<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 22, 1999
REGISTRATION NO. 333-87453
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SYMYX TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8731 77-0397908
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
SYMYX TECHNOLOGIES, INC.
3100 CENTRAL EXPRESSWAY
SANTA CLARA, CALIFORNIA 95051
(408) 764-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEVEN D. GOLDBY
CHIEF EXECUTIVE OFFICER
SYMYX TECHNOLOGIES, INC.
3100 CENTRAL EXPRESSWAY
SANTA CLARA, CALIFORNIA 95051
(408) 764-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
MARIO M. ROSATI, ESQ. STANTON D. WONG, ESQ.
CHRISTOPHER D. MITCHELL, ESQ. JOHN L. DONAHUE, ESQ.
JASON M. BRADY, ESQ. WILLIAM A. HINES, ESQ.
ALEXANDER D. PHILLIPS, ESQ. DAWN C. STEELE, ESQ.
PAUL G. CASTOR, ESQ. BLAIR M. WALTERS, ESQ.
WILSON SONSINI GOODRICH & ROSATI PILLSBURY MADISON & SUTRO LLP
PROFESSIONAL CORPORATION 2550 HANOVER STREET
650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94304
PALO ALTO, CA 94304 (650) 233-4500
(650) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE PRICE(2) REGISTRATION FEE(3)
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock, $0.001 par value............ 5,307,250 $14.00 $74,301,500 $20,656.00
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</TABLE>
(1) Includes 692,250 shares which the underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.
(3) Of this amount, $19,182 was previously paid pursuant to Rule 457(o).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED OCTOBER 22, 1999
4,615,000 Shares
[SYMYX LOGO]
Common Stock
------------------
Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $12.00 and $14.00 per share. We have made application to list our common
stock on The Nasdaq Stock Market's National Market under the symbol "SMMX."
The underwriters have an option to purchase a maximum of 692,250 additional
shares to cover over-allotments of shares.
At our request, the underwriters have reserved up to 923,000 shares of
common stock for sale at the initial public offering price to employees,
directors and other persons associated with us, including up to 884,500 shares
reserved for sale to Alejandro Zaffaroni, Peter Schultz and RA Investments, each
of whom is an existing stockholder of ours. These shares are part of the
4,615,000 shares that will be issued through the underwriters. See
"Underwriting."
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 6.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS SYMYX
--------------- ------------- -----------
<S> <C> <C> <C>
Per Share............................... $ $ $
Total................................... $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about
, 1999.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
DONALDSON, LUFKIN & JENRETTE
INVEMED ASSOCIATES
SCHRODER & CO. INC.
The date of this prospectus is , 1999.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUMMARY.............. 3
RISK FACTORS.................... 6
FORWARD-LOOKING STATEMENTS...... 15
USE OF PROCEEDS................. 15
DIVIDEND POLICY................. 16
TRADEMARKS...................... 16
CAPITALIZATION.................. 17
DILUTION........................ 18
SELECTED FINANCIAL DATA......... 19
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS.................... 20
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
BUSINESS........................ 28
MANAGEMENT...................... 39
RELATED PARTY TRANSACTIONS...... 48
PRINCIPAL STOCKHOLDERS.......... 50
DESCRIPTION OF CAPITAL STOCK.... 53
SHARES ELIGIBLE FOR FUTURE
SALE.......................... 56
UNDERWRITING.................... 58
NOTICE TO CANADIAN RESIDENTS.... 60
LEGAL MATTERS................... 61
EXPERTS......................... 61
ADDITIONAL INFORMATION.......... 61
INDEX TO FINANCIAL STATEMENTS... F-1
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary highlights information we present more fully
elsewhere in this prospectus. This prospectus contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result
of factors described under the heading "Risk Factors" and elsewhere in this
prospectus.
SYMYX TECHNOLOGIES, INC.
We are a pioneer of high-speed technologies for the discovery of new
materials. 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, plastics and rubbers, the plastics in many of
our household and office goods, luminescent materials in lighting and computer
and television screens, the pigments in paint and the polymers on the bottom of
sneakers.
The chemical and electronics companies that produce these materials are
facing heightened pressure to achieve growth targets and increase profitability.
These companies are focused on reducing costs, increasing innovation, and
creating new businesses based on proprietary materials. We believe that we can
assist chemical and electronics companies by discovering new materials in a more
productive and cost-effective manner than by using traditional methods.
Our proprietary technologies, including instruments, software and methods,
represent complete processes designed to cost-effectively accelerate and
fundamentally change materials discovery. We create hundreds to thousands of
unique materials at one time and screen those materials rapidly and
automatically for desired properties. Our process of simultaneously making and
then screening large numbers of different materials is called the
"combinatorial" approach. We believe our combinatorial 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 apply our proprietary combinatorial technologies to discover materials
both for ourselves and in collaboration with major companies. Most of these
companies are in the chemical and electronics industries. Our current partners
include Agfa, BASF, Bayer, Celanese, Ciba Specialty Chemicals, Dow Chemical,
Osram OS (an affiliate of Siemens) and Unilever. These partners and other
collaborators have committed a total of over $85 million in near-term research
funding, of which we have recognized revenue of $41 million through September
30, 1999. If a new material is discovered and commercialized, we generally will
receive either royalties or milestone payments.
We are applying our technology to discover a wide range of materials,
including catalysts to manufacture a broad array of chemicals, polymers for
coatings and additives, and materials for electronic applications. These areas
all represent substantial worldwide markets. For example, our technology may
discover catalysts which could be applied to the manufacture of products with a
worldwide annual market in excess of $500 billion. In addition to our alliances,
we are seeking to meet the growing demand for combinatorial technologies by
offering selective access to some of our equipment and technologies, including
our Discovery Tools.
3
<PAGE> 5
Dr. Alejandro Zaffaroni and Dr. Peter Schultz founded Symyx in 1994. Dr.
Zaffaroni is also a founder of ALZA, Affymax, Affymetrix and DNAX Research
Institute. The conceptual basis for Symyx draws from Affymax and Affymetrix,
which commercialized the use of high-speed combinatorial methods for
pharmaceutical and genetic research, respectively.
As a pioneer of high-speed materials discovery, we have focused on building
a strong competitive position through both our people and our intellectual
property. We have assembled a diverse technical and scientific team to enable us
to create, validate and apply high-speed discovery technologies. Our team
includes chemists, physicists, engineers and programmers. In addition, we have
filed over 80 patent applications in the United States and more than 110
worldwide, covering combinatorial methodologies, instruments and software and
novel materials.
Our main facility is located at 3100 Central Expressway, Santa Clara, CA
95051 and our telephone number is (408) 764-2000. Our corporate web site is
located at www.symyx.com. We were incorporated in California in September 1994
and reincorporated in Delaware in February 1999.
THE OFFERING
Common stock offered.............. 4,615,000 shares
Common stock to be outstanding
after this offering............... 27,761,014 shares
Use of proceeds................... General corporate purposes, including
working capital.
Proposed Nasdaq National Market
symbol.......................... SMMX
Common stock to be outstanding after this offering is based on 23,146,014
shares of common stock outstanding as of September 30, 1999. It does not
include:
- 2,002,041 shares subject to stock options outstanding as of September 30,
1999; and
- 1,528,521 shares available for future grant or issuance under our stock
option plans as of September 30, 1999.
Except as otherwise indicated, all of the information in this prospectus:
- reflects the automatic conversion of each outstanding share of preferred
stock into 0.7778 shares of common stock immediately prior to the closing
of this offering;
- reflects a 0.7778-for-1 reverse stock split of our outstanding common
stock that was effected on October 22, 1999; and
- assumes no exercise of the underwriters' over-allotment option.
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<PAGE> 6
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
See Note 1 of Notes to Financial Statements for an explanation of the
method used to determine the number of shares used in computing per share data
below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue............................. $ -- $ 4,806 $13,787 $10,035 $22,530
Operating expenses.................. 3,050 10,893 22,258 16,657 24,222
Loss from operations................ (3,050) (6,087) (8,471) (6,622) (1,692)
Net loss............................ (2,681) (5,596) (8,085) (6,393) (961)
Pro forma basic and diluted net loss
per share......................... $ (0.46) $ (0.04)
Shares used in computing pro forma
basic and diluted net loss per
share............................. 17,737 21,538
</TABLE>
In the "as adjusted" column below, we have adjusted the actual balance
sheet data to give effect to receipt of the net proceeds from the sale in this
offering of 4,615,000 shares of common stock at an assumed initial public
offering price of $13.00 per share, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses and assuming the
automatic conversion of each outstanding share of preferred stock into 0.7778
shares of common stock immediately prior to the closing of this offering.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------
ACTUAL AS ADJUSTED
------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments................... $39,883 $ 94,678
Working capital.......................................... 2,828 57,623
Total assets............................................. 60,627 115,422
Long-term obligations, net of current portion............ 7,014 7,014
Total stockholders' equity............................... 38,365 93,160
</TABLE>
5
<PAGE> 7
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Risks and
uncertainties, in addition to those we describe below, that are not presently
known to us or that we believe are immaterial may also impair our business
operations. If any of the following risks occur, our business could be seriously
harmed. In addition, the trading price of our common stock could decline due to
the occurrence of any of these risks, and you may lose all or part of your
investment.
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, no materials that we have discovered using these technologies and
processes have been successfully commercialized as products. Discovery and
development of new materials is a highly uncertain process, and we cannot assure
you that our discovery process will result in the identification of development
candidates that will be commercialized. 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 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, chemical companies have conducted
basic research and discovery activities internally using traditional manual
materials 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. We may not be
able to keep our existing customers or attract additional customers on
acceptable terms or develop a sustainable, profitable business.
WE ARE DEPENDENT ON THE RESEARCH AND DEVELOPMENT ACTIVITIES OF COMPANIES IN THE
CHEMICAL INDUSTRY, AND INDUSTRY DECLINES OR REDUCTIONS IN RESEARCH AND
DEVELOPMENT ACTIVITIES COULD HARM OUR BUSINESS
The market for our discovery services and instrumentation within the
chemical industry depends on our customers' ability and willingness to invest in
research and development. Substantially all of our revenues are attributable to
our research collaborations. Our future revenues will also be dependent on sales
of Discovery Tools and other instrumentation to chemical companies.
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
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<PAGE> 8
companies could adopt strategies that involve significant reductions in their
research and development programs. Although we believe that our approach can
help chemical 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 chemical companies reduce their research and
development activities, they would be less likely to do business with us and our
business and operating results could be harmed.
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
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. We may be unable to 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, the future
revenues from our research collaborations and from commercialization of products
would be adversely affected. 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
harm our business and operating results.
WE ARE DEPENDENT ON OUR COLLABORATIONS WITH MAJOR COMPANIES, AND THE FAILURE OF
OUR COLLABORATIVE PARTNERS TO SUCCESSFULLY COMMERCIALIZE PRODUCTS WOULD HARM OUR
BUSINESS
To date, substantially all of our revenues have come from collaborative
arrangements with chemical and electronics companies. These contracts 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 will 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 INTEND TO 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. 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
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<PAGE> 9
collaborator. However, in the event any conflict of this nature were to arise,
our business could be harmed.
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 chemical 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 future revenues would be reduced and our business and operating
results would be harmed.
WE HAVE NOT SOLD ANY DISCOVERY TOOLS SYSTEMS, AND WE CANNOT ASSURE YOU THAT WE
WILL BE ABLE TO BUILD A SUSTAINABLE BUSINESS RELATED TO THE SALE OF THESE
SYSTEMS
We have not sold any of our Discovery Tools systems. Because of the high
cost and complexity of these systems, the sales cycle for them is likely to be
long. Sales of these systems will require us to educate our potential customers
about the full 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; and
- potential downturns in general or in industry specific economic
conditions.
If the cycle for Discovery Tools systems lengthens unexpectedly, it could
adversely affect the timing of our revenues.
WE WILL NEED TO DEVELOP MANUFACTURING, SALES AND MARKETING CAPABILITIES FOR
DISCOVERY TOOLS, AND IF WE ARE UNABLE TO DO SO, WE WILL BE UNABLE TO BUILD OUR
DISCOVERY TOOLS BUSINESS
In order to successfully market and sell these systems, we will need to
develop the capability to manufacture, market and sell large capital equipment
items. Although we have several business development professionals with
experience in this area, we may need to hire additional personnel. We may not be
able to sell these systems and we may not be able to build a sustainable
business related to the sale of these systems. If we are not able to build our
Discovery Tools business, our future revenues and operating results would be
harmed.
WE ARE COMMERCIALIZING OUR NONAUTOMATED LABORATORY INSTRUMENTS THROUGH A THIRD
PARTY ARRANGEMENT, AND IF THIS THIRD PARTY DOES NOT PERFORM EFFECTIVELY, OUR
ABILITY TO GENERATE REVENUE FROM THE SALE OF THESE PRODUCTS WILL BE HARMED
We intend to commercialize our nonautomated laboratory instruments through
our relationship with Argonaut Technologies. 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 in promoting, marketing
and selling these instruments. Argonaut's efforts in this regard will be outside
of our control. Accordingly, to the extent that Argonaut fails to effectively
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<PAGE> 10
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. For example, our revenues for the nine
months ended September 30, 1999 were $22.5 million, as compared to $10.0 million
for the nine months ended September 30, 1998. Revenues in future fiscal periods
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; 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 2000. 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.
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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 HARM OUR BUSINESS
The field of combinatorial materials science is increasingly competitive.
We are aware of several companies that are applying their expertise in
combinatorial chemistry to materials research and development. These companies
include Aperion LLC, a joint venture between CombiChem, Inc. and Catalytica,
Inc., and Cambridge Combinatorial Limited, an affiliate of Oxford Molecular PLC.
We are also aware of some chemical companies that have internal combinatorial
programs. In addition, Shell Chemicals is participating in a consortium in The
Netherlands and BASF is funding a new start-up company in Heidelberg, Germany
named HTE. BASF is also one of our collaborative partners. 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 RESOURCES THAN WE DO,
WHICH MAY ENABLE THEM TO COMPETE MORE EFFECTIVELY
Many of our current and potential competitors have greater financial,
manufacturing, marketing and sales resources than we do. Our competitors could
develop technologies and methods for materials research and discovery that
render our technologies and systems obsolete or less competitive. Any
competitive developments of this nature would make our technologies and
methodologies less competitive. This would make it more difficult for us to
retain existing customers and attract new customers and would therefore harm our
business 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 business
and operating results.
10
<PAGE> 12
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 business and operating results would be
harmed. We also seek to protect our technology and processes in part by
confidentiality agreements with our collaborators, employees and consultants.
However, these agreements might be breached, 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.
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
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 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 received a communication dated in December 1998 from a company claiming
that our activities may infringe one or more patents held by that company. We
responded in writing to this claim in February 1999 and indicated that we did
not believe we were infringing any of the company's patents. We have not
received any further communications from this company. We may receive
communications from this company or others in the future asserting that our
business or technologies infringe their intellectual property rights.
We may be required 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 and
operating results would likely suffer.
11
<PAGE> 13
WE USE HAZARDOUS MATERIALS IN OUR BUSINESS, AND ANY CLAIMS RELATING TO IMPROPER
HANDLING, STORAGE OR DISPOSAL OF THESE MATERIALS COULD HARM OUR BUSINESS OR OUR
OPERATING RESULTS
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.
WE HAVE EXPERIENCED SIGNIFICANT GROWTH, AND WE MUST IMPROVE OUR OPERATIONAL,
FINANCIAL AND MANAGEMENT CONTROLS AND SYSTEMS TO KEEP PACE WITH OUR GROWTH
We have experienced a period of rapid and substantial growth that has
placed and, if such growth continues, will continue to place a strain on our
human and capital resources. If we are unable to manage this growth effectively,
our business, results of operations or financial condition may be materially
adversely affected. We increased the number of our employees from 28 at December
31, 1996 to 152 at September 30, 1999. Our revenues increased from $4.8 million
in 1997 to $13.8 million in 1998 and $22.5 million for the nine months ended
September 30, 1999. Our ability to manage our operations and growth effectively
requires us to continue to improve our operational, financial and management
controls, reporting systems and procedures and hiring programs. We may not be
able to successfully implement improvements to our management information and
control systems in an efficient or timely manner and may discover deficiencies
in existing systems and controls.
IF WE, OUR CUSTOMERS AND OUR SUPPLIERS FAIL TO REMEDY YEAR 2000 ISSUES, OUR
RESEARCH PROGRAMS COULD BE INTERRUPTED AND OUR BUSINESS AND OPERATING RESULTS
COULD BE HARMED
If we, our customers, our providers of hardware and software, or our
third-party computer network providers fail to remedy any Year 2000 issues, the
reasonably likely worst case scenario would be the interruption of our research
programs, which could harm our business and operating results. Presently we are
unable to quantitatively estimate the duration and extent of any such
interruption, or estimate the effect such interruption may have on our future
revenue.
We cannot assure you that, despite our current assessments of the Year 2000
problems that may affect our business, we will be able to identify and correct
all Year 2000 problems on a timely basis. Similarly, we cannot assure you that
unknown or unanticipated Year 2000 issues will not arise. Accordingly, Year 2000
compliance efforts may involve significant time and expense and the occurrence
of unknown, unanticipated or unremediated Year 2000 problems could harm our
business and operating results. We currently have no contingency plans to
address the risks associated with unremediated Year 2000 problems.
12
<PAGE> 14
SOME OF OUR EXISTING STOCKHOLDERS CAN EXERT CONTROL OVER US, AND MAY NOT MAKE
DECISIONS THAT ARE IN THE BEST INTERESTS OF ALL STOCKHOLDERS
After this offering, our officers, directors and principal stockholders
(greater than 5% stockholders) will together control approximately 33.0% 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.
OUR STOCK PRICE MAY FLUCTUATE SUBSTANTIALLY
Prior to this offering, there has been no public market for shares of our
common stock. An active public trading market may not develop following
completion of this offering or, if developed, may not be sustained. The initial
public offering price of the shares of common stock will be determined by
negotiation between us and representatives of the underwriters. This price will
not necessarily reflect the market price of the common stock following this
offering. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price.
The market price for the common stock following this offering 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.
OUR FACILITIES ARE LOCATED NEAR KNOWN EARTHQUAKE FAULT ZONES, AND THE OCCURRENCE
OF AN EARTHQUAKE OR OTHER CATASTROPHIC 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. 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
13
<PAGE> 15
interruptions. Accordingly, an earthquake or other disaster could harm our
business and operating results.
POTENTIAL SALES OF SHARES ELIGIBLE FOR FUTURE SALE AFTER THIS OFFERING COULD
CAUSE OUR STOCK PRICE TO DECLINE
If our stockholders sell substantial amounts of our common stock (including
shares issued upon the exercise of outstanding options and warrants) in the
public market following this offering, the market price of our common stock
could fall. These sales also might make it more difficult for us to sell equity
or equity-related securities in the future at a time and price that we deem
appropriate. The shares sold in this offering will be freely tradable
immediately upon completion of this offering. In addition, on the 181st day
after completion of this offering, approximately 22,976,457 shares of our common
stock held by existing stockholders will be freely tradable, subject in some
instances to the volume and other limitations of Rule 144. Sales of these shares
and other shares of common stock held by existing stockholders could cause the
market price of our common stock to decline.
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.
AS A NEW INVESTOR, YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION
If you purchase shares of our common stock in this offering, you will incur
immediate dilution of $9.64 per share in pro forma net tangible book value. If
the holders of outstanding options or warrants exercise those options or
warrants, you will incur further dilution. See "Dilution."
14
<PAGE> 16
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning of
the federal securities laws that relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "intend," "potential" or "continue."
In addition, these forward-looking statements include, but are not limited
to, statements regarding the following:
- our combinatorial materials discovery technologies and processes;
- our ability to realize commercially valuable discoveries in our
collaborations with chemical and electronics companies and in our
proprietary programs;
- our plans to develop our Discovery Tools and instrumentation businesses;
- our intellectual property portfolio; and
- our business strategies and plans.
