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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, 2008ORo

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 is a large accelerated filer, an accelerated filer, a non-accelerated filer or smaller reporting
company. See the definitions of "large accelerated filer," "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, 2008, was 21,119,910 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


3Consolidated Balance Sheets as of December 31, 2007 and June 30, 2008


3Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2008 and the period from May 9, 2003 (date of inception) through June 30, 2008


4Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2008 and the period from May 9, 2003 (date of inception) through June 30, 2008


5Notes to Consolidated Financial Statements


6Item 2.

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


14Item 3.

Quantitative and Qualitative Disclosures about Market Risk


22Item 4.

Controls and Procedures


22Part IIOther InformationItem 1.

Legal Proceedings


23Item 1A.

Risk Factors


23Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds


38Item 3.

Defaults upon Senior Securities


38Item 4.

Submission of Matters to a Vote of Security Holders


39Item 5.

Other Information


39Item 6.

Exhibits


39SIGNATURES


40


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, 2007

June 30, 2008ASSETSCurrent assetsCash

$
52,683

$
24,362Unbilled government grant receivable


117


251Inventory


1,612


6,913Prepaid expenses and other current assets


706


692Total current assets


55,118


32,218Property and equipment, net


3,400


4,858Restricted cash


450


10,450Other assets


241


133Total assets

$
59,209

$
47,659LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesAccounts payable

$
1,691

$
1,344Accrued expenses and other current liabilities


1,993


2,973Current portion of long-term debt


988


7,705Total current liabilities


4,672


12,022Long-term debt, net of current portion


10,786


13,111Other long-term liabilities


312


123Total liabilities


15,770


25,256Commitments and contingencies (Notes 5 and 6)Stockholders' equityPreferred stock: par value $0.001 per share; 5,000,000 shares authorized at December 31, 2007 and June 30, 2008; no shares issued and outstanding at December 31,
 2007 and June 30, 2008





Common stock: par value $0.001 per share; 120,000,000 shares authorized at December 31, 2007 and June 30, 2008; 20,983,638 shares and 20,985,691 shares issued and
outstanding at December 31, 2007 and June 30, 2008, respectively


21


21Additional paid-in capital


137,472


140,121Deficit accumulated during the development stage


(94,054
)

(117,739
)Total stockholders' equity


43,439


22,403Total liabilities and stockholders' equity

$
59,209

$
47,659


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, 20082007

2008

2007

2008Grant revenue

$
143

$
251

$
235

$
364

$
1,105Operating expensesResearch and development


5,298


7,083


10,683


12,788


64,533Selling, general and administrative


3,310


4,830


6,561


11,014


38,830Total operating expenses


8,608


11,913


17,244


23,802


103,363Operating loss


(8,465
)

(11,662
)

(17,009
)

(23,438
)

(102,258
)Interest income


427


145


694


483


3,872Interest expense


(34
)

(370
)

(107
)

(730
)

(1,213
)Net loss


(8,072
)

(11,887
)

(16,422
)

(23,685
)

(99,599
)Beneficial conversion feature related to Series B redeemable convertible preferred stock








(18,140
)




(18,140
)Net loss attributable to common stockholders

$
(8,072
)
$
(11,887
)
$
(34,562
)
$
(23,685
)
$
(117,739
)Net loss attributable to common stockholders per sharebasic and diluted

$
(0.87
)
$
(0.57
)
$
(6.42
)
$
(1.14
)Weighted average number of common shares used in computationbasic and diluted


9,294,298


20,726,679


5,387,214


20,707,628


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)

Six months ended
June 30,Period from
May 9, 2003
(date of inception)
through June 30, 20082007

2008Cash flows from operating activities:Net loss

$
(16,422
)
$
(23,685
)
$
(99,599
)Adjustments to reconcile net loss to cash used in operating activities:Depreciation and amortization


737


1,177


4,380Amortization of lease incentive


(24
)

(74
)

(290
)Common stock issued for licenses








147Stock-based compensation expense


1,535


2,273


7,164Noncash interest expense related to debt and warrants


(16
)

139


287Changes in operating assets and liabilities:Unbilled government grant receivable


16


(134
)

(251
)Inventory





(5,301
)

(6,913
)Prepaid expenses and other current assets


(148
)

14


(692
)Accounts payable


(234
)

(347
)

1,344Accrued expenses and other current liabilities


1,166


1,051


3,087Other long-term liabilities


(19
)

(115
)

249Net cash used in operating activities


(13,409
)

(25,002
)

(91,087
)Cash flows from investing activities:Purchases of property and equipment


(765
)

(2,635
)

(9,238
)Increase in restricted cash





(10,000
)

(10,450
)Purchases of short-term investments








(34,709
)Maturities of short-term investments


795





34,709Net cash provided by (used in) investing activities


30


(12,635
)

(19,688
)Cash flows from financing activities:Proceeds from debt issuances





9,850


22,256Payments on debt


(227
)

(482
)

(1,167
)Payments on debt issuance costs





(20
)

(194
)Proceeds from initial public offering


49,011





49,011Deferred initial public offering costs


(1,664
)




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


19,994





66,405Proceeds from bridge loan








350Proceeds from issuance of common stock








26Proceeds from issuance of restricted common stock


4





339Payments to employees for cancelled restricted common stock


(52
)

(41
)

(98
)Proceeds from exercise of stock options


5


9


47Net cash provided by financing activities


67,071


9,316


135,137Net increase (decrease) in cash and cash equivalents


53,692


(28,321
)

24,362Cash and cash equivalents, beginning of period


10,589


52,683


Cash and cash equivalents, end of period

$
64,281

$
24,362

$
24,362Supplemental disclosure of cash flow informationCash paid during the year for:Interest

$
122

$
499

$
802Noncash financing activities:Issuance of redeemable convertible preferred stock warrants

$


$


$
95Issuance of common stock warrants

$


$
337

$
337Conversion of bridge loan to equity

$


$


$
350Beneficial conversion feature related to Series B redeemable convertible preferred stock

$
18,140

$


$
18,140Conversion of preferred stock to common stock

$
66,755

$


$
66,755Conversion of preferred stock warrants to common stock warrants

$
162

$


$
162


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

5

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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 research, drug discovery and clinical
diagnostics markets. 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 single DNA
copies of RNA. Helicos is a Delaware corporation and was incorporated on May 9, 2003.

Although
the Company shipped its first product in March 2008, it has had limited operations to date and its activities have consisted primarily of conducting research and development,
early-stage manufacturing, initial sales related activities, recruiting personnel and raising capital. Accordingly, the Company is considered to be in the development stage at June 30, 2008, as
defined by the Financial Accounting Standards Board ("FASB") in Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development Stage Enterprises." The
Company's fiscal year ends on December 31. The Company operates as one reportable segment.

Since
inception, the Company has incurred losses and has not generated positive cash flows from operations. The Company expects such losses to continue for at least two years as it
continues to develop and commercialize its products. The Company believes that its existing cash and interest income earned on these balances will be sufficient into the first quarter of 2009. Prior
to the end of the first quarter of 2009, the Company will seek to raise additional funds through public or private equity or debt financings, collaborative or other arrangements with corporate
sources, or through other sources of financing. However, additional financing may not be available on a timely basis on terms acceptable to the Company, or at all. The Company's failure to raise
capital as and when needed would have a negative impact on its financial condition and its ability to pursue its business strategies. If adequate funds are not available, the Company would have to
delay, reduce or eliminate development and commercialization efforts, and may have to obtain funds through arrangements with collaborators or others on terms unfavorable to the Company or pursue
merger or acquisition strategies.

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 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 interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended
December 31, 2007 included in the Company's Form 10-K.

Certain
amounts reported in previous periods have been reclassified to conform to the current presentation.

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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

The
year-end balance sheet data was derived from the audited financial statements but does not include all disclosures required by accounting principles generally accepted in
the United States of America.

