Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2010ORo

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


Commission File Number 001-33484

HELICOS BIOSCIENCES CORPORATION(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

05-0587367(I.R.S. Employer
Identification No.)One Kendall Square, Building 700, Cambridge, MA 02139
(617) 264-1800(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)


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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes: o    No: o

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company ý


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

The number of shares of the registrant's Common Stock, $.001 par value, outstanding as of July 31, 2010, was 79,903,400 shares.



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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)        Table of Contents



PagePart IFinancial InformationItem 1.

Consolidated Financial Statements (Unaudited)

3Consolidated Balance Sheets as of December 31, 2009 and June 30, 2010

3Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2010 and the
cumulative period from May 9, 2003 (date of inception) through June 30, 2010

4Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2010 and the cumulative
period from May 9, 2003 (date of inception) through June 30, 2010

5Notes to Consolidated Financial Statements

6Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

16Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29Item 4.

Controls and Procedures

29Part IIOther InformationItem 1.

Legal Proceedings

30Item 1A.

Risk Factors

30Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

48Item 3.

Defaults upon Senior Securities

50Item 4.

Removed and Reserved

51Item 5.

Other Information

51Item 6.

Exhibits

51SIGNATURES

52


2

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Table of Contents

Part IFinancial Information

Item 1.    Consolidated Financial Statements



HELICOS BIOSCIENCES CORPORATION (a development stage company)        CONSOLIDATED BALANCE SHEETS        (unaudited)        (in thousands, except share and
per share data)

December 31, 2009

June 30, 2010ASSETSCurrent assetsCash and cash equivalents

$
15,930

$
6,169Accounts receivable


848


380Unbilled receivables


496


377Inventory


6,827


6,157Prepaid expenses and other current assets


424


479Total current assets


24,525


13,562Property and equipment, net


1,706


2,351Restricted cash


225


225Other assets


79


72Total assets

$
26,535

$
16,210LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current liabilitiesAccounts payable

$
1,005

$
1,057Accrued expenses and other current liabilities


3,632


2,995Deferred revenue


5,705


7,220Current portion of long-term debt


2,773


3,650Total current liabilities


13,115


14,922Long-term debt, net of current portion


2,081


Warrants


5,253


1,668Other long-term liabilities


400


400Total liabilities


20,849


16,990Commitments and contingenciesStockholders' equity (deficit)Preferred stock: par value $0.001 per share; 5,000,000 shares authorized at December 31, 2009 and June 30, 2010, respectively; no shares issued
and outstanding December 31, 2009 and June 30, 2010





Common stock: par value $0.001 per share; 120,000,000 shares authorized at December 31, 2009 and June 30, 2010, respectively; 79,370,610 and
80,008,098 shares issued and outstanding at December 31, 2009 and June 30, 2010, respectively


79


80Additional paid-in capital


173,272


177,859Deficit accumulated during the development stage


(167,665
)

(178,719
)Total stockholders' equity (deficit)


5,686


(780
)Total liabilities and stockholders' equity (deficit)

$
26,535

$
16,210


The
accompanying notes are an integral part of the interim consolidated financial statements.

3

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HELICOS BIOSCIENCES CORPORATION (a development stage company)        CONSOLIDATED STATEMENTS OF OPERATIONS        (unaudited)        (in thousands, except
share and per share data)

Three Months Ended
June 30,

Six Months Ended
June 30,

Period from
May 9, 2003
(date of inception)
through
June 30, 20102009

2010

2009

2010Product revenue

$
158

$
85

$
1,121

$
127

$
2,488Grant revenue


213


576


452


1,103


3,317Total revenue


371


661


1,573


1,230


5,805Costs and expensesCost of product revenue


124


104


645


176


1,425Research and development


3,539


4,216


7,632


8,262


102,878Selling, general and administrative


2,732


2,693


5,583


6,765


67,201Total costs and expenses


6,395


7,013


13,860


15,203


171,504Operating loss


(6,024
)

(6,352
)

(12,287
)

(13,973
)

(165,699
)Interest income


22


4


62


16


4,150Interest expense


(275
)

(162
)

(580
)

(345
)

(4,237
)Change in fair value of warrant liability





1,796





3,248


5,207Net loss


(6,277
)

(4,714
)

(12,805
)

(11,054
)

(160,579
)Beneficial conversion feature related to Series B redeemable convertible preferred stock














(18,140
)Net loss attributable to common stockholders

$
(6,277
)
$
(4,714
)
$
(12,805
)
$
(11,054
)
$
(178,719
)Net loss attributable to common stockholders per sharebasic and diluted

$
(0.10
)
$
(0.06
)
$
(0.20
)
$
(0.14
)Weighted average number of common shares used in computationbasic and diluted


63,561,410


79,859,226


63,530,036


79,561,205


The
accompanying notes are an integral part of the interim consolidated financial statements.

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HELICOS BIOSCIENCES CORPORATION (a development stage company)        CONSOLIDATED STATEMENTS OF CASH FLOWS        (unaudited)        (in thousands)

Period from May 9, 2003 (date of inception) through June 30, 2010Six Months Ended June 30,2009

2010Cash flows from operating activities:Net loss

$
(12,805
)
$
(11,054
)
$
(160,579
)Adjustments to reconcile net loss to cash used in operating activities:Depreciation and amortization


1,339


686


8,725Amortization of lease incentive


(74
)

(4
)

(474
)Common stock issued for licenses








147Stock-based compensation expense


2,195


3,549


18,259Noncash interest expense related to debt and warrants


175


139


1,016Noncash gain related to change in fair value of warrant liability





(3,248
)

(5,207
)Provisions on inventory








3,276Loss on disposal of property and equipment





10


36Changes in operating assets and liabilities:Accounts receivable


124


468


(380
)Unbilled receivable


(8
)

119


(127
)Inventory


(263
)

(1,306
)

(11,664
)Prepaid expenses and other current assets


(192
)

(55
)

(804
)Deferred revenue


(123
)

1,515


7,220Accounts payable


419


52


1,057Accrued expenses and other current liabilities


(386
)

590


4,529Other long-term liabilities


(31
)




557Net cash used in operating activities


(9,630
)

(8,539
)

(134,413
)Cash flows from investing activities:Purchases of property and equipment


(8
)

(37
)

(9,551
)Increase in restricted cash








(225
)Purchases of short-term investments








(34,709
)Maturities of short-term investments








34,709Net cash used in investing activities


(8
)

(37
)

(9,776
)Cash flows from financing activities:Proceeds from debt issuances








22,256Payments on debt


(1,694
)

(1,343
)

(18,935
)Payments of debt issuance costs








(194
)Proceeds from initial public offering








49,011Deferred initial public offering costs








(1,838
)Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs








66,405Proceeds from bridge loan








350Proceeds from issuance of common stock and common stock warrants





158


32,965Proceeds from issuance of restricted common stock


1





338Payments to employees for cancelled restricted common stock








(104
)Proceeds from exercise of stock options


2





104Net cash (used in) provided by financing activities


(1,691
)

(1,185
)

150,358Net (decrease) increase in cash and cash equivalents


(11,329
)

(9,761
)

6,169Cash and cash equivalents, beginning of period


19,713


15,930


Cash and cash equivalents, end of period

$
8,384

$
6,169

$
6,169


The accompanying notes are an integral part of the interim consolidated financial statements.

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HELICOS BIOSCIENCES CORPORATION (a development stage company)        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        (unaudited)

1. Nature of the Business and Basis of Presentation

Helicos BioSciences Corporation ("Helicos" or the "Company") is a life sciences company focused on innovative genetic analysis technologies for the development and marketing of molecular
diagnostic tests. Helicos has developed a proprietary technology to enable the rapid analysis of large volumes of genetic material by directly sequencing single molecules of DNA or RNA. Helicos is a
Delaware corporation and was incorporated on May 9, 2003.

The
Company has had limited operations to date and its activities have consisted primarily of raising capital, conducting research and development and recruiting personnel. Accordingly,
the Company is considered to be in the development stage at June 30, 2010, as defined by the Financial Accounting Standards Board ("FASB"). The Company's fiscal year ends on December 31.
The Company operates as one reportable segment.

In
the first quarter of 2010, the Company began a process of considering alternatives to the Company's existing long-term strategic focus, including a repositioning of the
Company in the genetic analysis markets. The Company engaged a variety of consultants in the genomic research,
services and diagnostics industries to evaluate available alternatives. As a result of this evaluation, on May 17, 2010, the Company announced it was in the process of implementing a strategic
shift to focus the business on the molecular diagnostics markets and, on June 25, 2010, the Company announced that it had launched its diagnostics business.

In
connection with its repositioning strategy, the Board of Directors of the Company approved a reduction in headcount and restructuring plan (the "Restructuring Plan") which involved
the consolidation and reorganization of its operations in order to reduce operating costs. The Restructuring Plan was approved on May 11, 2010 and resulted in the elimination of approximately
40 positions during the second fiscal quarter of 2010. Employees directly affected by the Restructuring Plan were notified on May 13, 2010, and have been provided with severance arrangements
including outplacement assistance.

The
Company believes that its transition to the diagnostic markets will better position the Company to take advantage of the unique capabilities of its proprietary platform and to
address the growing competition in the genetic research marketplace. Although the Company made progress during 2009 in the genetic research market as demonstrated by its growing installed base and the
number of peer reviewed publications referencing its single molecule sequencing technology, the Company considered alternatives to improving shareholder value which culminated in the decision to
direct Helicos' highly differentiated single molecule sequencing solution into the diagnostics markets.

In
this regard, the Company believes that Helicos' proprietary technology is uniquely suited for applications in molecular diagnostics. The Company believes that diagnostics applications
may benefit from the specific features of the Helicos System, including the platform's ability to sequence non-amplified natural DNA and RNA directly, quantitative accuracy, high
throughput, ability to use small sample quantities in simple and cost effective preparation methods, as well as lack of biases typically seen with sample amplification.

In
furtherance of its new strategic plan, the Company began a process of validating molecular diagnostic tests that utilize its HeliScope® Single Molecule Sequencer.
Initially, Helicos is developing a diagnostic test that is designed to identify gene mutations indicative of a woman's increased lifetime risk of developing hereditary breast and/or ovarian cancer.
This test is currently scheduled to launch during the second quarter of 2011. The Company is also developing additional diagnostic tests in

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

1. Nature of the Business and Basis of Presentation (Continued)

well-established
markets and plans over the long term to use its core technology's quantitative capabilities to explore developing diagnostic tests based upon the detection and
quantification of foreign DNA/RNA circulating in the bloodstream, such as a non-invasive prenatal diagnostic test. The HeliScope Sequencer's ability to sequence single molecules of
natural, unamplified DNA or RNA simplifies the diagnostic testing workflow obviating the need for the amplification steps utilized by most genetic analysis methods. This ability to eliminate
amplification steps has several advantages including the simplicity of the laboratory workflow
and the potential for Helicos to sell its diagnostic tests for substantially less than the price of existing, comparable diagnostic tests. The Company has begun development of its own genetic testing
laboratory for which it expects to seek certification under the Clinical Laboratory Improvement Amendments of 1988 (CLIA).

The
Company's transition to the diagnostics markets is ongoing. There can be no assurance, however, that the Company will be successful in entering the diagnostics markets or that any
strategic or financing transaction it undertakes to implement its change in strategy will ultimately be completed or, if one is undertaken, there can be no assurance regarding its terms, timing or
sources of funding. Although the Company has shifted a significant portion of its limited resources towards the development of its diagnostics strategy and related technology, applications and
commercialization plans, the Company plans to continue to support its current installed base with collaborative activities, reagent supply and service support, as well as stabilizing system
performance, which has varied at some customer and placement sites.

Since
inception, the Company has incurred losses and has not generated positive cash flows from operations. The Company expects its losses to continue for a considerable period of time
as the Company focuses its efforts on entering the diagnostic markets. These losses, among other things, have had and will continue to have an adverse effect on the Company's working capital, total
assets and stockholders' equity. As of June 30, 2010 and August 11, 2010, the Company had $6.2 million and $3.7 million, respectively, in cash and cash equivalents. The
Company will, before the end of the third quarter of 2010, require significant additional capital to continue its operations. In this regard, the Company is actively pursuing various financing
strategies and plans to seek to raise the funds it requires to continue its operations and finance its new strategic plan through public or private sales of equity, from borrowings or from strategic
partners. During the second quarter of 2010, the Company terminated its relationship with investment bank Thomas Weisel Partners LLC (now known as Stifel Financial following Stifel Financial's
merger with TWP), which previously had assisted the Company with its evaluation of strategic alternatives and a long term financing strategy. Because the Company's present capital resources are not
sufficient to fund its planned operations for a twelve month period as of the date of the Annual Report on Form 10-K for the year ended December 31, 2009, the Company's
current financial resources raise substantial doubt about its ability to continue as a going concern.

The
Company's future capital requirements will depend on many factors, and the Company may require additional capital beyond its currently anticipated amounts. Any such required
additional capital may not be available on reasonable terms, if at all, given the current economic environment and restricted access to capital markets. The continued depletion of our resources may
make future funding more difficult or expensive to attain. Additional equity financing may be dilutive to the Company's stockholders; debt financing, if available, may involve significant cash payment
obligations and covenants that restrict its ability to operate as a business; and strategic partnerships may result in royalties or other terms which reduce its economic potential from any adjustments
to its existing

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

1. Nature of the Business and Basis of Presentation (Continued)

long-term
strategy. If the Company is unable to execute its operations according to its plans or to obtain additional financing, the Company may be forced to cease operations. The
financial
statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amount of reclassification of liabilities, or any adjustment that might be
necessary should the Company be unable to continue as a going concern.

The
accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting principles ("GAAP") in the United States of America. The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated.

The
preparation of financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent liabilities at the dates of the financial statements. Actual amounts may differ from these estimates, different assumptions or conditions.

It
is management's opinion that the accompanying unaudited interim consolidated financial statements reflect all adjustments (which are normal and recurring) that are necessary for a
fair statement of the results for the interim periods. The unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year
ended December 31, 2009 included in the Company's Form 10-K.

2. Summary of Significant Accounting Policies

The Company's significant accounting policies were identified in its Form 10-K for the fiscal year ended December 31, 2009.

Revenue recognition

Government research grants that provide for payments to the Company for work performed are recognized as revenue when the related
expenses are incurred.

The
Company recognizes revenue in accordance with FASB accounting guidance on revenue recognition in financial statements and accounting for multiple element revenue arrangements. This
guidance requires that persuasive evidence of a sales arrangement exists; delivery of goods occurs through transfer of title and risk and rewards of ownership, the selling price is fixed or
determinable and collectability is reasonably assured. The Company also follows FASB guidance on how to account for arrangements that involve the delivery or performance of multiple products, services
and/or rights to use assets.

In
instances where the Company sells instruments with a related installation obligation, the Company will allocate the revenue between the instrument and the installation based on
relative fair value at the time of the sale. The instrument revenue will be recognized when title and risk of loss passes. The installation revenue will be recognized when the installation is
performed. If fair value is not available for any undelivered element, revenue for all elements is deferred until delivery and installation are complete.