These statements are only predictions.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of these statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus or to conform these statements to actual results.
USE OF PROCEEDS
We expect to receive net proceeds of approximately $54.8 million from the
sale of the 4,615,000 shares of common stock, at an assumed initial public
offering price of $13.00 per share, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses. If the underwriters'
over-allotment option is exercised in full, our estimated net proceeds will be
$63.2 million.
We expect to use the net proceeds from this offering for general corporate
purposes, including working capital and research and development activities.
Pending use of the net proceeds of this offering, we intend to invest the net
proceeds in interest-bearing, investment-grade securities.
A portion of the net proceeds 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 these businesses, products or technologies.
We have no current plans, agreements or commitments, and are not currently
engaged in any negotiations regarding any such transaction.
15
<PAGE> 17
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.
TRADEMARKS
Symyx(R) is our registered trademark, and Symyx Technologies(TM), Discovery
Tools(TM), Library Studio(TM), PPR(TM), Endeavor(TM) and the Symyx logo are our
trademarks. Other service marks, trademarks and trade names referred to in this
prospectus are the property of their respective owners.
16
<PAGE> 18
CAPITALIZATION
The following table sets forth:
- the actual capitalization of Symyx at September 30, 1999;
- the pro forma capitalization of Symyx after giving effect to the
conversion of all outstanding shares of our preferred stock into
15,991,849 shares of common stock effective automatically immediately
prior to the closing of this offering; and
- the pro forma as adjusted capitalization after giving effect to the sale
of 4,615,000 shares of common stock in this offering at an assumed
initial public offering price of $13.00 per share and the application of
the net proceeds, after deducting estimated underwriting discounts and
commissions and estimated offering expenses.
You should read this table in conjunction with our financial statements and
the related notes and Selected Financial Data included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- ------------
(IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
Long-term obligations.................................... $ 7,014 $ 7,014 $ 7,014
Stockholders' equity:
Preferred stock, $0.001 par value, 23,650,000 shares
authorized, issuable in series:
Series A convertible, 1,000,000 shares designated,
issued and outstanding, (no shares outstanding pro
forma or pro forma as adjusted)..................... 1 -- --
Series B convertible, 8,650,000 shares designated,
8,600,687 shares issued and outstanding, (no shares
outstanding pro forma or pro forma as adjusted)..... 9 -- --
Series C convertible, 8,000,000 shares designated,
6,750,284 shares issued and outstanding, (no shares
outstanding pro forma or pro forma as adjusted)..... 7 -- --
Series D convertible, 6,000,000 shares designated,
4,210,185 shares issued and outstanding, (no shares
outstanding pro forma or pro forma as adjusted)..... 4 -- --
Common stock, $0.001 par value, 50,000,000 shares
authorized, 7,154,165 shares issued and outstanding
(23,146,014 shares outstanding pro forma and 27,761,014
shares outstanding pro forma as adjusted).............. 7 23 28
Additional paid-in capital............................... 59,795 59,800 114,590
Stockholder notes receivable............................. (731) (731) (731)
Deferred stock compensation.............................. (2,838) (2,838) (2,838)
Unrealized gain (loss) on investments.................... (58) (58) (58)
Accumulated deficit...................................... (17,831) (17,831) (17,831)
-------- -------- --------
Total stockholders' equity..................... 38,365 38,365 93,160
-------- -------- --------
Total capitalization........................... $ 45,379 $ 45,379 $100,174
======== ======== ========
</TABLE>
This table excludes the following shares:
- 2,002,041 shares subject to stock options outstanding as of September 30,
1999; and
- 1,528,521 shares reserved for issuance under our stock option plans as of
September 30, 1999.
For additional information regarding these shares, see Note 4 of Notes to
Financial Statements.
17
<PAGE> 19
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering.
The pro forma net tangible book value of Symyx at September 30, 1999, was
$38.4 million, or $1.66 per share of common stock. Pro forma net tangible book
value per share represents total tangible assets less total liabilities, divided
by the number of outstanding shares of common stock after giving effect to the
conversion of all outstanding shares of our preferred stock into 15,991,849
shares of common stock effective automatically immediately prior to the closing
of this offering. After giving effect to the sale of the 4,615,000 shares of
common stock at an assumed initial public offering price of $13.00 per share,
and after deducting estimated underwriting discounts and commissions and
estimated offering expenses, our pro forma as adjusted net tangible book value
at September 30, 1999, would be $93.2 million or $3.36 per share. This
represents an immediate increase in the pro forma as adjusted net tangible book
value of $1.70 per share to existing stockholders and an immediate dilution of
$9.64 per share to new investors, or approximately 74% of the assumed offering
price of $13.00 per share. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $13.00
Pro forma net tangible book value per share at
September 30, 1999.................................... $1.66
Increase per share attributable to this offering....... 1.70
-----
Pro forma net tangible book value per share after this
offering.................................................. 3.36
------
Dilution per share to new investors......................... $ 9.64
======
</TABLE>
The following table shows on a pro forma as adjusted basis at September 30,
1999, after giving effect to the sale of the 4,615,000 shares of common stock at
an assumed initial public offering price of $13.00 per share, before deducting
estimated underwriting discounts and commissions and estimated offering
expenses, and conversion of all preferred stock into common stock for the number
of shares of common stock purchased from us, the total consideration paid to us
and the average price paid per share by existing stockholders and by new
investors purchasing common stock in this offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------- PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- ------------ ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.... 23,146,014 83.4% $ 54,073,280 47.4% $ 2.34
New investors............ 4,615,000 16.6 59,995,000 52.6 13.00
---------- ----- ------------ -----
Total.......... 27,761,014 100.0% $114,068,280 100.0%
========== ===== ============ =====
</TABLE>
The computations in the table above assume no exercise of any stock options
outstanding at September 30, 1999. As of September 30, 1999, there were options
outstanding to purchase a total of 2,002,041 shares of common stock at a
weighted average exercise price of $2.14 per share. If any of these options are
exercised, there will be further dilution to new public investors.
18
<PAGE> 20
SELECTED FINANCIAL DATA
The statement of operations data for the years ended December 31, 1996,
1997 and 1998 and the nine months ended September 30, 1999, and the balance
sheet data as of December 31, 1997 and 1998 and September 30, 1999 are derived
from our financial statements, which have been audited by Ernst & Young LLP,
independent auditors and are included elsewhere in this prospectus. The
statement of operations data for the period from inception through December 31,
1995 and the balance sheet data as of December 31, 1995 and 1996 are derived
from audited financial statements not included in this prospectus. The financial
data for the nine months ended September 30, 1998 are derived from unaudited
financial statements included elsewhere in this prospectus. We have prepared
this unaudited information on the same basis as the audited financial statements
and have included all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation of our financial
position and operating results for such periods. When you read this selected
financial data, it is important that you also read the historical financial
statements and related notes included in this prospectus, as well as the section
of this prospectus related to "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Historical results are not necessarily
indicative of future results. See Note 1 of Notes to Financial Statements for an
explanation of the method used to determine the number of shares used in
computing pro forma net loss per share.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
PERIOD FROM INCEPTION YEAR ENDED DECEMBER 31, SEPTEMBER 30,
(SEPTEMBER 20, 1994) TO --------------------------- -----------------
DECEMBER 31, 1995 1996 1997 1998 1998 1999
----------------------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue from collaborations........... $ -- $ -- $ 4,806 $13,787 $10,035 $22,530
Operating expenses:
Research and development............ 27 2,483 8,764 17,640 13,299 16,787
General and administrative.......... 481 567 2,129 4,501 3,350 4,641
Amortization of deferred
compensation...................... -- -- -- 117 8 2,794
------ ------- ------- ------- ------- -------
Total operating expenses.......... 508 3,050 10,893 22,258 16,657 24,222
------ ------- ------- ------- ------- -------
Loss from operations.................. (508) (3,050) (6,087) (8,471) (6,622) (1,692)
Interest income....................... -- 375 843 1,117 773 1,500
Interest and other expense............ -- (6) (352) (731) (544) (769)
------ ------- ------- ------- ------- -------
Net loss.............................. $ (508) $(2,681) $(5,596) (8,085) $(6,393) $ (961)
====== ======= ======= ======= ======= =======
Basic and diluted net loss per
share............................... $(0.40) $ (1.24) $ (1.97) $ (2.11) $ (1.75) $ (0.17)
====== ======= ======= ======= ======= =======
Shares used in computing basic and
diluted net loss per share.......... 1,269 2,168 2,845 3,829 3,656 5,546
====== ======= ======= ======= ======= =======
Pro forma basic and diluted net loss
per share........................... $ (0.46) $ (0.04)
======= =======
Shares used in computing pro forma
basic and diluted net loss per
share............................... 17,737 21,538
======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------ SEPTEMBER 30,
1995 1996 1997 1998 1999
------ ------- ------- ------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments.................. $ 15 $ 9,349 $20,614 $35,121 $39,883
Working capital (deficit)............................... (510) 8,789 9,860 15,701 2,828
Total assets............................................ 19 10,674 34,861 52,903 60,627
Long-term obligations, net of current portion........... -- -- 4,455 7,592 7,014
Total stockholders' equity.............................. (506) 10,283 25,030 36,166 38,365
</TABLE>
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements based upon current
expectations that involve risks and uncertainties. When used in this prospectus,
the words "intend," "anticipate," "believe," "estimate," "plan" and "expect" and
similar expressions are included to identify forward-looking statements. Our
actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
Symyx was founded in September 1994 and began significant operations in
April 1996. To date, our revenues and cash flow have come from research
collaborations with large chemical and electronics companies and government
grants. Our current corporate partners are Agfa-Gevaert N.V., BASF AG, Bayer AG,
Celanese Ltd., Ciba Specialty Chemicals, Inc., The Dow Chemical Company, Osram
Opto Semiconductors GmbH & Co. OHG and Unilever UK Central Resources Ltd. These
agreements are generally for a two to three year guaranteed term. Five of our
research contracts commenced in the last twelve months, representing over half
of our committed revenue. Four of our research contracts may end by their terms
in 2000. Revenue related to these contracts for the nine-month period ended
September 30, 1999 was $6.4 million.
We have invested heavily in establishing the technology, instrumentation
and informatics necessary to pursue high throughput discovery for proprietary
materials. These materials include:
- catalysts for commodity chemicals and polyolefins;
- catalysts for fine chemicals;
- specialty polymers; and
- electronic materials.
These investments contributed to revenue increases from no revenue in
fiscal 1996 to $4.8 million in fiscal 1997 to $13.8 million in fiscal 1998 to
$22.5 million in the nine months ended September 30, 1999. Operating expenses
increased from $3.1 million in fiscal 1996 to $10.9 million in fiscal 1997 to
$22.3 million in fiscal 1998 to $24.2 million in the nine months ended September
30, 1999. Our total headcount increased from 28 employees at the end of fiscal
1996 to 76 employees at the end of fiscal 1997 to 108 employees at the end of
fiscal 1998 and to 152 employees at September 30, 1999.
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 September
30, 1999, our accumulated deficit was approximately $17.8 million. We expect to
incur additional operating losses over at least the next year as we continue to
expand staffing, equipment and facilities.
20
<PAGE> 22
SOURCE OF REVENUES AND REVENUE RECOGNITION POLICY
We recognize revenues from research collaboration agreements and government
grants as earned upon achievement of the performance requirements of the
agreements and grants. Payments received which are related to future performance
are deferred and recognized as revenue as the performance requirements are
achieved. As of September 30, 1999, we have deferred revenues of approximately
$9.1 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 Note 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 $5.2 million in the
nine month period ended September 30, 1999 and $560,000 in the fiscal 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. We recorded amortization of deferred compensation
of approximately $2.8 million for the nine months ended September 30, 1999 and
$117,000 in fiscal 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. We anticipate recording additional deferred stock
compensation expense of approximately $456,000 for the three months ending
December 31, 1999.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1999
Revenues
Our total revenues increased 125% from $10.0 million for the nine months
ended September 30, 1998 to $22.5 million for the nine months ended September
30, 1999. 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 39%, 38% and none of total revenue
for the nine months ended September 30, 1998, and 32%, 12% and 18% of revenue
for the nine months ended
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<PAGE> 23
September 30, 1999, respectively. B.F. Goodrich accounted for 13% of revenue for
the nine months ended September 30, 1998. Our collaboration with B.F. Goodrich
was terminated by mutual agreement 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 will continue to make required
termination payments under the collaboration agreement through December 31,
1999.
Revenue from research collaborations exceeded research and development
expense for the nine months ended September 30, 1999. This increase was
primarily due to an increase in sponsored research programs as a percentage of
total research and development activities, and higher reimbursement rates under
certain collaboration agreements.
Research and Development Expenses
Our research and development expenses consist primarily of:
- salaries and other personnel-related expenses;
- facility costs;
- supplies; and
- depreciation of facilities and laboratory equipment.
Research and development expenses increased 26% from $13.3 million for the
nine months ended September 30, 1998 to $16.8 million for the nine months ended
September 30, 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 133% of total revenues for
the nine months ended September 30, 1998 and 75% of total revenues for the nine
months ended September 30, 1999. The decrease as a percentage of total revenues
was due primarily to the addition of significant contracts in 1999. Our core
business is research and development. Accordingly, we expect to continue to
devote substantial resources to research and development, and we expect that
research and development expenses will continue to increase in absolute dollars.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel
costs for finance, human resources, business development, legal and general
management, as well as professional expenses, such as legal and accounting.
General and administrative expenses increased 39% from $3.4 million for the nine
months ended September 30, 1998 to $4.6 million for the nine months ended
September 30, 1999. Expenses increased primarily due to increased staffing
necessary to manage and support our growth.
General and administrative expenses represented 33% of total revenues for
the nine months ended September 30, 1998 and 21% of total revenues for the nine
months ended September 30, 1999. The decrease as a percentage of our total
revenues was due primarily to the growth in our total revenues. 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
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<PAGE> 24
- incur additional costs related to being a public company, including
directors' and officers' insurance, investor relations programs and
increased professional fees.
Net Interest Income (Expense)
Net interest income (expense) represents interest income earned on our cash
and cash equivalents net of interest expense on equipment financing loans.
Interest income increased from $773,000 for the nine months ended September 30,
1998 to $1.5 million for the nine months ended September 30, 1999. This increase
was due to higher average cash balances. Interest expense increased from
$544,000 for the nine months ended September 30, 1998 to $769,000 for the nine
months ended September 30, 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 the nine months ended September 30,
1998 and 1999, and consequently we did not pay any federal, state or foreign
income taxes.
As of September 30, 1999, we had a federal net operating loss carryforward
of approximately $13 million. We also had federal research and development
credit carryforwards of approximately $500,000. If not utilized, the net
operating losses and credit carryforwards will expire at various dates beginning
in 2010 through 2019. 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, 1996, 1997 AND 1998
Revenues
We did not have any revenues in fiscal 1996. Our total revenues for fiscal
1997 were $4.8 million and our total revenues for fiscal 1998 were $13.8
million. The increase in each of these periods was due primarily to the addition
of new research collaborations. Bayer, Hoechst, including its wholly-owned
subsidiary Celanese, and B.F. Goodrich accounted for 22%, 76% and 1% of revenue
in fiscal 1997 and 38%, 35% and 12% of total revenue in fiscal 1998,
respectively. Our collaboration with Hoechst was terminated by mutual agreement
in October 1998 following a change in Hoechst's business focus away from
chemicals. One project that was the subject of the Hoechst collaboration
agreement was transferred to Celanese, Hoechst's wholly-owned subsidiary.
Hoescht has returned to us all of the intellectual property that was the subject
of the collaboration agreement in the polyolefin field. That field is the
subject of subsequent agreements with Dow Chemical and Bayer.
Research and Development Expenses
Research and development expenses increased from $2.5 million in fiscal
1996, to $8.8 million in fiscal 1997 and to $17.6 million in fiscal 1998. The
increase in each of these periods was due primarily to an increase in
personnel-related costs in each period. Research and development expenses
represented 182% of total revenues in fiscal 1997 and 128% of total revenues in
fiscal 1998. The decrease as a percentage of total revenues was due primarily to
the growth in our total revenues.
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<PAGE> 25
General and Administrative Expenses
General and administrative expenses increased from $567,000 in fiscal 1996,
to $2.1 million in fiscal 1997 to $4.5 million in fiscal 1998. Expenses
increased in each period due primarily to increased personnel-related costs
resulting from additional staffing necessary to manage and support our growth.
General and administrative expenses represented 44% of total revenues for fiscal
1997 and 33% of total revenues for fiscal 1998. The decrease as a percentage of
our total revenues was due primarily to the growth in our total revenues.
Net Interest Income (Expense)
Interest income was $375,000 in fiscal 1996, $843,000 in fiscal 1997 and
$1.1 million in fiscal 1998. Changes in interest income were due primarily to
changes in our cash balance during these periods. Interest expense increased
from $6,000 in fiscal 1996 to $352,000 in fiscal 1997 to $731,000 in fiscal 1998
due to additional equipment financing loans used to partially fund leasehold
improvements and acquisition of equipment.
Provision for Income Taxes
We incurred net operating losses in fiscal 1996, 1997 and 1998 and
consequently we did not pay any federal, state or foreign income taxes.
As of December 31, 1998, we had a federal net operating loss carryforward
of approximately $16.2 million. We also had federal research and development
credit carryforwards of approximately $500,000. If not utilized, the net
operating losses and credit carryforwards will expire at various dates beginning
in 2010 through 2018. 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.
LIQUIDITY AND CAPITAL RESOURCES
Since 1996, we have financed our operations to date primarily through
private placements of preferred stock, totaling $52.2 million, and, to a lesser
extent, equipment financing loans and research and development funding from
collaborative partners. As of September 30, 1999, we had $39.9 million in cash,
cash equivalents and investments and $2.4 million available under an equipment
financing line of credit.
Our operating activities provided $8.7 million of cash in the nine months
ended September 30, 1999. The source of cash for the nine months ended September
30, 1999 was primarily the receipt of research and development funding from
collaborative partners, partially offset by operating expenses. Cash used in our
operating activities was $6.1 million for the nine months ended September 30,
1998. For fiscal years 1996, 1997 and 1998, cash used in our operating
activities was $2.5 million, $1.3 million and $2.9 million, respectively. Uses
of cash in operating activities were primarily to fund net operating losses.
Net cash used in investing activities was $7.3 million in fiscal 1996,
$24.0 million in fiscal 1997, $10.2 million in fiscal 1998 and $9.5 million in
the nine months ended September 30, 1999. Our investing activities provided $5.3
million in the nine months ended September 30, 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
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<PAGE> 26
property and equipment. Purchases of property and equipment were $1.3 million in
fiscal year 1996, $13.2 million in fiscal year 1997, $5.8 million in fiscal year
1998, $4.7 million in the nine month period ended September 30, 1998 and $4.1
million in the nine month period ended September 30, 1999. We expect to continue
to make significant investments in the purchase of property and equipment to
support our expanding operations.
Financing activities provided cash of $13.0 million in 1996, $25.9 million
in 1997, $23.3 million in fiscal 1998, $5.6 million in the nine month period
ended September 30, 1998 and $442,000 in the nine month period ended September
30, 1999. These amounts are primarily the proceeds we received from the sale of
preferred stock, net of issuance costs, equipment and leasehold improvement loan
financings and proceeds from the exercise of stock options. We will repay loan
financings over the next five years as follows: $700,000 in 1999, $3.1 million
in 2000, $3.6 million in 2001, $2.3 million in 2002 and $300,000 in 2003.
As of December 31, 1998 and September 30, 1999, our principal commitments
were $3.0 million and $6.8 million, respectively. Principal commitments
consisted of our obligations under operating leases. We will satisfy these
obligations over the next four years.