2. Summary of Significant Accounting Policies

In the Company's Form 10-K for the fiscal year ended December 31, 2007, our significant accounting policies were identified. Effective January 1, 2008,
the Company made a prospective change to its estimate associated with its useful lives for property and equipment. However, the change did not have a material impact on the Company's financial
position, results of operations or cash flows.

Property and equipment

Property and equipment are recorded at cost. Expenditures for maintenance and repairs are charged to expense while the costs of
significant improvements are capitalized. Depreciation is provided using the straight-line method over the following estimated useful lives: Machinery and equipmentthree to
five years, office furniture and equipmentthree to seven years, leasehold improvementsthe shorter of three years or the life of lease. Upon retirement or sale, the cost of
the assets disposed of and the related accumulated depreciation are eliminated from the consolidated balance sheets and related gains or losses are reflected in the consolidated statements of
operations. There have been no material retirements or sale of assets since May 9, 2003 (date of inception).

Other comprehensive income (loss)

Statement of Financial Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. For each of the three and six months ended June 30, 2007 and 2008, and
the period from May 9, 2003 (date of inception) to June 30, 2008, there was no material difference between the net loss and comprehensive loss.

Recent Accounting Pronouncements

In February 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 159,
"The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115" ("SFAS No. 159"). SFAS No. 159 permits an
entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value
option has been elected will be reported in earnings. The Company did not elect to re-measure any of its existing financial assets or liabilities under the provisions of SFAS
No. 159.

In
November 2007, the Emerging Issues Task Force ("EITF") issued EITF Issue 07-01 "Accounting for Collaborative Arrangements" ("EITF No. 07-01"). EITF
No. 07-01 requires collaborators to present the results of activities for which they act as the principal on a gross basis and report any payments received from (made to) other
collaborators based on other applicable GAAP or, in the absence of other applicable GAAP, based on analogy to authoritative accounting literature or a reasonable, rational, and consistently applied
accounting policy election. Further, EITF No. 07-01 clarified that the

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

2. Summary of Significant Accounting Policies (Continued)

determination
of whether transactions within a collaborative arrangement are part of a vendor-customer (or analogous) relationship subject to Issue 01-9, "Accounting for Consideration
Given by a Vendor to a Customer". EITF No. 07-01 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. The Company is
currently evaluating the impact, if any, that the adoption of EITF No. 07-01 will have on its financial position, results of operations or cash flows.

Effective
January 1, 2008, the Company implemented Statement of Financial Accounting Standards No. 157, "Fair Value Measurement" ("SFAS No. 157") for its financial
assets and liabilities that are
re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least
annually. In accordance with the provisions of FSP No. FAS 157-2, "Effective Date of FASB Statement No. 157", the Company has elected to defer implementation of SFAS
No. 157 as it relates to the Company's non-financial assets and non-financial liabilities that are recognized and disclosed at fair value in the financial statements on
a nonrecurring basis until January 1, 2009. The Company is currently evaluating the impact, if any, that FSP No. FAS 157-2 will have on its non-financial assets
and liabilities. The adoption of SFAS No. 157 to the Company's financial assets and liabilities and non-financial assets and liabilities that are re-measured and
reported at fair value at least annually did not have an impact on the Company's financial results in any period.

In
April 2008, the FASB issued EITF 07-05, "Determining whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock",
("EITF 07-05"). EITF 07-05 provides guidance on determining what types of instruments or embedded features in an instrument held by a reporting entity can be
considered indexed to its own stock for the purpose of evaluating the first criteria of the scope exception in paragraph 11(a) of SFAS 133. EITF 07-05 is effective for
financial statements issued for fiscal years beginning after December 15, 2008 and early application is not permitted. Management is evaluating what effect, if any,
EITF 07-05 might have on the Company's financial position and operating results.

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,
2007

June 30,
2008Raw materials

$
799

$
2,596Work in process


813


3,202Finished goods





1,115Inventory

$
1,612

$
6,913


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, redeemable convertible preferred stock

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

4. Net Loss per Share (Continued)

and
warrants have not been included in the computation of diluted net loss per share for any of the 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, 2007 and 2008, 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 at June 30, 2007 and 2008 consist
of the following:

June 30,2007

2008Stock options


1,723,929


2,456,011Unvested restricted stock


362,409


250,485Warrants


18,040


110,000


5. Commitments and Contingencies

License agreements and patents

In November 2003, the Company entered into a license agreement with California Institute of Technology (the "Caltech License
Agreement") that granted the Company a worldwide, exclusive, royalty-bearing license, with the right to grant sublicenses, under specified patents and patent applications, and a worldwide,
non-exclusive royalty bearing license, with the right to grant sublicenses, under specified technology outside the scope of the licensed patents. In connection with the Caltech License
Agreement, the Company issued 46,514 shares of common stock, and recorded a charge of $20,000. In addition, the Company pays an annual license fee of $10,000 per year. The license fee payments are
creditable against royalties based upon sales of products covered by patents licensed under the agreement. Royalties are calculated based on a percentage of defined net
sales. The Company is also obligated to pay California Institute of Technology a portion of specified license and sublicense income, proceeds from sales of specified intellectual property and
specified service revenue amounts that it receives based on licenses and sublicenses that the Company grants, sales of intellectual property and services that are provided to third parties. The
royalty obligation with respect to any licensed product extends until the later of the expiration of the last-to-expire of the licensed patents covering the licensed product
and three years after the first commercial sale of the licensed product in any country for non-patented technology covered under the agreement. Through June 30, 2008, no royalty
payments have been made. In March 2007, the Company amended the Caltech License Agreement to provide rights under an additional patent application under the terms of the existing license in exchange
for a one-time payment of $50,000 to the California Institute of Technology. All amounts paid to date and the value of the common stock issued have been expensed to research and
development expense as technological feasibility had not been established and the technology had no alternative future use.

In
June 2004, the Company entered into a license agreement with Roche Diagnostics (the "Roche License Agreement") that granted the Company a worldwide, semi-exclusive
royalty-bearing license, with the right to grant sublicenses under a patent relating to sequencing methods. In connection with the Roche License Agreement, the Company paid an upfront fee of
175,000 Euros and committed to pay an annual license fee ranging from 10,000 to 40,000 Euros. The Company has an option to convert

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

5. Commitments and Contingencies (Continued)

the
license to non-exclusive beginning in 2008, in which case the annual license fees would be reduced to 10,000 Euros beginning in 2008. The Company has the right to terminate the
Roche License Agreement at any time for convenience upon 90 days prior written notice to Roche Diagnostics. Both the Company and Roche Diagnostics have the right to terminate the Roche License
Agreement upon breach by the other party, subject to notice and an opportunity to cure. The Roche License Agreement also terminates upon the occurrence of specified bankruptcy events. As part of the
Roche License Agreement, the Company agrees to pay royalties based on a percentage of defined net sales. The Company also agrees to pay a portion of specified sublicense income amounts that are
received based on sublicenses that the Company grants to third parties. The Company's royalty obligation, if any, extends until the expiration of the last-to-expire of the
licensed patents. Through June 30, 2008, no royalty payments have been made. All amounts paid to date have been expensed to research and development expense as technological feasibility had not
established and the technology had no alternative future use.

In
March 2005, the Company entered into a license agreement with Arizona Technology Enterprises (the "AZTE License Agreement") that granted the Company a worldwide, exclusive,
irrevocable, royalty-bearing license, with the right to grant sublicenses, under specified patents and patent applications exclusively licensed by AZTE from Arizona State University and the University
of Alberta. In connection with the AZTE License Agreement, the Company paid an upfront fee of $350,000, committed to an annual license fee of $50,000, which will increase to $100,000 upon the
successful issuance of a U.S. patent, committed to pay a three-year maintenance fee of $50,000, payable in equal annual installments beginning in March 2006, and issued 88,888 shares of
restricted common stock, which vest in two equal installments upon the achievement of separate milestones. The Company is obligated to use reasonable commercial efforts to develop, manufacture and
commercialize
licensed products. In addition, if the Company fails to meet specified development and commercialization deadlines, the AZTE License Agreement converts from exclusive to non-exclusive. The
AZTE License Agreement will remain in force until terminated. The Company has the right to terminate the AZTE License Agreement at any time for convenience upon 60 days prior written notice to
Arizona Technology Enterprises. Both the Company and Arizona Technology Enterprises have the right to terminate the agreement upon breach by the other party, subject to notice and an opportunity to
cure. The AZTE License Agreement also terminates upon the occurrence of specified bankruptcy events.

