<PAGE>
As filed with the Securities and Exchange Commission on July 27, 2000
Registration No. 333-33922
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 5
FORM S-1
REGISTRATION STATEMENT
Under The Securities Act of 1933
---------------
ILLUMINA, INC.
(Exact name of Registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
Delaware 3826 33-0804655
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
9390 Towne Centre Drive, Suite 200
San Diego, CA 92121
(858) 587-4290
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
Jay T. Flatley
President and Chief Executive Officer
9390 Towne Centre Drive, Suite 200
San Diego, CA 92121
(858) 587-4290
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Please send copies of all communications to:
<TABLE>
<S> <C>
Michael J. O'Donnell, Esq. Edwin D. Williamson, Esq.
Martin J. Waters III, Esq. Sullivan & Cromwell
Wilson Sonsini Goodrich & Rosati 1701 Pennsylvania Avenue, N.W.
Professional Corporation Washington, D.C. 20006
650 Page Mill Road (202) 956-7500
Palo Alto, CA 94304
(650) 493-9300
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), please check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum
Title of Each Class Number of Offering Aggregate Amount of
of Securities to be Shares Price Per Offering Registration
Registered Registered(1) Unit(2) Price(2) Fee
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par
value................. 6,900,000 $15.00 $103,500,000 $27,324
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(1) Includes 900,000 shares subject to the underwriters' over-allotment option.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. These securities may not be sold until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell nor does it seek an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated July 27, 2000.
6,000,000 Shares
[LOGO OF ILLUMINA]
Common Stock
-----------
This is an initial public offering of shares of common stock of Illumina,
Inc. All of the 6,000,000 shares of common stock are being sold by Illumina.
Prior to this offering, there has been no market for the common stock. It is
currently estimated that the initial public offering price per share will be
between $13.00 and $15.00. Application has been made for quotation of the
common stock on the Nasdaq National Market under the symbol "ILMN".
See "Risk Factors" beginning on page 8 to read about certain factors you
should consider before buying shares of the common stock.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price................................... $ $
Underwriting discount........................................... $ $
Proceeds, before expenses, to Illumina.......................... $ $
</TABLE>
To the extent that the underwriters sell more than 6,000,000 shares of common
stock, the underwriters have the option to purchase up to an additional 900,000
shares from Illumina at the initial public offering price less the underwriting
discount.
-----------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
Goldman, Sachs & Co.
Chase H&Q
SG Cowen
-----------
Prospectus dated , 2000.
<PAGE>
[ARTWORK]
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and our financial statements and notes to
those statements appearing elsewhere in this prospectus.
Our Business
Overview
We are a leading developer of next-generation tools for the large-scale
analysis of genetic variation and function. Understanding genetic variation and
function is critical to the development of personalized medicine, a key goal of
genomics. Our tools will provide information that could be used to improve
drugs and therapies, customize diagnoses and treatment, and cure disease.
Completion of the sequencing of the human genome will drive demand for tools
that can assist researchers in processing the billions of tests necessary to
convert raw genetic data into medically valuable information. This requires
functional analysis of highly complex biological systems, involving a scale of
experimentation not practical using currently available tools and technologies.
Using our technologies, we are developing a comprehensive line of products that
can address the scale of experimentation and the breadth of functional analysis
required to achieve the goals of molecular medicine.
Our patented BeadArray technology uses fiber optics to achieve a level of
array miniaturization that allows for a new scale of experimentation. An array
is a collection of miniaturized test sites arranged on a surface that permits
many tests, or assays, to be performed in parallel. By arranging our arrays in
a pattern that matches the wells of industry standard containers called
microtiter plates, we can simultaneously process up to 3 million assays, a
throughput significantly beyond the capability of any technology known to us.
We assemble our arrays using relatively inexpensive raw materials. Our
proprietary manufacturing process allows us to easily adapt the arrays to a
broad range of applications. These advances allow us to create next-generation
arrays with a unique combination of high throughput, cost effectiveness and
flexibility. In addition, our complementary Oligator technology permits
parallel synthesis of the millions of different pieces of DNA necessary to
perform large-scale genetic analysis on arrays.
We intend to provide both products and services that utilize our proprietary
technologies. Our first products, developed in partnership with PE Biosystems,
will include disposable BeadArray cassettes, reagent kits for analyzing
variation in genetic sequences, and instruments that automatically read data
from the BeadArray cassettes. An array cassette is a collection of individual
arrays arranged in a pattern, and a reagent kit is a set of chemicals used for
performing specific analyses. We also plan to commercialize services for the
analysis of genetic variation.
3
<PAGE>
Our Market Opportunity
We believe that advances in genomics will underpin the future of medicine.
To date, billions of dollars have been spent on the sequencing of the human
genome. We anticipate that during the next decade, a substantially greater
amount will be spent on efforts to understand the function of the genome and to
apply this information to medicine and related industries. A significant
portion of these funds will likely be used to purchase tools for the analysis
of genetic variation and function. We are initially focusing on the key
techniques for performing these analyses:
. SNP genotyping - a method for analyzing genetic variation by determining
which of the most common form of variation, called Single Nucleotide
Polymorphisms, or SNPs, are present in genetic sequences;
. gene expression profiling - the analysis of which genes are active in a
particular cell or group of cells; and
. proteomics - the process of determining which proteins are present in
cells and how they interact.
The complexity of biology, with combinations of over one hundred thousand
genes and potentially millions of genetic variations, will require an
unprecedented level of experimentation using these techniques. Unlocking the
full potential of the markets for these techniques requires a new generation of
high-throughput, cost-effective technologies.
We believe our technologies will have broad applicability in a variety of
other high-growth markets, such as high-throughput screening of pharmaceutical
candidates and chemical detection. One of our initial collaborations outside of
healthcare is with The Dow Chemical Company to design a system for identifying
chemicals to determine their purity prior to their introduction into a
manufacturing process.
Our Technologies
Our proprietary BeadArray technology combines fiber optic bundles and
specially prepared beads that self-assemble into an array. Each fiber optic
bundle contains thousands to millions of individual fibers depending on the
diameter of the bundle. In a separate process, we create sensors by affixing a
specific type of molecule to each of the billions of microscopic beads in a
given batch. The particular molecules on a bead define that bead's function as
a sensor. We combine batches of beads coated with specific molecules to form a
pool specific to the type of array we intend to create.
To form an array, we typically dip each fiber optic bundle into a pool of
coated beads. The coated beads are drawn into the wells, one bead per well, on
the end of each fiber in the bundle. The tens of thousands of beads at the end
of the fiber optic bundle comprise our BeadArray. One may perform an experiment
by then dipping the BeadArray into a prepared sample. The molecules in the
sample bind to their matching molecules on the coated bead. Since each bead
performs its own assay, we are able to make tens of thousands of quantitative
measurements simultaneously on each sample.
Using our BeadArray technology, we have addressed the limitations of the
tools for genetic analysis. We achieve high throughput with a high density of
test sites per array and our ability to format arrays in a pattern arranged to
match the wells of standard microtiter plates. We maximize
4
<PAGE>
cost effectiveness by reducing consumption of expensive reagents and valuable
samples, and through the low manufacturing cost associated with our BeadArray
technology. Our ability to vary the size, shape and format of the fiber optic
bundles and to create specific beads for various applications gives us the
flexibility to address multiple markets and market segments.
Our proprietary Oligator technology complements our BeadArray technology.
The Oligator synthesizes in parallel many different short segments of DNA to
meet the requirements of large-scale genomics applications. We believe that our
Oligator technology is substantially more cost effective and provides higher
throughput than available commercial alternatives.
Our Strategy
Our goal is to make our BeadArray platform the industry standard for
products and services utilizing array technologies. We plan to achieve this by:
. focusing on emerging high-growth markets;
. rapidly commercializing our BeadArray technology for SNP genotyping;
. partnering with multiple companies to expand our market opportunity;
. expanding our technologies into multiple product lines; and
. strengthening our technological leadership.
Company Information
We had no revenue during the period from our inception on April 28, 1998
through December 31, 1998. We recorded $0.5 million in revenue during the year
ended December 31, 1999 and $83,205 during the three-month period ended March
31, 2000. Our net losses were approximately $1.1 million, $5.5 million and $4.8
million, respectively, during the same periods. As of March 31, 2000, our total
accumulated deficit was $11.5 million. Substantially all our revenue has been
from government grants. We do not expect to ship any products before 2001.
We were incorporated in California in April 1998. We intend to reincorporate
in Delaware prior to the completion of this offering. Our principal executive
offices are located at 9390 Towne Centre Drive, Suite 200, San Diego,
California 92121. Our telephone number is (858) 587-4290.
Illumina, BeadArray, Array of Arrays and Oligator are trademarks of our
company. This prospectus also contains brand names, trademarks or service marks
of companies other than Illumina, and these brand names, trademarks and service
marks are the property of their respective holders.
5
<PAGE>
The Offering
<TABLE>
<S> <C>
Shares offered by Illumina..... 6,000,000 shares
Shares to be outstanding after
the offering.................. 31,541,095 shares
Proposed Nasdaq National Market
symbol........................ ILMN
Use of proceeds................ For general corporate purposes, including
commercialization of our BeadArray and Oligator
technologies, research and development, working
capital, funding our operating losses, capital
expenditures and potential acquisitions.
</TABLE>
The above information is based on 25,541,095 shares outstanding as of March
31, 2000 and excludes:
. 932,485 shares issuable upon exercise of options then outstanding at a
weighted average exercise price of $0.34 per share;
. 43,183 shares issuable upon exercise of warrants then outstanding at a
weighted average exercise price of $0.926 per share; and
. a total of 522,384 shares available for future issuance under our 1998
Incentive Stock Plan.
. a total of 500,000 shares available for future issuance under our 2000
Employee Stock Purchase Plan.
In June 2000, we authorized an additional 1,250,000 shares under our 1998
Incentive Stock Plan and 4,000,000 shares under our 2000 Stock Plan.
Unless otherwise noted, this prospectus assumes:
. our reincorporation in Delaware prior to this offering;
. the automatic conversion of our outstanding convertible preferred stock
into common stock upon the closing of this offering;
. the filing of our amended and restated certificate of incorporation
authorizing a class of 10,000,000 shares of undesignated preferred stock
prior to the closing of this offering; and
. no exercise by the underwriters of their option to purchase additional
shares of our common stock in the offering.
6
<PAGE>
Summary Financial Information
(in thousands, except per share data)
The following tables summarize our financial data for the periods presented.
The pro forma share data in the statement of operations data assumes the
conversion of all of our outstanding preferred stock into 18,836,297 shares of
common stock upon the closing of this offering. The as adjusted balance sheet
data reflects the sale of 6,000,000 shares of our common stock in the offering
at an estimated price of $14.00 per share, less estimated expenses payable by
us and the underwriting discount. You should read the following financial
information together with the "Selected Financial Information" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Period from
April 28, 1998 Three months
(inception) ended March
through Year ended 31,
December 31, December 31, ---------------
1998 1999 1999 2000
-------------- ------------ ------ -------
(Unaudited)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Total revenue..................... $ -- $ 474 $ 42 $ 83
Total operating expenses.......... 1,194 6,392 984 5,426
------- ------- ------ -------
Operating loss.................... (1,194) (5,918) (942) (5,343)
------- ------- ------ -------
Net loss.......................... (1,146) (5,518) (843) (4,846)
======= ======= ====== =======
Historical net loss per share,
basic and diluted................ $ (1.71) $ (3.91) $(1.21) $ (2.87)
======= ======= ====== =======
Historical weighted average shares
outstanding...................... 669 1,410 696 1,686
Pro forma net loss per share...... $ (0.40) $ (0.31)
======= =======
Pro forma weighted average shares
outstanding...................... 13,697 15,701
</TABLE>
<TABLE>
<CAPTION>
As of
March 31, 2000
-------------------
Actual As Adjusted
------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents
and short-term
investments............ $32,717 $109,537
Working capital......... 32,392 109,212
Total assets............ 34,430 111,250
Deferred revenue........ 2,500 2,500
Stockholders' equity.... 30,834 107,654
</TABLE>
7
<PAGE>
RISK FACTORS
Any investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below and all of the information
contained in this prospectus before deciding whether to purchase our common
stock. If any of the following risks actually occur, our business, financial
condition and results of operations would suffer. In such case, the trading
price of our common stock could decline, and you may lose all or part of your
investment in our common stock.
We Have Generated No Revenue from Product Sales to Date. We Expect to Continue
to Incur Net Losses and We May Not Achieve or Maintain Profitability.
Since inception, we have recognized no revenue from product sales. We have
incurred net losses since our inception. At March 31, 2000, our accumulated
deficit was approximately $11.5 million. We expect to continue to have
increasing net losses and negative cash flow. The magnitude of our net losses
will depend, in part, on the rate of growth, if any, of our revenues and on the
level of our expenses. To date, we have derived all of our revenues from grants
and partnerships. We expect to incur significant expenses for research and
development, for developing our manufacturing capabilities and for efforts to
commercialize our products. As a result, we expect that our operating expenses
will increase significantly in the near term and, consequently, we will need to
generate significant additional revenues to achieve profitability. Even if we
achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis.
Our Success Depends Upon The Increasing Availability of Genetic Information and
The Continued Emergence and Growth of Markets For Analysis of Genetic Variation
and Function.
We design our products primarily for applications in the life sciences and
pharmaceutical industries. The usefulness of our technology depends in part
upon the availability of genetic data. We are initially focusing on markets for
analysis of genetic variation and function, namely SNP genotyping, gene
expression profiling and proteomics. These markets are new and emerging, and
they may not develop as we anticipate, or reach their full potential. Other
methods of analysis of genetic variation and function may emerge and displace
the methods we are developing. Also, researchers may not seek or be able to
convert raw genetic data into medically valuable information through the
analysis of genetic variation and function. If genetic data is not available or
if our target markets do not emerge in a timely manner, or at all, demand for
our products will not develop as we expect, and we may never become profitable.
Our Success Depends on Market Acceptance of Our New and Unproven Technology.
Historically, life sciences and pharmaceutical companies have analyzed
genetic variation and function using a variety of technologies. Compared to the
existing technologies, our technologies are new and unproven. In order to be
successful, our products must meet the commercial requirements of the life
sciences and pharmaceutical industries as tools for the large-scale analysis of
genetic variation and function. Market acceptance will depend on many factors,
including:
. our ability and the ability of our collaborative partners to demonstrate
to potential customers the benefits and cost effectiveness of our
products and services relative to others available in the market;
. the extent of our partners' efforts to market, sell and distribute our
products;
8
<PAGE>
. our or our partners' ability to manufacture products in sufficient
quantities with acceptable quality and reliability and at an acceptable
cost; and
. the willingness and ability of customers to adopt new technologies
requiring capital investments.
Our products may not gain market acceptance. If our BeadArray technology
does not become widely used in the life sciences and pharmaceutical industries,
demand for our products will not develop as expected and it is unlikely that we
ever will become profitable.
We Are an Early Stage Company Deploying Unproven Technologies. If We Do Not
Develop Commercially Successful Products, We May Be Forced to Cease Operations.
We currently have no commercially available products. Our technologies are
in the early stages of development. You should evaluate us in light of the
uncertainties and complexities affecting an early stage company developing
tools for the life sciences and pharmaceutical industries.
We may not be successful in the commercial development of products. Prior to
their commercialization, products will require significant research and
development and investment, including testing, to demonstrate their technical
benefits and cost effectiveness. We have not proven our ability to develop and
commercialize products. We must conduct a substantial amount of additional
research and development before any of our products will be ready for sale.
Problems frequently encountered in connection with the development of
commercial products using new and unproven technologies might limit our ability
to develop and commercialize our products.
Commercialization of Our Technologies Depends On Partnerships and
Collaborations with Other Companies. If Our Current Partnership and
Collaborations Are Not Successful, or If We Are Not Able to Enter Into
Additional Partnerships and Collaborations in the Future, We May Not Be Able to
Develop Our Technologies or Products.
Since we currently do not possess all of the resources necessary to develop
and commercialize products that may result from our technologies, we will need
either to develop a sales, marketing and support group with relevant experience
or make appropriate arrangements with strategic partners to market and sell our
products. We have chosen to enter into arrangements to develop and
commercialize our initial products. We have entered into an agreement with PE
Biosystems to gain access to their proprietary chemistry format for use with
the initial products of the partnership. PE Biosystems also will fund, in part,
the development of these products. Our partnership agreement provides that
PE Biosystems will develop the detection instrument and reagent kits required
for use with these products, and will provide sales and marketing support for
the products. If our partnership with PE Biosystems is not successful, or if PE
Biosystems elects to terminate our partnership, we may not be able to develop
or successfully commercialize our initial products on a timely basis, or at
all. We intend to rely on other corporate partners and collaborators to develop
other chemistry formats and to gain access to genetic data for use with our
technologies. If we do not enter into additional partnership agreements, or if
these agreements are not successful, our ability to develop and commercialize
products will be impacted negatively and our revenues will decline.
We have limited or no control over the resources that any partner or
collaborator may devote to our products. Any of our present or future partners
or collaborators may not perform their obligations as expected. These partners
or collaborators may breach or terminate their agreements with us or otherwise
fail to meet their obligations or perform their collaborative activities
successfully and in a timely manner. Further, any of our partners or
collaborators may elect not to develop products arising
9
<PAGE>
out of our partnerships or collaborations or devote sufficient resources to the
development, manufacture or commercialization of these products. If any of
these events occur, we may not be able to develop our technologies or
commercialize our products and our ability to generate revenues will decrease.
We Have Limited Manufacturing Experience. If We Are Unable to Find Third-Party
Manufacturers to Manufacture Our Products or Unless We Develop Our Product
Capability, We May Not Be Able to Launch Our Products in a Timely Manner, or at
All.
We have no experience manufacturing our products in the volumes that will be
necessary for us to achieve significant commercial sales. To date, we have
limited our manufacturing activities to the manufacturing of prototype systems
for testing purposes and for internal use by our collaborative partners.
The nature of our products requires customized components that currently are
available from a limited number of sources. For example, we currently obtain
the fiber optic bundles included in our products from a single source. If we
are unable to secure a sufficient supply of fiber optic bundles or other
product components, we will be unable to meet future demand for our products.
We will need to enter into contractual relationships with manufacturers for
commercial scale production of our products, or develop these capabilities
internally, and we cannot assure you that we will be able to do so on a timely
basis, for sufficient quantities or on commercially reasonable terms.
Accordingly, we may not be able to establish or maintain reliable, high-volume
manufacturing at commercially reasonable costs.
We May Encounter Difficulties in Managing Our Growth That Could Increase Our
Losses.
We have experienced a period of rapid and substantial growth that has
strained our human and capital resources. If our growth continues and we are
unable to manage it effectively, our business will suffer and our stock price
could decline. The number of our employees increased from nine at December 31,
1998 to 60 at March 31, 2000. The need to effectively manage our operations and
growth requires us to continue to expend funds to improve our operational,
financial and management controls, reporting systems and procedures, and to
attract and retain sufficient numbers of talented employees. If we are unable
to successfully implement improvements to our management information and
control systems in an efficient or timely manner, or if we encounter
deficiencies in existing systems and controls, management may receive
inadequate information to manage our day-to-day operations.
We Expect Intense Competition in Our Target Markets, Which Could Render Our
Products Obsolete or Substantially Limit the Volume of Products That We Sell.
This Would Limit Our Ability to Compete and Achieve Profitability.
We compete with life sciences companies that design, manufacture and market
instruments for analysis of genetic variation and function and other
applications using technologies such as two-dimensional electrophoresis,
capillary electrophoresis, mass spectrometry, flow cytometry, microfluidics,
and mechanically deposited, inkjet and photolithographic arrays. For an
explanation of these technologies, see "Business--Current Technologies and
Their Limitations." We anticipate that we will face increased competition in
the future as new companies enter the market with new technologies. The markets
for our products are characterized by rapidly changing technology, evolving
industry standards, changes in customer needs, emerging competition and new
product introductions. One or more of our competitors may render our technology
obsolete or uneconomical. Many of our competitors have greater financial and
personnel resources and more experience in research and development than we
have. Furthermore, the life sciences and pharmaceutical companies, which are
our potential customers and strategic partners, could develop competing
products.
10
<PAGE>
Our Technologies Can Be Applied to Many Different Industries, and We May Fail
to Focus on the Most Profitable Areas.
Our technologies may be applicable to numerous, diverse industries. However,
we have limited financial and managerial resources. Therefore, we will be
required to focus on product candidates in selected industries and to forego
efforts with regard to other products and industries. Our decisions may not
produce viable commercial products and may divert our resources from more
profitable market opportunities.
Any Inability to Adequately Protect Our Proprietary Technologies Could Harm Our
Competitive Position.
Our success will depend in part on our ability to obtain patents and
maintain adequate protection of our intellectual property in the United States
and other countries. If we do not protect our intellectual property adequately,
competitors may be able to use our technologies and thereby erode our
competitive advantage. The laws of some foreign countries do not protect
proprietary rights to the same extent as the laws of the United States, and
many companies have encountered significant problems in protecting their
proprietary rights abroad. These problems can be caused by the absence of rules
and methods for defending intellectual property rights.
The patent positions of companies developing tools for the life sciences and
pharmaceutical industries, including our patent position, generally are
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. We will
apply for patents covering our technologies and products, as we deem
appropriate. However, our applications may be challenged and may not 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. There also is risk that others may
independently develop similar or alternative technologies or design around our
patented technologies. In addition, others may challenge or invalidate our
patents, or our patents may fail to provide us with any competitive advantage.
We also rely upon trade secret protection for our confidential and
proprietary information. We have taken security measures to protect our
proprietary information. These measures, however, may not provide adequate
protection for our trade secrets or other proprietary information. We seek to
protect our proprietary information by entering into confidentiality agreements
with employees, collaborators and consultants. Nevertheless, employees,
collaborators or consultants may still disclose our proprietary information,
and we may not be able to meaningfully protect our trade secrets. In addition,
others may independently develop substantially equivalent proprietary
information or techniques or otherwise gain access to our trade secrets.
Litigation or Other Proceedings or Third Party Claims of Intellectual Property
Infringement Could Require Us to Spend Time and Money and Could Shut Down Some
of Our Operations.
Our commercial success depends in part on our non-infringement of the
patents or proprietary rights of third parties. Third parties may assert that
we are employing their proprietary technology without authorization. In
addition, third parties may obtain patents in the future and claim that use of
our technologies infringes these patents. We could incur substantial costs and
divert the attention of our management and technical personnel in defending
ourselves against any of these claims. We may incur the same liabilities in
enforcing our patents against others. Furthermore, parties making claims
against us may be able to obtain injunctive or other equitable relief, which
effectively could block our ability to further develop, commercialize and sell
products, and could result in the award of substantial damages against us. In
the event of a successful claim of infringement against us, we
11
<PAGE>
may be required 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. In that event, we could encounter delays in product introductions while
we attempt to develop alternative methods or products. Defense of any lawsuit
or failure to obtain any of these licenses could prevent us from
commercializing available products.
If We Lose Our Key Personnel or Are Unable to Attract and Retain Additional
Personnel, We May Be Unable to Achieve Our Goals.
We are highly dependent on our management and scientific personnel. The loss
of their services could adversely impact our ability to achieve our business
objectives. We will need to hire additional qualified personnel with expertise
in molecular biology, chemistry and biological information processing. We
compete for qualified management and scientific personnel with other
biotechnology companies, universities and research institutions, particularly
those focusing on genomics. Competition for these individuals, particularly in
the San Diego area, is intense, and the turnover rate can be high. Failure to
attract and retain management and scientific personnel would prevent us from
pursuing collaborations or developing our products or technologies.
Our planned activities will require additional expertise in specific
industries and areas applicable to the products developed through our
technologies, including the life sciences and healthcare industries and
molecular biology, chemistry and biological information processing. Thus, we
will need to add new personnel, including management, and develop the expertise
of existing management. The failure to do so could impair the growth of our
business.
Our Collaborations With Outside Scientists May Be Subject to Change, Which
Could Limit Our Access to Their Expertise.
We work extensively with scientific advisors and collaborators at academic
and other institutions to develop applications of our technologies. These
scientists are not our employees and may have other commitments that could
limit their availability. Although our scientific advisors generally agree not
to do competing work, if a conflict of interest between their work for us and
their work for another entity arises, we may lose their services. Although our
scientific advisors and collaborators sign agreements not to disclose our
confidential information, it is possible that some of our valuable proprietary
information could become publicly known through them.
We May Need Additional Capital in the Future. If Additional Capital is Not
Available On Acceptable Terms, We May Have to Curtail or Cease Operations.
Our future capital requirements will be substantial and will depend on many
factors including payments received under collaborative agreements and
government grants, the progress and scope of our collaborative and independent
research and development projects, and the filing, prosecution and enforcement
of patent claims. Changes also may occur that would require our available
capital resources to be consumed significantly sooner than we expect.
We expect that the proceeds from this offering, combined with our current
cash and cash equivalents, investments and funding from existing strategic
alliances and grants, will be sufficient to fund our anticipated operating
needs for at least the next 24 months. If our capital resources are
insufficient to meet future capital requirements, we may have to raise
additional funds to continue the development of our technologies and complete
the commercialization of products, if any, resulting from our technologies. We
may be unable to raise sufficient additional capital. If we fail to do so, we
may have to curtail or cease operations.