We believe that the net proceeds from this offering, together with 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 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. We have no current
plans, agreements or commitments, and are not currently engaged in any
negotiations with respect to any such transaction.
DISCLOSURE 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. 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 September 30,
1999 levels, the fair value of our portfolio would decline by approximately
$167,000. 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.
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YEAR 2000 ISSUES
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer programs
or hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations causing disruptions of operations for any
company using such computer programs or hardware, including, among other things,
a temporary inability to process research data, send invoices or engage in
normal business activities. As a result, many companies' computer systems may
need to be upgraded or replaced in order to avoid "Year 2000" issues.
State of Readiness
We completed an assessment of our information technology systems for year
2000 problems in April 1999. Our internal software development group conducted a
review of our internally developed software, and our information technology
group coordinated a program to assess and document all other systems.
We are a relatively new enterprise and therefore a majority of the computer
hardware and software we use to operate our business has been acquired or
created internally within the past 30 months. While this itself is not
protection against Year 2000 issues, it is a factor to consider when comparing
the efforts required to achieve Year 2000 readiness against other enterprises
with older legacy systems.
Our approach was to prioritize a comprehensive list of all systems on the
basis of their importance to the operation of our business. Working from this
list, we would:
- obtain documentation from third party vendors as to their Year 2000
compliance testing and recommendations;
- devise a review and testing plan for all internal systems;
- conduct the review and testing;
- assess any necessary follow-on actions or remediation required; and
- execute the measures identified.
We have completed execution of this process against all software we have
developed for use in research activities, commercial software used in financial
operations and in support of standard employee daily activities and the systems
used to operate building facilities. In some cases, the process resulted in the
determination that the system had no date processing and therefore was not
deemed to be a risk. In other cases, systems were subjected to a detailed
software code review and a "smoke test" consisting of running the system with
the date manually set beyond December 31, 1999.
We have not replaced any of our systems based on the results of our
assessment. However, we have made modifications to the commercial software
installations based on the vendor's and our assessment of Year 2000 problems. We
have replaced the older computer system that operates our building's card key
door access.
Principally because information from third party hardware and software
vendors has continued to change throughout this year, we have determined that an
additional set of compliance tests are prudent. We will conduct a final review
process of all systems in October 1999. Based on the continuing release of
information and recommended remediation activities from the principal vendor of
our enterprise productivity software,
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Microsoft, we expect to continue to be required to make changes to our server
software throughout the remainder of 1999.
Budget
To date we have incurred expenses relating to Year 2000 compliance of less
than $50,000. We do not expect the remaining planned work to exceed $25,000.
These costs have been included in the operating expenses of 1999.
Reasonably Likely Worst Case Scenario
If we, our customers, our providers of hardware and software, or our
third-party computer network providers fail to remedy any Year 2000 issues, the
reasonably likely worst case scenario would be the interruption of our research
programs, which could have a material adverse affect on our business, financial
conditions and results of operations. Presently we are unable to quantitatively
estimate the duration and extent of any such interruption, or estimate the
effect such interruption may have on our future revenue. However, we believe
that the impact of any Year 2000 issue on our research operations will be
limited to the ongoing execution of new experiments. We do not expect that any
historical data will be affected.
Contingency Plans
We do not believe that we will need to implement a Year 2000 contingency
plan. We expect to complete our Year 2000 plan in October 1999. The effort
required to complete the plan is minimal. Therefore, we believe that we can
complete the planned work within this timeframe. Additionally, we plan on
implementing a company-wide system shutdown on December 31, 1999 and a
controlled startup by the information technology organization on January 2, 2000
prior to the opening of business on January 3, 2000. This will allow us to
immediately identify and address any issues.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities," which will be effective for our fiscal
year 2001. This Statement establishes accounting and reporting standards
requiring that every derivative instrument, including certain derivative
instruments embedded 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. SFAS 133 is not anticipated
to have a significant impact on our operating results or financial condition
when adopted, since we currently do not engage in hedging activities.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires that
entities capitalize certain costs related to internal use software once certain
criteria have been met. We adopted SOP No. 98-1 effective January 1, 1999. The
adoption of SOP No. 98-1 has not had a material impact on our financial
statements.
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<PAGE> 29
BUSINESS
We are a pioneer of high-speed technologies for the discovery of new
materials. Our proprietary technologies, including instruments, software and
methods, represent a complete platform designed to reduce the cost and time of
new 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 a wide range of material types.
Our efforts can be grouped into four market areas:
- Commodity Chemicals and Polyolefins. These major chemicals, plastics and
rubbers include products such as ethylene glycol, acrylic acid, ethanol,
and polyolefins such as polyethylene, polypropylene and polystyrene.
According to various articles and publications (Townsend Tarnell 1999
Polyethylene Annual Report; Townsend Tarnell 1999 Polypropylene Annual
Report; U.S. Industry & Trade Outlook 1999; and Chemical & Engineering
News), the annual global market for commodity chemicals and polyolefins
is over $500 billion. Opportunities exist for us to add value within this
sector by discovering catalysts that reduce manufacturing costs through
the use of cheaper raw materials and by developing alternatives to the
current multi-step, energy and capital intensive processes. We may also
discover catalysts that create polyolefins with improved properties and
as a result are able to compete against more expensive materials.
- Fine Chemicals. Fine chemicals are developed to achieve specific
performance characteristics and are incorporated into pharmaceutical and
agricultural products. According to Chemical Week and Chemical Marketing
Reporter, the annual worldwide market for fine chemicals is approximately
$65 billion. Due to the diversity and short life cycle of fine chemicals
products and the intense competition between fine chemicals
manufacturers, flexibility and speed in process development and
manufacturing are vital to success. In this market, we add value by
rapidly discovering diverse families of catalysts and improving
production processes.
- Specialty Polymers. Specialty polymers are incorporated into adhesives,
sealants, paints, and coatings in the form of latexes. According to
Chemical Marketing Reporter and the Synthetic Latex Polymers 1993 Report,
the annual worldwide market for latex polymers is estimated to be $10
billion. Within this sector, we seek to discover materials to enhance
product performance and to create new businesses using novel polymer
structures and architectures.
- Electronic and Related Materials. Electronic and related materials
comprise a diverse group of functional materials. Examples include
phosphors for lighting, displays and radiography, thermoelectric
materials for cooling, fuel cells for automotive applications, and
magnetic materials for permanent magnets. According to various articles
and publications (Air Conditioning, Heating and Refrigeration News;
Advanced Materials: Emerging Markets for Today's Industries and
Tomorrow's Products; Fuel Cell Industry Review; Electronic Business; High
Tech Ceramics Reviews; Lamps to 2001; and Display Industry Review), the
annual worldwide market for these materials is estimated to be $37
billion. We seek to discover breakthrough materials with unique and
unmatched functional properties
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that will enable the creation of new products or dramatically enhance the
performance of existing products.
INDUSTRY BACKGROUND
Chemical companies are under heightened pressure from slowing sales growth
and decreasing profit margins. These indicators reflect maturing end markets,
accelerating price pressures, increasing competitive intensity and industry
consolidation. As a result, chemical companies are focused on reducing costs,
increasing innovation and creating new businesses based on proprietary
materials. New products and materials typically carry higher prices and profit
margins than the products and materials they replace. New products and materials
are also critical for attaining and maintaining leading market positions, in
creating barriers to entry and adding value to customer relationships. The
transformation of the existing polyethylene industry by metallocene catalysis, a
new catalyst technology which has enabled the creation of tailored
polyethylenes, is an example of a materials innovation that has resulted in
enhanced production flexibility and product performance within a $50 billion
industry.
As the chemical and electronics industries consolidate and become more
globalized, and as their customers become larger and more global as well,
chemical and electronics companies are under increasing pressure to accelerate
the discovery of new products and materials. 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 within the chemical and electronics industries.
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.
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.
<TABLE>
<CAPTION>
TRADITIONAL RESEARCH APPROACH SYMYX DISCOVERY TECHNOLOGIES
----------------------------- ----------------------------
<S> <C> <C>
Team....................... 1 chemist + 1 technician 1 chemist + 1 technician
Cost/year.................. $500,000 $500,000
Experiments/year........... 500 - 1,000 20,000 - 50,000
Cost/experiment............ $500 - $1,000 $10 - $25
</TABLE>
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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 phosphor for lighting applications, we need to screen
optical properties such as color and brightness; and
- 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.
SYMYX STRATEGY
Our objective is to be the leading company using high-speed technologies
for the discovery of new materials with commercially valuable properties. Key
strategies that we intend to follow in pursuit of our objective are:
- entering into collaborative research and early-stage licensing agreements
with corporate partners that provide funding for research and discovery
efforts, commercialize our materials and pay royalties on commercial
sales;
- investing in proprietary materials research efforts to discover materials
with near-term commercial potential and then enter into late-stage
licensing arrangements or commercialize materials directly; and
- selling and licensing selected equipment and software to chemical and
other industrial companies for their own use in optimization of existing
materials.
Collaborative Research and Early-Stage Licensing
In collaboration with major chemical and other industrial companies, we
seek to discover:
- new catalysts to manufacture commodity chemicals and polyolefins;
- new polymer formulations and pigments for industrial applications; and
- new phosphors for applications including lighting and displays.
We provide the platform technologies and effort, and our partners have
rights to develop and commercialize resulting materials within their predefined
field of exclusivity. Typically, we enter into collaborative arrangements to
discover materials that require considerable investment in product development
and manufacturing, as well as extensive marketing efforts. Our collaborative
partners have already developed the infrastructure to
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<PAGE> 32
support these requirements, and may therefore be in a strong position to
commercialize our discoveries.
We receive funding from our collaborative partners through annual research
payments. These payments are made over the term of the research contract, which
is generally two to three years. If a new material is discovered and
commercialized, we will receive either royalties or milestone payments. We
believe that we have the potential for royalties ranging from 3% to 7% on sales
of products incorporating our materials, such as pigments, phosphors and
polymers and 1% to 3% on sales of end products manufactured using our catalysts,
such as high-volume commodity chemicals and polyolefins.
We currently have eight collaborative partners, including Bayer which has
expanded our collaboration three times to date. The table below indicates, for
each of our currently active collaborations, the collaborative partner, date and
field.
<TABLE>
<CAPTION>
DATE(S) OF
PARTNER ALLIANCE FIELD(S)
------- ---------- --------
<S> <C> <C>
Agfa.......... March 1998 X-ray phosphors for radiography
BASF.......... Specialty polymers for industrial
March 1999 formulations
Bayer......... March 1998, Polyolefins, commodity chemicals
May 1998,
January 1999,
September 1999
Celanese...... August 1998 Commodity chemicals
Ciba Specialty
Chemicals... April 1998 Pigments
Dow
Chemical.... January 1999 Polyolefins
Osram OS*..... December 1998 Phosphors for lighting
Unilever...... December 1998 Polymers for product formulations
</TABLE>
- -------------------------
* an affiliate of Siemens
Our collaborations, together with government grants, provide for over $85
million in aggregate commitments for research payments. Through September 30,
1999, we had recognized revenue of $41 million under these agreements with the
remaining amounts scheduled to be paid through 2003. 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.
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 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
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<PAGE> 33
Agfa that their objective is to have products based on these materials on the
market during 2001.
Symyx Proprietary Materials
We believe that the assets resulting from our investment in proprietary
research programs will be a significant contributor of future value. Our
proprietary research efforts are focused on discovery of products for specialty
markets with well defined materials needs and short-term development and
commercialization cycles.
One significant area of current activity is fine chemicals. In the area of
fine chemicals, we are working to discover families of catalysts that would be
used in the production of pharmaceutical intermediates. Pharmaceutical
intermediates are chemicals that are transformed into a pharmaceutical product.
Another area of activity is specialty polymers. In this area, we have developed
proprietary technology to create polymers with customized, predictable
properties called block co-polymers.
We also have several programs in electronic materials, funded by ourselves
and by the U.S. Office of Naval Research Defense Advanced Research Projects
Agency (known as DARPA) and the United States Department of Energy. Our DARPA
program is funding research relating to thermoelectric materials used for
refrigeration and applications requiring precise active cooling devices. These
applications include computer chips and missile guidance systems. Our DARPA
program is also funding research for magnetic materials used as permanent
magnets in applications including electro-magnetic motors. Our program with the
Department of Energy is funding research relating to materials for fuel cells
for potential use in automobiles. Funding under the DARPA and Department of
Energy programs is structured as grants, and we own the rights to commercialize
materials discovered under these programs.
We expect to commercialize development candidates discovered through our
proprietary materials programs either by manufacturing, marketing, and selling
the product ourselves or through late-stage licensing arrangements. We expect to
be able to obtain significantly higher royalty rates under these late-stage
licenses than under our collaborative agreements because we will have completed
essentially all development work at the time we license the product.
We also have developed a "quick-strike" licensing model in which we would
assume the research risk during a short, well-defined, research period of
approximately three months in exchange for the customer's agreement to make
milestone payments and enter into a license agreement upon completion of
research and technical validation. We expect that royalty rates under these
licenses will be in a range of 4% to 7% of sales, which is attractive to us due
to the breadth and number of projects which we believe we can successfully
complete annually.
Sale of Discovery Tools Systems and Other Equipment
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.
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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.
Our Discovery Tools will be sold together with a license to associated
software, know-how and patents. Our first planned offering is a combination of a
multi-channel polymer reactor system together with two screening instruments.
Each of these systems will likely sell for several million dollars and will have
a long sales cycle involving both marketing the system and designing the system
to meet customer requirements.
In addition to the sale of Discovery Tools, we also believe that there is
significant commercial value in the nonautomated laboratory instruments that we
developed to perform small scale parallel synthesis of materials. We have formed
a collaboration with Argonaut Technologies, Inc. to capture this opportunity.
Argonaut is an instrument company that develops and commercializes synthesizers,
instruments, software and chemical resins and reagents to accelerate and
automate chemical synthesis. Argonaut will refine our designs for manual
benchtop instruments, manufacture the instruments and sell them worldwide. In
return, we will receive a portion of the profits from the sale of these
instruments. Our first product, sold with both the Argonaut and Symyx
trademarks, was introduced for sale in August 1999. This instrument, the
Endeavor, is an eight-channel manual reactor used to synthesize polymers and
other chemicals under high pressure. This instrument has a sale price of
approximately $60,000. We expect other manual bench instruments developed by us
and commercialized by Argonaut to have similar sales prices.
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.
[TARGETED NEW MATERIAL DIAGRAM]
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
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<PAGE> 35
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.
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.
- Hits. First, we screen materials to identify those 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.
- Leads. 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.
- Development Candidates. 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.
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<PAGE> 36
In our experience to date, approximately 0.1% of materials tested become
hits, 10% to 15% of hits become leads and 5% to 10% of leads become development
candidates. The actual number of hits, leads and development candidates that
have been identified in our four target markets through August 1999 is set forth
in the table below.
<TABLE>
<CAPTION>
COMMODITIES, FINE SPECIALTY ELECTRONIC
POLYOLEFINS CHEMICALS POLYMERS MATERIALS
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
HITS 466 70 16 183
- ---------------------------------------------------------------------------------------------
LEADS 43 14 6 25
- ---------------------------------------------------------------------------------------------
DEVELOPMENT CANDIDATES 2 2 1 2
- ---------------------------------------------------------------------------------------------
</TABLE>
We have screened over 500,000 compounds in 1999. Of the development
candidates we have generated, three have been transferred to our partners for
further validation. We are developing the other four internally. Further testing
of many of the hits and leads is underway to identify additional development
candidates.
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.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
Our success depends upon our proprietary technology. There are five general
patent areas within our combinatorial approach:
- library synthesis methods;
- the libraries themselves;
- screening or characterization methods;
- equipment and software; and
- new materials.
We have 76 patent applications pending in the United States, and 30 foreign
patent applications pending. In addition, we have 5 patent applications allowed
in the United States containing over 230 claims. We co-own some of the pending
patent applications and
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<PAGE> 37
one of the allowed patent applications with Lawrence Berkeley Laboratory, on
behalf of The Regents of the University of California. We have an exclusive
license to these patent applications from Lawrence Berkeley Laboratory. 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 products. 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
The field of combinatorial materials science is increasingly competitive.
We are aware of several companies that are applying their expertise in
combinatorial chemistry to materials research and development. These companies
include Aperion, a joint venture between CombiChem and Catalytica, and Cambridge
Combinatorial, an affiliate of Oxford Molecular. We are also aware of some
chemical companies with internal combinatorial programs participating in
materials research and development consortiums. In addition, Shell Chemicals is
participating in a consortium in The Netherlands and BASF is funding a start-up
company in Heidelberg, Germany named HTE. BASF is also one of our collaborative
partners. 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 September 30, 1999, we had a total of 152 employees, including 122
scientific and technical employees and 30 people in business development, legal
and general and administrative services. Of our scientific and technical staff,
101 have masters or doctorate degrees. None of our employees is represented by a
labor union, and we consider our employee relations to be good.
LEGAL PROCEEDINGS
We are not currently a party to any material pending legal proceedings.
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<PAGE> 38
FACILITIES
Our primary offices are located in approximately 38,800 square feet of
space in Santa Clara, California under a lease expiring on November 2007. We
leased a second building of approximately 24,000 square feet also in Santa
Clara, which we expect will be ready for occupancy in January 2000, with a lease
expiring January 2008. In addition, we have a month-to-month lease on a 5,000
square foot facility. We believe that our existing facilities are adequate for
our needs through at least the end of 2000. We believe that any additional space
we may need in the future will be available on commercially reasonable terms.
SCIENTIFIC ADVISORS
We recruited several leading researchers in our fields of interest to serve
as scientific advisors. These advisors have fixed term contracts ranging from
one to three years. In general, they serve on an exclusive basis within a
defined field of collaboration. These advisors received option grants to
purchase our common stock. In addition, some may receive cash compensation, and
they are reimbursed for expenses.
The following individuals are scientific advisors in their respective areas
of specialization:
<TABLE>
<S> <C>
Chairman
Peter Schultz.................. Institute Director, Novartis Institute for Functional
Genomics, Professor of Chemistry at the Scripps
Research Institute
Technical Strategy
Alejandro Zaffaroni............ Managing Director, Technogen Enterprises LLC, a
venture
capital fund
George Whitesides.............. Mallinckrodt Professor of Chemistry, Harvard
University
Catalysis
Michel Boudart................. Keck Professor of Chemical Engineering, Emeritus,
Stanford University
Stephen Buchwald............... Camille Dreyfus Professor of Chemistry,
Massachusetts Institute of Technology
John Groves.................... Hugh Stott Taylor Professor of Chemistry,
Princeton University
Robert Grubbs.................. Victor & Elizabeth Atkins Professor of Chemistry,
California
Institute of Technology
Gregory Kovacs................. Associate Professor, Electrical Engineering, Stanford
University
Fine Chemicals
Mark Gallop.................... Vice President of Chemistry, Xenoport
Abul Iqbal..................... Head of Global Research and Development, Colors
Division,
Ciba Specialty Chemicals
Klaus Kuhlein.................. Director, Operative Research, Member of the
Management
Committee of Aventis Research & Technologies (member
of the Hoechst Group), Retired
David MacMillan................ Assistant Professor, University of California,
Berkeley
</TABLE>
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<PAGE> 39
<TABLE>
<S> <C>
Polymers
Jean Frechet................... Professor of Chemistry, University of California,
Berkeley
Craig Hawker................... Research Staff Member, IBM Almaden Research Center
Virgil Percec.................. P. Roy Vagelos Chair and Professor of Chemistry,
University of Pennsylvania
Tom Russell.................... Professor, Polymer Science and Engineering,
University of Massachusetts at Amherst
Owen Webster................... DuPont Fellow, Retired
Electronic Materials
Frank DiSalvo.................. John A. Newman Professor of Physical Science,
Cornell University
Theodore Geballe............... Professor of Applied Physics and of Materials Science
and
Engineering, Emeritus, Stanford University
</TABLE>
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<PAGE> 40
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding our executive
officers and directors as of September 30, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Steven D. Goldby.................... 59 Chairman of the Board and Chief Executive
Officer
Isy Goldwasser...................... 29 President and Chief Operating Officer
W. Henry Weinberg, Ph.D. ........... 54 Senior Vice President and Chief Technical
Officer
Jeryl L. Hilleman................... 42 Senior Vice President and Chief Financial
Officer
Thomas R. Baruch.................... 60 Director
Samuel D. Colella................... 60 Director
Martin Gerstel...................... 58 Director
Baron Gaulthaus Kraijenhoff......... 77 Director
Francois A. L'Eplattenier, Ph.D. ... 60 Director
Kenneth J. Nussbacher............... 46 Director
Mario M. Rosati..................... 53 Director
Peter G. Schultz, Ph.D. ............ 43 Director
Isaac Stein......................... 52 Director
</TABLE>
Steven D. Goldby has served as our Chairman of the Board and Chief
Executive Officer since July 1998. Prior to joining Symyx, Mr. Goldby served as
Chief Executive Officer of MDL Information Systems, Inc. from 1987 to July 1998.