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

2. Summary of Significant Accounting Policies (Continued)

When
the Company sells an instrument with specified acceptance criteria, the Company will defer revenue recognition until such acceptance has been obtained.

The
customer may also purchase a service contract. Revenue from service contracts will be recognized ratably over the service period.

Recent Accounting Pronouncements

In October 2009, the FASB issued an amendment to the accounting guidance for revenue arrangements with multiple deliverables. This
guidance provides principles for allocation of consideration among its multiple-elements, allowing more flexibility in identifying and accounting for separate deliverables under an arrangement. The
guidance introduces an estimated selling price method for valuing the elements of a bundled arrangement if vendor-specific objective evidence or third-party evidence of selling price is not available,
and significantly expands related disclosure requirements. This guidance is effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on
or after June 15, 2010. Alternatively, adoption may be on a retrospective basis, and early application is permitted. Although the Company is still evaluating the impact of this standard, its
adoption is not expected to have a material impact on the financial position or results of operations.

In
October 2009, the FASB issued an amendment to the accounting standards related to certain revenue arrangements that include software elements. This standard clarifies the existing
accounting guidance such that tangible products that contain both software and non-software components that function together to deliver the product's essential functionality, shall be
excluded from the scope of the software revenue recognition accounting standards. Accordingly, sales of these products may fall within the scope of other revenue recognition accounting standards or
may now be within the scope of this standard and may require an allocation of the arrangement consideration for each element of the arrangement. This standard, for which the Company is currently
assessing the impact, will become effective for the Company on January 1, 2011.

3. Inventory

Inventories are stated at the lower of cost or market with cost determined under the first-in, first-out, or FIFO, method. The components of inventory are as
follows (in thousands):

December 31,
2009

June 30,
2010Raw materials

$
372

$
105Work in process


2,462


2,081Finished goods


3,993


3,971Total inventory

$
6,827

$
6,157


4. Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company's potential dilutive shares, which
include outstanding common stock options, unvested restricted stock and warrants, have not been included in

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

4. Net Loss per Share (Continued)

the
computation of diluted net loss per share for both periods as the result would be antidilutive. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share.
Because the Company reported a net loss for the three and six months ended June 30, 2009 and 2010, all potential common shares have been excluded from the computation of the dilutive net loss
per share for all periods presented because the effect would have been antidilutive. Such potential common shares consist of the following:

June 30,2009

2010Stock options


3,994,197


3,556,679Unvested restricted stock


1,026,135


680,756Warrants


25,762,333


27,952,35830,782,665


32,189,793


5. Stock-Based Compensation

The Company recognized stock-based compensation expense on all employee and non-employee awards as follows (in thousands):

Three months ended
June 30,

Six months ended
June 30,2009

2010

2009

2010Selling, general and administrative

$
721

$
1,149

$
1,402

$
2,618Research and development


412


385


793


931Total

$
1,133

$
1,534

$
2,195

$
3,549


During
the six months ended June 30, 2009, the Company granted 1,409,521 stock options at an exercise price of $1.04 per share, 82,260 stock options at an exercise price of $0.78
per share, 100,000 stock options at an exercise price of $0.62 per share, and 5,000 stock options at an exercise price of $0.54 per share. During the six months ended June 30, 2009, the Company
granted 890,895 shares of restricted stock. During the six months ended June 30, 2010, the Company granted 8,750 stock options at an exercise price of $1.00 per share and 68,356 shares of
restricted stock.

For
the six months ended June 30, 2009 and 2010, the fair value of stock options was estimated on the date of grant using the Black-Scholes option valuation model with the
following assumptions:

Six months ended June 30,2009

2010Expected volatility


63.2
%

91.9
%Expected life in years


6.0


6.0Weighted average risk-free interest rate


2.1
%

1.8
%Expected dividends


0.0
%

0.0
%


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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

6. Fair Value Measurement

The Company considers all highly liquid investments with original maturities of generally three months or less at the time of acquisition to be cash equivalents. Cash equivalents are
stated at cost, which approximates fair market value. The Company classifies marketable securities as available-for-sale. These securities are carried at fair market value with
unrealized gains and, to the extent deemed temporary, unrealized losses, reported as a component of other comprehensive gain or loss in stockholders' equity. Realized gains or losses on securities
sold are based on the specific identification method.

Marketable
securities are considered to be impaired when a decline in fair value below cost basis is determined to be other-than-temporary. The Company evaluates
whether a decline in fair value below cost basis is other-than-temporary using available evidence regarding its investments. In the event that the cost basis of a security
significantly exceeds its fair value, the Company evaluates, among other factors, the duration of the period that, and extent to which, the fair value is less than cost basis, the financial health of
and business outlook for the issuer, including industry and sector performance, and operational and financing cash flow factors, overall market conditions and trends, the Company's intent to sell the
investment and if it is more likely than not that the Company would be required to sell the investment before its anticipated recovery. Once a decline in fair value is determined to be
other-than-temporary, a write-down is recorded in the consolidated statements of operations and a new cost basis in the security is established. In April 2009, the
Company adopted new accounting guidance which provides additional guidance in assessing the credit and noncredit component of an other-than-temporary impairment event for debt
securities and modifies the presentation and disclosures when an other-than-temporary impairment event for debt securities has occurred. The adoption of this new accounting
guidance did not have a significant impact on the Company's financial statements.

The
Company's assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2009 and June 30, 2010 are measured in accordance with FASB
standards. Fair values determined by Level 1 inputs utilize observable data such as quoted prices in active markets. Fair values determined by Level 2 inputs utilize data points other
than quoted prices in active markets that are observable either directly or indirectly. Fair values determined by Level 3 inputs utilize unobservable
data points in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The
following table represents the Company's assets and liabilities measured at fair value on a recurring basis at December 31, 2009:

Quoted Prices
in Active
Markets
(Level 1)

Other
Observable
Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

Total($ in thousands)Money market funds

$


$
3,053

$


$
3,053Warrant liability

$


$


$
5,253

$
5,253


The
Company's money market funds were valued at December 31, 2009 using calculated net asset values and are therefore classified as Level 2. The Company's warrant liability
was valued at December 31, 2009 using a Black-Scholes model and is therefore classified as Level 3.

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

6. Fair Value Measurement (Continued)

The
following table represents the Company's assets and liabilities measured at fair value on a recurring basis at June 30, 2010:

Quoted Prices
in Active
Markets
(Level 1)

Other
Observable
Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

Total($ in thousands)Money market funds

$


$
3,053

$


$
3,053Warrant liability

$


$


$
1,668

$
1,668


The
Company's money market funds were valued at June 30, 2010 using calculated net asset values and are therefore classified as Level 2. The Company's warrant liability was
valued at June 30, 2010 using a Black-Scholes model and is therefore classified as Level 3.

The
following tables roll forward the fair value of our warrant liability, whose fair value is determined by Level 3 inputs for the 2010 period presented:

Balance at December 31, 2009

$
5,253Exercise warrants


(141
)Change in fair value


(1,452
)Balance at March 31, 2010

$
3,660Exercise warrants


(196
)Change in fair value


(1,796
)Balance at June 30, 2010

$
1,668


The
valuation of the warrant liability is discussed further in Note 7.

The
carrying amount of the Company's debt approximates its fair value at December 31, 2009 and June 30, 2010.

7. Common Stock and Warrant Liability

September 2009 Financing

In September 2009, the Company entered into a securities purchase agreement with certain investors pursuant to which it (i) sold
to certain existing investors a total of 1,030,028 units, each unit consisting of (a) one share of common stock (collectively, the "Shares") and (b) one warrant (collectively, the
"Warrants") to purchase 0.662 shares of common stock at an exercise price equal to $2.61 per share (105% of the closing bid price of the common stock on September 15, 2009), at a purchase price
equal to $2.57 per unit, and (ii) sold to certain new investors a total of 3,281,252 units, each unit consisting of (a) one share of common stock and (b) one warrant to purchase
0.50 shares of common stock at an exercise price equal to $2.61 per share, at a purchase price equal to $2.24 per unit (together, the "September 2009 Offering"). The closing of the transaction
occurred on September 18, 2009. In connection with the September 2009 Offering, the Company raised approximately $10.0 million in gross proceeds. After paying $646,000 in placement agent
fees and offering expenses, the net proceeds were $9.4 million.

12

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

7. Common Stock and Warrant Liability (Continued)

In
connection with the September 2009 Offering, the Company issued warrants to purchase an aggregate of 2,322,509 shares of common stock which become exercisable on or after the six
month anniversary following the closing of the transaction. The warrants have an exercise price of $2.61 per share and have a five and a half year term. The fair value of the warrants was estimated at
$4.5 million using a Black-Scholes model with the following assumptions: expected volatility of 100%, risk free interest rate of 2.49%, expected life of five and a half years and no dividends.
Expected volatility was
based on the volatility contractually specified in the warrant agreements. Due to a price adjustment clause included in the warrant agreements, the warrants were deemed to be a liability and,
therefore, the fair value of the warrants was recorded in the liability section of the balance sheet. As such, the warrants will be revalued each reporting period, with the resulting gains and losses
recorded as the change in fair value of warrant liability on the statement of operations. In connection with the December 2009 Offering, the exercise price for the warrants issued in this transaction
was subsequently reduced to $0.31 per share in accordance with the terms of the warrant. For the three and six month period ending June 30, 2010 the Company recorded a gain in the amount of
$0.6 million and $1.1 million, respectively for the change in the fair value of the warrant liability. During the six months ended June 30, 2010, 502,231 warrant shares from the
September 2009 Offering were exercised into common stock at an exercise price of $0.31.

In
connection with the September 2009 Offering, the Company entered into a registration rights agreement (the "September 2009 Registration Rights Agreement") with each of the investors.
The Registration Rights Agreement provides that the Company will file a "resale" registration statement covering all of the shares of common stock and the shares of common stock issuable upon
exercise of the warrants, up to the maximum number of shares able to be registered pursuant to applicable SEC regulations, within 15 days of the closing of the September 2009 Offering. The
Company currently maintains an effective registration statement relating to these shares (File No. 333-162240). Under the terms of the September 2009 Registration Rights Agreement,
the Company is obligated to maintain the effectiveness of the "resale" registration statement until all securities therein are sold or are otherwise can be sold pursuant to Rule 144, without
any restrictions. A cash penalty at the rate of 2% per month will be triggered for any filing or effectiveness failures or 1% in the event of suspensions of prospectus delivery or if, at any time
after six months following the closing of the September 2009 Offering, the Company ceases to be current in its periodic reports with the SEC. The aggregate penalty accrued with respect to each
investor may not exceed 12% of the original purchase price paid by that investor. The Company has not recorded an amount associated with the contingent obligation regarding the cash penalties as of
June 30, 2010 as the Company believes that the contingent obligation to make future payments is not probable.

December 2009 Financing

In December 2009, the Company entered into an Underwriting Agreement (the "Underwriting Agreement") with Thomas Weisel
Partners LLC (the "Underwriter"), pursuant to which it sold to the Underwriter 6,400,000 shares of common stock and warrants to purchase up to 4,160,000 shares of common stock sold in units, at
a price of $1.00 per unit ("December 2009 Offering"). Each unit consists of one share of common stock and a warrant to buy 0.65 of a share of common stock. The warrants will be exercisable for a
period of five years, beginning six months after issuance, at an exercise price of $1.4385 per share. The closing of the transaction occurred on December 15, 2009. The

13

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

7. Common Stock and Warrant Liability (Continued)

Company
received approximately $6.4 million in gross proceeds from the December 2009 Offering. After paying $718,000 in underwriting discounts, commissions and offering expenses, the net
proceeds were $5.6 million.

In
connection with the December 2009 Offering, the Company issued warrants to purchase an aggregate of 4,160,000 shares of common stock. The warrants have an exercise price of $1.44 per
share and have a five and a half year term. The fair value of the warrants was estimated at $2.7 million using a Black-Scholes model with the following assumptions: expected volatility of 100%,
risk free interest rate of 2.43%, expected life of five and a half years and no dividends. Expected volatility was based on the volatility contractually specified in the warrant agreements. Due to a
price adjustment clause included in the warrant agreements, the warrants were deemed to be a liability and, therefore, the fair value of the warrants was recorded in the liability section of the
balance sheet. As such, the warrants will be revalued each reporting period, with the resulting gains and losses recorded as the change in fair value of warrant liability on the income statement. The
Company recorded a gain in the amount of $1.2 million and $2.1 million for the change in the fair value of the warrant liability for the three and six month period ending June 30,
2010, respectively.

8. Debt

As of December 31, 2009 and June 30, 2010, the outstanding balance on a loan and security agreement was $4.9 million and $3.6 million, respectively.

As
of June 30, 2010, loan payable payments are due as follows (in thousands):

2010

$
1,5762011


2,439Thereafter


Total future minimum payments


4,015Less: amount representing interest


(818
)Add: amortization of debt discount


453Carrying value of debt

$
3,650


As
of June 30, 2010, the loan and security agreement did not require the Company to comply with any financial covenants.

The
loan and security agreement contains a subjective material adverse clause, which allows the debt holders to call the loans upon a material adverse event. Based on an updated
assessment of the terms of the loan and security agreement, the entire balance due is classified in the current liabilities section in the accompanying balance sheet at June 30, 2010.

9. Restructuring

On May 11, 2010, the Board of Directors of the Company approved a reduction in headcount and restructuring plan ("Restructuring Plan") which involved the consolidation and
reorganization of its operations in order to reduce operating costs. The Restructuring Plan resulted in the elimination of approximately 40 positions during the second fiscal quarter of 2010.
Employees directly affected by the Restructuring Plan were notified on May 13, 2010, and have been provided with severance

14

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

9. Restructuring (Continued)

arrangements
including outplacement assistance. These actions were approved as part of the Company's repositioning strategy in the diagnostics market.

The
Company incurred restructuring charges relating to one-time termination benefits of approximately $667,000 in the second quarter of 2010, of which $543,000 was recorded
in research and development expense and $124,000 was recorded in selling, general and administrative expense. These charges represent employee severance and termination costs as well as facility
consolidation costs, which were partially paid out during the second quarter of 2010. The Company expects that payments associated with the restructuring provision will continue through the second
quarter of 2011.

