loan financings over the next three years as follows: $3.7 million in
2001, $2.5 million in 2002 and $500,000 in 2003.
Current assets decreased at December 31, 2000 as compared to December 31,
1999. The decrease was due primarily to a change in the classification of
marketable securities between short and long term investments. At December 31,
1999 more of our portfolio was held as short term investments, whereas at
December 31, 2000 we have invested in a greater number of longer term securities
to take advantage of the higher interest rates. This change in the
classification of marketable securities has been partially offset by an increase
in interest receivable from these investments and an increase in inventories
related to Discovery Tools systems currently being constructed. Deferred revenue
decreased at December 31, 2000 as compared to December 31, 1999. This decrease
was due to the timing of the receipt of advance payments, including technology
access fees, under collaborative research programs.
As of December 31, 2000, we had committed funding from existing
collaborative partners, excluding milestone payments which are contingent upon
the success of the research, of approximately $33.1 million. We also had
committed revenue for the sale of Discovery Tools Systems of approximately $11.5
million.
As of December 31, 2000 and 1999, our principal commitments were $18.9
million and $6.6 million, respectively. Principal commitments consisted of our
obligations under operating leases. We will satisfy these obligations over the
next ten years.
We believe that our current cash balances and the cash flows generated by
operations will be sufficient to satisfy our anticipated cash needs for working
capital and capital expenditures for at least the next 18 months. However, we
may seek additional financing within this timeframe. We may raise additional
funds through public or private financing, collaborative relationships or other
arrangements. We cannot assure you that
21
24
additional funding, if sought, will be available on terms favorable to us.
Further, any additional equity financing may be dilutive to stockholders, and
debt financing, if available, may involve restrictive covenants. Collaborative
arrangements may require us to relinquish our rights to some of our technologies
or products. Our failure to raise capital when needed may harm our business and
operating results.
A portion of our cash may be used to acquire or invest in complementary
businesses or products or to obtain the right to use complementary technologies.
From time to time, in the ordinary course of business, we may evaluate potential
acquisitions of such businesses, products or technologies.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which will be effective for the year
ending 2001. This Statement establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments imbedded in other contracts, be recorded in the balance sheet as
either an asset or liability measured at its fair value. The Statement also
requires that changes in the derivative's fair value be recognized in earnings
unless specific hedge accounting criteria are met. In July 1999, the FASB issued
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133." ("SFAS 137"). SFAS No. 137 deferred the effective date of
SFAS No. 133 until fiscal years beginning after June 15, 2000. In June 2000, the
FASB issued Statement of Financial Accounting Standards No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities" ("SFAS 138").
SFAS No. 138 addresses a limited number of issues causing implementation
difficulties for entities applying Statement 133. We will adopt SFAS No. 133
during our year ending December 31, 2001. To date, we have not engaged in
derivative or hedging activities. We are unable to predict the impact of
adopting SFAS No. 133 if we were to engage in derivative and hedging activity in
the future.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, to support the development
of our business and do not anticipate paying any cash dividends in the
foreseeable future.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk is principally confined to our cash, cash
equivalents and investments which have maturities of less than two years. We
maintain a non-trading investment portfolio of investment grade, liquid debt
securities that limits the amount of credit exposure to any one issue, issuer or
type of instrument. At December 31, 2000 our investment portfolio comprised
approximately $9.3 million in money market funds and $100.4 million in U.S.
corporate debt securities. The securities in our investment portfolio are not
leveraged, are classified as available for sale and are therefore subject to
interest rate risk. We currently do not hedge interest rate exposure. If market
interest rates were to increase by 100 basis points, or 1%, from December 31,
2000 levels, the fair value of our portfolio would decline by approximately
$520,000. The modeling technique used measures the change in fair values arising
from an immediate hypothetical shift in market interest rates and assumes ending
fair values include principal plus accrued interest.
22
25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Ernst & Young LLP, Independent Auditors........... 24
Balance Sheets at December 31, 2000 and 1999................ 25
Statements of Operations for the years ended December 31,
2000, 1999 and 1998....................................... 26
Statement of Stockholders' Equity for the three year period
ended December 31, 2000................................... 27
Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998....................................... 28
Notes to Financial Statements............................... 29
23
26
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Symyx Technologies, Inc.
We have audited the accompanying balance sheets of Symyx Technologies, Inc.
as of December 31, 2000 and 1999, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Symyx Technologies, Inc. at
December 31, 2000 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Palo Alto, California
January 25, 2001
24
27
SYMYX TECHNOLOGIES, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
DECEMBER 31,
--------------------
2000 1999
-------- --------
Current assets:
Cash and cash equivalents................................. $ 10,624 $ 28,943
Short-term investments.................................... 11,910 21,533
Accounts receivable....................................... 993 962
Prepaid expenses.......................................... 967 1,555
Inventories............................................... 2,763 462
Interest receivable....................................... 1,930 937
Other current assets...................................... 6 540
-------- --------
Total current assets.............................. 29,193 54,932
Property and equipment, net................................. 26,377 23,879
Long-term investments....................................... 88,506 68,794
Other assets................................................ 2,145 700
-------- --------
$146,221 $148,305
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities............ $ 4,107 $ 4,951
Accrued compensation and employee benefits................ 1,396 711
Deferred rent............................................. 604 478
Deferred revenue.......................................... 9,734 12,189
Current portion of equipment and facility loans........... 3,719 3,304
-------- --------
Total current liabilities......................... 19,560 21,633
Equipment and facility loans................................ 3,010 6,729
Commitments
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares
authorized, issuable in series; no shares issued and
outstanding............................................ -- --
Common stock, $0.001 par value, 100,000,000 shares
authorized; 30,138,569 and 29,638,562 shares issued and
outstanding at December 31, 2000 and 1999,
respectively........................................... 30 30
Additional paid-in capital.................................. 144,748 142,048
Stockholder notes receivable................................ (621) (731)
Deferred stock compensation................................. (822) (2,128)
Accumulated other comprehensive income (loss)............... 325 (189)
Accumulated deficit......................................... (20,009) (19,087)
-------- --------
Total stockholders' equity........................ 123,651 119,943
-------- --------
Total liabilities and stockholders' equity........ $146,221 $148,305
======== ========
See accompanying notes.
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SYMYX TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
------- ------- -------
Revenues:
Service revenues from collaborations and grants........... $34,999 $30,497 $13,787
Product and license revenues.............................. 8,319 -- --
------- ------- -------
Total revenues.................................... 43,318 30,497 13,787
Operating expenses:
Cost of products sold..................................... 2,775 -- --
Research and development.................................. 35,898 26,628 17,813
Sales, general and administrative......................... 11,798 7,624 4,515
------- ------- -------
Total operating expenses.......................... 50,471 34,252 22,328
------- ------- -------
Income (loss) from operations............................... (7,153) (3,755) (8,541)
Interest income............................................. 7,155 2,542 1,117
Interest and other expense.................................. (924) (934) (731)
------- ------- -------
Net income (loss)........................................... $ (922) $(2,147) $(8,155)
======= ======= =======
Basic and diluted net loss per share........................ $ (0.03) $ (0.27) $ (2.13)
======= ======= =======
Shares used in computing basic and diluted net loss per
share..................................................... 28,873 8,087 3,829
======= ======= =======
See accompanying notes.