He held numerous management positions at ALZA Corporation from 1968 to 1981
including President of ALZA Pharmaceuticals and President of Dynapol, a
subsidiary of ALZA. Mr. Goldby joined MDL Information Systems in 1982 as a Chief
Operating Officer. He is a director of Aspect Development, Inc. Mr. Goldby holds
an A.B. from the University of North Carolina and a J.D. from Georgetown
University Law School.
Isy Goldwasser has served as our President and Chief Operating Officer
since February 1998. From February 1996 to February 1998, Mr. Goldwasser served
as our Vice President of Corporate Development. From the founding of Symyx until
February 1996, he held a business development position with us in which he was
responsible for applications development, financing and operations. Mr.
Goldwasser holds a B.S. from the Massachusetts Institute of Technology and an
M.S. from Stanford University.
W. Henry Weinberg has served as our Senior Vice President since August 1999
and our Chief Technical Officer since March 1996. Dr. Weinberg also previously
served as our Vice President from March 1996 to August 1999. Dr. Weinberg is
also Adjunct Professor of Chemical Engineering, Materials Engineering, and
Chemistry at the University of California, Santa Barbara. Dr. Weinberg was
Professor of Chemical Engineering, Materials Engineering, and Chemistry at the
University of California, Santa Barbara from 1989 through September 1999. Dr.
Weinberg is a member of the National Academy of Engineering. He holds a B.S.
from the University of South Carolina and a Ph.D. from the University of
California, Berkeley.
Jeryl Lynn Hilleman has served as our Senior Vice President since August
1999 and our Chief Financial Officer since June 1997. Ms. Hilleman also
previously served as our
39
<PAGE> 41
Vice President from June 1997 to August 1999. From 1992 to 1997, Ms. Hilleman
held several senior positions at Geron Corporation, a biopharmaceutical company,
including Vice President, Finance and Administration. Ms. Hilleman holds an A.B.
from Brown University and an M.B.A. from the Wharton School of Business.
Thomas R. Baruch has served as one of our directors since May 1996. Since
1988, Mr. Baruch has been a general partner of CMEA Ventures, a venture capital
firm. From 1990 to 1996, Mr. Baruch also served as a special partner of New
Enterprise Associates. Mr. Baruch serves on the boards of directors of Netro
Corp. and Physiometrix Inc. Mr. Baruch holds a B.S. from Rensselaer Polytechnic
Institute and a J.D. from Capital University.
Samuel D. Colella has served as one of our directors since August 1997.
Since 1984, Mr. Colella has been a general partner of Institutional Venture
Partners. Mr. Colella also serves as Chairman of Onyx Pharmaceuticals. Mr.
Colella holds a B.A. and B.S. from the University of Pittsburgh and an M.B.A.
from Stanford University.
Martin S. Gerstel has served as one of our directors since February 1995.
Mr. Gerstel serves as Chairman of Compugen, Ltd. Previously, Mr. Gerstel
participated in the founding of ALZA Corporation, where he held numerous
positions including President and Chief Operating Officer from 1982 to 1987 and
Co-Chairman and Chief Executive Officer from 1987 to 1993. Mr. Gerstel is a
director of Teva Pharmaceuticals. Mr. Gerstel holds a B.S. from Yale University
and an M.B.A. from Stanford University.
Baron Gualthaus Kraijenhoff has been one of our directors since January
1996. Following his retirement in 1978, Baron Kraijenhoff served as President of
the Supervisory Council of AKZO N.V. since 1980. Baron Kraijenhoff also held
numerous other management positions with AKZO N.V. and its predecessor company,
KZO, including President of the Board of Management of AKZO N.V., President of
the Board of Management of KZO, and Member of the Board of Management of KZO.
Francois A. L'Eplattenier has served as one of our directors since October
1996. Since the merger of Ciba-Geigy with Sandoz to form Novartis in 1996, Dr.
L'Eplattenier has served as Chairman of the Novartis Venture Fund. Since 1988,
Dr. L'Eplattenier has served as a member of the Executive Committee of
Ciba-Geigy, where he is responsible for Research and Development of the Group
world-wide. From 1981 to 1988, Dr. L'Eplattenier served as Head of Research and
Development of Plastics, Pigments and Additives at Geigy. From 1977 to 1981, Dr.
L'Eplattenier served as Head of Central Research of Geigy. Dr. L'Eplattenier
presently is a member of the Board of the Swiss Federal Institute of Technology.
Dr. L'Eplattenier holds an M.S. and Ph.D. from the Swiss Federal Institute of
Technology.
Kenneth J. Nussbacher has served as one of our directors since February
1995. Mr. Nussbacher has been Executive Vice President of Affymetrix since 1995
and was Chief Financial Officer of Affymetrix from 1995 to 1997. From 1989 to
1995, he held several management positions at Affymax, most recently as
Executive Vice President for Business and Legal Affairs and Managing Director of
Affymax Technologies N.V. Mr. Nussbacher holds a B.S. from Cooper Union and a
J.D. from Duke University.
Mario M. Rosati has served as one of our directors since September 1994.
Mr. Rosati has been with the Palo Alto, California law firm of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, since 1971, first as an associate
and then as a member since 1975. Mr. Rosati also serves as a director of Aehr
Test Systems, Genus, Inc., MyPoints.com, Inc., Ross Systems, Inc., Sanmina
Corporation, The Management Network
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<PAGE> 42
Group, Inc. and Vivus, Inc. Mr. Rosati holds a B.A. from the University of
California, Los Angeles and a J.D. from the University of California, Berkeley,
Boalt Hall School of Law.
Peter G. Schultz, Ph.D. has been one of our directors since January 1996
and is one of our founders. Since November 1998, Dr. Schultz has been Head of
the Novartis Institute for Functional Genomics. From 1985 to 1998, Dr. Schultz
was Professor of Chemistry at the Lawrence Berkeley Laboratories of the
University of California, Berkeley. He holds a B.S. and a Ph.D. from the
California Institute of Technology.
Isaac Stein has been one of our directors since October 1996. Since 1983,
Mr. Stein has been President of Waverley Associates, a private investment firm.
Mr. Stein is also a Managing Director of Technogen Enterprises, L.L.C. and a
director of ALZA Corporation, the Benham Group of mutual funds and CV
Therapeutics, Inc. Mr. Stein holds an B.A. from Colgate University and a J.D.
and an M.B.A. from Stanford University.
BOARD OF DIRECTORS
We currently have ten directors. Upon completion of this offering, our
board of directors will be divided into three classes, each with staggered
three-year terms. As a result, only one class of directors will be elected at
each annual meeting of our stockholders, with the other classes continuing for
the remainder of their respective three-year terms.
Our class I directors, whose terms will expire at the 2000 annual meeting
of stockholders, are Thomas R. Baruch, Samuel D. Colella and Martin Gerstel. Our
class II directors, whose terms will expire at the 2001 annual meeting of
stockholders, are Steven D. Goldby, Baron Gaulthaus Kraijenhoff and Francois A.
L'Eplattenier Ph.D. Our class III directors, whose terms will expire at the 2002
annual meeting of stockholders, are Kenneth J. Nussbacher, Mario M. Rosati,
Peter G. Schulz, Ph.D. and Issac Stein.
BOARD COMMITTEES
Our board of directors currently has an audit committee and a compensation
committee. The audit committee consists of Thomas R. Baruch, Martin Gerstel and
Kenneth J. Nussbacher. The audit committee makes recommendations to the board of
directors regarding the selection of independent auditors, reviews the scope of
audit and other services by our independent auditors, reviews the accounting
principles and auditing practices and procedures to be used for our financial
statements and reviews the results of those audits.
The compensation committee consists of Samuel D. Colella, Mario M. Rosati
and Isaac Stein. The compensation committee makes recommendations to the board
of directors regarding our stock plans and the compensation of officers.
DIRECTOR COMPENSATION
Our non-employee directors are reimbursed for expenses incurred in
connection with attending board and committee meetings but are not compensated
for their services as board or committee members. We have in the past granted
non-employee directors options to purchase our common stock pursuant to the
terms of our stock plans, and our board continues to have the discretion to
grant options to new non-employee directors. Beginning in 2000, our outside
directors will each annually receive automatic, nondiscretionary grants of
options to purchase 7,500 shares of our common stock.
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<PAGE> 43
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the compensation committee is currently, or has ever
been at any time since our formation, one of our officers or employees. No
member of the compensation committee serves as a member of the board of
directors or compensation committee of any entity that has one or more officers
serving as a member of our board of directors or compensation committee.
EXECUTIVE OFFICERS
COMPENSATION
The following table sets forth the compensation paid by us during 1998 to
our Chief Executive Officer and our other executive officers who received salary
compensation of more that $100,000 during 1998:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -----------------------
COMPENSATION RESTRICTED SECURITIES
------------ STOCK UNDERLYING OTHER
NAME AND PRINCIPAL POSITION SALARY($) AWARDS($) OPTIONS(#) COMPENSATION($)
--------------------------- --------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Steven D. Goldby....................... $125,040(1) $ 0(2) -- --
Chief Executive Officer and Chairman
of the Board
Isy Goldwasser......................... 171,667 -- 186,666 --
President and Chief Operating Officer
W. Henry Weinberg, Ph.D. .............. 240,533 -- -- $218,620(3)
Senior Vice President and Chief
Technical Officer
Jeryl L. Hilleman...................... 181,667 -- 58,333 --
Senior Vice President and Chief
Financial Officer
</TABLE>
- ---------------
(1) Mr. Goldby joined Symyx in July 1998. His 1998 annual salary was $250,080.
(2) Mr. Goldby purchased 525,000 shares of common stock at a purchase price of
approximately $0.58 per share. The aggregate purchase price was $303,750. If
Mr. Goldby's services to Symyx are terminated, Symyx has the option to
repurchase the shares at $0.58 per share. This option lapses as to a portion
of the shares over time. The repurchase option will lapse for all of the
shares in July 2002. The fair market value of Symyx' common stock as of
December 31, 1998 was $0.96 per share as determined by the board of
directors. The appreciated value of Mr. Goldby's shares as of December 31,
1998 was $200,250. The appreciated value is the difference between $0.58 and
$0.96, $0.38, multiplied by the number of shares, 525,000.
(3) Consists of a $71,250 housing allowance, $139,870 in relocation
reimbursement payments and $7,500 in imputed interest on an interest free
loan.
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<PAGE> 44
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information relating to stock options
granted during 1998 to our Chief Executive Officer and our other executive
officers who received salary compensation of more than $100,000. In accordance
with the rules of the Securities and Exchange Commission, also shown below is
the potential realizable value over the term of the option (the period from the
grant date to the expiration date) based on assumed rates of stock appreciation
of 5% and 10%, compounded annually. These amounts are mandated by the Securities
and Exchange Commission and do not represent our estimate of future stock price.
Actual gains, if any, on stock option exercises will depend on the future
performance of our common stock.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------ POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN PRICE PER EXPIRATION ---------------------
NAME GRANTED 1998(1) SHARE DATE 5% 10%
---- ---------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Steven D. Goldby.............. -- -- -- -- -- --
Isy Goldwasser................ 155,555 13.71% $ 0.39 3/01/08 $38,153 $96,687
31,111 2.74 0.96 12/04/08 18,783 47,600
W. Henry Weinberg, Ph.D. ..... -- -- -- -- -- --
Jeryl L. Hilleman............. 58,333 5.14 0.39 3/01/08 14,307 36,257
</TABLE>
- -------------------------
(1) We granted options to purchase a total of 1,134,890 shares of common stock
during 1998.
AGGREGATE OPTION EXERCISES IN 1998 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information for our Chief Executive Officer
and our other executive officers who received salary compensation of more than
$100,000 in 1998, relating to option exercises in 1998 and the number and value
of securities underlying exercisable and unexercisable options held at December
31, 1998:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven D. Goldby...... -- -- -- -- -- --
Isy Goldwasser........ -- -- 186,666 -- $88,666 --
W. Henry Weinberg..... 233,333 $135,000 -- -- -- --
Jeryl L. Hilleman..... 23,333 13,300 35,000 -- 19,950 --
</TABLE>
- -------------------------
(1) Value realized reflects the fair market value of our common stock underlying
the option on the date of exercise minus the aggregate exercise price of the
option.
(2) Value of unexercised in-the-money options are based on a value of $0.96 per
share, the fair market value of our common stock on December 31, 1998 as
determined by our board of directors. Amounts reflected are based on the
value of $0.96 per share, minus the per share exercise price, multiplied by
the number of shares underlying the option.
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<PAGE> 45
STOCK PLANS
1996 STOCK PLAN AND 1997 STOCK PLAN
Our 1996 Stock Plan was adopted by our board of directors in January 1996.
This plan provides for the grant of incentive stock options to our employees and
nonstatutory stock options and stock purchase rights to our employees, directors
and consultants. We have reserved an aggregate of 1,153,444 shares of common
stock for issuance under this plan. As of September 30, 1999, 876,024 shares had
been issued pursuant to the exercise of options and stock purchase rights and
options to purchase 156,198 shares of common stock were outstanding. 121,222
shares were available for future grant. We will not grant any additional stock
options under our 1996 Stock Plan. Instead, we will grant options under our 1997
Stock Plan.
Our 1997 Stock Plan was adopted by our board of directors in January 1997.
This plan provides for the grant of incentive stock options to our employees and
nonstatutory stock options and stock purchase rights to our employees, directors
and consultants. As of September 30, 1999, 5,055,556 shares of common stock were
reserved for issuance under this plan. Of these shares, 1,802,414 had been
issued upon exercise of stock options or stock purchase rights, 1,845,843 shares
were subject to outstanding options or stock purchase rights and 1,407,299
shares were available for future grant.
The number of shares reserved for issuance under the 1997 Stock Plan will
increase by the following:
- 121,222 shares which were reserved but unissued under the our 1996 Stock
Plan;
- any shares returned to the 1996 Stock Plan as a result of termination of
options or repurchase of stock purchase rights issued under the 1996
Plan; and
- beginning in fiscal year 2000, an annual increase equal to the lesser of
1.5 million shares, 4% of the outstanding shares on the date of the
annual increase, or a lesser amount determined by our board of directors.
The compensation committee of our board of directors administers the stock
plan and determines the terms of options granted, including the exercise price,
the number of shares subject to individual option awards and the vesting period
of options. The exercise price of nonstatutory options must generally be at
least 85% of the fair market value of the common stock on the date of grant. The
exercise price of incentive stock options cannot be lower than 100% of the fair
market value of the common stock on the date of grant and, in the case of
incentive stock options granted to holders of more than 10% of our voting power,
not less than 110% of the fair market value. The term of an incentive stock
option cannot exceed 10 years, and the term of an incentive stock option granted
to a holder of more than 10% of our voting power cannot exceed five years.
Options granted under our stock plan will accelerate and become fully
vested in the event we are acquired, unless the successor corporation assumes or
substitutes other options in their place. Our board of directors may not,
without the adversely affected optionee's prior written consent, amend, modify
or terminate the stock plan if the amendment, modification or termination would
impair the rights of optionees. Our stock plan will terminate in 2007 unless
terminated earlier by the board of directors.
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<PAGE> 46
1999 EMPLOYEE STOCK PURCHASE PLAN
Our board of directors adopted our 1999 Employee Stock Purchase Plan in
September 1999. This plan provides our employees with an opportunity to purchase
our common stock through accumulated payroll deductions.
A total of 300,000 shares of common stock has been reserved for issuance
under the purchase plan. 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
lesser of 1% of the outstanding shares of common stock on the first day of the
fiscal year or 350,000 shares or such lesser amount as may be determined by the
board.
The board of directors or a committee appointed by the board administers
the purchase plan. The board or its committee has full and exclusive authority
to interpret the terms of the purchase plan and determine eligibility.
Employees are eligible to participate if they are customarily employed by
us or any participating subsidiary for at least 20 hours per week and more than
five months in any calendar year. However, an employee may not be granted an
option to purchase stock under the purchase plan if such an employee:
- immediately after grant owns stock possessing five percent or more of the
total combined voting power or value of all classes of the capital stock
of ours, or
- whose rights to purchase stock under all employee stock purchase plans of
ours accrues at a rate which exceeds $25,000 worth of stock for each
calendar year.
The purchase plan, which is intended to qualify under Section 423 of the
Internal Revenue Code of 1986, as amended, contains consecutive, overlapping
24-month offering periods. Each offering period includes four six-month purchase
periods. The offering periods generally start on the first trading day on or
after May 1 and November 1 of each year, except for the first such offering
period which will commence on the first trading day on or after the effective
date of this offering and will end on the last trading day on or before October
31, 2001.
The purchase plan permits participants to purchase common stock through
payroll deductions of up to 10.0% of the participant's "compensation."
Compensation is defined as the participant's base straight time gross earnings
and commissions but excludes payments for overtime, shift premium payments,
incentive compensation, incentive payments, bonuses and other compensation. The
maximum number of shares a participant may purchase during a single offering
period is 5,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each offering period. The price of stock
purchased under the purchase plan is 85.0% of the lower of the fair market value
of the common stock at the beginning or end of the offering period. If the fair
market value at the end of a purchase period is less than the fair market value
at the beginning of the offering period, participants will withdraw from the
current offering period following the exercise and will automatically re-enroll
in a new offering period. Participants may end their participation at any time
during an offering period, and they will be paid their payroll deductions to
date. Participation ends automatically upon termination of employment with us.
A participant may not transfer rights granted under the purchase plan other
than by will, the laws of descent and distribution or as otherwise provided
under the purchase plan.
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<PAGE> 47
The purchase plan provides that, if we merge with or into another
corporation or a sale of substantially all of our assets, a successor
corporation may assume or substitute for each outstanding purchase right. If the
successor corporation refuses to assume or substitute for the outstanding
purchase rights, the offering period then in progress will be shortened, and a
new exercise date will be set.
The purchase plan will terminate in 2009. However, the board of directors
has the authority to amend or terminate the purchase plan, except that, subject
to some exceptions described in the purchase plan, no such action may adversely
affect any outstanding rights to purchase stock under the purchase plan.
401(K) PLAN
In July 1997, our board of directors adopted a Retirement Savings and
Investment Plan covering our full-time employees located in the United States.
This plan is intended to qualify under Section 401(k) of the Internal Revenue
Code of 1986, as amended, so that contributions to this plan by employees, and
the investment earnings thereon, are not taxable to employees until withdrawn.
Pursuant to this plan, employees may elect to reduce their current compensation
by up to the lesser of 20% of their annual compensation or the statutorily
prescribed annual limit ($10,000 in 1999) and to have the amount of such
reduction contributed to this plan. We do not currently make additional matching
contributions on behalf of plan participants.