12
<PAGE>
Management May Invest or Spend the Proceeds of This Offering in Ways With Which
You May Not Agree and in Ways That May Not Yield a Return.
Management will have broad discretion over the use of proceeds from this
offering. Stockholders may not agree with management's decisions, and our use
of the proceeds may not yield a significant return, or any return at all. We
intend to use a majority of the proceeds from this offering for research and
development, working capital and other general corporate purposes and to
finance potential acquisitions. Because of the number and variability of
factors that determine our use of the net proceeds from this offering, we
cannot assure you that our actual use will not vary substantially from our
currently planned uses. Initially, we intend to invest the net proceeds from
this offering in income producing, investment grade securities.
We Expect that Our Quarterly Results of Operations Will Fluctuate. This
Fluctuation Could Cause Our Stock Price to Decline.
Our quarterly operating results have fluctuated in the past and are likely
to do so in the future. These fluctuations could cause our stock price to
fluctuate significantly or decline. A large portion of our expenses are
relatively fixed, including expenses for facilities, equipment and personnel.
In addition, we expect operating expenses to increase significantly in 2000.
Accordingly, if revenues do not grow as anticipated, we may not be able to
correspondingly reduce our operating expenses. Failure to achieve anticipated
levels of revenues, therefore, could significantly harm our operating results
for a particular fiscal period.
Due to the possibility of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. Our operating results in some
quarters may not meet the expectations of stock market analysts and investors.
In that case, our stock price probably would decline.
If We Engage in Any Acquisition, We Will Incur a Variety of Costs, and May
Never Realize the Anticipated Benefits of the Acquisition.
If appropriate opportunities become available, we may attempt to acquire
businesses, technologies, services or products that we believe are a strategic
fit with our business. We currently have no commitments or agreements with
respect to any material acquisitions. If we do undertake any acquisition, the
process of integrating an acquired business, technology, service or product may
result in unforeseen operating difficulties and expenditures and may absorb
significant management attention that would otherwise be available for ongoing
development of our business. Moreover, we may fail to realize the anticipated
benefits of any acquisition. Future acquisitions could reduce your ownership in
Illumina and could cause us to incur debt, expose us to future liabilities and
result in amortization expenses related to goodwill and other intangible
assets.
In addition, recent proposed changes in the Financial Accounting Standards
Board rules for merger accounting may affect the cost of making acquisitions or
of being acquired. For example, if these proposed changes become effective, we
likely would have to record goodwill or other intangible assets that we would
amortize to earnings if we merge with another company. This amortization would
adversely impact our future operating results. In addition, a prospective
acquiror of Illumina might be less inclined to acquire us if they are required
to amortize goodwill or other intangible assets. Further, accounting rules
changes that reduce the availability of immediate write-offs of the value of
in-process research and development in connection with an acquisition could
result in the capitalization and amortization of these amounts, which would
negatively impact our results of operations in future periods.
13
<PAGE>
Our Stock Price Could Be Extremely Volatile. You May Not Be Able to Resell Your
Shares at or Above the Initial Public Offering Price.
Prior to this offering, there has been no public market for shares of our
common stock. An active trading market may not develop or be sustained
following completion of this offering. The initial public offering price for
the shares will be determined by negotiations between us and representatives of
the underwriters. This price may bear no relationship to the price at which our
common stock will trade upon completion of this offering. The stock market has
experienced significant price and volume fluctuations, and the market prices of
technology companies, particularly life sciences companies, have been highly
volatile. You may not be able to resell your shares at or above the initial
public offering price.
In the past, companies that have experienced volatility in the market price
of their stock have been the objects of securities class action litigation. If
we were the object of securities class action litigation, it could result in
substantial costs and a diversion of management's attention and resources.
Future Sales of Our Common Stock May Depress Our Stock Price.
The market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market after the closing
of this offering, or the perception that these sales could occur. In addition,
these factors could make it more difficult for us to raise funds through future
offerings of common stock. There will be approximately 31,541,095 shares of
common stock outstanding immediately after this offering, or approximately
32,441,095 shares if the representatives of the underwriters exercise their
over-allotment option in full. These shares, other than the shares sold in the
offering, will become available for sale in the public market as follows:
. 264,768 shares that become eligible for sale at various times between
the date of this offering and the date 90 days after the effective date
of this offering;
. an additional 15,862,985 shares that become eligible for sale beginning
180 days after the effective date of this offering;
. an additional 82,372 shares that become eligible for sale upon exercise
of vested options 90 days after the date of this prospectus and an
additional 41,755 shares that become eligible for sale upon the exercise
of vested options 180 days after the date of this prospectus; and
. an additional 9,413,342 shares that become eligible for sale at various
times thereafter upon the expiration of applicable holding periods.
Some of Our Existing Stockholders Can Exert Control Over Us, and May Not Make
Decisions That Are in the Best Interests of All Stockholders.
After this offering, our officers, directors and principal stockholders
(greater than 5% stockholders) together will control approximately 45.9% of our
outstanding common stock. As a result, these stockholders, acting together,
would be able to exert significant influence over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. In addition, this concentration of
ownership may delay or prevent a change of control of our company, even when a
change may be in the best interests of our stockholders. The interests of these
stockholders may not always coincide with our interests as a company or the
interests of other stockholders. Accordingly, these stockholders could cause us
to enter into transactions or agreements that we would not otherwise consider.
14
<PAGE>
Our Operations Must Comply With Environmental Statutes and Regulations, and Any
Failure to Comply Could Result in Extensive Costs Which Would Harm Our
Business.
The manufacture of our products involves the use, transportation, storage
and disposal of hazardous substances and is subject to related environmental
and health and safety statutes and regulations. Although we currently use
fairly small quantities of hazardous substances, as we expand our operations,
the increased use of hazardous substances will lead to additional and more
stringent requirements. This may cause us to incur substantial costs to
maintain compliance with applicable statutes and regulations. In addition, our
failure to comply with laws and regulations and any costs associated with
unexpected and unintended releases of hazardous substances by us into the
environment, or at disposal sites used by us, could expose us to substantial
liability in the form of fines, penalties, remediation costs or other damages,
or could lead to a shut down of our operations. We are not aware of any current
claims associated with our use of hazardous substances. It is our intent to
remain at all times in full compliance with all applicable environmental and
health and safety laws and regulations.
15
<PAGE>
FORWARD-LOOKING STATEMENTS
You should not rely on forward-looking statements in this prospectus. This
prospectus, including the sections entitled "Prospectus Summary", "Risk
Factors", "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business", contains forward-looking statements
within the meaning of the federal securities laws. These statements relate to
future events or our future financial performance and involve known and unknown
risks, uncertainties and other factors that may cause our or our industry's
actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance
or achievements expressed or implied by the forward-looking statements. These
risks and other factors include those listed under "Risk Factors" and elsewhere
in this prospectus. In some cases, you can identify forward-looking statements
by terminology such as "may", "will", "should", "expect", "intend", "plan",
"anticipate", "believe", "estimate", "predict", "potential", "continue" or the
negative of these terms or other comparable terminology. Examples of these
forward-looking statements include, but are not limited to, statements
regarding the following:
. the introduction and development of new products, product improvements
and new services;
. the applicability and usefulness of our technologies in various markets
and industries;
. the success of our technologies;
. emerging markets in functional genetic analysis, namely SNP genotyping,
gene expression profiling and proteomics, and the future growth of these
markets;
. demand for increased throughput in genetic analysis;
. continued advances in genomics;
. the potential to derive medically valuable information from raw genetic
data and the further potential to use this information to improve drugs
and therapies, to customize diagnosis and treatment, and cure disease;
. potential future partnerships, collaborations and acquisitions;
. growth in our research and development, general and administrative
expenses;
. the proceeds of this offering, combined with our cash, cash equivalents,
investments, and funding through grants and collaborations being
sufficient to fund our anticipated operating needs for the next 24
months; and
. the lack of a material impact of the adoption of SFAS No. 133.
These statements are only predictions. In evaluating these statements, you
should consider various factors, including the risks outlined under "Risk
Factors." These factors may cause actual events or our results to differ
materially from those expressed or implied by any forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
forward-looking statements. We are under no duty and do not intend to update
any of the forward-looking statements after the date of this prospectus or to
conform our prior statements to actual results.
16
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 6,000,000 shares of
common stock that we are selling in this offering will be approximately $76.8
million ($88.5 million if the underwriters exercise their over-allotment option
in full) based on an assumed public offering price of $14.00 per share and
after deducting the estimated underwriting discount and estimated offering
expenses payable by us.
We intend to use the net proceeds of this offering for general corporate
purposes including:
. commercialization of our BeadArray and Oligator technologies;
. research and development;
. working capital;
. funding our operating losses;
. capital expenditures; and
. possible acquisitions.
The amounts that we actually expend for working capital purposes will vary
significantly depending on a number of factors, including future revenue
growth, if any, and the amount of cash we generate from operations. As a
result, we will retain broad discretion in the allocation of the net proceeds
of this offering. In addition, we may use a portion of the net proceeds for
further development of our products through acquisitions of complementary
businesses, products and technologies. However, we have no present commitments
or agreements with respect to any acquisitions. We intend to invest the net
proceeds primarily in income producing, investment-grade U.S. government
securities.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently expect to retain any future earnings for use in the operation and
expansion of our business and do not anticipate paying any cash dividends.
17
<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization as of March 31,
2000 and as adjusted to reflect the automatic conversion of our outstanding
preferred stock into 18,836,297 shares of common stock upon the closing of this
offering and the sale of 6,000,000 shares of our common stock at an estimated
price of $14.00 per share, less estimated expenses payable by us and the
underwriting discount. You should read this table in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and the notes to those statements
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Actual As Adjusted
------- -----------
(in thousands,
except share data)
<S> <C> <C>
Stockholders' equity:
Convertible preferred stock: authorized--50,000,000
shares actual (no par value) and 10,000,000 shares as
adjusted ($0.01 par value); issued and outstanding--
18,836,297 shares actual and none as adjusted.......... $37,398 $ --
Common stock, $0.01 par value: authorized--60,000,000
shares actual and 120,000,000 shares as adjusted;
issued and outstanding--6,704,798 shares actual and
31,541,095 shares as adjusted.......................... 67 315
Additional paid-in capital.............................. 23,686 106,046
Deferred compensation................................... (18,768) (18,768)
Unrealized loss on investments.......................... (40) (40)
Accumulated deficit..................................... (11,509) (11,509)
------- --------
Total stockholders' equity................................ $30,834 $107,654
======= ========
</TABLE>
The outstanding share information excludes shares issuable upon exercise of
outstanding options and warrants. See the paragraph following the table under
"Prospectus Summary--The Offering."
18
<PAGE>
DILUTION
Our pro forma net tangible book value as of March 31, 2000 was $30.8
million, or $1.20 per share. Pro forma net tangible book value per share
represents the amount of our total tangible assets reduced by the amount of our
total liabilities and divided by the total number of shares of common stock
then outstanding after giving effect to the automatic conversion of our
convertible preferred stock. Dilution in pro forma net tangible book value per
share represents the difference between the amount per share paid by purchasers
of shares of common stock in this offering and the pro forma net tangible book
value per share of common stock immediately after the completion of this
offering. After giving effect to the sale of the shares of common stock offered
by us at an assumed initial public offering price of $14.00 per share, and
after deducting the estimated underwriting discounts and commissions and
estimated offering expenses payable by us, our pro forma net tangible book
value as of March 31, 2000 would have been approximately $107.6 million or
$3.41 per share of common stock. This represents an immediate increase in
pro forma net tangible book value of $2.21 per share to existing stockholders
and an immediate dilution of $10.59 per share to new investors of common stock.
The following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $14.00
Pro forma net tangible book value per share as of March 31,
2000........................................................ $1.20
Increase per share attributable to new investors............. 2.21
-----
Pro forma net tangible book value per share after this
offering...................................................... 3.41
------
Dilution per share to new investors............................ $10.59
======
</TABLE>
The following table summarizes, on a pro forma basis after giving effect to
the offering (based on an assumed initial public offering price of $14.00 per
share), as of March 31, 2000, the differences between the existing stockholders
and new investors with respect to the number of shares of common stock
purchased from us, the total consideration paid to us and the average price per
share paid:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 25,541,095 81% $ 39,940,480 32% $ 1.56
New investors........... 6,000,000 19% 84,000,000 68% $14.00
---------- --- ------------ ---
Total................. 31,541,095 100% $123,940,480 100%
========== === ============ ===
</TABLE>
The foregoing discussion and tables are based upon the number of shares
actually issued and outstanding on March 31, 2000 and assume no exercise of the
options and warrants then outstanding. See the first paragraph following the
table under "Prospectus Summary--The Offering". Assuming the exercise of all of
these options and warrants, the number of shares purchased by existing
shareholders would be 26,516,763, or 82%, the total consideration paid by
existing shareholders would be $40,297,512, or 32%, for an average price per
share of $1.52 and the dilution per share to new investors would be $10.68.
19
<PAGE>
SELECTED FINANCIAL INFORMATION
(in thousands, expect per share data)
The statement of operations data set forth below for the period from April
28, 1998 (inception) to December 31, 1998 and for the year ended December 31,
1999 and the balance sheet data at December 31, 1998 and 1999 are derived from
our financial statements that have been audited by Ernst & Young LLP, which are
included elsewhere in this prospectus, and are qualified by reference to those
financial statements. The data for the three months ended March 31, 1999 and
2000 and at March 31, 2000 are derived from unaudited financial statements
included elsewhere in this prospectus. We have prepared this unaudited
information on the same basis as the audited financial statements and have
included all adjustments, consisting only of normal recurring adjustments, that
we consider necessary for a fair presentation of our financial position at such
date and our operating results for these periods. You should read the selected
financial information set forth below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
our financial statements and related notes appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Period from
April 28,
1998 Three months
(inception) ended
through Year ended March 31,
December 31, December 31, ---------------
1998 1999 1999 2000
------------ ------------ ------ -------
(Unaudited)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Grant and collaborative revenue..... $ -- $ 474 $ 42 $ 83
------- ------- ------ -------
Total revenue..................... -- 474 42 83
Operating expenses:
Selling, general and administrative
(exclusive of stock based
compensation)..................... 345 1,349 164 615
Research and development (exclusive
of stock based compensation)...... 771 4,085 720 3,625
Amortization of deferred
compensation, and other non-cash
compensation charges.............. 78 958 100 1,186
------- ------- ------ -------
Total operating expenses.......... 1,194 6,392 984 5,426
------- ------- ------ -------
Operating loss...................... (1,194) (5,918) (942) (5,343)
Interest income, net................ 48 400 99 497
------- ------- ------ -------
Net loss............................ $(1,146) $(5,518) $ (843) $(4,846)
======= ======= ====== =======
Historical net loss per share, basic
and diluted........................ $ (1.71) $ (3.91) $(1.21) $ (2.87)
======= ======= ====== =======
Historical weighted average shares
outstanding........................ 669 1,410 696 1,686
Pro forma net loss per share........ $ (0.40) $ (0.31)
======= =======
Pro forma weighted average shares
outstanding........................ 13,697 15,701
</TABLE>
<TABLE>
<CAPTION>
As of
December 31, March 31,
1998 1999 2000
------ ------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-term
investments..................................... $8,234 $33,088 $32,717
Working capital.................................. 8,231 32,881 32,392
Total assets..................................... 8,557 33,895 34,430
Deferred revenue................................. -- 1,250 2,500
Convertible preferred stock...................... 9,398 37,398 37,398
Stockholders' equity............................. 8,380 32,032 30,834
</TABLE>
See our financial statements for a description of the computation of
historical and pro forma net loss per share and the number of shares used in
the historical and pro forma per share calculations in "Statement of Operations
Data" above.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with "Selected Financial Data" and
our financial statements and related notes included elsewhere in this
prospectus. In addition to historical information, the discussion and analysis
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated by these forward-
looking statements due to factors including, but not limited to, those factors
set forth under "Risk Factors" and elsewhere in this prospectus.
Overview
We were founded and began operations in April 1998. We are developing next-
generation tools that will permit the large-scale analysis of genetic variation
and function. To date, we have generated revenues primarily from government
grants from the National Institutes of Health. We have entered into a strategic
partnership with PE Biosystems and research collaborations with Dow Chemical,
Third Wave Technologies and PyroSequencing. We expect to commercialize our
first products in 2001 in partnership with PE Biosystems. We have not entered
into any commercial agreements with our research collaborators, but we may do
so in the future.
We have dedicated substantial resources to the development of our
proprietary technologies. We have designed our technologies to provide the
throughput, cost effectiveness and flexibility necessary to investigate and
understand genetic variation and function on the large scale necessary to
extract medically valuable information from raw genetic data.
Our revenues are primarily attributable to research funding. We recognize
revenues related to research funding as we incur related research and
development expenses. Our strategic partners often pay us before we recognize
the related revenues, and we defer these payments until we earn them. As of
March 31, 2000, we had deferred revenue of $2.5 million.
We have incurred substantial operating losses since our inception. As of
March 31, 2000, our accumulated deficit was $11.5 million, and total
stockholders' equity was $30.8 million. We expect to incur additional operating
losses over the next several years as we continue to fund internal research and
development, develop our technologies and commercialize products based on those
technologies.
Results of Operations
Comparison of Three Months Ended March 31, 1999 and 2000
Revenue
Revenue for the three months ended March 31, 1999 and 2000 were $42,233 and
$83,205, respectively. Government grants accounted for 100% and 89% of our
total revenue for the three months ended March 31, 1999 and 2000, respectively.
Research and Development Expenses
Our research and development expenses consist primarily of salaries and
other personnel-related expenses, facility costs and supplies. Research and
development expenses increased $2.9 million to $3.6 million for the three
months ended March 31, 2000, from $0.7 million for the three months ended March
31, 1999. A charge of $1.6 million related to the purchase of in-process
technologies was recorded in March 2000. Of such increase, $1.6 million was
related to the purchase of in-process technologies. The balance was primarily
due to increased staffing and other personnel-related costs to support our
BeadArray technology. Increased staffing also caused stock based
21
<PAGE>
compensation related to research and development employees and consultants to
increase by $0.7 million to $0.8 million for the three months ended March 31,
2000 from approximately $85,000 for the three months ended March 31, 1999. We
expect that our research and development expenses will increase substantially
to support our collaborative research programs, internal product research and
development and technology development.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel costs
for finance, human resources, business development and general management, as
well as professional fees, such as expenses for legal and accounting services.
General and administrative expenses increased $0.4 million to $0.6 million for
the three months ended March 31, 2000 from $0.2 million for the three months
ended March 31, 1999. Stock based compensation related to general and
administrative employees, directors and consultants increased $0.4 million to
$0.4 million for the three months ended March 31, 2000 from approximately
$16,000 for the three months ended March 31,1999. These increases were
primarily attributable to an increase in staffing necessary to manage and
support our growth. We expect that our general and administrative expenses will
increase as we expand our legal and accounting staff, add infrastructure and
incur additional costs to support our growth and requirements as a public
company.
Amortization of Deferred Compensation and Other Non-Cash Compensation Charges
In connection with the grant of stock options and sale of restricted common
stock to employees, founders and directors, we recorded deferred compensation
of approximately $0.3 million and $12.6 million for the three months ended
March 31, 1999 and 2000, respectively. We recorded this amount as a component
of stockholders' equity and will amortize the amount as a charge to operations
over the vesting period of the stock and options. We recorded amortization of
this deferred compensation of approximately $48,000 and $0.8 million for the
three months ended March 31, 1999 and 2000, respectively. We recorded an
additional $52,000 and $0.3 million of expense related to restricted common
stock sold to consultants for the three months ended March 31, 1999 and 2000,
respectively, which was expensed as our rights to repurchase the common stock
lapsed.
For employees, founders and directors, deferred compensation represents the
difference between the exercise price of the option or purchase price of the
stock and the deemed fair value of our common stock on the date of grant in
accordance with Accounting Principles Board Opinion No. 25 and its related
interpretations. For consultants, deferred compensation is recorded at the fair
value for the options granted or stock sold in accordance with Statement of
Financial Accounting Standards No. 123 and Emerging Issues Task Force No. 96-
18.
We recognize compensation expense over the vesting period for employees,
founders and directors, using an accelerated amortization methodology in
accordance with Financial Accounting Standards Board interpretation No. 28. In
February 2000, we modified all our consultant agreements to include assurances
that the contracts would be fulfilled. In accordance with these modifications,
we recorded additional deferred compensation of $3.0 million as a component of
stockholders' equity and will amortize this amount as a charge to operations
over the vesting period of the stock and options. We recorded amortization of
this deferred compensation of approximately $80,000 for the three months ended
March 31, 2000.
Other Income
Other income, net of expenses, primarily consists of interest income, net of
interest expense. Interest income, which represents income earned on our cash
and cash equivalents and investments, was $0.5 million for the three months
ended March 31, 2000 as compared to $0.1 million for the
22
<PAGE>
three months ended March 31, 1999. Changes in interest income were due
primarily to changes in our average cash and investment balances during these
periods. There was no interest expense in either period.
Comparison of Years Ended December 31, 1998 and 1999
Revenue
Revenue for the year ended December 31, 1999 was $0.5 million, 92% of which
was from government grants. We had no revenue for the period from our inception
on April 28, 1998 through December 31, 1998.
Research and Development
Research and development expenses increased $3.2 million to $4.0 million for
the year ended December 31, 1999, from $0.8 million for the period from our
inception on April 28, 1998 through December 31, 1998. Stock based compensation
related to research and development employees and consultants increased $0.5
million to $0.6 million for the year ended December 31, 1999 from approximately
$62,000 for the period from our inception on April 28, 1998 through December
31, 1998. These increases were primarily due to increased staffing and other
personnel costs to support the development of our technologies.
General and Administrative Expenses
General and administrative expenses increased $1.0 million to $1.3 million
for the year ended December 31, 1999 from $0.3 million for the period from our
inception on April 28, 1998 through December 31, 1998. Stock based compensation
related to general and administrative employees, directors and consultants
increased $0.3 million to $0.3 million for the year ended December 31, 1999
from approximately $16,000 for the period from our inception on April 28, 1998
through December 31, 1998. These increases were primarily attributable to an
increase in staffing necessary to manage and support our growth.
Amortization of Deferred Compensation and Other Non-Cash Compensation Charges
In connection with the grant of stock options and sale of restricted common
stock to employees, founders and directors, we recorded deferred compensation
of approximately $0.3 million and $4.3 million for the period from our
inception on April 28, 1998 through December 31, 1998 and the year ended
December 31, 1999, respectively. We recorded this amount as a component of
stockholders' equity and will amortize the amount as a charge to operations
over the vesting period of the stock and options. We recorded amortization of
this deferred compensation of approximately $33,000 and $0.6 million for the
period from our inception on April 28, 1998 through December 31, 1998 and the
year ended December 31, 1999, respectively. We recorded an additional $45,000
and $0.4 million of expense related to restricted common stock sold to
consultants for the period from our inception on April 28, 1998 through
December 31, 1998 and the year ended December 31, 1999, respectively, which is
expensed as our rights to repurchase the common stock lapse.
Other Income
Interest income was $0.4 million for the year ended December 31, 1999 as
compared to $48,000 for the period from our inception on April 28, 1998 through
December 31, 1998. Interest expense was $48,000 for the year ended December 31,
1999. There was no interest expense for the period from our inception on
April 28, 1998 through December 31, 1998.
Provision for Income Taxes
We incurred net operating losses for the period from our inception on April
28, 1998 through December 31, 1998 and the year ended December 31, 1999, and
accordingly, we did not pay any federal or state income taxes. As of December
31, 1999, we had net operating loss carryforwards for federal tax purposes of
approximately $5.1 million, which begin to expire in 2018.
23
<PAGE>
As of December 31, 1999, we had net operating loss carryforwards for state
tax purposes of approximately $5.3 million, which begin to expire in 2006. We
also had federal and state research and development tax credit carryforwards of
approximately $0.3 million and $0.2 million, respectively, which begin to
expire in 2018, unless previously utilized.
Our utilization of the net operating losses and credits may be subject to
substantial annual limitations pursuant to Section 382 and 383 of the Internal
Revenue Code, and similar state provisions, as a result of changes in our
ownership structure. These annual limitations may result in the expiration of
net operating losses and credits prior to utilization.
Liquidity and Capital Resources
Since inception, we have financed our business primarily through private
placements of preferred stock with net proceeds of $37.4 million, and funding
from strategic partners and government grants. As of March 31, 2000, we had
cash, cash equivalents and investments of approximately $32.7 million. We
currently invest our funds in U.S. investment-grade corporate debt securities
with maturities not exceeding 18 months.
Our operating activities used cash of $1.1 million and $2.9 million in the
period from our inception on April 28, 1998 through December 31, 1998 and the
year ended December 31, 1999 respectively, and $0.8 million and $0.7 million in
the three months ended March 31, 1999 and 2000, respectively. Our use of cash
for these periods primarily resulted from our losses from operations offset by
receipt of funding from collaborators.
Our investing activities used cash of $12.3 million in the year ended
December 31, 1999, and $5.3 million and $6.3 million in the three months ended
March 31, 1999 and 2000, respectively, substantially all of which consisted of
purchases of investment securities. We had minimal investing activities in the
period from our inception on April 28, 1998 through December 31, 1998.