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29
SYMYX TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
ACCUMULATED
OTHER
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCKHOLDER DEFERRED COMPREHENSIVE
---------------- --------------- PAID-IN NOTES STOCK INCOME
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION (LOSS)
------- ------ ------ ------ ---------- ----------- ------------ -------------
BALANCE AT JANUARY 1, 1998....... 16,351 $ 17 3,853 $ 4 $ 33,786 $ -- $ -- $ 8
Issuance of Series D preferred
stock for cash, net of issuance
costs of $36.................... 4,143 4 -- -- 18,606 -- -- --
Issuance of common stock......... -- -- 1,532 1 642 (398) -- --
Conversion of Class B common
stock to common stock on a 1:10
basis........................... -- -- 840 1 (1) -- -- --
Issuance of Series D preferred
stock as consideration for
technology rights............... 67 -- -- -- 300 -- -- --
Deferred stock compensation...... -- -- -- -- 760 -- (760) --
Amortization of deferred stock
compensation.................... -- -- -- -- -- -- 188 --
Comprehensive income (loss):
Net income (loss) for the year
ended December 31, 1998....... -- -- -- -- -- -- -- --
Unrealized gain (loss) on
available-for-sale
securities.................... -- -- -- -- -- -- -- (52)
Comprehensive loss............... -- -- -- -- -- -- -- --
------- ---- ------ --- -------- ----- ------- -----
BALANCE AT DECEMBER 31, 1998..... 20,561 21 6,225 6 54,093 (398) (572) (44)
Issuance of common stock net of
issuance costs of $7,741........ -- -- 7,440 8 82,413 (361) -- --
Repurchase of common stock....... -- -- (43) -- (35) 28 -- --
Issuance of common stock in
exchange for services........... -- -- 25 -- 222 -- -- --
Conversion of preferred stock to
common stock on a 7 for 9
basis........................... (20,561) (21) 15,992 16 5 -- -- --
Deferred stock compensation...... -- -- -- -- 5,350 -- (5,350) --
Amortization of deferred stock
compensation.................... -- -- -- -- -- -- 3,794 --
Comprehensive income (loss):
Net income (loss) for the year
ended December 31, 1999....... -- -- -- -- -- -- -- --
Unrealized gain (loss) on
available-for-sale
securities.................... -- -- -- -- -- -- -- (145)
Comprehensive loss............... -- -- -- -- -- -- -- --
------- ---- ------ --- -------- ----- ------- -----
BALANCE AT DECEMBER 31, 1999..... -- -- 29,639 30 142,048 (731) (2,128) (189)
Repurchase of common stock....... -- -- (43) -- (50) 42 -- --
Issuance of common stock on
exercise of options............. -- -- 436 -- 1,356 -- -- --
Issuance of common stock under
employee share purchase plan.... -- -- 91 -- 1,125 -- -- --
Issuance of common stock in
exchange for acquired
technology...................... -- -- 16 -- 815 -- -- --
Repayment of notes receivable.... -- -- -- -- -- 68 -- --
Amortization of deferred stock
compensation.................... -- -- -- -- -- -- 760 --
Deferred stock compensation
related to terminated
employees....................... -- -- -- -- (546) -- 546 --
Comprehensive income (loss):
Net income (loss) for the year
ended December 31, 2000....... -- -- -- -- -- -- -- --
Unrealized gain (loss) on
available-for-sale
securities.................... -- -- -- -- -- -- -- 514
Comprehensive loss............... -- -- -- -- -- -- -- --
------- ---- ------ --- -------- ----- ------- -----
BALANCE AT DECEMBER 31, 2000..... -- $ -- 30,139 $30 $144,748 $(621) $ (822) $ 325
======= ==== ====== === ======== ===== ======= =====
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
----------- -------------
BALANCE AT JANUARY 1, 1998....... $ (8,785) $ 25,030
Issuance of Series D preferred
stock for cash, net of issuance
costs of $36.................... -- 18,610
Issuance of common stock......... -- 245
Conversion of Class B common
stock to common stock on a 1:10
basis........................... -- --
Issuance of Series D preferred
stock as consideration for
technology rights............... -- 300
Deferred stock compensation...... -- --
Amortization of deferred stock
compensation.................... -- 188
Comprehensive income (loss):
Net income (loss) for the year
ended December 31, 1998....... (8,155) (8,155)
Unrealized gain (loss) on
available-for-sale
securities.................... -- (52)
--------
Comprehensive loss............... -- (8,207)
-------- --------
BALANCE AT DECEMBER 31, 1998..... (16,940) 36,166
Issuance of common stock net of
issuance costs of $7,741........ -- 82,060
Repurchase of common stock....... -- (7)
Issuance of common stock in
exchange for services........... -- 222
Conversion of preferred stock to
common stock on a 7 for 9
basis........................... -- --
Deferred stock compensation...... -- --
Amortization of deferred stock
compensation.................... -- 3,794
Comprehensive income (loss):
Net income (loss) for the year
ended December 31, 1999....... (2,147) (2,147)
Unrealized gain (loss) on
available-for-sale
securities.................... -- (145)
--------
Comprehensive loss............... -- (2,292)
-------- --------
BALANCE AT DECEMBER 31, 1999..... (19,087) 119,943
Repurchase of common stock....... -- (8)
Issuance of common stock on
exercise of options............. -- 1,356
Issuance of common stock under
employee share purchase plan.... -- 1,125
Issuance of common stock in
exchange for acquired
technology...................... -- 815
Repayment of notes receivable.... -- 68
Amortization of deferred stock
compensation.................... -- 760
Deferred stock compensation
related to terminated
employees....................... -- --
Comprehensive income (loss):
Net income (loss) for the year
ended December 31, 2000....... (922) (922)
Unrealized gain (loss) on
available-for-sale
securities.................... -- 514
--------
Comprehensive loss............... -- (408)
-------- --------
BALANCE AT DECEMBER 31, 2000..... $(20,009) $123,651
======== ========
See accompanying notes.
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SYMYX TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
OPERATING ACTIVITIES
Net income (loss).......................................... $ (922) $ (2,147) $ (8,155)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization............................ 6,477 4,248 3,091
Deferred compensation amortization....................... 760 3,794 188
Issuance of preferred stock as consideration for
technology rights..................................... -- -- 300
Changes in assets and liabilities:
Accounts receivable................................... (31) (336) (626)
Inventories........................................... (2,301) (462) --
Prepaid expenses...................................... 588 (1,267) (16)
Other current assets.................................. (459) (926) 42
Accounts payable and other current liabilities........ (844) 3,275 (212)
Deferred revenue...................................... (2,455) 8,017 2,288
Accrued compensation and employee benefits............ 685 295 213
Deferred rent......................................... 126 31 159
Other long-term assets................................ 27 (492) (146)
-------- -------- --------
Net cash provided by (used in) operating
activities..................................... 1,651 14,030 (2,874)
-------- -------- --------
INVESTING ACTIVITIES
Purchases of property and equipment, net................... (8,824) (11,535) (5,809)
Purchases of investments................................... (63,165) (84,204) (20,053)
Proceeds from sales of investments......................... -- -- 1,275
Proceeds from maturities of investments.................... 53,825 14,550 14,350
Acquisition of technology.................................. (1,000) -- --
-------- -------- --------
Net cash provided by (used in) investing
activities..................................... (19,164) (81,189) (10,237)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock, net of issuance
costs.................................................... -- -- 18,610
Proceeds from issuance of common stock, net of repurchases
and issuance costs....................................... 2,498 82,053 245
Principal payments on equipment and facility loans......... (3,304) (2,709) (1,166)
Proceeds from equipment and facility loans................. -- 2,715 5,624
-------- -------- --------
Net cash provided by (used in) financing
activities..................................... (806) 82,059 23,313
-------- -------- --------
Net increase (decrease) in cash and cash equivalents....... (18,319) 14,900 10,202
Cash and cash equivalents at beginning of year............. 28,943 14,043 3,841
-------- -------- --------
Cash and cash equivalents at end of year................... $ 10,624 $ 28,943 $ 14,043
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid.............................................. $ 925 $ 1,090 $ 733
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Exercise of stock options for notes receivable............. $ -- $ 333 $ 398
======== ======== ========
Common shares issued and contribution of capital in
consideration of services rendered....................... $ -- $ 222 $ --
======== ======== ========
Common shares issued and contribution of capital in
consideration of technology acquisition.................. $ 815 $ -- $ --
======== ======== ========
See accompanying notes.