A
summary of restructuring activity is as follows:

Expense
May 13,
2010

Payments/
Settlements

Balance
June 30,
2010($ in thousands)Employee severance, benefits and related costs:Salaries and Benefits

$
548

$
(162
)
$
386Outplacement


35


(35
)
$
Other costsfacility consolidation related


84


(84
)

Total

$
667

$
(281
)
$
386


15

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Table of Contents

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

Forward-Looking Statements

This quarterly report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In particular, statements contained in this Form 10-Q, including
but not limited to, statements regarding our future results of operations and financial position, business strategy and plan prospects, projected revenue or costs and objectives of management for
future research, development or operations, are forward-looking statements. These statements relate to our future plans, objectives,
expectations and intentions and may be identified by words such as "may," "will," "should," "expects," "plans," "anticipates," "intends," "targets," "projects," "contemplates," "believes," "seeks,"
"goals," "estimates," "predicts," "potential" and "continue" or similar words. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties,
and assumptions that are difficult to predict, including those identified below, under Part II, Item 1A. "Risk Factors" and elsewhere herein. Therefore, actual results may differ
materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

Business Overview

Helicos BioSciences Corporation is a life sciences company focused on innovative genetic analysis technologies for the development and
marketing of molecular diagnostic tests. Our proprietary True Single Molecule Sequencing (tSMS) technology enables rapid analysis of genetic material by directly sequencing single
molecules of DNA or single DNA copies of RNA (cDNA) and our newest approach of direct sequencing of RNA. Our tSMS approach differs from current methods of sequencing DNA or RNA because it analyzes
individual molecules of DNA directly instead of analyzing a large number of copies of the molecule produced through complex sample preparation techniques. Our tSMS technology eliminates the need for
costly, labor-intensive and time-consuming sample preparation techniques, such as amplification or cloning, which are required by other methods to produce a sufficient quantity of genetic
material for analysis.

Our
Helicos® Genetic Analysis Platform is designed to obtain sequencing information by repetitively performing a cycle of biochemical reactions on individual DNA or RNA
molecules and imaging the results after each cycle. The platform consists of an instrument called the HeliScope Single Molecule Sequencer, an image analysis computer tower called the
HeliScope Analysis Engine, associated reagents, which are chemicals used in the sequencing process, and disposable supplies.

In
the first quarter of 2010, we began a process of considering alternatives to our existing long-term strategic focus, including a repositioning of the Company in the
genetic analysis markets. We engaged a variety of consultants in the genomic research, services and diagnostics industries to evaluate available alternatives. As a result of this evaluation, on
May 17, 2010, we announced that we were in the process of implementing a strategic shift to focus the business on the molecular diagnostics markets and, on June 25, 2010, we announced
that we had launched our diagnostics business.

We
believe that our transition to the diagnostic markets will better position us to take advantage of the unique capabilities of our proprietary platform and to address the growing
competition in the genetic research marketplace. Although we made progress during 2009 in the genetic research market as demonstrated by our growing installed base and the number of peer-reviewed
publications referencing our single molecule sequencing technology, we considered alternatives to improving shareholder value
which culminated in the decision to direct our highly differentiated single molecule sequencing solution into the diagnostic markets.

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In
connection with our repositioning strategy, our Board of Directors approved a reduction in headcount and restructuring plan ("Restructuring Plan") which involved the consolidation and
reorganization of our operations in order to reduce operating costs. The Restructuring Plan was approved on May 11, 2010 and resulted in the elimination of approximately 40 positions during the
second fiscal quarter of 2010. Employees directly affected by the Restructuring Plan were notified on May 13, 2010 and have been provided with severance arrangements including outplacement
assistance. The annual savings are estimated to be approximately $6.8 million as a result of the Restructuring Plan.

In
this regard, we believe that our proprietary technology is uniquely suited for applications in molecular diagnostics. We believe that diagnostics applications may benefit from the
specific features of the Helicos System, including the platform's ability to sequence non-amplified natural DNA and RNA directly, quantitative accuracy, high throughput, ability to use
small sample quantities in simple, cost effective preparation methods, as well as lack of biases typically seen with sample amplification.

In
furtherance of our new strategic plan, we began a process of validating molecular diagnostic tests that utilize our HeliScope® Single Molecule Sequencer. Initially, we are
developing a diagnostic test that is designed to identify gene mutations indicative of a woman's increased lifetime risk of developing hereditary breast and/or ovarian cancer. This test is currently
scheduled to launch during the second quarter of 2011. We are also developing additional diagnostic tests in well-established markets and plans over the long term to use our core
technology's quantitative capabilities to explore developing diagnostic tests based upon the detection and quantification of foreign DNA/RNA circulating in the bloodstream, such as a
non-invasive prenatal diagnostic test. The HeliScope Sequencer's ability to sequence single molecules of natural, unamplified DNA or RNA simplifies the diagnostic testing workflow
obviating the need for the amplification steps utilized by most genetic analysis methods. This ability to eliminate amplification steps has several advantages including the simplicity of the
laboratory workflow and the potential for us to sell our diagnostic tests for substantially less than the price of existing, comparable diagnostic tests. We have begun to develop our own genetic
testing laboratory for which we expect to seek certification under the Clinical Laboratory Improvement Amendments of 1988 (CLIA).

Our
transition to the diagnostics markets is ongoing. There can be no assurance that we will be successful in entering the diagnostics markets or that any strategic financing transaction
we undertake to implement a change in strategy will ultimately be completed or, if one is undertaken, there can be no assurance regarding its terms, timing or sources of funding. Although we have
shifted a significant portion of our limited resources towards the development of our diagnostics strategy, and related
technology, applications and commercialization plans, we plan to continue to support our current installed base with collaborative activities, reagent supply and service support, as well as
stabilizing system performance, which has varied at some customer and placement sites.

In
September 2009, we raised approximately $9.4 million, after deducting placement agent fees and offering expenses, through the issuance of 4,311,280 shares of common stock and
warrants to acquire up to 2,322,509 shares of common stock for an exercise price of $2.61 per share. In December 2009, we raised approximately $5.7 million, after deducting placement agent fees
and offering expenses, through the issuance of 6,400,000 shares of common stock and warrants to acquire up to 4,160,000 shares of common stock for an exercise price of $1.44 per share.

Since
inception, we have incurred losses and have not generated positive cash flows from operations. We expect our losses to continue for a considerable period of time as we focus our
efforts on entering the diagnostic markets. These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders' equity. As of
June 30, 2010 and August 11, 2010, we had $6.2 million and $3.7 million, respectively, in cash and cash equivalents. We will, before the end of the third quarter of 2010,
require significant additional capital to continue our operations. In this regard, we are actively pursuing various financing strategies and plan to seek to

17

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raise
funds to continue our operations and finance our new strategic plan through public or private sales of equity, from borrowings or from strategic partners. During the second quarter of 2010, we
terminated our relationship with investment bank Thomas Weisel Partners LLC (now known as Stifel Financial following Stifel Financial's merger with TWP), which previously had assisted us with
our evaluation of strategic alternatives and a long term financing strategy. Because our present capital resources are not sufficient to fund our planned operations for a twelve-month period as of the
date of the Annual Report on Form 10-K for the year ended December 31, 2009, our current financial resources raise substantial doubt about our ability to continue as a going
concern.

Our
future capital requirements will depend on many factors, and we may require additional capital beyond our currently-anticipated amounts. Any such required additional capital may not
be available on reasonable terms, if at all, given the current economic environment and restricted access to capital markets. The continued depletion of our resources may make future funding more
difficult or expensive to obtain. Additional equity financing may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that
restrict our ability to operate as a business; and strategic partnerships may result in royalties or other terms which reduce our economic potential from any adjustments to our existing
long-term strategy. If we are unable to execute our operations according to our plans or to obtain additional financing, we may be forced to cease operations. The financial statements in
this report do not include any adjustments relating to the recoverability and classification of recorded assets or the amount of reclassification of liabilities, or any adjustment that might be
necessary should we be unable to continue as a going concern.

We
were incorporated in Delaware in May 2003 under the name RareEvent Medical Corporation, renamed Newco LS6, Inc. in September 2003 and ultimately renamed Helicos BioSciences
Corporation in November 2003. Our activities to date have consisted primarily of conducting research and development. Accordingly, we are considered to be in the development stage at
December 31, 2009, as defined by the Financial Accounting Standards Board ("FASB"). Our fiscal year ends on December 31, and we operate as one reportable segment. Our corporate offices
are located at One Kendall Square, Building 700, Cambridge, Massachusetts 02139.

Financial Overview

Product revenue

Product revenue for the six months ended June 30, 2009 primarily consists of $829,000 in revenue from the sale of systems,
$280,000 of revenue recognized from the sale of proprietary reagents to customers and an additional $12,000 in services revenue. Product revenue for the six months ended June 30, 2010 primarily
consists of $127,000 of revenue recognized from the sale of proprietary reagents to customers.

Grant revenue

In September 2006, we were awarded a grant from the National Human Genome Research Institute ("NHGRI"), a branch of the National
Institutes of Health ("NIH"), pursuant to which were eligible to receive reimbursement of our research expenses of up to $2.0 million through August 2009. In connection with this award we
recognized $452,000 in revenue during the six months ended June 30, 2009. We have fully expended all available funds under this grant as of December 31, 2009.

In
September 2009, we were awarded another grant from the NHGRI, pursuant to which we are eligible to receive reimbursement of our research expenses of up to $2.9 million through
August 2011. The two year grant is part of the Sequencing Technology Development Program representing one of NHGRI's signature projects for the American Recovery and Reinvestment Act's effort to
jumpstart the economy and create or save millions of jobs. This project, a part of NIH's "Grand Opportunities" program, is designed to support large-scale, high impact research projects that are
expected to

18

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accelerate
critical scientific breakthroughs and enable growth and investment in biomedical research and development. In connection with this award we recognized $825,000 in revenue for the six months
ended June 30, 2010.

In
April 2010, we were awarded an RO1 Research Project Grant from the NHGRI, pursuant to which we are eligible to receive reimbursement of our research expenses of up to
$1.6 million through February 2013. We will be pursuing research related to direct RNA sequencing under this grant. In connection with this award, we recognized $58,000 in revenue for the six
months ended June 30, 2010.

In
April 2010, we completed a collaborative study that was sponsored by The Children's Oncology Group, under which we were reimbursed for our research expenses of approximately $200,000
in July 2010. The purpose of the study was to generate large-scale datasets and obtain novel information that would allow deeper insights into cancer genomes with a focus on Ewing's Sarcoma. In
connection with this study, we recognized approximately $200,000 in revenue for the six months ended June 30, 2010.

In
June 2010, we were awarded a Phase 1 Small Business Innovation Research grant from the NHGRI under which we will be pursuing research related to the development of methods to
sequence patient DNA samples at an attomole level. The phase 1 portion of the grant provides funding for eligible research expenses of up to $146,000 through November 2010. Following the
completion of phase 1, we may be eligible for additional funding under this grant. In connection with this award we recognized $20,000 in revenue for the six months ended June 30, 2010.

Cost of product revenue

Cost of product revenue for the six months ended June 30, 2010 consists of costs associated with the sale of proprietary
reagents.

Research and development expenses

Research and development expenses consist of costs associated with scientific research activities, and engineering development efforts.
Such costs primarily include salaries, benefits and stock-based compensation; lab and engineering supplies; investment in equipment; consulting fees; and facility related costs, including rent and
depreciation. During the six months ended June 30, 2009 and 2010, research and development expenses also included labor and overhead costs associated with the under-utilization of the
manufacturing facility.

Substantially
all research and development expenses since our inception were in connection with the launch of the initial version of the Helicos® Genetic Analysis System and
we believe that we had incurred the substantial majority of the development costs associated with the commercial launch of the first generation of the Helicos System through December 2007. However,
additional costs were incurred during 2008, 2009 and the first six months of 2010 to both maintain and enhance the initial version of the Helicos System in addition to development of new and different
genetic analysis assays.

Research
and development expenses for the six months ended June 30, 2009 and 2010 were $7.6 million and $8.3 million, respectively. In addition to our ongoing
research and development efforts, we have incurred start-up manufacturing costs related to the assembly, testing and performance validation of the Helicos System. These costs were
accounted for as research and development expenses in our pre-commercialization phase as we prepared to ship the first Helicos System, which occurred on March 5, 2008. We reached
technological feasibility of the Helicos System in December 2007 and, as a result, we began to record the cost of the Helicos System in inventory.

Selling, general and administrative expenses

Selling, general and administrative expenses consist principally of salaries, benefits and stock-based compensation, consulting and
professional fees, including patent related costs, general corporate costs

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and
facility costs not otherwise included in research and development expenses or cost of product revenue.

Selling,
general and administrative expenses for the six months ended June 30, 2009 and 2010 were $5.6 million and $6.8 million, respectively.

Restructuring

On May 11, 2010, our Board of Directors approved a reduction in headcount and restructuring plan ("Restructuring Plan") which
involved the consolidation and reorganization of our operations in order to reduce operating costs. The Restructuring Plan resulted in the elimination of approximately 40 positions during the second
fiscal quarter of 2010. Employees directly affected by the Restructuring Plan were notified on May 13, 2010, and have been provided with severance arrangements including outplacement
assistance. These actions were approved as part of our previously announced efforts to consider alternatives to our existing long-term strategic focus, including a repositioning of the
Company in the genetic analysis markets.

We
incurred restructuring charges relating to one-time termination benefits of approximately $667,000 in the second quarter of 2010, of which $543,000 was recorded in
research and development expense and $124,000 was recorded in selling, general and administrative expense. These charges represent employee severance and termination costs as well as facility
consolidation costs, which were partially paid out during the second quarter of 2010. We expect that payments associated with the restructuring provision will continue through the second quarter of
2011. We estimate that this restructuring will result in an annual cost savings of approximately $6.8 million, including salaries and benefits.

A
summary of restructuring activity at June 30, 2010 is as follows:

Expense
May 13,
2010

Payments/
Settlements

Balance
June 30,
2010($ in thousands)Employee severance, benefits and related costs:Salaries and Benefits

$
548

$
(162
)
$
386Outplacement


35


(35
)

Other costsfacility consolidation related


84


(84
)

Total

$
667

$
(281
)
$
386


Overview of Results of Operations

Three and six months ended June 30, 2009 compared to three and six months ended June 30, 2010

Product revenue.We recognized $158,000 and $1.1 million of product revenue during the three and six months ended June 30,
2009,
respectively, and $85,000 and $127,000 of product revenue during the three and six months ended June 30, 2010, respectively. Product revenue recognized during the three months ended
June 30, 2009 primarily consists of the sale of proprietary reagents to customers. Product revenue recognized during the six months ended June 30, 2009 primarily consists of $829,000 of
revenue from the sale of an instrument that was shipped in 2008, while the remaining amount consists of revenue from the sale of proprietary reagents to customers. Product revenue recognized during
the three and six months ended June 30, 2010 consists primarily of revenue from the sale of proprietary reagents to customers.

Grant revenue.We recognized $213,000 and $452,000 of grant revenue during the three and six months ended June 30, 2009 and
$576,000 and
$1.1 million of grant revenue during the three and six months ended June 30, 2010, respectively. Grant revenue recognized during the three and six months

20

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ended
June 30, 2009 related to the reimbursement of expenses in connection with our government research grants. Grant revenue recognized during the three months ended June 30, 2010
related to the reimbursement of expenses in connection with our government research grants of $376,000 and $200,000 from a contract in connection with The Children's Oncology Group. Grant revenue
recognized during the six months ended June 30, 2010 related to the reimbursement of expenses in connection with our government research grants of $903,000 and $200,000 from a contract in
connection with The Children's Oncology Group.

