10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

for the quarterly period ended March 31, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

for the transition period from                      to                     

Commission File Number 0-22570

Solexa, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 94-3161073
(I.R.S. Employer
Identification No.)

25861 Industrial Blvd., Hayward, CA 94545
(Address of principal executive offices)

(510) 670-9300
(Registrant’s telephone number, including area code)

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

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

The number of shares of common stock outstanding as of May 1, 2006 was 36,488,011.

Solexa, Inc.

FORM 10-Q
For the Quarter Ended March 31, 2006

INDEX

	Page
PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets — March 31, 2006 and December 31, 2005	3
Condensed Consolidated Statements of Operations — three months ended March 31, 2006 and 2005	4
Condensed Consolidated Statements of Cash Flows — three months ended March 31, 2006 and 2005	5
Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3. Quantitative and Qualitative Disclosures About Market Risk	22
Item 4. Controls and Procedures	22
PART II. OTHER INFORMATION	24
Item 1A. Risk Factors	24
Item 4. Submission of Matters to a Vote of Security Holders	33
Item 5. Other Information	33
Item 6. Exhibits	33
Signatures	34
EXHIBIT 10.20.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SOLEXA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

	March 31,			December 31,
	2006			2005
ASSETS
Current assets:
Cash and cash equivalents	$	68,768		$	38,403
Accounts receivable		160			539
Inventory		867			754
Other current assets		3,492			2,422
Total current assets		73,287			42,118
Property and equipment, net		3,981			4,378
Intangible assets, net		3,401			3,510
Goodwill		22,529			22,529
Other non-current assets		484			482
Total assets	$	103,682		$	73,017
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,175		$	2,235
Accrued compensation		2,636			2,067
Accrued professional fees		574			705
Equipment financing, current portion		28			31
Forward loss contingency		364			1,028
Deferred revenue — current portion		1,063			1,518
Deferred rent and lease obligations		866			801
Other accrued liabilities		624			529
Total current liabilities		8,330			8,914
Deferred revenues, net of current portion		2,395			1,905
Equipment financing, net of current portion		37			44
Deferred rent and lease obligations, net of current portion		2,144			2,381
Stockholders’ equity:
Preferred stock: $0.01 par value; 2,000 shares authorized; no shares issued and outstanding at March 31, 2006 and December 31, 2005		—			—
Common stock: $0.01 par value; 60,000 shares authorized; 36,479 shares and 30,027 shares issued and outstanding at March 31, 2006 and December 31, 2005, respectively		365			300
Additional paid-in capital		149,679			109,575
Deferred compensation		(275	)		(326	)
Accumulated other comprehensive income		2,180			2,064
Accumulated deficit		(61,173	)		(51,840	)
Total stockholders’ equity		90,776			59,773
Total liabilities and stockholders’ equity	$	103,682		$	73,017

See accompanying notes.

3

SOLEXA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	March 31,
	2006			2005
Service revenue	$	768		$	605
Operating costs and expenses:
Cost of service revenue		912			540
Research and development		6,332			2,993
Sales, general and administrative		3,817			2,333
Total operating costs and expenses		11,061			5,866
Loss from operations		(10,293	)		(5,261	)
Interest income		655			136
Interest expense		(156	)		(132	)
Other (expense), net		50			(3	)
Loss from operations		(9,744	)		(5,260	)
Income tax benefit related to research and development tax credit		(411	)		—
Net loss	$	(9,333	)	$	(5,260	)
Dividends to ‘A’ ordinary and ‘B’ preferred shares		—			522
Net loss attributable to common shareholders	$	(9,333	)	$	(5,782	)
Basic and diluted net loss per common share	$	(0.27	)	$	(0.96	)
Weighted average shares used to compute basic and diluted net loss per common share		35,113			6,007

See accompanying notes.

4

SOLEXA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Three Months Ended
	March 31,
	2006			2005
Operating activities:
Net loss	$	(9,333	)	$	(5,260	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		874			555
Amortization of deferred compensation and stock based compensation expense		924			13
Amortization of warrant value related to note payable		—			32
Changes in operating assets and liabilities:
Accounts receivable		419			118
Inventory		(113	)		26
Other assets		(1,093	)		837
Accounts payable		260			(880	)
Forward loss contingency		(664	)		—
Other accrued liabilities		163			(60	)
Deferred revenues		35			(411	)
Non-current liabilities		—			(43	)
Net cash used in operating activities		(8,528	)		(5,073	)
Investing activities:
Purchases of property and equipment		(341	)		(453	)
Costs paid in connection with the business combination		—			(365	)
Net cash used in investing activities		(341	)		(818	)
Financing activities:
Issuance of common stock, net of issuance costs		37,799			3
Proceeds from the exercise of stock options		97			—
Proceeds from the exercise of warrants		1,260			—
Repayment of equipment loans		(11	)		(5	)
Net cash provided by (used in) financing activities		39,145			(2	)
Net increase (decrease) in cash and cash equivalents		30,276			(5,893	)
Effect of exchange rate differences on cash and cash equivalents		89			(121	)
Cash and cash equivalents at beginning of period		38,403			10,463
Cash and cash equivalents at end of period	$	68,768		$	4,449
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	155		$	—
Supplemental disclosure of non-cash financing activities:
Issuance of common stock in payment of board fees	$	140		$	—

See accompanying notes.

5

SOLEXA, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2006

1. Description of Business

     Solexa, Inc. (“Solexa, “or the “Company”) is in the business of developing and commercializing genetic analysis technologies. We currently generate service revenues in our genomics services business from processing biological samples supplied to us by customers using our MPSS™ technology. We intend to discontinue providing MPSS services in 2006. We are currently developing and preparing to commercialize a novel instrumentation system for genetic analysis based on our reversible-terminator Sequencing-by-Synthesis, or SBS, chemistry and based on our Clonal Single Molecule Array^TM technology. This platform is expected to support many types of genetic analyses, including DNA sequencing, gene expression and small RNA analysis. We believe that this technology, which can potentially generate over a billion bases of DNA sequence from a single experiment with a single sample preparation, will dramatically reduce the cost, and improve the practicality, of human re-sequencing relative to conventional technologies. We introduced our first-generation system, the Solexa Genome Analysis System, to customers at the end of 2005 for expected delivery in 2006. We believe our new DNA sequencing system will enable us to implement a new business model based primarily on the sale of genetic analysis equipment, reagents and other consumables and services to end user customers. Our longer-term goal is to further reduce the cost of human re-sequencing to a few thousand dollars for use in a wide range of applications from basic research through clinical diagnostics.

2. Basis of Presentation

     On March 4, 2005, Solexa Limited, a privately held United Kingdom company, and Lynx Therapeutics, Inc., a Delaware corporation, completed a business combination. Solexa Limited became a wholly owned subsidiary of Lynx as a result of the transaction, and Lynx changed its name to Solexa, Inc. However, because immediately following the business combination transaction the former Solexa Limited shareholders owned approximately 80% of the shares of the common stock of Lynx, Solexa Limited’s designees to the combined company’s board of directors represented a majority of the combined company’s directors and Solexa Limited’s senior management represented a majority of the senior management of the combined company, Solexa Limited is deemed to be the acquiring company for accounting purposes. Accordingly, the assets and liabilities of Lynx were recorded, as of the date of the business combination, at their respective fair values and added to those of Solexa Limited. Results of operations of the combined company for the three months ended March 31, 2005, reflect those of Solexa Limited, to which the results of operations of Lynx were added from the date of the consummation of the business combination. The results of operations of the combined company reflect purchase accounting adjustments, including increased amortization and depreciation expense for acquired net assets.

     In connection with this business combination transaction, Lynx changed its name to Solexa, Inc. and its symbol to SLXA. Unless specifically noted otherwise, as used throughout these Consolidated Financial Statements, “Lynx Therapeutics” or “Lynx” refers to the business, operations and financial results of Lynx Therapeutics, Inc. prior to the business combination consummated on March 4, 2005, “Solexa Limited” refers to the business of Solexa Limited, a privately held United Kingdom company prior to the business combination, “Solexa” refers to the business of the combined company after the business combination, and “we” refers to either the business operations and financial results of Solexa Limited prior to the business combination or the business of the combined company after the business combination, as the context requires.

6

          The accompanying unaudited condensed consolidated financial statements included herein have been prepared by Solexa without audit, pursuant to the rules and regulations promulgated by the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to SEC rules and regulations; nevertheless, Solexa believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows of the Company for the interim periods presented. Revenues, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these interim consolidated condensed financial statements may not be indicative of results for any other interim period or for the entire year. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes for the year ended December 31, 2005, which are contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2006.

          The unaudited condensed consolidated financial statements include all accounts of Solexa and our wholly owned subsidiaries, Solexa Limited and Lynx Therapeutics GmbH. All intercompany balances and transactions have been eliminated.

          Certain prior year amounts have been reclassified to conform to the current year presentation. Specifically, certain amounts in the condensed consolidated statements of operations were reclassified between research and development expense, sales, general and administrative expense, interest income and interest expense. These reclassifications have no impact on our previously reported net losses.

3. Summary of Significant Accounting Policies

     Use of Estimates

          The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

     Stock-Based Employee Compensation

          Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123R, “Share Based Payment” (Revised 2004) (“SFAS 123R”) on the modified prospective basis. As a result, the Company has included stock-based employee compensation costs in its results of operations for the quarter ended March 31, 2006, as more fully described in Note 4 to the Company’s condensed consolidated financial statements.

     Concentrations and Segment Information

          For the three months ended March 31, 2006, revenue from two customers represented 48% and 21% of the Company’s revenue, respectively. For the three months ended March 31, 2005, revenue from two customers accounted for 60% and 21% of the Company’s revenue, respectively.

          To date, revenues have been derived primarily from contracts with customers located in the United States and other countries as follows (revenues are attributed to geographic areas based on the location of the customer, in thousands):

	Three Months Ended
	March 31,
	2006		2005
United States	$	715	$	584
United Kingdom		23		21
Other		30		—
	$	768	$	605

7

     Net Loss Per Share

          Basic net loss per share has been computed using the weighted-average number of shares of common stock for the three months ended March 31, 2006 and of common stock and ordinary shares outstanding for the three months ended March 31, 2005.

          Common stock equivalents were not included in the computation of diluted net loss per share, as their effect was anti-dilutive for the periods presented. Therefore, both the basic and diluted net loss per share computations resulted in the same number of shares, and there were no reconciling items. These common stock equivalents will be included in the calculation at such time as the effect is no longer anti-dilutive, as calculated using the treasury stock method. Options and warrants to purchase 11,450,433 and 1,773,014 common shares as of March 31, 2006 and 2005, respectively, were not considered in the computation of basic and diluted net loss per share.

     Recent Accounting Pronouncements

          FASB Staff Position No. 123(R)-3

          In November 2005, the Financial Accounting Standards Board ( the “FASB”) issued FASB Staff Position No. 123(R)-3 (“FSP FAS 123(R)-3”), “Transition Election to Accounting for Tax Effects of Share-Based Payment Awards.” This pronouncement provides an alternative method of calculating the excess tax benefits available to absorb any tax deficiencies recognized subsequent to the adoption of SFAS 123R. The Company has until November 2006 to make a one-time election to adopt the transition method. The Company is currently evaluating FSP FAS 123(R)-3 and whether to make this election. This one-time election will not affect operating loss or net loss.

4. Stock-based Employee Compensation

          Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123R, “Share Based Payment” (“SFAS 123R”), using the modified prospective application method. Under this method, all employee stock-based payments, including grants of stock options, are recognized in the income statement as an operating expense, based on their fair values over the requisite service period. Awards that are granted after January 1, 2006 were measured and non-cash employee compensation expenses were recognized in the consolidated statements of operations in accordance with SFAS 123R. In addition, the non-vested portion of awards as of January 1, 2006 also resulted in recognition of non-cash employee compensation expense. The Company recognizes share-based employee compensation expense ratably over the vesting period of options, adjusted for the expected forfeiture rate.

          For the three months ended March 31, 2006, in accordance with SFAS 123R, the Company recognized non-cash stock-based employee compensation expenses of $846,000. The expenses were included in the consolidated statements of operations as follows (in thousands):

	Three Months Ended
	March 31, 2006
Cost of service revenue	$	6
Research and development		315
Sales, general and administrative		525
Non-cash stock-based employee compensation expense	$	846

          There was no tax benefit from recording this non-cash expense. As a result of adopting Statement 123(R) on January 1, 2006, the company’s net loss for the period ended March 31, 2006, is $846,000 higher than if it had continued to account for share-based compensation under Opinion 25. Both basic and diluted loss per share for the period ended March 31, 2006 would have been $0.24 if the company had not adopted Statement 123(R), compared to reported basic and diluted loss per share of $0.27. Stock-based employee compensation costs capitalized into inventory and charged against the forward loss contingency were $7,000 and $7,000, respectively.

          As of March 31, 2006, total unrecognized compensation costs related to non-vested awards of $10.9 million is expected to be recognized over a weighted average period of approximately 2.81 years.