28
31
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Symyx Technologies, Inc. (the "Company"), was incorporated on September 20,
1994 in the state of California to research, develop, manufacture and market
products through the application of combinatorial technologies in the area of
materials science. In February 1999, the Company completed a reincorporation in
the state of Delaware. As a result, the accompanying financial statements have
been retroactively adjusted to reflect the issuance of $.001 par value preferred
stock and common stock. To date, the Company's operations have involved research
and development activities, a significant portion of which has been funded by
collaborative partners.
On November 18, 1999, the Company completed an initial public offering of
its shares pursuant to which it issued 6,368,700 common shares for net proceeds
of approximately $81,420,000. Immediately prior to the closing of the initial
public offering, each outstanding share of preferred stock was converted to
common stock on a seven-for-nine shares basis.
On October 22, 1999, the stockholders approved a seven-for-nine reverse
split of the Company's common stock. All share and per share amounts in the
accompanying financial statements have been adjusted retroactively.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from these estimates.
Cash and Cash Equivalents, Short-Term and Long-Term Investments
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents; investments with
maturities between three and twelve months from the date of purchase are
considered to be short-term investments; investments with maturities greater
than twelve months from the date of purchase are considered to be long-term
investments. By policy, the Company restricts its investments to instruments
with maturities of less than twenty-four months.
The Company invests its excess cash primarily in deposits with banks and
short-term and medium-term marketable securities. These investments primarily
include corporate notes, money market funds and U.S. treasury notes. By policy,
the Company restricts its investments to long-term bank obligations rated "A" or
higher and short-term obligations rated "P1" or higher by Moody's or "A1" or
higher by Standard & Poor's ("S&P"), and corporate obligations, including
intermediate term notes rated "A" or higher and commercial paper rated "P1" or
higher by Moody's, or "A1" or higher by S&P.
Management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such determination as of each balance sheet
date. Through December 31, 2000, the Company has classified its entire
investment portfolio as available-for-sale. Available-for-sale securities are
carried at fair value with unrealized gains and losses reported as a separate
component of stockholders' equity. The estimated fair value amounts have been
determined by the Company using available market information and commonly used
valuation methodologies.
The amortized cost of debt securities is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization is included
in interest income. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are also included in
interest income. The cost of securities sold is based on the specific
identification method. Interest and dividends are included in interest income.
29
32
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following is a summary of the fair value of available-for-sale
securities (in thousands):
DECEMBER 31,
--------------------
2000 1999
-------- --------
Money market funds..................................... $ 9,337 $ 9,994
U.S. corporate debt securities......................... 100,416 107,745
-------- --------
Total........................................ $109,753 $117,739
======== ========
Above amounts are included in the following:
DECEMBER 31,
--------------------
2000 1999
-------- --------
Cash and cash equivalents.............................. $ 9,337 $ 27,412
Short-term investments................................. 11,910 21,533
Long-term investments.................................. 88,506 68,794
-------- --------
Total........................................ $109,753 $117,739
======== ========
Following is a reconciliation of cash and cash equivalents:
DECEMBER 31,
------------------
2000 1999
------- -------
Available-for-sale securities............................ $ 9,337 $27,412
Cash and bank accounts................................... 1,287 1,531
------- -------
Total cash and cash equivalents................ $10,624 $28,943
======= =======
Unrealized gains and losses are not material, and have, therefore, not been
shown separately; however, they have been included as a separate component in
the statement of stockholders' equity. Gross realized gains and losses on sales
of available-for-sale securities were immaterial.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed on the
straight-line method using a life of three to five years. Leasehold improvements
are amortized over the shorter of the lease term or the estimated useful life of
the assets.
Property and equipment consists of the following (in thousands):
DECEMBER 31,
-------------------
2000 1999
-------- -------
Machinery and equipment................................. $ 15,955 $10,699
Computers and software.................................. 2,791 2,736
Leasehold improvements.................................. 16,191 11,030
Construction in progress................................ 2,127 5,981
Furniture and fixtures.................................. 898 689
-------- -------
37,962 31,135
Less accumulated depreciation and amortization.......... (11,585) (7,256)
-------- -------
Property and equipment, net............................. $ 26,377 $23,879
======== =======
At December 31, 2000 and 1999, property and equipment with an original cost
of $15,938,000 was collateralized and had accumulated depreciation of $8,813,000
and $6,102,000, respectively.
30
33
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Long Lived Assets
The Company routinely evaluates the carrying value of its long-lived
assets. The Company records impairment losses on long-lived assets used in
operations when events and circumstances indicate that assets may be impaired
and the undiscounted cash flows estimated to be generated by the assets are less
than they carrying amount of those assets.
Revenue Recognition
The Company recognizes revenues from research collaboration agreements and
government grants as earned based upon the performance requirements of the
agreements. Payments received prior to performance are deferred and recognized
as revenue when earned over future performance periods. Collaboration agreements
generally specify minimum levels of research effort required to be performed by
the Company. Payments received under research collaboration agreements are not
refundable if the research effort is not successful. Direct costs associated
with these contracts and grants are reported as research and development
expense.
Non-refundable up-front payments received in connection with research and
development collaboration agreements, including technology access fees, are
deferred and recognized on a straight-line basis over the relevant periods
specified in the agreement, generally the research term. Revenue from milestone
payments, which are at risk until the milestones are completed, is recognized
upon completion of these milestones.
Product and license revenues include sales of Discovery Tools hardware,
software and maintenance together with amounts earned for licenses to third
parties licensed under the Company's intellectual property. Revenue from the
sale of Discovery Tools systems is recognized when earned. Revenue is earned
when persuasive evidence of an arrangement exists, delivery of the product has
occurred, no significant obligations with regard to implementation remain, the
fee is fixed or determinable, and collectibility is probable. This is generally
upon shipment, transfer of title to and acceptance by the customer of the
hardware, software and licenses to intellectual property unless there are
extended payment terms. The Company considers all arrangements with payment
terms extending beyond 12 months, and all other arrangements with payment terms
longer than normal, not to be fixed or determinable. If the fee is not fixed or
determinable, revenue is recognized as payments become due from the customer. In
multiple element arrangements, the Company uses the residual method to allocate
revenue to delivered elements once it has established fair value for all
undelivered elements. Payments received in advance under these arrangements are
recorded as deferred revenue until earned.