Cost of product revenue.We recorded $124,000 and $645,000 as cost of product revenue during the three and six months ended June 30,
 2009,
respectively and we recorded $104,000 and $176,000 as cost of product revenue during the three and six months ended June 30, 2010, respectively. Cost of product revenue consists of costs
associated with the sale and placement of instruments and sale of proprietary reagents. The decrease in cost of product revenue from the six months ended June 30, 2009 to the six months ended
June 30, 2010 is primarily due to lower system sales in 2010.

Research and development expenses.Research and development expenses during the three and six months ended June 30, 2009 and 2010
were as
follows:

Three months ended
June 30,





Six months ended
June 30,2009

2010

Change

2009

2010

Change($ in thousands)Research and development

$
3,539

$
4,216

$
677


19
%
$
7,632

$
8,262

$
630


8
%


Research
and development expenses increased by $677,000 from the three months ended June 30, 2009 to the three months ended June 30, 2010. The increase was primarily due to
a restructuring charge of $543,000, an increase in stock-based compensation of $36,000, and a net increase of $98,000 in other
expenses. In comparing the six months ended June 30, 2009 to the six months ended June 30, 2010, research and development expenses increased by $630,000. The increase was primarily due
to a restructuring charge of $543,000 and a $200,000 increase in stock-based compensation, partially offset by a net decrease of $113,000 in other expenses.

Selling, general and administrative expenses.Selling, general and administrative expenses during the three and six months ended
June 30, 2009
and 2010 were as follows:

Three months ended
June 30,





Six months ended
June 30,2009

2010

Change

2009

2010

Change($ in thousands)Selling, general and administrative

$
2,732

$
2,693

$
(39
)

-1
%
$
5,583

$
6,765

$
1,182


21
%


Selling,
general and administrative expenses decreased by $39,000 from the three months ended June 30, 2009 to the three months ended June 30, 2010. The decrease was
primarily due to a $356,000 decrease in salaries and benefits and decrease of $490,000 in occupancy costs, offset by an increase in
stock-based compensation expenses of $400,000, an increase of patent expenses of $224,000 and an increase of $165,000 in public company expenses.

In
comparing the six months ended June 30, 2009 to the six months ended June 30, 2010, selling, general and administrative expenses increased by $1.2 million. The
increase was primarily due to an increase in stock-based compensation expenses of $1.2 million, an increase of patent expenses of $217,000 and an increase of $206,000 in public company
expenses, partially offset by a $607,000 decrease in occupancy costs.

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Interest income.Interest income for the three and six months ended June 30, 2009 and 2010 was as follows:

Three months ended
June 30,





Six months ended
June 30,2009

2010

Change

2009

2010

Change($ in thousands)Interest income

$
22

$
4

$
(18
)

-82
%
$
62

$
16

$
(46
)

-74
%


The
decrease in interest income from the three and six months ended June 30, 2009 compared to the three and six months ended June 30, 2010 was due primarily to decreased
cash balances.

Interest expense.Interest expense for the three and six months ended June 30, 2009 and 2010 was as follows:

Three months ended
June 30,





Six months ended
June 30,2009

2010

Change

2009

2010

Change($ in thousands)Interest expense

$
275

$
162

$
(113
)

-41
%
$
580

$
345

$
(235
)

-41
%


The
decrease in interest expense from the three and six months ended June 30, 2009 compared to the three and six months ended June 30, 2010 is attributable to the year over
year decrease in our long-term debt obligations.

Change in fair value of warrant liability.Change in fair value of warrant liability for the three and six months ended June 30,
2009 and 2010
was as follows:

Three months ended
June 30,





Six months ended
June 30,2009

2010

Change

2009

2010

Change($ in thousands)Change in fair value of warrant liability

$


$
1,796

$
1,796


100
%
$


$
3,248

$
3,248


100
%


In
connection with the September and December 2009 equity offerings, we issued warrants to purchase an aggregate of 6,482,509 shares of common stock. The fair value of the warrants is
recorded in the liability section of the balance sheet and at June 30, 2010 was estimated at $1.7 million. The fair value of
the warrant liability will be determined at the end of each reporting period with the resulting gains and losses recorded as the change in fair value of warrant liability on the statement of
operations. For the three and six month period ended June 30, 2010, we realized a gain of $1.8 million and $3.2 million, respectively, due to the change in the fair value of the
warrant liability. This gain is principally a result of the decrease of our stock price between December 31, 2009 and June 30, 2010. During the three and six months ended June 30,
2010, 279,018 warrant shares and 502,231 warrant shares from the September 2009 equity offering were exercised for common stock at a exercise price of $0.31, respectively.

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Liquidity and Capital Resources

We have incurred losses since our inception in May 2003 and, as of June 30, 2010 we have an accumulated deficit of
$178.7 million. We have financed our operations to date principally through the sale of common stock and preferred stock, including our IPO, two private placements of common stock and warrants,
an underwritten offering of common stock and warrants, debt financing and interest earned on investments. Through June 30, 2010, we have received net proceeds of $80.4 million through
the issuance of common stock, including our IPO, private placements and an underwritten offering of common stock and warrants, $66.8 million from the issuance of preferred stock,
$2.5 million in debt financing from a lender to finance equipment purchases, and $19.6 million in debt financing from a lender for working capital, capital expenditures and general
corporate purposes. Working capital as of December 31, 2009 was $11.4 million, consisting of $24.5 million in current assets and $13.1 million in current liabilities.
Working capital as of June 30, 2010 was $(1.3) million, consisting of $13.6 million in current assets and $14.9 million in current liabilities. Our cash and cash equivalents are
held in interest-bearing cash accounts. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily to achieve liquidity and capital preservation.

The
following table summarizes our net decrease in cash and cash equivalents for the six months ended June 30, 2009 and 2010:

Six months ended
June 30,2009

2010($ in thousands)Net cash (used in) provided by:Operating activities

$
(9,630
)
$
(8,539
)Investing activities


(8
)

(37
)Financing activities


(1,691
)

(1,185
)Net decrease in cash and cash equivalents

$
(11,329
)
$
(9,761
)


Net
cash used in operating activities was $9.6 million for the six months ended June 30, 2009 compared to $8.5 million for the six months ended June 30, 2010.
The $1.1 million decrease was primarily due to a decrease in the net loss of $1.8 million, an increase in the change of accounts receivables of $0.5 million, an increase in
prepaid and other current assets of $0.1 million, an increase in deferred revenue of $1.6 million, an increase in non-cash stock-based compensation expense of
$1.4 million and an increase in the change in accrued expenses and other current liabilities of $1.0 million, offset by an decrease in inventory of $1.0 million, a decrease in the
change in accounts payable of $0.4 million, and a decrease in non-cash gain related to the fair value of the warrant liability of $3.2 million and a decrease in depreciation
and amortization expense of $0.6 million.

Net
cash used in investing activities was $8,000 for the six months ended June 30, 2009 compared to $37,000 for the six months ended June 30, 2010.

Net
cash used in financing activities was $1.7 million for the six months ended June 30, 2009 compared to $1.2 million for the six months ended June 30, 2010.
The $500,000 decrease was primarily due to a $351,000 decrease in debt payments, and $158,000 in proceeds from the conversion of warrant shares into common stock.

Operating capital and capital expenditure requirements

As of June 30, 2010 and August 11, 2010, we had $6.2 million and $3.7 million, respectively, in cash and
cash equivalents. We will, before the end of the third quarter of 2010, require significant additional capital to continue our operations. In this regard, we are actively pursuing various financing

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strategies
and plans to seek to raise the funds we require to continue our operations and finance our new strategic plan through public or private sale of equity, from borrowings, or from strategic
partners. During the second quarter of 2010, we terminated our relationship with investment bank Thomas Weisel Partners LLC (now known as Stifel Financial following Stifel Financial's merger
with TWP), which previously had assisted us with our evaluation of strategic alternatives and a long term financing strategy. Because our present capital resources are not sufficient to fund our
planned operations for a twelve month period as of the date of the Annual Report on Form 10-K for the year ended December 31, 2009, our current financial resources raise
substantial doubt about our ability to continue as a going concern.

Failure
to satisfy our capital requirements or any such delay would have a negative impact on our ability to continue as a going concern.

Through
June 30, 2010, we have received cumulative sales orders for ten Helicos Systems. In addition, we have one system installed at The Broad Institute, Inc. on a no-cost
basis, and have three systems at leading academic institutions for scientific and commercial evaluation. During 2009, we recognized revenue on two of the ten sales orders. For the six month period
ended June 30, 2010, no revenue on system sales was recognized. We have shipped seven units that have not met our revenue recognition criteria.

The
continued depletion of our resources may make future funding more difficult or expensive to attain. Additional equity financing may be dilutive to our stockholders; debt financing,
if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business; and strategic partnerships may result in royalties or other terms which
reduce our economic potential from our long-term strategy. Because our present capital resources are not sufficient to fund our planned operations for a twelve month period as of the date
of this Form 10-Q, substantial doubt about our ability to continue as a going concern exists without successfully raising funds as described above. If we are unable to execute our
operations according to our plans or to obtain additional financing, we may be forced to cease operations.

Our
forecast of the period of time through which our financial resources will be adequate to support our operations, and the costs associated with our repositioning strategy in the
diagnostics markets are forward-looking statements and involve risks and uncertainties, and actual results could vary materially and negatively as a result of a number of factors, including the
factors discussed in the "Risk Factors" section of our annual report on Form 10-K for the year ended December 31, 2009, and under Part II, Item 1A herein. We
have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

Because
of the numerous risks and uncertainties associated with our long-term strategic focus we are unable to estimate the exact amounts of capital outlays and operating
expenditures necessary to reposition our business, complete the development of our future products and successfully deliver any such products to the market. Our future capital requirements will depend
on many factors, including, but not limited to, the following:



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Working
capital as of December 31, 2009 was $11.4 million, consisting of $24.5 million in current assets and $13.1 million in current liabilities. Working
capital as of June 30, 2010 was $(1.3) million, consisting of $13.6 million in current assets and $14.9 million in current liabilities.

License agreements and patents

We have fixed annual costs associated with license agreements into which we have entered. In addition, we may have to make contingent
payments in the future upon realization of certain milestones or royalties payable under these agreements.

Contractual obligations

A summary of our contractual obligations is included in our Form 10-K for the fiscal year ended December 31,
2009. There has been one change to our contractual obligations previously disclosed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2009.
On June 9, 2010 we entered into a Sixth Amendment to Lease with RB Kendall Fee, LLC. The Sixth Amendment amends the Lease dated as of December 30, 2005, relating to our leased
space at our headquarters located at One Kendall Square, Cambridge, Massachusetts. The lease began on July 1, 2010 and expires on December 31, 2010. Future minimum lease payments under
the lease will be $324,000.

Line of credit facility and security agreement

In June 2006, we entered into a line of credit facility and security agreement with General Electric Capital Corporation ("GE
Capital"). The credit facility provided that we may borrow up to $8.0 million at an interest rate based on the Federal Reserve's three year Treasury Constant Maturities Rate. The advance period
ended on December 31, 2007. The proceeds of the credit facility may be used for the purchase of equipment and are collateralized by specific equipment assets. Payments are required to be made
on a monthly basis. For the first six months
interest-only payments were required. Thereafter, for the following 30 months, payments of principal and interest will be due for each advance. The outstanding balance is
collateralized by the equipment purchased with the proceeds from each equipment advance. Borrowings on the credit facility in aggregate were $2.5 million at a weighted-average interest rate of
10.1% through June 30, 2010. As of December 31, 2009 and June 30, 2010, there was no outstanding balance on the credit facility.

Loan and security agreement

In December 2007, we entered into a loan and security agreement with two lenders including GE Capital Corporation, which is serving as
agent. The loan agreement provided that we may borrow up to $20.0 million at an interest rate equal to the sum of (i) the greater of (A) an interest rate based on the

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Federal
Reserve's three year Treasury Constant Maturities Rate and (B) 3.84% plus (ii) 6.11%. The initial term loan was made on the closing date in an aggregate principal amount equal to
$10.0 million.

In
June 2008, we entered into an amendment to the loan and security agreement with two lenders including GE Capital Corporation. A subsequent term loan was made upon execution of the
amendment in an aggregate principal amount equal to $10.0 million. The loan amendment provided that the interest rate for the subsequent term loan is equal to the sum of (i) the greater
of (A) an interest rate based on the Federal Reserve's three year Treasury Constant Maturities Rate and (B) 3.17% plus (ii) 8.33%. The loan agreement, as amended, contained
affirmative and negative covenants to which we and our subsidiaries were required to adhere. Pursuant to the amendment, we were required to maintain, at all times, unrestricted cash in our bank
account equal to at least $10.0 million. The borrowings under the loan agreement were collateralized by essentially all of our assets. Payments are required to be made on a monthly basis. For
the initial term loan, interest-only payments were required for the first five months. Thereafter, for the following 31 months, payments of principal and interest will be due. For
the subsequent term loan, principal and interest payments are required for the 36 month term of the loan.

In
connection with the execution of the June 2008 amendment to the loan and security agreement with two lenders including GE Capital Corporation, we issued warrants to the two lenders to
purchase an aggregate of 110,000 shares of common stock. The warrants have an exercise price of $4.80 per share and expire in June 2014. The fair value of the warrants was estimated at $337,000 using
a Black-Scholes model with the following assumptions: expected volatility of 65.4%, risk free interest rate of 3.4%, expected life of six years and no dividends. Expected volatility was based on the
volatility of similar entities in the life sciences industry of comparable size of market capitalization and financial position that completed initial public offerings within the last ten years. The
fair value of the warrants was recorded as equity and a debt discount and will be amortized to interest expense over the term of the loan.

In
December 2008, we entered into an additional amendment to the loan and security agreement with certain lenders including GE Capital Corporation. The amendment amended the prepayment
provisions of the loan and security agreement to allow us to make a prepayment of $10.0 million (the "Pay Down Amount") without incurring any prepayment penalties. Pursuant to the amendment, we
made a prepayment, equal to the Pay Down Amount, before December 31, 2008. In connection with such prepayment, and in lieu of the 4% final payment fee with respect to the Pay Down Amount, the
amendment provides that we will pay a fee equal to 2% of the initial $10.0 million term loan, payable on the earlier of (a) January 31, 2011 and (b) the maturity date for
the subsequent term loan.

The
amendment further provides that our obligations under the loan agreement, as amended, are no longer secured by a cash amount of $10.0 million. As such, this amount in no
longer classified as restricted cash as of December 31, 2008. Such obligations continue to be secured under various collateral documents by interests in substantially all of our personal
property, including the pledge of the stock of our wholly-owned subsidiary, and proceeds of any intellectual property, but not by our intellectual property.