As
part of the AZTE License Agreement, the Company agrees to pay royalties based on a percentage of defined net sales. The Company also agrees to pay a portion of specified sublicense
income amounts that are received based on sublicenses granted to third parties. The Company's royalty obligation, if any, extends until the expiration of the last-to-expire of
the licensed patents. Through June 30, 2008, no royalty payments have been made. All amounts paid to date have been expensed to research and development expense as technological feasibility had
not been established and the technology had no alternative future use. In May 2006, in accordance with the license agreement, due to the successful issuance of a U.S. patent, the committed annual
license fee increased from $50,000 to $100,000 and 44,444 shares of the restricted common stock vested. The vesting of 44,444 shares of restricted common stock resulted in a charge to research and
development expense of $127,000 based on the fair value of the Company's common stock at the time the milestone was achieved. The remaining 44,444 shares of restricted common stock will vest
immediately upon the successful issuance of a second U.S. patent.

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

5. Commitments and Contingencies (Continued)

In
June 2006, the Company entered into an agreement to acquire certain U.S. and foreign patents and patent applications. In connection with the agreement, the Company paid an upfront fee
of $350,000, committed to a one-time payment of $250,000 once technological feasibility has been established, and committed to a one-time payment of $400,000 upon the first
commercial sale of product. As part of the agreement, the Company agrees to pay royalties based on a percentage of defined net sales. Through June 30, 2008, no royalty payments have been made.
All amounts paid to date have been expensed to research and development expense as technological feasibility had not established and the technology had no alternative future use.

In
April 2007, the Company entered into an agreement with PerkinElmer LAS, Inc. ("PerkinElmer"), in which PerkinElmer granted the Company a worldwide, non-exclusive,
non-transferable, non-sublicensable, royalty bearing license under specified patents. The license from PerkinElmer grants the Company rights under certain patents to produce
and commercialize certain of the reagents used in some applications on the HeliScope system, which contain chemicals purchased from PerkinElmer. In exchange for rights licensed from PerkinElmer, the
Company is obligated to pay PerkinElmer a portion of the Company's net revenue from the sale of reagents that contain chemicals covered by the patents licensed under the PerkinElmer agreement. The
Company has the right to terminate the agreement at any time upon 90 days written
notice to PerkinElmer. Each party has the right to terminate the agreement upon breach by the other party subject to notice and an opportunity to cure. The agreement also terminates upon the
occurrence of specified bankruptcy events. PerkinElmer has the sole right under the agreement to enforce the licensed patents.

6. Long-Term Debt

Loan and security agreement

In December 2007, the Company entered into a loan and security agreement with two lenders including GE Capital Corporation, which is
serving as agent. The loan agreement provided that the Company 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 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, the Company entered into an amendment to the loan and security agreement with two lenders including GE Capital Corporation, which is serving as agent. 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, contains affirmative and negative covenants to which the Company and its subsidiaries must adhere. Pursuant to the amendment, the Company is required to maintain, at all times,
unrestricted cash in its bank account equal to at least $10.0 million. The proceeds of the loan agreement are collateralized by essentially all of the Company's 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. As of June 30, 2008, advances on

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

6. Long-Term Debt (Continued)

the
loan agreement, as amended, were $20.0 million at an interest rate of 9.95% for the initial term loan and 11.5% for the subsequent term loan.

As
of June 30, 2008, loan payable payments are due as follows (in thousands):

2008

$
4,7142009


9,4212010


8,4922011


1,977Thereafter


Total future minimum payments

$
24,604Less: amount representing interest


(3,298
)Less: debt discount


(610
)Add: amortization of debt discount


120Carrying value of debt

$
20,816Less: current portion


7,705Long-term obligations

$
13,111


Common stock warrants

In connection with the execution of the amendment to the loan and security agreement with two lenders including GE Capital Corporation,
which is serving as agent, the Company 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.

7. Stock-Based Compensation

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

Three months ended

Six months ended($ in thousands)

June 30, 2007

June 30, 2008

June 30, 2007

June 30, 2008Research and development

$
188

$
340

$
472

$
652Selling, general and administrative


632


700


1,063


1,621Total stock-based compensation expense

$
820

$
1,040

$
1,535

$
2,273


12

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

7. Stock-Based Compensation (Continued)

During
the six months ended June 30, 2008, the Company granted 148,333 stock options at an exercise price of $12.36 per share, 50,600 stock options at an exercise price of $6.15
per share, 23,812 stock options at an exercise price of $6.99 per share, 151,850 stock options at an exercise price of $5.93 per share and 44,718 stock options at an exercise price of $4.93 per share.

For
the six months ended June 30, 2007 and 2008, the fair value of stock options was estimated on the date of grant using a Black-Scholes option valuation model with the following
assumptions:

Six months endedJune 30, 2007

June 30, 2008Expected volatility


76.3
%

65.6
%Expected option life


6.5 years


6 yearsWeighted average risk-free interest rate


4.9
%

3.0
%Expected annual dividend yield


none


none


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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

We are a life sciences company focused on innovative genetic analysis technologies for the research, drug discovery and clinical
diagnostics markets. We have developed our True Single Molecule Sequencing (tSMS) technology to enable the rapid analysis of large quantities of genetic material by directly sequencing
single molecules of DNA or single DNA copies of RNA. By enabling direct sequencing of single DNA molecules, we believe our technology represents a fundamental breakthrough in genetic analysis.

Our
Helicos Genetic Analysis System is comprised of an instrument, its associated reagents and disposable supplies. We shipped our first Helicos System on March 5,
2008 following assembly and completion of our initial verification and validation process. As a result, we believe that we have incurred the substantial majority of the costs related to the
development of the initial version of our Helicos System. In anticipation of future orders and shipments, we are assembling and are testing multiple production units of our Helicos System, and are
purchasing the subassemblies and components for future systems. In addition, we are taking other steps to scale the commercial manufacturing process of the system, including improvements to our
manufacturing documentation and quality assurance and quality control procedures. We also are manufacturing the proprietary reagents and disposable supplies that are part of the system.

Because
of the dynamic nature of the market for genetic analysis instruments, we expect to expend significant amounts of research and development expense on an ongoing basis to improve
the performance of our HeliScope Sequencer and tSMS technology. The goals of these performance improvements are to increase the throughput of the HeliScope Sequencer and to achieve a
further approximate 100-fold reduction in the cost per base of sequencing. We also plan to explore other markets for the Helicos System in the longer term, such as diagnostics.

Although
we shipped our first Helicos System on March 5, 2008 and plan to ship additional Helicos Systems during fiscal 2008, the initial shipments of this product will be subject
to various customer evaluation periods with acceptance criteria, and we expect the customer evaluation period to extend beyond the fiscal quarters in which commercial units are shipped. While we
continue to secure orders for the Helicos instrument system, we do not expect to recognize any revenue from product shipments until the second half of 2008 or later, and future revenues from sales of
proprietary reagents and disposable supplies will depend on the timing of system placements, customers' use of the system and our ability to maintain our proprietary position on the reagents and
disposable supplies. Because we have limited experience in the commercialization of our Helicos System, we cannot predict the

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percentage
of our revenues that we will derive from sales of proprietary reagents and disposable supplies. However, over time we would expect the sales of the reagents and disposable supplies to
increase as our installed base of instruments grows and usage of these instruments increases.

