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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 September 30, 2010ORo

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


Commission File Number 001-33484

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

Delaware(State or other jurisdiction of
incorporation or organization)

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


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

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

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

Large accelerated filer o

Accelerated filer o

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

Smaller reporting company ý


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

The number of shares of the registrant's Common Stock, $.001 par value, outstanding as of October 31, 2010, was 82,673,443 shares.



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HELICOS BIOSCIENCES CORPORATION (a development stage company)

Table of Contents



PagePart IFinancial InformationItem 1.

Consolidated Financial Statements (Unaudited)

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

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

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

5Notes to Consolidated Financial Statements

6Item 2.

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

25Item 3.

Quantitative and Qualitative Disclosures About Market Risk

43Item 4.

Controls and Procedures

43Part IIOther InformationItem 1.

Legal Proceedings

44Item 1A.

Risk Factors

44Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

56Item 3.

Defaults upon Senior Securities

59Item 4.

Removed and Reserved

59Item 5.

Other Information

59Item 6.

Exhibits

59SIGNATURES

60


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Part IFinancial Information

Item 1.    Consolidated Financial Statements



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

December 31,
2009

September 30,
2010ASSETSCurrent assetsCash and cash equivalents

$
15,930

$
1,850Accounts receivable


848


197Unbilled receivables


496


423Inventory


6,827


3,294Prepaid expenses and other current assets


424


204Total current assets


24,525


5,968Property and equipment, net


1,706


126Restricted cash


225


225Other assets


79


70Total assets

$
26,535

$
6,389LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)Current liabilitiesAccounts payable

$
1,005

$
817Accrued expenses and other current liabilities


3,632


1,789Deferred revenue


5,705


7,347Current portion of long-term debt


2,773


2,997Total current liabilities


13,115


12,950Long-term debt, net of current portion


2,081


Warrants


5,253


1,798Other long-term liabilities


400


94Total liabilities


20,849


14,842Commitments and contingenciesStockholders' equity (deficit)Preferred stock: par value $0.001 per share; 5,000,000 shares authorized at December 31, 2009 and September 30, 2010, respectively; no shares
issued and outstanding December 31, 2009 and September 30, 2010





Common stock: par value $0.001 per share; 120,000,000 shares authorized at December 31, 2009 and September 30, 2010, respectively; 79,370,610 and
81,582,252 shares issued and outstanding at December 31, 2009 and September 30, 2010, respectively


79


82Additional paid-in capital


173,272


179,063Deficit accumulated during the development stage


(167,665
)

(187,598
)Total stockholders' equity (deficit)


5,686


(8,453
)Total liabilities and stockholders' equity (deficit)

$
26,535

$
6,389


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
September 30,

Nine Months Ended
September 30,

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

2010

2009

2010Product revenue

$
1,100

$
214

$
2,221

$
341

$
2,702Grant revenue


13


422


465


1,525


3,739Total revenue


1,113


636


2,686


1,866


6,441Costs and expensesCost of product revenue


451


94


1,096


270


1,519Research and development


3,513


4,945


11,145


13,207


107,823Selling, general and administrative


3,145


2,347


8,728


9,112


69,548Impairment of long lived assets





1,894





1,894


1,894Total costs and expenses


7,109


9,280


20,969


24,483


180,784Operating loss


(5,996
)

(8,644
)

(18,283
)

(22,617
)

(174,343
)Interest income


5


1


67


18


4,152Interest expense


(246
)

(106
)

(826
)

(451
)

(4,343
)Change in fair value of warrant liability


(710
)

(130
)

(710
)

3,117


5,076Net loss


(6,947
)

(8,879
)

(19,752
)

(19,933
)

(169,458
)Beneficial conversion feature related to Series B redeemable convertible preferred stock














(18,140
)Net loss attributable to common stockholders

$
(6,947
)
$
(8,879
)
$
(19,752
)
$
(19,933
)
$
(187,598
)Net loss attributable to common stockholders per sharebasic and diluted

$
(0.11
)
$
(0.11
)
$
(0.31
)
$
(0.25
)Weighted average number of common shares used in computationbasic and diluted


64,837,332


79,459,909


63,969,719


78,193,843


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

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

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

2010Cash flows from operating activities:Net loss

$
(19,752
)
$
(19,933
)
$
(169,458
)Adjustments to reconcile net loss to cash used in operating activities:Depreciation and amortization


1,887


1,019


9,058Amortization of lease incentive


(101
)

(4
)

(474
)Common stock issued for licenses








147Stock-based compensation expense


3,432


4,704


19,414Noncash interest expense related to debt and warrants


255


193


1,070Noncash gain related to change in fair value of warrant liability


710


(3,117
)

(5,076
)Provisions on inventory





2,570


5,846Loss on disposal of property and equipment





10


36Gain on sale of property and equipment





(33
)

(33
)Impairment of long lived assets





1,894


1,894Changes in operating assets and liabilities:Accounts receivable


171


651


(197
)Unbilled receivable


192


73


(173
)Inventory


(948
)

(1,013
)

(11,371
)Prepaid expenses and other current assets


(355
)

42


(707
)Deferred revenue


(598
)

1,514


7,219Accounts payable


(25
)

(188
)

817Accrued expenses and other current liabilities


123


(569
)

3,370Other long-term liabilities


(31
)




557Net cash used in operating activities


(15,040
)

(12,187
)

(138,061
)Cash flows from investing activities:Purchases of property and equipment


(83
)

(37
)

(9,551
)Proceeds from the sale of fixed assets





33


33Increase in restricted cash








(225
)Purchases of short-term investments








(34,709
)Maturities of short-term investments








34,709Net cash used in investing activities


(83
)

(4
)

(9,743
)Cash flows from financing activities:Proceeds from debt issuances








22,256Payments on debt


(2,516
)

(2,050
)

(19,642
)Payments of debt issuance costs








(194
)Proceeds from initial public offering








49,011Deferred initial public offering costs








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








66,405Proceeds from bridge loan








350Proceeds from issuance of common stock and common stock warrants


9,353


158


32,965Proceeds from issuance of restricted common stock








338Payments to employees for cancelled restricted common stock








(104
)Proceeds from exercise of stock options


42


3


107Net cash (used in) provided by financing activities


6,879


(1,889
)

149,654Net (decrease) increase in cash and cash equivalents


(8,244
)

(14,080
)

1,850Cash and cash equivalents, beginning of period


19,713


15,930


Cash and cash equivalents, end of period

$
11,469

$
1,850

$
1,850


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

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

1. Nature of the Business and Basis of Presentation

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

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

As
previously disclosed in the Company's quarterly and periodic reports with the Securities and Exchange Commission, in the first quarter of 2010, the Company began a process of
considering alternatives to its long-term strategic focus, including a repositioning of the Company in the genetic analysis markets. As a result of this process, on June 25, 2010,
the Company announced that
it had launched its diagnostics business and that it was in early stages of validating molecular diagnostic (MDx) tests that utilize its HeliScope® Single Molecule Sequencer. To date,
the Company's research and development team has made progress in developing two prototype tests. The first test is for the detection of gene mutations indicative of a woman's increased risk of
developing hereditary breast or ovarian cancer. The second prototype is a non-invasive prenatal diagnostic test. Nevertheless, despite this scientific progress, and a lengthy and
comprehensive financing initiative supported by a nationally recognized investment bank during the second and third quarter of 2010, the Company was unable to secure any long-term equity
financings or financing arrangements with strategic partners during the third quarter of 2010. The Company has had numerous meetings with prospective investors and corporate partners and has not been
able to secure a bona-fide offer for financing or a strategic transaction. In addition, the Company has had very limited commercial activity to date during fiscal 2010. Further, as of
September 30, 2010 and November 10, 2010, the Company only had $1.9 million and $1.8 million, respectively, in cash and cash equivalents.