The
loan and security agreement contains a subjective material adverse clause, which allows the debt holders to call the loans upon a material adverse event. Based on an updated
assessment of the terms of the loan and security agreement, the entire balance due is classified in the current liabilities section in the accompanying balance sheet at June 30, 2010.

As
of December 31, 2009 and June 30, 2010, the outstanding balance on the loan agreement was $4.9 million and $3.6 million, respectively.

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Private Placement in Public Equity Offering (December 2008)

In December 2008, we entered into a securities purchase agreement with certain investors pursuant to which we sold a total of
42,753,869 units (the "Units"), each Unit consisting of (i) one share of common stock and (ii) one warrant to purchase 0.6 shares of common stock at an exercise price of $0.45 per share,
for a purchase price of $0.435 per unit (representing the closing bid price plus an additional amount for the warrants) (the "December 2008 Offering"). The closing of the transaction occurred on
December 23, 2008. In connection with the December 2008 Offering, we raised approximately $18.6 million in gross proceeds. We paid $813,000 in placement agent
fees and offering expenses and expect to use the remaining net proceeds of $17.8 million for general corporate purposes.

In
connection with the December 2008 Offering, we issued warrants to purchase an aggregate of 25,652,333 shares of common stock which are exercisable immediately. The warrants have an
exercise price of $0.45 per share and have a five year term. The relative fair value of the warrants was estimated at $4.4 million using a Black-Scholes model with the following assumptions:
expected volatility of 66.15%, risk free interest rate of 1.53%, expected life of five years and no dividends. Expected volatility was based on the volatility of similar entities in the life sciences
industry of comparable size of market capitalization and financial position that completed initial public offerings within the last ten years. The relative fair value of the warrants was recorded in
the equity section of the balance sheet.

In
connection with the December 2008 Offering, we entered into a registration rights agreement (the "2008 Registration Rights Agreement") with each of the investors. The 2008
Registration Rights Agreement provides that we file a "resale" registration statement covering all of the shares of common stock and the shares of common stock issuable upon exercise of the
warrants, up to the maximum number of shares able to be registered pursuant to applicable SEC regulations, within 30 days of the closing of the December 2008 Offering. We currently maintain an
effective registration statement relating to a portion of these shares (File No. 333-156885). Under the terms of the 2008 Registration Rights Agreement, we are obligated to maintain
the effectiveness of the "resale" registration statement until all securities therein are sold or are otherwise can be sold pursuant to Rule 144, without any restrictions. A cash penalty at the
rate of 2% per month will be triggered for any filing or effectiveness failures or suspensions of prospectus delivery or if, at any time after six months following the closing of the December 2008
Offering, we cease to be current in our periodic reports with the SEC. The aggregate penalty accrued with respect to each investor may not exceed 12% of the original purchase price paid by that
investor.

Private Placement in Public Equity Offering (September 2009)

In September 2009, we entered into a securities purchase agreement with certain investors pursuant to which we (i) sold to
certain existing investors a total of 1,030,028 units, each unit consisting of (a) one share of common stock and (b) one warrant to purchase 0.662 shares of common stock at an exercise
price equal to $2.61 per share (105% of the closing bid price of the common stock on September 15, 2009), at a purchase price equal to $2.57 per unit, and (ii) sold to certain new
investors a total of 3,281,252 units, each unit consisting of (a) one share of common stock and (b) one warrant to purchase 0.50 shares of common stock at an exercise price equal to
$2.61 per share, at a purchase price equal to $2.24 per unit (together, the "September 2009 Offering"). The closing of the transaction occurred on September 18, 2009. In connection with the
September 2009 Offering, we raised approximately $10.0 million in gross proceeds. We paid $646,000 in placement agent fees and offering expenses and expect to use the remaining net proceeds of
$9.4 million for general corporate purposes.

In
connection with the September 2009 Offering, we issued warrants to purchase an aggregate of 2,322,509 shares of common stock which become exercisable on or after the six month
anniversary following the closing of the transaction. The warrants have an exercise price of $2.61 per share and

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have
a five and a half year term. The fair value of the warrants was estimated at $4.5 million using a Black-Scholes model with the following assumptions: expected volatility of 100%, risk free
interest rate of 2.49%, expected life of five and a half years and no dividends. Expected volatility was based on the volatility contractually specified in the warrant agreements. Due to a price
adjustment clause included in the warrant agreements, the warrants were deemed to be a liability and, therefore, the fair value of the warrants was recorded in the liability section of the balance
sheet. As such, the warrants will be revalued each reporting period, with the resulting gains and losses recorded as the change in fair value of warrant liability on the income statement. In
connection with the December 2009 Offering, the exercise price for the warrants issued in this transaction was subsequently reduced to $0.31 per share in accordance with the terms of the warrant. For
the three and six month period ending June 30, 2010 we recorded a gain in the amount of $0.6 million and $1.1 million, respectively, for the change in the fair value of the
warrant liability. During the three and six months ended June 30, 2010, 279,018 and 502,231 warrant shares from the September 2009 Offering were exercised into common stock at an exercise price
of $0.31, respectively.

In
connection with the September 2009 Offering, we entered into a registration rights agreement (the "September 2009 Registration Rights Agreement") with each of the investors. The
September 2009 Registration Rights Agreement provides that we will file a "resale" registration statement covering all of the shares of common stock and the shares of common stock issuable upon
exercise of the warrants, up to the maximum number of shares able to be registered pursuant to applicable SEC regulations, within 15 days of the closing of the September 2009 Offering. We
currently maintain an effective registration statement relating to these shares (File No. 333-162240). Under the terms of the September 2009 Registration Rights Agreement, we are
obligated to maintain the effectiveness of the "resale" registration statement until all securities therein are sold or are otherwise can be sold pursuant to Rule 144, without any restrictions.
A cash penalty at the rate of 2% per month will be triggered for any filing or effectiveness failures or 1% in the event of suspensions of prospectus delivery or if, at any time after six months
following the closing of the September 2009 Offering, we cease to be current in our periodic reports with the SEC. The aggregate penalty accrued with respect to each investor may not exceed 12% of the
original purchase price paid by that investor.

Underwritten Offering (December 2009)

In December 2009, we entered into an Underwriting Agreement (the "Underwriting Agreement") with Thomas Weisel Partners LLC (TWP)
(the "Underwriter"), pursuant to which we agreed to sell to the Underwriter 6,400,000 shares of common stock and warrants to purchase up to 4,160,000 shares of common stock sold in units, at a price
of $1.00 per unit ("December 2009 Offering"). Each unit consists of one share of common stock and a warrant to buy 0.65 of a share of common stock. The Warrants will be exercisable for a period of
five years, beginning six months after
issuance, at an exercise price of $1.4385 per share. We received approximately $6.4 million in gross proceeds from the December 2009 Offering. We paid $718,000 in underwriting discounts,
commissions and offering expenses and expect to use the remaining net proceeds of $5.6 million for general corporate purposes, which include ongoing research and development activities, funding
marketing initiatives and funding manufacturing expenses associated with the commercial version of our Helicos System. The closing of the transaction occurred on December 21, 2009.

In
connection with the December 2009 Offering, we issued warrants to purchase an aggregate of 4,160,000 shares of common stock. The warrants have an exercise price of $1.44 per share and
have a five and a half year term. The fair value of the warrants was estimated at $2.7 million using a Black-Scholes model with the following assumptions: expected volatility of 100%, risk free
interest rate of 2.43%, expected life of five and a half years and no dividends. Expected volatility was based on the volatility contractually specified in the warrant agreements. Due to a price
adjustment clause included in the warrant agreements, the warrants were deemed to be a liability and, therefore, the fair value of

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the
warrants was recorded in the liability section of the balance sheet. As such, the warrants will be revalued each reporting period, with the resulting gains and losses recorded as the change in
fair value of warrant liability on the income statement. We recorded a gain in the amount of $1.2 million and $2.1 million for the change in the fair value of the warrant liability for
the three and six month period ending June 30, 2010, respectively.

Off-balance sheet arrangements

During the six months ended June 30, 2009 and 2010, we did not engage in any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

In our Form 10-K for the fiscal year ended December 31, 2009, our critical accounting policies and estimates
upon which our financial status depends were identified as those relating to inventory; revenue recognition; impairment of long-lived assets; allowance for doubtful accounts; stock-based
compensation; and fair value of financial instruments. We reviewed our policies and determined that those policies remain our critical accounting policies for the six months ended June 30,
2010. We did not make any changes in those policies during the six months ended June 30, 2010.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is limited to our cash. The goals of our investment policy are preservation of capital, fulfillment of
liquidity needs and fiduciary control of cash and investments. We also seek to maximize income from our investments without assuming significant risk. To achieve our goals, we maintain our cash in
interest-bearing bank accounts. As all of our investments are cash deposits in a global bank, it is subject to minimal interest rate risk.

Item 4.    Controls and Procedures

Our management, with the participation of our principal executive officer (PEO) and principal financial officer (PFO), has evaluated
the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), as of June 30, 2010. Based on that evaluation, our PEO and PFO have concluded that our disclosure controls and procedures were effective at the reasonable level of assurance.

No
change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) occurred during the period covered by
this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Part IIOther Information

Item 1.    Legal Proceedings

We are not party to any material pending litigation.

Item 1A.    Risk Factors

The Company cautions investors that any forward-looking statements and, therefore, its future performance and results are subject to
risks and uncertainties. The following important factors could cause our actual business, prospects, financial results or financial condition to differ materially from those contained in
forward-looking statements made in this Quarterly Report on Form 10-Q or elsewhere by management from time to time. The risk factors in this report have been revised to incorporate
changes to our risk factors from those included in our annual report on Form 10-K for the year ended December 31, 2009. The risk factors set forth below with an asterisk (*)
next to the title are new risk factors or risk factors containing changes, which may be material, from the risk factors previously disclosed in Item 1A of our annual report on
Form 10-K for the fiscal year ended December 31, 2009, as filed with the Securities and Exchange Commission.

RISKS RELATED TO OUR BUSINESS

* We are implementing a new, long-term strategic focus. If we are unsuccessful in pursuing our new business initiatives, our business, financial condition,
results of operations and prospects will be materially adversely affected and we may have to cease operations.

We are implementing a new, long-term strategic focus and repositioning our business to utilize our technology for molecular
diagnostic applications in the genetic analysis market. While our new business opportunities will rely upon the capabilities of our proprietary Helicos® Genetic Analysis Platform, the
business model, including the revenue and expense models and the potential marketing and distribution channels, for these opportunities will be materially different than that which we have engaged in
before. We are unable to give any assurance we will be commercially successful in our new business strategy. Our failure to be commercially successful in any such new business opportunity would
materially adversely impact our business, financial condition, results of operations and prospects and could ultimately require that we cease operations. Even if we develop diagnostic products for
commercial use, we may not be able to develop products that:



A
successful shift in our strategic focus will require significant organizational changes. We will need to attract, train and retain qualified sales, marketing and service personnel,
engineers, scientists and other technical and management personnel with appropriate expertise for our new strategic focus. These areas of expertise will include areas that are different than the
skills of our existing employees. Given the potential uncertainty about the success of our new strategic focus and long term roles within our organization, morale may be lowered, key employees may be
distracted and our business may experience a loss of continuity while we implement our long-term strategic focus. Our inability to retain existing personnel, or our inability to attract
new personnel that fit within our new strategic focus, would prevent us from fully exploiting our new business strategy and thereby cause a material adverse effect on our business, financial
condition, results of operations and prospects.

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* Before the end of the third quarter of 2010, our business will require additional funding, which may not be available on favorable terms, if at all, or without potentially
very substantial dilution to our stockholders. If we do not raise the necessary funds, we will need to dramatically reduce, or even terminate all of, our operations.

Our business will require additional financial investment that we have not yet secured and we will need to raise additional capital
before the end of the third quarter of 2010 in order to sustain our business and to pursue our new business strategy. The amount of additional capital we will need to raise depends on many factors,
including:



The
instability of the worldwide financial markets has materially and adversely impacted the availability of financing to a wide variety of companies, particularly early-stage companies
such as Helicos. We do not know whether the additional capital that we will require will be available when and as needed, on favorable terms or if at all, or that our actual cash requirements will not
be greater than anticipated. We may seek additional capital through a combination of private and public equity offerings, debt financings and collaboration, strategic and licensing arrangements. To
the extent we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences
that adversely affect your rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as
incurring additional debt or making capital expenditures or that require early repayment, even with penalties, in connection with a change of control. If we raise additional funds through
collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or products, or grant licenses on terms that are not
favorable to us. We may not be able to complete any such capital raising transactions on acceptable terms, or at all. If adequate additional funds are not available to us when required, we will be
required to terminate some or all aspects of our operations.

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* The audit report contained in our Annual Report on Form 10-K for the year ended December 31, 2009 contains an explanatory paragraph to the effect
that there is substantial doubt about our ability to continue as a going concern.

This "going concern" statement may discourage some third parties from contracting with us and some investors from purchasing our stock
or providing alternative capital financing. The resulting failure to establish, or loss of existing, favorable commercial relationships or to satisfy our capital requirements could adversely affect
our business, financial condition, results of operations and prospects. Unless we raise additional funds, either through public or private sales of equity, from borrowings or from strategic partners,
we will likely have to cease operations. Even if we can continue operating by reducing expenses, the requisite significant reduction in our workforce and operating expenses will adversely affect our
business and prospects.

We may not be able to meet our debt service obligations, or may otherwise default, under our loan and security agreement, which would materially adversely affect our
business, financial condition, results of operations and prospects.

Our loan and security agreement imposes restrictions and obligations on us with which we may not be able to comply. If we fail to
comply with such restrictions, our lenders may declare us in default. Also, we have debt service obligations under our loan and security agreement. We may be unable to generate sufficient cash flow
from operations to service this debt.
Failure to service our debt could result in an event of default. The occurrence of an event of default could lead to acceleration of such debt or any instruments evidencing indebtedness that contain
cross-acceleration or cross-default provisions. In such event, we may be required to sell assets, to refinance, or to obtain additional financing. Such refinancing may not be possible and additional
financing may not be available on commercially acceptable terms or at all. The borrowings under the loan agreement are collateralized by essentially all of our assets and include account control
agreements for each of our cash and investment accounts. These account control agreements permit the lender to control our cash and investment accounts in the event of a default.

* We have a history of operating losses, expect to continue to incur substantial losses, and might never achieve or maintain profitability.

We are a development-stage company with limited operating history. We have incurred significant losses in each fiscal year since our
inception, including net losses attributable to common stockholders of $45.7 million and $28.0 million in the years ended December 31, 2008 and 2009, respectively. As of
December 31, 2009, we had an accumulated deficit of $167.7 million. These losses have resulted principally from costs incurred in our research and development programs and from our
selling, general and administrative expenses. In the year ended December 31, 2009, we used cash in operating activities of $15.5 million and used cash in investing activities totaling
$22,000. As of December 31, 2009, June 30, 2010, and August 11, 2010, we had $15.9 million, $6.2 million and $3.7 million, respectively, in cash and cash
equivalents.