Our financing activities provided $9.3 million, $28.1 million and $0.9
million in the period from our inception on April 28, 1998 through December 31,
1998, the year ended December 31, 1999 and the three months ended March 31,
2000, respectively. We had minimal financing activities in the three months
ended March 31, 1999. Our financing activities have consisted primarily of the
sale of stock to both private investors and strategic partners.
We lease our primary office facility under an operating lease with options
to renew under varying terms. In addition, we entered into a $1 million lease
financing arrangement with a lease financing corporation in October 1998. As of
December 31, 1999, we had utilized all funds available under this lease
agreement. At March 31, 2000, the total of annual future minimum lease payments
under these lease arrangements was $1.1 million. In April 2000, we entered into
a $3 million loan arrangement to be used at our discretion to finance purchases
of capital equipment, $1.7 million of which remains available.
Our existing facility lease will expire in August 2001. We are currently in
negotiations to lease an additional 20,000 square feet in the same facility,
through August 2002. We have signed a lease to rent a total of 97,000 square
feet in two buildings that will be constructed over the next year. The lease
contains an option to purchase the buildings together with additional land on
the same site. The lease will not become effective until the developer obtains
a firm written commitment for financing, at which time we would be obligated to
provide funding of approximately $6 million, in the form of an interest
bearing, secured loan with a term of approximately one year. In addition, we
would be obligated to provide a secured letter of credit of approximately $3
million.
We expect that the proceeds from this offering, combined with our current
cash and cash equivalents, investments and funding from existing strategic
alliances and grants will be sufficient to fund our anticipated operating needs
for at least the next 24 months. However, our future capital requirements and
the adequacy of our available funds will depend on many factors, including
scientific progress in our research and development programs, the magnitude of
those programs,
24
<PAGE>
competing technological and market developments and our ability to successfully
commercialize our first products in partnership with PE Biosystems and to
establish additional strategic relationships. Therefore, we may require
additional funding within this time frame and the additional funding, if
needed, may not be available on terms that are acceptable to us, or at all.
Further, any additional equity financing may be dilutive to our then existing
stockholders and may adversely affect their rights.
Recently Issued Accounting Standards
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
will be effective January 1, 2001. This statement establishes accounting and
reporting standards requiring that every derivative instrument, including
derivative instruments imbedded in other contracts, be recorded in the balance
sheet as either an asset or liability measured at its fair value. The statement
also requires that changes in the derivative's fair value be recognized in
earnings unless specific hedge accounting criteria are met. We believe the
adoption of SFAS No. 133 will not have an effect on our financial statements
because we do not engage in derivative or hedging activities.
Quantitative and Qualitative Disclosure about Market Risk
Our exposure to market risk for changes in interest rates relates primarily
to the increase or decrease in the amount of interest income we can earn on our
investment portfolio and on the increase or decrease in the amount of interest
expense we must pay with respect to our various outstanding debt instruments.
Our risk associated with fluctuating interest expense is limited, however, to
our capital lease obligations, the interest rates under which are closely tied
to market rates, and our investments in interest rate sensitive financial
instruments. Under our current policies, we do not use interest rate derivative
instruments to manage exposure to interest rate changes. We ensure the safety
and preservation of our invested principal funds by limiting default risk,
market risk and reinvestment risk. We mitigate default risk by investing in
investment grade securities. A hypothetical 100 basis point adverse move in
interest rates along the entire interest rate yield curve would not materially
affect the fair value of our interest sensitive financial instruments. Declines
in interest rates over time will, however, reduce our interest income while
increases in interest rates over time will increase our interest expense.
25
<PAGE>
BUSINESS
Overview
We are developing next-generation tools that will permit the large-scale
analysis of genetic variation and function. The information provided by these
analyses will enable the development of personalized medicine, a key goal of
genomics. Our proprietary BeadArray technology will provide the throughput,
cost effectiveness and flexibility necessary to enable researchers in the life
sciences and pharmaceutical industries to perform the billions of tests
necessary to extract medically valuable information from advances in genomics.
This information will correlate genetic variation and gene function with
particular disease states, enhancing drug discovery, allowing diseases to be
detected earlier and more specifically, and permitting better choices of drugs
for individual patients. Our technology will have applicability across a wide
variety of industries beyond life sciences and pharmaceuticals, including
agriculture, food, chemicals and petrochemicals.
The Importance of SNPs, Gene Expression and Proteomics in Modern Medical
Research
Background on Genes and Proteins
The human body is composed of billions of cells each containing
deoxyribonucleic acid, or DNA, which encodes the basic instructions for
cellular function. The complete set of an individual's DNA is called the
genome, and is organized into 23 pairs of chromosomes, which are further
divided into over 100,000 smaller regions called genes. Each cell uses or
expresses only those genes required for its specific functions. Each gene is
comprised of a string of four types of nucleotide bases, known as A, C, G and
T. Human DNA has approximately 3 billion nucleotides and their precise order is
known as the DNA sequence. When a gene is expressed, a copy of its DNA
sequence, called messenger RNA, or mRNA, is used as a template to direct the
synthesis of a protein. Proteins direct cell function and ultimately the
development of individual traits. Any variation in any part of a gene, called a
polymorphism, may result in a change in cell function leading to disease.
Genetic Variation and Function
Every person inherits two copies of each gene, one from each parent. The two
copies of each gene may be identical, or they may be different. These
differences are referred to as genetic variation. Examples of the physical
consequences of genetic variation include differences in eye and hair color.
Genetic variation can also have important medical consequences, including
predisposition to disease and differential response to drugs. Genetic variation
affects diseases, including cancer, diabetes, cardiovascular disease and
Alzheimer's disease. In addition, genetic variation may cause people to respond
differently to the same drug. Some people may respond well, others may not
respond at all, and still others may experience adverse side effects.
The most common form of genetic variation is a Single Nucleotide
Polymorphism, or SNP. A SNP is a variation in a single position in a DNA
sequence. It is estimated that the human genome contains between three and six
million SNPs. The importance of SNPs is illustrated by the recent formation of
the SNP Consortium, which includes nine major pharmaceutical companies,
chartered to discover an initial set of approximately 300,000 SNPs.
While in some cases a single SNP will be responsible for medically important
effects, it is now believed that the genetic component of most major diseases
is the result of the interaction of many SNPs. Therefore, it will be important
to investigate many SNPs together in order to discover medically valuable
information.
26
<PAGE>
In addition to the knowledge gained from the analysis of SNPs, the study of
gene function will significantly contribute to clinical diagnosis and
treatment. This study focuses on the physiological functions that are affected
by medically relevant SNPs.
Current efforts to understand genetic variation and function have centered
around three principal techniques: SNP genotyping, gene expression profiling
and proteomics.
SNP Genotyping
SNP genotyping is the process of determining which SNPs are present in each
of the two copies of a gene, or other portion of DNA sequence, within an
individual or other organism. The use of SNP genotyping to obtain meaningful
statistics on the effect of an individual SNP or a collection of SNPs, and to
apply that information to clinical trials and diagnostic testing, will require
the analysis of millions of SNP genotypes and the testing of large populations
for each disease. For example, a single large clinical trial could involve
genotyping 300,000 SNPs per patient in 1,000 patients, thus requiring
300 million assays. Using available technologies, this scale of SNP genotyping
is both impractical and prohibitively expensive.
Large-scale SNP genotyping, when commercially feasible, will be used for a
variety of applications, including genomics-based drug development, clinical
trial analysis, disease predisposition testing, and disease diagnosis. SNP
genotyping can also be used outside of healthcare, for example in the
development of plants and animals with desirable commercial characteristics.
These markets will require billions of SNP genotyping assays annually.
Gene Expression Profiling
Gene expression profiling is the process of determining which genes are
active in a specific cell or group of cells and is accomplished by measuring
mRNA, the intermediary between genes and proteins. Variation in gene expression
can cause disease, or act as an important indicator of disease or
predisposition to disease. By comparing gene expression patterns between cells
from different environments, such as normal tissue compared to diseased tissue
or in the presence or absence of a drug, specific genes or groups of genes that
play a role in these processes can be identified. Studies of this type, used in
drug discovery, require monitoring thousands, and preferably tens of thousands,
of mRNAs in large numbers of samples. The high cost of large-scale gene
expression profiling has limited the development of the gene expression
profiling market.
Once gene expression patterns have been correlated to specific diseases,
gene expression profiling is expected to become an important diagnostic tool.
Diagnostic use of expression profiling tools is anticipated to grow rapidly
with the combination of the sequencing of various genomes and the availability
of more cost-effective technologies.
Proteomics
Proteomics is the process of determining which proteins are present in cells
and how they interact with one another. Proteomics is another method of
correlating the molecular state of a cell with disease or reaction to a
stimulus such as a drug. This market remains undeveloped, as low cost, accurate
technologies for analysis have not been available. We expect that proteomics
will become valuable in drug discovery research as the technologies improve and
that array technology will be critical in facilitating the growth of this
market.
27
<PAGE>
Current Technologies and Their Limitations
There are currently a variety of technologies available for analyzing
genetic variation and function. These technologies lack the combination of high
throughput, cost effectiveness and flexibility necessary to adequately address
the rapidly evolving markets of SNP genotyping, gene expression profiling and
proteomics. These technologies can be classified into three distinct groups:
Traditional Technologies. Traditional technologies perform assays
individually, or serially. Serial processing is an inherent limitation to assay
throughput. These technologies often require relatively large sample volumes,
adding significantly to the costs of the assays. Most of them have limited
flexibility to perform different applications. Examples of traditional
technologies include 2D electrophoresis, capillary electrophoresis, mass
spectrometry and flow cytometry.
. 2D Electrophoresis. Two-dimensional electrophoresis, or 2D
electrophoresis, separates proteins on the basis of molecular
characteristics and is the traditional method for detecting the presence
of proteins. This process separates large numbers of proteins within a
sample, but has poor reproducibility and requires an additional process
to identify particular proteins.
. Capillary Electrophoresis. Capillary electrophoresis is a process for
separating DNA in glass tubes and can be applied to SNP genotyping.
While recent advances that include multiple capillaries have improved
throughput, this technology is still fundamentally serial in nature, and
thus has low throughput for genotyping applications. It also uses large
sample sizes, contributing to assay cost.
. Mass Spectrometry. Mass spectrometry, a process that uses a
sophisticated instrument to measure molecular weight, has recently been
applied to SNP genotyping and proteomics. Provided sample preparation
and purification are successful, the sample read out is accurate.
However, as another serial detection process, mass spectrometry has
limited throughput compared to array technologies and requires expensive
instrumentation.
. Flow Cytometry. Flow cytometry, a technique for counting cells, has been
modified for use in SNP genotyping and proteomics. For these
applications, beads flow past a detector one bead at a time. While flow
cytometry is a somewhat flexible and inexpensive technology, it has low
throughput compared to array technologies because it analyzes SNPs and
proteins serially. Moreover, flow cytometry can only perform a limited
number of tests per bead pool.
Microfluidics. Microfluidics, a process for miniaturizing the scale of
experimentation, offers some improvement over traditional techniques, although
it remains a largely serial process with only moderate throughput compared to
array technologies. Although multiple applications are possible using
microfluidic systems, the practical implementation of applications using these
systems is challenging.
Arrays. Arrays, which perform assays in parallel, were developed to achieve
the high throughput required for large-scale genetic analysis. The spacing
between test sites in an array defines the array's density. Higher density
increases parallel processing. In addition to increasing the throughput, higher
density reduces the required sample volume, and thereby lowers costs. Arrays
offer parallel processing by performing multiple assays per sample
simultaneously. However, they currently lack the ability to test multiple
samples simultaneously, one more level of parallel processing necessary for
large-scale genetic analysis. These array technologies also have limited
applications outside of SNP genotyping and gene expression profiling.
Manufacturing limitations have further prevented arrays from reaching their
full potential. There are a number of current methodologies for manufacturing
arrays, including mechanical deposition, inkjet printing and photolithography,
each with its own set of limitations.
28
<PAGE>
. Mechanical Deposition. This method of manufacturing arrays has centered
around creating test sites by mechanically depositing material on a flat
surface. These arrays can be easily modified and are relatively
inexpensive. However, it is difficult to put the test sites close
together, resulting in relatively low-density arrays that have limited
throughput. In addition, the arrays cannot be mass produced and because
they are made individually, they may vary in quality.
. Inkjet Printing. Inkjet printing is a new method for manufacturing
arrays that deposits DNA on a surface in a manner similar to the way an
inkjet printer deposits ink on paper. Although these arrays are
flexible, they are unlikely to be used for large-scale genetic analysis
because they are difficult to mass produce.
. Photolithography. Photolithography uses a process similar to
semiconductor manufacturing to synthesize DNA on a surface. Test sites
can be placed closer together using this process, creating high-density
arrays, thereby increasing assay throughput. However, the
photolithographic process requires very expensive capital equipment and
has expensive tooling that greatly limits the ability to modify arrays.
Traditional technologies, microfluidics and arrays all use various
chemistries to perform assays in SNP genotyping, gene expression profiling and
proteomics. The specific chemistries and techniques used to perform an assay,
known as an assay format, can be deployed using one or more of the above
technologies. Often, assay formats are designed to perfom only one test per
well of a microtiter plate, resulting in low throughput and adding
significantly to expense.
Thus, while numerous technologies and assay formats are being applied to SNP
genotyping, gene expression and proteomics, growth of these markets is
currently limited by the absence of a cost-effective technology that enables
billions of assays to be carried out annually.
Illumina's Solution
Illumina has developed a proprietary array technology that enables the
large-scale analysis of genetic variation and function. Our BeadArray
technology combines fiber optic bundles and microscopic beads in a simple
proprietary manufacturing process to produce array cassettes that can perform
up to 3 million assays simultaneously. Our BeadArray technology provides a
unique combination of high throughput, cost effectiveness, and flexibility. We
achieve high throughput with a high density of test sites per array and our
ability to format arrays in a pattern arranged to match the wells of standard
microtiter plates. We maximize cost effectiveness by reducing consumption of
expensive reagents and valuable samples, and from the low manufacturing costs
associated with our complementary technologies. Our ability to vary the size,
shape and format of the fiber optic bundles and to create specific beads for
different applications provides the flexibility to address multiple markets and
market segments. We believe that these features will enable our BeadArray
technology to become a leading platform for the emerging high-growth markets of
SNP genotyping, gene expression profiling and proteomics.
Illumina's Strategy
Our goal is to make our BeadArray platform the industry standard for
products and services using array technologies. We plan to achieve this by:
Focusing on Emerging High-Growth Markets
We are initially focusing on the SNP genotyping, gene expression profiling
and proteomics markets. We believe these markets have the potential for high
growth due to increasing demand for therapeutics and diagnostics based on newly
available genomic information. To date, the lack of high-throughput, cost-
effective technologies has limited the growth of these markets.
29
<PAGE>
Rapidly Commercializing Our BeadArray Technology for SNP Genotyping
We intend to rapidly commercialize our BeadArray technology for SNP
genotyping through partnerships. Our first partner, PE Biosystems, contributes
extensive expertise in instrument and reagent development, as well as a large
and experienced worldwide sales and marketing team. We believe that the
combination of our BeadArray technology with PE Biosystems' leadership position
in the genetic analysis market will enable us to capture a significant portion
of the SNP genotyping market.
Partnering With Multiple Companies To Expand Our Market Opportunity
We plan to pursue multiple partnerships to facilitate the expansion of our
BeadArray and Oligator technologies and to exploit large and diverse markets.
We expect to enter into partnerships and collaborations to gain access to
complementary technologies, distribution channels and information content. We
intend to structure partnerships that maximize our long-term commercial benefit
by maintaining control of our technologies.
Expanding Our Technologies into Multiple Product Lines
We intend to utilize the flexibility of our BeadArray and Oligator
technologies to develop multiple product lines. In addition to providing new
sources of revenue, we believe these product lines will further our goal of
establishing our BeadArray technology as the industry standard for array-based
analysis. We expect these product lines to include a lower-throughput array
system, handheld instruments, and a high capacity BeadArray system that will
allow more simultaneous assays per sample. We intend to expand our Oligator
technology by continuing to increase the capacity and cost effectiveness of our
instrumentation.
Strengthening Our Technological Leadership
We plan to continue advancing our proprietary technologies through our
internal research efforts, collaborations with industry leaders and strategic
licensing. We may also pursue opportunistic acquisitions of complementary
technologies and leverage our technologies into other value-added businesses.
Illumina's Technology
BeadArray Technology
Our proprietary BeadArray technology combines fiber optic bundles and
specially prepared beads that self-assemble into an array.
Fiber Optic Bundles. We have the fiber optic bundles manufactured to our
specifications, which we cut into lengths of less than one inch. Each bundle
contains thousands to millions of individual fibers depending on the size of
the bundle. For example, a fiber optic bundle with a diameter of approximately
one millimeter could contain up to 50,000 individual fibers. Dipping the fiber
optic bundles into a chemical solution etches a microscopic well at the end of
each individual fiber within a bundle. In the preceding example, this process
would create 50,000 microscopic wells per bundle.
Microscopic Beads. In a separate process, we create sensors by affixing a
specific type of molecule to each of the billions of microscopic beads in a
batch. We make different batches of beads, with the beads in a given batch
coated with one particular type of molecule. The particular molecules on a bead
define that bead's function as a sensor. For example, we create a batch of SNP
sensors by attaching a particular DNA sequence to each bead in the batch. We
combine batches of coated beads to form a pool specific to the type of array we
intend to create. A bead pool one milliliter in volume contains sufficient
beads to produce thousands of arrays.
30
<PAGE>
BeadArray Sensors: Coating, Pooling and Self-Assembly
[GRAPHIC DESCRIPTION OF BEADARRAY SENORS APPEARS HERE]
Array Self-Assembly and Decoding. To form an array we typically dip each
fiber optic bundle into a pool of coated beads. The coated beads are drawn into
the wells, one bead per well, on the end of each fiber in the bundle. We call
this process self-assembly. The tens of thousands of beads at the end of the
fiber optic bundle comprise our BeadArray. Because the beads assemble randomly
into the wells, we perform a final procedure called decoding in order to
determine which bead type occupies which well in the array. We employ several
proprietary methods for decoding, a process that requires only a few steps to
identify all the beads in the array. One beneficial by-product of the decoding
process is a validation of each bead in the array. This quality control test
characterizes the performance of each bead and can identify and eliminate use
of any empty wells. We ensure that each bead type on the array is sufficiently
represented by having multiple copies of each bead type. This improves the
reliability and accuracy of the resulting data by allowing statistical
processing of the results of identical beads.
Array Use in Experiments. One performs an experiment on the BeadArray by
preparing a sample, such as DNA from a patient, and introducing it to the
array. The design features of our BeadArray allow it to be simply dipped into a
solution containing the sample. The molecules in the sample bind to their
matching molecules on the coated bead. An analytical instrument detects the
matched molecules by shining a laser through the fiber optic bundle. Since the
molecules in the sample have a structure that causes them to emit light in
response to a laser, detection of a binding event is possible. This allows the
measurement of the number of molecules bound to each coated bead, resulting in
a quantitative analysis of the sample.
Oligator Technology
Genomic applications require many different short pieces of DNA that can be
made synthetically, called oligonucleotides. For example, SNP genotyping
typically requires three to four different oligonucleotides per assay. A SNP
genotyping experiment analyzing 10,000 SNPs may therefore require 30,000 to
40,000 different oligonucleotides, contributing significantly to the expense of
the experiment.
31
<PAGE>
We have designed our proprietary Oligator technology for the parallel
synthesis of many different oligonucleotides to meet the requirements of large-
scale genomics applications. We believe that our Oligator technology is
substantially more cost effective and provides higher throughput than available
commercial alternatives. Our technology utilizes centrifugation for the
automated parallel synthesis of 768 different oligonucleotides per machine per
day. Using a similar approach, we expect to develop instruments in the future
with substantially greater capacity.
Key Advantages of Our BeadArray and Oligator Technologies
We believe that our BeadArray and Oligator technologies provide distinct
advantages, in a variety of applications, over competing technologies, by
creating cost-effective, highly miniaturized arrays with the following
advantages:
High Throughput. The miniaturization of our BeadArray provides a
significantly greater information content per unit area than any other array
known to us. To further increase throughput, we have formatted our arrays in a
pattern arranged to match the wells of standard microtiter plates, allowing
throughput levels of up to 3 million unique assays per microtiter plate. The
Oligator's parallel synthesis capability allows us to manufacture the diversity
of oligonucleotides necessary to support large-scale genomic applications.
Cost Effectiveness. Our BeadArray substantially reduces the cost of
experiments as a result of our proprietary manufacturing process and our
ability to capitalize on cost reductions generated by advances in fiber optics,
digital imaging and bead chemistry. In addition, our miniaturized BeadArray
requires smaller volumes than other array technologies, and therefore reduces
reagent costs. Our Oligator technology further reduces reagent costs, as well
as the cost of coating beads.
Flexibility. A wide variety of conventional chemistries are available for
attaching different molecules, such as DNA, RNA, proteins, and other chemicals
to beads. By using beads, we are able to take advantage of these chemistries to
create a wide variety of sensors, which we assemble into arrays using the same
proprietary manufacturing process. In addition, we can have fiber optic bundles
manufactured in multiple shapes and sizes and organized in various arrangements
to optimize them for different markets and market segments. In combination, the
use of beads and fiber optic bundles provides the flexibility and scalability
for our BeadArray technology to be tailored to perform many applications in
many different market segments, from drug discovery to diagnostics. Our
Oligator technology allows us to manufacture a wide diversity of lengths and
quantities of oligonucleotides.
Accuracy. The high density of beads in each array enables us to have
multiple copies of each individual bead type. We measure the copies
simultaneously and combine them into one data point. This allows us to make a
comparison of each bead against its own population of identical beads, which
permits the statistical calculation of a more reliable and accurate value for
each data point. Finally, the manufacture of the array includes a proprietary
decoding step that also functions as a quality control test of every bead on
every array, improving the overall accuracy of the data.
32
<PAGE>
Potential Fields of Application
We believe that the demand for increased throughput will continue in genetic
analysis and will develop in new areas, including proteomics, high-throughput
screening and chemical detection. The parallel processing capabilities of our
BeadArray technology are applicable to the complex problems of many different
industries, including the following:
Pharmaceutical Discovery and Development
. Cost-effective, rapid methods for gene discovery and function
characterization
. Specific targeting of drug discovery efforts
. Customized drugs for patients
. Toxicological evaluation of potential drugs
. High-throughput screening for pharmaceutical candidates
Medicine
. Diagnostic methods for identifying, classifying and staging diseases
. Predictors of successful drug therapy for a particular patient
. Early recognition of potential adverse response to drug therapy
. Identification of predisposition to disease in order to prescribe
preventative therapies
Agriculture and Food Production
. Development of plants and animals with desirable commercial
characteristics
. Evaluation of foods to ensure safety
Chemical and Petrochemical
. Process monitoring
. Leak detection and environmental monitoring
Food, Beverage and Fragrance
. Quality control monitoring
. Identification of new products with appealing compositions
Products and Services
The first implementation of our BeadArray technology, the Array of Arrays,
will be a disposable cassette with 96 fiber optic bundles arranged in a pattern
that matches the standard 96-well microtiter plate. Each fiber optic bundle
will perform approximately 2,000 unique assays. Therefore, one Array of Arrays
can perform approximately 192,000 individual assays simultaneously, more than
any other array system known to us.
By simply increasing the number of fiber optic bundles in the cassette, we
will expand the Array of Arrays to match standard 384-well and 1,536-well
microtiter plates. In these configurations, the Array of Arrays will be able to
simultaneously perform approximately 768,000 and 3,072,000 unique assays,
respectively.
33
<PAGE>
We intend to provide both products and services using our proprietary
BeadArray platform. In partnership with PE Biosystems, we are developing our
first products based on our Array of Arrays. These products will include
disposable Array of Arrays, reagent kits for SNP genotyping and instruments
that automatically read data from our Array of Arrays. Our services may involve
partnerships for early access to our technology prior to its general commercial
release. In addition to early access, we may commercialize assay development
and genotyping services.
SNP Genotyping
We are designing our first product based on the Array of Arrays for SNP
genotyping. The first SNP genotyping assay format that we intend to
commercialize will be PE Biosystems' proprietary OLA ZipCode assay format. This
assay format enables the creation of a universal Array of Arrays that can be
used to analyze any set of SNPs. We expect to commercialize our first product
using this assay format in 2001. We plan to extend our BeadArray technology to
create products using other assay formats. We expect one or more of these
additional assay formats to be available on the Array of Arrays in 2002.
Gene Expression Profiling
We will design our first product for gene expression profiling to test
selected sets of approximately 100 to 2,000 genes on large numbers of samples.
We believe that there is currently a need for a cost-effective and high-
throughput gene expression profiling technology to analyze the activity of
selected sets of genes from many samples simultaneously. We expect our initial
products in gene expression profiling, based on the Array of Arrays combined
with specific assay formats, to be commercially available in 2001.
High-Throughput Synthesis
We plan to use our Oligator technology to build internal capacity to produce
millions of oligonucleotides per year. In addition to their use to coat beads,
these oligonucleotides may be components of the reagent kits for our BeadArray
products and used for assay development.
Areas of Exploration
The increasing need for high-throughput experimentation will drive the use
of array technology into other potentially large emerging markets, including:
Proteomics. We are currently investigating the use of our BeadArray
technology for the analysis of proteins. This application has the potential to
provide information that is complementary to gene expression profiling, because
many important cellular processes are regulated at the level of proteins rather
than at the level of genes. We have demonstrated the feasibility of carrying
out assays for the detection and analysis of proteins on the BeadArray.