8

          Under SFAS 123R, we estimate the fair value of stock options at the date of grant using the Black-Scholes option valuation model. Expected volatility is based on trading activity of the Company since the business combination between Solexa Limited and Lynx Therapeutics, Inc. and that of certain comparable companies in our industry. The Company uses an estimate of the expected life based on the weighted-average difference between the vesting term and the contract term. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The fair value of options at date of grant and the assumptions utilized to determine such values are indicated in the following table:

	Three Months Ended
	March 31, 2006
Risk-free interest rate		4.83	%
Expected volatility		88	%
Expected life (in years)		6.04
Expected dividend yield		0	%

           Prior to the adoption of SFAS 123R, we applied SFAS 123, amended by SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (SFAS 148), which allowed companies to apply the existing accounting rules under APB 25, “ Accounting for Stock Issued to Employees”, and related Interpretations. Periods prior to the adoption of 123R have not been restated. In general, as the exercise price of options granted under these plans was equal to the market price of the underlying common stock on the grant date, no stock-based employee compensation cost was recognized in our net income (loss) for period prior to the adoption of SFAS 123R. AS required by SFAS 148 prior to the adoption of SFAS 123R, we provided pro forma net loss and pro forma net loss per share disclosures for stock-based awards, as if fair-value-based method defined in SFAS 123 had been applied.

           The following table illustrate the effect on net loss after tax and net loss per share as if we had applied the fair value recognition provisions of SFAS 123 to stock-based compensation during the three month period-ended March 31, 2005 (in thousands, except per share amounts):

	Three Months Ended
	March 31, 2005
Net loss, as reported	$	(5,782	)
Add: Stock-based employee compensation as reported		13
Deduct: Stock-based employee compensation as if fair value method applied to all awards		(14	)
Net loss, pro forma as if fair value method applied to all awards	$	(5,783	)
Basic and diluted net loss per share, as reported	$	(0.96	)
Basic and diluted net loss per share, pro forma as if fair value method applied to all awards	$	(0.96	)

          For the three months ended March 31, 2006, the only stock option plan under which the Company awarded new grants to employees was the 2005 Equity Incentive Plan. The 2005 Equity Incentive Plan awards generally vest either ratably over four years of service or one quarter at the end of the first year and then ratably over the following three years of service and have a contractual life of 10 years. At March 31, 2006, the Company has 366,534 shares available for grant under the 2005 Equity Incentive Plan. Option transactions under all the Company plans during the quarter ended March 31, 2006 are summarized as follows:

						Weighted-
						Average
				Weighted		Remaining
	Number of			Average		Contractual		Aggregate Intrinsic
	Shares			Exercise		Term		Value
	(In thousands)			Price_		(In years)		(In thousands)
Outstanding at December 31, 2005		3,090,308		$	6.15
Granted		497,500			9.17
Exercised		(14,211	)		6.84
Forfeited		(51,373	)		6.28
Outstanding at March 31, 2006		3,522,224		$	6.57		8.82	$	14,782
Exercisable at March 31, 2006		1,104,937		$	7.39		7.80	$	5,596

9

     The weighted average fair value of options granted during the three months ended March 31, 2006 was $6.87. The total intrinsic value, the difference between the exercise price and the market price on the date of exercise, of options exercised during the three months ended March 31, 2006, was $44,500.

     Cash received from options exercised during the three months ended March 31, 2006 was approximately $97,000. In connection with these exercises, there was no tax benefit realized by the Company due to the Company’s current loss position.

     The following table summarizes additional information about options outstanding at March 31, 2006:

			Weighted				Options Exercisable
	Number		Average				Number
	Outstanding		Remaining		Weighted		Exercisable		Weighted
	As of		Contractual		Average		As of		Average
Range of Exercise Prices	3/31/06__		Term		Exercise Price		3/31/06		Exercise Price
$1.28 — $2.31		487,110		8.18	$	1.41		218,500	$	1.48
$2.32 — $4.38		324,545		5.83	$	4.18		308,351	$	4.18
$4.39 — $6.39		2,098,900		9.29	$	6.10		487,367	$	6.19
$6.40 — $10.78		601,989		9.39	$	9.07		81,623	$	8.73
$10.79 — $21.56		3,286		5.97	$	20.05		2,702	$	20.06
$21.57 — $70.00		714		1.02	$	70.00		714	$	70.00
$70.01 — $220.50		3,895		3.34	$	204.95		3,895	$	204.95
$220.51 — $1,074.50		1,785		3.90	$	1,074.50		1,785	$	1,074.50
$1.28 — $1,074.50		3,522,224		8.82	$	6.57		1,104,937	$	7.39

5. Balance Sheet Accounts

     Inventory consisted of the following (in thousands):

	March 31,		December 31,
	2006		2005
Raw materials	$	176	$	213
Work in process		691		541
	$	867	$	754

     Other current assets consisted of the following (in thousands):

	March 31,		December 31,
	2006		2005
Prepaid expenses	$	924	$	544
Research and development tax credit receivable		2,218		1,789
Other receivables		350		89
	$	3,492	$	2,422

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

	March 31,			December 31,
	2006			2005
Leasehold improvements	$	3,536		$	3,500
Laboratory and other equipment		6,392			6,288
	$	9,928		$	9,788
Less accumulated depreciation and amortization		(5,947	)		(5,410	)
	$	3,981		$	4,378

10

6. Forward Loss Contingency

     In our genomics services business, we enter into service contracts to provide genetic analysis on samples provided to us by customers. If management considers it probable that performance on the contract will result in a loss and this loss can be reasonably estimated, a loss reserve is recorded.

     Changes in the forward loss reserves during the three months ended March 31, 2006 and 2005 were as follows (in thousands):

	Three Months Ended
	March 31,
	2006			2005
Balance at beginning of year	$	1,028		$	—
Loss experienced on completed samples		(669	)		—
Reversal of forward loss accrual for completed contracts		(72	)		—
Change in forward loss estimate		77			—
Balance at March 31	$	364		$	—

     In addition, we recorded $207,000 in cost of service revenue during the three months ended March 31, 2006 for the cost of samples in excess of our estimates at the beginning of the quarter.

7. Comprehensive Loss

     The following are the components of comprehensive loss (in thousands):

	Three Months Ended
	March 31,
	2006			2005
Net loss	$	(9,333	)	$	(5,260	)
Currency translation		116			(9	)
Comprehensive loss	$	(9,217	)	$	(5,269	)

8. Commitments and Contingencies

     We lease facilities and certain equipment under non-cancelable operating leases with various expiration dates through 2008. Future minimum lease payments under non-cancelable operating leases as of March 31, 2006 are as follows (in thousands):

	Operating
	Leases
Remainder of 2006	$	2,394
2007		3,286
2008 and thereafter		3,250
Total minimum payments	$	8,930

9. Stockholders’ Equity

     On November 18, 2005, Solexa entered into an agreement to issue to 10.0 million shares of common stock at $6.50 per share and five-year warrants to purchase approximately 3.5 million shares of common stock at an exercise price of $7.50 per share. On November 23, 2005, pursuant to the agreement, Solexa issued approximately 3.9 million shares of common stock and warrants to purchase approximately 1.3 million shares of common stock, receiving net proceeds of $23.3 million. Following receipt of stockholder approval, Solexa issued on January 19, 2006 approximately 6.1 million shares of common stock and warrants to purchase approximately 2.2 million shares of common stock, receiving net proceeds of approximately $37.8 million. In aggregate, Solexa raised a total of approximately $61.1 million, net of issuance costs.

11

     In January 2006, the Company issued 13,042 shares of common stock from the 2005 Equity Incentive Plan to members of the Board of Directors in lieu of board fees accrued. The related expense had been recognized in 2005 in the approximate amount of $140,000.

     In January 2006, the Company issued 24,580 shares of common stock to Silicon Valley Bank in a net exercise of warrants to purchase 59,999 shares of common stock. No proceeds were received by the Company as a result of this net exercise.

     During the three months ended March 31, 2006, the Company issued 251,861 shares of common stock for total cash consideration of $1,260,000 from the exercise of warrants.

     During the three months ended March 31, 2006, the Company issued 14,211 shares of common stock for total cash consideration of $97,000 from the exercise of employee stock options.

10. Goodwill and Intangible Assets

     Goodwill is not being amortized but is tested for impairment annually, as well as when an event or circumstance occurs indicating a possible impairment in value.

     Intangible assets consist of the following (in thousands):

	March 31,			December 31,
	2006			2005
Purchased technology	$	4,164		$	4,143
Accumulated amortization		(763	)		(633	)
Intangible assets, net	$	3,401		$	3,510

     All intangible assets are being amortized using a straight-line method over their estimated useful lives. Purchased technologies have been assigned useful lives of between 7 and 10 years (with a weighted average remaining life of approximately 8.6 years). Amortization expense related to identifiable intangible assets for the three months ended March 31, 2006 and 2005 was approximately $130,000 and $89,000, respectively.

     Estimated future amortization expense of intangible assets is as follows (in thousands):

2006 (Remaining 9 months)	$	397
2007		531
2008		531
2009		530
2010		481
Thereafter		931
	$	3,401

11. Income Tax Benefit

     We maintained a full valuation allowance on our deferred tax assets as of March 31, 2006. The valuation allowance was determined in accordance with the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“ SFAS No. 109”), which requires an assessment of both positive and negative evidence of possible sources of taxable income and then a determination of whether it is more likely than not that deferred tax assets are recoverable. This assessment is required on a jurisdiction by jurisdiction basis. Cumulative losses incurred by us in recent years represented sufficient negative evidence under SFAS No. 109, and, accordingly, a full valuation allowance was recorded against deferred tax assets. We intend to maintain a full valuation allowance on the deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.

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     Our tax provision benefit was $411,000 for the three months ended March 31, 2006, compared to zero for the three months ended March 31, 2005. This tax benefit results from our estimate of that portion of the annual refundable research credits for 2006 allowed by the United Kingdom Inland Revenue which is attributable to the three months ended March 31, 2006.

12. Pension Plans

     We operate a defined contribution group personal pension plan for substantially all of our United Kingdom employees and a 401(k) Plan, also a defined contribution plan for the employees in the Unites States. Pursuant to the 401(k) Plan, employees in the United States may elect to reduce their current compensation by up to 25% (subject to an annual limit prescribed by the Internal Revenue Code) and have the amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan permits, but does not require, additional contributions to the 401(k) Plan by us on behalf of all participants in the 401(k) Plan. Company contributions to the plans totaled $133,000 and $100,000 for the three months ended March 31, 2006 and 2005, respectively.

13. Subsequent Event

     In April 2006, Solexa, Ltd. entered into an additional facilities lease for our United Kingdom operations. The lease is for approximately 7,000 square feet which we expect to use for both office and research and development use. The lease term is through July 12, 2008 with total rent and common area charges of approximately $560,000.

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

     This discussion and analysis should be read in conjunction with our financial statements and accompanying notes included in this report and our 2005 audited financial statements and notes thereto included in our Form 10-K filed on March 31, 2006.

     Operating results for the three months ended March 31, 2006 are not necessarily indicative of results that may occur in future periods.

     Except for the historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. When used herein, the words “believe,” “anticipate,” “expect,” “estimate” and imilar expressions are intended to identify such forward-looking statements. There can be no assurance that these statements will prove to be correct. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors which are difficult to forecast and can materially affect our quarterly or annual operating results. Please see Part II. Item 1A “Risk factors”. We undertake no obligation to update any of the forward-looking statements contained herein to reflect any future events or developments.

Overview

We are in the business of developing and commercializing genetic analysis technologies. We currently generate service revenues in our genomics services business from processing biological samples supplied to us by customers using our MPSS™ technology. We intend to discontinue providing MPSS services in 2006. We are currently developing and preparing to commercialize the Solexa Genome Analysis System, which performs DNA sequencing based on our proprietary reversible-terminator Sequencing-by-Synthesis, or SBS, chemistry and our Clonal Single Molecule Array™ technology. This instrument platform is expected to perform a range of analyses, including whole genome resequencing, gene expression analysis and small RNA analysis. We believe that this technology, which can potentially generate over a billion bases of DNA sequence from a single experiment with a single sample preparation, will dramatically reduce the cost, and improve the practicality, of human resequencing relative to conventional technologies. We expect our first-generation instrument, the 1G Genome Analyzer, to enable human genome resequencing below $100,000 per sample, which would make it the first platform to reach this important milestone. We introduced the 1G Genome Analyzer to customers in 2005 and expect to begin shipping and recognizing revenues on instruments in 2006. Our longer-term goal is to further reduce the cost of resequencing a human genome to a few thousand dollars for use in a wide range of applications from basic research through clinical diagnostics.

     On March 4, 2005, Solexa Limited, a privately held United Kingdom company, and Lynx Therapeutics, Inc., a Delaware corporation, completed a business combination. Solexa Limited became a wholly-owned subsidiary of Lynx as a result of the transaction, and Lynx changed its name to Solexa, Inc. However, because immediately following the business combination transaction the former Solexa Limited shareholders owned approximately 80% of the shares of the common stock of Lynx, Solexa Limited’s designees to the combined company’s board of directors represented a majority of the combined company’s directors and Solexa Limited’s senior management represented a majority of the senior management of the combined company, Solexa Limited was deemed to be the acquiring company for accounting purposes. Accordingly, the assets and liabilities of Lynx were recorded, as of the date of the business combination, at their respective fair values and added to those of Solexa Limited. The results of operations of the combined company for 2005 reflect those of Solexa Limited, to which the results of operations of Lynx were added from the date of the consummation of the business combination. The results of operations of the combined company reflect purchase accounting adjustments, including increased amortization and depreciation expense for acquired assets.