We
expect our losses to continue for a considerable period of time as we implement our new long-term strategic focus and reposition our business by utilizing and deploying
our technology for diagnostic applications in the genetic analysis market. These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets
and stockholders' equity. Because of the numerous risks and uncertainties associated with our new long-term strategic focus, we are unable to predict when we will become profitable, and we
may never become profitable. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. If we are unable to achieve and then maintain
profitability, the market value of our common stock will decline.

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* Following our reduction in force in May 2010, which resulted in the elimination of approximately one-half of the Company's headcount, we may not be able to
retain our remaining employees while we pursue our new business strategy. As a result, we may be unable to achieve our goals, in which case, our business, financial conditions, results of operations
and prospects will be materially adversely affected and we may have to cease operations.

In connection with our efforts to consider alternatives to our long-term strategic focus, in May 2010, we committed to a
reduction in headcount and restructuring plan, or the Restructuring Plan, which involved the consolidation and reorganization of our operations in order to reduce operating costs. The Restructuring
Plan involved a reduction in headcount of approximately 40 employees or one-half of the organization. As a result, while we begin to pursue our new business strategy, we will rely heavily
on our ability to retain our remaining employees. The loss of the service of any number of our remaining employees may significantly delay or prevent our ability to implement a long-term
strategy and other business objectives. For example, because of the complex and technical nature of our Helicos System, any failure to retain a sufficient number of our remaining, qualified employees
could materially harm our ability to maintain our existing know-how and proprietary technology which would severely limit any ability to pursue our long-term strategic
direction.

Given
the magnitude of our May 2010 reduction in force and the potential uncertainty about our strategic direction and long-term roles within our organization, the morale of
our remaining employees may be lowered, key employees may be distracted and our business may experience a loss of continuity while we begin to implement our new business strategy. Each of our
remaining employees could terminate his or her relationship with us at any time. These persons' expertise would be difficult to replace and the failure to do so could have a material adverse effect on
our ability to achieve our business goals. There can be no assurance that we will have the financial resources or otherwise be successful in retaining our remaining personnel and our failure to do so
could have a material adverse effect on our business, financial condition and results of operations. Our inability to retain existing personnel during this period of uncertainty or our inability to
attract new personnel that fit within a new strategic focus, would prevent our exploiting fully our new business strategy and thereby cause a material adverse effect on our business, financial
condition, results of operations and prospects.

* If the diagnostic products we are developing fail to achieve and sustain sufficient market acceptance, we will not generate expected revenue.

Our success depends, in part, on our ability to develop diagnostic products and applications that displace current diagnostic tests and
services. As we implement our long-term strategic focus and reposition our business by utilizing our technology for diagnostic applications in the genetic analysis market, we may not have
adequate resources available to develop products that displace current technologies. We cannot guarantee that the design of our products will be satisfactory to potential customers in the markets we
seek to reach.

* We have limited resources in selling and marketing and, as a result, may be unable to successfully market and sell our diagnostic tests, once developed.

We have a small sales and marketing team. Our ability to achieve profitability depends on attracting customers for the diagnostic tests
we are developing and taking full advantage of the capabilities of our proprietary technology for business opportunities that are materially different than that which we have engaged in before.
Although members of our sales and marketing team have considerable industry experience and have engaged in marketing activities for our Helicos System, in the future we must expand our sales,
marketing, distribution and customer support capabilities with the appropriate technical expertise to effectively pursue our new business strategy. To successfully perform

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sales,
marketing, distribution and customer support functions ourselves, we will face a number of risks, including:



We
may seek to enlist one or more third parties to assist with sales, distribution and customer support globally or in certain regions of the world. There is no guarantee, if we do seek
to enter into such arrangements, that we will be successful in attracting desirable sales and distribution partners, or that we will be able to enter into such arrangements on favorable terms. If our
sales and marketing efforts, or those of any third-party sales and distribution partners, are not successful, our technologies and products may not gain market acceptance, which could materially
impact our business operations.

* We have limited experience.

Our diagnostic tests are at an early stage of development. We are seeking to develop and commercialize new diagnostic products for use
on our Helicos System, and we have limited or no experience in these applications of our technology and operating and selling in these markets. You should evaluate us in the context of the
uncertainties and complexities affecting an early stage company developing diagnostic products and applications for the life science industries and experiencing the challenges associated with entering
into new markets that are highly competitive. Based on our limited experience in developing new products and applications, we may not:



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* We may not be able to generate significant revenue from the diagnostic tests we are developing.

Our new business strategy is substantially dependent on our ability to develop and launch diagnostic tests. We have committed
significant research and development resources to the development of diagnostic tests that utilize our Helicos System. There is no guarantee that we will successfully generate significant revenues
from any tests that we plan to launch in the future. We have limited experience in licensing, manufacturing, selling, marketing or distributing
diagnostic or other tests. If we are not able to successfully market or sell the diagnostic tests we are selling for any reason, including the failure to obtain any required regulatory approvals, we
will not generate any revenue from the sale of such tests.

* If third-party payors, including managed care organizations and Medicare, do not provide reimbursement, breach, rescind or modify their contracts or reimbursement policies
or delay payments for diagnostic tests, once developed, our commercial success could be compromised.

Physicians and patients may not order our diagnostic tests, once developed, unless third-party payors, such as managed care
organizations as well as government payors such as Medicare and Medicaid, pay a substantial portion of the test price. Reimbursement by a third-party payor may depend on a number of factors, including
a payor's determination that tests using our technologies are:



There
may be uncertainty concerning third-party payor reimbursement of any test incorporating new technology, including new tests developed using our Helicos System. Several entities
conduct technology assessments of new medical tests and devices and provide the results of their assessments for informational purposes to other parties. These assessments may be used by third-party
payors and health care providers as grounds to deny coverage for a test or procedure.

Since
each payor makes its own decision as to whether to establish a policy to reimburse tests, seeking these approvals is a time-consuming and costly process. We cannot be
certain that coverage for our diagnostic tests, once developed, will be provided in the future by any third-party payors. If we are unable to obtain reimbursement from private payors and Medicare and
Medicaid programs for our diagnostic tests, once developed, our ability to generate revenues could be severely limited. We may experience delays and temporary interruptions in the receipt of payments
from third-party payors due to contract implementation steps, documentation requirements and other issues, which could cause our revenues to fluctuate from period to period.

* The prices at which our diagnostic tests, once developed, are reimbursed may be reduced by Medicare and private and other payors, and any such changes could have a
negative impact on our revenues.

Even if we are being reimbursed for our diagnostic tests, once developed, Medicare and private and other payors may withdraw their
coverage policies or cancel their contracts with us at any time, review and adjust the rate of reimbursement or stop paying for our tests, which would reduce our total revenues. In addition, insurers,
including managed care organizations as well as government payors such as Medicare and Medicaid, have increased, and we believe will continue to increase, their efforts

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to
control the cost, utilization and delivery of healthcare services. These measures have resulted in reduced payment rates and decreased utilization for the clinical laboratory industry. From time to
time, Congress has considered and implemented changes to the Medicare fee schedules in conjunction with budgetary legislation, and pricing for tests covered by Medicare is subject to change at any
time. Reductions in the reimbursement rate of payors have occurred and may occur in the future. Reductions in the prices at which our tests, once developed, are reimbursed could have a negative impact
on our revenues.

* Our financial results will depend on sales of our diagnostic tests, once developed, and we will need to generate sufficient revenues from our tests to run our business.

We expect to derive substantially all of our revenues from sales of our diagnostic tests once they are developed. We have not launched
any diagnostic tests yet and, once launched, we do not expect to recognize significant revenues from our tests until adoption of and reimbursement for the tests have been established. We are in
various stages of research and development for diagnostic tests that we may offer and we may not be able to successfully commercialize our tests. If we are unable to commercialize and sell our tests,
our revenues, business and prospects would be impaired.

* Complying with numerous regulations pertaining to our business is an expensive and time-consuming process and any failure to comply could result in substantial
penalties

We are in the process of obtaining a certificate of accreditation under the Clinical Laboratory Improvement Amendments of 1988, or
CLIA, to perform testing. CLIA is a federal law that regulates clinical laboratories that perform testing on specimens derived from humans for the purpose of providing information for the diagnosis,
prevention or treatment of disease. CLIA is intended to ensure the quality and reliability of clinical laboratories in the U.S. by mandating specific standards in the areas of personnel
qualifications, administration, and participation in proficiency testing, patient test management, quality control, quality assurance and inspections. If obtained, to renew this certificate, we will
be subject to survey and inspection every two years and CLIA inspectors may make random inspections of our clinical reference laboratory. If we are unable to obtain CLIA accreditation or if we were to
lose our CLIA accreditation if obtained, whether as a result of a revocation, suspension or limitation, we would no longer be able to sell the tests we are developing, which would limit our revenues
and harm our business.

We
are or may be subject to other regulation by both the federal government and the states in which we conduct our business, including:



We
may need to adopt policies and procedures, which we have not yet done, designed to comply with these laws, including policies and procedures relating to financial arrangements between
us and physicians who may refer patients to us in the future. Our compliance with these laws may be subject to governmental review. Any growth of our business and sales organization may increase the
potential of violating these laws or our internal policies and procedures. The risk of our being found in violation of these laws and regulations is further increased by the fact that many of them
have not been fully

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interpreted
by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action brought against us for violation of these laws or regulations, even
if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. If our operations are found to be in
violation of any of these laws and regulations, we may be subject to any applicable penalty associated with the violation, including civil and criminal penalties, damages and fines, we could be
required to refund payments received by us, and we could be required to curtail or cease our operations.

* If the FDA were to begin regulating our laboratory developed diagnostic tests, once developed and validated, we could incur substantial costs and time delays associated
with meeting requirements for pre-market clearance or approval.

Although the Food and Drug Administration, or FDA, has elected not to substantially regulate tests similar to the diagnostic tests we
are developing, the FDA has stated that it has the right to do so and the FDA may seek to regulate or require clearance or approval of our diagnostic products in the future. We cannot provide any
assurance, however, that FDA regulation, including pre-market review, will not be required in the future for our diagnostic products, once developed.

If
pre-market review is required, our business could be negatively impacted until such review is completed and clearance to market or approval is obtained, and the FDA could
require that we stop selling our tests, once developed, pending pre-market clearance or approval. If our tests, once developed, are allowed to remain on the market but there is uncertainty
about our tests, if they are labeled investigational by the FDA, or if labeling claims the FDA allows us to make are very limited, orders or reimbursement may decline. The regulatory approval process
may involve, among other things, successfully completing additional clinical trials and submitting a pre-market clearance notice or filing an application with the FDA. If
pre-market review of our tests, once developed, is required by the FDA, there can be no assurance that our tests will be cleared or approved on a timely basis, if at all. Ongoing
compliance with the FDA regulations would increase the cost of conducting our business, and subject us to inspection by the FDA and to the requirements of the FDA and penalties for failure to comply
with these requirements. We may also decide voluntarily to pursue FDA pre-market review of our tests, once developed, if we determine that doing so would be appropriate.

Laws
and regulations are also in effect in many countries that could affect the products we are developing. The number and scope of these requirements are increasing. We may not be able
to obtain regulatory approvals in such countries or may incur significant costs in obtaining or maintaining our foreign regulatory approvals. In addition, the export by us of certain of the products
we are developing that have not yet been cleared for domestic commercial distribution may be subject to FDA or other export restrictions.

* New test development involves a lengthy and complex process and we may be unable to commercialize any of the tests we are currently developing.

Our diagnostic tests are in early development and require considerable resources to achieve final development and validation. There can
be no assurance that our tests will be capable of reliably predicting results with the sensitivity and specificity necessary to be clinically and commercially useful. In addition, before we can
develop new diagnostic tests and commercialize any new products, we will need to:



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This
product development process involves a high degree of risk and may take longer than expected. Our product development efforts may fail for many reasons, including failure of the
product at the research or development stage or lack of clinical validation data to support the effectiveness of the product. Few research and development projects result in commercial products, and
success in early clinical trials often is not replicated in later studies. At any point, we may abandon development of a diagnostic test candidate or we may be required to expend considerable
resources repeating clinical trials, which would adversely impact the timing for generating potential revenues from those diagnostic test candidates. In addition, as we develop diagnostic tests, we
will have to make significant investments in development, marketing and selling resources. If a clinical validation study fails to demonstrate the prospectively defined endpoints of the study, we
might choose to abandon the development of the diagnostic test that was the subject of the clinical trial, which could harm our business.

* If we are unable to support demand for our diagnostic tests, once developed, including successfully managing the evolution of our technology and manufacturing platforms,
our business could suffer.

Once we develop diagnostic tests and if our test volume grows, we will need to ramp up our testing capacity, implement increases in
scale and related processing, customer
service, billing and systems process improvements, and expand our internal quality assurance program, technology and manufacturing platforms to support testing on a larger scale. We will also need
additional certified laboratory scientists and other scientific and technical personnel to process higher volumes of our tests. We cannot assure you that any increases in scale, related improvements
and quality assurance will be successfully implemented or that appropriate personnel will be available. Failure to implement necessary procedures or to hire the necessary personnel could result in
higher cost of processing or an inability to meet market demand. There can be no assurance that we will be able to perform tests, once developed, on a timely basis at a level consistent with demand,
that our efforts to scale our commercial operations will not negatively affect the quality of our test results, or that we will be successful in responding to the growing complexity of our testing
operations. If we encounter difficulty meeting market demand or quality standards for the tests we are developing, our reputation could be harmed and our future prospects and our business could
suffer.

* We may experience limits on our revenues if physicians decide not to order our diagnostic tests, once developed, or if we are unable to obtain adequate reimbursement
coverage from third-party payors.

If medical practitioners do not order our diagnostic tests, once developed, we will likely not be able to create demand for our
products in sufficient volume for us to become profitable. To generate demand, we will need to make medical practitioners aware of the benefits of each type of test through published papers,
presentations at scientific conferences and one-on-one education by our sales force. In addition, we will need to demonstrate our ability to obtain adequate reimbursement
coverage from third-party payors.

* We may experience limits on our revenues if patients decide not to use our diagnostic tests, once developed.

Some patients may decide not to use our diagnostic tests, once developed, due to their price, part or all of which may be payable
directly by the patient if the applicable payor denies reimbursement in full or in part. Even if medical practitioners recommend that their patients use our tests, once developed, patients may still
decide not to use our tests. Additionally, the current economic environment could continue to negatively impact patients, resulting in loss of healthcare coverage, delayed medical checkups or
inability to pay for a relatively expensive test. If only a small portion of the patient population decides to use our tests, once developed, we will experience limits on our revenues and our ability
to achieve profitability.

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* If we do not compete effectively with scientific and commercial competitors, we may not be able to successfully commercialize the tests we are developing.