As
previously disclosed, on May 11, 2010, the Board of Directors of the Company (the "Board") approved a reduction in headcount and restructuring plan (the "May Restructuring
Plan") which involved the consolidation and reorganization of its operations in order to reduce operating costs. The May Restructuring Plan resulted in the elimination of approximately 40 positions
during the second fiscal quarter of 2010. In order to further reduce operating costs and preserve cash, on September 15, 2010, the Board approved a subsequent reduction in headcount and
restructuring plan (the "September Restructuring Plan") which involved the consolidation and reorganization of its operations. The September Restructuring Plan eliminated approximately 14 positions
during the third quarter of 2010. The Company entered the fourth quarter of 2010 with approximately 24 employees. In addition, during the third quarter of 2010, as a result of the inability to
complete the financing referenced above and the subsequent change in business direction, the Company recorded charges of $2.6 million in connection with a write-off of certain of
its inventory that is no longer used in the business and $1.9 million in connection with the impairment of certain long-lived assets.

Going
forward, the Company plans to deploy its limited resources by focusing on intellectual property monetization and concentrating its research and development efforts in targeted
areas designed to achieve tangible proof-of-concept goals, which may enable the Company to seek

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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)

partnership
opportunities with companies interested in next-generation sequencing, or to pursue other funding and strategic alternatives. As of the date of this filing, the Company does
not have adequate resources and will need to generate additional funding from various sources including contract sequencing service projects, strategic collaborations and licensing activities. On
October 14, 2010, Helicos announced the launch of a technology licensing program for its Single Molecule Sequencing and Sequencing-by-Synthesis intellectual property.
The Company plans to defend its intellectual property rights through licensing and enforcement strategies. In this regard, on October 22, 2010, the Company filed an amended complaint against
Pacific Biosciences by naming Illumina, Inc. and Life Technologies Corporation as additional defendants. The amended lawsuit alleges that the defendants willfully infringe the Company's patents
in suit by using their respective technologies, sequencing systems and products which the Company alleges are within the scope of one or more claims of the Company's patents in suit. Helicos is
seeking a permanent
injunction enjoining the defendants from further infringement as well as monetary and punitive damages, costs and attorneys' fees, interest and other relief as determined by the Court. See
Part II, Item 1, Legal Proceedings, for more information.

The
Company entered the fourth quarter of 2010 without any prospects of securing long-term financing from outside investors. An Independent Committee of the Board evaluated
the alternatives available to the Company and determined that a bridge financing lead by certain inside investors was in the best interests of the Company's stakeholders in view of the Company's
current financial and operating condition, and would best position the Company to continue operations for the remainder of 2010 and into 2011. The Independent Committee met multiple times to consider
the alternatives and reached the conclusion that the bridge financing was the best alternative for generating value for stakeholders. As a result, the Company entered into an insider bridge loan
facility with two of the four venture capital firms which decided to participate in the bridge financing and whose representatives are members of the Board. In connection with this transaction, the
Company entered into a Subordinated Secured Note Purchase Agreement (the "Note Purchase Agreement") with investment funds affiliated with Atlas Venture and Flagship Ventures (the "Purchasers"),
pursuant to which the Company has agreed to sell to the Purchasers, and the Purchasers have agreed to purchase, up to an aggregate of $4,000,000 of convertible promissory notes (the "Notes"), a
portion of which is committed and a portion of which is optional (the "Bridge Debt Financing"). Upon the effective date of the Note Purchase Agreement, the Purchasers purchased Notes having an
aggregate principal amount of $333,333. Subject to the Company's continued compliance with the terms of the Note Purchase Agreement, including that there not be an event of default thereunder, upon
notice from the Company the Purchasers are committed to purchase an aggregate of an additional $333,333 of Notes in each of five subsequent closings, for a total aggregate committed amount of
$2,000,000. The Purchasers also have the right, but not the obligation, upon the Company's request to purchase up to an additional $2,000,000 of Notes on or before December 31, 2012.

The
Notes will accrue interest at a rate of 10% per annum plus a risk premium as described below. The outstanding principal and any unpaid accrued interest on all of the Notes shall be
due and payable in full (i) upon demand by the Purchasers, which demand shall be no earlier than December 31, 2012, (ii) upon the Company receiving at least $10,000,000 in
proceeds from a subsequent equity financing, (iii) upon a change of control of the Company or (iv) upon an event of default. A Purchaser may elect to convert principal and interest
outstanding under any of the Notes upon the closing of any future round of equity or debt financing of the Company into shares, and at

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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
per share price, of the securities issued at such financing. Simultaneous with execution of the Note Purchase Agreement, the Company and the requisite parties entered into an Amendment to the
Amended and Restated Investor Rights Agreement, dated as of March 1, 2006, by and among the Company and the parties specified therein, including the Purchasers (the "IRA Amendment"), pursuant
to which the Purchasers will be entitled to demand and piggyback registration rights consistent with the terms of the Purchasers' existing registration rights for any securities issued upon conversion
of the Notes.

The
Company's obligations under the Notes are subordinated to the indebtedness incurred by the Company under the Loan and Security Agreement among the Company, certain lenders (the
"Lenders") and General Electric Capital Corporation ("GE"), as agent, dated as of December 31, 2007, as amended (the "Loan Agreement"). The Company's obligations under the Notes are secured by
a security interest on all of the Company's assets, including its intellectual property, that, with regard to all of the Company's assets other than the cause of action that is the subject of the
intellectual property litigation against Pacific Biosciences, Illumina and Life Technologies (and any recovery therefrom) (the "Cause of Action"), is junior to the Lenders' first priority security
interest under the Loan Agreement, and with regard to the Cause of Action, is junior to the Lenders' first priority security interest under the Loan Agreement and the second priority security interest
of the Company's outside legal counsel that is representing the Company in the Cause of Action (the "Outside IP Litigation Counsel").

As
an inducement for the Purchasers to purchase the Notes, the Company entered into a Risk Premium Payment Agreement, dated as of November 16, 2010, with the Purchasers (the "Risk
Premium Agreement") simultaneous with the execution of, and as required by, the Note Purchase Agreement. Under the terms of the Risk Premium Agreement, the Company has agreed to pay the Purchasers the
following portions of the consideration the Company receives (the "Payment Consideration") in Liquidity Transactions, as defined below: (i) until the aggregate Payment Consideration equals
$10 million, 60% of the Payment Consideration; (ii) for aggregate Payment Consideration from $10 million to $20 million, 50% of the Payment Consideration; (iii) for
aggregate Payment Consideration from $20 million to $30 million, 40% of the Payment Consideration; (iv) for aggregate Payment Consideration from $30 million to
$40 million, 30% of the Payment Consideration; and (v) for aggregate Payment Consideration in excess of $40 million, 10% of the Payment Consideration (any such payments, "Risk
Premium Payments"). For purposes of determining amounts payable under the Risk Premium Agreement, the Payment Consideration will not include amounts the Company uses to first satisfy specified
existing obligations, including obligations under the Loan Agreement, under professional contingency arrangements (including the contingency fee arrangement between the Company and the Outside IP
Litigation Counsel relating to the Cause of Action) and obligations that may arise under existing technology license agreements (the "Existing IP Licensing Agreements") between the Company and each of
Arizona Technology Enterprises, Roche Diagnostics GMBH and Roche Diagnostics Corporation, and California Institute of Technology (as previously disclosed by the Company, under the Existing IP
Licensing Agreements, the Company is obligated to pay license fees in connection with the licensing, sublicensing, legal settlements or sales of specified intellectual property or services provided to
third parties ranging from a single digit percentage up to one-half of the income from those activities). For purposes of the Risk Premium Agreement and subject to various provisions
therein, the following shall constitute Liquidity Transactions: (A) the receipt by the Company of payments from third parties relating to the intellectual property portfolio of

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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
Company, including payments received as a license or other settlement in patent infringement litigation brought by the Company ("IP Licensing Events"); (B) a merger of the Company in which
there is a change of control; and (C) the sale or exclusive license by the Company of all or substantially all of its assets or intellectual property.