     In connection with this business combination transaction, Lynx changed its name to Solexa, Inc. and its symbol to SLXA. Unless specifically noted otherwise, as used throughout these Consolidated Financial Statements, “Lynx Therapeutics” or “Lynx” refers to the business, operations and financial results of Lynx Therapeutics, Inc. prior to the business combination consummated on March 4, 2005, “Solexa Limited” refers to the business of Solexa Limited, a privately held United Kingdom company prior to the business combination, “Solexa” refers to the business of the combined company after the business combination, and “we” refers to either the business operations and financial results of Solexa Limited prior to the business combination or the business of the combined company after the business combination, as the context requires.

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     As of March 31, 2006, we had an accumulated deficit of approximately $61.2 million. We expect to continue to incur net losses as we proceed with the commercialization and development of our technologies. The size of these losses will depend on the rate of growth, if any, in our revenues and on the level of our expenses. Our cash and cash equivalents have increased from $38.4 million as of December 31, 2005 to $68.8 million as of March 31, 2006, due to financing activities involving a private placement of shares of our common stock and warrants to purchase our common stock and warrant exercises, partially offset by cash used in operations.

     On November 18, 2005, we entered into a definitive agreement for a private placement of common stock and warrants to purchase common stock that raised approximately $23.3 million, net of expenses, in the fourth quarter of 2005. On January 19, 2006, we received the balance of net proceeds of approximately $37.8 million pursuant to this agreement. In aggregate, we raised a total of approximately $61.1 million net of issuance costs in connection with the two closings of the private placement.

     Prior to the business combination with Lynx, Solexa Limited was a development stage company with minimal revenue. As a result of the business combination, Solexa is no longer a development stage company. Until our instrument system is available for commercial use, our primary revenue source will be from our genomics services business based on MPSS technology, which had previously been conducted by Lynx Therapeutics. Lynx historically received, and we expect to continue to receive in the future, a significant portion of our genomics services revenues from a small number of customers. We intend to discontinue services based on MPSS in 2006 and are in the process of renegotiating our current MPSS customer contracts in order to provide these customers with services based on our SBS chemistry.

     Revenues from the genomics services business in each quarterly period have in the past, and could in the future, fluctuate due to: the level of service fees, which is tied to the price, number and timing of biological samples received from our customers, as well as our performance of the related genomics services on the samples; the timing and amount of any technology access fees and the period over which the revenue is recognized; the number, type and timing of new, and the termination of existing, agreements with customers; and the sale of instruments, reagents and other consumables, if any. In addition, our plans to introduce genomics services based on our next-generation technology and to discontinue MPSS-based services could adversely impact our genomics services revenues.

     We expect revenues from the sale of our genetic analysis systems to commence in 2006. We anticipate that systems revenues will fluctuate due to a number of factors, including: the level and timing of sales of instruments, reagents and other consumables and service contracts; the timing and ability of Solexa to manufacture or procure these items; the pricing and technical performance levels of our products; and the existence of competing genetic analysis systems.

     Our operating costs and expenses include cost of service revenue, research and development expenses, and sales, general and administrative expenses. Cost of service revenue includes primarily, the cost of direct labor, materials and supplies, outside expenses, equipment and overhead including instrument depreciation, as well as period spending on work-in-process samples that exceeds the expected revenue for those samples. Cost of service revenue in the first quarter of 2006 excludes amounts charged to a forward loss contingency that we established in the third quarter of 2005, of which $364,000 and $1.0 million remained outstanding at March 31, 2006 and December 31, 2005, respectively. We did not incur cost of service revenue until completion of the business combination transaction between Lynx and Solexa Limited.

     Research and development expenses include the cost of personnel, materials and supplies, outside expenses, equipment and overhead incurred by us in research and development related to our genetic analysis instrument systems and process development and improvements related to our genomics services business. Research and development expenses are expected to increase due to spending for ongoing technology development and implementation, including building additional instruments for internal use in research and development.

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          Sales, general and administrative expenses include the cost of personnel, materials and supplies, outside expenses, equipment and overhead incurred by us primarily in our administrative, sales and marketing, legal and investor relations activities. Sales, general and administrative expenses are expected to increase in support of our research and development and commercial efforts.

Critical Accounting Policies and Estimates

          The preparation of our consolidated financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. The items in our financial statements requiring significant estimates and judgments include determining the useful lives of fixed assets for depreciation and amortization calculations, determining the fair value of goodwill and intangibles for impairment considerations, assumptions for valuing options and warrants, estimates of future losses for contracts in our genomics services business and assumptions for tax credits that we can claim for research and development activities. Actual results could differ materially from these estimates.

     Revenue

          Revenues are related principally to services that we perform on biological samples we receive from our customers. We recognize revenue when persuasive evidence of an arrangement exists, services have been rendered and materials are delivered, the fee is fixed or determinable, and collectibility is reasonably assured. Should conditions cause management to determine these criteria have not yet been met, then any amounts billed to the customer are recorded as deferred revenue.

     Forward Loss Contingency

          In our genomics services business, we enter into service contracts to provide genetic analyses on samples provided to us by customers. If management considers it probable that performance on the contract will result in a loss and this loss can be reasonably estimated, a loss reserve is recorded. Management makes estimates of the costs to complete the applicable genetic analyses based on historical experience; expectations of the nature and volume of future samples; the proportion of fixed and variable costs; expectations with respect to production capacity, yields and efficiency in our genomics services business; expectations with respect to the timing and expense of implementing our next-generation technology in our genomics services business; the expected rate of adoption by current customers of our next-generation technology in lieu of MPSS to perform genetic analyses on their biological samples; and expectations of genomic services business sample volume as a whole, including both MPSS and our next-generation technology. If our assumptions or conditions change, the forward loss contingency will be adjusted accordingly.

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     Inventory

          Inventory is stated at the lower of cost (which approximates first-in, first-out cost) or market. The balance at March 31, 2006 was classified as raw materials and work in process. Raw material inventories consist primarily of reagents and other chemicals utilized while performing genomics services. Work-in-process inventories consist of the accumulated cost of experiments not completed. Amounts in excess of the inventory’s net realizable value are charged to cost of service revenue or to the forward loss contingency reserve, as appropriate. Inventory used in providing genomics services and for reagent sales is charged to cost of service revenue when the related revenue is recognized. Reagents, chemicals and flow cells purchased for internal development purposes are charged to research and development expenses upon receipt or as consumed.

     Goodwill and Other Intangible Assets

          Goodwill represents the excess of the purchase price over the fair value of net tangible and identifiable intangible assets acquired in the business combination. Other intangibles including patents, acquired technology rights and developed technology are being amortized using the straight-line method over estimated useful lives of seven to ten years.

          Goodwill is not amortized. We review goodwill for impairment annually (or more frequently if impairment indicators exist). We review other intangible assets for impairment when indicators of impairment exist.

     Stock-based Employee Compensation

          Commencing January 1, 2006, we adopted the provisions of SFAS No. 123R, “Share-Based Payment”, which required us to expense the fair value of grants made under our equity incentive plans over the requisite service period. We adopted the “Modified Prospective Application” transition method, which does not result in the restatement of previously issued financial statements. Awards that were granted after January 1, 2006 were measured and non-cash employee compensation expenses were recognized in the condensed consolidated statements of operations in accordance with SFAS No. 123(R). In addition, the non-vested portion of awards as of January 1, 2006 also resulted in recognition of non-cash employee compensation expense. We recognize share-based employee compensation expense ratably over the vesting period of options, adjusted for the expected forfeiture rate.

          We estimate the fair value of stock options using a Black-Scholes valuation model, consistent with the provisions of SFAS 123R. SFAS 123R requires the use of subjective assumptions, including the options’ expected life and the price volatility of the underlying stock. The expected volatility is based on the Company’s trading activity since the business combination and that of comparable companies in our industry.

          In accordance with SFAS No. 123R, we recognized non-cash employee compensation expenses of approximately $846,000 or 7.65% of total operating costs and expenses for the three months ended March 31, 2006. The share-based employee compensation expenses for the three months March 31, 2006 were based on the fair values of 467,500 shares of options granted during the period, in addition to the fair value of approximately 1.8 million shares of options granted before January 1, 2006 which were unvested as of that date, net of the capitalized portion. The operating expenses discussed above include the following allocations of share-based compensation expense for the three months ended March 31, 2006 (in thousands):

	Three Months Ended
	March 31, 2006
Cost of service revenue	$	6
Research and development		315
Sales, general and administrative		525
Non-cash stock-based employee compensation expense	$	846

          Stock-based employee compensation costs capitalized into inventory and charged against the forward loss contingency during the three months ended March 31, 2006 were approximately $7,000 and $7,000, respectively.

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Recent Accounting Pronouncements

          FASB Staff Position No. 123(R)-3 In November 2005, the FASB issued FASB Staff Position No. 123(R)-3 (“FSP FAS 123(R)-3”), “Transition Election to Accounting for Tax Effects of Share-Based Payment Awards.” This pronouncement provides an alternative method of calculating the excess tax benefits available to absorb any tax deficiencies recognized subsequent to the adoption of SFAS 123R. We have until November 2006 to make a one-time election to adopt the transition method. We are currently evaluating FSP FAS 123(R)-3 and whether to make this election. This one-time election will not affect operating loss or net loss.

Results of Operations

     Revenues

          Revenues for the three months ended March 31, 2006 were approximately $768,000, compared to revenues of $605,000 for the three months ended March 31, 2005. The increase in revenue of $163,000 was primarily due to revenue generated by the genomics service business subsequent to the business combination of Lynx and Solexa Limited. The three months ended March 31, 2005 only included the genomics service business revenue of Lynx from March 5 through March 31, 2005. We had been a development stage company prior to that time. We have experienced variability from period to period in revenues attributable to our genomics services business based in part on the timing of receipt of biological samples, variability in outstanding contracts and the presence of non-service fee revenues, including sales of reagents and other consumables. We expect this variability to continue through 2006 and beyond.

          During the remainder of 2006, we anticipate beginning to perform genomics services using our SBS reversible terminator chemistry and Clonal Single Molecule Array technology and ceasing to perform MPSS experiments for customers. Our contract with E.I. du Pont de Nemours and Company has been amended to reduce the remaining maximum amount payable to Solexa to $1.5 million, of which a portion is related to the delivery of an instrument and related consumables and the balance to genomics services to be performed under the agreement. Our revenues could vary in 2006 and beyond due to interruptions in genomics services production until the new instrumentation is ready to be deployed in our genomics services business and as the new instrumentation is brought on line as well as due to variable customer demand until the new technology has demonstrated equivalence or superiority to the MPSS technology. During the remainder of 2006, we also anticipate the first deliveries to customers of our first-generation Solexa Genome Analysis Systems.

     Operating Costs and Expenses

          Total operating costs and expenses were approximately $11.1 million for the three months ended March 31, 2006, compared to $5.9 million for the three months ended March 31, 2005. The increase in operating costs for 2006 over 2005 is due primarily to increased operating costs following the business combination between Lynx and Solexa Limited, the expensing of stock-based compensation under SFAS 123R, increased material costs for research and development and increased professional fees for SEC reporting and compliance partially offset by the absence of costs related to execution of the business combination. The three months ended March 31, 2005 only included operating costs and expenses of Lynx from March 5 through March 31, 2005.

          Cost of Service Revenue. Cost of service revenue primarily reflects the cost of providing our genomics services, including a reserve for future loss contingencies, direct labor, materials and supplies, outside expenses, equipment and overhead, including instrument depreciation. In addition, we include in cost of service revenue period spending on work-in-process samples that exceeds the expected revenue for those samples. For the three months ended March 31, 2006, cost of service fees were $912,000, compared to $540,000 for the three months ended March 31, 2005. Cost of service revenue increased $372,000 as a result of the addition of revenue from the genomics services business of Lynx after completion of the business combination, charges for work-in process samples that exceed the expected revenue and charges for stock-based compensation.

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     Cost of service revenue is net of amounts charged to a future loss contingency that we recorded in the third quarter of 2005 for future loss contingencies with respect to existing service fee contracts. At March 31, 2006, the forward loss contingency which remained on the balance sheet was $364,000. We update this reserve based on an evaluation of contracts with samples performed at a loss; an assessment of our future obligations under these contracts; and a range of forecast assumptions for our future performance of these obligations, including but not limited to the timing of sample receipt, genomics services business sample volume as a whole, our plans to cease operation of our MPSS technology and to deploy our next-generation technology, and operating efficiencies. This reserve may vary in future periods due to additional data on our costs to process these samples; expectations of the nature and volume of future samples; the proportion of fixed and variable costs; expectations with respect to production capacity, yields and efficiency in our genomics services business; expectations with respect to the timing and expense of implementing our next-generation technology in our genomics services business; the expected rate of adoption by current customers of our next-generation technology in lieu of MPSS to perform genetic analysis on their biological samples; and expectations of the genomic service business sample volume as a whole, for both MPSS and our next-generation technology.

     At the time that we begin to perform genomics services using our next-generation technology, we anticipate that our material and labor costs per sample may decline; however, we could experience periods of higher spending in the event we process samples using both the older MPSS and the new technology in parallel and we experience efficiency levels below expectations as we work with the new technology.

     We expect cost of goods sold to increase in the future from zero at present as we initiate the manufacturing of our next-generation instrument and associated consumables. These costs will include personnel, materials and overhead. We anticipate that production activities will take place both in the US and the UK in the remaining months of 2006.