The biotechnology, diagnostic and genetics testing fields are intense and highly competitive. Our competitors in the United States and
abroad are numerous and include, among others, major diagnostic companies, reference laboratories, diagnostic firms, universities and other research institutions. Many of our potential competitors
have considerably greater financial, technical, marketing and other resources than we do, which may allow these competitors to develop better diagnostic products. Those companies that already have
comparable diagnostic tests on the market or bring to market new diagnostic tests before we do may achieve a significant competitive advantage in marketing and commercializing their tests. We may not
be able to develop diagnostic tests successfully and we or our licensors may not obtain patents covering these products that provide protection against our competitors. Moreover, our competitors may
succeed in developing diagnostic products that circumvent our technologies or products. Furthermore, our competitors may succeed in developing technologies or products that are more effective than
those developed by us or that would render our technologies or products less competitive or obsolete. We expect competition to intensify in the fields in which we are involved as technical advances in
these fields occur and become more widely known.

* If we are unable to recruit and retain key executives, scientists and other employees, we may be unable to achieve our goals.

We are substantially dependent on the performance of our senior management and key scientific and technical personnel. We do not
maintain employment contracts with any of our employees. We have implemented a number of workforce reductions to reduce our operating costs, conserve cash and direct our resources to continue
advancing towards the Company's near term goals. Depending on our circumstances, we may need to implement additional workforce reductions in the future. The loss of the services of any member of our
senior management or our scientific or technical staff may significantly delay or prevent the development of our products and other business objectives by diverting management's attention to
transition matters and identification of suitable replacements, if any, and could have a material adverse effect on our business, prospects, operating results and financial condition.

In
addition, our diagnostic product development and marketing efforts could be delayed or curtailed if we are unable to hire, train and retain highly skilled employees and scientific
advisors, particularly our management team, senior scientists and engineers and sales, marketing and service personnel. To expand our research, product development and sales efforts we need additional
people skilled in areas such as diagnostics, technical support, bioinformatics, manufacturing, sales and marketing. Because of the complex and technical nature of our Helicos System and the dynamic
market in which we compete, any failure to attract and retain a sufficient number of qualified employees could materially harm our ability to implement our new business initiatives. Competition for
these people is intense. Further, our inability to hire, train and retain sales, marketing and service personnel could have a material adverse affect on our ability to generate sales. Each of our
executive officers and other key employees could terminate his or her relationship with us at any time. These persons' expertise would be difficult to replace and could have a material adverse effect
on our ability to achieve our business goals. There can
be no assurance that we will have the financial resources or otherwise be successful in hiring or retaining qualified personnel and our failure to do so could have a material adverse effect on our
business, financial condition and results of operations.

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* Ethical, legal and social concerns surrounding the use of genetic information could reduce demand for the diagnostic tests we are developing.

One of the potential uses for the diagnostic tests we are developing is genetic testing for predisposition to certain conditions.
Genetic testing has raised ethical, legal and social issues regarding privacy and the appropriate uses of the resulting information. Governmental authorities could, for social or other purposes, call
for limits on or regulation of the use of genetic testing or prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure. Similarly, such concerns
may lead individuals to refuse to use genetics tests even if permissible. These and other ethical, legal and social concerns about genetic testing may limit market acceptance of or reduce the
potential markets for the diagnostic products we are developing, either of which could have a material adverse effect on our business, financial condition and results of operations.

* The diagnostic products we are developing could have unknown defects or errors, which may give rise to claims against us or divert application of our resources from other
purposes.

Any diagnostic product utilizing our True Single Molecule Sequencing (tSMS) technology will be complex and may develop or
contain undetected defects or errors. We cannot assure you that a material performance problem will not arise. Despite testing and quality assurance processes, defects or errors may arise in our
diagnostic tests, once developed, which could result in a failure to achieve market acceptance or expansion, diversion of development resources, injury to our reputation and increased service and
maintenance costs. The costs incurred in correcting any defects or errors may be substantial and could adversely affect our operating margins. In addition, such defects or errors could lead to the
filing of product liability claims, which could be costly and time-consuming to defend and result in substantial damages. Though we intend to procure product liability insurance, the
coverage levels we procure may not protect our assets from the financial impact of a product liability claim. Moreover, we may not be able to obtain adequate insurance coverage on acceptable terms.
Any insurance that we do obtain will be subject to deductibles and coverage limits. A product liability claim could have a serious adverse effect on our business, financial condition and results of
operations.

* If we were successfully sued for product liability, we could face substantial liabilities that exceed our resources.

The diagnostic products we are developing expose us to potential liability risks inherent in the testing, marketing and processing of
diagnostic products, including possible misdiagnoses. Although we intend to procure insurance coverage against such risks in amounts that we believe to be commercially reasonable, our ability to
obtain adequate levels of professional and product liability insurance is uncertain. A successful product liability claim in excess of our insurance coverage, once obtained, could have a material
adverse effect on our business. Any successful product liability claim may prevent us from obtaining adequate product liability insurance in the future on commercially desirable or reasonable terms.
An inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the development or
commercialization of our products.

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

Our research and the development of diagnostic tests involve the controlled use of hazardous materials, including chemicals and
biological materials. Our operations produce hazardous waste products. We cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. We may be
sued for any injury or contamination that results from our use or the use by third parties of these materials. We do not currently maintain separate environmental liability coverage. Federal, state
and local laws and regulations govern the use, manufacture, storage,

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handling
and disposal of hazardous materials. Compliance with environmental laws and regulations may be expensive, and current or future environmental regulations may impair our research, development
and production efforts.

* We rely on a single laboratory facility to develop our diagnostic tests.

We rely on a single laboratory facility in Cambridge, Massachusetts to develop our diagnostic tests. This facility and certain pieces
of laboratory equipment would be difficult to replace and may require significant replacement lead-time. This facility may be affected by natural disasters such as earthquakes, floods and
fires. In the event our laboratory facility or equipment is affected by man-made or natural disasters, we would be unable to continue our development of diagnostic products for a
significant period of time. Although we maintain insurance on this facility, it may not be adequate to protect us from all potential losses if this facility were damaged or destroyed. In addition, any
interruption in the development of our diagnostic tests would result in a loss of goodwill, including damage to our reputation and it would seriously harm our business.

* Once we develop and launch our diagnostic tests, we must be in compliance with security and privacy regulations under the Health Insurance Portability and Accountability
Act of 1996, or HIPAA, and other state regulations, which may increase our operational costs.

The HIPAA privacy and security regulations establish comprehensive federal standards with respect to the uses and disclosures of
protected health information, or PHI, by health plans and healthcare providers, in addition to setting standards to protect the confidentiality,
integrity and availability of electronic PHI. The regulations establish a complex regulatory framework on a variety of subjects, including:



Once
we develop and launch commercial diagnostic tests, we must implement policies and procedures related to compliance with the HIPAA privacy and security regulations, as required by
law, which may increase our operational costs. Furthermore, the privacy and security regulations provide for significant fines and other penalties for wrongful use or disclosure of PHI, including
potential civil and criminal fines and penalties. Although the HIPAA statute and regulations do not expressly provide for a private right of damages, we also could incur damages under state laws to
private parties for the wrongful use or disclosure of confidential health information or other private personal information.

* Because we are subject to existing and potential additional governmental regulation, we may become subject to burdens on our operations, and the markets for our products
may be narrowed.

We are subject, both directly and indirectly, to the adverse impact of existing and potential future government regulation of our
operations and markets. The life sciences industry, which is the market for our technology, has historically been heavily regulated. Given the evolving nature of this industry, legislative bodies or
regulatory authorities may adopt additional regulation that adversely affects our market opportunities. Our business is also directly affected by a wide variety of government regulations applicable to
business enterprises generally and to companies operating in the life science industry in particular. Failure to comply with these regulations or obtain or maintain necessary permits and licenses

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could
result in a variety of fines or other censures or an interruption in our business operations which may have a negative impact on our ability to generate revenues and could increase the cost of
operating our business.

We have incurred, and will continue to incur, significant increased costs as a result of operating as a public company, and our management is and will continue to be
required to devote substantial time to new compliance initiatives.

The Sarbanes-Oxley Act of 2002 and rules subsequently implemented by the Securities and Exchange Commission and The NASDAQ Stock
Market LLC have imposed various requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel devote a substantial amount
of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly.

In
addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In
particular, we must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over
financial reporting, as required by Section 404(a) of the Sarbanes-Oxley Act. However, our testing may reveal deficiencies in our internal control over financial reporting that are deemed to be
material weaknesses. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues. We currently
do not have an internal audit group and we will evaluate the need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.
Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we identify deficiencies in our internal control over financial reporting that are deemed
to be material weaknesses, the market price of our stock
could decline and we could be subject to sanctions or investigations by The NASDAQ Stock Market LLC, the Securities and Exchange Commission or other regulatory authorities, which would require
additional financial and management resources.

If we make acquisitions in the future, we may encounter a range of problems that could harm our business.

We may acquire technologies, products or companies that we feel could accelerate our ability to compete in our core markets.
Acquisitions involve numerous risks, including:



Acquisitions
also frequently result in the recording of goodwill and other intangible assets which are subject to potential impairments in the future that could harm our financial
results. In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted, which could affect the market price of our stock. As a
result, if we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any such acquisitions, and we may incur costs in excess of what we anticipate.

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RISKS RELATED TO OUR INTELLECTUAL PROPERTY

* Our failure to establish a strong intellectual property position and enforce our intellectual property rights against others would enable competitors to develop similar or
alternative technologies.

Our success depends in part on our ability to obtain and maintain intellectual property protection for our technologies, including the
diagnostic tests we are developing. Our policy is to seek to protect our intellectual property by, among other methods, filing U.S. patent applications related to our proprietary technology,
inventions and improvements that are important to the development of our business.

Our
patent portfolio relating to our proprietary technology is comprised of issued patents and pending patent applications which, in either case, we own directly or for which we are the
exclusive or semi-exclusive licensee. Some of these patents and patent applications are foreign counterparts of U.S. patents or patent applications. We may not be able to maintain and
enforce existing patents or obtain further patents for our products, processes and technologies, including for the diagnostic tests we are developing. Even if we are able to maintain our existing
patents or obtain further patents, these patents may not provide us with substantial protection or be commercially beneficial. The issuance of a patent is not conclusive as to its validity or
enforceability, nor does it provide the patent holder with freedom to operate unimpeded by the patent rights of others. Patent law relating to the scope of claims in the technology fields in which we
operate is still evolving and the extent of future protection is highly uncertain, so there can be no assurance that the patent rights that we have or may obtain will be valuable. Others have filed
patent applications that are similar in scope to ours, and in the future are likely to file patent applications that are similar or identical in scope to
ours or those of our licensors. We cannot predict whether any of our competitors' pending patent applications will result in the issuance of valid patents. Moreover, we cannot assure investors that
any such patent applications will not have priority or dominate over our patents or patent applications. The invalidation of key patents owned by or licensed to us or non-approval of
pending patent applications could increase competition, and materially adversely affect our business, financial condition and results of operations. Furthermore, there can be no assurance that others
will not independently develop similar or alternative technologies, duplicate any of our technologies, or, if patents are issued to us, design around the patented technologies developed by us.

We may be involved in lawsuits and administrative proceedings to protect or enforce our patents and proprietary rights and to determine the scope and validity of others'
proprietary rights, which could result in substantial costs and diversion of resources and which, if unsuccessful, could harm our competitive position and our results of operations.

Litigation and administrative proceedings may be necessary to enforce our patent and proprietary rights and/or to determine the scope
and validity of others' proprietary rights. Litigation on these matters has been prevalent in our industry and we expect that this will continue. To determine the priority of inventions, we may have
to initiate and participate in interference proceedings declared by the U.S. Patent and Trademark Office that could result in substantial costs in legal fees and could substantially affect the scope
of our patent protection. Also, our intellectual property may be subject to significant administrative and litigation proceedings such as invalidity, opposition, reexamination, or reissue proceedings
against our patents. The outcome of any litigation or administrative proceeding might not be favorable to us, and, in that case, we might be required to develop alternative technological approaches
that we may not be able to complete successfully or require licenses from others that we may not be able to obtain. Even if such licenses are obtainable, they may not be available at a reasonable
cost. We may also be held liable for money damages to third parties and could be enjoined from manufacturing or selling our products or technologies. In addition, if we resort to legal proceedings to
enforce our intellectual property rights or to determine the validity and scope of the intellectual property or other proprietary rights of others, the proceedings could be burdensome

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and
expensive, even if we were to prevail. These types of administrative proceedings and any litigation that may be necessary in the future could result in our patent protection being significantly
modified or reduced, and could result in substantial costs and diversion of resources and could have a material adverse effect on our business, operating results or financial condition. In August
2006, we filed an opposition against EP 1 105 529 B1 in the European Patent Office, with respect to which we received a preliminary non-binding opinion upholding
the patent. In October 2008, EP 1 105 529 B1 was maintained in amended form and in January 2009 we filed a notice of appeal of the European Patent Office's decision. The
patent owner filed a response brief on October 19, 2009, and the Company filed a reply brief on March 19, 2010.

* We depend upon our ability to license technologies, and the failure to license or otherwise acquire necessary technologies could harm our ability to sell our products or
defend our intellectual property position.

We hold various licenses to use certain technologies that we consider to be material to our business. Each of these licenses imposes a
range of obligations on us and may be terminated if we breach the terms of any of the respective agreements. We may also be required to enter into additional licenses with third parties for other
technologies that we consider to be necessary for our business. If we are unable to maintain our existing licenses or obtain additional technologies on acceptable terms, we could be required to
develop alternative technologies, either alone or with others, in order to avoid infringing the intellectual property to which we no longer hold a license. This could require the tests we are
developing to be re-configured, which could negatively impact the availability of our tests, once developed, for commercial sale and increase our development costs. Failure to license or
otherwise acquire necessary technologies would harm our ability to market and sell our diagnostic products, once developed, which could materially adversely affect our business, financial condition
and results of operations. In addition, any licenses we obtain from federally-funded institutions are subject to the march-in rights of the U.S. government.

* We may be the subject of costly and time-consuming lawsuits brought by third parties for alleged infringement of their proprietary rights, which could limit
our ability to use certain technologies in the future, force us to redesign or discontinue our diagnostic products, or pay royalties to continue to sell our diagnostic products.

Our success depends, in part, on us neither infringing patents or other proprietary rights of third parties nor breaching any licenses
to which we are a party. We may be the subject of legal claims by third-parties that our technology or diagnostic products infringe their patents or otherwise violate their intellectual property
rights. In addition, the technology that we license from third parties for use in our Helicos System could become subject to similar infringement claims. Infringement claims asserted against us or our
licensors may have a material adverse effect on our business, results of operations or financial condition. Any claims, either with or without merit, could be time-consuming and expensive
to defend, and could divert our management's attention away from the execution of our business plan. Moreover, any settlement or adverse judgment resulting from the claim could require us to pay
substantial amounts of money or obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology. There can be no
assurance that we would be able to obtain a license on commercially reasonable terms, if at all, from third parties asserting an infringement claim; that we would be able to develop alternative
technology on a timely basis, if at all; or that we would be able to obtain a license to use a suitable alternative technology to permit us to continue offering, and our customers to continue using,
our affected products. Accordingly, an adverse determination could prevent us from offering the diagnostic tests we are developing. We believe that there may be significant litigation in the industry
regarding patent and other intellectual property rights. If we become involved in such litigation, it could consume a substantial portion of our managerial and financial resources.