CHANGE OF CONTROL AGREEMENTS
We have entered into change of control agreements with Steven D. Goldby,
Isy Goldwasser, W. Henry Weinberg and Jeryl L. Hilleman. In the event of a
change of control of Symyx (as defined in the agreements) and the actual or
constructive termination of employment, without cause, of the executive within
18 months following the change of control, all outstanding stock options issued
to the executive will be accelerated and all of our rights to repurchase their
restricted stock will lapse. Under these agreements, constructive termination of
employment means the executive's resignation following a reduction in salary, a
material reduction in employment-related responsibilities or a requirement to
relocate outside the Silicon Valley area.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for the following:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
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<PAGE> 48
Our certificate of incorporation and bylaws provide that we shall indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. We believe
that indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in such capacity, regardless of
whether the bylaws would permit indemnification.
We have entered into agreements to indemnify our directors, executive
officers and controller, in addition to indemnification provided for in our
bylaws. These agreements, among other things, provide for indemnification of our
directors and executive officers for certain expenses (including attorneys'
fees), judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in our rights, arising out
of such person's services as a director or executive officer to us, any of our
subsidiaries or any other company or enterprise to which the person provides
services at our request. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.
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<PAGE> 49
RELATED PARTY TRANSACTIONS
PREFERRED STOCK FINANCINGS
In February 1996, Symyx issued to one investor a total of 1,000,000 shares
of Series A preferred stock at a purchase price of $0.50 per share. In May 1996,
we issued to various investors a total of 8,600,687 shares of Series B preferred
stock at a purchase price of $1.50 per share. In July 1997, we issued to various
investors a total of 6,750,284 shares of Series C preferred stock at a purchase
price of $3.00 per share. In March, April, October and November 1998, we issued
to various investors a total of 4,210,185 shares of Series D preferred stock at
a purchase price of $4.50 per share.
The table below sets forth the directors and holders of more than 5% of our
outstanding stock who invested in, or are beneficial owners of our preferred
stock. The numbers in the table below are on an as converted to common stock
basis at a conversion ratio of 0.7778 shares of common stock for each share of
preferred stock.
<TABLE>
<CAPTION>
PREFERRED STOCK
---------------------------------------------
PREFERRED STOCKHOLDER SERIES A SERIES B SERIES C SERIES D
--------------------- -------- --------- -------- --------
<S> <C> <C> <C> <C>
Holders of More than 5%:
Institutional Venture Partners
Entities........................ -- 1,555,555 842,591 207,406
Venrock Associates Entities........ -- 1,037,036 518,517 120,987
Directors:
Thomas R. Baruch................... -- 272,222 136,111 172,839
Samuel D. Colella.................. -- 1,555,555 842,591 207,406
Baron Gaulthaus Kraijenhoff........ -- 50,555 25,277 9,202
Peter G. Schultz, Ph.D............. 194,444 -- 77,777 --
Isaac Stein........................ 116,665 38,888 19,444 --
</TABLE>
Holders of our preferred stock are entitled to registration rights with
respect to the shares of common stock that they will hold following this
offering. See "Description of Capital Stock -- Registration Rights."
LOANS TO OFFICERS
We have implemented a program under which our directors, executive officers
and a number of other key employees are permitted to purchase restricted stock
or to exercise their outstanding options as to both vested and unvested shares,
with unvested shares being subject to a right of repurchase at cost in favor of
Symyx in the event of termination of employment prior to vesting of all shares.
Under this program, the participants paid the exercise price for their
outstanding options pursuant to full recourse promissory notes. The notes 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 us,
or on various dates beginning in February 2003. The principal amounts of each
note payable by a director or executive officer are set forth below:
<TABLE>
<CAPTION>
DIRECTOR OR EXECUTIVE OFFICER NOTE AMOUNT
----------------------------- -----------
<S> <C>
Steven D. Goldby.................................. $303,750
Isy Goldwasser.................................... $ 50,000
W. Henry Weinberg, Ph.D........................... $ 80,000
Jeryl L. Hilleman................................. $ 13,500
</TABLE>
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<PAGE> 50
In addition, in January 1998, we lent $300,000 to W. Henry Weinberg, Ph.D.
in connection with his employment with us to assist him with relocation
expenses. This loan did not bear interest. Dr. Weinberg repaid this loan in full
in July 1998.
PAYMENTS TO OFFICERS
Since 1996, we have made the following housing allowance and relocation
payments to W. Henry Weinberg, Ph.D. in connection with his employment with us:
- in 1996, $72,592;
- in 1997, $70,752;
- in 1998, $211,120; and
- in 1999 through September 30, 1999, $45,000.
OTHER TRANSACTIONS
Mario M. Rosati, one of our directors, is also a member of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, which has served as our outside
corporate counsel since our formation.
POLICY REGARDING TRANSACTIONS WITH AFFILIATES
It is our policy that future transactions with affiliates, including any
loans we make to our officers, directors, principal stockholders or other
affiliates will be on terms no less favorable to us than we could have obtained
from unaffiliated third parties. These transactions will be approved by a
majority of our board of directors, including a majority of the independent and
disinterested members or, if required by law, a majority of our disinterested
stockholders.
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<PAGE> 51
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock, as of September 30, 1999, by the following
individuals or groups:
- each person, or group of affiliated persons, whom we know beneficially
owns more than 5% of our outstanding stock;
- each of our executive officers;
- each of our directors; and
- all of our directors and executive officers as a group.
Unless otherwise indicated, the address for each stockholder on this table
is c/o Symyx Technologies, Inc., 3100 Central Expressway, Santa Clara,
California 95051. Except as otherwise noted, and subject to applicable community
property laws, to the best of our knowledge, the persons named in this table
have sole voting and investing power for all of the shares of common stock held
by them.
This table lists applicable percentage ownership based on 23,146,014 shares
of common stock outstanding as of September 30, 1999, as adjusted to reflect the
conversion of all outstanding shares of preferred stock upon the closing of this
offering, and also lists applicable percentage ownership based on 27,761,014
shares of common stock outstanding after completion of this offering. Options to
purchase shares of our common stock that are exercisable within 60 days of
September 30, 1999 are deemed to be beneficially owned by the persons holding
these options for the purpose of computing percentage ownership of that person,
but are not treated as outstanding for the purpose of computing any other
person's ownership percentage. All of these options are immediately exercisable
for common stock that would be subject to repurchase by us. Shares underlying
options that are deemed beneficially owned are listed in this table separately
in the column labeled "Shares Subject to Options." These shares are included in
the number of shares listed in the column labeled "Total Number."
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------------------------------
TOTAL SHARES SUBJECT PERCENT BEFORE PERCENT AFTER
BENEFICIAL OWNER NUMBER TO OPTIONS OFFERING OFFERING
---------------- --------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS:
Institutional Venture Partners
Entities(1)................. 2,897,216 -- 12.52% 10.44%
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Venrock Associates
Entities(2)................. 1,695,983 -- 7.33 6.11
30 Rockefeller Plaza,
Room 5508
New York, NY 10122
</TABLE>
50
<PAGE> 52
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------------------------------
TOTAL SHARES SUBJECT PERCENT BEFORE PERCENT AFTER
BENEFICIAL OWNER NUMBER TO OPTIONS OFFERING OFFERING
---------------- --------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND
DIRECTORS:
Steven D. Goldby(3)........... 493,888 38,888 2.13 1.78
Isy Goldwasser................ 435,554 69,999 1.88 1.56
W. Henry Weinberg, Ph.D....... 719,443 38,888 3.10 2.59
Jeryl L. Hilleman(4).......... 252,775 38,888 1.09 *
Thomas R. Baruch(5)........... 604,505 23,333 2.61 2.18
Samuel D. Colella(6).......... 2,897,216 -- 12.52 10.44
Martin Gerstel(7)............. 174,999 -- * *
Baron Gaulthaus Kraijenhoff... 123,922 -- * *
Francois A. L'Eplattenier..... 38,888 -- * *
Kenneth J. Nussbacher(8)...... 158,665 -- * *
Mario M. Rosati(9)............ 77,777 -- * *
Peter G. Schultz, Ph.D.(10)... 1,205,553 -- 5.21 4.34
Isaac Stein(11)............... 353,888 23,333 1.53 1.27
All directors and executive
officers as a group (13
persons).................... 7,537,073 233,329 32.24% 26.92%
</TABLE>
- -------------------------
* Less than 1% of the outstanding shares of common stock.
(1) Includes 2,723,387 shares held by Institutional Venture Partners VI, L.P.,
57,942 shares held by Institutional Venture Management VI, L.P. and 115,887
shares held by IVP Founders Fund I, L.P.
(2) Includes 1,030,942 shares held by Venrock Associates and 665,041 shares
held by Venrock Associates II, L.P. The general partners of Venrock
Associates and Venrock Associates II, L.P. are Anthony B. Evnin, David R.
Hathaway, Patrick F. Latterell, Ted H. McCourtney, Ray A. Rothrock,
Kimberly A. Rummelsburg and Anthony Sun.
(3) Includes 455,000 shares held by the Steven Goldby and Florence Goldby
Trust, of which Mr. Goldby is trustee.
(4) Includes 198,334 shares held by Jeryl L. Hilleman and William A. Albright,
Jr. as trustees of the Hilleman/Albright Family Trust. Also includes 3,888
shares held by Craig Albright as trustee of the Colin M. Albright 1991
Trust Agreement dated October 3, 1991, 7,777 shares held by Craig Albright
as trustee of the Caroline V. Albright 1995 Trust Agreement dated April 24,
1995, and 3,888 shares held by Craig Albright as trustee of the Evan M.
Albright 1991 Trust Agreement dated October 3, 1991. Ms. Hilleman disclaims
beneficial ownership of an aggregate of 15,553 shares held in trust for the
benefit of her children.
(5) Includes 408,333 shares held by Chemicals and Materials Enterprise
Associates Limited Partnership and 172,839 shares held by CMEA Life
Sciences Fund, L.P. Mr. Baruch is a general partner of each of these
entities and disclaims beneficial ownership of these shares, except to the
extent of his proportionate partnership interest therein.
(6) Includes 2,723,387 shares held by Institutional Venture Partners VI, L.P.,
57,942 shares held by Institutional Venture Management VI, L.P. and 115,887
shares held by IVP Founders Fund I, L.P. Mr. Colella is a general partner
of each of these entities and disclaims beneficial ownership of these
shares except to the extent of his individual partnership interests
therein.
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<PAGE> 53
(7) Includes 174,999 shares held by Shomar Corporation. Mr. Gerstel and his
wife are the sole owners of this entity.
(8) Includes 80,888 shares held by Kenneth J. Nussbacher and Loretta S.
Nussbacher, Trustees U/T/A dated October 6, 1999.
(9) Includes 70,000 shares held by WS Investment Company 95A. Mr. Rosati is a
general partner of this entity and disclaims beneficial ownership of the
shares held by it, except to the extent of his proportionate partnership
interest therein.
(10) Includes 388,888 shares held by George E. Schultz as trustee of the Schultz
Children's Trust. Dr. Schultz disclaims beneficial ownership of these
shares. Dr. Schultz has expressed an interest in acquiring shares in the
offering.
(11) Includes 311,111 shares held by the Isaac Stein and Madeline Johnson Stein
Revocable Trust, of which Mr. Stein is a trustee, and 19,444 shares held by
Stein Partners, of which Mr. Stein is a general partner.
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<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our certificate of incorporation that becomes effective upon the closing of
this offering authorizes the issuance of 100,000,000 shares of common stock,
$0.001 par value, and authorizes the issuance of 10,000,000 shares of
undesignated preferred stock, no par value. From time to time, our board of
directors may establish the rights and preferences of the preferred stock. As of
September 30, 1999, 23,146,014 shares of common stock were issued and
outstanding and held by approximately 328 stockholders, and options to purchase
2,002,041 shares of common stock were issued and outstanding and held by
approximately 164 optionholders.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share held on
all matters to be voted upon by the stockholders and there are no cumulative
voting rights. Subject to preferences that may be applicable to any outstanding
preferred stock, holders of common stock are entitled to receive ratably the
dividends, if any, that are declared from time to time by the board of directors
out of funds legally available for that purpose. See "Dividend Policy." In the
event of a liquidation, dissolution or winding up of Symyx, the holders of
common stock are entitled to share in our assets remaining after the payment of
liabilities and the satisfaction of any liquidation preference granted to the
holders of any outstanding shares of preferred stock. Holders of common stock
have no preemptive or conversion rights or other subscription rights. There are
no redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable. The rights,
preferences and privileges of the holders of common stock are subject to, and
may be adversely affected by, the rights of the holders of shares of any series
of preferred stock that we may designate in the future.
PREFERRED STOCK
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, which may be
greater than the rights of the common stock. It is not possible to state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of the common stock until the board of directors determines the
specific rights of the holders of this preferred stock. However, the effects
might include, among other things:
- restricting dividends on the common stock;
- diluting the voting power of the common stock;
- impairing the liquidation rights of the common stock; or
- delaying or preventing a change in control of Symyx without further
action by the stockholders.
Upon the closing of this offering, no shares of preferred stock will be
outstanding, and we have no present plans to issue any shares of preferred
stock.
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<PAGE> 55
REGISTRATION RIGHTS
Pursuant to a registration and information rights agreement entered into
between us and holders of 15,991,849 shares of common stock issuable upon
conversion of our Series A, Series B, Series C and Series D preferred stock, we
are obligated, under limited circumstances and subject to specified conditions
and limitations, to use our best efforts to register the registrable shares.
We must use our best efforts to register shares of the registrable shares:
- if we receive written notice from holders of 40% or more of the
registrable shares requesting that we effect a registration with respect
to not less than 80% of the registrable shares then held by the holders
requesting registration (or a lesser percentage where the reasonably
anticipated price to the public of the sale of the registrable shares
will exceed $10,000,000);
- if we decide to register our own securities (except in connection with
this offering); or
- if (1) we receive written notice from any holder or holders of the
registrable shares requesting that we effect a registration on Form S-3
(a shortened form of registration statement) with respect to shares of
the registrable shares, the reasonably anticipated price to the public of
which exceeds $500,000 and (2) we are then eligible to use Form S-3
(which at the earliest will occur twelve calendar months after the
closing of this offering).
However, in addition to certain other conditions and limitations, if
requested to register shares of registrable shares, we can delay registration
not more than once in any 12-month period and for not more than 90 days.
These registration rights terminate with respect to each registrable share
upon the first to occur of when the holder can transfer his or her registrable
shares pursuant to Rule 144 or five years after the closing of this offering. In
addition, the holders of these registration rights have entered into lockup
agreements and waived their registration rights until 180 days following this
offering.
ANTITAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BYLAWS
Provisions of Delaware law and our certificate of incorporation and bylaws
could make the following more difficult:
- the acquisition of Symyx by means of a tender offer;
- the acquisition of Symyx by means of a proxy contest or otherwise; or
- the removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids. These
provisions are also designed to encourage persons seeking to acquire control of
Symyx to negotiate first with our board. We believe that the benefits of
increased protection of its potential ability to negotiate with the proponent of
an unfriendly or unsolicited proposal to acquire or restructure Symyx outweigh
the disadvantages of discouraging these proposals because negotiation of any
proposals of this type could result in an improvement of their terms.
Election and Removal of Directors. Our board of directors is divided into
three classes. The directors in each class will serve for a three-year term,
with our stockholders
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<PAGE> 56
electing one class each year. See "Management -- Board of Directors." This
system of electing and removing directors may tend to discourage a third party
from making a tender offer or otherwise attempting to obtain control of Symyx,
because it generally makes it more difficult for stockholders to replace a
majority of the directors.
Stockholder Meetings. Under our bylaws, only the board of directors, the
chairman of the board or the president may call special meetings of
stockholders.
Requirements for Advance Notification of Stockholder Nominations and
Proposals. Our bylaws establish advance notice procedures for stockholder
proposals and for the nomination of candidates for election as directors, other
than nominations made by or at the direction of the board of directors or a
committee of the board.
Delaware Antitakeover Law. Symyx is subject to Section 203 of the Delaware
General Corporation Law, an antitakeover law. In general, Section 203 prohibits
a publicly held Delaware corporation from engaging in a business combination
with an interested stockholder for a period of three years following the date
the person became an interested stockholder, unless the business combination or
the transaction in which the person became an interested stockholder is approved
in the manner specified in Section 203. Generally, a business combination
includes a merger, asset or stock sale, or other transaction resulting in a
financial benefit to the interested stockholder. Generally, an interested
stockholder is a person who, together with affiliates and associates, owns or
within three years prior to the determination of interested stockholder status
did own 15% or more of a corporation's voting stock. The existence of this
provision may have an antitakeover effect by discouraging takeover attempts not
approved in advance by the board of directors, that might result in a premium
over the market price for the shares of common stock held by stockholders.
Elimination of Stockholder Action by Written Consent. Our certificate of
incorporation eliminates the right of stockholders to act by written consent
without a meeting.
No Cumulative Voting. Our certificate of incorporation and bylaws do not
provide for cumulative voting in the election of directors.
Undesignated Preferred Stock. The authorization of undesignated preferred
stock makes it possible for the board of directors to issue preferred stock with
voting or other rights or preferences that could impede the success of any
attempt to change control of Symyx. These and other provisions may have the
effect of deferring hostile takeovers or delaying changes in control or
management of Symyx.
Amendment of Charter Provisions. The amendment of any of the above
provisions would require approval by holders of at least 66 2/3% of the
outstanding common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Norwest Bank
Minnesota, N.A.
LISTING
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "SMMX."
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<PAGE> 57
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and
we cannot assure you that a significant public market for the common stock will
develop or be sustained after this offering. Future sales of substantial amounts
of common stock, including shares issued upon exercise of outstanding options
and warrants, in the public market following this offering could adversely
affect market prices prevailing from time to time and could impair our ability
to raise capital through sale of our equity securities. As described below, no
shares currently outstanding will be available for sale immediately after this
offering because of contractual resale restrictions contained in agreements
between us and our stockholders.
Upon completion of this offering, we will have outstanding 27,761,014
shares of common stock based upon shares outstanding as of September 30, 1999,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options prior to completion of this offering. Of these shares,
the 4,615,000 shares sold in this offering will be freely tradable without
restriction under the Securities Act, except for any shares purchased by our
"affiliates" as defined in Rule 144 under the Securities Act. Of the remaining
23,146,014 shares of common stock, 23,146,014 shares held by existing
stockholders are subject to lock-up agreements with the underwriters and/or us
providing that the stockholder will not offer to sell, contract to sell or
otherwise sell, dispose of, loan, pledge or grant any rights to, any shares of
common stock or any securities that are convertible into common stock, owned as
of the date of this prospectus or subsequently acquired, for a period of 180
days after the date of this prospectus without the prior written consent of
Credit Suisse First Boston. As a result of these lock-up agreements,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144, 144(k) and 701 under the Securities Act, none of these shares will be
resellable until 181 days after the date of this prospectus. Credit Suisse First
Boston may, in its sole discretion and at any time without notice, release all
or any portion of the shares subject to lock-up agreements.
Beginning 181 days after the date of this prospectus, approximately
22,976,457 shares will be eligible for sale in the public market. All of these
shares will be subject to volume limitations under Rule 144, except 10,864,573
shares eligible for sale under Rule 144(k) and 2,189,091 shares eligible for
sale under Rule 701. In some cases, these shares are subject to repurchase
rights of Symyx.
In general, under Rule 144, as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned restricted
shares for at least one year, including the holding period of any prior owner
and except an affiliate, would be entitled to sell within any three-month period
a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will
equal approximately 277,610 shares immediately after this offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about Symyx. Under Rule 144(k), a person who is not deemed to have been an
affiliate of Symyx at any time during the three months preceding a sale, and who
has beneficially owned the shares proposed to be sold for at least two years
including the holding period of any prior owner
56
<PAGE> 58
except an affiliate, is entitled to sell those shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.