     Research and Development Expenses. Research and development expenses were approximately $6.3 million for the three months ended March 31, 2006, compared to $3.0 million for the three months ended March 31, 2005. The $3.3 million increase in research and development expenses was primarily due to increases in personnel and related expenses resulting from the business combination, increases in material expenses, particularly our spending on components for the production of instrument prototypes based on the new technology and charges for stock-based compensation.

     We expect research and development expenses to increase in the future as we continue product development efforts for our next-generation genetic analysis instrument system, build and operate a fleet of instruments for internal R&D projects, including our plan to sequence a human genome in 2006, and build out additional leasehold improvements.

     We cannot reasonably estimate the timing and costs of our research and development programs due to the risks and uncertainties associated with developing a novel genetic analysis instrument system and subsequent improvements. We expect that there will be significant additional work required to optimize the instrument and consumable portions of the system to achieve target performance levels even after we begin to ship and recognize revenue on the sale of our next-generation instrument system. Furthermore, we anticipate continued spending on research and development related to future-generation systems and to additional applications of our genetic analysis instrument systems.

     Sales, General and Administrative Expenses. Sales, general and administrative expenses were approximately $3.8 million for the three months ended March 31, 2006, compared to $2.3 million for the three months ended March 31, 2005. The increase of $1.5 million in sales, general and administrative spending was primarily due to increased operating costs following the business combination due both to the business combination and to subsequent recruiting, including increased personnel and related expenses; increased professional fees related to SEC compliance; and charges for stock-based compensation.

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          We expect sales, general and administrative expense to increase in the near future as we hire increased personnel to support the commercialization of our next-generation genetic analysis instrument system and to increase non-personnel sales and marketing spending, including but not limited to promotional materials and activities, market research, travel and training. We expect to hire sales and marketing personnel, including salespeople, application specialists and field service and customer service/technical support personnel. We may need to establish additional places of business in conjunction with this hiring.

     Interest Income

          Interest income for the three months ended March 31, 2006 was $655,000, compared to $136,000 for the three months ended March 31, 2005. The increase in interest income of $519,000 was primarily due to increased amounts of cash and cash equivalents as a result of sales of our common stock in private placement transactions.

     Interest Expense

          Interest expense was approximately $156,000 for the three months ended March 31, 2006, compared to $132,000 for the three months ended March 31, 2005. Interest expense is related principally to the business combination, including the assumption of an idle facility that had been written off prior to the business combination and for which a portion of the rental payments are treated as interest expense and the assumption of $3.0 million of Lynx’s note obligations.

     Income Tax Provision (Benefit)

          We maintained a full valuation allowance on our deferred tax assets as of March 31, 2006. The valuation allowance was determined in accordance with the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS No. 109”), which requires an assessment of both positive and negative evidence of possible sources of taxable income and then a determination of whether it is more likely than not that deferred tax assets are recoverable. This assessment is required on a jurisdiction by jurisdiction basis. Cumulative losses incurred by us in recent years represented sufficient negative evidence under SFAS No. 109, and, accordingly, a full valuation allowance was recorded against deferred tax assets. We intend to maintain a full valuation allowance on the deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.

          Our tax provision benefit was approximately $411,000 for the three months ended March 31, 2006, compared to zero for the three months ended March 31, 2005. This tax benefit results from our estimate of that portion of the annual refundable research credits for 2006 allowed by the United Kingdom Inland Revenue which is attributable to the three months ended March 31, 2006.

Liquidity and Capital Resources

          Cash and cash equivalents increased from approximately $38.4 million as of December 31, 2005 to approximately $68.8 million as of March 31, 2006.

          Operating Activities. Net cash used in operating activities was approximately $8.5 for the three months ended March 31, 2006 as compared to $5.1 million for the three months ended March 31, 2005. Increase in cash used in operating activities resulted primarily from increases in our net loss, partially offset by increases in stock-based compensation expense and depreciation and amortization expense.

          Investing Activities. Net cash used in investing activities was approximately $341,000 for the three months ended March 31, 2006, compared to $818,000 for the three months ended March 31, 2005. Decreased net cash used in investing activities was primarily due to the absence of cash expenses incurred in the business combination and to the reduction in capital expenditures.

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     Financing Activities. Net cash provided by financing activities was approximately $39.1 million for the three months ended March 31, 2006, compared to net cash used by financing activities of $2,000 for the three months ended March 31, 2005. Net cash provided by financing activities in the three months ended March 31, 2006 consisted of $37.8 million received pursuant to a private placement of common stock and warrants to purchase common stock, net of related financing costs, and proceeds from the exercise of stock options and warrants.

     On November 18, 2005, we entered into an agreement to issue to private investors 10.0 million shares of common stock at $6.50 per share and five-year warrants to purchase approximately 3.5 million shares of common stock at an exercise price of $7.50 per share. On November 23, 2005, pursuant to the agreement, we issued approximately 3.9 million shares of common stock and warrants to purchase approximately 1.3 million shares of common stock, receiving net proceeds of $23.3 million. Upon receipt of stockholder approval, we issued on January 19, 2006 approximately 6.1 million shares of common stock and warrants to purchase approximately 2.2 million shares of common stock, receiving net proceeds of approximately $37.8 million. In aggregate, we received a total of approximately $61.1 million, net of issuance costs.

     Operating Capital Requirements. We plan to use available funds for ongoing commercial, research and development and related general sales and administrative activities, working capital, capital expenditures and other general corporate purposes. We expect our capital investments during 2006 to be approximately $3.1 million and to consist primarily of expenditures for capital equipment required in the normal course of business, for the introduction of our Solexa Genome Analysis System and for leasehold improvements.

     We have obtained funding for our operations primarily through sales of common stock, ordinary shares and preferred shares, payments received under contractual arrangements with customers, proceeds from the exercise of stock options and warrants and interest income. Consequently, investors in our equity securities and our customers are significant sources of liquidity for us. Therefore, our ability to maintain liquidity is dependent upon a number of uncertain factors, including but not limited to the following: our ability to advance and commercialize further our new technologies; our ability to generate revenues through expanding and converting existing customer arrangements to our new technologies and obtaining significant new customers either in our genomics services business or through the sale of our instruments and consumables related to the Solexa Genome Analysis System, and the receptivity of capital markets toward our equity or debt securities. The cost, timing and amount of funds required by us for specific uses cannot be precisely determined at this time and will be based upon the progress and the scope of our commercial and research and development activities; payments received under customer agreements; our ability to establish and maintain customer agreements; costs of protecting intellectual property rights; legal and administrative costs; additional facilities capacity needs; and the availability of various methods of financing.

     Solexa Limited incurred net losses each year since its inception in 1998 through March 4, 2005, the date on which the business combination transaction with Lynx was consummated, and we have continued to incur net losses since that time. As of March 31, 2006, we had an accumulated deficit of $61.2 million. Net losses may continue for the next several years as we proceed with the development and commercialization of our technologies. The presence and size of these potential net losses will depend, in part, on the rate of growth, if any, in our revenues and on the level of our expenses.

     We believe that our cash balances at March 31, 2006 will be sufficient to meet our projected working capital and other cash requirements through at least the next twelve months. However, there can be no assurance that future events will not require us to seek additional borrowings or capital and, if so required, that such borrowing or capital will be available on acceptable terms.

     Contractual Obligations and Commitments. We have long-term, non-cancelable building and equipment lease commitments. Future payments due under building leases and other contractual obligations as of March 31, 2006 (in thousands):

			Less than
	Total		1 year		1-3 years
Equipment loan	$	72	$	33	$	39
Operating leases		8,858		3,182		5,676
Total	$	8,930	$	3,215	$	5,715

     Off-Balance Sheet Arrangements. At March 31, 2006 and December 31, 2005, we did not have any off-balance sheet arrangements or relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purposes entities, which are typically established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Financial Risk Management

     We are exposed to various market risks, including changes in foreign currency exchange rates. Our United Kingdom subsidiary’s assets are held in the U.K. pound, its functional currency. Its accounts are translated from the U.K. pound to the U.S. dollar using the current exchange rate in effect at the balance sheet date, for most balance sheet accounts excluding principally certain intercompany and equity accounts, and using the average exchange rate during the period, for revenues and expense accounts. Additionally, approximately 7% of our revenue for the three months ended March 31, 2006 was from foreign countries. All of our sales are denominated in U.S. dollars or U.K. pounds. As a result, we are exposed to risks associated with foreign exchange rate fluctuations. To date, we have not taken any action to reduce our exposure to changes in foreign currency exchange rates, such as options or futures contracts, with respect to transactions between our subsidiary and us.

     The primary objective of our investment activities is to preserve principal while, at the same time, maximizing yields without significantly increasing risk. To achieve this objective, we invest in highly liquid and high-quality debt securities. Our investments in debt securities are subject to interest rate risk. To minimize the exposure due to adverse shifts in interest rates, we invest in short-term securities and maintain an average maturity of less than one year. As a result, we do not believe we are subject to significant interest rate risk.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

     Based on their evaluation as of March 31, 2006, our Chief Executive Officer and Vice President and Chief Financial Officer have concluded that, as a result of the material weakness discussed below, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were not effective in providing reasonable assurance that the information required to be disclosed by us in this report on Form 10-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and Form 10-Q.

     A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As of March 31, 2006, management has determined a material weakness exists in our ability to maintain effective controls over the application of generally accepted accounting principles (“GAAP”) related to the financial reporting process. We currently have limited financial personnel and they do not possess sufficient depth, skills and experience to ensure that all transactions are accounted for in accordance with GAAP. Additionally, we have insufficient formalized procedures to assure that transactions receive adequate review by accounting personnel with sufficient technical accounting expertise.

     The ineffective control over the application of GAAP related to the financial reporting process could result in a material misstatement to our annual or interim financial statements that may not be prevented or detected. As a result, management has determined that this control deficiency constituted a material weakness in internal controls over financial reporting as of March 31, 2006.

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Changes in Internal Controls over Financial Reporting

     We are recruiting additional finance and accounting personnel to fill multiple open positions in our finance organization. During the second quarter of 2005 we hired a controller, who departed in April 2006. Her duties are currently being performed by a consultant, who is serving as an interim finance director. During the first quarter of 2006, we implemented a new companywide automated accounting system and contracted for additional temporary and consulting personnel resources. In addition, we are in the process of reviewing our control procedures surrounding monthly account reconciliations, support for manual journal vouchers and the review of the monthly close to determine any additional steps necessary to remediate the material weaknesses.

     Except as discussed above, there were no changes in our internal control over financial reporting during the quarter ended March 31, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

     Our management, including our Chief Executive Officer and Vice President and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

     Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings.

     We are not a party to any material legal proceedings.

Item 1A. Risk Factors.

     Our business faces significant risks. These risks include those described below and may include additional risks of which we are not currently aware or which we currently do not believe are material. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could be harmed. These risks should be read in conjunction with the other information set forth in this report.

We have a history of net losses, expect to continue to incur net losses and may not achieve or maintain profitability.

     We have incurred net losses each year since our inception, including a net loss for the three months ended March 31, 2006. As of March 31, 2006, we had an accumulated deficit of approximately $61.2 million. Net losses may continue for the next several years as we proceed with the development and commercialization of our technologies, including the Solexa Genome Analysis System. The presence and size of these potential net losses will depend, in part, on the rate of growth, if any, or decline in revenues and on the level of expenses. Research and development expenditures and sales, general and administrative costs have exceeded revenues to date, and we expect these expenses to increase in the future. We will need to generate significant revenues to achieve profitability, and even if we are successful in achieving profitability, there is no assurance we will be able to sustain profitability.

If we are unable to successfully develop and commercialize our new products, we will not be able to increase our revenues or become profitable.

     We set out to develop new DNA sequencing technologies, and we are now using those technologies to develop new genetic analysis instruments, consumables and services. If our strategy does not result in the development of products, including our 1G Genome Analyzer, that we can commercialize in a timely manner, we will be unable to generate significant revenues. Furthermore, there is no guarantee that we will be able to sell our instruments and consumables on terms that will generate profits or positive cash flow. Although we have developed DNA sequencing instruments that we currently use in providing gene expression services to customers, these instruments are based on the MPSS technology developed by Lynx rather than the new technologies currently under development. We cannot be certain that we will successfully develop any new products, including our 1G Genome Analyzer, in a timely manner, or that the new products will receive commercial acceptance, in which case we may not be able to increase or maintain our revenues or become profitable.

     We have articulated aggressive business and technical objectives for 2006, including our expectation of recognizing revenue on sales of our 1G Genome Analyzer beginning in the second quarter of 2006; launching a number of applications to be run on the Solexa Genome Analysis System in 2006; and sequencing the human genome in 2006. We will need to overcome significant challenges to achieve these milestones in the designated timeframes, including continuing to improve the technical performance of our system; obtaining customer acceptance of our products; and producing and implementing a number of 1G Genome Analyzers at both our U.K. and California sites. Failure to accomplish these objectives, or to accomplish them within the articulated timeframes, could cause our stock price to decline or to be come more volatile.

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Our technology platform is at the development stage and is unproven for market acceptance.