The Company's software licenses may provide for technical support, bug
fixes and rights to unspecified upgrades on a when-if-available basis for
periods defined within the contract. Revenue related to this post contract
customer support is deferred and recognized over the term of the contracted
support.
Reserves are provided for warranty expenses at the time the associated
revenue is recognized. Shipping and insurance costs associated with the sale of
discovery tools systems are not material and are included in sales, general and
administrative costs.
Amounts received from third parties for licenses to the Company's
intellectual property are recognized when earned under the terms of the related
agreements. Generally revenue is recognized upon transfer of the license unless
the Company has continuing obligations for which fair value cannot be
established, in which case the revenue is recognized over the period of the
obligation.
31
34
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Concentration of Revenue
During the years ended December 31, 2000, 1999 and 1998 the following
customers contributed more than 10% of the Company's total revenue for the year
(in thousands).
YEARS ENDED DECEMBER 31,
--------------------------
2000 1999 1998
------ ------ ------
Applied Biosystems....................................... $4,600 $ -- $ --
Bayer AG................................................. 8,607 9,650 5,242
B.F. Goodrich Company.................................... -- 1,935 1,722
Celanese Ltd............................................. 4,621 3,688 4,783
The Dow Chemical Company................................. 5,950 5,500 --
Inventories
Work in process is the only component of inventories for all periods
presented and comprises customized Discovery Tool instruments in the process of
being built for customers. Inventories are carried at the lower of cost or
market, determined on a specific identification basis.
Acquisition of Technology
In February 2000, the Company exercised an option to license certain patent
rights and know-how relating to synthesis and screening of diverse materials in
connection with combinatorial materials science research. Symyx paid an amount
of $750,000 and issued 16,262 shares of common stock to acquire these rights.
The License Agreement also provides for Symyx to pay up to an additional
$1,500,000 subject to the achievement of certain milestones. The first of these
milestones was met during the quarter ended June 30, 2000 and consequently a
further $250,000 was paid in July 2000. The exercise of this option and the
subsequent milestone payment has been accounted for as an acquisition of
technology and the associated costs are being amortized over the expected
remaining useful life of the technology.
Research and Development
Symyx' policy is to expense as incurred all costs of research and
development, including direct and allocated expenses, related both to costs
incurred on its own behalf and on behalf of its customers.
Software Development Costs
Statement of Financial Accounting Standards No. 86, Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed, requires
the capitalization of certain software development costs subsequent to the
establishment of technological feasibility.
As the Company's business model has evolved, it has commenced bundling with
the Discovery Tools it sells, licenses to software that was originally developed
for internal research and development purposes. Due to the unique nature of the
Discovery Tool Systems, and the required product development process,
technological feasibility is established only upon the completion of a working
model. Costs incurred by the Company between the completion of the working model
and the point at which the product is ready for general release have been
insignificant. Accordingly, the Company has charged all such costs to research
and development expense in the period incurred.
Stock-Based Compensation
The Company generally grants stock options to its employees for a fixed
number of shares with an exercise price equal to the fair value of the shares on
the date of grant. As allowed under the Statement of
32
35
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), the Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25") and related interpretations in accounting for stock awards to
employees. Accordingly, no compensation expense is recognized in the Company's
financial statements in connection with stock options granted to employees with
exercise prices not less than fair value. Deferred compensation for options
granted to employees is determined as the difference between the deemed fair
market value of the Company's common stock on the date options were granted and
the exercise price.
Compensation expense for options granted to non-employees has been
determined in accordance with SFAS 123 as the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measured. Compensation expense for options granted to non-employees is
periodically re-measured as the underlying options vest.
Net Loss Per Share
Basic and diluted net loss per share has been computed using the
weighted-average number of shares of common stock outstanding during the period,
less shares subject to repurchase. Pro forma basic and diluted net loss per
common share, as presented in the following table, has been computed for the
years ended December 31, 1999 and 1998 as described above, and also gives effect
to the conversion of the convertible preferred stock, which converted to common
stock immediately prior to the completion of the Company's initial public
offering, (using the if-converted method) from the original date of issuance.
The following table presents the calculation of basic, diluted, and pro
forma basic and diluted net loss per share (in thousands, except per share
data):
YEARS ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
------- ------- -------
Net loss.................................................... $ (922) $(2,147) $(8,155)
======= ======= =======
Basic and diluted:
Weighted-average shares of common stock outstanding....... 29,884 9,599 4,659
Less: weighted-average shares subject to repurchase....... (1,011) (1,512) (830)
------- ------- -------
Weighted-average shares used in computing basic and
diluted net loss per share............................. 28,873 8,087 3,829
======= ======= =======
Basic and diluted net loss per share........................ $ (0.03) $ (0.27) $ (2.13)
======= ======= =======
Pro forma (unaudited):
Net loss.................................................. $(2,147) $(8,155)
======= =======
Shares used above......................................... 8,087 3,829
Pro forma adjustment to reflect weighted effect of
conversion of convertible preferred stock.............. 14,080 13,908
------- -------
Shares used in computing pro forma basic and diluted net
loss per share......................................... 22,167 17,737
======= =======
Pro forma basic and diluted net loss per share.............. $ (0.10) $ (0.46)
======= =======
The Company has excluded all convertible preferred stock, outstanding stock
options, and shares subject to repurchase from the calculation of diluted loss
per common share because all such securities are anti-dilutive for all
applicable periods presented. The total number of shares excluded from the
calculations of diluted net loss per share, prior to application of the treasury
stock method for options, was 5,083,787, 4,218,304 and 18,862,072 for the years
ended December 31, 2000, 1999 and 1998, respectively. See Note 4 for further
information on these securities.
33
36
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Comprehensive Income (Loss)
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income". The only component of other comprehensive
income (loss) is unrealized gains and losses on available-for-sale securities.
Comprehensive loss has been disclosed in the statement of stockholders' equity
for all periods presented.
Segment Reporting
The Company has determined that it operates in only one segment, being the
discovery and license of proprietary materials and sale of instruments and
software used in the discovery of such materials.
Effect of New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which will be effective for the year
ending 2001. This Statement establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments imbedded in other contracts, be recorded in the balance sheet as
either an asset or liability measured at its fair value. The Statement also
requires that changes in the derivative's fair value be recognized in earnings
unless specific hedge accounting criteria are met. In July 1999, the FASB issued
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133." ("SFAS 137"). SFAS No. 137 deferred the effective date of
SFAS No. 133 until fiscal years beginning after June 15, 2000. In June 2000, the
FASB issued Statement of Financial Accounting Standards No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities" ("SFAS 138").
SFAS No. 138 addresses a limited number of issues causing implementation
difficulties for entities applying Statement 133. The Company will adopt SFAS
No. 133 during our year ending December 31, 2001. To date, the Company has not
engaged in derivative or hedging activities. The Company is unable to predict
the impact of adopting SFAS No. 133 if we were to engage in derivative and
hedging activity in the future.
2. RESEARCH AND DEVELOPMENT ARRANGEMENTS
The Company has entered into a number of multi-year research and
development collaborations to perform research for customers in exclusive fields
over multiple years. The major collaborative arrangements all have similar
contractual terms and are non-cancelable other than for material breach or
certain other conditions. Under the collaborative arrangements, the Company is
responsible for performing research at levels defined in the agreement,
including synthesis, screening and informatics. The customer, in turn, is
entitled to develop and commercialize materials discovered in or under
collaboration within the defined field. The Company typically receives research
and development funding at specified amounts per full time equivalent employee
working on the project and is entitled to receive royalties on the sale of any
products commercialized under the agreement or payments on the achievement of
specified research milestones. The agreements also contain procedures by which
the Company and the customer will determine royalty rates for the sale or
license of products under the agreements.