Rule 701, as currently in effect, permits resales of shares in reliance
upon Rule 144 but without compliance with certain restrictions, including the
holding period requirement, of Rule 144. Any employee, officer or director of or
consultant to Symyx who purchased shares pursuant to a written compensatory plan
or contact may be entitled to rely on the resale provisions of Rule 701. Rule
701 permits affiliates to sell their Rule 701 shares under Rule 144 without
complying with the holding period requirements of Rule 144. Rule 701 further
provides that non-affiliates may sell their Rule 701 shares in reliance on Rule
144 without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. All holders of Rule 701 shares are
required to wait until 90 days after the date of this prospectus before selling
their Rule 701 shares. However, all Rule 701 shares are subject to lock-up
agreements and will only become eligible for sale at the earlier of the
expiration of the 180-day lock-up agreements or the receipt of the written
consent of Credit Suisse First Boston more than 90 days after the date of this
prospectus.
After this offering, we intend to file a registration statement on Form S-8
registering shares of common stock subject to outstanding options or reserved
for future issuance under our employee benefit plans. As of September 30, 1999,
options to purchase a total of 2,002,041 shares were outstanding and 1,528,521
shares were reserved for future issuance under our stock plans. Common stock
issued upon exercise of outstanding vested options or issued pursuant to our
employee stock purchase plan, other than common stock issued to our affiliates,
will be available for immediate resale in the open market following expiration
of the 180-day lock-up agreements.
Also beginning six months after the date of this offering, holders of
15,991,849 restricted shares will be entitled to registration rights on these
shares for sale in the public market. See "Description of Capital
Stock -- Registration Rights." Registration of these shares under the Securities
Act would result in their becoming freely tradable without restriction under the
Securities Act immediately upon the effectiveness of the registration.
57
<PAGE> 59
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we have agreed to sell to the
underwriters named below, for whom Credit Suisse First Boston Corporation,
Donaldson, Lufkin & Jenrette Securities Corporation, Invemed Associates LLC and
Schroder & Co. Inc. are acting as representatives, the following respective
numbers of shares of common stock:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Invemed Associates LLC......................................
Schroder & Co. Inc. ........................................
---------
Total............................................. 4,615,000
=========
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to 692,250 additional shares of common stock at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation we will pay:
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------------------- -------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts and
Commissions paid by us... $ $ $ $
</TABLE>
We estimate that our out-of-pocket expenses for this offering will be
approximately $1 million.
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, our executive officers, directors and our existing stockholders have
agreed that we will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, or file with the Securities and Exchange
Commission a registration statement under the Securities Act relating to, any
additional shares of our common stock or securities convertible into or
exchangeable or exercisable for any of our common stock, or publicly disclose
the intention to make any such offer, sale, pledge, disposition or filing,
without the prior written consent of Credit Suisse First Boston Corporation for
a period of 180 days after the date of this prospectus.
58
<PAGE> 60
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
The underwriters have reserved for sale, at the initial public offering
price, up to 923,000 shares of common stock for employees, directors and other
persons associated with us who have expressed an interest in purchasing common
stock in the offering. This group may include Alejandro Zaffaroni, Peter Schultz
and RA Investments, each of whom is an existing stockholder of ours, who have
expressed an interest in acquiring up to 884,500 shares of common stock in the
offering, based upon an assumed initial public offering price of $13.00 per
share. Dr. Schulz is also one of our directors. The number of shares available
for sale to the general public in the offering will be reduced to the extent
these persons purchase these reserved shares. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
terms as the other shares.
We have made application to list the shares of common stock on The Nasdaq
Stock Market's National Market under the symbol "SMMX."
Prior to this offering, there has been no public market for our common
stock. The initial public offering price was determined by negotiation between
us and the underwriters. The principal factors considered in determining the
public offering price included:
- the history of and prospects for the industry in which we will compete;
- the ability of our management;
- our prospects for our future earnings;
- the present state of our development and our current financial condition;
- the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies; and
- the general condition of the securities markets at the time of this
offering.
We can offer no assurances that the initial public offering price will
correspond to the price at which the common stock will trade in the public
market subsequent to the offering or that an active trading market for the
common stock will develop and continue after the offering.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act:
- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by such
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.
59
<PAGE> 61
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that (i) the purchaser is entitled under
applicable provincial securities laws to purchase the common stock without the
benefit of a prospectus qualified under the securities laws, (ii) where required
by law, that the purchaser is purchasing as principal and not as agent, and
(iii) the purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or these persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or these persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or these persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that the purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser in this offering. This report must be in
the form attached to British Columbia Securities Commission Blanket Order BOR
#95/17, a copy of which may be obtained from us. Only one report must be filed
in respect of common stock acquired on the same date and under the same
prospectus exemption.
60
<PAGE> 62
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult with their own legal and
tax advisors with respect to the tax consequences of an investment in our common
stock in their particular circumstances and with respect to the eligibility of
our common stock for investment by the purchaser under relevant Canadian
legislation.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Symyx by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Pillsbury Madison & Sutro LLP, Palo Alto, California, is acting as
counsel for the underwriters in connection with selected legal matters relating
to the shares of common stock offered by this prospectus. As of September 30,
1999, an investment partnership and a member of Wilson Sonsini Goodrich & Rosati
beneficially owned an aggregate of 77,777 shares of common stock of Symyx. Mario
M. Rosati, one of our directors and our secretary, is a member of Wilson Sonsini
Goodrich & Rosati.
EXPERTS
Ernst & Young, LLP, independent auditors, have audited our financial
statements at December 31, 1997 and 1998 and September 30, 1999, and for each of
the three years in the period ended December 31, 1998 and for the nine months
ended September 30, 1999, as set forth in their report. We have included our
financial statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given upon the authority of
such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1. This prospectus, which forms a part of the Registration
Statement, does not contain all the information included in the Registration
Statement. Certain information is omitted and you should refer to the
Registration Statement and its exhibits. With respect to references made in this
prospectus to any contract or other document of Symyx, such references are not
necessarily complete and you should refer to the exhibits attached to the
Registration Statement for copies of the actual contract or document. You may
review a copy of the Registration Statement, including exhibits and schedule
filed therewith, at the Securities and Exchange Commission's public reference
facilities in Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Securities and Exchange
Commission located at 7 World Trade Center, Suite 1300, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You may also obtain copies of such materials from the Public
References Section of the Securities and Exchange Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Securities and Exchange Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, such as Symyx, that file electronically
with the Securities and Exchange Commission.
61
<PAGE> 63
SYMYX TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statement of Stockholders' Equity........................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 64
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, 1997 and 1998 and September 30, 1999, and the related
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1998 and the nine months ended
September 30, 1999. 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 generally accepted auditing
standards. 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, 1997 and 1998 and September 30, 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 and the nine months ended September 30, 1999, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Palo Alto, California
October 8, 1999, except as to
the third paragraph of Note 1 for
which the date is October 22, 1999.
F-2
<PAGE> 65
SYMYX TECHNOLOGIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
-------------------------- SEPTEMBER 30, SEPTEMBER 30, 1999
1997 1998 1999 (NOTE 1)
----------- ------------ ------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 3,841,237 $ 14,042,755 $ 13,627,711
Short-term investments.............................. 10,530,855 9,338,897 1,500,000
Accounts receivable................................. -- 626,088 1,093,840
Other current assets................................ 864,387 838,816 1,854,500
----------- ------------ ------------
Total current assets.................................. 15,236,479 24,846,556 18,076,051
Property and equipment, net........................... 13,320,423 16,109,920 17,232,341
Long-term investments................................. 6,241,920 11,738,965 24,755,534
Other assets.......................................... 62,470 208,025 563,479
----------- ------------ ------------
$34,861,292 $ 52,903,466 $ 60,627,405
=========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities...... $ 1,887,428 $ 1,676,000 $ 1,986,030
Accrued compensation and employee benefits.......... 203,630 416,253 579,808
Deferred rent....................................... 286,988 446,282 469,905
Deferred revenue.................................... 1,883,699 4,171,429 9,129,896
Current portion of equipment and facility loans..... 1,114,638 2,435,836 3,082,678
----------- ------------ ------------
Total current liabilities............................. 5,376,383 9,145,800 15,248,317
Equipment and facility loans.......................... 4,454,943 7,591,793 7,014,264
Commitments
Stockholders' equity:
Preferred stock, $0.001 par value, 23,650,000 shares
authorized, issuable in series:
Series A convertible, 1,000,000 shares designated,
issued and outstanding (no shares outstanding pro
forma); aggregate liquidation preference of
$500,000.......................................... 500,000 500,000 1,000 $ --
Series B convertible, 8,650,000 shares designated,
8,600,687 shares issued and outstanding (no shares
outstanding pro forma); aggregate liquidation
preference of $12,901,030......................... 12,869,171 12,869,171 8,601 --
Series C convertible, 8,000,000 shares designated,
6,750,284 shares issued and outstanding (no shares
outstanding pro forma); aggregate liquidation
preference of $20,250,852......................... 20,231,584 20,231,584 6,750 --
Series D convertible, 6,000,000 shares designated,
4,210,185 shares issued and outstanding (no shares
outstanding pro forma); aggregate liquidation
preference of $18,945,832......................... -- 18,909,685 4,210 --
Common stock, $0.001 par value, 50,000,000 shares
authorized, 3,759,772, 6,225,475 and 7,154,165
shares issued and outstanding at December 31, 1997,
December 31, 1998 and September 30, 1999,
respectively (23,146,014 shares outstanding pro
forma).............................................. 205,073 849,347 7,154 23,146
Class B common stock, no par value, no shares
authorized, issued and outstanding (93,333 shares at
December 31, 1997).................................. 1,200 -- -- --
Additional paid-in capital............................ -- 559,556 59,795,355 59,799,924
Stockholder notes receivable.......................... -- (397,750) (731,350) (731,350)
Deferred stock compensation........................... -- (442,217) (2,838,064) (2,838,064)
Unrealized gain (loss) on investments................. 7,891 (43,823) (58,095) (58,095)
Accumulated deficit................................... (8,784,953) (16,869,680) (17,830,737) (17,830,737)
----------- ------------ ------------ ------------
Total stockholders' equity............................ 25,029,966 36,165,873 38,364,824 $ 38,364,824
----------- ------------ ------------ ============
Total liabilities and stockholder's equity............ $34,861,292 $ 52,903,466 $ 60,627,405
=========== ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 66
SYMYX TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- --------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue from
collaborations............. $ -- $ 4,806,301 $13,786,836 $10,035,136 $22,529,624
Operating costs and expenses:
Research and development..... 2,482,776 8,763,679 17,639,884 13,298,523 16,787,169
General and administrative... 567,377 2,129,285 4,500,462 3,350,455 4,640,570
Amortization of deferred
compensation............... -- -- 117,339 8,537 2,794,386
----------- ----------- ----------- ----------- -----------
Total operating expenses..... 3,050,153 10,892,964 22,257,685 16,657,515 24,222,125
----------- ----------- ----------- ----------- -----------
Income (loss) from
operations................. (3,050,153) (6,086,663) (8,470,849) (6,622,379) (1,692,501)
Interest income.............. 374,733 842,853 1,117,514 773,315 1,500,160
Interest and other expense... (5,763) (351,725) (731,392) (543,843) (768,716)
----------- ----------- ----------- ----------- -----------
Net income (loss)............ $(2,681,183) $(5,595,535) $(8,084,727) $(6,392,907) $ (961,057)
=========== =========== =========== =========== ===========
Basic and diluted net loss
per share.................. $ (1.24) $ (1.97) $ (2.11) $ (1.75) $ (0.17)
=========== =========== =========== =========== ===========
Shares used in computing
basic and diluted net loss
per share.................. 2,168,095 2,844,646 3,829,060 3,655,774 5,546,445
=========== =========== =========== =========== ===========
Pro forma basic and diluted
net loss per share
(unaudited)................ $ (0.46) $ (0.04)
=========== ===========
Shares used in computing pro
forma basic and diluted net
loss per share
(unaudited)................ 17,736,765 21,538,294
=========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 67
SYMYX TECHNOLOGIES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL STOCKHOLDER DEFERRED
------------------------- ----------------------- PAID-IN NOTES STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION
---------- ------------ --------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995....... -- $ -- 2,076,666 $ 2,670 $ -- $ -- $ --
Issuance of common stock........... -- -- 1,231,362 99,228 -- -- --
Issuance of Class B common stock... -- -- 116,666 1,500 -- -- --
Issuance of Series A preferred
stock upon conversion of loan from
officer........................... 1,000,000 500,000 -- -- -- -- --
Issuance of Series B preferred
stock for cash, net of issuance
costs of $31,860.................. 8,600,687 12,869,171 -- -- -- -- --
Net income (loss) and comprehensive
income (loss) for year ended
December 31, 1996................. -- -- -- -- -- -- --
---------- ------------ --------- ----------- ----------- --------- -----------
Balance at December 31, 1996....... 9,600,687 13,369,171 3,424,694 103,398 -- -- --
Issuance of common stock........... -- -- 471,188 103,425 -- -- --
Issuance of Series C preferred
stock for cash, net of issuance
costs of $19,268.................. 6,750,284 20,231,584 -- -- -- -- --
Repurchase of common stock (19,444
shares) and Class B common stock
(23,333 shares)................... -- -- (42,777) (550) -- -- --
Comprehensive income (loss):
Unrealized gain (loss) on
available-for-sale securities... -- -- -- -- -- -- --
Net income (loss) for the year
ended December 31, 1997......... -- -- -- -- -- -- --
Comprehensive loss................ -- -- -- -- -- -- --
---------- ------------ --------- ----------- ----------- --------- -----------
Balance at December 31, 1997....... 16,350,971 33,600,755 3,853,105 206,273 -- -- --
Issuance of Series D preferred
stock for cash, net of issuance
costs of $36,148.................. 4,143,518 18,609,685 -- -- -- -- --
Issuance of common stock........... -- -- 1,532,370 643,074 -- (397,750) --
Conversion of Class B common stock
to common stock on a 1:10 basis... -- -- 840,000 -- -- -- --
Issuance of Series D preferred
stock as consideration for
technology rights................. 66,667 300,000 -- -- -- -- --
Deferred stock compensation........ -- -- -- -- 559,556 -- (559,556)
Amortization of deferred stock
compensation...................... -- -- -- -- -- -- 117,339
Comprehensive income (loss):
Net income (loss) for the year
ended December 31,1998.......... -- -- -- -- -- -- --
Unrealized gain (loss) on
available-for-sale securities... -- -- -- -- -- -- --
Comprehensive income (loss)....... -- -- -- -- -- -- --
---------- ------------ --------- ----------- ----------- --------- -----------
Balance at December 31, 1998....... 20,561,156 52,510,440 6,225,475 849,347 559,556 (397,750) (442,217)
Issuance of common stock........... -- -- 961,355 744,994 -- (361,050) --
Repurchase of common stock......... -- -- (32,665) (31,500) -- 27,450 --
Deferred stock compensation........ -- -- -- -- (5,190,233) -- 5,190,233
Amortization of deferred stock
compensation...................... -- -- -- -- -- -- 2,794,386
Reincorporation in Delaware........ -- (52,489,879) -- (1,555,687) 54,045,566 -- --
Comprehensive income (loss):
Net income (loss) for the nine
months ended September 30,
1999............................ -- -- -- -- -- -- --
Unrealized gain (loss) on
available for sale securities... -- -- -- -- -- -- --
Comprehensive income (loss)....... -- -- -- -- -- -- --
---------- ------------ --------- ----------- ----------- --------- -----------
Balance as of September 30, 1999... 20,561,156 $ 20,561 7,154,165 $ 7,154 $59,795,355 $(731,350) $(2,838,064)
========== ============ ========= =========== =========== ========= ===========
<CAPTION>
UNREALIZED
GAIN TOTAL
(LOSS) ON ACCUMULATED STOCKHOLDERS'
INVESTMENTS DEFICIT EQUITY
----------- ------------ -------------
<S> <C> <C> <C>
Balance at December 31, 1995....... $ -- $ (508,235) $ (505,565)
Issuance of common stock........... -- -- 99,228
Issuance of Class B common stock... -- -- 1,500
Issuance of Series A preferred
stock upon conversion of loan from
officer........................... -- -- 500,000
Issuance of Series B preferred
stock for cash, net of issuance
costs of $31,860.................. -- -- 12,869,171
Net income (loss) and comprehensive
income (loss) for year ended
December 31, 1996................. -- (2,681,183) (2,681,183)
--------- ------------ -----------
Balance at December 31, 1996....... -- (3,189,418) 10,283,151
Issuance of common stock........... -- -- 103,425
Issuance of Series C preferred
stock for cash, net of issuance
costs of $19,268.................. -- -- 20,231,584
Repurchase of common stock (19,444
shares) and Class B common stock
(23,333 shares)................... -- -- (550)
Comprehensive income (loss):
Unrealized gain (loss) on
available-for-sale securities... 7,891 -- 7,891
Net income (loss) for the year
ended December 31, 1997......... -- (5,595,535) (5,595,535)
-----------
Comprehensive loss................ -- -- (5,587,644)
--------- ------------ -----------
Balance at December 31, 1997....... 7,891 (8,784,953) 25,029,966
Issuance of Series D preferred
stock for cash, net of issuance
costs of $36,148.................. -- -- 18,609,685
Issuance of common stock........... -- -- 245,324
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................. -- -- 300,000
Deferred stock compensation........ -- -- --
Amortization of deferred stock
compensation...................... -- -- 117,339
Comprehensive income (loss):
Net income (loss) for the year
ended December 31,1998.......... -- (8,084,727) (8,084,727)
Unrealized gain (loss) on
available-for-sale securities... (51,714) -- (51,714)
-----------
Comprehensive income (loss)....... -- -- (8,136,441)
--------- ------------ -----------
Balance at December 31, 1998....... (43,823) (16,869,680) 36,165,873
Issuance of common stock........... -- -- 383,944
Repurchase of common stock......... -- -- (4,050)
Deferred stock compensation........ -- -- --
Amortization of deferred stock
compensation...................... -- -- 2,794,386
Reincorporation in Delaware........ -- -- --
Comprehensive income (loss):
Net income (loss) for the nine
months ended September 30,
1999............................ -- (961,057) (961,057)
Unrealized gain (loss) on
available for sale securities... (14,272) -- (14,272)
-----------
Comprehensive income (loss)....... -- -- (975,329)
--------- ------------ -----------
Balance as of September 30, 1999... $ (58,095) $(17,830,737) $38,364,824
========= ============ ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 68
SYMYX TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- ---------------------------
1996 1997 1998 1998 1999
----------- ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............................. $(2,681,183) $ (5,595,535) $ (8,084,727) $ (6,392,907) $ (961,057)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization................ 200,334 1,031,258 3,090,533 2,752,648 3,234,303
Deferred compensation amortization........... -- -- 117,339 8,537 2,794,386
Issuance of preferred stock as consideration
for technology rights...................... -- -- 300,000 -- --
Common shares issued and contribution of
capital in consideration of services
rendered................................... 10,000 -- -- -- --
Changes in assets and liabilities:
Other current assets....................... (249,635) (614,752) 25,571 12,484 (1,015,684)
Accounts receivable........................ -- -- (626,088) (424,910) (467,752)
Accounts payable and other current
liabilities.............................. 276,391 1,540,149 (211,428) (1,095,017) 310,030
Deferred revenue........................... -- 1,883,699 2,287,730 (1,205,783) 4,958,467
Deferred rent.............................. -- 286,988 159,294 143,545 23,623
Accrued compensation and employee
benefits................................. 43,870 159,760 212,623 166,686 163,555
Other long-term assets..................... (55,119) (7,351) (145,555) (35,009) (355,454)
----------- ------------ ------------ ------------ ------------
Net cash provided by (used in) operating
activities................................... (2,455,342) (1,315,784) (2,874,708) (6,069,726) 8,684,417
----------- ------------ ------------ ------------ ------------
INVESTING ACTIVITIES
Purchase of property and equipment, net........ (1,329,770) (13,218,044) (5,808,609) (4,747,212) (4,060,959)
Purchase of investments........................ (5,978,859) (35,036,081) (20,053,101) (2,707,714) (14,530,285)
Proceeds from sales of investments............. -- 12,917,486 1,274,879 1,274,879 --
Proceeds from maturities of investments........ -- 11,332,570 14,350,000 11,500,000 9,050,000
----------- ------------ ------------ ------------ ------------
Net cash provided by (used in) investing
activities................................... (7,308,629) (24,004,069) (10,236,831) 5,319,953 (9,541,244)
----------- ------------ ------------ ------------ ------------
FINANCING ACTIVITIES
Proceeds from issuance of preferred stock, net
of issuance costs............................ 12,869,171 20,231,584 18,609,685 6,233,745 --
Proceeds from issuance of common stock, net of
repurchases.................................. 90,728 102,875 245,324 232,934 372,470
Proceeds from loan from officer................ 696,137 -- -- -- --
Repayment of loan from officer................. (650,000) -- -- -- --
Principal payments on equipment and facility
loans........................................ -- (430,419) (1,166,310) (821,383) (1,956,489)
Proceeds from equipment and facility loans..... -- 6,000,000 5,624,358 -- 2,025,802
----------- ------------ ------------ ------------ ------------
Net cash provided by financing activities...... 13,006,036 25,904,040 23,313,057 5,645,296 441,783
----------- ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents.................................. 3,242,065 584,187 10,201,518 4,895,523 (415,044)
Cash and cash equivalents at beginning of
period....................................... 14,985 3,257,050 3,841,237 3,841,237 14,042,755
----------- ------------ ------------ ------------ ------------
Cash and cash equivalents at end of period..... $ 3,257,050 $ 3,841,237 $ 14,042,755 $ 8,736,760 $ 13,627,711
=========== ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid.................................. $ 5,763 $ 406,229 $ 733,077 $ 543,035 $ 811,318
=========== ============ ============ ============ ============
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Conversion of loan from officer to preferred
stock........................................ $ 500,000 $ -- $ -- $ -- $ --
=========== ============ ============ ============ ============
Exercise of stock options for notes
receivable................................... $ -- -- $ 397,750 $ 397,750 $ 333,600
=========== ============ ============ ============ ============
</TABLE>
See accompanying notes.