In
connection with the Bridge Debt Financing, on November 16, 2010, the Company, GE and the Lenders executed the Fourth Amendment to the Loan and Security Agreement, dated
November 16, 2010 (the "Fourth Amendment"). Pursuant to the Fourth Amendment, GE and the Lenders waived
various existing events of default and consented to the Company's incurrence of indebtedness and grant of a junior security interest to the Purchasers under the Note Purchase Agreement. The Company
amended warrants previously issued to the Lenders to re-price the Warrants from $4.80 to $0.01 and GE and the Lenders agreed to defer a $200,000 payment due January 31, 2011 to the
term loan maturity date. In addition, subject to the Company's continued compliance with the terms of the Loan Agreement, including that there not be an event of default thereunder, GE and the Lenders
agreed to defer up to five additional principal monthly payments with respect to the term loan. Also pursuant to the Fourth Amendment, the Company agreed to grant the Lenders a first priority security
interest in all of the Company's intellectual property and to pay the Lenders an additional $50,000 to $200,000 (depending upon how many principal payments are deferred) upon the full repayment of all
outstanding amounts due with respect to the term loans. Under the terms of the Loan and Security Agreement prior to its amendment by the Fourth Amendment, the scope of the Lenders' first priority
security interest included all of the Company's assets other than intellectual property.

In
connection with the Bridge Debt Financing and the Fourth Amendment and as security for the Company's obligations under its contingency fee arrangement with Outside IP Litigation
Counsel relating to the Cause of Action, the Company and the Outside IP Litigation Counsel entered into a Subordinated Security Agreement pursuant to which the Company agreed to grant the Outside IP
Litigation Counsel a second priority security interest in the Cause of Action. Under the terms of the contingency fee arrangement, the Company is obligated to pay Outside IP Litigation Counsel up to
40% of the proceeds paid to the Company in connection with the settlement, judgment or other resolution of the Cause of Action or certain business transactions resulting from or relating to the Cause
of Action.

In
approving the transactions relating to the Bridge Debt Financing and the Fourth Amendment, the Board of Directors of the Company approved a management incentive plan pursuant to which
participants in the plan will be entitled to receive, in the aggregate, an amount equal to 7.5% of the Payment Consideration resulting from IP Licensing Events (which, as noted above,
represents gross proceeds from IP Licensing Events less various contractual and contingent payments described above) (the "Management Incentive Plan"). The specific terms of the Management Incentive
Plan, administration and all payments to be made to management thereunder will be under the control and direction of the Compensation Committee of the Board of Directors of the Company.

The
agreements and arrangements described above and all of the transactions contemplated by those agreements were approved by an independent committee of the Board of Directors of the
Company. In addition, Noubar B. Afeyan, PhD, who is the founder, a Managing Partner and the Chief Executive Officer of Flagship Ventures, and Peter Barrett, who is a Partner of Atlas Venture,
abstained from the vote of the Board of Directors of the Company approving the transactions.

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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)

Although
the Company believes that the HeliScope Sequencer has unique utility across a broad array of MDx tests, due to significant financial and resource constraints, the Company has
discontinued the plan to develop its own genetic testing laboratory certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA). Nevertheless, the Company still believes that
diagnostics applications may benefit from the specific features of the Helicos System, including the platform's ability to sequence non-amplified natural DNA and RNA directly, quantitative
accuracy, high throughput, ability to use small sample quantities in simple and cost effective preparation methods, as well as lack of biases typically seen with sample amplification.

Notwithstanding
recent workforce reductions, restructurings, and the bridge financing, the Company may not have sufficient funds to pursue its business priorities. The Company will
require significant additional capital in the first half of 2011 to continue its operations. As a result, the Company is no longer able to remain current in making payments to trade vendors and other
unsecured creditors when such payments are due and, despite the restructuring of the Company's credit facility with GE Capital discussed above, this inability to remain current increases the
likelihood that GE Capital could declare a default under the credit facility in the near-term, including with regard to solvency. These workforce reductions, as well as curtailed financial
resources, will further impact the Company's ability to implement its business priorities. In addition, these constraints have caused the Company to significantly scale back service support and
reagent supply to its current installed base. The Company has also significantly curtailed collaborative activities with other parties. Nevertheless, the Company believes that these actions will
preserve the Company's viability and provide additional time to execute its business priorities.

On
June 28, 2010, the Company received a letter from The NASDAQ Stock Market LLC ("NASDAQ") advising that for the previous 30 consecutive business days, the Company failed
to comply with the minimum market value of listed securities ("MVLS") requirement for continued listing on the NASDAQ Global Market pursuant to NASDAQ Marketplace Rule 5450(b)(2)(A) and that
the Company did not otherwise satisfy the criteria for continued listing pursuant to NASDAQ Marketplace Rule 5450(b). NASDAQ stated in its letter that in accordance with NASDAQ Marketplace
Rule 5810(c)(3)(C), the Company will be provided 180 calendar days, or until December 27, 2010, to regain compliance with the MVLS continued listing requirement. MVLS is calculated by
multiplying the total shares outstanding by the daily closing bid price. The NASDAQ letter also states that if, at any time before December 27, 2010, the MVLS of the Company's common stock
closes at $50,000,000 or more for a minimum of 10 consecutive business days, the NASDAQ staff will provide the Company with written notification that it has achieved compliance with the MVLS continued
listing requirement and the matter will be closed. On October 12, 2010, the Company received a delisting determination letter from NASDAQ due to the Company's failure to regain compliance with
the NASDAQ Global Market's minimum bid price requirement for continued listing as set forth in Listing Rule 5450(a)(1). In addition, the Company has not yet held its annual meeting of
stockholders for fiscal 2010 which is an additional requirement for Helicos to comply with in order to maintain its continued listing on NASDAQ. Based on the unlikely ability of the Company to meet
the NASDAQ MLVS requirements due to the state of its finances and near-term business prospects, on November 12, 2010, the Company withdrew its appeal to NASDAQ. As a result, the
Company's securities were delisted from the NASDAQ Global Market and the trading of the Company's common stock was suspended before the opening of business on November 16, 2010, and a
Form 25-NSE will be filed with the Securities and

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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)

Exchange
Commission which will remove the Company's securities from listing and registration on The NASDAQ Stock Market. The Company has been advised by Pink OTC Markets Inc., which operates an
electronic quotation service for securities traded over-the-counter ("OTC"), that its securities are immediately eligible for quotation on the OTCQB. The OTCQB is a market tier
for OTC traded companies that are registered and reporting with the Securities and Exchange Commission. The Company has also been advised that its shares will continue to trade under the symbol HLCS.
Investors can now view real time stock quotes for HLCS at http://www.otcmarkets.com.

Please
see Part II, Item 1A, in this Form 10-Q, for risks related to ownership of the Company's common stock.

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

Since
inception, the Company has incurred losses and has not generated positive cash flows from operations. The Company expects its losses to continue for a considerable period of time.
These losses, among other things, have had and will continue to have an adverse effect on the Company's working capital, total assets and stockholders' equity. As of September 30, 2010 and
November 10, 2010, the Company had $1.9 million and $1.8 million, respectively, in cash and cash equivalents. The Company will, during the first half of 2011, require significant
additional capital to continue its operations. Because the Company's present capital resources are not sufficient to fund its planned operations for a twelve month period as of the date of the Annual
Report on Form 10-K for the year ended December 31, 2009, the Company's current financial resources raise substantial doubt about its ability to continue as a going concern.

The
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.

11

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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

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

2. Summary of Significant Accounting Policies

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

Revenue recognition

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

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

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

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

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

Recent Accounting Pronouncements

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

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

2. Summary of Significant Accounting Policies (Continued)

retrospective
basis, and early application is permitted. Although the Company is still evaluating the impact of this standard, its adoption is not expected to have a material impact on the financial
position or results of operations.

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

3. Inventory

Inventories are stated at the lower of cost or market with cost determined under the first-in, first-out, or FIFO, method. During the quarter ended
September 30, 2010, the Company recorded a $2.6 million charge to research and development expenses to write-off excess inventory.