34
37
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The table below indicates the major collaborative partners for whom the
Company conducted research and development in 2000, together with the primary
focus of the collaborations:
PARTNER PRIMARY FOCUS OF COLLABORATIVE EFFORTS
------- --------------------------------------
ABB Lumus Global......................... Environmentally improved automotive fuels
Applied Biosystems....................... Polymers for DNA separation
BASF..................................... Specialty polymers for industrial
formulations
Bayer.................................... Polyolefins, commodity chemicals
Celanese................................. Commodity chemicals
Ciba Specialty Chemicals................. Pigments
Dow Chemical............................. Polyolefins and pharmaceutical
intermediates
Eveready................................. Battery materials
ExxonMobil............................... Production of olefins
Imperial Chemical Industries (ICI)....... High value specialty materials for high
quality industrial applications
Osram OS*................................ Phosphors for lighting
Unilever................................. Polymers for product formulations used in
home and personal care products
- ---------------
* an affiliate of Siemens
Under the collaborative arrangements, the Company owns all inventions
conceived and reduced to practice solely by the Company in connection with
activities under the agreements and all know-how and intellectual property
rights related thereto; and the Company and the collaborative partner jointly
own all inventions made, conceived, reduced to practice, or otherwise developed
jointly by employees or consultants of the Company and those of the
collaborative partner in connection with activities under the agreement and all
know-how and intellectual property rights related thereto.
The agreements are typically cancelable only in the event of breach by
either party. As of December 31, 2000, the Company had committed funding from
existing collaborative partners, excluding milestone payments which are
contingent upon the success of the research, of approximately $33.1 million.
Revenue from collaborative partners who individually comprised more than 10% of
revenue are included within Note 1 -- Concentration of Revenue.
During 1998, the Company was awarded grants from the U.S. Office of Naval
Research Defense Advanced Research Projects Agency (DARPA) and the U.S.
Department of Energy. During the year ended December 31, 1999, the Company was
awarded one additional grant from both the U.S. Office of Naval Research Defense
Advanced Research Projects Agency (DARPA) and the U.S. Department of Energy.
During 2000, an extension to the 1999 grant was awarded to the Company. Under
these grants, the Company was reimbursed for research costs over various periods
as specified in the awards. During the years ended December 31, 2000, 1999 and
1998, revenue recognized in the aggregate under these grants was approximately
$1,596,000, $2,811,000 and $1,011,000, respectively.
3. FACILITY LEASE AND OTHER COMMITMENTS
The Company entered into an 11 year operating lease agreement for its
facility commencing February 1, 1997, with rent payments commencing July 1,
1998. In May 1999, the Company entered into an eight-and-a-half-year operating
lease agreement for an additional facility commencing October 1999. In February
2000, the Company entered into an agreement to lease an additional facility. The
lease commenced on October 1, 2000 and has an initial term of ten years with an
option to extend the initial term for an additional five years.
35
38
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Rent expense, which is being recognized on a straight-line basis over the
lease terms, was approximately $1,160,000, $426,000 and $308,000, for the years
ended December 31, 2000, 1999, and 1998, respectively. Future commitments under
the operating leases for the facilities are as follows (in thousands):
DECEMBER 31,
2000
------------
2001.................................................... $ 1,841
2002.................................................... 1,902
2003.................................................... 1,982
2004.................................................... 2,064
2005.................................................... 2,148
Thereafter.............................................. 8,942
-------
$18,879
=======
In connection with the build out of the Company's facility, the Company
entered into a loan and security agreement in January 1997 for up to $6,000,000
(of which $5,000,000 may be used for leasehold improvements). Amounts drawn
under the loan bear a weighted-average interest rate of 13.9%, have a term of 48
months and are secured by the building improvements financed. The Company issued
155,555 shares of common stock to the lender at $0.19 per share in January 1997
in connection with this arrangement. As of December 31, 1998, the Company had
drawn the full amount available under the arrangement.
In December 1998, the Company entered into loan and security arrangements
for up to $10,000,000 with Transamerica Business Credit and LMSI Venture
Finance. Amounts drawn under the loans will bear interest rates of approximately
8.5% to 10.0%, have a term of 48 months, and are secured by equipment financed
by proceeds under the agreements. Under these agreements, $5,624,000 was drawn
in 1998 and an additional $2,715,000 was drawn in 1999. No additional amounts
are available for draw down under these loan and security arrangements as they
expired during 2000.
Future principal payments under the loan agreements are as follows as of
December 31, 2000 (in thousands):
DECEMBER 31,
2000
------------
2001.................................................... $3,719
2002.................................................... 2,467
2003.................................................... 543
------
Total principal payments...................... $6,729
======
The carrying value of these loans approximates their fair value based on a
comparison to debt arrangements with similar terms and conditions.
4. STOCKHOLDERS' EQUITY
Convertible Preferred Stock
In September 1999, the board of directors approved an amendment to the
Company's articles of incorporation to authorize 10,000,000 shares of
undesignated preferred stock, for which the board of directors is authorized to
fix the designation, powers, preferences and rights and an increase in the
authorized number of shares of common stock to 100,000,000 shares.
Immediately prior to closing of the initial public offering in November
1999, all 20,561,156 outstanding shares of Series A, B, C and D Convertible
preferred stock of the Company were converted into 15,991,849 shares of Common
Stock.
36
39
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Common Stock
Included in the common shares outstanding at December 31, 2000 and 1999 are
750,821 and 1,379,806 shares of common stock subject to repurchase rights, which
generally expire ratably over four or five years from date of issuance. Certain
of these shares were issued pursuant to full-recourse notes receivable, which
bear interest at rates between 4.6% and 6.0% per annum and are due and payable
on the earlier of 120 days after termination of the participant's employment
with the Company, or on various dates beginning in February 2003. In 1998, the
Company sold 525,000 shares of common stock to its Chief Executive Officer
concurrent with the commencement of his employment. The shares are subject to
the Company's right of repurchase at the original purchase price, in the event
of termination, which lapses over a four year period.
As of December 31, 2000, the Company has reserved 4,426,207 shares of
common stock for future issuance in relation to the Company's Stock Option
Plans.
Stock Purchase Plan
In October 1999, the Company's shareholders approved the adoption of the
1999 Employee Stock Purchase Plan (the "Purchase Plan"). A total of 300,000
shares of the Company's common stock have been reserved for issuance under the
Purchase Plan. The Purchase Plan permits eligible employees to purchase common
stock at a discount, but only through payroll deductions, during concurrent
24-month offering periods. Each offering period will be divided into four
consecutive six-month purchase periods. The price at which stock is purchased
under the Purchase Plan is equal to 85% of the fair market value of the common
stock on the first or last day of the offering period, whichever is lower. The
initial offering period commenced on November 18, 1999. In addition, the
Purchase Plan provides for annual increases in the number of shares available
for issuance under the Purchase Plan on the first day of each fiscal year,
beginning with fiscal 2000, equal to the lessor of 1% of the outstanding shares
of common stock on the first day of the fiscal year, 350,000 shares, or a lesser
amount as determined by the board of directors. At December 31, 2000, shares of
common stock available for future issue under the Stock Purchase Plan are
505,262.