We
were incorporated in May 2003, and our activities to date have consisted primarily of conducting research and development. Accordingly, we are considered to be in the development
stage at June 30, 2008, as defined by the Financial Accounting Standards Board ("FASB") in Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by
Development Stage Enterprises." Our fiscal year ends on December 31, and we operate as one reportable segment.

We
expect to continue to incur operating losses for at least the next two years, and will need additional financing to support our activities. If required, we will seek to fund our
operations through public or private equity or debt financings or other sources, such as collaborations. Adequate additional funding may not be available to us on acceptable terms, or at all. Our
failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue business strategies. If adequate funds are not available to us, we may be
required to delay, reduce or eliminate research and development programs, reduce or eliminate commercialization efforts, obtain funds through arrangements with collaborators or others on terms
unfavorable to us or pursue merger or acquisition strategies.

In
May 2007, we completed an initial public offering ("IPO") of our common stock in which we sold and issued 5.4 million shares of our common stock at an issue price of $9.00 per
share. We raised a total of $48.6 million in gross proceeds from the IPO, or $43.9 million in net proceeds after deducting underwriting discounts and commissions of $2.9 million
and other offering costs of $1.8 million. In June 2007, we sold an additional 397,000 shares of our common stock at $9.00 per share resulting in net proceeds of $3.3 million after
deducting underwriting discounts and commissions of $250,000, pursuant to the over-allotment option granted by us to the underwriters of our IPO. Upon the closing of our IPO, all
outstanding shares of our preferred stock were converted into common stock.

Financial Overview

Grant revenue

In September 2006, we were awarded a grant from the National Human Genome Research Institute, a branch of the National Institutes of
Health, pursuant to which we are eligible to receive reimbursement of our research expenses of up to $2.0 million through August 2009. We recognized revenue during the three months ended
June 30, 2007 and 2008 of $143,000 and $251,000, respectively, in connection with this award. During the six months ended June 30, 2007 and 2008, we recognized revenue of $235,000
and $364,000, respectively, in connection with this award. We will continue to recognize revenue under this grant as the related expenses are incurred.

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
2007, we were focused on preparing for the launch of the initial version of the Helicos Genetic Analysis System. Substantially all research and development expenses
since our inception have been in connection with this project and we believe that we have incurred the substantial majority of the development costs associated with the commercial launch of the first
generation of the Helicos System prior to our first shipment on March 5, 2008. However, additional costs will be incurred to both

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maintain
and enhance the initial version of the Helicos System in addition to development of new and different genetic analysis assays which will extend the capability of the initial version.

Research
and development expenses for the three months ended June 30, 2007 and 2008 were $5.3 million and $7.1 million, respectively. Research and development
expenses for the six months ended June 30, 2007 and 2008 were $10.7 million and $12.8 million, respectively. From 2007 to 2008, expenses increased as our research
progressed and we built infrastructure and hired additional employees with the requisite expertise to execute the next steps in the development process. Research and development expenses also
increased during the three and six months ended June 30, 2008 by $2.8 million for labor and overhead costs associated with the under-utilization of the manufacturing
facility.

In
2007, in addition to our ongoing research and development efforts, we 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.

We
believe that the Helicos System can potentially access a wide range of genetic analysis tests useful to the basic, pharmaceutical, and biomedical research and diagnostic markets. In
addition, we have envisioned a series of performance enhancements to the chemistries and consumables used on the initial Helicos System which potentially serve to greatly enhance the sequencing
throughput. Each of these research and development projects is dependent upon achieving technical objectives, which are inherently uncertain. As a result of these uncertainties, we are unable to
predict to what extent we will receive additional cash inflows from the commercialization and sale of these future tests or from the future enhanced throughput. Our inability to complete these new
research and development projects in a timely manner would significantly increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to seek
additional, external sources of financing from time to time in order to continue with our strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would
jeopardize the future success of our business.

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 and facility costs not otherwise included in research and development expenses.

Selling,
general and administrative expenses for the three months ended June 30, 2007 and 2008 were $3.3 million and $4.8 million, respectively. Selling, general and
administrative expenses for the six months ended June 30, 2007 and 2008 were $6.6 million and $11.0 million, respectively. We expect that these expenses will increase as we
hire our specialized sales, marketing and service personnel. We also anticipate that we will incur additional expenses for the costs associated with Sarbanes-Oxley compliance, continued
ERP system enhancements, and investor relations programs.

Overview of Results of Operations

Three and six months ended June 30, 2007 compared to three and six months ended June 30, 2008

Grant revenue.We recognized $143,000 and $235,000 of grant revenue during the three and six months ended June 30, 2007, respectively, and $251,000
and $364,000 of grant revenue during the three and six months ended June 30, 2008, respectively. Grant revenue recognized during the three and six months ended June 30,
2007 and 2008 related to the reimbursement of expenses in connection with our government research grant.

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Research and development expenses.Research and development expenses during the three and six months ended June 30, 2007 and 2008 were as follows:

Three months
ended
June 30,





Six months
ended
June 30,($ in thousands)

2007

2008

Change

2007

2008

ChangeResearch and development

$
5,298

$
7,083

$
1,785


34
%
$
10,683

$
12,788

$
2,105


20
%


Research
and development expenses increased by $1.8 million from the three months ended June 30, 2007 to the three months ended June 30, 2008. The increase was
primarily due to the $2.8 million charge for labor and overhead costs associated with the under-utilization of the manufacturing facility. Contributing to the increase was the
hiring of additional personnel which led to a $198,000 increase in our salary and benefit expenses and stock based compensation expense. These increases were offset by a $1.3 million decrease
in product development costs, which included lab expenses, materials, supplies, temporary help and prototype expenses. Our product development costs decreased as we moved toward manufacturing and
production activities.

In
comparing the six months ended June 30, 2007 to the six months ended June 30, 2008, research and development expenses increased $2.1 million. The
increase was again primarily due to the $2.8 million charge for labor and overhead costs associated with the under-utilization of the manufacturing facility. Contributing to the
increase was the hiring of additional personnel which led to a $210,000 increase in our salary and benefit expenses and stock based compensation expense. Increased headcount led to additional space
requirements which raised our occupancy costs by $126,000. These increases were offset by a $1.3 million decrease in product development costs, which included lab expenses, materials, supplies,
temporary help and prototype expenses. Our product development costs decreased as we moved toward manufacturing and production activities.

We
expect our research and development expenses to continue to increase to support our start-up manufacturing efforts this year and as we continue to invest in future
versions of our system.

Selling, general and administrative expenses.Selling, general and administrative expenses during the three and six months ended June 30, 2007 and
2008 were as follows:

Three months
ended
June 30,





Six months
ended
June 30,($ in thousands)

2007

2008

Change

2007

2008

ChangeSelling, general and administrative

$
3,310

$
4,830

$
1,520


46
%
$
6,561

$
11,014

$
4,453


68
%


The
increase in selling, general and administrative expenses of $1.5 million from the three months ended June 30, 2007 to the three months ended June 30, 2008 was
primarily due to hiring additional personnel which lead to an increase in our salary and benefit expenses and stock based compensation expense of $602,000. The increase also included an additional
$334,000 related to public company activities, including investor relations expenses, business insurance and consulting fees. Increased headcount also led to additional space requirements which raised
our occupancy costs by $258,000.

Selling,
general and administrative expenses increased by $4.5 million from the six months ended June 30, 2007 to the six months ended June 30, 2008.
The increase was primarily due to the hiring of additional personnel which led to a $2.2 million increase in our salary and benefit expenses and stock based compensation expense. The increase
also included an additional $640,000 related to public company activities, including investor relations expenses, business insurance and consulting fees. Patent expense also increased by $559,000 from
the six months ended June 30, 2007 to the six months ended June 30, 2008. In addition, increased headcount led to additional space requirements which raised our occupancy
costs by $310,000.

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We
expect our selling, general and administrative expenses to increase as we expand our sales and marketing functions, and incur additional administrative costs associated with
Sarbanes-Oxley compliance, continued ERP system enhancements and investor relations programs.