High-Throughput Screening. The synthesis of large libraries of chemicals and
their high-throughput screening for potential as drugs are core technologies in
drug development. These libraries contain more compounds than can be
effectively screened using available technologies. We have developed a strategy
for high-throughput screening using our BeadArray technology. We believe that
we may be able to miniaturize high-throughput screening significantly, increase
the throughput of screens, and increase the amount of information obtained for
each compound.
Chemical Detection. We have demonstrated the use of our BeadArray technology
for the detection of chemicals. For this application, the BeadArray generates a
unique pattern for each chemical that it detects. Currently, we are working
with Dow Chemical to design a system to qualify
34
<PAGE>
chemical solvents for use in manufacturing. We are exploring with Chevron the
possibility of using this system for the detection of leaks at gasoline
refineries. There are many other potential applications for this type of
detector such as quality control monitoring in the food, beverage and fragrance
industries.
Partnerships and Collaborations
We have entered into the following strategic agreements with commercial
entities to expand the functionality of our BeadArray technology and to provide
distribution channels for the commercialization of our products and services:
PE Biosystems, a Division of PE Corporation. In November 1999, we entered
into a partnership with PE Biosystems, a leading supplier of instruments and
reagents to the life sciences and pharmaceutical industries. Illumina and PE
Biosystems will jointly implement PE Biosystems' proprietary OLA ZipCode assay
format on Illumina's proprietary Array of Arrays initially for SNP genotyping.
We will develop and manufacture the Array of Arrays and PE Biosystems will
develop and manufacture the detection instrument and the reagent kits. PE
Biosystems and Illumina will co-brand products and PE Biosystems will
distribute them through their worldwide sales channels. Under the agreement,
Illumina has rights to use and sell the instruments developed in the
partnership for other applications.
In connection with this partnership, PE Corporation invested $5 million to
purchase shares of our preferred stock and agreed to provide Illumina with
substantial research and development support over two years. Illumina and PE
Biosystems will divide the profits from all partnership products, including
instruments, array cassettes and reagent kits, after both parties have received
repayment for cost-of-goods, sales and marketing expenses, and ongoing research
and development expenses.
The Dow Chemical Company. In June 1999, we entered into a research
collaboration with Dow Chemical to develop a BeadArray designed for the
identification of chemical solvents prior to entry into Dow Chemical's
manufacturing facilities. If successful, Dow Chemical could use our technology
as a rapid and reliable method for performing a quality control check on their
incoming raw materials. We retain all rights to commercialize any resulting
products.
Third Wave Technologies, Inc. In December 1999, we entered into a research
collaboration with Third Wave Technologies to adapt their proprietary assay
format, called Invader, to our BeadArray platform. If the research
collaboration is successful, Illumina and Third Wave Technologies may negotiate
a commercialization agreement.
PyroSequencing, Inc. In November 1999, we entered into a research
collaboration with PyroSequencing to adapt their proprietary assay format,
called PyroSequencing, to our BeadArray platform. Pyrosequencing provides
instrumentation and chemistry to perform DNA sequencing and SNP genotyping. If
the research collaboration is successful, Illumina and PyroSequencing may
negotiate a commercialization agreement.
We also have entered into collaborations with Tufts University, The
Australian National University, Stanford University and The University of
California, San Diego to develop new applications for our BeadArray technology.
Intellectual Property
We have an extensive patent portfolio, including ownership of, or exclusive
licenses to, 12 issued U.S. patents and 44 pending U.S. patent applications,
including two allowed applications, some of which derive from a common parent
application. Our issued patents, which cover fiber optic
35
<PAGE>
arrays, bead array technology and chemical detection, expire between 2010 and
2017. We are seeking to extend this patent protection on our BeadArray,
Oligator and related technologies. We have received or filed counterparts for
many of these patents and applications in one or more foreign countries.
We also rely upon copyright protection, trade secrets, know-how, continuing
technological innovation and licensing opportunities to develop and maintain
our competitive position. Our success will depend in part on our ability to
obtain patent protection for our products and processes, to preserve our
copyrights and trade secrets, to operate without infringing the proprietary
rights of third parties and to acquire licenses related to enabling technology
or products used with our BeadArray and Oligator technologies.
We are party to various exclusive and non-exclusive license agreements with
third parties which grant us rights to use key aspects of our BeadArray and
Oligator technologies. For example, we have an exclusive license from Tufts
University to patents filed by Dr. David Walt, a Director, the Chairman of our
Scientific Advisory Board and one of our founders. Our exclusive licenses
expire with the termination of the underlying patents, which will occur between
2010 and 2017. These exclusive licenses are critical to our business.
U.S. Government Grants
Government grants allow us to fund internal scientific programs and
exploratory research. We retain ownership of all intellectual property and
commercial rights generated during these projects, subject to a non-exclusive,
non-transferable, paid-up license to practice, for or on behalf of the
United States, inventions made with federal funds. This license is retained by
the U.S. government as provided by applicable statutes and regulations. We do
not believe that the retained license will have any impact on our ability to
market our products. We do not need government approval to enter into
collaborations or other relationships with third parties. We have grants from
the National Institutes of Health as outlined below.
<TABLE>
<CAPTION>
Grant Title Grant Date
------------------------------------------------------------------------------
<S> <C>
Decoding randomly ordered arrays.............................. February 1999
Gene expression analysis on randomly ordered DNA arrays....... March 1999
Parallel array processor...................................... August 1999
Randomly ordered arrays for SNP genotyping.................... September 1999
Compact device for solvent identification..................... September 1999
Pyrosequencing arrays......................................... March 2000
Optical binary encoding of assembled arrays................... June 2000
Automated DNA synthesizer using tilted plate technology....... July 2000
Automated synthesizer using tilted plate centrifugation....... July 2000
Invader(TM) arrays for nucleic acid analysis.................. July 2000
</TABLE>
Manufacturing
We manufacture our BeadArrays and Array of Arrays in-house and intend to
rely upon PE Biosystems to manufacture the imaging system and reagent kits for
our first product. We currently depend upon outside suppliers for materials
used in the manufacture of our BeadArrays and Array of Arrays. We intend to
continue, and may extend, the outsourcing of portions of our manufacturing
process to subcontractors where we determine it is in our best commercial
interests.
We have designed our manufacturing facility to optimize material flow and
personnel movement. We adhere to access and safety standards required by
federal, state and local health ordinances, such as standards for the use,
handling and disposal of hazardous substances. This year, we will implement a
company-wide enterprise resource planning system to manage and control our
manufacturing resources.
36
<PAGE>
Competition
We are aware of other life sciences companies or companies with life
sciences divisions, such as Affymetrix, Agilent, Aclara Biosciences, Caliper
Technologies, Ciphergen, Genometrix, Luminex, Orchid Biosciences and Sequenom,
that have, or are developing, assay technologies for the SNP genotyping, gene
expression profiling and proteomics markets. Each of these markets is very
competitive. Many of our potential competitors in these markets have greater
commercial experience and substantially greater financial, technical and
personnel resources than we do. We expect new competitors to emerge and the
intensity of competition to increase in the future.
Employees
As of March 31, 2000, we had a total of 60 employees, 20 of whom hold Ph.D.
or M.D. degrees and 44 of whom are engaged in full-time research and
development activities. We plan to expand our research and development programs
as well as corporate collaborations and will hire additional staff as these
initiatives are implemented. None of our employees is represented by a labor
union. We consider our employee relations to be good.
Facilities
We lease an aggregate of approximately 15,000 square feet of office and
laboratory facilities at 9390 Towne Centre Drive in San Diego, California. Our
lease expires in August 2001. We are currently in negotiations to lease an
additional 20,000 square feet in the same facility, through August 2002. We
have signed a lease to rent a total of 97,000 square feet in two buildings that
will be constructed over the next year. The lease contains an option to
purchase the buildings together with additional land on the same site. The
lease will not become effective until the developer obtains a firm written
commitment for financing, at which time we would be obligated to provide
funding of approximately $6 million, in the form of an interest bearing,
secured loan with a term of approximately one year. In addition, we would be
obligated to provide a secured letter of credit of approximately $3 million.
Legal Proceedings
We are not currently a party to any material legal proceedings.
37
<PAGE>
MANAGEMENT
Directors and Executive Officers
Our directors and executive officers as of March 31, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Jay T. Flatley..................... 47 President, Chief Executive Officer and
Director
Timothy M. Kish.................... 48 Vice President, Chief Financial
Officer
David L. Barker, Ph.D.............. 59 Vice President, Chief Scientific
Officer
John R. Stuelpnagel, DVM........... 42 Founder, Vice President of Business
Development and Director
Mark S. Chee, Ph.D. ............... 38 Founder, Vice President of Genomics
Robert C. Kain..................... 39 Vice President of Engineering
Noemi C. Espinosa.................. 41 Vice President of Intellectual
Property
Anthony W. Czarnik, Ph.D. ......... 42 Founder, Research Fellow, Former Chief
Scientific Officer
Lawrence A. Bock................... 40 Founder
Charles M. Hartman(1).............. 58 Director
Robert T. Nelsen(1)(2)............. 36 Director
George Poste, DVM, Ph.D. .......... 55 Director
William H. Rastetter, Ph.D.(1)(2).. 51 Director
David R. Walt, Ph.D. .............. 47 Founder, Director, Chairman of the
Scientific Advisory Board
</TABLE>
--------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Jay T. Flatley has served as our President, Chief Executive Officer and a
Director since October 1999. Prior to joining Illumina, Mr. Flatley was co-
founder, President, Chief Executive Officer and a Director of Molecular
Dynamics, a life sciences company, from May 1994 to September 1999. He served
in various other positions with that company from 1987 to 1994. From 1985 to
1987, Mr. Flatley was Vice President of Engineering and Vice President of
Strategic Planning at Plexus Computers, a UNIX computer company. Mr. Flatley
holds a B.A. in Economics from Claremont McKenna College and a B.S. and M.S. in
Industrial Engineering from Stanford University.
Timothy M. Kish has served as our Vice President and Chief Financial Officer
since May 2000. Prior to joining us, Mr. Kish was Vice President, Finance and
Chief Financial Officer at Biogen, Inc., a biopharmaceutical company, from
September 1993 to April 2000. He served as Corporate Controller of that company
from 1986 to 1993. From 1983 to 1986, Mr. Kish was Director of Finance at
Allied Health & Scientific Products Company, a subsidiary of Allied-Signal
Corporation. Mr. Kish holds a B.B.A. from Michigan State University and an
M.B.A. from the University of Minnesota.
David L. Barker, Ph.D. has served as our Vice President and Chief Scientific
Officer since March 2000. Prior to joining us, Dr. Barker was Vice President
and Chief Science Advisor at Amersham Pharmacia Biotech, a life sciences
company, from September 1998 to March 2000. From May 1997 to September 1998,
Dr. Barker was Vice President of Research and Business Development of Molecular
Dynamics. From 1992 to 1997, he was Vice President of Scientific Development.
From 1988 to 1995, he held various other positions with that company. Dr.
Barker holds a B.S. in Chemistry from California Institute of Technology and
received his Ph.D. in Biochemistry from Brandeis University.
John R. Stuelpnagel, D.V.M., one of our founders, is our Vice President of
Business Development, acting Chief Financial Officer and a Director since April
1998. From April 1998 to
38
<PAGE>
October 1999, he served as Illumina's acting President and Chief Executive
Officer. While founding Illumina, Dr. Stuelpnagel was an associate with CW
Group, a venture capital firm, from June 1997 to September 1998 and with
Catalyst Partners, a venture capital firm, from August 1996 to June 1997. Dr.
Stuelpnagel received his B.S. in Biochemistry and his Doctorate in Veterinary
Medicine from the University of California, Davis and his M.B.A. from the
University of California, Los Angeles.
Mark S. Chee, Ph.D., one of our founders, has served as our Vice President
of Genomics since June 1998. Prior to founding Illumina, Dr. Chee served as
Director of Genetics Research at Affymetrix, a life sciences company, from
April 1997 to July 1997 and in other positions from 1993 to April 1997. Dr.
Chee received his B.Sc. in Biochemistry from the University of New South Wales
and his Ph.D. from the University of Cambridge.
Robert C. Kain has served as our Vice President of Engineering since
December 1999. Prior to joining us, Mr. Kain was Senior Director of Engineering
at Molecular Devices from July 1999 to December 1999. Previously, Mr. Kain
served as Director of Microarray Engineering at Molecular Dynamics from August
1998 to July 1999 and in other positions from August 1996 to August 1998. From
1983 to 1988, Mr. Kain was employed at DatagraphiX, an information technology
equipment company. Mr. Kain received his B.S. in Physics from San Diego State
University and his M.B.A. from St. Mary's College.
Noemi C. Espinosa has served as our Vice President of Intellectual Property
since May 2000. Prior to joining us, Ms. Espinosa was a partner with the firm
of Brobeck, Phleger & Harrison LLP from January 1992 to April 2000, having
joined the firm in 1990. From 1983 to 1990, Ms. Espinosa was associated with
the intellectual property firm of Townsend & Townsend. Ms. Espinosa holds a
B.S. in Chemical Engineering and a J.D. from the University of California,
Hastings College of Law. She is registered to practice before the United States
Patent and Trademark Office.
Anthony W. Czarnik, Ph.D., one of our founders, has been a Research Fellow
at Illumina since March 2000. From June 1998 to March 2000, he served as
Illumina's Chief Scientific Officer. Prior to joining Illumina, Dr. Czarnik was
Vice President of Chemistry at IRORI Quantum Microchemistry from 1996 to 1998
and Director of Bioorganic Chemistry at Parke-Davis from 1993 to 1996.
Previously, he was a professor at The Ohio State University. Dr. Czarnik
received his B.S. in Biochemistry from the University of Wisconsin-Madison and
his Ph.D. from the University of Illinois at Urbana/Champaign.
Lawrence A. Bock, one of our founders, served as a Director from June 1998
to March 2000. He has been a General Partner of CW Group, a medical venture
capital fund, since June 1998. From 1988 to 1998, Mr. Bock was General Partner
of Avalon Ventures, a venture capital firm. He is also founder and Director of
FastTrack Systems, Inc. Mr. Bock holds a B.S. in Biochemistry from Bowdoin
College and an M.B.A. from the University of California, Los Angeles.
Charles M. Hartman has been a Director since March 2000. He has been a
General Partner of CW Group since April 1983. Mr. Hartman is a Director of
Caliper Technologies Corp. (Nasdaq: CALP). From 1966 to 1983, Mr. Hartman
served in various positions at Johnson & Johnson, a healthcare company, where
he was responsible for identification, evaluation and negotiation of situations
ranging from single product opportunities to company acquisitions, both
domestically and internationally. Mr. Hartman is a Director of The Hastings
Center, a non-profit organization devoted to the study of bioethical issues in
medicine and the life sciences. Mr. Hartman holds a B.S. in Chemistry from the
University of Notre Dame and an M.B.A. from the University of Chicago.
Robert T. Nelsen has been a Director since June 1998. Since July 1994, Mr.
Nelsen has served as a senior principal of venture capital funds associated
with ARCH Venture Partners, a venture capital firm, including ARCH Venture Fund
III, L.P., a stockholder of the Company. From April 1987 to July 1994, Mr.
Nelsen was Senior Manager at ARCH Development Corporation, a company affiliated
with the University of Chicago, where he was responsible for new company
formation.
39
<PAGE>
Mr. Nelsen is a Director of Caliper Technologies Corp. (Nasdaq: CALP).
Mr. Nelsen holds a B.S. in Biology and Economics from the University of Puget
Sound and an M.B.A. from the University of Chicago.
George Poste, D.V.M., Ph.D. has been a Director since February 2000. Dr.
Poste was Chief Science and Technology Officer at SmithKline Beecham, a
biopharmaceutical company, from October 1981 to December 1999. Dr. Poste is a
Director of SmithKline Beecham (Nasdaq: SBH) and Maxygen (Nasdaq: MAXY). Prior
to being appointed Chief Science and Technology Officer, Dr. Poste was
President of Research and Development at SmithKline Beecham. Dr. Poste is also
a Research Professor at the University of Pennsylvania and holds the William
Pitt Fellowship at Pembroke College, Cambridge University. He was awarded a
D.Sc. for meritorious research contributions by the University of Bristol in
1987. Dr. Poste received his Doctorate in Veterinary Medicine and his Ph.D. in
Virology from the University of Bristol.
William H. Rastetter, Ph.D. has been a Director since November 1998. Since
December 1986, Dr. Rastetter has served as President and Chief Executive
Officer of IDEC Pharmaceuticals, a biopharmaceutical company. Dr. Rastetter is
a Director of Spiros Development (Nasdaq: SDCO). Additionally, he has served as
Chairman of the Board of Directors of IDEC Pharmaceuticals since May 1996. From
1982 to 1986, Dr. Rastetter served in various positions at Genentech and
previously he was a professor at the Massachusetts Institute of Technology.
Dr. Rastetter holds a S.B. in Chemistry from the Massachusetts Institute of
Technology and received his M.A. and Ph.D. in Chemistry from Harvard
University.
David R. Walt, Ph.D. has been a Director and Chairman of the Scientific
Advisory Board since June 1998. Dr. Walt has been the Robinson Professor of
Chemistry at Tufts University since September 1995. Dr. Walt has published over
100 papers and holds over 20 patents. Dr. Walt holds a B.S. in Chemistry from
the University of Michigan and received his Ph.D. in Organic Chemistry and
Pharmacology from the State University of New York at Stony Brook.
Scientific Advisory Board
The following individuals are members of our Scientific Advisory Board:
Christopher C. Goodnow, Ph.D. is Professor at the John Curtin School of
Medical Research at The Australian National University where he is the Founder
and Director of the Medical Genome Centre. Previously, he was an Assistant
Investigator of the Howard Hughes Medical Institute and Assistant Professor of
Microbiology and Immunology at Stanford University Medical School. Dr. Goodnow
has been a recipient of numerous awards and honors, including the Searle
Scholar and the University Medal from the University of Sydney. Dr. Goodnow
received his B.V.Sc. and B.Sc. (Vet) in Veterinary Science from the University
of Sydney and his Ph.D. in Immunology from Stanford University.
Leroy Hood, M.D., Ph.D. is the William Gates III Professor of Biomedical
Sciences, Director of a National Science Foundation Science and Technology
Center and Chairman of the Department of Molecular Biotechnology at the
University of Washington School of Medicine. Dr. Hood is a member of the
National Academy of Sciences and the American Association of Arts and Sciences.
Among his numerous honors and awards are the Louis Pasteur Award for Medical
Innovation, the Albert Lasker Basic Medical Research Award, the Cetus Award for
Biotechnology, the American College of Physician Award, Ciba-Geigy/Drew Award,
Lynen Medal and the University Distinguished Alumnus Award from the Johns
Hopkins University School of Medicine. Dr. Hood has a M.D. from the Johns
Hopkins Medical School and a Ph.D. in Biochemistry from the California
Institute of Technology.
Terrence J. Sejnowski, Ph.D. is an Investigator with the Howard Hughes
Medical Institute and a Professor at The Salk Institute for Biological Studies
where he directs the Computational
40
<PAGE>
Neurobiology Laboratory. He is also Professor of Biology and Adjunct Professor
in the Departments of Physics, Neurosciences, Psychology, Cognitive Science,
and Computer Science and Engineering at the University of California, San
Diego. Dr. Sejnowski has been the recipient of numerous honors and awards
including the Presidential Young Investigator Award, the Wright Prize from the
Harvey Mudd College and the Sherman Fairchild Distinguished Scholar Award at
the California Institute of Technology. Dr. Sejnowski received a B.S. in
Physics from the Case-Western Reserve University, a M.A. in Physics from
Princeton University, and a Ph.D. in Physics from Princeton University.
Paul R. Schimmel, Ph.D. is Professor and Member at The Skaggs Institute for
Chemical Biology at The Scripps Research Institute. He formerly was the John D.
and Catherine T. MacArthur Professor of Biochemistry and Biophysics in the
Department of Biology at The Massachusetts Institute of Technology. He received
the Pfizer Award in enzyme chemistry from the American Chemical Society and was
named co-recipient of the Biophysical Society Emily M. Gray Award. Dr. Schimmel
is a member of the National Academy of Sciences and the American Academy of
Arts and Sciences. Dr. Schimmel received his A.B. degree in pre-medicine from
Ohio Weslyan University and his Ph.D. in Biophysical Chemistry from The
Massachusetts Institute of Technology.
W. Clark Still, Ph.D. is Mitchell Professor of Chemistry at Columbia
University. He is a recipient of numerous awards and honors including Science
Digest's 100 Brightest Scientists Under 40, the National Science Foundation's
Alan T. Waterman Award, the American Chemical Society's Cope Scholar and
Computers in Chemistry Awards, California Institute of Technology's Buchman
Award, Frankfurt University's Rolf Sammet Award, and Nagoya University's Nagoya
Medal of Organic Chemistry. He is a Fellow of the American Academy of Arts and
Sciences, the Japan Society for the Promotion of Science and the Alfred P.
Sloan Society. He received his B.S. in Chemistry and his Ph.D. in Organic
Chemistry from Emory University.
Board Composition and Committees
Our board of directors currently consists of seven members. Prior to the
closing of this offering, our board of directors will be divided into three
classes, with each director serving a three-year term and one class being
elected at each year's annual meeting of stockholders. Directors Hartman and
Walt will be in the class of directors whose initial term expires at the 2001
annual meeting of stockholders. Directors Stuelpnagel and Nelsen will be in the
class of directors whose initial term expires at the 2002 annual meeting of the
stockholders. Directors Flatley, Poste and Rastetter will be in the class of
directors whose initial term expires at the 2003 annual meeting of
stockholders.
Our board of directors currently has an audit committee and a compensation
committee. Directors Hartman, Nelsen and Rastetter are currently members of the
audit committee. The audit committee reviews our internal accounting procedures
and consults with and reviews the services provided by our independent
accountants. Directors Nelsen and Rastetter currently are members of the
compensation committee. The compensation committee reviews and recommends to
the board of directors the compensation and benefits for all of our officers
and establishes and reviews general policies relating to compensation and
benefits for our other employees.
Director Compensation
We reimburse our non-employee directors for their expenses incurred in
connection with attending board and committee meetings but do not compensate
them for their services as board or committee members. We have in the past
granted non-employee directors options to purchase our common stock pursuant to
the terms of our stock plan, and our board continues to have the discretion to
grant options to new and continuing non-employee directors. In addition,
several directors have purchased shares of our common stock pursuant to
restricted stock purchase agreements, subject to a repurchase right in our
favor. For a discussion of each director's restricted stock purchase agreement,
see "Related Party Transactions."
41
<PAGE>
In July 2000, our stockholders approved guidelines for the grant of stock
options under our 2000 Stock Option Plan, as amended, to directors who are not
our officers or employees. These guidelines provide that such directors will
receive:
. one-time option grants of 20,000 shares vesting annually over four years
upon joining the board which are to be granted on the date of the first
board meeting attended at the fair market value of one share of our
common stock on the date of grant; and
. annual option grants of 10,000 shares vesting annually over four years
which are to be granted on the date of each annual stockholder meeting
following the closing of this offering at the fair market value of one
share of our common stock on the date of grant.
Executive Compensation
The following table sets forth the compensation earned for services rendered
to us in all capacities by our chief executive officer and our four most highly
compensated executive officers whose total cash compensation exceeded
$100,000--collectively, the "Named Executive Officers"--for the year ended
December 31, 1999.
Summary 1999 Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term
($) Compensation
--------------------- ------------
Securities
Underlying All Other
Name and Principal Positions Salary Bonus Other Options (#) Compensation
---------------------------- ------- ------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Jay T. Flatley, President
and Chief Executive
Officer(1)................. 55,859 -- 11,179(2) -- --
John R. Stuelpnagel, Vice
President of Business
Development................ 141,500 12,000 -- -- --
Mark S. Chee, Vice President
of Genomics................ 145,000 7,000 -- -- --
Anthony W. Czarnik, former
Chief Scientific
Officer(3)................. 185,000 -- -- -- --
Richard J. Pytelewski,
former Vice President of
Operations................. 158,000 -- 55,025(4) -- --
</TABLE>
--------
(1) Mr. Flatley joined Illumina in October 1999.
(2) This amount represents an allowance for housing.
(3) Dr. Czarnik is currently a Research Fellow.
(4) This amount represents reimbursement for relocation costs.
Purchases of Restricted Common Stock
We have not granted any options to the named executive officers. However,
each named executive officer has purchased shares of our common stock subject
to a repurchase right in our favor. The repurchase right entitles us to
repurchase unvested shares at their original exercise price on termination of
the executive officer's services with us. Our repurchase rights lapse over time
on employment anniversary dates and upon achievement of business milestones.
For a discussion of each executive officer's restricted stock purchase
agreement, see "Related Party Transactions."
Stock Plans
1998 Incentive Stock Plan
Our 1998 Incentive Stock Plan was adopted by our board of directors in April
1998, approved by our stockholders in April 1999 and amended in October 1999
and February 2000. A total of
42
<PAGE>
5,750,000 shares of common stock have been reserved for issuance under our 1998
Incentive Stock Plan.