Stock Option Plans
The Company's 1996 Stock Option Plan was adopted in March 1996 and provided
for the issuance of options for up to 1,153,444 shares of common stock to
employees and consultants.
During 1997, the Company's board of directors approved the adoption of the
1997 Stock Option Plan with terms and conditions the same as those of the 1996
Stock Option Plan (collectively, the "Plans"). The 1997 Stock Option Plan
provides for the issuance of options for up to 5,346,556 shares of common stock
to employee and consultants. In October 1999, the Company's stockholders
approved an annual increase, beginning in fiscal year 2000, in the number of
shares of common stock reserved for issuance under the 1997 Stock Plan equal to
the lesser of 1,500,000 shares, 4% of the outstanding shares on the date of the
annual increase, or a lesser amount as determined by the board of directors.
Stock options granted under the Plans may be either incentive stock options
or nonstatutory stock options. Incentive stock options may be granted to
employees with exercise prices of no less than the fair value and nonstatutory
options may be granted to employees or consultants at exercise prices of no less
than 85% of the fair value of the common stock on the grant date, as determined
by the board of directors. The options expire no more than 10 years after the
date of grant or earlier if employment or relationship as a director or
consultant is terminated. If, at the time the Company grants an option, the
optionee owns stock representing more than 10% of the total combined voting
power of all classes of stock of the Company, the option price shall be at least
110% of the fair value on the date of grant and shall not be exercisable more
than five years after the date of grant. The board of directors shall determine
the times during the term when the options may be exercised and the number of
shares for which an option may be granted. Options may be granted with
37
40
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
different vesting terms from time to time but will provide for annual vesting of
at least 20% of the total number of shares subject to the option. The Company
allows early exercise of options, subject to repurchase rights until such
options are fully vested.
A summary of activity under the 1996 and 1997 Stock Option Plans is as
follows:
OUTSTANDING STOCK OPTIONS
------------------------------------------
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE EXERCISE
SHARES PRICE PRICE
---------- --------------- ---------
Balance at December 31, 1997......................... 2,141,584 $ 0.01 - $ 0.39 $ 0.28
Options granted...................................... 1,205,430 $ 0.39 - $ 0.96 $ 0.71
Options exercised.................................... (1,162,909) $ 0.19 - $ 0.96 $ 0.28
Options canceled..................................... (229,885) $ 0.19 - $ 0.58 $ 0.26
----------
Balance at December 31, 1998......................... 1,954,220 $ 0.19 - $ 0.96 $ 0.54
Options granted...................................... 2,209,817 $ 0.96 - $33.00 $ 7.50
Options exercised.................................... (1,071,580) $ 0.19 - $12.00 $ 0.93
Options canceled..................................... (253,959) $ 0.19 - $ 1.93 $ 0.64
----------
Balance at December 31, 1999......................... 2,838,498 $ 0.01 - $33.00 $ 5.80
Options granted...................................... 2,054,105 $24.13 - $62.63 $47.83
Options exercised.................................... (418,669) $ 0.19 - $31.88 $ 3.24
Options canceled..................................... (592,228) $ 0.19 - $57.00 $17.23
----------
Balance at December 31, 2000......................... 3,881,706 $ 0.01 - $62.63 $26.57
==========
At December 31, 2000 and 1999, vested and outstanding options for 2,200,389
and 580,476 shares were exercisable at weighted-average exercise prices of
$9.95, and $1.84, respectively. The weighted-average grant date fair value of
options granted during the years ended December 31, 2000, 1999 and 1998 was
$28.77, $4.01 and $0.35, respectively. At December 31, 2000, options for shares
of common stock available for future grants under the 1997 Stock Option Plan are
544,501.
An analysis of options outstanding at December 31, 2000 is as follows:
OPTIONS VESTED
OPTIONS WEIGHTED- OPTIONS ------------------------
OUTSTANDING AVERAGE WEIGHTED- WEIGHTED-
AT REMAINING AVERAGE VESTED AT AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
EXERCISE PRICE 2000 LIFE PRICE 2000 PRICE
- -------------- ------------ ----------- --------- ------------ ---------
(IN YEARS)
$ 0.19 - $ 0.39 348,703 6.6 $ 0.34 348,703 $ 0.34
$ 0.96 - $ 0.96 400,819 7.8 $ 0.96 400,819 $ 0.96
$ 1.93 - $ 6.43 446,639 8.3 $ 3.73 446,639 $ 3.73
$11.57 - $12.00 776,041 8.7 $11.96 775,101 $11.96
$22.44 - $33.00 445,594 9.5 $28.51 71,336 $29.84
$34.63 - $51.50 282,849 9.4 $41.01 73,691 $46.87
$55.38 - $62.63 1,181,061 9.2 $57.06 84,100 $57.97
--------- ---------
3,881,706 8.7 $26.57 2,200,389 $ 9.95
========= =========
Pro forma net loss information is required by SFAS 123, computed as if the
Company had accounted for its employee stock options granted under the fair
value method of that Statement. The fair value for options granted prior to the
Company's initial public offering in November 1999 were estimated at the date of
grant using the minimum value method. Options granted following the Company's
November 1999 initial public
38
41
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
offering have been valued using the Black-Scholes method with an expected stock
volatility of 0.70 in 1999 and 0.84 in 2000. Other valuation assumptions are as
follows:
2000 1999 1998
---- ---- ----
Expected dividend yield..................................... 0% 0% 0%
Risk-free interest rate..................................... 6.4% 5.50% 5.25%
Expected life (years)....................................... 3.5 3.5 5.0
The fair value of issuances under the Employee Stock Purchase Plan is
estimated on the issuance date using the Black-Scholes model assuming no
expected dividends and the following weighted average assumptions for issuance
made in 2000. No issuances were made in 1999 or 1998.
2000
----
Expected stock price volatility............................. 0.84
Risk-free interest rate..................................... 6.40%
Expected life (years)....................................... 0.50
Had the Company valued its stock options and stock purchase rights
according to the fair value provisions of SFAS 123, pro forma net income (loss)
and pro forma net income (loss) per share would have been as follows (in
thousands):
YEARS ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- ------- -------
Net income (loss):
As reported........................................ $ (922) $(2,147) $(8,155)
======== ======= =======
Pro forma for SFAS 123............................. $(19,419) $(3,031) $(8,226)
======== ======= =======
Basic and diluted net income (loss) per share:
As reported........................................ $ (0.03) $ (0.27) $ (2.13)
======== ======= =======
Pro forma for SFAS 123............................. $ (0.67) $ (0.37) $ (2.15)
======== ======= =======
During the years ended December 31, 1999 and 1998, in connection with the
grant of certain share options to employees, the Company recorded deferred stock
compensation of $4,070,000 and $605,000, respectively, representing the
difference between the exercise price and the deemed fair value of the Company's
common stock on the date such stock options were granted. During the years ended
December 31, 1999 and 1998, the Company also recorded deferred compensation with
respect to stock options granted to consultants totaling $1,502,000 and
$155,000, respectively. Options granted to consultants are generally variable
awards and are revalued at the end of each accounting period in accordance with
SFAS 123 and EITF 96-18 using a Black-Scholes model and the following
weighted-average assumptions for 1998 and 1999: estimated volatility of 0.5,
risk-free interest rate of 5.0%, no dividend yield; and an expected life of the
option equal to the full term, generally ten years from the date of grant. The
resulting values are charged to expense as they are earned. All consultant
awards were fully vested during 1999 and no additional awards to consultants
were granted in 2000. Deferred compensation is included as a reduction of
stockholders' equity and is being amortized to expense on a graded vesting
method. During the years ended December 31, 2000, 1999 and 1998, the Company
recorded amortization of deferred stock compensation expense of approximately
$760,000, $3,794,000 and $188,000, respectively. At December 31, 2000, the
Company had a total of approximately $822,000 remaining to be amortized over the
corresponding vesting period of each respective option.