The
components of inventory are as follows (in thousands):

December 31,
2009

September 30,
2010Raw materials

$
372

$
Work in process


2,462


Finished goods


3,993


3,294Total inventory

$
6,827

$
3,294


4. Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company's potential dilutive shares, which
include outstanding common stock options, unvested restricted stock and warrants, have not been included in the computation of diluted net loss per share for both periods as the result would be
antidilutive. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share. Because the Company reported a net loss for the three and nine months ended
September 30, 2009 and 2010, all potential common shares have been excluded from the computation of the dilutive net loss per

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

4. Net Loss per Share (Continued)

share
for all periods presented because the effect would have been antidilutive. Such potential common shares consist of the following:

September 30,2009

2010Stock options


4,812,764


2,514,108Unvested restricted stock


1,501,838


2,010,888Warrants


24,294,589


27,952,35830,609,191


32,477,354


5. Stock-Based Compensation

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

Three months ended
September 30,

Nine months ended
September 30,2009

2010

2009

2010Selling, general and administrative

$
818

$
912

$
2,220

$
3,530Research and development


419


243


1,212


1,174Total

$
1,237

$
1,155

$
3,432

$
4,704


During
the nine months ended September 30, 2009, the Company granted 1,409,521 stock options at an exercise price of $1.04 per share, 82,260 stock options at an exercise price of
$0.78 per share, 100,000 stock options at an exercise price of $0.62 per share, 5,000 stock options at an exercise price of $0.54 per share, 233,330 stock options at an exercise price of $0.79 per
share, and 783,696 at an exercise price of $2.72 per share. During the nine months ended September 30, 2009, the Company granted 1,749,591 shares of restricted stock. During the nine
months ended September 30, 2010, the Company granted 10,750 stock options at an exercise price of $1.00 per share, 2,000 stock options at an exercise price of $0.7625 per share and 3,079,227
shares of restricted stock.

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

Nine months ended
September 30,2009

2010Expected volatility


63.2
%

94.1
%Expected life in years


6.0


6.0Weighted average risk-free interest rate


2.2
%

1.3
%Expected dividends


0.0
%

0.0
%


14

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

6. Fair Value Measurement

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

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

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

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

Quoted Prices
in Active
Markets
(Level 1)

Other
Observable
Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

Total($ in thousands)Money market funds

$


$
3,053

$


$
3,053Warrant liability

$


$


$
5,253

$
5,253


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

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

6. Fair Value Measurement (Continued)

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

Quoted Prices
in Active
Markets
(Level 1)

Other
Observable
Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

Total($ in thousands)Money market funds

$


$
53

$


$
53Warrant liability







$
1,798

$
1,798


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

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

Balance at December 31, 2009

$
5,253Exercise warrants


(141
)Change in fair value


(1,452
)Balance at March 31, 2010

$
3,660Exercise warrants


(196
)Change in fair value


(1,796
)Balance at June 30, 2010

$
1,668Exercise warrants


Change in fair value


130Balance at September 30, 2010

$
1,798


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

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

7. Common Stock and Warrant Liability

September 2009 Financing

In September 2009, the Company entered into a securities purchase agreement with certain investors pursuant to which it (i) sold
to certain existing investors a total of 1,030,028 units, each unit consisting of (a) one share of common stock (collectively, the "Shares") and (b) one warrant (collectively, the
"Warrants") to purchase 0.662 shares of common stock at an exercise price equal to $2.61 per share (105% of the closing bid price of the common stock on September 15, 2009), at a purchase price
equal to $2.57 per unit, and (ii) sold to certain new investors a total of 3,281,252 units, each unit consisting of (a) one share of common stock and (b) one warrant to purchase
0.50 shares of

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

7. Common Stock and Warrant Liability (Continued)

common
stock at an exercise price equal to $2.61 per share, at a purchase price equal to $2.24 per unit (together, the "September 2009 Offering"). The closing of the transaction occurred on
September 18, 2009. In connection with the September 2009 Offering, the Company raised approximately $10.0 million in gross proceeds. After paying $646,000 in placement agent fees and
offering expenses, the net proceeds were $9.4 million.

In
connection with the September 2009 Offering, the Company issued warrants to purchase an aggregate of 2,322,509 shares of common stock which become exercisable on or after the six
month anniversary following the closing of the transaction. The warrants have an exercise price of $2.61 per share and have a five and a half year term. The fair value of the warrants was estimated at
$4.5 million using a Black-Scholes model with the following assumptions: expected volatility of 100%, risk free interest rate of 2.49%, expected life of five and a half years and no dividends.
Expected volatility was based on the volatility contractually specified in the warrant agreements. Due to a price adjustment
clause included in the warrant agreements, the warrants were deemed to be a liability and, therefore, the fair value of the warrants was recorded in the liability section of the balance sheet. As
such, the warrants will be revalued each reporting period, with the resulting gains and losses recorded as the change in fair value of warrant liability on the statement of operations. In connection
with the December 2009 Offering, the exercise price for the warrants issued in this transaction was subsequently reduced to $0.3124 per share in accordance with the terms of the warrant. For the three
month period ending September 30, 2010 the Company recorded an expense in the amount of $54,000 and for the nine month period ending September 30, 2010 the Company recorded a gain of
$1.1 million, respectively, for the change in the fair value of the warrant liability. During the nine months ended September 30, 2010, 502,231 warrant shares from the September 2009
Offering were exercised into common stock at an exercise price of $0.3124.

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

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

7. Common Stock and Warrant Liability (Continued)

December 2009 Financing

In December 2009, the Company entered into an Underwriting Agreement (the "Underwriting Agreement") with Thomas Weisel
Partners LLC (the "Underwriter"), pursuant to which it sold to the Underwriter 6,400,000 shares of common stock and warrants to purchase up to 4,160,000 shares of common stock sold in units, at
a price of $1.00 per unit ("December 2009 Offering"). Each unit consists of one share of common stock and a warrant to buy 0.65 of a share of common stock. The warrants will be exercisable for a
period of five years, beginning six months after issuance, at an exercise price of $1.4385 per share. The closing of the transaction occurred on
December 15, 2009. The Company received approximately $6.4 million in gross proceeds from the December 2009 Offering. After paying $718,000 in underwriting discounts, commissions and
offering expenses, the net proceeds were $5.6 million.

In
connection with the December 2009 Offering, the Company issued warrants to purchase an aggregate of 4,160,000 shares of common stock. The warrants have an exercise price of $1.44 per
share and have a five and a half year term. The fair value of the warrants was estimated at $2.7 million using a Black-Scholes model with the following assumptions: expected volatility of 100%,
risk free interest rate of 2.43%, expected life of five and a half years and no dividends. Expected volatility was based on the volatility contractually specified in the warrant agreements. Due to a
price adjustment clause included in the warrant agreements, the warrants were deemed to be a liability and, therefore, the fair value of the warrants was recorded in the liability section of the
balance sheet. As such, the warrants will be revalued each reporting period, with the resulting gains and losses recorded as the change in fair value of warrant liability on the income statement. For
the three month period ending September 30, 2010 the Company recorded an expense in the amount of $76,000 and for the nine month period ending September 30, 2010 the Company recorded a
gain of $2.0 million, respectively, for the change in the fair value of the warrant liability.

8. Debt

As of December 31, 2009 and September 30, 2010, the outstanding balance on a loan and security agreement was $4.9 million and $3.0 million, respectively.

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

2010

$
7882011


2,439Thereafter


Total future minimum payments


3,227Less: amount representing interest


(733
)Add: amortization of debt discount


503Carrying value of debt

$
2,997


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

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

8. Debt (Continued)

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

9. Restructuring

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

The
Company incurred restructuring charges relating to one-time termination benefits of approximately $667,000 in the second quarter of 2010, of which $543,000 was recorded
in research and development expense and $124,000 was recorded in selling, general and administrative expense. These charges represent employee severance and termination costs as well as facility
consolidation costs, which were partially paid out during the second quarter of 2010. In the third quarter the Company reversed $118,000 of severance expenses in connection with an employee waiving
his severance in exchange for the Company waiving elements of their non-compete agreement. The Company expects that payments associated with the restructuring provision will end in the
fourth quarter of 2010.