The 1998 Incentive Stock Plan provides for grants of incentive stock options
to our employees including officers and employee directors and nonstatutory
stock options to our consultants including nonemployee directors. The purpose
of our stock plan is to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to our
employees and consultants and to promote the success of our business. At the
request of the board of directors, the compensation committee administers our
stock plan and determines the optionees and the terms of options granted,
including the exercise price, number of shares subject to the option and the
exercisability thereof.
The term of options granted under the 1998 Incentive Stock Plan is stated in
the option agreement. However, the term of an incentive stock option may not
exceed ten years and, in the case of an option granted to an optionee who owns
more than 10 percent of our outstanding stock at the time of grant, the term of
an option may not exceed five years. Options granted under the 1998 Incentive
Stock Plan vest and become exercisable as set forth in each option agreement.
With respect to any optionee who owns more than 10% of our outstanding
stock, the exercise price of any stock option granted must be at least 110% of
the fair market value on the grant date.
No incentive stock options may be granted to an optionee, which, when
combined with all other incentive stock options becoming exercisable in any
calendar year that are held by that person, would have an aggregate fair market
value in excess of $100,000.
The 1998 Incentive Stock Plan will terminate in April 2008, unless our board
of directors terminates it sooner.
As of March 31, 2000, we had issued 392,381 shares of common stock upon the
exercise of options granted under our 1998 Incentive Stock Plan, we had
outstanding options to purchase 932,485 shares of common stock at a weighted
average exercise price of $0.34 per share and we had 522,384 shares available
for future option grants. In June 2000 we increased the number of shares
reserved for issuance under our 1998 Incentive Stock Plan by 1,250,000. Upon
completion of this offering, the 1998 Incentive Stock Plan will terminate and
all reserved but unissued shares will be reserved for issuance under our 2000
Stock Plan.
2000 Stock Plan
Our board of directors adopted the 2000 Stock Plan in June 2000, and our
stockholders subsequently approved it. This plan provides for the grant of
incentive stock options to our employees and nonstatutory stock options and
stock purchase rights to our employees, directors and consultants. As of June
2000, a total of 4,000,000 shares of our common stock were reserved for
issuance pursuant to our 2000 Stock Plan.
No options have yet been issued pursuant to the 2000 Stock Plan. The number
of shares reserved for issuance under our 2000 Stock Plan will increase
annually on the first day of the Company's fiscal year beginning in 2001 by an
amount equal to the lesser of 5% of the outstanding shares of our common stock
on the last day of the immediately preceding fiscal year, 1,500,000 shares or
such lesser amount as our board of directors may determine.
Our board of directors or a committee of our board administers the 2000
Stock Plan. The committee may consist of two or more "outside directors" to
satisfy certain tax and securities requirements. The administrator has the
power to determine the terms of the options or stock purchase rights granted,
including the exercise price, the number of shares subject to each option or
43
<PAGE>
stock purchase right, the exercisability of the options and the form of
consideration payable upon exercise. The administrator determines the exercise
price of options granted under our stock option plan, but with respect to
incentive stock options, the exercise price must at least be equal to the fair
market value of our common stock on the date of grant. Additionally, the term
of an incentive stock option may not exceed ten years. The administrator
determines the term of all other options. No optionee may be granted an option
to purchase more than 500,000 shares in any fiscal year. In connection with his
or her initial service, an optionee may be granted an additional option to
purchase not more than 1,000,000 shares of our common stock. After termination
of one of our employees, directors or consultants, he or she may exercise his
or her option for the period of time stated in the option agreement. If
termination is due to death or disability, the option will generally remain
exercisable for 12 months following such termination. In all other cases, the
option will generally remain exercisable for 3 months. However, an option may
never be exercised later than the expiration of its term.
The administrator determines the exercise price of stock purchase rights
granted under our 2000 Stock Plan. Unless the administrator determines
otherwise, the restricted stock purchase agreement will grant us a repurchase
option that we may exercise upon the voluntary or involuntary termination of
the purchaser's service with us for any reason (including death or disability).
The purchase price for shares we repurchase will generally be at the original
price paid by the purchaser. The administrator determines the rate at which our
repurchase option will lapse. Our 2000 Stock Plan generally does not allow for
the transfer of options or stock purchase rights and only the optionee may
exercise an option and stock purchase right during his or her lifetime.
Our 2000 Stock Plan provides that in the event of our merger with or into
another corporation or a sale of substantially all of our assets, the successor
corporation will assume or substitute for each option or stock purchase right.
If the outstanding options or stock purchase rights are not assumed or
substituted for, all outstanding options and stock purchase rights become fully
vest and exercisable. Our 2000 Stock Plan will automatically terminate in 2010,
unless we terminate it sooner. In addition, our board of directors has the
authority to amend, suspend or terminate the plan provided it does not
adversely affect any option previously granted under the plan.
2000 Employee Stock Purchase Plan
Our 2000 employee stock purchase plan was adopted by our board of directors
in February 2000. It was subsequently approved by our shareholders and will
become effective upon the closing of this offering. We have reserved a total
of 500,000 shares of common stock for issuance under the 2000 employee stock
purchase plan, together with an annual increase in the number of shares
reserved thereunder beginning on the first day of our fiscal year commencing
January 1, 2001 in an amount equal to the lesser of:
. 1.5 million shares;
. 3% of our outstanding common stock on the last day of the prior fiscal
year; or
. an amount determined by our board of directors.
Our employee stock purchase plan is administered by the board of directors
and is intended to qualify under Section 423 of the Internal Revenue Code. Our
employees, including our officers and employee directors but excluding our five
percent or greater stockholders, are eligible to participate if they are
customarily employed for at least 20 hours per week and for more than five
months in any calendar year. Our employee stock purchase plan permits eligible
employees to purchase common stock through payroll deductions, which may not
exceed the lesser of 15% of an employee's compensation, where compensation is
defined on Form W-2, or $25,000.
44
<PAGE>
Our employee stock purchase plan will be implemented in a series of
overlapping 24 month offering periods, and each offering period consists of
four six month purchase periods. The initial offering period under our employee
stock purchase plan will begin on the effective date of this offering, and the
subsequent offering periods will begin on the first trading day on or after
February 1 and August 1 of each year. Each participant will be granted an
option on the first day of the offering period and the option will be
automatically exercised on the date six months later, the end of a purchase
period, throughout the offering period. If the fair market value of our common
stock on any purchase date is lower than the fair market value on the start
date of that offering period, then all participants in that offering period
will be automatically withdrawn from that offering period and re-enrolled in
the immediately following offering period. The purchase price of our common
stock under our employee stock purchase plan will be 85 percent of the lesser
of the fair market value per share on the start date of the offering period or
at the end of the purchase period. Employees may end their participation in an
offering period at any time, and their participation ends automatically on
termination of employment with our company.
Our employee stock purchase plan will terminate in 2010, unless our board of
directors terminates it sooner.
401(k) Plan
In 1998, we adopted a Retirement Savings and Investment Plan, the 401(k)
Plan, covering our full-time employees located in the United States. The 401(k)
Plan is intended to qualify under Section 401(k) of the Internal Revenues Code,
so that contributions to the 401(k) Plan by employees or by us and the
investment earnings thereon are not taxable to the employees until withdrawn.
If our 401(k) Plan qualifies under Section 401(k) of the Internal Revenues
Code, our contributions will be deductible by us when made. Our employees may
elect to reduce their current compensation by up to the statutorily prescribed
annual limit of $10,500 in 2000 and to have those funds contributed to the
401(k) Plan. The 401(k) Plan permits us, but does not require us, to make
additional matching contributions on behalf of all participants. To date, we
have not made any contributions to the 401(k) Plan.
Employment Agreements and Change in Control Arrangements
We have not entered into employment or severance agreements with any of our
officers or employees other than Dr. Czarnik. We have agreed to provide Dr.
Czarnik with severance compensation for up to twelve months in an amount equal
to his then annual base salary in the event of his termination without cause.
We entered into an agreement with Richard Pytelewski, our former Vice President
of Operations, to serve as a consultant to Illumina. Pursuant to that
agreement, we paid Mr. Pytelewski his salary through the end of his consultancy
in June 2000, and issued him 30,000 shares of common stock at that time.
45
<PAGE>
RELATED PARTY TRANSACTIONS
Stock Issuances to our Directors, Officers and Principal Stockholders
In June 1998, we sold 2,499,998 shares of our Series A preferred stock at a
price per share of $0.30. In November 1998, we sold 9,336,299 shares of our
Series B preferred stock at $0.926 per share. In November and December 1999, we
sold 7,000,000 shares of our Series C preferred stock at $4.00 per share. All
of our preferred stock is convertible into shares of our common stock on a one-
for-one basis.
Since our inception, we have from time to time sold shares of our common
stock, at per share prices ranging from $0.01 per share to $1.00, to our
directors, officers, founders and consultants, subject to repurchase rights in
our favor that lapse over specified periods, usually five years, subject to
earlier lapse in some cases upon the achievement of specified milestones by
Illumina. The repurchase right entitles us to repurchase shares at their
original purchase price on termination of a purchaser's services with us. Upon
the closing of an acquisition of Illumina for cash or publicly traded
securities, the lapsing of our repurchase right accelerates as to 50% of each
officer's shares of common stock then subject to our repurchase right and, with
respect to the remaining 50%, on the first anniversary of the closing date of
the acquisition. If the acquirer terminates the officer without cause within
one year of the closing date, our repurchase right lapses with respect to all
shares.
Listed below are those persons who participated in the transactions
described above who are our executive officers or directors or who beneficially
own five percent or more of our securities.
<TABLE>
<CAPTION>
Common Stock Convertible Preferred Stock
----------------------- -------------------------------------------
Aggregate Aggregate
Shares Consideration Series A Series B Series C Consideration
(#) ($) (#) (#) (#) ($)
--------- ------------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Executive Officers &
Directors
Jay T. Flatley(1)....... 1,000,000 90,000 -- -- 12,500 50,000
Timothy M. Kish(2)...... 375,000 375,000 -- -- -- --
David L. Barker,
Ph.D.(3)............... 250,000 100,000 -- -- -- --
John R. Stuelpnagel,
DVM(4)................. 550,000 49,750 72,399 107,959 6,250 146,720
Mark S. Chee, Ph.D.(5).. 550,000 44,750 5,733 367,060 7,500 371,719
Anthony W. Czarnik,
Ph.D.(6)............... 425,000 6,250 6,551 -- -- 1,965
Robert C. Kain(7)....... 150,000 37,500 -- -- -- --
Noemi C. Espinosa(8).... 215,000 215,000 -- -- -- --
Richard J.
Pytelewski(9).......... 109,167 3,275 -- -- 5,000 20,000
Lawrence A. Bock(10).... 68,750 688 -- -- -- --
Charles M. Hartman(10).. 68,750 688 -- -- -- --
George Poste, DVM,
Ph.D(11)............... 100,000 40,000 -- -- -- --
William H. Rastetter,
Ph.D(12)............... 75,000 14,500 -- -- -- --
David R. Walt,
Ph.D.(13).............. 1,000,000 10,000 266,378 107,960 -- 179,914
5% Stockholders
Entities affiliated with
CW Group(14)........... -- -- 1,770,302 2,375,099 575,000 5,031,090
ARCH Venture Fund III,
L.P. (15).............. -- -- 345,302 2,644,997 625,000 5,053,590
Entities affiliated with
Venrock Associates..... -- -- -- 2,644,997 625,000 4,950,000
TGI Fund II, L.C. ...... -- -- -- 998,621 750,000 3,925,000
PE Corporation.......... -- -- -- -- 1,250,000 5,000,000
</TABLE>
--------
(1) Mr. Flatley purchased his shares of common stock in October 1999, at a per
share price of $0.09. Our right to repurchase 750,000 of these shares
lapses over a five-year period, and our right to repurchase 250,000 of
these shares lapses over an eight-year period, subject to earlier lapse
upon the achievement of specified milestones by Illumina. The right to
repurchase had lapsed as to 20,000 shares as of March 31, 2000.
(2) Mr. Kish purchased his shares of common stock in March 2000, at a per
share price of $1.00. Our right to repurchase these shares lapses over a
five year period. The right to repurchase had lapsed as to no shares as of
March 31, 2000.
46
<PAGE>
(3) Dr. Barker purchased his shares of common stock in March 2000, at a per
share price of $0.40. Our right to repurchase these shares lapses over a
five-year period. The right to repurchase had lapsed as to no shares as of
March 31, 2000.
(4) Dr. Stuelpnagel purchased his shares of common stock in June and August
1998, October 1999 and March 2000, at a per share price of $0.01 to $0.40.
We have no repurchase right with respect to 100,000 shares, our right to
repurchase 375,000 shares lapses over four- and five-year periods, and our
right to repurchase 75,000 of these shares lapses over an eight-year
period, subject to earlier lapse upon the achievement of specified
milestones by Illumina. The right to repurchase had lapsed as to 92,706
shares as of March 31, 2000.
(5) Dr. Chee purchased his shares of common stock in June 1998, October 1999
and March 2000 at a per share price of $0.01 to $0.40. Our right to
repurchase 450,000 of these shares lapses over four- and five-year
periods, and our right to repurchase 100,000 of these shares lapses over
an eight-year period, subject to earlier lapse upon the achievement of
specified milestones by Illumina. The right to repurchase had lapsed as to
132,916 shares as of March 31, 2000.
(6) Dr. Czarnik purchased his shares of common stock in June 1998 and October
1999, at a per share price of $0.01 to $0.09. Our right to repurchase
400,000 of these shares lapses over a five-year period, and our right to
repurchase 25,000 of these shares lapses over an eight-year period,
subject to earlier lapse upon the achievement of specified milestones by
Illumina. The right to repurchase had lapsed as to 140,000 shares as of
March 31, 2000.
(7) Mr. Kain purchased his shares of common stock in January 2000, at a per
share price of $0.25. Our right to repurchase these shares lapses over a
five-year period. The right to repurchase had lapsed as to no shares as of
March 31, 2000.
(8) Ms. Espinosa purchased her shares of common stock in March 2000, at a per
share purchase price of $1.00. Our right to repurchase these shares lapses
over a five-year period. The right to repurchase had lapsed as to no
shares as of March 31, 2000.
(9) Mr. Pytelewski purchased his shares of common stock in November 1998 and
October 1999, at a per share price of $0.03 to $0.09. Our right to
repurchase 250,000 of these shares lapses over a five-year period, and our
right to repurchase 25,000 of these shares lapses over an eight-year
period, subject to earlier lapse upon the achievement of specified
milestones by Illumina. The right to repurchase had lapsed as to 66,666
shares as of March 31, 2000. In June 2000, we issued Mr. Pytelewski 30,000
shares of common stock in connection with the completion of his
consultancy and we repurchased 195,833 shares of his common stock.
(10) Mr. Bock, a founder, and Mr. Hartman, a director, purchased their shares
of common stock in May 1999 at a per price share of $0.01 upon the
exercise of options. Mr. Bock and Mr. Hartman are general partners of CW
Group.
(11) Dr. Poste purchased his shares of common stock in February 2000, at a per
share price of $0.40. Our right to repurchase these shares lapses over a
four-year period. The right to repurchase had lapsed as to 2,083 shares as
of March 31, 2000.
(12) Dr. Rastetter purchased his shares of common stock in February 1999 and
March 2000, at a per share price of $0.09 to $0.40. Our right to
repurchase these shares lapses over four- and five-year periods. The right
to repurchase had lapsed as to 12,500 shares as of March 31, 2000.
(13) Dr. Walt purchased his shares of common stock in April 1998, at a per
share price of $0.01. Our right to repurchase these shares lapses over a
five-year period. The right to repurchase had lapsed as to 533,333 shares
as of March 31, 2000.
(14) Lawrence A. Bock and Charles M. Hartman are general partners of CW Group.
Mr. Hartman is a Director of Illumina and Mr. Bock is a founder of
Illumina.
(15) Robert T. Nelsen, a Director of Illumina, is a managing director of the
general partner of ARCH Venture Fund III, L.P.
Upon closing of this offering, all shares of outstanding preferred stock
will be automatically converted into shares of common stock. We have entered
into an agreement pursuant to which these and other preferred stockholders will
have registration rights with respect to their shares of common stock following
this offering. For a description of these registration rights, see "Description
of Capital Stock."
Other Transactions
We pay license fees to Tufts University in connection with our license of
patents filed by Dr. David Walt, one of our directors. Dr. Walt is the Robinson
Professor of Chemistry at Tufts. It is our understanding that Tufts University
pays a portion of the license fees received from us to Dr. Walt. We have also
provided Tufts University with $100,000 in funding for research relating to the
development of our BeadArray technology. In addition, we and Tufts University
are co-investigators under a research grant for DNA sequencing sponsored by the
Department of Energy.
47
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of March 31, 2000 and as adjusted
to reflect the sale of common stock offered hereby by:
. each stockholder known by us to own beneficially more than five percent
of our common stock;
. each of the named executive officers listed in the Summary Compensation
Table on page 40;
. each of our directors; and
.all of our directors and the named executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to stock
options and warrants currently exercisable or exercisable within 60 days are
deemed to be outstanding for computing the percentage ownership of the person
holding these options and the percentage ownership of any group of which the
holder is a member, but are not deemed outstanding for computing the percentage
of any other person. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table have sole voting
and investment power with respect to all shares of common stock shown as
beneficially owned by them. Some of the shares of common stock held by our
directors, officers and consultants are subject to repurchase rights in our
favor. For a discussion of these repurchase rights, see "Related Party
Transactions."
<TABLE>
<CAPTION>
Number of
Shares Percent of Shares
Beneficially Beneficially Owned
Owned Prior to ---------------------------------
Name and Address the Offering Before Offering(1) After Offering
---------------- -------------- ------------------ --------------
<S> <C> <C> <C>
CW Group(2)................... 4,991,464 19.5% 15.8%
1041 Third Avenue
New York, NY 10021
ARCH Venture Fund III,
L.P.(3)...................... 3,615,299 14.2 11.5
8725 West Higgins Road, Suite
290
Chicago, IL 60631
Venrock Associates(4)......... 3,269,997 12.8 10.4
30 Rockefeller Plaza, Room
5508
New York, NY 10112
TGI Fund II, L.C.(5) ......... 1,748,621 6.8 5.5
6501 Columbia Center
701 Fifth Avenue
Seattle, WA 98104
David R. Walt(6).............. 1,374,338 5.4 4.4
62 Talbot Avenue
Medford, MA 02155
PE Corporation................ 1,250,000 4.9 4.0
50 Danbury Road
Wilton, CT 06897
Jay T. Flatley(7)............. 992,000 3.9 3.1
Mark S. Chee.................. 921,793 3.6 2.9
John R. Stuelpnagel........... 716,608 2.8 2.3
Anthony W. Czarnik............ 421,551 1.7 1.3
Timothy M. Kish............... 375,000 1.5 1.2
Richard J. Pytelewski......... 280,000 1.1 *
David L. Barker............... 250,000 1.0 *
Noemi C. Espinosa............. 215,000 * *
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares Percent of Shares
Beneficially Beneficially Owned
Owned Prior to ---------------------------------
Name and Address the Offering Before Offering(1) After Offering
---------------- -------------- ------------------ --------------
<S> <C> <C> <C>
Robert C. Kain................ 150,000 * *
George Poste.................. 100,000 * *
709 Swedeland
King of Prussia, PA 19406
William H. Rastetter.......... 75,000 * *
1101 Torreyana Road
San Diego, CA 92121
Charles M. Hartman(2)......... 4,991,464 19.5 15.8
1041 Third Avenue
New York, NY 10021
Lawrence A. Bock (2).......... 4,991,464 19.5 15.8
2187 New Castle Avenue, Suite
101
Cardiff By the Sea, CA 92007
Robert T. Nelsen(3)........... 3,615,299 14.2 11.5
8725 West Higgins Road, Suite
290
Chicago, IL 60631
All directors and named
executive officers as a group
(14 persons)................. 14,478,053 56.7 45.9
</TABLE>
--------
* Represents beneficial ownership of less than one percent (1%) of the
outstanding shares of our common stock.
(1) Percentage ownership before the offering is based on the 25,541,095 shares
of common stock outstanding on March 31, 2000, after giving effect to the
conversion of all of our preferred stock into shares of our common stock.
(2) Shares shown as owned by CW Group, Charles M. Hartman, a Director of
Illumina and a general partner of CW Group, and Lawrence A. Bock, a founder
of Illumina and a general partner of CW Group, are owned by CW Ventures
III, L.P. CW Partners IV, L.L.C. is the general partner of CW Ventures III,
L.P. Messrs. Bock and Hartman and Barry Weinberg and Walter Channing are
the managing members of CW Partners IV, L.L.C. Messrs. Hartman, Bock,
Weinberg and Channing disclaim beneficial ownership of the shares shown
except shares owned directly or attributable to their respective
partnership interests.
(3) Shares shown as owned by ARCH Venture Fund III, L.P. and Robert T. Nelsen,
a Director of Illumina and a managing director of the general partner of
ARCH Venture Fund III, L.P., are owned by ARCH Venture Fund III. Mr. Nelsen
disclaims beneficial ownership of the shares shown except to the extent of
his pecuniary interest therein.
(4) Consists of 1,380,786 shares held by Venrock Associates, 1,857,961 shares
held by Venrock Associates II, L.P. and 31,250 shares by Venrock
Entrepreneurs Fund, L.P. These Venrock entities are located at
30 Rockefeller Plaza, Suite 5508, New York, NY 10112. Michael C. Brooks,
Joseph E. Casey, Eric S. Copeland, Anthony B. Evnin, Thomas R. Frederick,
David R. Hathaway, Patrick F. Latterell, Ray A. Rothrock, Kimberley A.
Rummelsburg, Anthony Sun and Michael F. Tyrrell are general partners of
these entities or are members of a limited liability company that serves as
a general partner. They disclaim beneficial ownership of these shares
except to the extent of their proportionate partnership or membership
interest in these shares.
(5) TGI Fund II, L.C. is controlled by Steven Johnson.
(6) Includes 303,980 shares owned by Dr. Walt's wife.
(7) Includes 12,000 shares owned by Mr. Flatley's children.
Except as otherwise noted above, the address of each person listed on the
table is 9390 Towne Centre Drive, San Diego, California 92121.
49
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
We are authorized to issue 120,000,000 shares of common stock, $0.01 par
value, and 10,000,000 shares of undesignated preferred stock, $0.01 par value.
Common Stock
Assuming the conversion of all of our preferred stock into 18,836,297 shares
of common stock, as of March 31, 2000 we had 25,541,095 shares of common stock
outstanding that were held of record by approximately 101 stockholders.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably any dividends that may be declared from time to
time by the board of directors out of funds legally available for that purpose.
In the event of our liquidation, dissolution or winding up, the holders of
common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior distribution rights of preferred stock
then outstanding. The common stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are
fully paid and nonassessable, and the shares of common stock to be issued upon
the closing of this offering will be fully paid and nonassessable.
Preferred Stock
Upon the closing of this offering, our board of directors will have the
authority, without action by our stockholders, to designate and issue up to
10,000,000 shares of preferred stock in one or more series. The board of
directors may also designate the rights, preferences and privileges of each
series of preferred stock; any or all of which may be greater than the rights
of the common stock. It is not possible to state the actual effect of the
issuance of any shares of preferred stock upon the rights of holders of the
common stock until the board of directors determines the specific rights of the
holders of the preferred stock. However, these effects might include:
. restricting dividends on the common stock;
. diluting the voting power of the common stock;
. impairing the liquidation rights of the common stock; and
. delaying or preventing a change in control of our company without further
action by the stockholders.
We have no present plans to issue any shares of preferred stock.
Warrants
As of March 31, 2000 we had outstanding warrants to purchase 43,183 shares
of Series B preferred stock at an exercise price of $0.926 per share. The
warrants will expire in November 2005.
Holders of Registration Rights Can Require Us to Register Shares of Our Stock
for Resale
The holders of 18,836,297 shares of common stock and 43,183 shares of common
stock issuable upon the exercise of warrants or their permitted transferees are
entitled to rights with respect to registration of these shares under the
Securities Act of 1933, as amended. These rights are provided under the terms
of our agreement with the holders of registrable securities. Under these
50
<PAGE>
registration rights, holders of at least a majority of the then outstanding
registrable securities may require on two occasions that we register their
shares for public resale. We are obligated to register, on two separate
occasions, these shares if the holders of a majority of the eligible shares
request registration and only if the shares to be registered have an
anticipated public offering price of at least $5,000,000. In addition, holders
of registrable securities may require that we register their shares for public
resale on Form S-3 or similar short-form registration, if we are eligible to
use Form S-3 or similar short-form registration, and the value of the
securities to be registered is at least $1,000,000. If we elect to register any
of our shares of common stock for any public offering, the holders of
registrable securities are entitled to include shares of common stock in the
registration. However we may reduce the number of shares proposed to be
registered in view of market conditions. We will pay all expenses in connection
with any registration, other than underwriting discounts and commissions.
Anti-Takeover Effects of Some Provisions of Delaware Law
Provisions of Delaware law and our amended and restated certificate of
incorporation and amended bylaws to be in effect upon the closing of this
offering could make the acquisition of our company through a tender offer, a
proxy contest or other means more difficult and could make the removal of
incumbent officers and directors more difficult. We expect these provisions to
discourage coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of our company to first negotiate
with our board of directors. We believe that the benefits provided by our
ability to negotiate with the proponent of an unfriendly or unsolicited
proposal outweigh the disadvantages of discouraging these proposals. We believe
the negotiation of an unfriendly or unsolicited proposal could result in an
improvement of its terms.