     While our MPSS technology has been commercialized and is currently in use for certain kinds of genetic analysis, including gene expression and small RNA analysis, we are developing our SBS reversible-terminator chemistry and our Clonal Single Molecule Array technology to perform similar genetic analyses as well as to sequence the DNA of genomes and of individual genes and genomic regions. These technologies are still in development, and we may not be able to successfully complete development of these technologies or commercialize them. Our success depends on many factors, including:

• technical and economic performance of our technologies in relation to competing technologies;

• acceptance of our technology in the marketplace;

• our ability to establish an instrument manufacturing capability, or obtain instruments from another manufacturer; and

• our ability to manufacture reagents and other consumables, or obtain licenses to resell reagents and other consumables.

     You must evaluate us in light of the uncertainties and complexities affecting an early stage genetic analysis systems company. The application of our technologies is at too early a stage to determine whether they can be successfully implemented within our targeted timeframe, for our targeted applications or at our targeted technical and economic performance levels. Our technologies also depend on the successful integration of independent technologies, each of which has its own development risks. We anticipate that, if our technology is able to successfully reduce the cost of genetic analysis relative to existing providers, our technology may be able to displace current technology as well as to expand the market for genetic analysis to include new applications that are not practical with current technology. The current focus of many of our potential customers performing DNA sequencing is on candidate region, candidate gene and de novo sequencing, rather than on whole genome resequencing. Furthermore, although we believe our system should be suitable for resequencing large and complex genomes, there is no single technique that can be used to resequence the entire genome of a human. Instead, scientists need to combine several techniques to address complex structures such as long repeat sequences. One example of such a technique is paired-end reads. We anticipate developing over time additional techniques, such as paired-end reads, for use with our system.

     Our inability to sequence an entire human genome may limit our market. Many of our potential customers must, in turn, demonstrate to governmental and other funding sources that our technology has been successfully developed before they can make substantial purchases of our products. There is no guarantee, even if our technology can reduce the cost of genetic analysis relative to existing approaches, that we will be able to induce customers with installed bases of conventional genetic analysis instruments to purchase our system or that we will be able to expand the market for genetic analysis to include new applications. Furthermore, if we are only able to successfully commercialize our genetic analysis systems as a replacement for existing technology, we may face a much smaller market than we currently anticipate.

We have limited experience in sales, marketing and field support and thus may be unable to commercialize our genetic analysis instrument systems and services.

     Our ability to achieve profitability depends on attracting customers for our genetic analysis instrument systems and services. There are a limited number of research institutes and pharmaceutical, biotechnology and agricultural companies that are potential customers for our products and services. To market and sell our products, we intend to develop a sales and marketing group with the appropriate technical expertise. We are currently conducting a search for an executive to run our field organization, including sales, field application support and field service. We may not successfully build such a field organization. In addition, we may seek to enlist a third party to assist with sales and distribution globally, in certain regions of the world or for certain applications. In addition, if we are successful in achieving market acceptance for our new genetic analysis instruments, we will need either to build internal capabilities to install and maintain instruments at customer sites, to assist customers with the experiments that they intend to conduct using our instruments and to train customers on the use of our instruments, or to contract with one or more partners to do so on our behalf. There is no guarantee, if we do seek to enter into such arrangements, that we will be successful in attracting one or more desirable sales and distribution partners, or that we will be able to enter into such arrangements on favorable terms. If our sales, marketing, field application support and field service efforts, or those of any third-party sales and distribution partner, are not successful, our technologies and products may not gain market acceptance, which could materially impact our business operations. Any delay in establishing or inability to expand our sales, marketing and field support capacity could hurt our business.

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We will need to develop manufacturing capacity either by ourselves or with a partner.

     If we are successful in achieving market acceptance for our new genetic analysis instruments, we will need either to build internal manufacturing capacity for instruments, flow cells and reagents, or to contract with one or more manufacturing partners. We are currently using personnel from our research and development and genomics services groups and consultants to address manufacturing and outsourcing, and we are conducting a search for an executive to manage these operations. There is no assurance that we will be able to build manufacturing capacity internally, or to contract with a manufacturing partner, in order to meet both the volume and quality requirements necessary to be successful in the market. Any delay in establishing or inability to expand our manufacturing capacity could hurt our business.

Our current business model is unproven and different from our former business model.

     Our current business model is based primarily on the planned sales of genetic analysis instruments and of reagents and other consumables and services to support customers in their use of that equipment. Alternative commercial arrangements may take the form of equipment leases, equipment placements and collaborations with customers at academic, government and commercial labs, among others.

     Lynx’s historical business model, which we have continued since the business combination, was based on providing genomics services using our MPSS technology and supplying customers with DNA sequences and other information that resulted from experiments. A change in emphasis from our former business model has caused some current and prospective customers of our genomics services business to delay, defer or cancel purchasing decisions with respect to new or existing agreements. There is no assurance that we will be successful in changing the emphasis of our business model from providing genomics services to selling instruments, consumables and support services to new or existing customers. We intend to discontinue providing MPSS based services in 2006 and are in the process of renegotiating our current MPSS customer contracts in order to provide those customers with services based on our new SBS technology. We have entered into new or amended agreements with some of our existing customers providing for the transition from MPSS-based services to SBS-based services. There is no guarantee, however, that all of our customers will migrate to the new technology platform once it is commercialized or that our genomics services business will generate positive cash flow or become profitable.

We may need to raise additional funding, which may not be available on favorable terms, if at all.

     We may need to raise additional capital through public or private equity or debt financings in order to satisfy our projected future capital needs.

     The amount of additional capital we may need to raise depends on many factors, including:

• the progress and scope of research and development programs;

• the progress of efforts to develop and commercialize new products and services; and

• the costs of preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights.

     We cannot be certain that additional capital will be available when and as needed or that our actual cash requirements will not be greater than anticipated. If we require additional capital at a time when investment in biotechnology companies or in the marketplace in general is limited due to the then prevailing market or other conditions, we may not be able to raise such funds at the time that we desire or any time thereafter. If we are unable to obtain financing on terms favorable to us, our stockholders may experience significant dilution, we may be unable to execute our business plan, and we may be required to cease or reduce development or commercialization of our products, sell some or all of our technology or assets or merge with another entity.

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We currently depend on a small number of genomics services customers for substantially all our revenues.

     Our strategy for the commercialization of our technologies includes entering into customer agreements in which we provide genomics services to research institutes and pharmaceutical, biotechnology and agricultural companies. Our genomics services business currently generates substantially all of our revenues. After we have developed the Solexa Genome Analysis System, it is our intention to deploy these systems over time to replace the MPSS-based instruments currently used in our genomics services business. If we are successful in commercializing our genetic analysis instrument systems, we anticipate continuing to provide genomics services after the commercial launch in order to meet particular customer requirements and to support the marketing of our instruments by, for example, allowing potential systems customers to understand how our instrumentation performs on their samples of interest. We have entered into new or amended agreements with some of our existing customers providing for the transition from MPSS-based services to SBS-based services. There is no guarantee, however, that all of our customers will migrate to the new technology platform once it is commercialized or that our genomics services business will generate positive cash flow or become profitable.

     Prior to the business combination with Solexa Limited, Lynx derived substantially all of its revenues from customer agreements, collaborations and licenses related to our genomics services business. Since the business combination we have continued to derive substantially all of our revenues from customer agreements. A significant portion of our revenues comes from a small number of customers. Thus, unless and until we are able to commercialize our new genetic analysis instrument systems under development, we will be dependent on a small number of customers to continue our current genomics services business, and the loss of one or more of those customers could harm our results of operations.

Capacity reduction in our genomics services business could increase our losses.

     Our genomics services business utilizes proprietary MPSS instruments and information systems. In addition, the MPSS process is lengthy and complex. These instruments, systems and work processes are subject to intermittent failures. Any production stoppages or yield reductions due to these factors or otherwise could reduce the number of samples we are able to process and the revenues we recognize, could delay our intended termination of MPSS activities in 2006 and could increase our losses.

The sales cycle for our genomics services business is lengthy, and we may spend considerable resources on unsuccessful sales efforts or may not be able to enter into agreements on the schedule we anticipate.

     Our ability to obtain customers for our technologies and products depends in significant part upon the perception that our technologies and products can help reduce the costs or accelerate the timing of drug discovery and development, diagnostics and genomics efforts. The sales cycle for our genomics services business is typically lengthy, in many cases nine months or more, because we need to educate our potential customers and to sell the benefits of our services to a variety of constituencies within such entities. In addition, we may be required to negotiate agreements containing terms unique to each customer. We may expend substantial funds and management effort without any assurance that we will successfully sell our technologies and products. Actual and proposed consolidations of pharmaceutical companies have negatively affected, and may negatively affect, the timing and progress of our sales efforts.

We operate in an intensely competitive industry with rapidly evolving technologies, and our competitors may develop products and technologies that make ours obsolete.

     The biotechnology industry is highly fragmented and is characterized by rapid technological change. In particular, the areas of genetic analysis platforms and genomics research are rapidly evolving fields. Competition among entities developing genetic analysis systems is intense. Many of our competitors have substantially greater research and product development capabilities and financial, scientific and marketing resources than we do.

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     In our genomics services business, we face, and will continue to face, competition primarily from biotechnology companies, such as Affymetrix, Inc., the Agencourt Biosciences business of Beckman Coulter, Inc., Celera Genomics Group, Gene Logic, Inc., academic and research institutions and government agencies, both in the United States and abroad. Our competitors are using a variety of gene expression analysis methodologies, including chip-based systems, to attempt to identify disease-related genes and to perform clinical diagnostic tests. In addition, a number of companies offer DNA sequencing equipment or consumables, including Applera Corporation, Beckman Coulter, Inc., the Amersham Biosciences business of General Electric and Roche Diagnostics in partnership with 454 Corporation. Furthermore, a number of other companies and academic groups are in the process of developing novel techniques for DNA sequencing. These companies include, among others, Agencourt Personal Genomics, Genizon, Genovoxx, Helicos Biosciences, LI-COR, Lucigen, Microchip Biotechnologies, Pacific Biosciences, Perlegen, Shimadzu Biotech and Visigen. A number of companies offer gene expression equipment including Affymetrix, Inc., Agilent Technologies, Applera Corporation, and Illumina, Inc. In order to successfully compete against existing and future technologies, we will need to demonstrate to potential customers that our technologies and capabilities are superior to those of our competitors.

     Our future success will depend on our ability to maintain a competitive position with respect to technological advances. Rapid technological development by others may make our technologies and future products obsolete.

     Any products that are developed based on our technologies will compete in highly competitive markets. Competitors may be more effective at using their technologies to develop commercial products than us. Moreover, some of our competitors have, and others may, introduce novel genetic analysis platforms before we do which, if adopted by customers, could eliminate the market for our new genetic analysis systems. Furthermore, our competitors may obtain intellectual property rights that would limit the use of our technologies or the commercialization of diagnostic or therapeutic products using our technologies. As a result, our competitors’ products or technologies may render our technologies and products obsolete or noncompetitive.

     Furthermore, our competitors may combine operations through merger, acquisition, licensing, distribution arrangements, partnerships and other activities. Such arrangements may give our competitors advantages they did not previously have and lead to even more intense competition.

If management is unable to effectively manage the increasing size and complexity of our organization, our operating results will suffer.

     As of May 1, 2006, our 61 U.S. employees are based in Hayward, California and the 62 employees of Solexa Limited, a subsidiary, are based near Cambridge, United Kingdom. We plan to hire additional personnel at both sites. As a result we face challenges inherent in efficiently managing and coordinating the activities of our increasing number of employees located in different countries, including the need to implement appropriate systems, financial controls, policies, standards, benefits and compliance programs. The inability to successfully manage a growing and internationally diverse organization could hurt our business, and, as a result, the market price of our common stock could decline.

We are subject to risks associated with our international operations which may harm our business.

     A significant portion of our research and development and other operations are located in the United Kingdom which subjects us to a number of risks associated with conducting business outside of the United States, including, but not limited to:

• fluctuations in currency exchange rates;

• imposition of additional taxes and penalties; and

• the burden of complying with foreign laws.

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     Currently, most of our employment arrangements with our employees and consultants in the United Kingdom and lease agreements for our facilities in Cambridge, United Kingdom provide for payment in British pounds. Increases in the value of the British pound relative to the Unites States dollar will increase our expenses related to our operations in the United Kingdom, which could harm our business in the future and reduce the market for our common stock. To date, we have not engaged in any currency hedging activities, although we may do so in the future.

We could lose key personnel, which could materially affect our business and require us to incur substantial costs to recruit replacements for such lost personnel.

     Any of our key personnel could terminate their employment with us, sometimes without notice, at any time. John West, our Chief Executive Officer, in particular, is a key member of our management team. We are also highly dependent on the principal members of our scientific and commercial staff. The loss of any of these persons’ services might adversely impact the achievement of our commercial objectives. In addition, recruiting and retaining qualified scientific personnel to perform future research and development work will be critical to our success. There is currently a shortage of skilled executives and employees with technical expertise in our industry, and this shortage may continue. As a result, competition for skilled personnel is intense, and turnover rates are high. Competition for experienced scientists from numerous companies, academic and other research institutions may limit our ability to attract and retain new or current personnel.

If we fail to adequately protect our proprietary technologies, third parties may be able to use our technologies, which could prevent us from competing in the genomic analysis instrument and genomics services market.