A
summary of restructuring activity is as follows:

Expense
May 13,
2010

Payments/
Settlements

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

$
548

$
(541
)
$
7Outplacement


35


(35
)

Other costsfacility consolidation related


84


(84
)

Total

$
667

$
(660
)
$
7


On
September 15, 2010, the Board of Directors of the Company approved a reduction in headcount and restructuring plan (the "September Restructuring Plan") which involved the
consolidation and reorganization of its operations in order to reduce operating costs. The September Restructuring Plan resulted in the elimination of approximately 14 positions during the third
fiscal quarter of 2010. Employees directly affected by the September Restructuring Plan were notified on September 16, 2010, and have been provided with severance arrangements including
outplacement assistance. These actions were approved as part of the Company's repositioning strategy in the diagnostics market.

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

9. Restructuring (Continued)

The
Company incurred restructuring charges relating to one-time termination benefits of approximately $172,000 in the third quarter of 2010, all of which was recorded in
research and development expense. These charges represent employee severance and termination costs. The Company expects that payments associated with the restructuring provision will continue into the
first quarter of 2011.

A
summary of restructuring activity is as follows:

Expense
September 16,
2010

Payments/
Settlements

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

$
164

$


$
164Outplacement


8





8Total

$
172

$


$
172


10. Impairment of Long Lived Assets

During the third quarter of 2010, the Company altered its business direction as a result of its inability to raise funding to support the repositioning of the Company in the genetic
analysis markets. As a result, the Company redirected its efforts to focus on a technology licensing and enforcement program to monetize the value of its intellectual property portfolio and to deploy
its limited resources by concentrating its research and development efforts in targeted areas designed to achieve tangible proof-of-concept goals, which may enable the Company
to seek partnership opportunities with companies interested in next-generation sequencing, or to pursue other funding and strategic alternatives.

As
a result of this altered business direction the Company undertook an analysis of the ongoing carrying value of its long lived assets. The Company determined that the ongoing value of
certain laboratory equipment was equivalent to its liquidation value, which the Company estimated was approximately ten percent of the original purchase price based on the value realized by other
similarly situated life science companies that have been forced to realize value through a liquidation process.

Based
on this analysis, during the three months ended September 30, 2010, the Company recorded an impairment charge related to long lived assets of approximately
$1.9 million, of which approximately $1.8 million was related to assets used in research and development and approximately $0.1 million was related to assets used for selling,
general and administrative purposes. These charges were derived from the net book value of the assets. The remaining book values of the Company's long lived assets are equivalent to ten percent of the
purchase price for certain laboratory equipment and the remaining unamortized value of certain intangible assets related to acquired intellectual property.

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

11. Subsequent Events

Bridge Financing and Senior Debt Restructuring

The Company entered the fourth quarter of 2010 without any prospects of securing long-term financing from outside
investors. An Independent Committee of the Board evaluated the alternatives available to the Company and determined that a bridge financing lead by certain inside investors was in the best interests
of the Company's stakeholders in view of the Company's current financial and operating condition, and would best position the Company to continue operations for the remainder of 2010 and into 2011.
The Independent Committee met multiple times to consider the alternatives and reached the conclusion that the bridge financing was the best alternative for generating value for stakeholders. As a
result, the Company entered into an insider bridge loan facility with two of the four venture capital firms which decided to participate in the bridge financing and whose representatives are members
of the Board. In connection with this transaction, the Company entered into a Subordinated Secured Note Purchase Agreement (the "Note Purchase Agreement") with investment funds affiliated with Atlas
Venture and Flagship Ventures (the "Purchasers"), pursuant to which the Company has agreed to sell to the Purchasers, and the Purchasers have agreed to purchase, up to an aggregate of $4,000,000 of
convertible promissory notes (the "Notes"), a portion of which is committed and a portion of which is optional (the "Bridge Debt Financing"). Upon the effective date of the Note Purchase Agreement,
the Purchasers purchased Notes having an aggregate principal amount of $333,333. Subject to the Company's continued compliance with the terms of the Note Purchase Agreement, including that there not
be an event of default thereunder, upon notice from the Company the Purchasers are committed to purchase an aggregate of an additional $333,333 of Notes in each of five subsequent closings, for a
total aggregate committed amount of $2,000,000. The Purchasers also have the right, but not the obligation, upon the Company's request to purchase up to an additional $2,000,000 of Notes on or before
December 31, 2012.

The
Notes will accrue interest at a rate of 10% per annum plus a risk premium as described below. The outstanding principal and any unpaid accrued interest on all of the Notes shall be
due and payable in full (i) upon demand by the Purchasers, which demand shall be no earlier than December 31, 2012,
(ii) upon the Company receiving at least $10,000,000 in proceeds from a subsequent equity financing, (iii) upon a change of control of the Company or (iv) upon an event of
default. A Purchaser may elect to convert principal and interest outstanding under any of the Notes upon the closing of any future round of equity or debt financing of the Company into shares, and at
the per share price, of the securities issued at such financing. Simultaneous with execution of the Note Purchase Agreement, the Company and the requisite parties entered into an Amendment to the
Amended and Restated Investor Rights Agreement, dated as of March 1, 2006, by and among the Company and the parties specified therein, including the Purchasers (the "IRA Amendment"), pursuant
to which the Purchasers will be entitled to demand and piggyback registration rights consistent with the terms of the Purchasers existing registration rights for any securities issued upon conversion
of the Notes.

The
Company's obligations under the Notes are subordinated to the indebtedness incurred by the Company under the Loan and Security Agreement among the Company, certain lenders (the
"Lenders") and General Electric Capital Corporation ("GE"), as agent, dated as of December 31, 2007, as amended (the "Loan Agreement"). The Company's obligations under the Notes are secured by
a security interest on all of the Company's assets, including its intellectual property, that, with regard to

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Table of Contents

HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

11. Subsequent Events (Continued)

all
of the Company's assets other than the cause of action that is the subject of the intellectual property litigation against Pacific Biosciences, Illumina and Life Technologies (and any recovery
therefrom) (the "Cause of Action"), is junior to the Lenders' first priority security interest under the Loan Agreement, and with regard to the Cause of Action, is junior to the Lenders' first
priority security interest under the Loan Agreement and the second priority security interest of the Company's outside legal counsel that is representing the Company in the Cause of Action (the
"Outside IP Litigation Counsel").

As
an inducement for the Purchasers to purchase the Notes, the Company entered into a Risk Premium Payment Agreement, dated as of November 16, 2010, with the Purchasers (the "Risk
Premium Agreement") simultaneous with the execution of, and as required by, the Note Purchase Agreement. Under the terms of the Risk Premium Agreement, the Company has agreed to pay the Purchasers the
following portions of the consideration the Company receives (the "Payment Consideration") in Liquidity Transactions, as defined below: (i) until the aggregate Payment Consideration equals
$10 million, 60% of the Payment Consideration; (ii) for aggregate Payment Consideration from $10 million to $20 million, 50% of the Payment Consideration; (iii) for
aggregate Payment Consideration from $20 million to $30 million, 40% of the Payment Consideration; (iv) for aggregate Payment Consideration from $30 million to
$40 million, 30% of the Payment Consideration; and (v) for aggregate Payment Consideration in excess of $40 million, 10% of the Payment Consideration (any such payments, "Risk
Premium Payments"). For purposes of determining amounts payable under the Risk Premium Agreement, the Payment Consideration will not include amounts the Company uses to first satisfy specified
existing obligations, including obligations under the Loan Agreement, under professional contingency arrangements (including the contingency fee arrangement between the Company and the Outside IP
Litigation Counsel relating to the Cause of Action) and obligations that may arise under existing technology license agreements (the "Existing IP Licensing Agreements") between the Company and each of
Arizona Technology Enterprises, Roche Diagnostics GMBH and Roche Diagnostics Corporation, and California Institute of Technology, (as previously disclosed by the Company, under the existing IP
Licensing agreements, the Company is obligated to pay license fees in connection with the licensing, sublicensing, legal settlements, or sales of specified intellectual property or services
provided to third parties ranging from a single digit percentage up to one-half of the income from those activities). For purposes of the Risk Premium Agreement and subject to various provisions
therein, the following shall constitute Liquidity Transactions: (A) the receipt by the Company of payments from third parties relating to the intellectual property portfolio of the Company,
including payments received as a license or other settlement in patent infringement litigation brought by the Company ("IP Licensing Events"); (B) a merger of the Company in which there is a
change of control; and (C) the sale or exclusive license by the Company of all or substantially all of its assets or intellectual property.