F-6
<PAGE> 69
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 statement of stockholders equity in 1999
includes a reclassification 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. The Company has had no revenues from product sales
through September 30, 1999.
In August 1999, the board of directors authorized management of the Company
to file a registration statement with the Securities and Exchange Commission
permitting the Company to sell shares of its common stock to the public. If the
initial public offering is closed under the terms presently anticipated, all of
the preferred stock outstanding will automatically convert into 15,991,849
shares of common stock. Unaudited pro forma stockholders' equity, as adjusted
for the assumed conversion of the preferred stock, is set forth on the balance
sheet.
On October 22, 1999, the stockholders approved a nine-for-seven reverse
split of the Company's common stock. All share and per share amounts in the
accompanying financial statements have been adjusted retroactively.
INTERIM FINANCIAL INFORMATION
The financial information for the nine months ended September 30, 1998 is
unaudited but, in the opinion of management, has been prepared on the same basis
as the annual financial statements and includes all adjustments (consisting only
of normal recurring adjustments) that the Company considers necessary for a fair
presentation of the financial position at such date and the operating results
and cash flows for such periods. Results for the interim period are not
necessarily indicative of the results to be expected for any subsequent
nine-month period nor for the entire year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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-
F-7
<PAGE> 70
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 September 30, 1999, 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.
The following is a summary of the fair value of available-for-sale
securities:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
<S> <C> <C> <C>
U.S. Treasury securities...... $ 400,001 $ -- $ --
Money market funds............ 3,212,210 11,242,137 9,592,855
U.S. Corporate securities..... 13,359,470 21,267,862 30,125,751
----------- ----------- -----------
Total......................... $16,971,681 $32,509,999 $39,718,606
=========== =========== ===========
</TABLE>
Above amounts are included in the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
<S> <C> <C> <C>
Cash and cash equivalents..... $ 198,906 $11,432,137 $13,463,072
Short-term investments........ 10,530,855 9,338,897 1,500,000
Long-term investments......... 6,241,920 11,738,965 24,755,534
----------- ----------- -----------
Total......................... $16,971,681 $32,509,999 $39,718,606
=========== =========== ===========
</TABLE>
F-8
<PAGE> 71
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Following is a reconciliation of cash and cash equivalents:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1997 1998 1999
---------- ----------- -------------
<S> <C> <C> <C>
Available-for-sale
securities................... $ 198,906 $11,432,137 $13,463,072
Cash and bank accounts......... 3,642,331 2,610,618 164,639
---------- ----------- -----------
Total cash and cash
equivalents.................. $3,841,237 $14,042,755 $13,627,711
========== =========== ===========
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1997 1998 1999
----------- ----------- -------------
<S> <C> <C> <C>
Machinery and equipment....... $ 4,026,939 $ 7,128,440 $ 8,805,463
Computers and software........ 911,380 1,469,014 2,023,136
Leasehold improvements........ 8,442,276 10,412,719 10,740,354
Construction in progress...... 603,623 346,632 1,386,073
Furniture and fixtures........ 273,103 461,443 483,984
----------- ----------- -----------
14,257,321 19,818,248 23,439,010
Less accumulated depreciation
and amortization............ (936,898) (3,708,328) (6,206,669)
----------- ----------- -----------
Property and equipment, net... $13,320,423 $16,109,920 $17,232,341
=========== =========== ===========
</TABLE>
Equipment which has been collateralized as security for the Company's three
loan agreements is included in property and equipment. At December 31, 1997 and
1998, and September 30, 1999, property and equipment collateralized was
$6,000,000, $13,180,000 and $15,200,000 with accumulated depreciation of
$140,000, $3,060,000 and $5,300,000, respectively.
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
F-9
<PAGE> 72
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
received under research collaboration agreements are not refundable if the
research effort is not successful.
RESEARCH AND DEVELOPMENT
Research and development expenditures, including direct and allocated
expenses, are charged to operations as 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 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 at 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.
Deferred compensation for options granted to nonemployees 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. Deferred compensation for options granted to nonemployees is
periodically remeasured as the underlying options vest.
NET LOSS PER SHARE
Basic and diluted net loss per common share are presented in conformity
with the Statement of Financial Accounting Standards No. 128, "Earnings per
Share," ("SFAS 128") for all periods presented. Following the guidance given by
the Securities and Exchange Commission Staff Accounting Bulletin No. 98, common
stock and convertible preferred stock that has been issued or granted for
nominal consideration prior to the anticipated effective date of the initial
public offering must be included in the calculation of basic and diluted net
loss per common share as if these shares had been outstanding for all periods
presented. To date, the Company has not issued or granted shares for nominal
consideration.
In accordance with SFAS 128, 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 statements of operations,
has been computed for the year ended December 31, 1998 and the nine months ended
September 30, 1999 as described above, and also gives effect to the conversion
of the convertible preferred stock, which will automatically convert to common
stock immediately prior to the completion of
F-10
<PAGE> 73
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ----------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss................. $(2,681) $(5,596) $(8,085) $(6,393) $ (961)
======= ======= ======= ======= =======
Basic and diluted:
Weighted-average shares
of common stock
outstanding......... 2,923 3,474 4,659 4,458 6,840
Less: weighted-average
shares subject to
repurchase.......... (755) (629) (830) (802) (1,294)
------- ------- ------- ------- -------
Weighted-average shares
used in computing
basic and diluted
net loss per
share............... 2,168 2,845 3,829 3,656 5,546
======= ======= ======= ======= =======
Basic and diluted net
loss per share......... $ (1.24) $ (1.97) $ (2.11) $ (1.75) $ (0.17)
======= ======= ======= ======= =======
Pro forma:
Net loss............... $(8,085) $ (961)
======= =======
Shares used above...... 3,829 5,546
Pro forma adjustment to
reflect weighted
effect of assumed
conversion of
convertible
preferred stock..... 13,908 15,992
------- -------
Shares used in
computing pro forma
basic and diluted
net loss per
share............... 17,737 21,538
======= =======
Pro forma basic and
diluted net loss per
share............... $ (0.46) $ (0.04)
======= =======
</TABLE>
The Company has excluded all convertible preferred stock, convertible class
B common stock, outstanding stock options, and shares subject to repurchase from
the calculation of diluted loss per common share because all such securities are
antidilutive 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,
F-11
<PAGE> 74
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
was 9,302,409, 15,558,813 and 18,862,072 for the years ended December 31, 1996,
1997 and 1998, respectively, and 19,918,048 and 19,318,912 for the nine months
ended September 30, 1998 and 1999, respectively. Such securities, had they been
dilutive, would have been included in the computations of diluted net loss per
share. See Note 4 for further information on these securities.
COMPREHENSIVE INCOME (LOSS)
The Company has adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income". The only component of other comprehensive
income (loss) is unrealized gains and losses on available-for-sale securities.
Comprehensive loss has been disclosed in the consolidated statement of
stockholders' equity for all periods presented.
SEGMENT REPORTING
Effective in January 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas and major customers.
The Company has determined that it operates in only one segment. Accordingly,
the adoption of this Statement had no impact on the Company's financial
statements.
EFFECT OF NEW ACCOUNTING STANDARDS
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. The Company believes the
adoption of SFAS 133 will not have a material effect on the financial
statements, since it currently does not engage in hedging activities.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). "SOP 98-1"
requires that entities capitalize certain costs related to internal-use software
once certain criteria have been met. The adoption of SOP 98-1, as required in
1999, has not had a material impact on the Company's financial position or
results of operations. The Company expenses as incurred the costs associated
with developing software for use in research and development activities in
accordance with Statement of Financial Accounting Standards No. 2, "Accounting
for Research and Development Costs" and related interpretations.
F-12
<PAGE> 75
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. RESEARCH AND DEVELOPMENT ARRANGEMENTS
In March 1998, the Company entered into a collaboration agreement with
Bayer AG that was subsequently expanded in May 1998, January 1999 and September
1999. The January 1999 portion of the expanded collaboration is a new three year
agreement, the September 1999 amendment expands the term of the March 1998
agreement through December 2000. The agreements are noncancellable other than
for material breach or certain other conditions. The partnership is focused on
the discovery of catalysts, polymers, and electronic materials. The Company is
responsible for performing research at levels defined in the agreement,
including synthesis, screening and informatics. Bayer is entitled to develop and
commercialize materials discovered in or under the collaboration within the
defined field. Under the terms of the expanded agreement, the Company will
receive $36,000,000 in guaranteed research funding and up to $60,000,000 if
extended through mutual agreement. In addition, in 1998 Bayer Innovation, a
corporate venture fund of Bayer AG, made an investment of $5,000,000 in the
Company's Series D convertible preferred stock on the same terms as other
financial investors. The Company will also receive royalties or milestone
payments on the sale of any products developed out of the collaboration. During
the year ending December 31, 1998, the Company recognized net revenue of
$5,242,000 in connection with this collaboration. During the nine months ended
September 30, 1999, the Company has recognized $7,190,000 in connection with
this collaboration. Revenue in 1997 included $1,042,000 earned under a related
interim agreement with Bayer.
In September 1998, the Company entered into a three-year collaborative
research agreement with Celanese Ltd. ("Celanese"). The agreement is
noncancellable other than for material breach or in certain other conditions.
Symyx may receive up to $20,000,000 of research funding under the terms of this
agreement. The collaboration is focused on heterogeneous catalysis for commodity
chemical applications, a program that began as part of a February 1997 broad
research collaboration with Hoechst AG. The program was transferred from Hoechst
to its chemical and acetate products subsidiary, Celanese, in keeping with
Hoechst's decision to focus exclusively on life sciences. The Company is
responsible for performing research at levels defined in the agreement,
including synthesis, screening and informatics. Celanese is entitled to develop
and commercialize materials discovered in or under collaboration within the
defined field. The Company will receive royalties on the sale of products
commercialized under this agreement. During the year ended December 31, 1998 and
the nine months ended September 30, 1999, the Company recognized net revenue of
$4,783,000 and $2,750,000, respectively, in connection with the Celanese/Hoechst
collaboration. The Company previously had a collaboration with Hoechst pursuant
to which approximately $3,667,000 of research revenue was earned in 1997.
Separately, in 1998 Hoechst's subsidiary, Aventis Research and Technologies,
made an equity investment of $1,800,000 in the Company's Series D convertible
preferred stock on the same terms as other financial investors. Included in this
amount is 51,993 shares of Series D convertible preferred stock valued at
$300,000 that was granted in consideration for the transfer of certain rights to
technology, the value of which was included in research and development expense.
During 1998, the Company was awarded grants from the U.S. Office of Naval
Research Defense Advanced Research Projects Agency (DARPA) and the
F-13
<PAGE> 76
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
U.S. Department of Energy. During the nine months ended September 30, 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. Under these collaboration arrangements, the Company will
be reimbursed for research costs over various periods as specified in the
agreements. During the years ended December 31, 1997 and 1998, and the nine
months ended September 30, 1999, revenue recognized in the aggregate under these
grants was approximately $60,000, $1,011,000 and $1,997,000, respectively.
In January 1999, the Company entered into a three-year collaboration
agreement with the Dow Chemical Company to develop polyolefin catalysts
primarily directed toward the identification of new catalyst systems for the
production of a wide range of plastic products. The agreement is noncancellable
other than for material breach or in certain other conditions. The Company is
responsible for performing research at levels defined in the agreement,
including synthesis screening and information. Bayer is entitled to develop and
commercialize materials discovered in or under the collaboration within the
defined field. Under the terms of the agreement, the Company will receive
$18,000,000 in guaranteed research payments and fees, as well as royalties from
polyolefin products sales resulting from the collaboration. During the nine
months ended September 30, 1999, the Company has recognized $4,125,000 in
connection with this collaboration.
In December 1997, the Company entered into a six-month interim research
funding agreement with The B.F. Goodrich Company to research polymers. The
Company received $1,005,000 of research funding under the terms of this
agreement. In August 1998, the interim agreement was expanded to a two-year
collaborative research agreement. Under the terms of the expanded agreement, the
Company would receive $3,810,000 of research funding of which $1,417,000 was
received. The collaboration agreement was terminated by mutual agreement in
April 1999. In consideration of the early termination of the agreement, the
Company will receive $1,273,000 in three payments through December 1999. During
the year ended December 31, 1998 and the nine months ended September 30, 1999,
the Company recognized $1,722,000 and $1,615,000, respectively, in connection
with the interim, collaboration and termination agreements.
During 1998 and the first nine months of 1999, the Company entered into
multiyear research agreements with several additional corporations. Under these
collaboration agreements, the Company will receive research funding over various
periods and would be entitled to milestone payments or royalties for any
products developed out of the collaboration. Revenue recognized in aggregate
under these collaborations was approximately $1,028,000 and $4,853,000 during
the year ended December 31, 1998 and the nine months ended September 30, 1999,
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.
F-14
<PAGE> 77
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Rent expense, which is being recognized on a straight-line basis over the
lease term, was approximately $142,000, $348,000, and $308,000 for the years
ended December 31, 1996, 1997, and 1998, respectively, and $226,000 and $250,000
for the nine months ended September 30, 1998 and 1999, respectively. Future
commitments under the operating lease for the facility are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
------------ -------------
<S> <C> <C>
1999.......................................... $ 255,793 $ 192,468
2000.......................................... 274,270 683,984
2001.......................................... 293,546 717,761
2002.......................................... 313,182 751,904
2003.......................................... 332,859 786,084
Thereafter.................................... 1,562,634 3,692,934
---------- ----------
$3,032,284 $6,825,135
========== ==========
</TABLE>
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 has
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. An additional $2,026,000 was drawn under the agreement during the nine
months ended September 30, 1999.
Future principal payments under the loan agreements are as follows as of
September 30, 1999:
<TABLE>
<S> <C>
1999...................................................... $ 738,315
2000...................................................... 3,171,133
2001...................................................... 3,571,254
2002...................................................... 2,302,383
2003...................................................... 313,857
-----------
Total principal payments.................................. $10,096,942
===========
</TABLE>
The carrying value of these loans approximates their fair value based on a
comparison to debt arrangements with similar terms and conditions.
F-15
<PAGE> 78
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Concurrent with the Series D convertible preferred stock financing in 1998,
the Company's Articles of Incorporation were amended. The Company is authorized
to issue two classes of capital stock, designated, respectively, "common stock"
and "preferred stock" with total authorized shares of 50,000,000 and 23,650,000,
respectively.
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.
Each share of Series A, B, C, and D preferred stock is convertible into
shares of common stock on a 0.7778-for-one basis, subject to adjustment
resulting from future issuances of certain equity securities at a lower price
per share. No such adjustments have been made to date. The preferred shares
automatically convert into common stock immediately prior to the closing of an
underwritten public offering of common stock under the Securities Act of 1933 in
which the Company receives at least $10,000,000 in aggregate gross proceeds and
the price per share is at least $6.00 (subject to adjustment for a
recapitalization or certain other stock adjustments).
Series A, B, C, and D preferred stockholders are entitled to annual
noncumulative dividends at an annual rate of $0.05, $0.15, $0.30, and $0.50 per
share, respectively, before and in preference to any dividends paid on common
stock, when, as and if declared by the board of directors. No dividends have
been declared or paid as of December 31, 1998 or September 30, 1999.
The Series A, B, C, and D preferred stockholders are entitled to receive,
upon liquidation, a distribution of $0.50, $1.50, $3.00, and $4.50 per share,
respectively (subject to adjustment for a recapitalization) plus all declared
but unpaid dividends. Thereafter, the remaining assets and funds, if any, shall
be distributed to the common stockholders.
If, upon liquidation, the assets and funds distributed among the preferred
stockholders are insufficient to permit the entitled payment, the entire assets
and funds of the Company legally available for distribution shall be distributed
ratably among the holders of Series A, B, C, and D preferred shares in
proportion to the aggregate preferential amounts owed to each such holder.
The preferred stockholders have voting rights equal to the common shares
they would own upon conversion.
COMMON STOCK
Included in the common shares outstanding at December 31, 1997 and 1998 and
September 30, 1999 are 736,048, 1,141,539 and 1,329,688 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
F-16
<PAGE> 79
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, in the event of termination, which
lapses over a four year period.
As of September 30, 1999, the Company has reserved shares of common stock
for future issuance as follows:
<TABLE>
<S> <C>
Stock option plans................................. 3,530,562
Preferred stock.................................... 15,991,849
----------
19,522,411
==========
</TABLE>
CLASS B COMMON STOCK
In 1996, the Company issued 116,666 shares of Class B common stock to a
founder and director of the Company. The Class B shares were convertible at the
option of the holder at an initial conversion ratio of one-for-one, subject to
adjustment for subsequent issuances of common stock or equity securities
convertible into common stock, up to a maximum exchange ratio of one-for-ten.
The purpose of the arrangement was to accommodate the founder's employment
agreement with a third party institution which precluded ownership in companies
above a specified percentage. In December 1998, all class B common stock was
converted into common stock at a conversion ratio of 1 for 10. On an
as-converted basis, the founder paid the same consideration per share of common
stock as other founding stockholders. The original transaction was accounted for
as the sale of convertible equity securities, and no accounting recognition was
given to the conversion of the Class B common stock.