     Our success depends in part on our ability to obtain patents and maintain adequate protection of the intellectual property related to our technologies and products. The patent positions of genetic analysis instrument, reagents and other consumables sales and services companies and other biotechnology companies, including us, are generally uncertain and involve complex legal and factual questions. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies are covered by valid and enforceable patents or are effectively maintained as trade secrets. The laws of some foreign countries do not protect proprietary rights to the same extent as the laws of the U.S., and many companies have encountered significant problems in protecting and defending their proprietary rights in foreign jurisdictions. We have applied and will continue to apply for patents covering our technologies, processes and products, as and when we deem appropriate. However, third parties may challenge these applications, or these applications may fail to result in issued patents. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products. Furthermore, others may independently develop similar or alternative technologies or design around our patents. In addition, our patents may be challenged or invalidated or fail to provide us with any competitive advantage.

     We also rely on trade secret protection for our confidential and proprietary information. However, trade secrets are difficult to protect. We protect our proprietary information and processes, in part, with confidentiality agreements with employees and consultants. However, third parties may breach these agreements, we may not have adequate remedies for any such breach or our trade secrets may still otherwise become known by our competitors. In addition, our competitors may independently develop substantially equivalent proprietary information.

Litigation or third-party claims of intellectual property infringement could require us to spend substantial time and money and adversely affect our ability to develop and commercialize our technologies and products.

     Our commercial success depends in part on our ability to avoid infringing patents and proprietary rights of third parties and not breaching any licenses that we have entered into with regard to our technologies. Other parties have filed, and in the future are likely to continue to file, patent applications covering imaging, image analysis, fluid delivery, DNA arrays on solid surfaces, chemical and biological reagents for DNA sequencing, genes, gene fragments, the analysis of gene sequences, gene expression, DNA amplification and the manufacture and use of DNA chips or microarrays, which are tiny glass or silicon wafers on which tens or hundreds of thousands of DNA molecules can be arrayed on the surface for subsequent analysis. If patents covering technologies required by our operations are issued to others, we may have to rely on licenses from third parties, which may not be available on commercially reasonable terms, or at all.

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     Third parties may accuse us of employing their proprietary technology without authorization. In addition, third parties may obtain patents that relate to our technologies and claim that use of such technologies infringes these patents. Regardless of their merit, such claims could require us to incur substantial costs, including the diversion of management and technical personnel, in defending ourselves against any such claims or enforcing our patents. In the event that a successful claim of infringement is brought against us, we may need to pay damages and obtain one or more licenses from third parties. We may not be able to obtain these licenses at a reasonable cost, or at all. Defense of any lawsuit or failure to obtain any of these licenses could adversely affect our ability to develop and commercialize our technologies and products and thus prevent us from achieving profitability.

We currently utilize sole-source suppliers for certain components of our Solexa Genome Analysis System and in our MPSS service business.

     We anticipate purchasing, on a sole-source basis, certain components for our 1G Genome Analyzer and certain consumables used to operate and prepare samples to be run on the 1G Genome Analyzer. We are in the process of negotiating supply agreements for certain of these sole-source items. In addition, we currently purchase, on a sole-source basis, the flow cells and certain enzymes that are used in our MPSS services business.

     When we rely on sole vendors, we subject our business to several risks, including:

• the inability to obtain an adequate supply due to manufacturing capacity constraints, a discontinuation of a product by a third-party manufacturer or other supply constraints;

• the potential lack of leverage in contract negotiations with the sole vendor;

• reduced control over quality and pricing of components; and

• delays and long lead times in receiving materials from vendors.

We believe that we would be able to purchase alternative instrument components and consumables from other providers should the need arise, although we would likely incur additional expense and delay. Such additional expense and delay could be material and could harm our business in the short term.

We use hazardous chemicals and radioactive and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.

     Our research and development processes involve the controlled use of hazardous materials, including chemicals and radioactive and biological materials. Our operations produce hazardous waste products. We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. We may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our insurance coverage and our total assets. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous materials. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development and production efforts.

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Our facilities in Hayward, California 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, which could require us to cease or curtail operations.

     Our facilities in Hayward, California are located near known earthquake fault zones and are vulnerable to damage from earthquakes. 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 activities could cause significant delays in our research programs commercial activities and make it difficult for us to recover from a disaster. The insurance we maintain may not be adequate to cover our losses resulting from disasters or other business interruptions. Accordingly, an earthquake or other disaster could materially and adversely harm our ability to conduct business.

Our stock price may be extremely volatile.

     We believe that the market price of our common stock will remain highly volatile and may fluctuate significantly due to a number of factors. The market prices for securities of many publicly held, early-stage biotechnology companies have in the past been, and can in the future be expected to be, especially volatile. For example, during the period from March 7, 2005 to March 31, 2006, the closing sales price of our common stock as quoted on the Nasdaq Capital Market (formerly the Nasdaq SmallCap Market) and the Nasdaq National Market fluctuated from a low of $4.79 to a high of $17.00 per share. In addition, the securities markets have from time to time experienced significant price and volume fluctuations that may be unrelated to the operating performance of particular companies. The following factors and events may have a significant and adverse impact on the market price of our common stock:

• fluctuations in our operating results;

• announcements of technological innovations or new commercial products by us or our competitors;

• release of reports by securities analysts;

• developments or disputes concerning patent or proprietary rights;

• developments in our relationships with current or future customers;

• sales of our common stock by large holders, and distributions and/or sales of shares held by stockholders affiliated with certain of our directors; and

• general market conditions.

     Many of these factors are beyond our control. These factors may cause a decrease in the market price of our common stock, regardless of our operating performance.

We have determined that we have a material weakness in our internal controls over financial reporting. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading of our stock.

     Under Section 302 of the Sarbanes-Oxley Act of 2002, we are required to evaluate and determine the effectiveness of our internal controls over financial reporting. As of March 31, 2006, we did not maintain effective control over the application of GAAP related to the financial reporting process. This control deficiency could result in material misstatement of the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, management has determined that this control deficiency constitutes a material weakness. Because of this material weakness, our management concluded that, as of March 31, 2006, we did not maintain effective internal control over financial reporting based on those criteria. Should we, or our independent registered public accounting firm, determine in future fiscal periods that we have additional material weaknesses in our internal controls over financial reporting, the reliability of our financial reports may be impacted, and our results of operations or financial condition may be harmed and the price of our common stock may decline. During the second quarter of 2005, we hired a US controller, who departed Solexa in April 2006. These duties are currently being performed by a consultant who is serving as an interim finance director.

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We are required to recognize expense for stock based compensation related to employee stock options and employee stock purchases, there is no assurance that the expense we are required to recognize accurately measures the value of our share-based payment awards, and the recognition of this expense could cause the trading price of our common stock to decline.

     On January 1, 2006, we adopted Statement of Financial Accounting Standards No. 123R, “Accounting for Share Based Payments,” or SFAS 123R, which requires the measurement and recognition of compensation expense for all stock-based compensation based on estimated fair values. As a result, our operating results for the first quarter of 2006 contain, and for future periods will continue to contain, a charge for stock-based compensation related to employee stock options and employee stock purchases. The application of SFAS 123R requires the use of an option-pricing model to determine the fair value of share-based payment awards. This determination of fair value is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include our expected stock price volatility over the expected term of the awards and actual and projected employee stock option exercise behaviors. Option-pricing models were developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Our employee stock options have certain characteristics that are significantly different from traded options, and changes in the subjective assumptions can materially affect the estimated value. Although the fair value of employee stock options is determined in accordance with SFAS 123R and Staff Accounting Bulletin No. 107 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

     Our adoption of SFAS 123R has had a material impact on our financial statements and results of operations, and we expect that this will continue to be the case for future periods. We cannot predict the effect that this adverse impact on our reported operating results will have on the trading price of our common stock.

Our company’s officers, directors and their affiliated entities have substantial control over the company.

     As of May 1, 2006, our company’s executive officers, directors and entities affiliated with them, in the aggregate, beneficially own approximately 37% of the outstanding common stock of the company, including warrants and options exercisable within 60 days of May 1, 2006. These stockholders, if acting together, may be able to influence significantly all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other changes in corporate control.

Anti-takeover provisions in our charter documents and under Delaware law may make it more difficult to acquire us or to effect a change in our management, even though an acquisition or management change may be beneficial to our stockholders.

     Under our certificate of incorporation, our board of directors has the authority, without further action by the holders of our common stock, to issue 2,000,000 shares of preferred stock from time to time in series and with preferences and rights as it may designate. These preferences and rights may be superior to those of the holders of our common stock. For example, the holders of preferred stock may be given a preference in payment upon our liquidation or for the payment or accumulation of dividends before any distributions are made to the holders of common stock.

     Any authorization or issuance of preferred stock, while providing desirable flexibility in connection with financings, possible acquisitions and other corporate purposes, could also have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock, to remove directors and to effect a change in management. The preferred stock may have other rights, including economic rights senior to those of our common stock, and, as a result, an issuance of additional preferred stock could lower the market value of our common stock. Provisions of Delaware law may also discourage, delay or prevent someone from acquiring or merging with us.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     On January 16, 2006, January 19, 2006, January 30, 2006 and March 8, 2006, we issued 71,043 shares, 50,000 shares, 24,580 shares and 130,818 shares of our common stock, respectively (collectively, the “Warrant Shares”), pursuant to the exercise of warrants to purchase our common stock (the “Exercised Warrants”) held by certain of our investors and Silicon Valley Bank. The Warrant Shares were sold to accredited investors who, except for Silicon Valley Bank, were issued the Exercise Warrants in connection with a private placement transaction. 251,861 of the Warrant Shares were purchased for $1.3 million in cash, and 24,580 of the Warrant Shares were acquired by Silicon Valley Bank in a net exercise of the Exercised Warrants. The Warrant Shares were sold in reliance upon Regulation D, Rule 506 promulgated under the Securities Act of 1933, as amended. In connection with the purchase and issuance of the Exercised Warrants, each of the purchasers represented and warranted to us that it (a) is an “accredited investor,” (b) is financially sophisticated and able to protect its own interests, and (c) acquired the warrant for its own account for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof, except as otherwise may be permitted under applicable securities laws.

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

At a Special Meeting of Stockholders held on January 17, 2006, our stockholders voted on the following matter:

Proposal I – Approval of the issuance of common stock and warrants to purchase common stock in connection with a financing transaction:

FOR		AGAINST		ABSTAIN		NO VOTE
	21,507,517		24,433		841,957		7,587,158

Item 5. Other Information

     Under an amendment effective as of January 1, 2006, we modified the terms of our Services Agreement, dated December 31, 2003, with E.I. du Pont de Nemours and Company, to reduce the remaining maximum amount payable to us to $1.5 million, of which a portion is related to the delivery of an instrument and related consumables and the balance to genomics services to be performed under the agreement.

Item 6. Exhibits.

     We incorporate by reference all exhibits filed in connection with our Annual Report on Form 10-K for the year ended December 31, 2005.

Exhibit
Number	Description
10.20.1+	Amended and Restated Services and Supply Agreement, by and between E. I. du Pont de Nemours and Company and Solexa, Inc.
31.1	Certification required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	Certification required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1*	Certification required by Rule 13a-14(a) or Rule 15d-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).

+

Portions of this agreement have been deleted pursuant to our request for confidential treatment.

*

This certification “accompanies” the Quarterly Report on Form 10-Q to which it relates, pursuant to Section 906 of the Sarbanes Oxley Act of 2002, and is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Solexa, Inc. under the Securities Act or the Exchange Act (whether made before or after the date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.

33

SIGNATURES

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

		SOLEXA, INC.
		/s/ John West
	By:	John West
		Chief Executive Officer
		(Principal Executive Officer)
Date: May 15, 2006
		/s/ Linda Rubinstein
	By:	Linda Rubinstein
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)
Date: May 15, 2006

34

Exhibit Index

Exhibit
Number	Description
10.20.1+	Amended and Restated Services and Supply Agreement, by and between E. I. du Pont de Nemours and Company and Solexa, Inc.
31.1	Certification required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	Certification required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1*	Certification required by Rule 13a-14(a) or Rule 15d-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).

+

Portions of this agreement have been deleted pursuant to our request for confidential treatment.

*

This certification “accompanies” the Quarterly Report on Form 10-Q to which it relates, pursuant to Section 906 of the Sarbanes Oxley Act of 2002, and is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Solexa, Inc. under the Securities Act or the Exchange Act (whether made before or after the date of the Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.

35

EX-10.20.1

Exhibit 10.20.1

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

AMENDED AND RESTATED SERVICES AND SUPPLY AGREEMENT

     This AMENDED AND RESTATED SERVICES AND SUPPLY AGREEMENT (“Restated Agreement”) is made and entered into as of January 1, 2006 (“Effective Date”), by and between E.I. du Pont de Nemours and Company, having a principal business address at 1007 Market Street, Wilmington, Delaware 19898 (“DuPont”) and Solexa, Inc. (formerly LYNX THERAPEUTICS, INC.), having a principal business address at 25861 Industrial Boulevard, Hayward, California, 94545 (“Solexa”). DuPont and Solexa may be referred to herein collectively as the “Parties” or individually as a “Party.”