39
42
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The amortization of deferred stock compensation, combined with the expense
associated with stock options granted to non-employees, has been included in the
following items in the accompanying statements of operations (in thousands):
YEARS ENDED DECEMBER 31,
-------------------------
2000 1999 1998
----- ------- -----
Research and development.................................... $588 $2,664 $173
General and administrative.................................. 172 1,130 15
---- ------ ----
Total............................................. $760 $3,794 $188
==== ====== ====
5. INCOME TAXES
Due to operating losses and the inability to recognize the benefits
therefrom, there is no provision for income taxes for the years ended December
31, 2000, 1999 and 1998.
As of December 31, 2000, the Company had a federal net operating loss carry
forward of approximately $18.5 million. The Company also had federal research
and development credit carry forwards of approximately $900,000. The net
operating loss and credit carry forwards will expire at various dates beginning
in 2010 through 2020, if not utilized.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the "change in ownership" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
Deferred tax assets and liabilities reflect the net tax effects of net
operating loss and credit carryforwards and of temporary differences between the
carrying amounts of assets and liabilities for financial reporting and the
amounts used for income tax purposes. Significant components of the Company's
deferred tax assets and liabilities are as follows (in thousands):
DECEMBER 31,
------------------
2000 1999
------- -------
DEFERRED TAX ASSETS:
Net operating loss carryforwards......................... $ 6,600 $ 4,000
Tax credit carryforwards................................. 1,500 1,500
Deferred revenue......................................... -- 600
Capitalized research and development..................... 400 200
Other.................................................... 700 700
------- -------
Total deferred tax assets...................... 9,200 7,000
Valuation allowance for deferred tax assets.............. (9,200) (7,000)
------- -------
Net deferred tax assets.................................. $ -- $ --
======= =======
SFAS No. 109 provides for the recognition of deferred tax assets if
realization of such assets is more likely than not. Based upon the weight of
available evidence, which includes the Company's historical operating
performance and the reported cumulative net losses in all prior year, the
Company has provided a full valuation allowance against its net deferred tax
assets.
The net valuation allowance decreased by $400,000 and increased by
$4,000,000 during the years ended December 31, 1999 and 1998, respectively.
40
43
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTIONS
Prior to its initial public offering, the Company implemented a program
under which directors, executive officers and certain other employees were
permitted to purchase restricted stock or to exercise stock options pursuant to
full recourse promissory notes. The notes bear interest between 4.6% and 6.0%
per annum and are due and payable on the earlier of 120 days after termination
of employment or on various dates beginning February 2003. In 1999 and 1998,
loans were made in the amount of $333,600 and $397,750, respectively, pursuant
to this program. During 2000, $128,996 of these promissory notes were repaid. In
addition, in 1998, the Company loaned $300,000 to an officer in connection with
certain relocation expenses. This loan was repaid in full in July 1999.
7. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended December 31, 2000 and 1999 (in thousands, except per share amounts).
THREE MONTHS ENDED
--------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
2000
Total revenues................................ $12,051 $11,047 $ 8,817 $11,403
Operating expenses
Cost of products sold....................... 196 1,533 29 1,017
Research and development.................... 8,581 8,871 8,657 9,789
Sales, general and administrative........... 3,093 3,152 2,723 2,830
------- ------- ------- -------
Total operating expenses............ 11,870 13,556 11,409 13,636
Interest income (expense), net................ 1,493 1,534 1,587 1,618
------- ------- ------- -------
Net income (loss)............................. $ 1,674 $ (975) $(1,005) $ (616)
======= ======= ======= =======
Basic net income (loss) per share............. $ 0.06 $ (0.03) $ (0.03) $ (0.02)
======= ======= ======= =======
Diluted net income (loss) per share........... $ 0.05 $ (0.03) $ (0.03) $ (0.02)
======= ======= ======= =======
THREE MONTHS ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
1999
Total revenues................................ $ 7,041 $8,589 $ 7,219 $ 7,648
Operating expenses
Cost of products sold....................... -- -- -- --
Research and development.................... 5,447 5,846 7,347 7,987
Sales, general and administrative........... 1,843 1,834 1,933 2,015
------- ------ ------- -------
Total operating expenses............ 7,290 7,680 9,280 10,002
Interest income (expense), net................ 177 236 319 876
------- ------ ------- -------
Net income (loss)............................. $ (72) $1,145 $(1,742) $(1,478)
======= ====== ======= =======
Basic net income (loss) per share............. $ (0.01) $ 0.22 $ (0.30) $ (0.09)
======= ====== ======= =======
Diluted net income (loss) per share........... $ (0.01) $ 0.17 $ (0.30) $ (0.09)
======= ====== ======= =======
8. SUBSEQUENT EVENTS (UNAUDITED)
The Company incorporated a Swiss subsidiary, Symyx Technologies AG,
effective February 9, 2001. The subsidiary will provide Symyx with a European
presence for sales and support.
41
44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is hereby incorporated by reference
from the information under the captions "Election of Directors" and "Executive
Officers" contained in the Company's definitive Proxy Statement, to be filed
with the Securities and Exchange Commission no later than 120 days from the end
of the Company's last fiscal year in connection with the solicitation of proxies
for its 2000 Annual Meeting of Stockholders (the "Proxy Statement"). The
information required by Section 16(a) is incorporated by reference from the
information under the caption "Compliance with Section 16(a) of the Securities
Exchange Act of 1934" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the
information under the caption "Executive Officer Compensation" in the Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to the
information under the caption "Security Ownership of Certain Beneficial Owners
and Management" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
information under the caption "Certain Relationships and Related Transactions"
in the Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A)1. FINANCIAL STATEMENTS
The following Financial Statements of Symyx Technologies, Inc. and Report
of Ernst & Young LLP, have been filed as part of this Form 10-K. See Index to
Financial Statements under Item 8, above:
INDEX TO FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Balance Sheets at December 31, 2000 and 1999
Statements of Operations for the years ended December 31,
2000, 1999 and 1998
Statement of Stockholders' Equity for the three year period
ended December 31, 2000
Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998
Notes to Financial Statements
(A)2. FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not applicable or the required
information is shown in the Financial Statements or the notes thereto.
(A)3. EXHIBITS
Refer to (C) below.
42
45
(B) REPORTS ON FORM 8-K
The Company was not required to and did not file any reports on Form 8-K
during the period from September 30, 2000 to date of filing.