In
connection with the Bridge Debt Financing, on November 16, 2010, the Company, GE and the Lenders executed the Fourth Amendment to the Loan and Security Agreement, dated
November 16, 2010 (the "Fourth Amendment"). Pursuant to the Fourth Amendment, GE and the Lenders waived various existing events of default and consented to the Company's incurrence of
indebtedness and grant of a junior security interest to the Purchasers under the Note Purchase Agreement. The Company amended warrants previously issued to the Lenders to re-price the
Warrants from $4.80 to $0.01 and GE and the Lenders agreed to defer a $200,000 payment due January 31, 2011 to the term loan maturity date. In addition, subject to the Company's continued
compliance with the terms of the Loan

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

11. Subsequent Events (Continued)

Agreement,
including that there not be an event of default thereunder, GE and the Lenders agreed to defer up to five additional principal monthly payments with respect to the term loan. Also pursuant
to the Fourth Amendment, the Company agreed to grant the Lenders a first priority security interest in all of the Company's intellectual property and to pay the Lenders an additional $50,000 to
$200,000 (depending upon how many principal payments are deferred) upon the full repayment of all outstanding amounts due with respect to the term loans. Under the terms of the Loan and Security
Agreement prior to its amendment by the Fourth Amendment, the scope of the Lenders' first priority security interest included all of the Company's assets other than intellectual property.

In
connection with the Bridge Debt Financing and the Fourth Amendment and as security for the Company's obligations under its contingency fee arrangement with Outside IP Litigation
Counsel relating to the Cause of Action, the Company and the Outside IP Litigation Counsel entered into a Subordinated Security Agreement pursuant to which the Company agreed to grant the Outside IP
Litigation Counsel a second priority security interest in the Cause of Action. Under the terms of the contingency fee arrangement, the Company is obligated to pay outside IP Litigation Counsel up to
40% of the proceeds paid to the Company in connection with the settlement, judgement, or other resolution of the Cause of Action or certain business transactions resulting from or relating to the
Cause of Action.

In
approving the transactions relating to the Bridge Debt Financing and the Fourth Amendment, the Board of Directors of the Company approved a management incentive plan pursuant to which
participants in the plan will be entitled to receive, in the aggregate, an amount equal to 7.5% of the Payment Consideration resulting from IP Licensing Events (which, as noted above, represents gross
proceeds from IP Licensing Events less various contractual and contingent payments described above) (the "Management Incentive Plan"). The specific terms of the Management Incentive Plan,
administration and all payments to be made to management thereunder will be under the control and direction of the Compensation Committee of the Board of Directors of the Company.

The
agreements and arrangements described above and all of the transactions contemplated by those agreements were approved by an independent committee of the Board of Directors of the
Company. In addition, Noubar B. Afeyan, PhD, who is the founder, a Managing Partner and the Chief Executive Officer of Flagship Ventures, and Peter Barrett, who is a Partner of Atlas Venture,
abstained from the vote of the Board of Directors of the Company approving the transactions.

NASDAQ Delisting

On June 28, 2010, the Company received a letter from The NASDAQ Stock Market LLC ("NASDAQ") advising that for the
previous 30 consecutive business days, the Company failed to comply with the minimum market value of listed securities ("MVLS") requirement for continued listing on the NASDAQ Global Market pursuant
to NASDAQ Marketplace Rule 5450(b)(2)(A) and that the Company did not otherwise satisfy the criteria for continued listing pursuant to NASDAQ Marketplace Rule 5450(b). NASDAQ stated in
its letter that in accordance with NASDAQ Marketplace Rule 5810(c)(3)(C), the Company will be provided 180 calendar days, or until December 27, 2010, to regain compliance with the MVLS
continued listing requirement. MVLS is calculated by multiplying the total shares outstanding by the daily closing bid price. The NASDAQ letter also states that if, at any time before
December 27, 2010, the MVLS of the Company's common stock closes at $50,000,000

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

11. Subsequent Events (Continued)

or
more for a minimum of 10 consecutive business days, the NASDAQ staff will provide the Company with written notification that it has achieved compliance with the MVLS continued listing requirement
and the matter will be closed. On October 12, 2010, the Company received a delisting determination letter from NASDAQ due to the Company's failure to regain compliance with the NASDAQ Global
Market's minimum bid price requirement for continued listing as set forth in Listing Rule 5450(a)(1). In addition, the Company has not yet held its annual meeting of stockholders for fiscal
2010 which is an additional requirement for Helicos to comply with in order to maintain its continued listing on NASDAQ. Based on the unlikely ability of the Company to meet the NASDAQ MLVS
requirements due to the state of its finances and near-term business prospects, on November 12, 2010, the Company withdrew its appeal to NASDAQ. As a result, the Company's securities were
delisted from the NASDAQ Global Market and the trading of the Company's common stock was suspended before the opening of business on November 16, 2010, and a Form 25-NSE will
be filed with the Securities and Exchange Commission which will remove the Company's securities from listing and registration on The NASDAQ Stock Market. The Company has been advised by Pink OTC
Markets Inc., which operates an electronic quotation service for securities traded over-the-counter ("OTC"), that its securities are immediately eligible for quotation
on the OTCQB. The OTCQB is a market tier for OTC traded companies that are registered and reporting with the Securities and Exchange Commission. The Company has also been advised that
its shares will continue to trade under the symbol HLCS. Investors can now view real time stock quotes for HLCS at http://www.otcmarkets.com.

Please
see Part II, Item 1A, in this Form 10-Q, for risks related to ownership of the Company's common stock.

Qualified Therapeutic Discovery Project Grant Funds

The Company has been awarded three federal grants totaling approximately $722,000 under the Patient Protection and Affordable Care Act
of 2010, of which $470,000 will be received during the fourth quarter of 2010 and the balance will be received during the first half of 2011 provided that the Company continues to qualify for funding
under the program. The grants were awarded under the Qualified Therapeutic Discovery Project (QDTP) aimed towards producing products that diagnose diseases or determine molecular factors related to
diseases by developing molecular diagnostics to guide therapeutic decisions.

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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

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

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

As
previously disclosed in our quarterly and periodic reports with the Securities and Exchange Commission, in the first quarter of 2010, we began a process of considering alternatives to
our long-term strategic focus, including a repositioning of our business in the genetic analysis markets. As a result of this process, on June 25, 2010, we announced that we had
launched our diagnostics business and that we were in early stages of validating molecular diagnostic (MDx) tests that utilize our HeliScope Sequencer. To date, our research and development team has
made progress in developing two prototype tests. The first test is for the detection of gene mutations indicative of a woman's increased risk of developing hereditary breast or ovarian cancer. The
second prototype is a non-invasive prenatal diagnostic test. Nevertheless, despite this scientific progress, and a lengthy and comprehensive financing initiative supported by a nationally
recognized investment bank during the second and third quarter of 2010, we were unable to secure any long-term equity financings or financing arrangements with strategic partners during
the third quarter of 2010. We have had numerous meetings with prospective investors and corporate partners and have not been able to secure a bona-fide offer for financing or a strategic
transaction. In addition, we have
had very limited commercial activity to date during fiscal 2010. Further, as of September 30, 2010 and November 10, 2010, we only had $1.9 million and $1.8 million,
respectively, in cash and cash equivalents.

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As
previously disclosed, on May 11, 2010, our Board of Directors (the "Board") approved a reduction in headcount and restructuring plan (the "May Restructuring Plan") which
involved the consolidation and reorganization of our operations in order to reduce operating costs. The May Restructuring Plan resulted in the elimination of approximately 40 positions during the
second fiscal quarter of 2010. In order to further reduce operating costs and preserve cash, on September 15, 2010, our Board of Directors (the "Board") approved a subsequent reduction in
headcount and restructuring plan (the "September Restructuring Plan") which involved the consolidation and reorganization of our operations. The September Restructuring Plan eliminated approximately
14 positions during the third quarter of 2010. We entered the fourth quarter of 2010 with approximately 24 employees. In addition, during the third quarter of 2010, as a result of the inability to
complete the financing referenced above and the subsequent change in business direction, we recorded charges of $2.6 million in connection with a write-off of certain of our
inventory that is no longer used in the business and $1.9 million in connection with the impairment of certain long-lived assets.