Interest income.Interest income for the three and six months ended June 30, 2007 and 2008 was as follows:

Three months
ended
June 30,





Six months
ended
June 30,($ in thousands)

2007

2008

Change

2007

2008

ChangeInterest income

$
427

$
145

$
(282
)

(66
)%
$
694

$
483

$
(211
)

(30
)%


The
decrease in interest income from the three and six months ended June 30, 2007 compared to the three and six months ended June 30, 2008 was due primarily
to higher cash balances during the three and six months ended June 30, 2007 in connection with the receipt of proceeds from the IPO. In addition, proceeds received from the
$10.0 million subsequent term loan with GE Capital were not received until the end of the June 2008; therefore, interest income was not significantly impacted during the three and
six months ended June 30, 2008. Decreased interest rates also contributed to the decline in interest earned during the three and six months ended June 30, 2007 compared to
the three and six months ended June 30, 2008.

Interest expense.Interest expense for the three and six months ended June 30, 2007 and 2008 was as follows:

Three months
ended
June 30,





Six months
ended
June 30,($ in thousands)

2007

2008

Change

2007

2008

ChangeInterest expense

$
34

$
370

$
336


988
%
$
107

$
730

$
623


582
%


The
increase in interest expense from the three and six months ended June 30, 2007 compared to the three and six months ended June 30, 2008 is attributable to
the $10.0 million term loan entered into on December 31, 2007.

Liquidity and Capital Resources

We have incurred losses since our inception in May 2003 and, as of June 30, 2008 we had an accumulated deficit of
$117.7 million. We have financed our operations to date principally through the sale of preferred stock and common stock, including our IPO, and to a lesser extent debt financing and interest
earned on investments. Through June 30, 2008, we have received net proceeds of $66.8 million from the issuance of preferred stock, $47.5 million through the issuance of common
stock, including our IPO, $19.6 million in debt financing for working capital and $2.5 million in debt financing to finance equipment purchases. Working capital as of December 31,
2007 was $50.4 million, consisting of $55.1 million in current assets and $4.7 million in current liabilities. Working capital as of June 30, 2008 was $20.2 million,
consisting of $32.2 million in current assets and $12.0 million in current liabilities. Our cash is held in interest-bearing bank accounts. Cash in excess of immediate
requirements is invested in accordance with our investment policy, primarily to achieve liquidity and capital preservation.

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The
following table summarizes our net increase (decrease) in cash and cash equivalents for the six months ended June 30, 2007 and 2008:

Six months ended($ in thousands)

June 30, 2007

June 30, 2008Net cash provided by (used in):Operating activities

$
(13,409
)
$
(25,002
)Investing activities


30


(12,635
)Financing activities


67,071


9,316Net increase (decrease) in cash and cash equivalents

$
53,692

$
(28,321
)


Net
cash used in operating activities was $13.4 million for the six months ended June 30, 2007 compared to $25.0 million for the six months ended
June 30, 2008. The $11.6 million increase was primarily due to a $7.3 million increase in the net loss and a $5.3 million increase in the change in inventory, partially
offset by an increase in non-cash stock-based compensation expense of $738,000 and an increase in non-cash depreciation and amortization expense of $440,000.

Net
cash provided by investing activities was $30,000 for the six months ended June 30, 2007 compared to net cash used in investing activities of $12.6 million for
the six months ended June 30, 2008. The $12.7 million decrease was primarily due to a $10.0 million increase in restricted cash and a $1.9 million increase in the
cash used for purchases of property and equipment, as well as a $795,000 decrease in cash provided by maturities of short-term investments.

Net
cash provided by financing activities was $67.1 million for the six months ended June 30, 2007 compared $9.3 million for the six months ended
June 30, 2008. The $57.8 million decrease was primarily due to the receipt of $49.0 million of cash proceeds from the initial public offering and the $20.0 million of cash
proceeds from the issuance of redeemable convertible preferred stock, net of issuance costs during the six months ended June 30, 2007. The decrease was slightly offset with the receipt
of $9.8 million of cash proceeds in debt financing, net of issuance costs during the six months ended June 30, 2008.

Operating capital and capital expenditure requirements

To date, we have shipped one HeliScope system and have not achieved profitability. We anticipate that we will continue to incur
substantial net losses for at least two years as we continue our efforts in commercializing the HeliScope system and develop the corporate infrastructure required to manufacture and sell our products.

While
we continue to secure orders for the Helicos instrument system, we do not expect to generate product revenue until the second half of 2008 or later. We believe that our existing
cash and interest income we earn on these balances will be sufficient into the first quarter of 2009. It is difficult to predict the actual rate of product sales as a result of the complex nature of
the HeliScope system and its expected long sales cycle. Prior to the end of the first quarter of 2009, we will seek to sell additional equity or debt securities or enter into another credit
facility. The sale of additional equity and debt securities may result in dilution to our stockholders. If we raise additional funds through the issuance of debt securities, these securities would
have rights senior to those of our common stock and could contain covenants that would restrict our operations. 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. If adequate funds are not available, we would have to delay, reduce or eliminate development and commercialization
efforts, curtail our future spending, and may have to obtain funds through arrangements with collaborators or others on terms unfavorable to us or pursue merger or acquisition strategies.

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Our
forecast of the period of time through which our financial resources will be adequate to support our operations, the costs to complete development of products and the cost to
commercialize our future products 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 this report. 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 the development of our product, we are unable to estimate the exact amounts of capital outlays and operating expenditures
necessary to 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:



Working
capital as of December 31, 2007 was $50.4 million, consisting of $55.1 million in current assets and $4.7 million in current liabilities. Working
capital as of June 30, 2008 was $20.2 million, consisting of $32.2 million in current assets and $12.0 million in current liabilities.

20

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Table of Contents

Contractual obligations

The following table summarizes our outstanding obligations as of June 30, 2008 and the effect those obligations are expected to
have on our liquidity and cash flows in future periods:



($ in thousands)

Total

Less than
1 year

1 - 3 years

3 - 5 years

More than
5 yearsOperating Leases

$
2,239

$
1,600

$
639

$


$
Long-term debt (including interest)


25,405


9,522


15,883





License agreements(1)


1,780


181


362


347


890$
29,424

$
11,303

$
16,884

$
347

$
890


---

The
table above does not include possible royalties payable under our license agreements. Our commitments for operating leases relate to the lease for our corporate headquarters in
Cambridge, Massachusetts.

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.

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 provides 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 end of the
advance period was 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 are 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. As of June 30, 2008, advances on the credit facility were $2.5 million at a
weighted-average interest rate of 10.1%.

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 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, which is serving as agent. 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, contains affirmative and

21

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Table of Contents

negative
covenants to which we and our subsidiaries must adhere. Pursuant to the amendment, we are required to maintain, at all times, unrestricted cash in our bank account equal to at least
$10.0 million. The proceeds of the loan agreement are 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. As of June 30, 2008, advances on the loan agreement, as amended, were $20.0 million at an
interest rate of 9.95% for the initial term loan and 11.5% for the subsequent term loan.

Off-balance sheet arrangements

During the six months ended June 30, 2007 and 2008, 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, 2007, our most critical accounting policies and
estimates upon which our financial status depends were identified as those relating to stock-based compensation; revenue recognition; inventory; allowance for doubtful accounts; net
operating losses and tax credit carryforwards; and impairment of long-lived assets. We reviewed our policies and determined that those policies remain our most critical accounting policies
for the six months ended June 30, 2008. We did not make any changes in those policies during the six months ended June 30, 2008.

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. 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 chief executive officer and chief financial officer, has evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the
end of the period covered by this report.
Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective in
ensuring that information required to be disclosed by Helicos in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, on a timely basis, and is
accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

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

Not applicable.