We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became
an interested stockholder, unless:
. prior to the date of the transaction, the board of directors of the
corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an interested stockholder;
. the stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes
of determining the number of shares outstanding (a) shares owned by
persons who are directors and also officers, and (b) shares owned by
employee stock plans in which employee participants do not have the right
to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer; or
. on or subsequent to the date of the transaction, the business combination
is approved by the board and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative vote of
at least 66% of the outstanding voting stock which is not owned by the
interested stockholder.
Generally, a "business combination" includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns or, within three years prior to the
determination of interested stockholder status, did own 15% or more of a
corporation's outstanding voting securities. We expect the existence of this
provision to have an anti-takeover effect with respect to transactions our
board of directors does not approve in advance. We also anticipate that Section
203 may also discourage attempts that might result in a premium over the market
price for the shares of common stock held by stockholders.
51
<PAGE>
Anti-Takeover Effects of Provisions of Our Charter Documents
Our amended and restated certificate of incorporation to be in effect upon
the closing of this offering provides for our board of directors to be divided
into three classes serving staggered terms. Approximately one-third of the
board of directors will be elected each year. The provision for a classified
board could prevent a party who acquires control of a majority of the
outstanding voting stock from obtaining control of the board of directors until
the second annual stockholders meeting following the date the acquirer obtains
the controlling stock interest. The classified board provision could discourage
a potential acquirer from making a tender offer or otherwise attempting to
obtain control of our company and could increase the likelihood that incumbent
directors will retain their positions. Our amended and restated certificate of
incorporation to be in effect upon the closing of this offering provides that
directors may be removed:
. with cause by the affirmative vote of the holders of at least a majority
of the outstanding shares of voting stock; or
. without cause by the affirmative vote of the holders of at least 66 2/3%
of the then-outstanding shares of the voting stock.
Our amended bylaws to be in effect upon the closing of this offering
establish an advance notice procedure for stockholder proposals to be brought
before an annual meeting of our stockholders, including proposed nominations of
persons for election to the board of directors. At an annual meeting,
stockholders may only consider proposals or nominations specified in the notice
of meeting or brought before the meeting by or at the direction of the board of
directors. Stockholders may also consider a proposal or nomination by a person
who was a stockholder of record on the record date for the meeting, who is
entitled to vote at the meeting and who has given to our Secretary timely
written notice, in proper form, of his or her intention to bring that business
before the meeting. The amended bylaws do not give the board of directors the
power to approve or disapprove stockholder nominations of candidates or
proposals regarding other business to be conducted at a special or annual
meeting of the stockholders. However, our bylaws may have the effect of
precluding the conduct of business at a meeting if the proper procedures are
not followed. These provisions may also discourage or deter a potential
acquirer from conducting a solicitation of proxies to elect the acquirer's own
slate of directors or otherwise attempting to obtain control of our company.
Under Delaware law, a special meeting of stockholders may be called by the
board of directors or by any other person authorized to do so in the amended
and restated certificate of incorporation or the amended bylaws. Our amended
bylaws authorize a majority of our board of directors, the chairman of the
board or the chief executive officer to call a special meeting of stockholders.
Because our stockholders do not have the right to call a special meeting, a
stockholder could not force stockholder consideration of a proposal over the
opposition of the board of directors by calling a special meeting of
stockholders prior to such time as a majority of the board of directors
believed or the chief executive officer believed the matter should be
considered or until the next annual meeting provided that the requestor met the
notice requirements. The restriction on the ability of stockholders to call a
special meeting means that a proposal to replace the board also could be
delayed until the next annual meeting.
Delaware law provides that stockholders may execute an action by written
consent in lieu of a stockholder meeting. However, Delaware law also allows us
to eliminate stockholder actions by written consent. Elimination of written
consents of stockholders may lengthen the amount of time required to take
stockholder actions since actions by written consent are not subject to the
minimum notice requirement of a stockholder's meeting. However, we believe that
the elimination of stockholders' written consents may deter hostile takeover
attempts. Without the availability of stockholder's actions by written consent,
a holder controlling a majority of our capital stock would not be able to amend
our bylaws or remove directors without holding a stockholders meeting. The
holder
52
<PAGE>
would have to obtain the consent of a majority of the board of directors, the
chairman of the board or the chief executive officer to call a stockholders'
meeting and satisfy the notice periods determined by the board of directors.
Our amended and restated certificate of incorporation to be in effect upon the
closing of this offering provides for the elimination of actions by written
consent of stockholders upon the closing of this offering.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is EquiServe.
Nasdaq Stock Market Listing
We have applied to have our common stock listed on the Nasdaq National
Market for quotation under the symbol "ILMN".
53
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our stock.
Future sales of substantial amounts of our common stock in the public market
following this offering or the possibility of these sales occurring could
adversely affect prevailing market prices for our common stock or could impair
our ability to raise capital through an offering of equity securities.
After this offering, we will have outstanding 31,541,095 shares of common
stock, based upon shares outstanding as of March 31, 2000. All of the shares
sold in this offering will be freely tradable without restriction under the
Securities Act except for any shares purchased by our "affiliates" as that term
is defined in Rule 144 under the Securities Act. The remaining 25,541,095
shares of common stock held by existing stockholders are "restricted" shares as
that term is defined in Rule 144 under the Securities Act. We issued and sold
the restricted shares in private transactions in reliance upon exemptions from
registration under the Securities Act. Restricted shares may be sold in the
public market only if they are registered under the Securities Act or if they
qualify for an exemption from registration, such as Rule 144 or 701 under the
Securities Act, which are summarized below.
Our officers, directors and some of our stockholders, including business
partners, who collectively hold an aggregate of 25,088,827 shares, and the
underwriters have entered into lock-up agreements in connection with this
offering. These lock-up agreements provide that, with limited exceptions, our
officers, directors and other stockholders have agreed not to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of any of
our shares for a period of 180 days after the effective date of this offering.
Goldman, Sachs & Co. may, in its sole discretion and at any time without prior
notice, release all or any portion of the shares subject to these lock-up
agreements. We have also entered into an agreement with Goldman, Sachs & Co.
that we will not offer, sell or otherwise dispose of our common stock until 180
days after the effective date of this offering.
Taking into account the lock-up agreements, the number of shares, other than
shares sold in the offering, that will be available for sale in the public
market under the provisions of Rules 144 and 701, will be as follows:
. 264,768 shares that become eligible for sale at various times between
the date of this offering and the date 90 days after the effective date
of this offering;
. an additional 15,862,985 shares that become eligible for sale beginning
180 days after the effective date of this offering;
. an additional 82,372 shares that become eligible for sale upon exercise
of vested options 90 days after the date of this prospectus and an
additional 41,755 shares that become eligible for sale upon the exercise
of vested options 180 days after the date of this prospectus; and
. an additional 9,413,342 shares that become eligible for sale at various
times thereafter upon the expiration of applicable holding periods.
Following the expiration of the lock-up period, shares issued upon exercise
of options granted by us prior to the completion of this offering will also be
available for sale in the public market pursuant to Rule 701 under the
Securities Act unless those shares are held by one of our affiliates, directors
or officers.
Rule 701 permits resale of shares in reliance upon Rule 144 but without
compliance with restrictions of Rule 144, including the holding period
requirement. In general, under Rule 144 as currently in effect, a person, or
persons whose shares are aggregated, who has beneficially owned restricted
shares for at least one year, including the holding period of any prior owner
except an
54
<PAGE>
affiliate, would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of:
. one percent of the number of shares of common stock then outstanding,
which will equal approximately 315,411 shares immediately after the
offering, or
. the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale.
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been an affiliate of
our company at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years
including the holding period of any prior owner except an affiliate, is
entitled to sell the shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits our employees, officers, directors
or consultants who purchased shares under a written compensatory plan or
contract to resell these shares in reliance upon Rule 144 but without
compliance with specific restrictions. Rule 701 provides that affiliates may
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirement and that non-affiliates may sell these shares in reliance on
Rule 144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144.
We intend to file, shortly after the effectiveness of this offering, a
registration statement on Form S-8 under the Securities Act covering all shares
of common stock reserved for issuance under the stock plans and subject to
outstanding options under our 1998 Incentive Stock Plan. See "Management--Stock
Plans". Shares of common stock issued upon exercise of options under the Form
S-8 will be available for sale in the public market, subject to Rule 144 volume
limitations applicable to affiliates and subject to the contractual
restrictions described above. As of March 31, 2000, options to purchase 932,485
shares of common stock were outstanding. Beginning 90 and 180 days after the
effective date of this offering, approximately 82,372 shares and 41,755 shares,
respectively, issuable upon the exercise of vested stock options will become
eligible for sale in the public market, if the options are exercised.
Following this offering, the holders of an aggregate of 18,836,297 shares of
outstanding common stock and 43,183 shares of common stock issuable upon the
exercise of warrants have the right to require us to register their shares for
sale upon meeting specific requirements. See "Description of Capital Stock--
Registration Rights" for additional information regarding registration rights.
55
<PAGE>
UNDERWRITING
Illumina and the underwriters for the offering named below have entered into
an underwriting agreement with respect to the shares being offered. Subject to
specified conditions, each underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co., Chase
Securities Inc. and SG Cowen Securities Corporation are the representatives of
the underwriters.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co. ..............................................
Chase Securities Inc. .............................................
SG Cowen Securities Corporation ...................................
---------
Total............................................................ 6,000,000
=========
</TABLE>
Under the terms and conditions of the underwriting agreement, the
underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken. If the underwriters sell more shares than the total
number set forth in the table above, the underwrites have an option to buy up
to an additional 900,000 shares from Illumina to cover such sales. They may
exercise that option for 30 days. If any shares are purchased pursuant to this
option, the underwriters will severally purchase shares in approximately the
same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by Illumina. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid by Illumina
----------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share.......................................... $ $
Total.............................................. $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. The
securities dealers may resell any shares purchased from the underwriters to
other brokers or dealers at a discount of up to $ per share from the initial
public offering price. If all the shares are not sold at the initial public
offering price, the representatives may change the offering price and the other
selling terms.
Illumina and its directors, officers, and principal shareholders have agreed
with the underwriters not to dispose of or hedge any of their common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 180
days after the date of this prospectus, except with the prior written consent
of the representatives. This restriction does not apply to any issuances under
existing employee benefit plans. See "Shares Eligible For Future Sale" for a
discussion of transfer restrictions.
Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated among Illumina and the
representatives. Among the factors considered in determining the initial public
offering price of the shares, in addition to prevailing market conditions, are
Illumina's historical performance, estimates of Illumina's business potential
and earnings prospects, an assessment of Illumina's management and the
consideration of the above factors in relation to market valuation of companies
in related businesses.
Application has been made for quotation of the common stock on the Nasdaq
National Market under the symbol "ILMN".
56
<PAGE>
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. "Covered"
short sales are sales made in an amount not greater than the underwriters'
option to purchase additional shares from the issuer in the offering. The
underwriters may close out any covered short position either by exercising
their option to purchase additional shares or by purchasing shares in the open
market. "Naked" short sales are any sales in excess of such option. The
underwriters must close out any naked short position by purchasing shares in
the open market. A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure on the price of
the common stock in the open market after pricing that could adversely affect
investors who purchase in the offering. Stabilizing transactions consist of
various bids for or purchases of common stock made by the underwriters in the
open market prior to the completion of the offering
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares
sold by or for the account of such underwriter in stabilizing or short covering
transactions.
Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of the
issuer's stock, and together with the imposition of the penalty bid, may
stabilize, maintain or otherwise affect the market price of the common stock.
As a result, the price of the common stock may be higher than the price that
otherwise might exist in the open market. If these activities are commenced,
they may be discontinued at any time. These transactions may be effected on the
Nasdaq National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
At Illumina's request, the underwriters have reserved up to 300,000 shares
of the common stock offered hereby for sale, at the initial public offering
price, to customers and other friends of Illumina through a directed share
program. The number of shares available for sale to the general public will be
reduced to the extent these persons purchase the reserved shares. There can be
no assurance that any of the reserved shares will be so purchased. Any reserved
shares not so purchased will be offered by the underwriters to the general
public on the same basis as other shares offered hereby.
A prospectus in electronic format may be made available on the web sites
maintained by one or more of the underwriters. The underwriters may agree to
allocate a number of shares to underwriters for sale to their online brokerage
account holders. Internet distributions will be allocated by the
representatives to underwriters that may make Internet distributions on the
same basis as other allocations.
Illumina estimates that its share of the total expenses of the offering,
excluding the underwriting discount, will be approximately $1,300,000.
Illumina has agreed to indemnify the underwriters against liabilities,
including liabilities under the Securities Act of 1933.
57
<PAGE>
VALIDITY OF THE SECURITIES
The validity of the common stock offered hereby will be passed upon for us
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California, and for the underwriters by Sullivan & Cromwell, Washington, D.C.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1998 and 1999, and for the period from April 28,
1998 (inception) through December 31, 1998 and the year ended December 31,
1999, as set forth in their report, which is included in this Prospectus and in
the registration statement. Our financial statements are included in reliance
on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.,
a registration statement on Form S-1 under the Securities Act with respect to
the shares of common stock offered hereby. This prospectus does not contain all
the information set forth in the registration statement and the exhibits and
schedules thereto. For further information with respect to us and our common
stock, you should refer to the registration statement and to the exhibits and
schedules filed therewith. A copy of the registration statement may be
inspected by anyone without charge at the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of all or any portion of the registration statement may be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, upon payment of prescribed fees. The public may
obtain information on the operation of the public reference room by calling the
SEC at 1-800-SEC-0330. The Commission maintains a Web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
58
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................... F-2
Balance Sheets as of December 31, 1998 and 1999 and March 31, 2000
(unaudited)............................................................... F-3
Statements of Operations for the period from April 28, 1998 (inception) to
December 31, 1998, the year ended December 31, 1999 and the three months
ended March 31, 1999 and 2000 (unaudited)................................. F-4
Statements of Stockholders' Equity for the period from April 28, 1998
(inception) to March 31, 2000............................................. F-5
Statements of Cash Flows for the period from April 28, 1998 (inception) to
December 31, 1998, the year ended December 31, 1999 and the three months
ended March 31, 1999 and 2000 (unaudited)................................. F-7
Notes to Financial Statements.............................................. F-8
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
Illumina, Inc.
We have audited the accompanying balance sheets of Illumina, Inc. as of
December 31, 1998 and 1999, and the related statements of operations,
stockholders' equity, and cash flows for the period from April 28, 1998
(inception) to December 31, 1998 and the year ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Illumina, Inc. at December
31, 1998 and 1999, and the results of its operations and its cash flows for the
period from April 28, 1998 (inception) to December 31, 1998 and the year ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
/s/ Ernst & Young LLP
San Diego, California
February 29, 2000,
F-2
<PAGE>
ILLUMINA, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
Pro forma
stockholders'
December 31, equity as of
------------------------ March 31, March 31,
1998 1999 2000 2000
----------- ----------- ----------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents............ $ 8,233,729 $21,164,114 $15,067,452
Investments, available
for sale............... -- 11,924,163 17,649,664
Accounts receivable..... -- 49,818 22,701
Other receivable........ 102,988 259,117 349,285
Prepaid expenses and
other current assets... 71,532 95,833 398,433
----------- ----------- -----------
Total current assets.. 8,408,249 33,493,045 33,487,535
Property and equipment,
net...................... 1,000 291,314 802,031
Intangible assets, net.... 113,600 75,733 66,266
Other assets.............. 34,566 34,566 74,376
----------- ----------- -----------
Total assets.......... $ 8,557,415 $33,894,658 $34,430,208
=========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........ $ 129,985 $ 318,219 $ 349,877
Accrued liabilities..... 45,685 292,689 745,974
Note payable............ 1,500 1,500 --
----------- ----------- -----------
Total current
liabilities.......... 177,170 612,408 1,095,851
Deferred revenue.......... -- 1,250,000 2,500,000
Commitments
Stockholders' equity:
Convertible preferred
stock, no par value,
50,000,000 shares
authorized, 11,836,297
and 18,836,297 shares
issued and outstanding
at December 31, 1998
and 1999, respectively;
18,836,297 shares
issued and outstanding
at March 31, 2000
(unaudited); 10,000,000
shares, $.01 par value,
authorized; no shares
issued and outstanding
pro forma (unaudited).. 9,397,998 37,397,998 37,397,998 $ --
Common stock, $.01 par
value, 60,000,000
shares authorized,
3,456,000 and 5,139,083
shares issued and
outstanding at December
31, 1998 and 1999,
respectively; 6,704,798
shares issued and
outstanding at March
31, 2000 (unaudited);
120,000,000 shares
authorized, 25,541,095
shares issued and
outstanding pro forma
(unaudited)............ 34,560 51,391 67,048 255,411
Additional paid-in
capital................ 380,202 5,288,231 23,686,071 60,895,706
Deferred compensation... (286,895) (4,026,916) (18,767,522) (18,767,522)
Unrealized loss on
investments............ -- (10,689) (40,120) (40,120)
Note receivable......... -- (4,500) -- --
Accumulated deficit..... (1,145,620) (6,663,265) (11,509,118) (11,509,118)
----------- ----------- ----------- -----------
Total stockholders'
equity............... 8,380,245 32,032,250 30,834,357 $30,834,357
----------- ----------- ----------- ===========
Total liabilities and
stockholders' equity. $ 8,557,415 $33,894,658 $34,430,208
=========== =========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
ILLUMINA, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
April 28,
1998 Three months ended
(inception) Year ended March 31,
to December December ----------------------
31, 1998 31, 1999 1999 2000
----------- ----------- --------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue.................. $ -- $ 474,026 $ 42,233 $ 83,205
Costs and expenses:
General and
administrative
(exclusive of stock
based compensation of
$16,095 and $345,970
in 1998 and 1999,
respectively, and
$15,596 and $380,496
for the three months
ended March 31, 1999
and 2000,
respectively)......... 345,080 1,348,870 164,529 615,341
Research and
development (exclusive
of stock based
compensation of
$62,092 and $611,852
in 1998 and 1999,
respectively, and
$84,707 and $805,329
for the three months
ended March 31, 1999
and 2000,
respectively)......... 770,901 4,085,743 720,061 3,625,041
Amortization of
deferred compensation
and other non-cash
compensation charges.. 78,187 957,822 100,303 1,185,825
----------- ----------- --------- -----------
Total costs and
expenses............ 1,194,168 6,392,435 984,893 5,426,207
----------- ----------- --------- -----------
Loss from operations..... (1,194,168) (5,918,409) (942,660) (5,343,002)
Interest income, net .... 48,548 400,764 99,221 497,149
----------- ----------- --------- -----------
Net loss................. $(1,145,620) $(5,517,645) $(843,439) $(4,845,853)
=========== =========== ========= ===========
Historical net loss per
share, basic and
diluted................. $ (1.71) $ (3.91) $ (1.21) $ (2.87)
=========== =========== ========= ===========
Shares used in
calculating historical
net loss per share,
basic and diluted....... 668,748 1,410,225 696,352 1,685,796
Pro forma net loss per
share, basic and
diluted................. $ (0.40) $ (0.31)
=========== ===========
Shares used in
calculating pro forma
net loss per share,
basic and diluted....... 13,696,522 15,701,190
</TABLE>
See accompanying notes.
F-4
<PAGE>
ILLUMINA, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Convertible preferred stock Common stock Additional Unrealized
--------------------------- ----------------- paid-in Deferred loss on Note Accumulated
Shares Amount Shares Amount capital compensation investments receivable deficit
------------- ------------- --------- ------ ---------- ------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April
28, 1998......... -- $ -- -- $ -- $ -- $ -- $ -- $ -- $ --
Issuance of
common stock at
$.01 per share
for cash........ -- -- 600,000 6,000 -- -- -- -- --
Issuance of
restricted
common stock at
$.01 to $.03 per
share for cash.. -- -- 2,856,000 28,560 15,120 -- -- -- --
Issuance of
Series A
preferred stock
at $.30 per
share for cash.. 2,499,998 749,999 -- -- -- -- -- -- --
Issuance of
Series B
preferred stock
at $.926 per
share for cash.. 9,212,147 8,533,000 -- -- -- -- -- -- --
Issuance of
Series B
preferred stock
at $.926 per
share for
nGenetics
acquisition..... 124,152 114,999 -- -- -- -- -- -- --
Deferred
compensation
related to stock
options and
restricted
stock........... -- -- -- -- 319,818 (319,818) -- -- --
Amortization of
deferred
compensation.... -- -- -- -- -- 32,923 -- -- --
Deferred
compensation
related to
restricted stock
purchased by
consultants..... -- -- -- -- 45,264 -- -- -- --
Net loss and
comprehensive
loss............ -- -- -- -- -- -- -- -- (1,145,620)
------------- ------------- --------- ------ --------- ----------- ------- ------ ----------
Balance at
December 31,
1998............. 11,836,297 9,397,998 3,456,000 34,560 380,202 (286,895) -- -- (1,145,620)
Issuance of
common stock
including
exercise of
stock options
for cash and
note receivable. -- -- 297,416 2,974 167 -- -- -- --
Issuance of
restricted
common stock for
cash............ -- -- 1,367,000 13,670 109,360 -- -- (4,500) --
Issuance of
common stock for
technology...... -- -- 35,000 350 100,986 -- -- -- --
Repurchase of
restricted
common stock.... -- -- (16,333) (163) (327) -- -- -- --
Issuance of
Series C
preferred stock
at $4.00 per
share for cash.. 7,000,000 28,000,000 -- -- -- -- -- -- --
Deferred
compensation
related to stock
options and
restricted
stock........... -- -- -- -- 4,334,469 (4,334,469) -- -- --
<CAPTION>
Total
stockholders'
equity
-------------
<S> <C>
Balance at April
28, 1998......... $ --
Issuance of
common stock at
$.01 per share
for cash........ 6,000
Issuance of
restricted
common stock at
$.01 to $.03 per
share for cash.. 43,680
Issuance of
Series A
preferred stock
at $.30 per
share for cash.. 749,999
Issuance of
Series B
preferred stock
at $.926 per
share for cash.. 8,533,000
Issuance of
Series B
preferred stock
at $.926 per
share for
nGenetics
acquisition..... 114,999
Deferred
compensation
related to stock
options and
restricted
stock........... --
Amortization of
deferred
compensation.... 32,923
Deferred
compensation
related to
restricted stock
purchased by
consultants..... 45,264
Net loss and
comprehensive
loss............ (1,145,620)
-------------
Balance at
December 31,
1998............. 8,380, 245
Issuance of
common stock
including
exercise of
stock options
for cash and
note receivable. 3,141
Issuance of
restricted
common stock for
cash............ 118,530
Issuance of
common stock for
technology...... 101,336
Repurchase of
restricted
common stock.... (490)
Issuance of
Series C
preferred stock
at $4.00 per
share for cash.. 28,000,000
Deferred
compensation
related to stock
options and
restricted
stock........... --
</TABLE>
(continued on following page)
F-5
<PAGE>
ILLUMINA, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
<TABLE>
<CAPTION>
Convertible
preferred stock Common stock Additional Unrealized
---------------------- ------------------ paid-in Deferred loss on Note Accumulated
Shares Amount Shares Amount capital compensation investments receivable deficit
---------- ----------- --------- ------- ----------- ------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Amortization of
deferred
compensation.... -- -- -- -- -- 594,448 -- -- --
Deferred
compensation
related to
restricted stock
purchased by
consultants..... -- -- -- -- 363,374 -- -- -- --
Comprehensive
loss:
Unrealized loss
on investments.. -- -- -- -- -- -- (10,689) -- --
Net loss........ -- -- -- -- -- -- -- -- (5,517,645)
Comprehensive
loss............ -- -- -- -- -- -- -- -- --
---------- ----------- --------- ------- ----------- ------------ -------- ------ ------------
Balance at
December 31,
1999............. 18,836,297 37,397,998 5,139,083 51,391 5,288,231 (4,026,916) (10,689) (4,500) (6,663,265)
Issuance of
common stock
including
exercise of
stock options
for cash
(unaudited)..... -- -- 94,965 950 4,839 -- -- -- --
Issuance of
restricted
common stock for
cash
(unaudited)..... -- -- 1,290,000 12,900 832,350 -- -- -- --
Issuance of
common stock for
technology and
services
(unaudited)..... -- -- 186,000 1,860 1,634,640 -- -- -- --
Repurchase of
restricted
common stock
(unaudited)..... -- -- (5,250) (53) (420) -- -- -- --
Repayment of
note receivable
(unaudited)..... -- -- -- -- -- -- -- 4,500 --
Deferred
compensation
related to stock
options and
restricted stock
(unaudited)..... -- -- -- -- 12,653,050 (12,653,050) -- -- --
Amortization of
deferred
compensation
(unaudited)..... -- -- -- -- -- 870,744 -- -- --
Deferred
compensation
related to
restricted stock
purchased by
consultants
(unaudited)..... -- -- -- -- 3,273,381 (2,958,300) -- -- --
Comprehensive
loss:
Unrealized loss
on investments
(unaudited)..... -- -- -- -- -- -- (29,431) -- --
Net loss
(unaudited)..... -- -- -- -- -- -- -- -- (4,845,853)
Comprehensive
loss
(unaudited)..... -- -- -- -- -- -- -- -- --
---------- ----------- --------- ------- ----------- ------------ -------- ------ ------------
Balance at March
31, 2000
(unaudited)...... 18,836,297 $37,397,998 6,704,798 $67,048 $23,686,071 $(18,767,522) $(40,120) $ -- $(11,509,118)
========== =========== ========= ======= =========== ============ ======== ====== ============
<CAPTION>
Total
stockholders'
equity
-------------
<S> <C>
Amortization of
deferred
compensation.... 594,448
Deferred
compensation
related to
restricted stock
purchased by
consultants..... 363,374
Comprehensive
loss:
Unrealized loss
on investments.. (10,689)
Net loss........ (5,517,645)
-------------
Comprehensive
loss............ (5,528,334)
-------------
Balance at
December 31,
1999............. 32,032,250
Issuance of
common stock
including
exercise of
stock options
for cash
(unaudited)..... 5,789
Issuance of
restricted
common stock for
cash
(unaudited)..... 845,250
Issuance of
common stock for
technology and
services
(unaudited)..... 1,636,500
Repurchase of
restricted
common stock
(unaudited)..... (473)
Repayment of
note receivable
(unaudited)..... 4,500
Deferred
compensation
related to stock
options and
restricted stock
(unaudited)..... --
Amortization of
deferred
compensation
(unaudited)..... 870,744
Deferred
compensation
related to
restricted stock
purchased by
consultants
(unaudited)..... 315,081
Comprehensive
loss:
Unrealized loss
on investments
(unaudited)..... (29,431)
Net loss
(unaudited)..... (4,845,853)
-------------
Comprehensive
loss
(unaudited)..... (4,875,284)
-------------
Balance at March
31, 2000
(unaudited)...... $30,834,357
=============
</TABLE>
See accompanying notes.