(C) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
#3.1 Amended and Restated Certificate of Incorporation
@3.2 Bylaws of Symyx
*4.1 Specimen Common Stock Certificate
*5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
*10.1 Restated Investors Rights Agreement dated March 27, 1998
*10.2 1996 Stock Plan and forms of agreements thereunder
*10.3 1997 Stock Plan and forms of agreements thereunder
*10.4 1999 Employee Stock Purchase Plan
*10.5 Form of Director and Executive Officer Indemnification
Agreement
*10.6 Form of Change of Control Agreement between Symyx and the
following individuals: Steven D. Goldby, Isy Goldwasser,
Jeryl L. Hilleman, and W. Henry Weinberg
*10.7 Standard Industrial/Commercial Single-Tenant Lease dated
November 15, 1996 between Symyx and Patrick and Bette Ng,
Co-Trustees for The Ng Living Trust, for office space
located at 3100 Central Expressway, Santa Clara, California,
and addenda and inserts thereto
*10.7(a) First Amendment to Lease between Symyx and Patrick and Bette
Ng, Co-Trustees for The Ng Living Trust
*10.8 Collaboration Agreement dated March 1, 1998 between Symyx
and Bayer AG
*10.8(a) Amendment No. 1 dated May 1, 1998 to Collaboration Agreement
between Symyx and Bayer AG
*10.8(b) Amendment No. 2 dated November 1, 1998 to Collaboration
Agreement between Symyx and Bayer AG
*10.8(c) Amendment No. 3 dated January 1, 1999 to Collaboration
Agreement between Symyx and Bayer AG
*10.8(d) Amendment No. 4 dated September 15, 1999 to Collaboration
Agreement between Symyx and Bayer AG
*10.9 Celanese-Symyx Collaboration Agreement dated August 1, 1998
between Symyx and Celanese Ltd.
*10.10 Collaborative Research and License Agreement dated January
1, 1999 between Symyx and The Dow Chemical Company
*10.11 License Agreement dated June 22, 1995 between Symyx and
Lawrence Berkeley Laboratory, on behalf of The Regents of
the University of California
*10.12 License and Supply Agreement effective August 6, 1999
between Symyx and Argonaut Technologies, Inc.
10.13 Lease by and between East Arques Sunnyvale, LLC and Symyx
Technologies, Inc. for the premises at 1263 E. Arques,
Sunnyvale, California, and addenda and inserts thereto
23.1 Consent of Ernst & Young LLP, Independent Auditors
- ---------------
# Incorporated by reference to exhibit 3.1(b) filed with Registrant's
Registration Statement on Form S-1 (File No. 333-87453), as amended.
@ Incorporated by reference to exhibit 3.2(b) filed with Registrant's
Registration Statement on Form S-1 (File No. 333-87453), as amended.
* Incorporated by reference to the same number exhibit filed with Registrant's
Registration Statement on Form S-1 (File No. 333-87453), as amended.
43
46
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SYMYX TECHNOLOGIES, INC.
(Registrant)
March 23, 2001 By: /s/ STEVEN D. GOLDBY
------------------------------------
Steven D. Goldby
Chief Executive Officer
and Chairman of the Board
March 23, 2001 By: /s/ JERYL L. HILLEMAN
------------------------------------
Jeryl L. Hilleman
Senior Vice President and
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Steven D. Goldby and Jeryl L. Hilleman,
or either of them, each with the power of substitution, his attorney-in-fact, to
sign any amendments to this Form 10-K (including post-effective amendments), and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
By /s/ STEVEN D. GOLDBY Chief Executive Officer and March 23, 2001
------------------------------------------------- Chairman of the Board
Steven D. Goldby (Principal Executive Officer)
By /s/ JERYL L. HILLEMAN Senior Vice President and Chief March 23, 2001
------------------------------------------------- Financial Officer (Principal
Jeryl L. Hilleman Financial and Accounting
Officer)
By /s/ THOMAS R. BARUCH Director March 23, 2001
-------------------------------------------------
Thomas R. Baruch
By /s/ SAMUEL D. COLELLA Director March 23, 2001
-------------------------------------------------
Samuel D. Colella
By /s/ MARTIN GERSTEL Director March 23, 2001
-------------------------------------------------
Martin Gerstel
44
47
SIGNATURE TITLE DATE
--------- ----- ----
By /s/ BARON GAULTHAUS KRAIJENHOFF Director March 23, 2001
-------------------------------------------------
Baron Gaulthaus Kraijenhoff
By /s/ FRANCOIS A. L'EPLATTENIER Director March 23, 2001
-------------------------------------------------
Francois A. L'Eplattenier
By /s/ KENNETH J. NUSSBACHER Director March 23, 2001
-------------------------------------------------
Kenneth J. Nussbacher
By /s/ MARIO M. ROSATI Director March 23, 2001
-------------------------------------------------
Mario M. Rosati
By /s/ PETER G. SCHULTZ Director March 23, 2001
-------------------------------------------------
Peter G. Schultz
45
48
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
#3.1 Amended and Restated Certificate of Incorporation
@3.2 Bylaws of Symyx
*4.1 Specimen Common Stock Certificate
*5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
*10.1 Restated Investors Rights Agreement dated March 27, 1998
*10.2 1996 Stock Plan and forms of agreements thereunder
*10.3 1997 Stock Plan and forms of agreements thereunder
*10.4 1999 Employee Stock Purchase Plan
*10.5 Form of Director and Executive Officer Indemnification
Agreement
*10.6 Form of Change of Control Agreement between Symyx and the
following individuals: Steven D. Goldby, Isy Goldwasser,
Jeryl L. Hilleman, and W. Henry Weinberg
*10.7 Standard Industrial/Commercial Single-Tenant Lease dated
November 15, 1996 between Symyx and Patrick and Bette Ng,
Co-Trustees for The Ng Living Trust, for office space
located at 3100 Central Expressway, Santa Clara, California,
and addenda and inserts thereto
*10.7(a) First Amendment to Lease between Symyx and Patrick and Bette
Ng, Co-Trustees for The Ng Living Trust
*10.8 Collaboration Agreement dated March 1, 1998 between Symyx
and Bayer AG
*10.8(a) Amendment No. 1 dated May 1, 1998 to Collaboration Agreement
between Symyx and Bayer AG
*10.8(b) Amendment No. 2 dated November 1, 1998 to Collaboration
Agreement between Symyx and Bayer AG
*10.8(c) Amendment No. 3 dated January 1, 1999 to Collaboration
Agreement between Symyx and Bayer AG
*10.8(d) Amendment No. 4 dated September 15, 1999 to Collaboration
Agreement between Symyx and Bayer AG
*10.9 Celanese-Symyx Collaboration Agreement dated August 1, 1998
between Symyx and Celanese Ltd.
*10.10 Collaborative Research and License Agreement dated January
1, 1999 between Symyx and The Dow Chemical Company
*10.11 License Agreement dated June 22, 1995 between Symyx and
Lawrence Berkeley Laboratory, on behalf of The Regents of
the University of California
*10.12 License and Supply Agreement effective August 6, 1999
between Symyx and Argonaut Technologies, Inc.
10.13 Lease by and between East Arques Sunnyvale, LLC and Symyx
Technologies, Inc. for the premises at 1263 E. Arques,
Sunnyvale, California, and addenda and inserts thereto
23.1 Consent of Ernst & Young LLP, Independent Auditors
- ---------------
# Incorporated by reference to exhibit 3.1(b) filed with Registrant's
Registration Statement on Form S-1 (File No. 333-87453), as amended.
@ Incorporated by reference to exhibit 3.2(b) filed with Registrant's
Registration Statement on Form S-1 (File No. 333-87453), as amended.
* Incorporated by reference to the same number exhibit filed with Registrant's
Registration Statement on Form S-1 (File No. 333-87453), as amended.
46