     WHEREAS, Solexa has expertise and intellectual property involving the use of certain molecular biological methods for cloning and identifying the sequence of nucleic acids, and using such technologies for discovery and characterization of genes;

     WHEREAS, DuPont and its agricultural Affiliates, including Pioneer Hi-Bred International, Inc. of Des Moines, Iowa (“Pioneer”), have expertise and interest in discovering, developing, distributing and marketing agricultural products and processes;

     WHEREAS, DuPont and Solexa have previously entered into a Research Collaboration Agreement dated October 29, 1998 and subsequently amended from time to time by the Parties (“1998 Collaboration Agreement”) and a Services Agreement dated as of December 31, 2003, which as amended from time to time by the Parties superseded the 1998 Collaboration Agreement (the “Previous Agreement”), under which Solexa technology has been applied to gene expression, physical mapping, and other analysis of certain crop plants for the benefit of DuPont’s agricultural research and development programs;

     WHEREAS, Solexa is phasing out its MPSS platform and replacing it with a new and alternative technology platform for identifying and counting sequence tags, such platform known as cluster sequencing or SBS;

     WHEREAS, Solexa is further developing this technology platform in 2006 with intention of generally commercializing both Solexa-provided services and instrument/consumables sales to customers by the end of 2006;

     WHEREAS, the Parties desire that DuPont have early access to services and instruments/consumables related to this platform during 2006; and

     WHEREAS, the Parties desire to supersede the Previous Agreement and to continue their interaction with one another under the terms and conditions of this Restated Agreement.

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

1. Definitions:

a. “Affiliate” shall mean any corporation, firm, limited liability company, partnership, or other entity that directly or indirectly controls, or is controlled by, or is under common control with a Party to this Restated Agreement. For the purpose of this definition, control means ownership, directly or through one or more Affiliates, of fifty percent (50%) (or such lesser percentage which is the maximum allowed to be owned by a foreign entity in a particular jurisdiction) or more of the shares of stock entitled to vote for the election of directors in the case of a corporation, or fifty percent (50%) (or such lesser percentage which is the maximum allowed to be owned by a foreign entity in a particular jurisdiction) or more of the equity interests in the case of any other type of legal entity, or status as a general partner in any partnership, or any other arrangement whereby a Party controls or has the right to control the board of directors or equivalent governing body of a corporation or other entity. For purposes of this Agreement, Affiliates shall also include Affiliates of Pioneer.

Page 1 of 12

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

b.	“Results” shall mean all information provided to DuPont and its Affiliates by Solexa, or developed by Solexa, under this Restated Agreement, including datasets, generated in the performance by Solexa of Analysis Services on DuPont Samples (“DuPont Results”) or Other Samples (for use in Category-2 Services under the Work Plan) (“Other Results”), as further described in the Work Plan.
c.	“DuPont Generated Results” shall mean all information, including data sets, generated by DuPont and its Affiliates during the Term in the course of using the SBS Instrument and SBS Reagents.
d.	“Exclusive Plants” shall mean [*].
e.	“Analysis Services” shall mean the application by Solexa of Solexa Technology to a Sample to generate Results, as outlined in the Work Plan and as will be further specified between the Parties during the Term via the JRC.
f.	“Intellectual Property” shall mean any right that protects any invention, improvement or discovery, that is created or discovered prior to, during, or as a result of the Services hereunder, whether or not patentable, and shall include, but is not limited to, patent rights, plant variety protection certificates, patent applications, copyrights, trademarks, and trade secrets.
g.	“Solexa Technology” shall mean any and all technologies owned or controlled by Solexa, including but not limited to MPSS and SBS.
h.	“MPSS™” shall mean Solexa’s Massively Parallel Signature Sequencing technology involving the solid phase cloning of nucleic acids on beads and its applications, as further described at the Solexa internet site, http://www.solexa.com/wt/page/mpss. For example, and as further described at this site, MPSS™ is applied by Solexa to identify and count the expressed sequence tags, each at least 17 bases long, in an mRNA Sample. Other applications of MPSS include small RNA MPSS to identify and count small RNAs in an RNA Sample. As used herein, “MPSS Services” means the application of MPSS technology by Solexa to a customer’s or collaborator’s samples to generate sequence tag data that is shared with such customer or collaborator.
i.	“Non-exclusive Plants” shall mean all plant species other than Exclusive Plants, except for [*].

Page 2 of 12

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

j.	“Sample” shall mean the biological material and information provided by DuPont (“DuPont Samples”) or by an academic institution as contemplated by the Work Plan (“Other Samples”) under this Agreement for use by Solexa in performing Analysis Services.
k.	“SBS” shall mean Solexa’s Sequencing-By Synthesis (SBS) technology involving the sequencing of templates immobilized on a proprietary flow cell surface via Clonal Single Molecule Array ™ technology as further described at http://www.solexa.com/wt/page/sbs. SBS utilizes four proprietary fluorescently labeled nucleotides to sequence millions of DNA clusters present on the flow cell surface. These nucleotides, specifically designed to possess a reversible termination property, allow each cycle of the sequencing reaction to occur simultaneously in the presence of all four nucleotides (A, C, G. T). In each cycle, the polymerase is able to select the correct base to incorporate, with the natural competition between all four alternatives leading to very high accuracy.
l.	“SBS Instrument” shall mean the early access version of Solexa’s SBS instrument, together with the associated cluster station, and the commercial version thereof resulting from the replacement or upgrade of the early access version, together with related installation and training, as described in the Work Plan.
m.	“SBS Reagents” shall mean the consumables supplied by Solexa to DuPont for use on the SBS Instrument, as described in the Work Plan.
n.	“Term” shall mean the 2006 calendar year, provided that in the event the commercial version of the SBS Instrument has not been provided to DuPont as contemplated by the Work Plan by the end of 2006, the portions of this Restated Agreement pertaining specifically to the delivery of such instrument shall continue in effect until such delivery has been made.
o.	“Work Plan” shall mean the description of the Analysis Services to be conducted under this Agreement and the SBS Instrument, SBS Reagents and related services to be supplied under this Agreement, attached as Schedule A herein.

2. Scope and Description of Services and Supply:

a.	Services. Solexa shall conduct the Analysis Services for DuPont, including its Affiliates, during the Term using Samples as outlined in the Work Plan, or such other written schedules, work plans or descriptions that the Parties may agree upon from time to time and shall make part of this Restated Agreement.
	Solexa hereby agrees (a) to use DuPont Samples solely to perform the Services for DuPont and meet its obligations under this Agreement, and (b) to send all residual DuPont Samples to DuPont (or another site designated by DuPont) within thirty (30) calendar days after the date of completion of Analysis Services for such DuPont Samples, or at the end of the Term, or at Termination of this Restated Agreement. In the event that DuPont provides written direction to Solexa to destroy all residual DuPont Samples, Solexa shall do so promptly.
	Solexa shall not distribute, release, sell, disclose, or otherwise transfer the DuPont Samples to, or use DuPont Samples with or on behalf of, any third party, except to such affiliates of Solexa as may be necessary for the performance of the Analysis Services. In such event, Solexa shall notify DuPont of such transfer or disclosure, and such Solexa affiliates shall be bound by the same terms as contained herein regarding use and treatment of DuPont Samples. DuPont agrees to pay directly, or to reimburse Solexa for, any shipping, handling or other like expenses that may be incurred in providing DuPont Samples to Solexa hereunder.

Page 3 of 12

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

As consistent with the timelines described in the Work Plan, DuPont shall provide DuPont Samples to Solexa as necessary for Solexa to conduct the applicable Analysis Services. Solexa will procure Other Samples as contemplated by the Work Plan. Solexa shall provide, at its own expense, all equipment, materials, information, know-how, and related services as are necessary to perform the Analysis Services using DuPont Samples and Other Samples and satisfy its obligations under this Restated Agreement with respect thereto. Solexa shall promptly deliver all Results to DuPont upon completion of the corresponding Analysis Services.

b. Supply. Solexa shall deliver and install the SBS Instrument in accordance with the provisions of the Work Plan. Following delivery of the early access version of the SBS Instruments, Solexa will supply SBS Reagents to DuPont for use on the SBS Instrument in accordance with, and subject to the limitations set forth in, the Work Plan Solexa will also provide training to DuPont personnel in the operation of the SBS Instrument as described in the Work Plan.

3.   Exclusive Period. [*] shall not [*] for any [*] in, or using, the [*] during [*]; or [*] up until the date on which [*] to [*]. [*] may [*] during the [*] to [*] in, or using, the [*]. [*] shall be [*] to [*] with respect to [*], and [*] that may be under [*] by [*] to a [*], as soon as such [*] becomes available. Nothing in this Section 3 shall restrict [*] in any way from being able to [*] under [*] in effect [*] of the [*] for the [*], and [*] of the [*] for the [*], whether or not such [*] would otherwise be in violation of this Section 3.

4.   Fees and Payments. As further described in the Work Plan, and, as full consideration for the Analysis Services to be provided during the Term and the SBS Instrument and SBS Reagents to be delivered to DuPont under this Restated Agreement, DuPont shall pay Solexa a total amount not to exceed One Million Five Hundred Thousand Dollars (USD 1,500,000), according to the payment schedule contained in the Work Plan. DuPont shall cause its Affiliate, Pioneer Hi-Bred International, Inc. to make all payments under this Restated Agreement. Except for the first payment of [*], which shall be paid by [*] without reliance on an invoice, all other payments specified in the Work Plan will be made [*] days after DuPont’s or its Affiliate’s receipt of an invoice from Solexa detailing the Analysis Services provided and/or the instruments or consumables delivered and following DuPont’s receipt of the specified applicable Results and/or products. Invoices shall be submitted to Pioneer’s contract administrator identified below, and each invoice shall reference [*].

[*]

All amounts paid hereunder shall be made to Solexa in US Dollars by bank wire transfer to:

[*]

5.   Future Access. The Parties agree that beyond the Term, an appropriate agreement, to be negotiated in good faith and mutually determined to be suitable for the nature and delivery of Solexa services and products in such year(s), may be established between the Parties.

Page 4 of 12

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

6.   Term and Termination. This Restated Agreement shall extend for the Term, unless extended by mutual written consent of the parties or earlier terminated (“Termination”) through any of the following:

a.	By mutual agreement of the Parties in writing at any time;
b.	By either Party upon sixty (60) days’ written notice, in the event the other Party commits a material breach of this Restated Agreement, with such breach not corrected by the breaching Party within the sixty (60) day period;
c.	By DuPont upon sixty (60) days’ notice in the event that Solexa is unable to perform its obligations hereunder, to the reasonable satisfaction of DuPont, according to the Work Plan; or
d.	By either Party at a moment’s notice in the event the other Party (i) becomes insolvent or unable to pay its debts as they mature; (ii) makes an assignment for the benefit of creditors; (iii) permits or procures the appointment of a receiver for its assets; (iv) becomes the subject of any bankruptcy, insolvency, or similar proceeding; or (v) is acquired by or merged with another Party.

In the event of Termination prior to completion of the Analysis Services requested and paid by DuPont in advance of Termination, Solexa agrees that it will complete all such Analysis Services that have been paid for by DuPont, and deliver to DuPont all Results of such Analysis Service, that have been paid for, and return or destroy, at DuPont’s discretion, all DuPont Samples remaining at Solexa at Termination.

7.   Effects of Termination. All payments for completed Analysis Services rendered or for products supplied up to and including the last day of the Term, prior to expiration or Termination, shall remain due and payable to Solexa, and payment for partially completed Analysis Services performed hereunder at the time of Termination as described in Section 5 herein, shall be determined in good faith.

Expiration or Termination of this Agreement shall not relieve Solexa of any obligation with respect to DuPont Confidential Information or DuPont Samples disclosed or DuPont Results or DuPont Generated Results developed prior to such expiration or Termination and shall not modify DuPont’s ownership or use rights in DuPont Confidential Information, DuPont Samples, Results, DuPont Generated Results, or the SBS Instrument and SBS Reagents; and DuPont shall exclusively own and have the right to use the results it generates using the SBS Instrument after the Term.

8.   Relationship of Parties. Both Parties agree that in the performance of this Restated Agreement, Solexa is an independent contractor and neither Solexa nor any of its employees or agents will be an agent or employee of DuPont or its Affiliates or be covered by DuPont’s or its Affiliates’ Worker’s Compensation Insurance or Unemployment Insurance. Further, neither Solexa nor any of its employees or agents will be eligible to participate in DuPont’s or its Affiliates’ retirement programs or be entitled to any other benefits from DuPont or its Affiliates.