F-6
<PAGE>
ILLUMINA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
April 28, 1998 Three Months Ended
(inception) to Year ended March 31,
December 31, December -----------------------
1998 31, 1999 1999 2000
-------------- ----------- ---------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Operating activities
Net loss................. $(1,145,620) $(5,517,645) $ (843,439) $(4,845,853)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Write-off of assets
purchased in exchange
for Series B preferred
stock.................. 399 -- -- --
Write-off of note
payable................ -- -- -- (1,500)
Issuance of stock for
technology and
services............... -- 101,336 11,336 1,636,500
Depreciation and
amortization........... -- 42,841 9,467 39,243
Amortization of premium
on investments......... -- 53,526 23,436 (44,166)
Amortization of
deferred compensation
and other non-cash
compensation charges... 78,187 957,822 100,303 1,185,825
Changes in operating
assets and
liabilities:
Prepaid expenses and
other current assets. (71,532) (24,301) 23,668 (302,600)
Accounts receivable... -- (49,818) (42,233) 27,117
Other receivable...... (102,988) (156,129) (67,975) (90,168)
Deferred revenue...... -- 1,250,000 -- 1,250,000
Other assets.......... (34,566) -- -- (39,810)
Accounts payable...... 129,985 188,234 (8,465) 31,658
Accrued liabilities... 45,685 247,004 (25,685) 453,285
----------- ----------- ---------- -----------
Net cash used in
operating
activities......... (1,100,450) (2,907,130) (819,587) (700,469)
Investing activities
Purchase of investment
securities.............. -- (16,244,380) (5,324,791) (8,710,766)
Maturity of investment
securities.............. -- 4,256,000 -- 3,000,000
Purchase of property and
equipment............... -- (295,286) -- (540,493)
----------- ----------- ---------- -----------
Net cash used in
investing activities.... -- (12,283,666) (5,324,791) (6,251,259)
Financing activities
Proceeds from note
payable................. 1,500 -- -- --
Proceeds from stock
subscription receivable. -- -- -- 4,500
Proceeds from issuance of
common stock, net of
repurchased shares...... 49,680 121,181 -- 850,566
Net proceeds from
issuance of Series A
preferred stock......... 749,999 -- -- --
Net proceeds from
issuance of Series B
preferred stock......... 8,533,000 -- -- --
Net proceeds from
issuance of Series C
preferred stock......... -- 28,000,000 -- --
----------- ----------- ---------- -----------
Net cash provided by
financing activities.... 9,334,179 28,121,181 -- 855,066
----------- ----------- ---------- -----------
Net increase (decrease)
in cash and cash
equivalents............. 8,233,729 12,930,385 (6,144,378) (6,096,662)
Cash and cash equivalents
at beginning of the
period.................. -- 8,233,729 8,233,729 21,164,114
----------- ----------- ---------- -----------
Cash and cash equivalents
at end of the period.... $ 8,233,729 $21,164,114 $2,089,351 $15,067,452
=========== =========== ========== ===========
Non-cash investing and
financing transactions:
Purchase of property and
equipment and intangible
assets in exchange for
Series B preferred
stock................... $ 114,999 $ -- $ -- $ --
=========== =========== ========== ===========
Issuance of stock for
stock subscription
receivable.............. $ -- $ 4,500 $ -- $ --
=========== =========== ========== ===========
Issuance of stock for
technology and services. $ -- $ 101,336 $ 11,336 $ 1,636,500
=========== =========== ========== ===========
</TABLE>
See accompanying notes.
F-7
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
1. Summary of Significant Accounting Policies
Organization and Business
Illumina, Inc. (the "Company") was incorporated on April 28, 1998. The
Company is developing next-generation tools that will permit the large-scale
analysis of genetic variation and function. The Company's proprietary BeadArray
technology will provide the throughput, cost effectiveness and flexibility
necessary to enable researchers in the life sciences and pharmaceutical
industries to perform the billions of tests necessary to extract medically
valuable information from advances in genomics. This information will correlate
genetic variation and gene function with particular disease states, enhancing
drug discovery, allowing diseases to be detected earlier and more specifically
and permitting better choices of drugs for individual patients. In addition to
the life sciences and pharmaceutical industries, the Company's technology will
have applicability across a wide variety of industries, including agriculture,
petrochemicals and food, flavor and beverages.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Interim Financial Information
The financial information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited and includes all adjustments,
consisting only of normal recurring adjustments, that the Company's management
considers necessary for a fair presentation of the Company's operating results
and cash flows for such periods. Results for the three month period ended March
31, 2000 are not necessary indicative of results to be expected for the full
fiscal year 2000 or any future period.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of highly liquid investments with an
original maturity of less than three months when purchased.
Investments
The Company applies Statement of Financial Accounting Standards ("SFAS") No.
115, Accounting for Certain Investments in Debt and Equity Securities, to its
investments. Under SFAS No. 115, the Company classifies its investments as
"Available-for-Sale" and records such assets at estimated fair value in the
balance sheet, with unrealized gains and losses, if any, reported in
stockholders' equity.
At December 31, 1999, investments consist of the following:
<TABLE>
<CAPTION>
Unrealized
Amortized Market gain
Cost Value (loss)
----------- ----------- ----------
<S> <C> <C> <C>
Corporate debt securities................ $11,935,562 $11,924,163 $(11,399)
----------- ----------- --------
$11,935,562 $11,924,163 $(11,399)
=========== =========== ========
</TABLE>
F-8
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
The Company has an unrealized gain of $710 related to cash equivalents,
resulting in total unrealized losses of $10,689 at December 31, 1999.
At March 31, 2000, investments consist of the following:
<TABLE>
<CAPTION>
Unrealized
Amortized Market gain
cost value (loss)
----------- ----------- ----------
<S> <C> <C> <C>
Corporate debt securities................ $17,691,229 $17,649,664 $(41,565)
----------- ----------- --------
$17,691,229 $17,649,664 $(41,565)
=========== =========== ========
</TABLE>
The Company has an unrealized gain of $1,445 related to cash equivalents,
resulting in total unrealized losses of $40,120 at March 31, 2000.
There were no material realized gains or losses for the year ended December
31, 1999 or for the three months ended March 31, 2000.
The amortized cost and estimated fair value of corporate debt securities at
March 31, 2000, by contractual maturity, are shown below. Expected maturities
may differ from contractual maturities because the issuers of the securities
may have the right to prepay obligations without prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Cost Fair Value
----------- -----------
<S> <C> <C>
Due in one year or less............................. $ 7,107,984 $ 7,101,327
Due after one year through three years.............. 10,583,245 10,548,337
----------- -----------
$17,691,229 $17,649,664
=========== ===========
</TABLE>
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash, cash equivalents and
short-term investments. The Company limits its exposure to credit loss by
placing its cash and investments with high credit quality financial
institutions.
Fair Value of Financial Instruments
Financial instruments, including cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities, are carried at cost,
which management believes approximates fair value.
Property and Equipment
Property and equipment are stated at cost and depreciated over the estimated
useful lives of the assets (generally three to five years) using the straight-
line method. Amortization of leasehold improvements is computed over the
shorter of the lease term or the estimated useful life of the related assets.
F-9
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
Acquired Technology Rights
The intangible assets consist of acquired technology rights related to the
acquisition of nGenetics in 1998. The purchase price was $114,999, consisting
of 124,152 shares of Series B preferred stock, valued at $0.926 per shares, the
selling price paid in cash by outside investors in a contemporaneous selling of
stock.
In accordance with APB 17, Accounting for Intangible Assets, the acquired
technology rights are recorded at cost. The rights related to the acquired
technology are being amortized over its estimated useful life (four years) and
the Company has amortized approximately $47,000 through March 31, 2000.
Long-Lived Assets
In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, if indicators of impairment
exist, the Company assesses the recoverability of the affected long-lived
assets by determining whether the carrying value of such assets can be
recovered through undiscounted future operating cash flows. If impairment is
indicated, the Company measures the future cash flows associated with the use
of the asset. While the Company's current and historical operating and cash
flow losses are indicators of impairment, the Company believes the future cash
flows to be received from the long-lived assets will exceed the assets'
carrying value, and accordingly the Company has not recognized any impairment
losses through March 31, 2000.
Revenue Recognition
Revenue from grants is recognized on a percentage of completion basis as
related costs are incurred, provided that amounts earned are not subject to
refund if the research is unsuccessful. Payments received in advance of the
performance or product sale requirements are deferred until the related
performance or product sale requirements have been completed.
Research and Development
Expenditures relating to research and development are expensed in the period
incurred.
Income Taxes
Current income tax expense is the amount of income taxes expected to be
payable for the current year. A deferred income tax asset or liability is
computed for the expected future impact of differences between the financial
reporting and tax bases of assets and liabilities, as well as the expected
future tax benefit to be derived from tax loss and credit carryforwards.
Deferred income tax expense is generally the net change during the year in the
deferred income tax asset or liability. Valuation allowances are established
when realizability of deferred tax assets is uncertain. The effect of tax rate
changes is reflected in tax expense during the period in which such changes are
enacted.
F-10
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
Stock-Based Compensation
As permitted by SFAS No. 123, Accounting for Stock-Based Compensation, the
Company accounts for common stock options granted, and restricted stock sold,
to employees, founders and directors using the intrinsic value method and,
thus, recognizes no compensation expense for options granted, or restricted
stock sold, with exercise prices equal to or greater than the fair value of the
Company's common stock on the date of the grant. The Company has recorded
deferred stock compensation related to certain stock options, and restricted
stock, which were granted with exercise prices below estimated fair value (see
Note 3), which is being amortized on an accelerated amortization methodology in
accordance with FIN 28.
Deferred compensation for options granted, and restricted stock sold, to
consultants has been determined in accordance with SFAS No. 123 and EITF 96-18
as the fair value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably measured. Deferred charges for
options granted, and restricted stock sold, to consultants are periodically
remeasured as the underlying options vest.
Comprehensive Loss
In accordance with SFAS No. 130, Reporting Comprehensive Income, the Company
has disclosed comprehensive loss as a component of stockholders' equity.
Net Loss Per Share
Basic and diluted net loss per common share are presented in conformity with
SFAS No. 128, Earnings per Share, and SAB 98, for all periods presented. Under
the provisions of SAB 98, common stock and convertible preferred stock that has
been issued or granted for nominal consideration prior to the anticipated
effective date of the initial public offering must be included in the
calculation of basic and diluted net loss per common share as if these shares
had been outstanding for all periods presented. To date, the Company has not
issued or granted shares for nominal consideration.
In accordance with SFAS No. 128, basic and diluted net loss per share has
been computed using the weighted-average number of shares of common stock
outstanding during the period, less shares subject to repurchase. Pro forma
basic and diluted net loss per common share, as presented in the statements of
operations, has been computed for the year ended December 31, 1999 as described
above, and also gives effect to the assumed conversion of preferred stock which
will automatically convert to common stock immediately prior to the completion
of the Company's initial public offering (using the "as if converted" method)
from the original date of issuance.
F-11
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
The following table presents the calculation net loss per share:
<TABLE>
<CAPTION>
Period from
April 28,
1998 Three Months Ended
(inception) Year ended March 31,
to December December ----------------------
31, 1998 31, 1999 1999 2000
----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Net loss.................... $(1,145,620) $(5,517,645) $(843,439) $(4,845,853)
=========== =========== ========= ===========
Basic and diluted net loss
per share.................. $ (1.71) $ (3.91) $ (1.21) $ (2.87)
=========== =========== ========= ===========
Weighted-average shares used
in computing historical net
loss per share, basic and
diluted.................... 668,748 1,410,225 696,352 1,685,796
Pro forma net loss per
share, basic and diluted... $ (0.26) $ (0.40) $ (0.14) $ (0.31)
=========== =========== ========= ===========
Shares used above........... 668,748 1,410,225 696,352 1,685,796
Pro forma adjustment to
reflect weighted-average
effect of assumed
conversion of convertible
preferred stock.......... 3,784,570 12,286,297 5,482,121 14,015,394
----------- ----------- --------- -----------
Shares used in computing
pro forma net loss per
share, basic and diluted. 4,453,318 13,696,522 6,178,473 15,701,190
</TABLE>
The Company has excluded all convertible preferred stock, outstanding stock
options and warrants, and shares subject to repurchase from the calculation of
diluted loss per common share because all such securities are antidilutive for
all periods presented. The total number of shares excluded from the calculation
of diluted net loss per share, prior to application of the treasury stock
method for options and warrants, was 14,919,900, 22,649,271, 15,073,736 and
24,056,726 for the period from April 28, 1998 (inception) through December 31,
1998, the year ended December 31, 1999 and for the three months ended March 31,
1999 and 2000, respectively. Such securities, had they been dilutive, would
have been included in the computation of diluted net loss per share.
Pro Forma Stockholders' Equity
Unaudited pro forma stockholders' equity at March 31, 2000 includes the
conversion of all outstanding shares of preferred stock into common stock.
Segment Reporting
The Company has determined that it operates in only one segment.
Effect of New Accounting Standards
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
will be effective January 1, 2001. This statement establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments imbedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement
F-12
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
also requires that changes in the derivative's fair value be recognized in
earnings unless specific hedge accounting criteria are met. The Company
believes the adoption of SFAS No. 133 will not have an effect on the financial
statements because the Company does not engage in derivative or hedging
activities.
2. Balance Sheet Account Details
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------- March 31,
1998 1999 2000
------ -------- ---------
<S> <C> <C> <C>
Laboratory equipment............................. $ -- $271,250 $658,518
Computer equipment............................... 1,000 24,487 161,264
Furniture and fixtures........................... -- 549 16,998
------ -------- --------
1,000 296,286 836,780
Accumulated depreciation and amortization........ -- (4,972) (34,749)
------ -------- --------
Total.......................................... $1,000 $291,314 $802,031
====== ======== ========
</TABLE>
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------- March 31,
1998 1999 2000
------- -------- ---------
<S> <C> <C> <C>
Compensation...................................... $19,196 $ 94,236 $297,488
Professional fees................................. 26,489 103,771 340,187
Sponsored research................................ -- 74,667 90,917
Other............................................. -- 20,015 17,382
------- -------- --------
Total........................................... $45,685 $292,689 $745,974
======= ======== ========
</TABLE>
3. Stockholders' Equity
Common stock
As of March 31, 2000, the Company has sold, net of repurchased shares,
2,989,083 shares of common stock at $0.01 per share, 797,749 shares at $0.03
per share, 1,441,234 shares at $0.09 per share, 175,000 shares at $0.25 per
share, 711,732 shares at $0.40 per share and 590,000 shares at $1.00 per share,
of which 5,491,417 shares were sold to employees and consultants subject to
restricted stock agreements. The common shares vest in accordance with the
provisions of the agreements, generally over five years. All unvested shares
are subject to repurchase by the Company at the original purchase price. As of
March 31, 2000, 4,244,761 shares of common stock were subject to repurchase.
F-13
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
Convertible Preferred Stock
A summary of convertible preferred stock issued and outstanding as of March
31, 2000 is as follows:
<TABLE>
<CAPTION>
Liquidation
Shares Preference
---------- -----------
<S> <C> <C>
Series A.............................................. 2,499,998 $ 749,999
Series B.............................................. 9,336,299 8,647,999
Series C.............................................. 7,000,000 28,000,000
---------- -----------
18,836,297 $37,397,998
========== ===========
</TABLE>
At March 31, 2000, the Company had 2,500,000 shares of Convertible Series A
preferred stock and 2,500,000 shares of Convertible Series A-1 preferred stock
authorized, of which 2,499,998 shares of the Series A preferred stock were
issued and outstanding. The Series A preferred stock was issued at $0.30 per
share for cash.
In addition, the Company had 12,000,000 shares of Convertible Series B
preferred stock and 12,000,000 shares of Convertible Series B-1 preferred stock
authorized, of which 9,336,299 shares of Series B preferred stock were issued
and outstanding. The Company issued 9,212,147 shares of Series B preferred
stock at $0.926 per share for cash and 124,152 shares of Series B preferred
stock at $0.926 per share in conjunction with the purchase of the net assets of
nGenetics in 1998.
The Company also has 7,000,000 shares of Convertible Series C preferred
stock and 7,000,000 shares of Convertible Series C-1 preferred stock
authorized. During November and December 1999, the Company sold 7,000,000
shares of Series C convertible preferred stock at $4.00 per share for cash. As
more fully discussed in Note 4, the Company sold 1,250,000 of these shares as
part of a collaborative agreement with PE Corporation. The remaining 5,750,000
Series C shares were sold to institutional investors after the completion of
the PE collaboration.
The Series A, A-1, B, B-1, C, and C-1 preferred stock are convertible, at
the option of the holder, at any time after the date of issuance, into shares
of common stock. The preferred stock will automatically be converted into
shares of common stock at the then effective conversion price (currently a one-
for-one conversion ratio) (i) upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933 with a sale price per share of common stock of
at least $4.50 and with aggregate proceeds of at least $15,000,000, or (ii)
upon the approval of the holders of more than 66 2/3% of the outstanding shares
of each series of preferred stock. Each holder of Series A, B and C convertible
preferred stock is entitled to one vote for each share of common stock into
which such convertible preferred share would convert.
In the event of any liquidation, dissolution or winding up of the Company,
the holders of preferred stock are entitled to receive their liquidation value
prior and in preference to any distribution of the assets or surplus funds of
the Company to the holders of common stock. If, upon the occurrence of such
event, the assets and funds distributed among the holders of preferred stock
are insufficient to permit full payment, the entire assets and funds of the
Company would be distributed
F-14
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
among the preferred stockholders in proportion to the product of the
liquidation preference of each such share and the number of such shares owned
by each such holder. The holders of Series A, B and C convertible preferred
stock are entitled to receive liquidation preferences over the common
stockholders at the rate of $0.30, $0.926, and $4.00 per share, respectively.
Warrants
In connection with a lease financing facility (Note 5), in 1998 the Company
issued to Comdisco warrants to purchase 43,183 shares of common stock at $.926
per share. Comdisco may exercise the warrants, in whole or in part, until
November 17, 2005, or 3 years after the closing date of the Company's initial
public offering, whichever is later.
Stock Options
In 1998, the Company adopted the 1998 Incentive Stock Plan (the "Plan") and
has reserved 4,500,000 shares of common stock for grants under the Plan. The
Plan provides for the grant of incentive and nonstatutory stock options, stock
bonuses and rights to purchase stock to employees, directors or consultants of
the Company. The Plan provides that incentive stock options will be granted
only to employees at no less than the fair value of the Company's common stock
(no less than 110% of the fair value for nonstatutory stock options), as
determined by the board of directors at the date of the grant. Options
generally vest 20% one year from the date of grant and ratably each month
thereafter for a period of 48 months and expire up to ten years from date of
grant. In December 1999, the Company modified the plan to allow for
acceleration of vesting in the event of an acquisition or merger.
A summary of the Company's stock option activity from April 28, 1998
(inception) through March 31, 2000 follows:
<TABLE>
<CAPTION>
Weighted-
Average
Options Exercise Price
-------- --------------
<S> <C> <C>
Outstanding at April 28, 1998 (inception)........... -- $ --
Granted............................................. 525,000 $0.02
--------
Outstanding at December 31, 1998.................... 525,000 $0.02
Granted............................................. 495,200 $0.10
Exercised........................................... (297,416) $0.01
Cancelled........................................... (77,584) $0.03
--------
Outstanding at December 31, 1999.................... 645,200 $0.08
Granted (unaudited)................................. 382,500 $0.70
Exercised (unaudited)............................... (94,965) $0.06
Cancelled (unaudited)............................... (250) $0.09
--------
Outstanding at March 31, 2000 (unaudited)........... 932,485 $0.34
========
</TABLE>
F-15
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
At March 31, 2000, options to purchase approximately 7,525 shares were
exercisable and 522,384 shares remain available for future grant.
Following is a further breakdown of the options outstanding as of March 31,
2000:
<TABLE>
<CAPTION>
Weighted
Weighted average
average Weighted exercise price
Range of Options remaining life average Options of options
exercise prices outstanding in years exercise price exercisable exercisable
--------------- ----------- -------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$0.03 115,251 3.5 $0.03 7,460 $0.03
$0.09 397,466 4.1 $0.09 65 $0.09
$0.25 38,000 4.7 $0.25 -- $0.25
$0.40 192,268 4.9 $0.40 -- $0.40
$1.00 189,500 5.0 $1.00 -- $1.00
------- -----
932,485 7,525
======= =====
</TABLE>
Pro forma information regarding net loss is required by SFAS No. 123 and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of that statement. The fair value for these options
was estimated at the dates of grant using the fair value option pricing model
(Black Scholes) with the following weighted-average assumptions for 1999 and
1998: (a) weighted average risk-free interest rate of 6.5%, (b) expected
dividend yield of 0%, (c) anticipated volatility of 70% and (d) five year
estimated life of the options.
For purposes of adjusted pro forma disclosures, the estimated fair value of
the options is amortized to expense over the vesting period. The Company's
adjusted pro forma information is as follows:
<TABLE>
<CAPTION>
Period from Three
April 28, 1998 Months
(inception) to Year ended Ended
December 31, December March 31,
1998 31, 1999 2000
-------------- ----------- -----------
<S> <C> <C> <C>
Adjusted pro forma net loss........ $(1,091,846) $(4,868,928) $(4,025,092)
Adjusted pro forma basic net loss
per share......................... $ (1.63) $ (3.45) $ (2.39)
</TABLE>
The pro forma effect on net loss presented is not likely to be
representative of the pro forma effects on reported net income or loss in
future years because these amounts reflect less than five years of vesting.
2000 Employee Stock Purchase Plan
In February 2000, the board of directors adopted the 2000 Employee Stock
Purchase Plan (the "Purchase Plan"). A total of 500,000 shares of the Company's
common stock have been reserved for issuance under the Purchase Plan. The
Purchase Plan permits eligible employees to purchase common stock at a
discount, but only through payroll deductions, during defined offering periods.
The price at which stock is purchased under the Purchase Plan is equal to 85%
of the fair market value of the common stock on the first or last day of the
offering period, whichever is lower. The initial offering period will commence
on the effective date of the offering. In addition, the Purchase Plan provides
for annual increases of shares available for issuance under the Purchase Plan
beginning with fiscal 2001.
F-16
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
Deferred Stock Compensation
Since the inception of the Company, in connection with the grant of certain
stock options and sales of restricted stock to employees, founders and
directors through March 31, 2000, the Company has recorded deferred stock
compensation totaling approximately $17.3 million, representing the difference
between the exercise or purchase price and the fair value of the Company's
common stock as estimated by the Company's management for financial reporting
purposes on the date such stock options were granted or restricted common stock
was sold. Deferred compensation is included as a reduction of stockholders'
equity and is being amortized to expense over the vesting period of the options
and restricted stock. During the three months ended March 31, 2000, the Company
recorded amortization of deferred stock compensation expense of approximately
$0.8 million.
In February 2000, the Company modified the consulting agreements with all of
its outside consultants. Under the modified consulting agreements, the
consultants agreed to pay a substantial financial penalty if they did not
fulfill their performance obligations under the agreements. The amount of the
penalty was determined for each consultant based on the intrinsic value of the
unvested restricted common stock based on the original purchase price and the
fair value of the common stock as estimated by the Company's management for
financial reporting purposes on the date of modification. Each consultant had
already vested in a portion of the original restricted common stock in
accordance with the services already provided, and the amounts related to the
vested common stock was expensed. The deferred consultant compensation related
to the unvested stock of $3.0 million was recorded in February 2000 and will be
amortized ratably over the contracted service periods. The Company amortized
approximately $80,000 of this deferred compensation in the three months ended
March 31, 2000.