Item 1A.    Risk Factors

The following important factors could cause our actual business and financial results 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, 2007. The risk factors set forth below with an
asterisk (*) next to the title are new risk factors or risk factors containing changes, including any material changes, from the risk factors previously disclosed in Item 1A of our Annual
Report on Form 10-K for the year ended December 31, 2007, as filed with the Securities and Exchange Commission.

RISKS RELATED TO OUR BUSINESS

*Although we have shipped one Helicos Genetic Analysis System to our first customer, we may not be able to successfully scale the manufacturing process
necessary to build and test multiple Helicos Genetic Analysis Systems on a full commercial basis, in which event our business would be materially harmed.

To ship multiple Helicos Genetic Analysis Systems on a full production scale, we need to continue the testing and performance
validation of the system. In order to sustain our commercial launch involving multiple shipments of the Helicos Systems, we need to take other steps to scale the manufacturing process of the system,
including improvements to our manufacturing yields and cycle times, manufacturing documentation and quality assurance and quality control procedures. We also need to scale our manufacturing process of
the proprietary reagents and disposable supplies that are part of the system. If we are unable to successfully complete these tasks, we may not be able to ship multiple Helicos Systems on a full
production scale which would materially harm our business. In addition, although we believe that we have already incurred the substantial majority of the costs related to the development of the
initial version of our Helicos System, if we experience unanticipated problems with our initial system placements, these costs could substantially increase, which would materially harm our business.

*We have a history of operating losses, expect to continue to incur substantial losses, might never achieve or maintain profitability and might have a going concern issue in
the future.

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 $34.6 million and $23.7 million in the six months ended June 30, 2007 and 2008, respectively. As
of June 30, 2008, we had an accumulated deficit of $117.7 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 six months ended June 30, 2007, we used cash in operating activities of $13.4 million and had capital expenditures totaling $765,000.
In the six months ended June 30, 2008, we used cash in operating activities of $25.0 million and had capital expenditures totaling $2.6 million. We expect our cash expenditures to
decrease slightly during the second half of 2008. In addition, if our capital resources are not sufficient to fund our planned operations for a twelve month period at the time the audit for our 2008
financial results is complete, our independent registered public accounting firm will likely include in its audit report, to be included in our annual report on Form 10-K, an explanatory paragraph
regarding substantial doubt relating to our ability to continue as a going concern.

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Accordingly,
we will need to generate significant revenue to achieve profitability. Because our products will be subject to acceptance testing by our customers we do not expect to have
any recognizable revenue from the sales of our instruments until the second half of 2008 or later. As of August 14, 2008, we have shipped one Helicos System. Moreover, even after we begin
selling our products on a commercial scale, we expect our losses to continue for at least the next two years as a result of ongoing research and development expenses, as well as increased
manufacturing, sales and marketing expenses. 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 product development and commercialization efforts, 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.

*If our technology fails to achieve and sustain sufficient market acceptance, we will not generate expected revenue.

Our success depends, in part, on our ability to develop products that displace current technology, as well as expand the market for
genetic analysis to include new applications that are not practical with current technology. To accomplish this, we must develop and successfully commercialize our Helicos System for use in a variety
of life science applications. In particular, while our early market focus is on DNA sequencing and gene expression applications, there can be no assurances that we will be successful at inducing
potential customers to purchase our Helicos System. Furthermore, we cannot guarantee that the design of the Helicos System, including the initial specifications and any enhancements or improvements to
those specifications, will be satisfactory to potential customers in the markets we seek to reach. These markets are new and emerging and there can be no assurances that they will develop as quickly
as we expect or that they will reach their full potential. As a result, we may be required to refocus our marketing efforts from time to time and we may have to make changes to the specifications of
our system to enhance our ability to more quickly enter particular markets. There is no guarantee, even if our technology is able to successfully reduce the cost and improve the performance of genetic
analysis relative to existing products, that we will be able to induce customers with installed bases of conventional genetic analysis instruments to purchase our systems or to expand the market for
genetic analysis to include new applications. Even if we are able to successfully implement our technology, we may fail to achieve or sustain market acceptance of our Helicos System by academic and
government research laboratories and pharmaceutical, biotechnology and agriculture companies, among others, across the full range of our intended life science applications. Any such failure would
materially harm our future sales and revenue. The price of the HeliScope instrument is significantly greater than the instrument cost of current market-leading sequencers,
which may adversely affect our ability to penetrate or grow the market for genetic analysis. In addition, if our products are only utilized as a replacement for existing DNA sequencing technology, we
may face a much smaller market than we currently anticipate.

We
are aware of other companies that have developed, or are developing, emerging sequencing technologies. Even if our product demonstrates dramatic cost and throughput improvements over
current market-leading technologies, we may fail to achieve market acceptance due to adoption of those emerging technologies by our potential customers, thereby reducing our market
opportunity.

We have limited experience in selling and marketing and, as a result, may be unable to successfully commercialize our Helicos Genetic Analysis System.

We have limited sales experience and limited marketing experience. Our ability to achieve profitability depends on attracting customers
for our Helicos System. Although members of our sales and marketing team have considerable industry experience and have engaged in pre-launch marketing

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activities
for our Helicos System, we must expand our sales, marketing, distribution and customer support capabilities with the appropriate technical expertise to effectively market our system. To
successfully perform sales, marketing, distribution and customer support functions ourselves, we will face a number of risks, including:



In
addition to the recruitment of our specialized sales, marketing and service force, 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.

If we are unable to timely establish manufacturing capacity by ourselves or with partners, commercialization of our products would be delayed, which could result in lost
revenues and harm our business.

To commercialize our Helicos Genetic Analysis System, we need to either build internal manufacturing capacity or contract
with one or more manufacturing partners, or both. We currently intend to manufacture our products using a combination of internal manufacturing resources and outsourced components and subassemblies.
We have recently begun to manufacture our instruments, reagents and disposable supplies on a commercial scale. We may encounter difficulties in manufacturing our products and, due to the complexity of
our technology and our manufacturing process, we cannot be sure we fully understand all of the factors that affect our manufacturing processes or product performance. There is no assurance that we
will be able to continue to build manufacturing capacity internally or find one or more suitable manufacturing partners, or both, to meet the volume and quality requirements necessary to be successful
in the market. Manufacturing and product quality issues may arise as we increase production rates of our Helicos System and associated proprietary reagents and disposable supplies. If our products do
not consistently meet our customers' performance expectations, we may be unable to generate sufficient revenues to become profitable. Any delay in establishing or inability to expand our manufacturing
capacity could delay our ability to develop or sell our products, which could result in lost revenue and seriously harm our business, financial condition and results of operations.

Future product sales will depend, in part, on research and development spending levels of academic, clinical and governmental research institutions and pharmaceutical,
biotechnology and agriculture companies, and any reduction in such spending levels could limit our ability to sell our product.

We expect that our revenues in the foreseeable future will be derived primarily from sales of instruments, reagents and disposable
supplies to a relatively small number of academic, clinical, governmental and other research institutions and pharmaceutical, biotechnology and agriculture companies that conduct
large-scale genetic analyses. Our success will depend upon their demand for and use of our products. Accordingly, the spending policies of these customers could have a significant effect
on the demand for our technology. These policies are based on a wide variety of factors, including the resources available to make purchases, the spending priorities among various types of

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equipment,
policies regarding spending during recessionary periods and changes in the political climate. In addition, academic, governmental and other research institutions that fund research and
development activities may be subject to stringent budgetary constraints that could result in spending reductions, reduced allocations or budget cutbacks, which could jeopardize the ability of these
customers to purchase our system. Our operating results may fluctuate substantially due to reductions and delays in research and development expenditures by these customers. For example, reductions in
capital expenditures by these customers may result in lower than expected instrument sales and similarly, reductions in operating expenditures by these customers could result in lower than expected
sales of reagents and disposable supplies. These reductions and delays may result from factors that are not within our control, such as:



Any
decrease in our customers' budgets or expenditures or in the size, scope or frequency of capital or operating expenditures as a result of the foregoing or other factors could
materially adversely affect our operations or financial condition.