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Furthermore,
because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could
be compromised by disclosure during this type of litigation. In addition, during the course of this kind of litigation, there could be public announcements of the results of hearings, motions or other
interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.

The measures that we use to protect the security of our intellectual property and other proprietary rights may not be adequate, which could result in the loss of legal
protection for, and thereby diminish the value of, such intellectual property and other rights.

Our success depends in part on our ability to protect our intellectual property and other proprietary rights. In addition to patent
protection, we also rely upon a combination of trademark, trade secret, copyright and unfair competition laws, as well as license agreements and other contractual provisions, to protect our
intellectual property and other proprietary rights. In addition, we attempt to protect our intellectual property and proprietary information by requiring our employees, consultants and certain
academic collaborators to enter into confidentiality and assignment of inventions agreements. There can be no assurance, however, that such measures will provide adequate protection for our patents,
copyrights, trade secrets or other proprietary information. In addition, there can be no assurance that trade secrets and other proprietary information will not be disclosed, that others will not
independently develop substantially equivalent proprietary information and techniques or otherwise gain access to or disclose our trade secrets and other proprietary information. To the extent that
our intellectual property and other proprietary rights are not adequately protected, third parties might gain access to our proprietary information, develop and market genetic analysis systems similar
to our tSMS technology, or use trademarks similar to ours, each of which could materially harm our business. Existing U.S. federal and state intellectual property laws offer only limited protection.
Moreover, the laws of other countries in which we may market our technology may afford little or no effective protection of our intellectual property. The failure to adequately protect our
intellectual property and other proprietary rights could materially harm our business.

RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

Our directors and management will exercise significant control over our company, which will limit your ability to influence corporate matters.

Certain of our directors and executive officers and their affiliates collectively control a majority of our outstanding common stock as
of June 30, 2010. As a result, these stockholders, if they act together, will be able to influence our management and affairs and all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control of our company and might
negatively affect the market price of our common stock.

The market price of our common stock may be volatile, which could result in substantial losses for our stockholders and subject us to securities class action litigation.

Market prices of technology and healthcare companies have been particularly volatile. Some of the factors that may cause the market
price of our common stock to fluctuate include:



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In
addition, if the market for biotechnology and life sciences stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock
could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to class
action lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

If equity research analysts do not publish research reports about our business or if they issue unfavorable commentary or downgrade our common stock, the price of our common
stock could decline.

The trading market for our common stock may rely in part on the research and reports that equity research analysts publish about us and
our business. We do not control the opinions of these analysts. The price of our stock could decline if one or more equity analysts downgrade our stock or if those analysts issue other unfavorable
commentary or cease publishing reports about us or our business.

A significant portion of our total outstanding shares may be sold into the public market in the near future, which could cause the market price of our common stock to drop
significantly, even if our business is doing well.

A majority of the shares of our common stock outstanding as of June 30, 2010 may be offered and sold by selling stockholders
pursuant to effective registration statements on Forms S-3 declared effective by the SEC. In addition, up to 27,842,358 additional shares of our common stock may be offered and sold
pursuant to effective registration statements by selling stockholders upon exercise of warrants. In addition, a majority of the other outstanding shares of our common stock and other warrants are
eligible for resale by the holders of those shares pursuant to other effective registration statements or in exempt private transactions.

If
our existing stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could decrease significantly. The perception in the
public market that our stockholders might sell shares of common stock could also depress the market price of our common stock. A decline in the price of shares of our common stock might impede our
ability to raise capital through the issuance of additional shares of our common stock or other equity securities, and may cause you to lose part or all of your investment in our shares of common
stock.

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We
have registered the issuance of all shares of common stock that we have issued and may issue under our employee option plans. Having registered the issuance of these shares, they can
be freely sold in the public market upon issuance. In addition, as of June 30, 2010, there were 277,777 shares of common stock reserved for future issuance as charitable contribution to the
Broad Institute, Inc. that will become eligible for sale in the public market to the extent permitted by Rule 144 under the Securities Act of 1933, as amended.

Due
to these factors, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the
holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

Provisions in our certificate of incorporation and by-laws or Delaware law might discourage, delay or prevent a change of control of our company or changes in
our management and, therefore, depress the trading price of our common stock.

Provisions of our certificate of incorporation and by-laws and Delaware law may discourage, delay or prevent a merger,
acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These
provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include:



The
affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote is necessary to amend or repeal the above provisions of our certificate of
incorporation. In addition, our board of directors has the ability to designate the terms of and issue new series of preferred stock without stockholder approval. Also, absent approval of our board of
directors, our by-laws may only be amended or repealed by the affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote. Accordingly, given that our
executive officers, directors and their affiliates collectively own a majority of our outstanding common stock, certain of these persons acting together will have the ability to block any such
amendment.

In
addition, Section 203 of the Delaware General Corporation Law prohibits a publicly-held Delaware corporation from engaging in a business combination with an
interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.

The
existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common
stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the
price of our common stock.

We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future.
We currently intend to invest our future earnings, if any, to

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fund
our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon
any future appreciation in its value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.

* Our common stock may be delisted from The NASDAQ Global Market, which could negatively impact the price of our common stock and our ability to access the capital markets.

Our common stock is listed on The NASDAQ Global Market. On April 14, 2010, we received a letter from The NASDAQ Stock
Market LLC, or NASDAQ, advising that for the previous 30 consecutive business days, the bid price of our common stock had closed below the minimum $1.00 per share requirement for continued
inclusion on the NASDAQ Global Market. In addition, on June 28, 2010, we received a letter from NASDAQ advising that for the previous 30 consecutive business days, we failed to comply with the
minimum market value of listed securities ("MVLS") requirement for continued listing on the NASDAQ Global Market. If we fail to comply with the minimum bid price or MVLS requirement or any other
listing standards applicable to issuers listed on The NASDAQ Global Market, our common stock may be delisted from The NASDAQ Global Market. The delisting of our common stock would significantly affect
the ability of investors to trade our securities and would significantly negatively affect the value and liquidity of our common stock. In addition, the delisting of our common stock could materially
adversely affect our ability to raise capital on terms acceptable to us or at all. Delisting from The NASDAQ Global Market could also have other negative results, including the potential loss of
confidence by suppliers and employees, the loss of institutional investor interest and fewer business development opportunities.

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

Use of Proceeds from Public Offering of Common Stock

On May 24, 2007, we completed our initial public offering of 5,400,000 shares of our common stock at a price to the public of
$9.00 per share for an aggregate offering price of $48.6 million. We received aggregate net proceeds of approximately $43.9 million, after deducting underwriting discounts and
commissions of $2.9 million, and $1.8 million of additional expenses, including legal, accounting and printing costs and various other fees associated with the registration and listing
of our common stock. None of the underwriting discounts and commissions or offering expenses were incurred or paid, directly or indirectly, to directors or officers of ours or their associates or to
persons owning 10% or more of our common stock or to any affiliates of ours. The offer and sale of all of the shares in the initial public offering were registered under the Securities Act of 1933, as
amended, pursuant to a registration statement on Form S-1 (File No. 333-140973), which was declared effective by the Securities and Exchange Commission on
May 24, 2007. UBS Investment Bank, JP Morgan, Leerink Swann & Company, and Pacific Growth Equities, LLC were the underwriters of the initial public offering. The offering
commenced on May 24, 2007 and did not terminate until after the sale of all of the securities registered in the registration statement.

On
June 27, 2007, we sold an additional 397,000 shares of our common stock at $9.00 per share pursuant to the over-allotment option granted to the underwriters of our
initial public offering. The net proceeds after deducting underwriters' discounts and commission related to the offering were $3.3 million. UBS Securities, J.P. Morgan Securities, Inc.,
Leerink Swann & Co., Inc. and Pacific Growth Equities, LLC acted as representatives of the underwriters.

Of
the $52.2 million of gross proceeds we received in our initial public offering, including the exercise of the over-allotment options, through December 31,
2008, we have spent approximately $3.2 million on underwriting discounts and commissions and approximately $1.8 million for payment of expenses related to our initial public offering.
Additionally, we have spent $16.6 million on pre-

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production
research and development expenses and $10.9 million on inventory. None of these expenses were incurred or paid, directly or indirectly, to directors or officers of ours or their
associates or to persons owning 10% or more of our common stock or to any affiliates of ours.

The
proceeds remaining after paying the costs noted above are invested in interest bearing bank accounts. During early 2009, we used the remaining proceeds from our initial public
offering for general corporate purposes which include ongoing research and development activities, funding the additional recruitment of our specialized sales, marketing and services force and
marketing initiatives and funding manufacturing expenses associated with the commercial version of our Helicos System. Our management has broad discretion as to the use of the net proceeds. As
required by applicable Securities and Exchange Commission ("SEC") regulations, we will provide further detail on our use of the net proceeds from our initial public offering in future periodic
reports.

Recent Sales of Unregistered Securities

In September 2009, we entered into a securities purchase agreement with certain investors pursuant to which we (i) sold to
certain existing investors a total of 1,030,028 units, each unit consisting of (a) one share of common stock and (b) one warrant to purchase 0.662 shares of common stock at an exercise
price equal to $2.61 per share (105% of the closing bid price of the common stock on September 15, 2009), at a purchase price equal to $2.57 per unit, and (ii) sold to certain new
investors a total of 3,281,252 units, each unit consisting of (a) one share of common stock and (b) one warrant to purchase 0.50 shares of common stock at an exercise price equal to
$2.61 per share, at a purchase price equal to $2.24 per unit (together, the "September 2009 Offering") for gross proceeds of $10.0 million. We paid $646,000 in placement agent fees and offering
expenses and expect to use the remaining net proceeds of $9.4 million for general corporate purposes, which include ongoing research and development activities, funding marketing initiatives
and funding manufacturing expenses associated with the commercial version of our Helicos System. The warrants have a five and a half year term and become exercisable on or after the six month
anniversary following the closing of the transaction. The closing of the transaction occurred on September 18, 2009. The September 2009 Offering was consummated in reliance on the exemption
from registration under Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act").

Under
NASDAQ Marketplace Rule 4350(i)(1)(B), stockholder approval is required for issuances of securities that will result in a change of control of the issuer. In order to comply
with Rule 4350(i)(1)(B), until the September 2009 Offering has been approved by the stockholders, the warrants prohibit holders from exercising the warrants for any number of shares which would
cause that holder to hold more than 19.9% of our common stock following the exercise. We expect to seek approval of the September 2009 Offering at our next annual meeting of stockholders.

In
connection with the September 2009 Offering, we entered into a registration rights agreement (the "September 2009 Registration Rights Agreement") with each of the investors. The
September 2009 Registration Rights Agreement provides that we will file a "resale" registration statement covering all of the shares of common stock and the shares of common stock issuable upon
exercise of the warrants, up to the maximum number of shares able to be registered pursuant to applicable SEC regulations, within 15 days of the closing of the September 2009 Offering. We
currently maintain an effective registration statement relating to these shares (File No. 333-162240). Under the terms of the
September 2009 Registration Rights Agreement, we are obligated to maintain the effectiveness of the "resale" registration statement until all securities therein are sold or are otherwise can be sold
pursuant to Rule 144, without any restrictions. A cash penalty at the rate of 2% per month will be triggered for any filing or effectiveness failures or 1% in the event of suspensions of
prospectus delivery or if, at any time after six months following the closing of the September 2009 Offering, we cease to be current in our periodic reports with the SEC. The aggregate penalty accrued
with respect to each investor may not exceed 12% of the original purchase price paid by that investor.

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In
December 2009, we entered into an Underwriting Agreement (the "Underwriting Agreement") with Thomas Weisel Partners LLC (the "Underwriter"), pursuant to which we agreed to sell
to the Underwriter 6,400,000 shares of common stock and warrants to purchase up to 4,160,000 shares of Common Stock sold in units, at a price of $1.00 per unit. Each unit consists of one share of
common stock and a warrant (each a "Warrant") to buy 0.65 of a share of common stock. The Warrants will be exercisable for a period of five years, beginning six months after issuance, at an exercise
price of $1.4385 per share. We received approximately $6.4 million in gross proceeds from the offering ("December 2009 Offering"). We paid $0.7 million in underwriting discounts,
commissions and offering expenses and expect to use the remaining net proceeds of $5.7 million for general corporate purposes, which include ongoing research and development activities, funding
marketing initiatives and funding manufacturing expenses associated with the commercial version of our Helicos System. The closing of the transaction occurred on December 21, 2009.

Issuer Purchases of Equity Securities

During the quarter ended June 30, 2010, we purchased 172,267 restricted shares from employees to cover withholding taxes due
from the employees at the time the shares vested. The following table provides information about these purchases of restricted shares for the six months ended June 30, 2010:

Period

Total Number of
Shares Purchased

Average Price
Paid Per Share
($)January 1 to 31, 2010


128,340

$
1.05February 1 to 28, 2010


7,452


1.02March 1 to 31, 2010


133,254


0.79April 1 to 30, 2010


62,674


0.79May 1 to 31, 2010


39,102


0.65June 1 to 30, 2010


70,491


0.44Total


441,313


Upon
the termination of employees during the quarter ended June 30, 2010, 117,726 unvested restricted shares were forfeited. The following table provides information about our
forfeited restricted shares for the six months ended June 30, 2010:

Period

Total Number of
Shares Forfeited

Average Price
Paid Per Share
($)January 1 to 31, 2010


4,861

$
1.10February 1 to 28, 2010


25,070


1.02March 1 to 31, 2010





April 1 to 30, 2010


2,501


0.90May 1 to 31, 2010


110,223


0.63June 1 to 30, 2010


5,002


0.47Total


147,657


Item 3.    Defaults upon Senior Securities

None.

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Item 4.    (Removed and Reserved)

Item 5.    Other Information

None.

Item 6.    Exhibits

The exhibits listed in the Exhibit Index immediately preceding such exhibits are filed as part of this report and such Exhibit Index is
incorporated herein by reference.

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SIGNATURES

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

HELICOS BIOSCIENCES CORPORATIONDated: August 16, 2010

By:

/s/ RONALD A. LOWYName:

Ronald A. LowyTitle:

President and Chief Executive Officer
(Principal Executive Officer)Dated: August 16, 2010

By:

/s/ JEFFREY R. MOOREName:

Jeffrey R. MooreTitle:

Senior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)


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EXHIBIT INDEX

Exhibit No.

Description10.1
*
Sixth Amendment to Lease by and between the Company and RB Kendall Fee, LLC dated June 9, 2010 (incorporated by reference herein to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on
June 14, 2010).31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1

Certifications pursuant to 18 U.S.C. Section 1350


*Previously
filed.


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