STOCK OPTION PLANS
The Company's 1996 Stock Option Plan was adopted in March 1996 and provides
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 5,055,556 shares of common stock
to employee and consultants. In September 1999, the Company's board of directors
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
F-17
<PAGE> 80
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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:
<TABLE>
<CAPTION>
OUTSTANDING STOCK OPTIONS
---------------------------------------------
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE EXERCISE
SHARES PRICE PRICE
---------- -------------- ---------
<S> <C> <C> <C>
Options granted..................... 1,130,733 $0.01 - $0.19 $0.19
Options exercised................... (238,515) $0.19 $0.19
----------
Balance at December 31, 1996........ 892,218 $0.01 - $0.19 $0.19
Options granted..................... 1,611,997 $0.19 - $0.39 $0.32
Options exercised................... (315,643) $0.01 - $0.39 $0.23
Options canceled.................... (46,988) $0.19 $0.19
----------
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..................... 1,233,771 $0.96 - $11.57 $3.35
Options exercised................... (961,365) $0.19 - $ 3.86 $0.77
Options canceled.................... (224,585) $0.19 - $ 1.93 $0.63
----------
Balance at September 30, 1999....... 2,002,041 $0.19 - $11.57 $2.14
==========
</TABLE>
At December 31, 1996, 1997, 1998, and September 30, 1999, vested and
outstanding options for 60,660, 542,676, 282,412, and 349,353 shares were
exercisable at weighted-average exercise prices of $0.19, $0.30, $0.35, and
$1.99, respectively. The weighted-average grant date fair value of options
granted during the years ended December 31, 1996, 1997, 1998 and the nine months
ended September 30, 1999 was $0.10, $0.16, $0.35, and $1.67, respectively. At
December 31, 1998, options for shares of common stock available for future
grants under the 1996 and 1997 Stock Option Plans are 121,222 and
F-18
<PAGE> 81
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
860,838, respectively. At September 30, 1999, options for shares of common stock
available for future grants under the 1996 and 1997 stock option plans are
121,222 and 1,407,299, respectively.
An analysis of options outstanding at December 31, 1998 is as follows:
<TABLE>
<CAPTION>
OPTIONS VESTED
WEIGHTED- -----------------------------
OPTIONS AVERAGE OPTIONS
OUTSTANDING AT REMAINING WEIGHTED- VESTED AT WEIGHTED-
EXERCISE DECEMBER 31, CONTRACTUAL AVERAGE DECEMBER 31, AVERAGE
PRICE 1998 LIFE EXERCISE PRICE 1998 EXERCISE PRICE
- ------------- -------------- ----------- -------------- ------------ --------------
(IN YEARS)
<S> <C> <C> <C> <C> <C>
$0.19 436,291 7.92 $0.19 127,590 $0.19
$0.38 854,736 8.98 $0.38 132,871 $0.38
$0.58 15,554 9.35 $0.58 -- $0.58
$0.96 647,639 9.66 $0.96 21,951 $0.96
--------- -------
$0.19 - $0.96 1,954,220 8.97 $0.54 282,412 $0.35
========= =======
</TABLE>
An analysis of options outstanding at September 30, 1999 is as follows:
<TABLE>
<CAPTION>
OPTIONS VESTED
WEIGHTED- ------------------------------
OPTIONS AVERAGE OPTIONS
OUTSTANDING AT REMAINING WEIGHTED- VESTED AT WEIGHTED-
EXERCISE SEPTEMBER 30, CONTRACTUAL AVERAGE SEPTEMBER 30, AVERAGE
PRICE 1999 LIFE EXERCISE PRICE 1999 EXERCISE PRICE
- -------------- -------------- ----------- -------------- ------------- --------------
(IN YEARS)
<S> <C> <C> <C> <C> <C>
$0.19 219,812 7.06 $0.19 92,196 $ 0.19
$0.38 385,257 8.18 $0.38 87,881 $ 0.38
$0.57 - $ 0.96 602,621 9.05 $0.95 86,953 $ 0.94
$1.92 - $ 3.85 581,248 9.58 $3.05 43,791 $ 2.71
$6.42 - $11.57 213,103 9.89 $7.35 38,532 $11.51
--------- ---- ----- ------- ------
2,002,041 8.91 $2.14 349,353 $ 1.99
</TABLE>
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 these options was estimated
at the date of grant using the minimum value method with the following
weighted-average assumptions:
<TABLE>
<CAPTION>
1996 1997 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Expected dividend yield......... 0% 0% 0% 0%
Risk-free interest rate......... 6.29% 6.11% 5.25% 5.5%
Expected life................... 5 years 5 years 5 years 5 years
</TABLE>
F-19
<PAGE> 82
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Had the Company valued its stock options 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):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -------------
1996 1997 1998 1999
------- ------- ------- -------------
<S> <C> <C> <C> <C>
Net income (loss):
As reported................... $(2,681) $(5,596) $(8,085) $ (961)
======= ======= ======= =======
Pro forma for SFAS 123........ $(2,688) $(5,640) $(8,156) $(1,063)
======= ======= ======= =======
Basic and diluted net income
(loss) per share:
As reported................... $ (1.24) $ (1.97) $ (2.11) $ (0.17)
======= ======= ======= =======
Pro forma for SFAS 123........ $ (1.24) $ (1.98) $ (2.13) $ (0.19)
======= ======= ======= =======
</TABLE>
During the year ended December 31, 1998 and during the nine months ended
September 30, 1999, in connection with the grant of certain share options to
employees, the Company recorded deferred stock compensation of $405,000 and
$4,112,000, 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 periods ended December 31, 1998 and September
30, 1999, the Company also recorded deferred compensation with respect to stock
options granted to consultants totaling $155,000 and $1,078,000, respectively.
Options granted to consultants are generally variable awards and are re-valued
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. Deferred compensation is included as a reduction of
stockholders' equity and is being amortized to expense on a graded vesting
method. During the year ended December 31, 1998 and during the nine months ended
September 30, 1999, the Company recorded amortization of deferred stock
compensation expense of approximately $117,000 and $2,794,000, respectively. At
September 30, 1999, the Company had a total of approximately $2.8 million
remaining to be amortized over the corresponding vesting period of each
respective option, generally five years.
STOCK PURCHASE PLAN
In September 1999, the Company's board of directors adopted 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 will commence on the effective date of the offering contemplated
by this
F-20
<PAGE> 83
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Prospectus. 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.
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, 1997, December 31, 1998 and the period ended September 30, 1999.
As of September 30, 1999, the Company had a federal net operating loss
carryforward of approximately $13,000,000. The Company also had federal research
and development credit carryforwards of approximately $500,000. The net
operating loss and credit carryforwards will expire at various dates beginning
in 2010 through 2019, 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):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1997 1998 1999
------- ------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards......... $ 2,800 $ 5,800 $ 4,600
Tax credit carryforwards................. 300 800 800
Capitalized research & development....... 200 300 200
Other.................................... 100 500 600
------- ------- -------
Total deferred tax assets................ 3,400 7,400 6,200
Valuation allowance for deferred tax
assets................................. (3,400) (7,400) (6,200)
------- ------- -------
Net deferred tax assets.................. $ -- $ -- $ --
======= ======= =======
</TABLE>
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 increased by $1,000,000 and $1,200,000 during
the years ended December 31, 1996 and 1997, respectively.
F-21
<PAGE> 84
SYMYX TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. RELATED PARTY TRANSACTIONS
The Company has implemented a program under which directors, executive
officers and certain other employees are 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 1998 and the nine months ended September 30, 1999,
loans were made in the amount of $397,750 and $333,600, respectively, pursuant
to this program. In addition, in 1998, the Company loaned $300,000 to an officer
in connection with certain relocation expenses. The loan was repaid in full in
July 1999.
F-22
<PAGE> 85
Inside Front Cover
Depiction of the various stages of the Symyx Complete Discovery Process. The
various stages are: Target New Material; Synthesis; Screening; Informatics; New
Materials Discovery.
Gate Fold
Depiction of four markets targeted by Symyx. Depiction of differences between
Symyx High Speed Discovery methods and traditional methods for materials
discovery. Depiction of Symyx strategies.
Page 33
Depiction of the various stages of the Symyx Complete Discovery Platform. The
various stages are: Target New Material; Synthesis; Screening; Informatics; New
Materials Discovery.
<PAGE> 86
SYMYX LOGO
SYMYX STRATEGIC ALLIANCES
We have alliances with these leading industrial companies, largely in the
chemicals and electronic sectors:
<TABLE>
<C> <S>
AGFA LOGO Agfa-Gevaert N.V. is a world leading imaging company.
BAYER LOGO Bayer AG is an international, research based company with
major businesses in life sciences, chemicals and polymer
technologies.
BASF LOGO The BASF Group is one of the leading companies in the
chemical industry with products ranging from basic chemicals
through innovative specialties and polymers to crop
protection and pharmaceuticals.
CELANESE LOGO Celanese Chemicals is one of the leading global
manufacturers of organic based chemicals for industrial
processing.
CIBA LOGO Ciba Specialty Chemicals is a global leader in the
discovery, development and manufacture of innovative
materials that provide color, performance and care for
plastics, coatings, and other products.
DOW CHEMICAL LOGO The Dow Chemical Company is a global science and technology
based company that develops and manufactures a portfolio of
chemical, plastic and agricultural products and services for
customers in 168 countries around the world.
OSRAM LOGO Osram Opto Semiconductors is a joint venture of the Siemens
subsidiary Osram GmbH and Infineon Technologies, the former
Semiconductor Group of Siemans AG. Osram is one of the
largest companies in the world for optoelectronic
semiconductors.
UNILEVER LOGO Unilever sells over 1,000 consumer product brands in 88
countries world-wide.
</TABLE>
<PAGE> 87
LOGO
<PAGE> 88
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all fees and expenses payable by Symyx in
connection with the registration of the common stock hereunder. All of the
amounts shown are estimates except for the SEC registration fee, the NASD filing
fee and the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC Registration Fee....................................... $ 20,656
NASD Filing Fee............................................ 7,931
Nasdaq National Market Listing Fee......................... 95,000
Printing and Engraving Expenses............................ 200,000
Legal Fees and Expenses.................................... 300,000
Accounting Fees and Expenses............................... 250,000
Transfer Agent and Registrar Fees and Expenses............. 25,000
Blue Sky fees and expenses................................. 10,000
Miscellaneous Expenses..................................... 91,413
----------
Total............................................ $1,000,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law allows for the
indemnification of officers, directors and any corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act. Our certificate of incorporation and our bylaws provide for
indemnification of our directors, officers, employees and other agents to the
extent and under the circumstances permitted by the Delaware General Corporation
Law. We have also entered into agreements with our directors and executive
officers that require Symyx, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors and executive officers to the fullest extent permitted by Delaware
law. We have also purchased directors and officers liability insurance, which
provides coverage against certain liabilities including liabilities under the
Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) Within the last three years, and through September 30, 1999, we have
issued and sold the following unregistered securities:
(1) Since our inception, we have issued and sold an aggregate of
4,508,392 shares of common stock to the founding officers and directors of
Symyx and to certain other individuals at purchase prices ranging from
$0.001 to $0.96 per share.
(2) Since our inception, we have granted options to purchase 5,181,931
shares of common stock to employees, directors and consultants under our
1996 and 1997 stock plans at exercise prices ranging from $0.01 to $11.57
per share. Of the 5,181,931 shares granted, 2,002,041 remain outstanding,
2,678,432 shares of common stock have
II-1
<PAGE> 89
been purchased pursuant to exercises of stock options and 501,458 shares
have been canceled and returned to the 1996 and 1997 stock plans.
(3) In February 1996, we sold 1,000,000 shares of Series A preferred
stock at a price of $0.50 per share to one investor.
(4) In May 1996, we sold an aggregate of 8,600,687 shares of Series B
preferred stock at a price of $1.50 per share to approximately 101
investors.
(5) In July 1997, we sold an aggregate of 6,750,284 shares of Series C
preferred stock at a price of $3.00 per share to approximately 108
investors.
(6) In March, April, October and November 1998, we sold an aggregate
of 4,210,185 shares of Series D preferred stock at a price of $4.50 per
share to approximately 74 investors.
The sales and issuances of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act in reliance
upon Section 4(2) of the Securities Act, Regulation D promulgated thereunder or
Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions
by an issuer not involving any public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. The recipients of securities in each transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the securities issued in such transactions. All
recipients had adequate access, through their relationship with Symyx, to
information about us.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
*1.1 Form of Underwriting Agreement
*3.1(a) Amended and Restated Certificate of Incorporation, as
currently in effect
*3.1(b) Certificate of Incorporation to be filed upon completion of
the offering
*3.2(a) Bylaws of Symyx as currently in effect
*3.2(b) Bylaws of Symyx as in effect upon completion of the offering
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
</TABLE>
II-2
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
*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
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Counsel (included in exhibit 5.1)
*24.1 Power of Attorney
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* Previously filed
** To be filed by amendment.
+ Confidential treatment has been requested for portions of this exhibit
(b) FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS
Insofar as indemnification by Symyx for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of Symyx, we have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Symyx of expenses incurred or paid by a director, officer or controlling person
of Symyx in the successful defense of any action, suit or proceeding) is
asserted by a director, officer or controlling person in connection with the
securities being
II-3
<PAGE> 91
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by Symyx is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
We hereby undertake that:
(a) We will provide to the underwriters at the closing as specified in
the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
(b) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by Symyx pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(c) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 92
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Symyx Technologies, Inc. has duly caused this Amendment No. 1 to the
Registration Statement on Form S-1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Clara, State of
California, on the 22nd day of October, 1999.
SYMYX TECHNOLOGIES, INC.
By: /s/ STEVEN D. GOLDBY
-----------------------------------
Steven D. Goldby
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended this
Amendment No. 1 to the Registration Statement on Form S-1 has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
/s/ STEVEN D. GOLDBY Chief Executive Officer and October 22, 1999
- ------------------------------------ Chairman of the Board
Steven D. Goldby (Principal Executive
Officer)
/s/ JERYL L. HILLEMAN Senior Vice President and October 22, 1999
- ------------------------------------ Chief Financial Officer
Jeryl L. Hilleman (Principal Financial and
Accounting Officer)
* THOMAS R. BARUCH Director October 22, 1999
- ------------------------------------
Thomas R. Baruch
*SAMUEL D. COLELLA Director October 22, 1999
- ------------------------------------
Samuel D. Colella
*MARTIN GERSTEL Director October 22, 1999
- ------------------------------------
Martin Gerstel
*BARON GAULTHAUS KRAIJENHOFF Director October 22, 1999
- ------------------------------------
Baron Gaulthaus Kraijenhoff
*FRANCOIS A. L'EPLATTENIER Director October 22, 1999
- ------------------------------------
Francois A. L'Eplattenier
*KENNETH J. NUSSBACHER Director October 22, 1999
- ------------------------------------
Kenneth J. Nussbacher
</TABLE>
II-5
<PAGE> 93
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <C> <S>
*MARIO M. ROSATI Director October 22, 1999
- ------------------------------------
Mario M. Rosati
*PETER G. SCHULTZ Director October 22, 1999
- ------------------------------------
Peter G. Schultz
Director
- ------------------------------------
Isaac Stein
</TABLE>
*By: /s/ STEVEN D. GOLDBY
-----------------------------------------
Steven D. Goldby
(Attorney-In-Fact)
II-6
<PAGE> 94
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<C> <S>
*1.1 Form of Underwriting Agreement
*3.1(a) Amended and Restated Certificate of Incorporation, as
currently in effect
*3.1(b) Certificate of Incorporation to be filed upon completion of
the offering
*3.2(a) Bylaws of Symyx as currently in effect
*3.2(b) Bylaws of Symyx as in effect upon completion of the offering
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
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Counsel (included in exhibit 5.1)
*24.1 Power of Attorney
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* Previously filed
** To be filed by amendment
+ Confidential treatment has been requested for portions of this exhibit
<PAGE> 1
EXHIBIT 4.1
[SYMYX LOGO]
COMMON STOCK
---------------
NUMBER
INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE
COMMON STOCK
---------------
SHARES
SEE REVERSE FOR
CERTAIN DESCRIPTIONS
CUSIP 87155S 10 8
THIS CERTIFIES THAT
----------------------------------------
IS THE OWNER OF
----------------------------------------
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
PAR VALUE OF $0.001 PER SHARE, OF
SYMYX TECHNOLOGIES, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certificate
is not valid until countersigned by the Transfer Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
[CERTIFICATE OF STOCK]
Dated:
-------------------
[SEAL]
/s/ MARIO M. ROSATI /s/ STEVEN GOLDBY
---------------------- -----------------------
SECRETARY CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
NORWEST BANK MINNESOTA, N.A.
TRANSFER AGENT AND REGISTRAR
By:
------------------------------------
Authorized Signature
<PAGE> 2
SYMYX TECHNOLOGIES, INC.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM - as tenants in common UNIF TRANS MIN ACT:______Custodian_______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with
right of survivorship and under Uniform Transfers to Minors
not as tenants in common Act________________________________
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ____________________________________ Attorney
to transfer the said stock on the books of the within named Company with full
power of substitution in the premises.
Dated
------------------------
X
------------------------------------------------
X
------------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATSOEVER.
SIGNATURE(S) GUARANTEED
By:
__________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR DESTROYED, THE
CORPORATION MAY REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A
REPLACEMENT CERTIFICATE.
<PAGE> 1
EXHIBIT 5.1
[WILSON SONSINI GOODRICH & ROSATI LETTERHEAD]
October 22, 1999
Symyx Technologies, Inc.
3100 Central Expressway
Santa Clara, California 95051
Re: Registration Statement on Form S-1
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 filed by you with
the Securities and Exchange Commission (the "Commission") on or about September
21, 1999 (as such may be further amended or supplemented, the "Registration
Statement"), in connection with the registration under the Securities Act of
1933, as amended (the "Act"), of up to 5,307,250 shares of your Common Stock
(the "Shares"). The Shares, which include up to 692,250 shares of Common Stock
issuable pursuant to an over-allotment option granted to the underwriters (the
"Underwriters"), are to be sold to the Underwriters as described in such
Registration Statement for sale to the public. As your counsel in connection
with this transaction, we have examined the proceedings proposed to be taken by
you in connection with the issuance and sale of the Shares.
Based on the foregoing, it is our opinion that, upon conclusion of the
proceedings being taken or contemplated by us, as your counsel, to be taken
prior to the issuance of the Shares and upon completion of the proceedings taken
in order to permit such transactions to be carried out in accordance with the
securities laws of various states where required, the Shares, when issued and
sold in the manner described in the Registration Statement, will be legally and
validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
which has been approved by us, as such may be further amended or supplemented,
or incorporated by reference in any Registration Statement relating to the
prospectus filed pursuant to Rule 462(b) of the Act.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated October 8, 1999
except, as to the third paragraph of Note 1 for which the date is October 22,
1999, in Amendment No. 1 to the Registration Statement (Form S-1, No. 333-87453)
and related Prospectus of Symyx Technologies, Inc. for the registration of
5,307,250 shares of its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
October 22, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS AS AT SEPTEMBER 30, 1999 AND FOR THE SIX MONTH
PERIOD THEN ENDED AND THE AUDITED FINANCIAL STATEMENTS AS AT DECEMBER 31, 1998
AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> SEP-30-1999 DEC-31-1998
<CASH> 13,628 14,043
<SECURITIES> 1,500 9,339
<RECEIVABLES> 1,094 626
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 18,076 24,847
<PP&E> 23,439 19,818
<DEPRECIATION> 6,207 3,708
<TOTAL-ASSETS> 60,627 52,903
<CURRENT-LIABILITIES> 15,248 9,146
<BONDS> 0 0
0 0
21 52,510
<COMMON> 7 849
<OTHER-SE> 38,337 (17,193)
<TOTAL-LIABILITY-AND-EQUITY> 60,627 52,903
<SALES> 0 0
<TOTAL-REVENUES> 22,530 13,787
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 24,222 22,258
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 769 731
<INCOME-PRETAX> (961) (8,085)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (961) (8,085)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (961) (8,085)
<EPS-BASIC> (0.17) (2.11)
<EPS-DILUTED> (0.17) (2.11)
</TABLE>