If the suppliers we rely on fail to supply the materials we use in the manufacturing of our products, we would be unable to satisfy product demand, which would negatively
affect our business.

Some components used in the manufacturing of our Helicos Genetic Analysis System and certain raw materials used in the
manufacturing of our reagents and disposable supplies are available from only a few suppliers. We acquire some of these components and raw materials on a purchase-order basis, which means
that the supplier is not required to supply us with specified quantities of these components or raw materials over a certain period of time or to set aside part of its inventory for our anticipated
requirements. If supplies from these vendors were delayed or interrupted for any reason, we may not be able to manufacture and sell our Helicos System and associated reagents and disposable supplies
in a timely fashion or in sufficient quantities or under acceptable terms. Additionally, for certain of these components and raw materials, we currently purchase from sole-source suppliers
and have not yet arranged for alternative suppliers. It might be difficult to find alternative suppliers in a timely manner and on terms acceptable to us. Consequently, as we begin our
commercialization efforts, if we do not forecast properly, or if our suppliers are unable or unwilling to supply us in sufficient quantities or on commercially acceptable terms, we might not have
access to sufficient quantities of these materials on a timely basis and might not be able to satisfy product demand. Moreover, if any of these components and raw materials becomes unavailable in the
marketplace, we will be forced to further develop our technologies to incorporate alternate components or raw materials.

Our inability to continually enhance our product performance, including our planned improvements to the Helicos Genetic Analysis System, to keep pace with rapidly changing
technology and customer requirements, would adversely affect our ability to compete effectively.

The success of any products utilizing our True Single Molecule Sequencing (tSMS) technology will depend on our ability to
continue to increase the performance and decrease the price of sequencing using this technology. New technologies, techniques or products could emerge which might allow the analysis of genomic
information with similar or better price-performance than our Helicos Genetic Analysis System and could exert pricing pressures on or take market share from our products.

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It
is critical to our success for us to anticipate changes in technology and customer requirements and to successfully introduce new, enhanced and competitive technology to meet our customers' and
prospective customers' needs on a timely basis. While we have planned substantial improvements to the Helicos System, including enhancing the performance of the system's reagents and disposable
supplies and image processing subsystem and reducing the consumption of reagents, we may not be able to successfully implement these improvements. Even if we successfully implement some or all of
these planned improvements, we could incur substantial development costs. We may not have adequate resources available to develop new technologies or be able to successfully introduce enhancements to
our system. There can be no guarantee that we will be able to maintain technological advantages over emerging technologies in the future, and we will need to respond to technological innovation in a
rapidly changing industry. If we fail to keep pace with emerging technologies, our system will become uncompetitive, our market share will decline and our business, revenue, financial condition and
operating results could suffer materially.

We operate in a highly competitive industry and if we are not able to compete effectively, our business and operating results will likely be harmed.

Some of our current competitors, as well as many of our potential competitors, have greater name recognition, more substantial
intellectual property portfolios, longer operating histories, significantly greater resources to invest in new technologies and more substantial experience in new product development, regulatory
expertise, manufacturing capabilities and the distribution channels to deliver products to customers than we do. For example, companies such as Affymetrix, Inc., Agilent Technologies, the
Applied Biosystems division of Applera Corporation, the Life Sciences Division of GE Healthcare, Illumina, Inc., and Roche Diagnostics have products for genetic analysis which compete in
certain segments of the market in which we plan to sell our Helicos Genetic Analysis System. Pharmaceutical and biotechnology companies have significant needs for genomic information and may also
choose to develop or acquire competing technologies to meet these needs. In addition, a number of other companies and academic groups are in the process of developing novel techniques for genetic
analysis, many of which have also received grants from the National Human
Genome Research Institute, a branch of the National Institutes of Health, for the development of technologies that can achieve substantially lower costs, referred to as a "$100,000 genome" or a
"$1,000 genome." These competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. Further, in light
of these advantages, even if our technology is more effective than the product or service offerings of our competitors, current or potential customers might accept competitive products and services in
lieu of purchasing our technology. We may not be able to compete effectively against these organizations. Increased competition is likely to result in pricing pressures, which could harm our sales,
profitability or market share. Our failure to compete effectively could materially adversely affect our business, financial condition or results of operations.

In
addition, to the extent that, in the long term, we commercialize any products utilizing our tSMS technology for use in future life science applications, such as clinical diagnostic or
protein analysis applications, we will face additional competition. In the event that we develop new technology and products that compete with existing technology and products of well established
companies, the marketplace might not adopt our technology and products.

*Failure to manage our rapid growth effectively would harm our business.

We will need to add additional personnel and expand our capabilities to successfully pursue our commercialization strategy for our
Helicos Genetic Analysis System as well as our research and development efforts. To manage our anticipated future growth effectively, we must enhance our manufacturing capabilities and operations,
information technology infrastructure, and financial and accounting systems and controls. For instance, certain aspects of our operations, such as our

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manufacturing
capabilities, must be scaled up to increase the number of Helicos Systems we can manufacture per quarter. We also must attract, train and retain qualified sales, marketing and service
personnel, engineers, scientists and other technical personnel and management personnel. Our failure to manage our rapid growth effectively could have a material adverse effect on our business,
operating results or financial condition. Organizational growth and scale-up of operations could strain our existing managerial, operational, financial and other resources. Our growth
could require significant capital expenditures and may divert financial resources from other projects, such as the development of new products or enhancements. If our management is unable to
effectively manage our growth, our expenses may increase more than expected, our revenue could grow more slowly than expected and we may not be able to achieve our research and development and
commercialization goals.

Our business would be harmed if we are not successful in entering into large contracts for the sale and installation of our Helicos Genetic Analysis Systems.

Our business may depend upon securing and maintaining large contracts for the sale and installation of our Helicos Genetic Analysis
Systems to a limited number of customers each year. We expect the sales cycle for these large contracts to be longer than for other contracts because we will need to educate potential customers
regarding the benefits of our system to a variety of constituencies within such customer organizations. Moreover, even after a purchase decision is made, these contracts may be delayed by factors
outside our control, including financial and budget constraints of the customers purchasing our product. Accordingly, we may expend substantial funds and management effort with no assurance that an
agreement will be reached with a potential customer. Our business, results of operations and financial condition could be materially adversely affected if we are unable to obtain major contracts for
the sale and installation of our Helicos Systems, or if we experience delays in the performance of such contracts.

*We expect that our sales cycle will be lengthy and unpredictable, which will make it difficult for us to forecast revenue and increase the magnitude of quarterly
fluctuations in our operating results.

Potential customers for our Helicos Genetic Analysis System typically commit significant resources to evaluate genetic analysis
technologies. The complexity of our product will require us to spend substantial time and effort to assist potential customers in evaluating our HeliScope system and in benchmarking it against
available technologies. Because our Helicos System requires a significant investment of time and cost by our customers, we must target those senior managers within the customer's organization who are
able to make these decisions on behalf of such organizations. We may face difficulty identifying and establishing contact with such decision makers. Even after initial acceptance, the negotiation and
documentation processes can be lengthy. We expect our sales cycle to typically range between six and twelve months, but it may be longer. Any delay in completing sales in a particular quarter could
cause our operating results to fall below expectations.

Our customers may purchase replacements for the reagents and disposable supplies that are a part of our Helicos Genetic Analysis System from third parties or discover a
method that allows them to use less than the expected amounts of such products, which would materially and adversely affect our revenues.

The success of our business depends, in part, on the recurring sales of the proprietary reagents and disposable supplies for our
system. Because we have not yet commercialized our Helicos Genetic Analysis System, we do not have the experience to predict the percentage of our revenues that we will derive from sales of
proprietary reagents and disposable supplies. Nevertheless, we expect such sales to represent a material source of our future revenues. Our customers or competitors could potentially produce reagents
and disposable supplies that are compatible with our Helicos System at a lower cost, which could exert pricing pressures on, or take market share from, our reagents and disposable supplies. Similarly,
our customers or competitors may discover a method of utilizing smaller quantities of our proprietary

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reagents
and disposable supplies while achieving satisfactory results, which could reduce the amount of reagents and supplies we are able to sell. In either case, there could be a material adverse
effect on our revenues and harm to our business, financial condition and results of operations.