Going
forward, we plan to deploy our limited resources by focusing on intellectual property monetization and concentrating our research and development efforts in targeted areas designed
to achieve tangible proof-of-concept goals, which may enable us to seek partnership opportunities with companies interested in next-generation sequencing, or to
pursue other funding and strategic alternatives. As of the date of this filing, we do not have adequate resources and will need to generate additional funding from various sources including contract
sequencing service projects, strategic collaborations and licensing activities. On October 14, 2010, we announced the launch of a technology licensing program for our Single Molecule Sequencing
and Sequencing-by-Synthesis intellectual property. We plan to defend our intellectual property rights through licensing and enforcement strategies. In this regard, on October 22, 2010, we filed
an amended complaint against Pacific Biosciences by naming Illumina, Inc. and Life Technologies Corporation as additional defendants. The amended lawsuit alleges that the defendants willfully
infringe our patents in suit by using their respective technologies, sequencing systems and products which we allege are within the scope of one or more claims of our patents in suit. We are seeking a
permanent injunction enjoining the defendants from further infringement as well as monetary and punitive damages, costs and attorneys' fees, interest and other relief as determined by the Court. See
Part II, Item 1 Legal Proceedings for more information.

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

We
entered the fourth quarter of 2010 without any prospects of securing long-term financing from outside investors. An Independent Committee of the Board evaluated the
alternatives available to us and determined that a bridge financing lead by certain inside investors was in the best interests of our stakeholders in view of our current financial and operating
condition, and would best position us to continue operations for the remainder of 2010 and into 2011. The Independent Committee met multiple times to consider the alternatives and reached the
conclusion that the bridge financing was the best alternative for generating value for stakeholders. As a result, we entered into an insider bridge loan facility with two of the four venture capital
firms which decided to participate in the bridge financing and whose representatives are members of the Board. In connection with this transaction, we entered into a Subordinated Secured Note Purchase
Agreement (the "Note Purchase Agreement") with investment funds affiliated with Atlas Venture and Flagship Ventures (the "Purchasers"), pursuant to which we have agreed to sell to the Purchasers, and
the Purchasers have agreed to purchase, up to an aggregate of $4,000,000 of convertible promissory notes (the "Notes"), a portion of which is committed

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and
a portion of which is optional. As an inducement for the Purchasers purchase of the Notes, we entered into a Risk Premium Payment Agreement, dated as of November 16, 2010, with the
Purchasers (the "Risk Premium Agreement") simultaneous with the execution of, and as required by, the Note Purchase Agreement. See Note 11, Subsequent Events, in the Notes to Consolidated Financial
Statements, in this Form 10-Q, for a description of the Bridge Financing and Senior Debt Restructuring.

Although
we believe that the HeliScope Sequencer has unique utility across a broad array of MDx tests, due to significant financial and resource constraints, we have discontinued the
plan to develop our own genetic testing laboratory certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA). Nevertheless, we still believe that diagnostics applications may
benefit from the specific features of our System, including the platform's ability to sequence non-amplified natural DNA and RNA directly, quantitative accuracy, high throughput, ability
to use small sample quantities in simple and cost effective preparation methods, as well as lack of biases typically seen with sample amplification.

Notwithstanding
recent workforce reductions, restructurings, and the bridge financing, we may not have sufficient funds to pursue our new business priorities. We will require significant
additional capital in the first half of 2011 to continue our operations. As a result, we are no longer able to remain current in making payments to trade vendors and other unsecured creditors when
such payments are due and, despite the restructuring of our credit facility with GE Capital discussed above, this inability to remain current increases the likelihood that GE Capital could declare a
default under the credit facility in the near-term, including with regard to solvency. These workforce reductions, as well as curtailed financial resources, will further impact our ability
to implement our business priorities. In addition, these constraints have caused us to significantly scale back service support and reagent supply to our current installed base. We have also
significantly curtailed collaborative activities with other parties. Nevertheless, we believe that these actions will preserve our viability and provide additional time to execute our new business
priorities.

Since
inception, we have incurred losses and have not generated positive cash flows from operations. We expect our losses to continue for a considerable period of time. These losses,
among other things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders' equity. As of September 30, 2010 and November 10, 2010, we
had $1.9 million and $1.8 million, respectively, in cash and cash equivalents. We will, during the first half of 2011, require significant additional capital to continue our operations.
Because our present capital resources are not sufficient to fund our planned operations for a twelve month period as of the date of the Annual Report on Form 10-K for the year ended
December 31, 2009, our current financial resources raise substantial doubt about our ability to continue as a going concern.

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

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On
June 28, 2010, we received a letter from The NASDAQ Stock Market LLC ("NASDAQ") advising that for the previous 30 consecutive business days, we failed to comply with the
minimum market value of listed securities ("MVLS") requirement for continued listing on the NASDAQ Global Market pursuant to NASDAQ Marketplace Rule 5450(b)(2)(A) and that we did not otherwise
satisfy the criteria for continued listing pursuant to NASDAQ Marketplace Rule 5450(b). NASDAQ stated in its letter that in accordance with NASDAQ Marketplace Rule 5810(c)(3)(C), we will
be provided 180 calendar days, or until December 27, 2010, to regain compliance with the MVLS continued listing requirement. MVLS is calculated by multiplying the total shares outstanding by
the daily closing bid price. The NASDAQ letter also states that if, at any time before December 27, 2010, the MVLS of our common stock closes at $50,000,000 or more for a minimum of 10
consecutive business days, the NASDAQ staff will provide us with written notification that we have achieved compliance with the MVLS continued listing requirement and the matter will be closed. On
October 12, 2010, we received a delisting determination letter from NASDAQ due to our failure to regain compliance with the NASDAQ Global Market's minimum bid price requirement for continued
listing as set forth in Listing Rule 5450(a)(1). In addition, we have not yet held our annual meeting of stockholders for fiscal 2010 which is an additional requirement for us to comply with in
order to maintain our continued listing on NASDAQ. Based on our unlikely ability to meet the NASDAQ MVLS requirements due to the state of our finances and near-term business prospects, on
November 12, 2010, we withdrew our appeal to NASDAQ and, therefore, our securities were delisted from the NASDAQ Global Market and the trading of our
common stock was suspended before the opening of business on November 16, 2010, and a Form 25-NSE will be filed with the Securities and Exchange Commission which will remove
our securities from listing and registration on The NASDAQ Stock Market. We have been advised by Pink OTC Markets Inc., which operates an electronic quotation service for securities traded
over-the-counter ("OTC"), that our securities are immediately eligible for quotation on the OTCQB. The OTCQB is a market tier for OTC traded companies that are registered and
reporting with the Securities and Exchange Commission. We have also been advised that our shares will continue to trade under the symbol HLCS. Investors can now view real time stock quotes for HLCS at
http://www.otcmarkets.com.

Please
see Part II, Item 1A, in this Form 10-Q, for risks related to ownership of our common stock.

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

Financial Overview

Product revenue

Product revenue for the nine months ended September 30, 2009 primarily consists of $1,800,000 in revenue from the sale of two
instrument systems and $377,000 of revenue recognized from the sale of proprietary reagents to customers. Product revenue for the nine months ended September 30, 2010 primarily consists of
$341,000 of revenue recognized from the sale of proprietary reagents to customers.

Grant revenue

In September 2006, we were awarded a grant from the National Human Genome Research Institute ("NHGRI"), a branch of the National
Institutes of Health ("NIH"), pursuant to which were eligible to receive reimbursement of our research expenses of up to $2.0 million through August 2009.

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In
connection with this award we recognized $454,000 in revenue during the nine months ended September 30, 2009. We have fully expended all available funds under this grant as of
December 31, 2009.