Page 5 of 12

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

9.   Property and Use Rights.

a.	Copyright. DuPont and Solexa agree that any copyrightable work(s) developed in the performance of Analysis Services under this Restated Agreement with respect to DuPont Samples constitute work(s) made for hire under the United States Copyright Laws and that all right, title, and interests therein, including copyright, shall vest in DuPont. In the event that any such work does not qualify as a work made for hire under the United States Copyright laws, or for any other reason does not constitute a work made for hire, Solexa by this Restated Agreement hereby assigns all right, title, and interest, including copyright, in said work(s) to DuPont, in perpetuity.
b.	Existing technology. Solexa represents and warrants that it either owns or has the right to use any technology or Intellectual Property used to carry out the Analysis Services under this Agreement, and further represents and warrants that neither Solexa Intellectual Property nor any existing or future Solexa contractual obligation outside this Agreement shall prevent DuPont from using the DuPont Results or, subject to the patent rights of any third party provider of Other Samples, Other Results or from using the SBS Instrument and SBS Reagents in the manner in which they are intended to be used.
c.	Results. DuPont, including its Affiliates, shall be the exclusive owner of all right, title and interest in and to the DuPont Samples and DuPont Results resulting from provision of Analysis Services under this Agreement. DuPont shall have exclusive ownership and use rights to all discoveries, inventions and property that are not directly related to Solexa Technology (“Developments”), arising from DuPont Results. Solexa shall irrevocably and perpetually assign, transfer and convey to DuPont all of Solexa’s right, title and interest, if any, in and to all DuPont Results and DuPont Generated Results hereunder and to all Developments arising from such results. Further, Solexa shall not disclose, transfer, sell, or use DuPont Results or DuPont Generated Results to, or use DuPont Results or DuPont Generated Results with or on behalf of, any third party. DuPont shall assume all responsibility for all costs associated with the application, prosecution, maintenance, defense and enforcement of patent applications and patents claiming all or a portion of the DuPont Samples, DuPont Results and DuPont Generated Results. With respect to Other Results, DuPont shall be the exclusive owner of all right, title and interest in and to any discoveries or inventions made by DuPont arising from its use of the Other Results.
d.	Notwithstanding any other provision of this Agreement, and for the avoidance of doubt, DuPont and its Affiliates shall have the right to use and disclose DuPont Results and DuPont Generated Results, without exception, and to use and, after publication by Solexa or the third party provider of Other Samples, disclose the related Other Results, without exception, for any purpose whatsoever, without further consideration to Solexa.
e.	Solexa or its successors of interest shall not assert against DuPont and its Affiliates, business partners, agents or customers of each, any patent owned or controlled by Solexa that would [*] making, having made, using and selling products that were developed by DuPont and its Affiliates from [*] or from using the SBS Instrument and SBS Reagents [*].
f.	Subject to full payment therefor as specified in the Work Plan, DuPont shall own the SBS Instrument and SBS Reagents and shall have the unrestricted right and license, without payment of additional compensation, to use the same [*].

Page 6 of 12

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

g. No right or license, either expressed or implied, is granted to Solexa under any material, information, patent, patent application, or trademark existing now or in the future.

10.   Project Champions (PC’s). A Project Champion (“PC”) shall be designated by each of the Parties, which shall be one (1) representative from each Party, each of whom shall be experienced in a relevant aspect of the Work Plan. These representatives are named in the Work Plan. The PC’s shall coordinate and manage the implementation of the Work Plan hereunder, including conducting quarterly meetings at mutually convenient times and locations, to:

a.	form and lead a joint research committee (“JRC”) made up of representatives of the Parties and to encourage and facilitate ongoing cooperation and information exchange between the Parties as necessary for the performance of each Party’s obligations hereunder;
b.	plan and agree upon a timetable for the Samples to be submitted and the Analysis Services to be conducted under the Work Plan;
c.	evaluate data and results of work related to the Work Plan and to make recommendations to the Parties for changes thereto, if necessary, to further the objectives of, and to achieve the technical objectives of the Parties under, this Restated Agreement;

The JRC and PC’s shall have no power to amend this Restated Agreement and shall have only such powers as are specifically delegated to them hereunder.

11.   Indemnification. Each Party agrees to defend, indemnify and hold the other Party (including its officers, employees and agents) harmless from and against any and all liability, loss, expense, reasonable attorneys’ fees, or claims for injury or damages arising from the performance of this Restated Agreement, but only in proportion to and to the extent such liability, loss, expense, reasonable attorneys’ fees, or claims for injury or damages are caused by or result from the negligent or intentional acts or omissions of the indemnifying Party, its officers, agents or employees.

12.   Disclaimer; Waiver

SOLEXA MAKES NO REPRESENTATION OR EXPRESS OR IMPLIED WARRANTY THAT THE RESULTS OBTAINED FROM USE OF THE SAMPLES OR THE SBS INSTRUMENT AND REAGENTS WILL NOT INFRINGE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES AND HEREBY DISCLAIMS THE SAME. DUPONT WILL ACCEPT THE RESULTS AND THE SBS INSTRUMENT AND REAGENTS WITH THE KNOWLEDGE THAT THEY ARE EXPERIMENTAL IN NATURE. BECAUSE THE AFORESAID ARE EXPERIMENTAL IN NATURE, THEY ARE BEING SUPPLIED TO DUPONT WITH NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

13.   Confidential Information. “Confidential Information” shall mean any and all information, know-how and data, technical or non-technical, disclosed or provided by one Party (the “Disclosing Party”) to the other Party (the “Receiving Party”) for or about the work to be performed hereunder, whether disclosed or provided in oral, written, graphic, photographic, electronic, or any other form. Confidential Information of DuPont shall include DuPont Samples, DuPont Results and DuPont Generated Results. Other Results shall be considered Confidential

Page 7 of 12

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Information of Solexa and the provider of the Other Samples until such time that such results are published in accordance with this Section 13. Each party shall use its best efforts, consistent with its established policies and procedures, to protect the confidentiality of the other Party’s Confidential Information. This Agreement applies to all confidential information (including the terms of this Agreement) except to the extent that the Confidential Information:

a.	Was part of the public domain at the time of disclosure;
b.	Became part of the public domain by publication or otherwise, except by breach of this Restated Agreement;
c.	Can be established to have been in the possession of Receiving Party at the time of disclosure and was not acquired directly or indirectly from the Disclosing Party under a confidentiality obligation;
d.	Was received from a third party without any restrictions; provided that the information was not obtained by that third party, directly or indirectly, in breach of a confidentiality obligation; or
e.	Can be established to have been developed by Receiving Party independently of any disclosure by Disclosing Party.

If a Disclosing Party requests protection of its Confidential Information by means not normally employed by the Receiving Party to protect its own confidential information, Disclosing Party agrees to reimburse Receiving Party in full for any costs it may incur in order to do so, which costs shall be pre-approved by the Disclosing Party. Further, should the Receiving Party be required by judicial or other governmental authority to disclose the Disclosing Party’s Confidential Information, the Receiving Party shall immediately inform and cooperate with the Disclosing Party in responding to such requirement in a manner that maintains the confidentiality of the information to the maximum extent possible.

Without limiting the foregoing, each Party will take at least those measures to protect the other Party’s Confidential Information that it takes to protect its own confidential information of a similar nature. Each Party agrees to immediately notify the other Party should it become aware of any unauthorized use or disclosure of Confidential Information.

The Receiving Party may disclose the Disclosing Party’s Confidential Information only to the Receiving Party’s and its Affiliates’ employees, consultants, or licensees who (a) have a need-to-know in order to perform or satisfy its obligations under this Restated Agreement and (b) are under obligation not to disclose or use Confidential Information, except as otherwise provided in this Restated Agreement.

Notwithstanding anything to the contrary in this Restated Agreement, it is expressly understood that Solexa shall have the right to disclose or authorize others to disclose the Other Results in any written or oral form it desires. In advance of any such publication, however, Solexa shall provide Pioneer with the opportunity to review any such disclosure for at least ten (10) business days in advance of any such disclosure. DuPont will have the right to comment within such period, and Solexa will consider such comments but will not be obligated to alter the contents of the proposed public disclosure, except if requested by DuPont to delete all references to DuPont or its Affiliates, or to delete any Confidential Information of DuPont.

Page 8 of 12

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

14.   Notice. Any notice required or permitted hereunder shall be sent to the parties via U.S. Mail, postage prepaid, or by personal service, facsimile or as may otherwise be permitted by law, at the following addresses:

DuPont:	SOLEXA:
E.I. du Pont de Nemours and Co.	Solexa, Inc.
Crop Genetics Research	25861 Industrial Blvd.
DuPont Experimental Station	Hayward, CA 94545
Rt. 141 at Henry Clay Rd.	USA
Wilmington, DE 19880-0353 USA
Attention: [*]	Attention: [*]
Fax: [*]	Fax: [*]

Either party may change its address by written notice to the other during the term. All notices relating to this Restated Agreement shall be in writing and shall be effective upon receipt.

15.   Further Actions. The Parties agree to promptly execute, acknowledge and deliver such further instruments, and to do all such other acts, as the Parties agree are necessary or appropriate in order to carry out the purposes and intent of this Restated Agreement.

16.   Governing Law. This Restated Agreement shall be construed in accordance with the laws of the State of California, without regard to its conflicts of laws principles.

17.   Assignment. This Restated Agreement shall not be assignable or otherwise transferable by either Party without the consent of the other Party, except that DuPont may, without such consent, assign this Restated Agreement to any purchaser of all or substantially all of the assets in the line of business to which this Restated Agreement pertains, or to any successor corporation that results from reincorporation, merger or consolidation of such Party with or into such purchaser or such corporation and DuPont may assign this Agreement to Affiliates. Upon assignment, the rights and obligations under this Agreement shall be binding upon and inure to the benefit of said purchaser or successor in interest.

18.   Publicity and Use of Names. Solexa and DuPont shall not to use the other’s name or trademarks (including those of the other’s Affiliates) in any advertising, publicity, publication or news release related to this Restated Agreement and its subject matter without the prior written consent of the other Party.

19.   Integrated Agreement, Amendment. This Restated Agreement contains all the terms agreed upon by both Parties with respect to the subject matter hereof and may not be amended except in writing and signed by both Parties. The terms of this Restated Agreement shall govern, in the case of conflict, over terms contained in the Work Plan or any form document including, but not limited to, quotes, invoices or proposals. The Previous Agreement is terminated as of the Effective Date of this instant Restated Agreement, provided that all work, results, inventions, rights, and obligations arising under or covered by the Previous Agreement shall continued to be governed by the terms and conditions of the Previous Agreement.

20.   Counterparts. This Restated Agreement may be executed in counterparts and by facsimile signature, which shall together constitute one and the same agreement.

Page 9 of 12

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives, as of the dates set forth below.

E.I. DU PONT DE NEMOURS AND COMPANY	SOLEXA, INC.
By: /s/ Robert T. Giaquinta	By: /s/ Mary L. Schramke
Name: Robert T. Giaquinta	Name: Mary L. Schramke
Title: Director	Title: Vice President & GM Services
Date: 31 March 2006	Taxpayer ID # 94-3161073
	Date: 4/4/06
	By: /s/ John West
	Name: John West
	Title: Chief Executive Officer
	Date: 4/4/06

Page 10 of 12

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Schedule A

2006 Work Plan
Finalized March 30, 2006

(Note: as used herein, “DuPont” includes DuPont’s Affiliate, Pioneer)

Principles for 2006:

DuPont obtains early access to SBS technology prior to formal commercial launch, for platform evaluation and processing of 2006 samples.

DuPont and Solexa cooperate to efficiently validate the platform for plant samples in gene expression and selected other application areas.

Consideration from DuPont tied to deliverables and/or milestones related to Solexa’s provision of SBS technology.

Objective as of end of 2006 is a completed evaluation of SBS performance from both Solexa’s SBS services and DuPont’s in-house use of the technology.

2006 Work Plan will be effective as of January 1, 2006.

For 2006:

$1.5 Million maximum payment from DuPont for delivered Solexa SBS Services and instruments/consumables.

[*] on [*] at [*].

[*] on [*] upon termination of [*] by [*].

The Project Champions (PCs) will be the following representatives:

     For DuPont : [*]

     For Solexa : [*]

SBS Technology delivery for 2006:

SBS Services:

• [*]

Category-2: Expanded Validation of SBS platform

• [*]

Category-3: DuPont discretionary Services and/or Consumables Kit

purchase

• [*]

SBS instrumentation/consumables:

• [*]

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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

Payments:

For the services performed and the deliverables provided to DuPont in 2006 as described in this work plan, DuPont will pay Solexa up to $1.5 million US dollars as follows:

Except for [*], all other payments in connection to the 2006 Work Plan will be based on [*] of [*], according to the schedule below. All payments except for [*] shall be made by DuPont following receipt of an invoice from Solexa detailing [*].

Deliverable/Milestone	Payment	Payment Date
[*]	[*]	[*]
[*]	[*]	[*]
[*]	[*]	[*]
[*]	[*]	[*]
[*]	[*]	[*]

[*]

SBS platform and instrument Objectives

• [*]

DuPont access to Solexa technology in 2007

Any service, consumables kits and instrument requests by DuPont in 2007 to be at DuPont’s election and to be covered by a separate supply/services agreement (as appropriate) to be negotiated in good faith. Solexa will provide at costs commensurate with other customers requesting similar volumes at same stage of development or commercialization. [*]

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, John West, Chief Executive Officer of Solexa, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Solexa, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2006

/s/ John West

John West

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Linda Rubinstein, Vice President and Chief Financial Officer of Solexa, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Solexa, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 15, 2006

/s/ Linda Rubinstein

Linda Rubinstein

Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION (1)

     Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), John West, Chief Executive Officer of Solexa, Inc. (the “Company”), and Linda Rubinstein, Vice President and Chief Financial Officer of the Company, each hereby certifies that, to the best of his or her knowledge:

1.	The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2006, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act, and
2.	The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

In Witness Whereof, the undersigned have set their hands hereto as of May 15, 2006.

/s/ John West

John West

Chief Executive Officer

/s/ Linda Rubinstein

Linda Rubinstein

Vice President and Chief Financial Officer

(1) This certification “accompanies” the Quarterly Report on Form 10-Q to which it relates, pursuant to Section 906 of the Sarbanes- Oxley Act of 2002, and is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Solexa, Inc. under the Securities Act or the Exchange Act (whether made before or after the date of the Quarterly Report on Form 10Q), irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906 has been provided to Solexa, Inc. and will be retained by Solexa, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.