The following is a breakdown of the amortization of deferred compensation
and other non-cash charges:
<TABLE>
<CAPTION>
Period from
April 28, 1998 Three Months Ended
(inception) to Year Ended March 31,
December 31, December 31, -------------------
1998 1999 1999 2000
-------------- ------------ -------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
General and administrative...... $16,095 $345,970 $ 15,596 $ 380,496
Research and development........ 62,092 611,852 84,707 805,329
------- -------- -------- ----------
$78,187 $957,822 $100,303 $1,185,825
======= ======== ======== ==========
</TABLE>
Shares Reserved for Future Issuance
At March 31, 2000, the Company has reserved shares of common stock for
future issuance as follows:
<TABLE>
<S> <C>
Conversion of convertible preferred stock......................... 18,836,297
1998 Incentive Stock Plan......................................... 1,454,869
2000 Employee Stock Purchase Plan................................. 500,000
Warrants.......................................................... 43,183
----------
20,834,349
==========
</TABLE>
F-17
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
4. Collaborative Agreements
PE Corporation
In November 1999, the Company signed a collaborative agreement with PE
Corporation ("PE") under which both companies will perform certain research
activities with an objective of developing and commercializing products
utilizing the Company's technology. In conjunction with the agreement,
PE purchased 1,250,000 shares of Series C convertible preferred stock, at $4.00
per share. Under the agreement, PE will provide the Company with non-refundable
research and development support, a portion of which is dependent on the
achievement of certain scientific milestones. Upon commercialization of the
products developed under the collaboration, the Company will share in the
operating profits resulting from the sale of such products, which will be
partially offset by the research funding amounts provided by PE to the Company.
The Company has deferred recognition of income from the research funding
provided by PE, and will recognize such amounts as revenue in conjunction with
the sale of any commercial products resulting from the development efforts.
Other Agreements
The Company has various research agreements with governmental and academic
organizations for which the Company performs research activities. These
organizations fund the research efforts, the revenue for which is recognized as
the procedures are performed.
5. Asset and Technology Purchase
In March 2000, the Company signed an agreement to acquire certain tangible
assets and rights to certain in-process technologies in exchange for $100,000
and 175,000 shares of common stock valued at $1,575,000 ($9.00 per share). The
Company recorded the tangible assets at their fair value of approximately
$50,000. As of the date these technologies were acquired, they had not achieved
technological or commercial feasibility and there is no significant alternative
future use should the Company's development efforts prove unsuccessful.
Accordingly, the Company recorded an acquired in-process technology charge of
$1,625,000 in March 2000 related to the purchase of these technologies.
Four projects were acquired in this purchase of these technologies. Three
projects are related to the development of instrumentation for oligonucleotide
synthesis. These three projects differ in the size and capacity of the
instrumentation. The first of these projects was approximately 50% complete at
the date of acquisition and is expected to be completed in approximately one
year at a cost of $0.8 million. The second of these projects was approximately
20% complete at the date of acquisition and is expected to be completed in
approximately two years at a cost of $1.5 million. The third of these projects
was approximately 10% complete at the date of acquisition and is expected to be
completed in approximately 2 years at a cost of $1.2 million. Revenue from
these three projects, if successful, is expected subsequent to their respective
completion dates. The fourth project is related to the development of
instrumentation for peptide synthesis. This project was approximately 20%
complete at the time of acquisition and is currently on hold with no projected
completion date at this time.
6. Commitments
Leases
The Company leases its primary office facility under an operating lease with
options to renew under varying terms. In addition, the Company entered into a
$1,000,000 lease financing arrangement with a lease financing corporation. As
of December 31, 1999, the Company had utilized all funds available under the
lease arrangement.
F-18
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
6. Commitments
Leases
The Company leases its primary office facility under an operating lease with
options to renew under varying terms. In addition, the Company entered into a
$1,000,000 lease financing arrangement with a lease financing corporation. As
of December 31, 1999, the Company had utilized all funds available under the
lease arrangement.
At March 31, 2000, annual future minimum rental payments under the Company's
operating leases for the years ending December 31 are as follows:
<TABLE>
<S> <C>
2000 (nine months)............................................... $ 549,669
2001............................................................. 379,718
2002............................................................. 177,655
----------
Total minimum lease payments................................... $1,107,042
==========
</TABLE>
Rent expense for the period from April 28, 1998 to December 31, 1998, the
year ended December 31, 1999 and the three months ended March 31, 2000 was
$138,264, $620,387, and $207,832, respectively.
7. Income Taxes
At December 31, 1999, the Company has federal and state tax net operating
loss carryforwards of approximately $5,119,000 and $5,262,000, respectively.
The federal and state tax loss carryforwards will begin expiring in 2018 and
2006, respectively, unless previously utilized. The Company also has federal
and state research and development tax credit carryforwards of approximately
$318,000 and $175,000, respectively, which will begin to expire in 2018, unless
previously utilized.
Pursuant to Sections 382 and 383 of the Internal Revenue Code, annual use of
the Company's net operating loss and credit carryforwards may be limited in the
event of a cumulative change in ownership of more than 50% within a three year
period.
Significant components of the Company's deferred tax assets as of December
31, 1999 are shown below. A valuation allowance has been recognized as of
December 31, 1999 to offset the deferred tax assets as realization of such
assets is uncertain.
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards............................... $2,094,000
Research and development credit carryforwards.................. 431,000
Other.......................................................... 224,000
----------
Total deferred tax assets.................................... 2,749,000
Valuation allowance for deferred tax assets...................... (2,749,000)
----------
Net deferred taxes............................................... $ --
==========
</TABLE>
F-19
<PAGE>
ILLUMINA, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
(Information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 is unaudited)
8. Retirement Plan
The Company has a 401(k) savings plan covering substantially all of its
employees. Company contributions to the plan are discretionary and no such
contributions were made in 1999.
9. Subsequent Events (unaudited)
Loan and Security Agreement
In April 2000, the Company entered into a $3,000,000 loan arrangement to be
used at its discretion to finance purchases of capital equipment. The loan is
secured by the capital equipment financed.
In June 2000, the Company adopted the 2000 Stock Plan. The plan provides for
the grant of incentive stock options to employees and nonstatutory stock
options and stock purchase rights to employees, directors and consultants. A
total of 4,000,000 shares of common stock were reserved for issuance pursuant
to the 2000 Stock Plan.
In June 2000, the Company increased the number of shares reserved under the
1998 Incentive Stock Plan to 5,750,000. In the three month period ended June
30, 2000, the Company issued options to purchase 224,000 shares of common stock
to employees and consultants under the 1998 Incentive Stock Plan. The Company
recorded deferred compensation of $795,000 in connection with these issuances.
F-20
<PAGE>
[LOGO OF ILLUMINA]
<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
No dealer, salesperson or other person is authorized to give any informa-
tion or to represent anything not contained in this prospectus. You must not
rely on any unauthorized information or representations. This prospectus is an
offer to sell only the shares offered hereby, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 8
Forward-Looking Statements................................................ 16
Use of Proceeds........................................................... 17
Dividend Policy........................................................... 17
Capitalization............................................................ 18
Dilution.................................................................. 19
Selected Financial Information............................................ 20
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 21
Business.................................................................. 26
Management................................................................ 38
Related Party Transactions................................................ 46
Principal Stockholders.................................................... 48
Description of Capital Stock.............................................. 50
Shares Eligible for Future Sale........................................... 54
Underwriting.............................................................. 56
Validity of the Securities................................................ 58
Experts................................................................... 58
Where You Can Find Additional Information................................. 58
Index to Financial Statements............................................. F-1
</TABLE>
----------------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether
or not participating in this offering, may be required to deliver a prospec-
tus. This is in addition to a dealer's obligation to deliver a prospectus when
acting as underwriter and with respect to an unsold allotment or subscription.
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
6,000,000 Shares
Illumina, Inc.
Common Stock
----------------
[LOGO OF ILLUMINA]
----------------
Goldman, Sachs & Co.
Chase H&Q
SG Cowen
Representatives of the Underwriters
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than the
underwriting discounts, payable by the Registrant in connection with the sale
of the securities being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq/NMS listing fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................. $ 27,324
NASD Filing Fee.................................................. 10,500
Nasdaq National Market Listing Fee............................... 95,000
Printing Costs................................................... 225,000
Legal Fees and Expenses.......................................... 425,000
Accounting Fees and Expenses..................................... 325,000
Blue Sky Fees and Expenses....................................... 1,500
Transfer Agent and Registrar Fees................................ 10,500
Miscellaneous.................................................... 180,176
----------
Total.......................................................... $1,300,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 204(a) of the California General Corporation Law,
the Registrant's Amended and Restated Articles of Incorporation eliminate a
director's personal liability for monetary damages to the Registrant and its
shareholders arising from a breach or alleged breach of the director's
fiduciary duty, except for liability arising under Sections 310 and 316 of the
California General Corporation Law or liability for (i) acts or omissions that
involve intentional misconduct or knowing and culpable violation of law, (ii)
acts or omissions that a director believes to be contrary to the best interests
of the Registrant or its shareholders or that involve the absence of good faith
on the part of the director, (iii) any transaction from which a director
derived an improper personal benefit, (iv) acts or omissions that show a
reckless disregard for the director's duty to the Registrant or its
shareholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to the Registrant or its shareholders, (v) acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the Registrant or its shareholders, (vi)
interested transactions between the corporation and a director in which a
director has a material financial interest, and (vii) liability for improper
distributions, loans or guarantees. This provision does not eliminate the
directors' duty of care, and in appropriate circumstances equitable remedies
such as an injunction or other forms of non-monetary relief would remain
available under California law.
Sections 204(a) and 317 of the California General Corporation Law authorize
a corporation to indemnify its directors, officers, employees and other agents
in terms sufficiently broad to permit indemnification (including reimbursement
for expenses) under certain circumstances for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"). The Registrant's
Amended and Restated Articles of Incorporation and Bylaws contain provisions
covering indemnification to the maximum extent permitted by the California
General Corporation Law of corporate directors, officers and other agents
against certain liabilities and expenses incurred as a result of proceedings
involving such persons in their capacities as directors, officers employees or
agents, including proceedings under the Securities Act or the Securities
Exchange Act of 1934, as amended. Prior to the effective date of this Offering,
the Registrant will enter into indemnification agreements with its directors
and executive officers.
II-1
<PAGE>
In connection with its reincorporation in Delaware, the Registrant will be
subject to Section 145 of the Delaware General Corporation Law ("Section 145").
Section 145 permits indemnification of officers and directors of the Company
under certain conditions and subject to certain limitations. Section 145 also
provides that a corporation has the power to maintain insurance on behalf of
its officers and directors against any liability asserted against such person
and incurred by him or her in such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of Section
145. Upon shareholder approval of such reincorporation, Article VI, Section
6.1, of the Registrant's Bylaws will provide for mandatory indemnification of
its directors and officers and permissible indemnification of employees and
other agents to the maximum extent not prohibited by the Delaware General
Corporation Law. The rights to indemnity thereunder continue as to a person who
has ceased to be a director, officer, employee or agent and inure to the
benefit of the heirs, executors and administrators of the person. In addition,
expenses incurred by a director or executive officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding by reason
of the fact that he or she is or was a director or officer of the Registrant
(or was serving at the Registrant's request as a director or officer of another
corporation) shall be paid by the Registrant in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
the Registrant as authorized by the relevant section of the Delaware General
Corporation Law.
As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
the Registrant's Certificate of Incorporation provides that, pursuant to
Delaware law, its directors shall not be personally liable for monetary damages
for breach of the directors' fiduciary duty as directors to the Registrant and
its stockholders. This provision in the Certificate of Incorporation does not
eliminate the directors' fiduciary duty, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief
will remain available under Delaware law. In addition, each director will
continue to be subject to liability for breach of the director's duty of
loyalty to the Registrant for acts or omission not in good faith or involving
international misconduct, for knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of Stock repurchases or redemptions that are unlawful under Section
174 of the Delaware General Corporation Law. The provision also does not affect
a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. The Registrant has
entered into indemnification agreements with each of its directors and
executive officers. Generally, the indemnification agreements attempt to
provide the maximum protection permitted by Delaware law as it may be amended
from time to time. Moreover, the indemnification agreements provide for certain
additional indemnification. Under such additional indemnification provisions,
however, an individual will not receive indemnification for judgments,
settlements or expenses if he or she is found liable to the Registrant (except
to the extent the court determines he or she is fairly and reasonably entitled
to indemnity for expenses), for settlements not approved by the Registrant or
for settlements and expenses if the settlement is not approved by the court.
The indemnification agreements provide for the Registrant to advance to the
individual any and all reasonable expenses (including legal fees and expenses)
incurred in investigating or defending any such action, suit or proceeding. In
order to receive an advance of expenses, the individual must submit to the
Registrant copies of invoices presented to him or her for such expenses. Also,
the individual must repay such advances upon a final judicial decision that he
or she is not entitled to indemnification.
The Registrant intends to enter into additional indemnification agreements
with each of its directors and executive officers to effectuate these indemnity
provisions and to purchase directors' and officers' liability insurance.
II-2
<PAGE>
In addition to the foregoing, the Underwriting Agreement contains certain
provisions by which the Underwriters have agreed to indemnify the Registrant,
each person, if any, who controls the Registrant within the meaning of Section
15 of the Securities Act, each director of the Registrant, each officer of the
Registrant who signs the Registration Statement, with respect to information
furnished in writing by or on behalf of the Underwriters for use in the
Registration Statement.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant in which
indemnification is being sought, nor is the Registrant aware of any threatened
litigation that may result in a claim for indemnification by any director,
officer, employee or other agent of the Registrant.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since our incorporation in April 1998, we have sold and issued the following
securities:
Common Stock
(1) In May 1998, we sold 1,075,000 shares of our Common Stock at a price
of $0.01 per share to Dr. Walt, a founder, and Dr. Still, a
consultant, for $10,750.
(2) In June 1998, we sold 1,125,000 shares of our Common Stock at a price
of $0.01 per share to Dr. Chee and Dr. Stuelpnagel, officers, Dr.
Czarnik, an employee, and Dr. John Kauer and Dr. Joel White,
consultants, for $11,250.
(3) In July 1998, we sold 500,000 shares of our Common Stock at a price of
$0.01 per share to Tufts University for $5,000 and 220,000 shares of
our Common Stock at a price of $0.03 per share to five consultants for
$6,600.
(4) In August 1998, we sold 20,000 shares of our Common Stock at a price
of $0.03 per share to Dr. Peter Jurs, a consultant, for $600.
(5) In September 1998, we sold 250,000 shares of Common Stock at a price
of $0.03 per share to Dr. Stuelpnagel, an officer, for $7,500.
(6) In November 1998, we sold 266,000 shares of our Common Stock at a
price of $0.03 per share to Mr. Pytelewski, a former officer, and Dr.
Leonid Kruglyak and Dr. Lincoln Stein, consultants, for $7,980.
(7) In February 1999, we sold 50,000 shares of our Common Stock at a price
of $0.09 per share to Dr. Rastetter, a director, for $4,500.
(8) In May 1999, we sold 137,500 shares of our Common Stock at a price of
$0.01 per share to Mr. Hartman, a director, and Mr. Bock, a
consultant, for $1,375 and 8,333 shares of our Common Stock at $0.03
per share to Ms. Fen Liu, a consultant, for $250. In connection with a
technology purchase we issued 10,000 shares of our Common Stock valued
at a price of $0.09 per share for a total value of $900.
(9) In June 1999, we sold 8,000 shares of our Common Stock at a price of
$0.09 per share to Dr. Michael Sailor, a consultant, for $720.
(10) In July 1999, we sold 14,083 shares of our Common Stock at a price of
$0.01 per share to Mr. Steven Auger, a former employee, for $141.
(11) In August 1999, we sold 68,750 shares of our Common Stock at a price
of $0.01 per share to Mr. Barry Weinberg, an investor, and 9,000
shares of our Common Stock at a price of $0.09 per share to Mr. L.
Scott Minick, a consultant, for $810.
(12) In September 1999, we sold 68,750 shares of our Common Stock at a
price of $0.01 per share to Mr. Walter Channing, an investor, for
$688.
(13) In October 1999, we sold 1,300,000 shares of our Common Stock at a
price of $0.09 per share to Dr. Chee, Mr. Flatley and Dr. Stuelpnagel,
officers, Dr. Czarnik, an employee and Mr. Pytelewski, a former
officer, for $117,000.
II-3
<PAGE>
(14) In November 1999, we sold 25,000 shares of our Common Stock at a price
of $0.09 per share to an investor for $2,250.
(15) In January 2000, we sold 175,000 shares of our Common Stock at a price
of $0.25 per share to an investor, Dr. Steve Brown and Dr. Fred
Milanovich, consultants and Mr. Kain, an officer, for $43,750.
(16) In February 2000, we sold 45,082 shares of our Common Stock at a price
of $0.03 per share to three employees for $1,352, 10,275 shares of our
Common Stock at a price of $0.09 per share to seven employees for
$925, and 110,299 shares of our Common Stock at a price of $0.40 per
share to Dr. Poste, a director, Dr. Bryan Roberts, a consultant and
two employees for $44,120.
(17) In March 2000, we sold 4,667 shares of our common stock at a price of
$0.03 per share to three employees for $140, 34,209 shares of our
Common Stock at a price of $0.09 per share to nine employees for
$3,079, 426,433 shares of our Common Stock at a price of $0.40 per
share to Dr. Barker, Dr. Chee and Dr. Stuelpnagel, officers, Dr.
Rastetter, a director, Mr. John Caplan and Mr. John Taylor,
consultants and three employees for $170,573 and 590,000 shares of our
common stock at a price of $1.00 per share to Ms. Espinosa and Mr.
Kish, officers, for $590,000. In connection with an asset purchase
transaction, we issued 175,000 shares valued at $0.40 per share for
$70,000.
The sales of the above securities were deemed to be exempt from registration
in reliance on Section 4(2) of the Securities Act as transactions by an issuer
not involving any public offering. All recipients were either accredited or
sophisticated investors, as those terms are defined under the Securities Act.
The recipients of securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and other instruments issued in such
transactions. All recipients either received adequate information about us or
had access, through employment or other relationships, to such information.
Preferred Stock
(1) In June 1998, we sold an aggregate of 2,499,998 shares of our Series A
Convertible Preferred Stock to investors at a price of $0.30 per share
for an aggregate purchase price of $749,999.
(2) In November 1998, we sold an aggregate of 9,336,299 shares of our
Series B Convertible Preferred Stock to investors at a price of $0.926
per share for an aggregate purchase price of $8,648,214.
(3) In November 1999, we sold 1,250,000 shares of our Series C Convertible
Preferred Stock to an investor at a price of $4.00 per share for a
purchase price of $5,000,000.
(4) In December 1999, we sold an aggregate of 5,750,000 shares of our
Series C Convertible Preferred Stock to investors at a price of $4.00
per share for an aggregate purchase price of $23,000,000.
The sales of the above securities were deemed to be exempt from registration
in reliance on Regulation D under the Securities Act in the case of (1) and
Section 4(2) of the Securities Act in the case of (2), (3) and (4) promulgated
thereunder as transactions by an issuer not involving any public offering. All
recipients were either accredited or sophisticated investors, as those terms
are defined in the Securities Act. The recipients of securities in each such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. All recipients
either received adequate information about us or had access, through employment
or other relationships, to such information.
II-4
<PAGE>
Stock Options and Stock Purchase Rights
(1) From inception through March 2000, we granted stock options and stock
purchase rights to acquire an aggregate of 4,060,700 shares of our
Common Stock at prices ranging from $0.01 to $1.00 per share to
employees, consultants and directors pursuant to our 1998 Incentive
Stock Plan.
(2) From inception through March 2000, we issued an aggregate of 3,050,381
shares of our Common Stock to employees, consultants and directors
pursuant to the exercise of stock options and stock purchase rights
under our 1998 Incentive Stock Plan, for aggregate consideration of
$977,610.
The sales of the above securities were deemed to be exempt from registration
in reliance on Rule 701 promulgated under Section 3(b) under the Securities Act
as transactions pursuant to a compensatory benefit plan or a written contract
relating to compensation.
Warrants
(1) In October 1998 we issued a warrant to acquire 43,183 shares of our
Series B Convertible Preferred Stock at an exercise price of $0.926 per
share to an investor.
The sales of the above securities were deemed to be exempt from registration
in reliance on Section 4(2) of the Securities Act as transactions by an issuer
not involving any public offering. The recipient was an accredited and
sophisticated investor, as those terms are defined in the Securities Act. The
recipient represented its intention to acquire the securities for investment
only and not with a view to or for sale in connection with any distribution
thereof and appropriate legends were affixed to the instruments issued in the
transaction. The recipient received adequate information about us and had
access, through their relationship with us, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S> <C>
1.1* Form of Underwriting Agreement
2.1* Form of Merger Agreement between Illumina, Inc., a California
corporation, and Illumina, Inc., a Delaware corporation.
3.1* Form of Certificate of Incorporation of the Registrant to be
filed after the closing of the offering made under this
Registration Statement.
3.2* Form of Bylaws of the Registrant to be in effect after the
closing of the offering made under this Registration Statement.
4.1* Specimen Common Stock Certificate.
4.2* Amended and Restated Investors Rights Agreement, dated November
5, 1999, by and among the Registrant and certain stockholders of
the Registrant.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1* Form of Indemnification Agreement between the Registrant and each
of its directors and officers.
10.2* 1998 Incentive Stock Plan.
10.3* 2000 Employee Stock Purchase Plan.
10.4* Sublease Agreement dated August 1998 between Registrant and
Gensia Sicor Inc. for Illumina's principal offices.
+10.5 Joint Development Agreement dated November 1999 between
Registrant and PE Corporation.
+10.6 Asset Purchase Agreement dated November 1998 between Registrant
and nGenetics, Inc.
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S> <C>
+10.7 Asset Purchase Agreement dated March 2000 between Registrant and
Spyder Instruments, Inc.
+10.8 License Agreement dated May 1998 between Tufts and Registrant.
10.9* Master Loan and Security Agreement, dated March 6, 2000, by and
between Registrant and FINOVA Capital Corporation.
10.10* 2000 Stock Plan
10.11* Eastgate Pointe Lease, dated July 6, 2000, between Diversified
Eastgate Venture and Registrant.
10.12* Option Agreement and Joint Escrow Instructions, dated July 6,
2000, between Diversified Eastgate Venture and Registrant.
23.1 Consent of Ernst & Young, LLP, Independent Auditors.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney (see Page II-7 of the original filing).
27.1 Financial Data Schedule.
</TABLE>
--------
* Previously filed.
+ Confidential treatment requested.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California on July 27, 2000.
Illumina, Inc.
/s/ Jay T. Flatley
By: _________________________________
Jay T. Flatley
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jay T. Flatley President, Chief Executive July 27, 2000
______________________________________ Officer and Director
Jay T. Flatley (Principal Executive Officer)
/s/ Timothy M. Kish Vice President of Finance July 27, 2000
______________________________________ (Principal Accounting Officer)
Timothy M. Kish
John R. Stuelpnagel* Director July 27, 2000
______________________________________
John R. Stuelpnagel
Charles M. Hartman* Director July 27, 2000
______________________________________
Charles M. Hartman
Robert T. Nelsen* Director July 27, 2000
______________________________________
Robert T. Nelsen
George Poste* Director July 27, 2000
______________________________________
George Poste, DVM, Ph.D.
William Rastetter* Director July 27, 2000
______________________________________
William Rastetter, Ph.D.
David R. Walt* Director July 27, 2000
______________________________________
David R. Walt, Ph.D.
</TABLE>
/s/ Jay T. Flatley
*By: __________________________
Jay T. Flatley
Attorney-in-Fact
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
2.1* Form of Merger Agreement between Illumina, Inc., a California
corporation, and Illumina, Inc., a Delaware corporation.
3.1* Form of Certificate of Incorporation of the Registrant to be filed
after the closing of the offering made under this Registration
Statement.
3.2* Form of Bylaws of the Registrant to be in effect after the closing of
the offering made under this Registration Statement.
4.1* Specimen Common Stock Certificate.
4.2* Amended and Restated Investors Rights Agreement, dated November 5,
1999, by and among the Registrant and certain stockholders of the
Registrant.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1* Form of Indemnification Agreement between the Registrant and each of
its directors and officers.
10.2* 1998 Incentive Stock Plan.
10.3* 2000 Employee Stock Purchase Plan.
10.4* Sublease Agreement dated August 1998 between Registrant and Gensia
Sicor Inc. for Illumina's principal offices.
+10.5 Joint Development Agreement dated November 1999 between Registrant and
PE Corporation.
+10.6 Asset Purchase Agreement dated November 1998 between Registrant and
nGenetics, Inc.
+10.7 Asset Purchase Agreement dated March 2000 between Registrant and
Spyder Instruments, Inc.
+10.8 License Agreement dated May 1998 between Tufts and Registrant.
10.9* Master Loan and Security Agreement, dated March 6, 2000, by and
between Registration and FINOVA Capital Corporation.
10.10* 2000 Stock Plan
10.11* Eastgate Pointe Lease, dated July 6, 2000, between Diversified
Eastgate Venture and Registrant.
10.12* Option Agreement and Joint Escrow Instructions, dated July 6, 2000,
between Diversified Eastgate Venture and Registrant.
23.1 Consent of Ernst & Young, LLP, Independent Auditors.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1* Power of Attorney (see Page II-7 of the original filing).
27.1 Financial Data Schedule.
</TABLE>
--------
* Previously filed.
+ Confidential treatment requested.