If we are unable to recruit and retain key executives and scientists, 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. 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, operating results and financial condition.

In
addition, our product development and marketing efforts could be delayed or curtailed if we are unable to attract, 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 bioinformatics, manufacturing, sales, marketing and technical support. Because of the complex and technical nature of our 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 develop and commercialize our technology. Competition for these people is intense.
Further, our inability to attract,
train and retain sales, marketing and service personnel could have a material adverse affect on our ability to generate sales or successfully commercialize our technology. 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 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.

Ethical, legal and social concerns surrounding the use of genetic information could reduce demand for our technology.

One of the potential uses for our product 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 our technology for certain applications or
reduce the potential markets for our technology, either of which could have a material adverse effect on our business, financial condition and results of operations.

Our products could in the future be subject to regulation by the U.S. Food and Drug Administration or other regulatory agencies, which could increase our costs and
delay our commercialization efforts, thereby materially and adversely affecting our business and results of operations.

Our products are not currently subject to U.S. Food and Drug Administration ("FDA") clearance or approval if they are not used
for the diagnosis or treatment of disease. However, in the future, certain of our products or related applications could be subject to FDA regulation; the FDA's regulatory jurisdiction could be
expanded to include our products, or both. Even where a product is exempted from FDA clearance or approval, the FDA may impose restrictions as to the types of

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customers
to which we can market and sell our products. Such regulation and restrictions may materially and adversely affect our business, financial condition and results of operations.

Laws
and regulations are also in effect in many countries that could affect our products. 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 our products which have
not yet been cleared for domestic commercial distribution may be subject to FDA or other export restrictions.

Our products could have unknown defects or errors, which may give rise to claims against us or divert application of our resources from other purposes.

Any 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, defects or errors may arise in our system, 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. Defects or errors in our products might also
discourage customers from purchasing our system. 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. Although we plan to obtain product
liability insurance prior to the commercial launch of our Helicos System, any future product liability insurance that 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.

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

We have limited history operating as a public company. As a public company, we will incur legal, accounting and other expenses that we
did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission and the NASDAQ Global Market,
have imposed various new requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of
time to these new compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will 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, commencing in 2008, 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

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the
NASDAQ Global Market, the Securities and Exchange Commission or other regulatory authorities, which would require additional financial and management resources.

*We will need to raise additional funding, which may not be available on favorable terms, if at all, or without dilution to our stockholders. If we do not raise the
necessary funds, we may need to cut back or terminate some or all aspects of our operations which would materially adversely affect our business prospects.

Because our Helicos System is complex and will be new to the market and involve significant capital expenditures by customers and a
long sales cycle, it is very difficult to predict the actual rate of product sales. We will need additional financing to execute on our current or future business strategies. We expect capital outlays
and operating expenditures to increase over the next several years as we expand our infrastructure, commercialization, manufacturing and research and development activities. The amount of additional
capital we may need to raise depends on many factors, including:



We
cannot be certain that additional capital will be available when and as needed or that our actual cash requirements will not be greater than anticipated. If we require additional
capital at a time when investment in biotechnology or life sciences companies or in the marketplace in general is limited due to the then prevailing market or other conditions, we may not be able to
raise such funds at the time that we desire or any time thereafter. In addition, if we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of
our stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we obtain additional debt
financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, and the terms of the debt securities issued could impose
significant restrictions on our operations. If we raise additional funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our technologies or
products, or grant licenses on terms that are not favorable to us. If we are unable to obtain financing on terms favorable to us, we may be unable to execute our business plan and we may be required
to cease or reduce development or commercialization of our technology, sell some of all of our technology or assets or merge with another entity.

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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 development processes 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, 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.

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. For example, export of our instruments is subject to strict regulatory control in a number of jurisdictions. The failure to satisfy export control criteria or obtain necessary
clearances could delay or prevent shipment of products, which could adversely affect our revenues and profitability. Moreover, the life sciences industry, which is the market for our technology, has
historically been heavily regulated. There are, for example, laws in several jurisdictions restricting research in genetic engineering, which can operate to narrow our markets. Given the evolving
nature of this industry, legislative bodies or regulatory authorities may adopt additional regulation that adversely affects our market opportunities. Additionally, if ethical and other concerns
surrounding the use of genetic information, diagnostics or therapies become widespread, we may have less demand for our products. 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 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.

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 products, processes and
technologies. 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. 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
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 the Company's patent protection being
significantly

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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 August 2008 we decided not to participate further in the opposition.

We depend upon our ability to license technologies, and the failure to license or otherwise acquire necessary technologies could harm our ability to commercialize 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 our product to be re-configured which could negatively impact its
availability for commercial sale and increase our development costs. Failure to license or otherwise acquire necessary technologies would harm our ability to commercialize our products, 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 products, or pay royalties to continue to sell our 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 we infringe their patents or otherwise violate their intellectual property rights. In addition, the technology that
we license from third parties for use in our 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 our instruments, reagents or disposable supplies to others. In addition, we may be required to indemnify our customers for third-party intellectual property infringement
claims, which would increase the cost to us of an adverse ruling for such a claim. 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.

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

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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 approximately 59% of our outstanding common
stock. 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.

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. Although,
substantially all of our stockholders prior to the initial public offering were subject to lock-up agreements with the underwriters that restricted their ability to transfer their stock
for 180 days following our initial public offering, these lock-ups expired on November 20, 2007. Accordingly, approximately 11 million shares of our common stock
became eligible for sale in the public market. The market price of shares of our common stock may drop significantly upon resale of shares held prior to our initial public offering by our existing
stockholders into the market. 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.

In
addition, the holders of an aggregate of approximately of 13.5 million shares of our common stock, as of June 30, 2008, have rights, subject to some conditions, to
require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also 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, subject to lock-up agreements. In

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addition,
as of June 30, 2008, there were 277,777 shares of common stock reserved for future issuance as charitable contribution to the Broad Institute of MIT and Harvard 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 approximately 59% 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 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

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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.

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 June 30, 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 $11.5 million on pre-production research and development expenses and $6.9 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.

We
expect to use 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 HeliScope system. Our
management has broad discretion as to the use of the net proceeds. We may use a portion of the net proceeds for the acquisition of, or investment in, technologies or products that complement our
business. As required by the Securities Commission regulations, we will provide further detail on our use of the net proceeds from our initial public offering in future periodic reports.

Item 3.    Defaults upon Senior Securities

Not applicable.

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

At the Annual Meeting of Stockholders held on May 22, 2008 stockholders of the Company approved proposals
to:



FOR

WITHHELD

ABSTAIN

NON-VOTESElisabeth K. Allison, PhD


19,304,044


5,941





Brian G. Atwood


19,306,645


3,340










FOR


19,306,024AGAINST


1,087ABSTAIN


2,874NON-VOTES





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.

Dated: August 14, 2008

/s/STANLEY N. LAPIDUSStanley N. Lapidus Chairman and Chief Executive Officer
(Principal Executive Officer)Dated: August 14, 2008

/s/STEPHEN P. HALLStephen P. Hall Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)


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EXHIBIT INDEX

10.1*

2007 Stock Option and Incentive Plan and forms of agreement thereunder10.2

Offer Letter between the Company and Stephen P. Hall dated April 25, 2008 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 1, 2008)10.3

Change in Control Agreement between the Company and Stephen P. Hall dated April 30, 2008 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on May 1, 2008)10.4

Second Amendment to the Loan and Security Agreement among Helicos, the Lenders and General Electric Capital Corporation, dated as of June 27, 2008 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K
filed on June 30, 2008)10.5

Form of Warrant, between Helicos and the Lenders (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on June 30, 2008)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


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