In
September 2009, we were awarded another grant from the NHGRI, pursuant to which we are eligible to receive reimbursement of our research expenses of up to $2.9 million through
August 2011. The two year grant is part of the Sequencing Technology Development Program representing one of NHGRI's signature projects for the American Recovery and Reinvestment Act's effort to
jumpstart the economy and create or save millions of jobs. This project, a part of NIH's "Grand Opportunities" program, is designed to support large-scale, high impact research projects that are
expected to accelerate critical scientific breakthroughs and enable growth and investment in biomedical research and development. In connection with this award we recognized $1,150,000 in revenue for
the nine months ended September 30, 2010 and $11,000 in revenue for the nine months ended September 30, 2009.

In
April 2010, we were awarded an RO1 Research Project Grant from the NHGRI, pursuant to which we are eligible to receive reimbursement for our research expenses of up to
$1.6 million through February 2013. We are pursuing research related to direct RNA sequencing under this grant. In connection with this award, we recognized $149,000 in revenue for the nine
months ended September 30, 2010.

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

In
June 2010, we were awarded a Phase 1 Small Business Innovation Research grant from the NHGRI under which we will be pursuing research related to the development of methods to
sequence patient DNA and RNA samples at an attomole level. The phase 1 portion of the grant provides funding for
eligible research expenses of up to $146,000 through November 2010. Following the completion of phase 1, we may be eligible for additional funding under this grant. In connection with this
award we recognized $26,000 in revenue for the nine months ended September 30, 2010.

Cost of product revenue

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

Research and development expenses

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

Substantially
all research and development expenses since our inception were in connection with the launch of the initial version of the Helicos® Genetic Analysis System and
we believe that we had incurred the substantial majority of the development costs associated with the commercial launch of the first generation of the Helicos System through December 2007. However,
additional costs were incurred

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during
2008, 2009 and the first nine months of 2010 to both maintain and enhance the initial version of the Helicos System in addition to development of new and different genetic analysis assays.

Research
and development expenses for the nine months ended September 30, 2009 and 2010 were $11.1 million and $13.2 million, respectively. In addition to our
ongoing research and development efforts, we have incurred start-up manufacturing costs related to the assembly, testing and performance validation of the Helicos System. These costs were
accounted for as research and development expenses in our pre-commercialization phase as we prepared to ship the first Helicos System, which occurred on March 5, 2008. We reached
technological feasibility of the
Helicos System in December 2007 and, as a result, we began to record the cost of the Helicos System in inventory. During the quarter ended September 30, 2010, we recorded a $2.6 million
charge to research and development expenses to write-off excess inventory.

Selling, general and administrative expenses

Selling, general and administrative expenses consist principally of salaries, benefits and stock-based compensation, consulting and
professional fees, including patent related costs, general corporate costs and facility costs not otherwise included in research and development expenses or cost of product revenue.

Selling,
general and administrative expenses for the nine months ended September 30, 2009 and 2010 were $8.7 million and $9.1 million, respectively.

Restructuring

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

We
incurred restructuring charges relating to one-time termination benefits of approximately $667,000 in the second quarter of 2010, of which $543,000 was recorded in
research and development expense and $124,000 was recorded in selling, general and administrative expense. These charges represent employee severance and termination costs as well as facility
consolidation costs, which were partially paid out during the second and third quarter of 2010.

In
the third quarter of 2010, we reversed $118,000 of severance expenses in connection with an agreement by us to waive certain provisions of a former employee's non-compete
agreement in exchange of certain previously committed severance payments. We expect that payments associated with the restructuring provision will end in the fourth quarter of 2010. We estimate that
this
restructuring will result in an annual cost savings of approximately $6.8 million, including salaries and benefits.

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

Expense
May 13,
2010

Payments/
Settlements

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

$
548

$
(541
)
$
7Outplacement


35


(35
)

Other costsfacility consolidation related


84


(84
)

Total

$
667

$
(660
)
$
7


On
September 15, 2010, our Board of Directors approved a reduction in headcount and restructuring plan (the "September Restructuring Plan") which involved the consolidation and
reorganization of our operations in order to reduce operating costs. The September Restructuring Plan resulted in the elimination of approximately 14 positions during the second fiscal quarter of
2010. Employees directly affected by the September Restructuring Plan were notified on September 16, 2010, and have been provided with severance arrangements including outplacement assistance.
These actions were approved as part of our previously announced efforts to consider alternatives to our existing long-term strategic focus, including a repositioning of our business in the
genetic analysis markets.

We
incurred restructuring charges relating to one-time termination benefits of approximately $172,000 in the third quarter of 2010, $164,000 was recorded in research and
development expense and $8,000 in selling, general and administrative expenses. These charges represent employee severance and termination costs. We expect that payments associated with the
restructuring provision will continue into the first quarter of 2011. We estimate that this restructuring will result in an annual cost savings of approximately $1.4 million, including salaries
and benefits.

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

Expense
September 16,
2010

Payments/
Settlements

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

$
164

$


$
164Outplacement


8





8Total

$
172

$


$
172


Impairment of Long Lived Assets

During the third quarter of 2010, we altered our business direction as a result of our inability to raise funding to support the
repositioning of our business in the genetic analysis markets. As a result, we redirected our efforts to focus on a technology licensing and enforcement program to monetize the value of our
intellectual property portfolio and to deploy our limited resources by concentrating our research and development efforts in targeted areas designed to achieve tangible
proof-of-concept goals, which may enable us to seek partnership opportunities with companies interested in next-generation sequencing, or to pursue other funding
and strategic alternatives.

As
a result of this altered business direction, we undertook an analysis of the ongoing carrying value of our long lived assets. We determined that the ongoing value of certain
laboratory equipment was equivalent to our liquidation value, which we estimated was approximately ten percent of the

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original
purchase price based on the value realized by other similarly situated life science companies that have been forced to realize value through a liquidation process.

Based
on this analysis, during the three months ended September 30, 2010, we recorded an impairment charge related to long lived assets of approximately $1.9 million, of
which approximately $1.8 million was related to assets used in research and development and approximately $0.1 million was related to assets used for selling, general and administrative
purposes. These charges were derived from the net book value of the assets. The remaining book values of our long lived assets are equivalent to ten percent of the purchase price for certain
laboratory equipment and the remaining unamortized value of certain intangible assets related to acquired intellectual property.

Overview of Results of Operations

Three and nine months ended September 30, 2009 compared to three and nine months ended September 30, 2010

Product revenue.We recognized $1.1 million and $2.2 million of product revenue during the three and nine months ended
September 30, 2009, respectively, and $214,000 and $341,000 of product revenue during the three and nine months ended September 30, 2010, respectively. Product revenue recognized during
the three months ended September 30, 2009 primarily consists of $1.0 million from the sale of an instrument and the sale of proprietary reagents to customers. Product revenue recognized
during the nine months ended September 30, 2009 primarily consists of $1.8 million of revenue from the sale of two instruments, while the remaining amount consists of revenue from the
sale of proprietary reagents to customers. Product revenue recognized during the three and nine months ended September 30, 2010 consists primarily of revenue from the sale of proprietary
reagents to customers.

Grant revenue.We recognized $13,000 and $465,000 of grant revenue during the three and nine months ended September 30, 2009 and
$422,000 and
$1.5 million of grant revenue during the three and nine months ended September 30, 2010, respectively. Grant revenue recognized during the three and nine months ended
September 30, 2009 related to the reimbursement of expenses in connection with our government research grants. Grant revenue recognized during the three months ended September 30, 2010
related to the reimbursement of expenses in connection with our government research grants. Grant revenue recognized during the nine months ended September 30, 2010 related to the reimbursement
of expenses in connection with our government research grants of $1.3 million and $200,000 from a contract with The Children's Oncology Group.

Cost of product revenue.We recorded $451,000 and $1.1 million as cost of product revenue during the three and nine months ended
September 30, 2009, respectively and we recorded $94,000 and $270,000 as cost of product revenue during the three and nine months ended September 30, 2010, respectively. Cost of product
revenue consists of costs associated with the sale of instruments and sale of proprietary reagents. The decrease in cost of product revenue from the nine months ended September 30, 2009 to the
nine months ended September 30, 2010 is primarily due to no ongoing system sales in 2010.

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

Three Months
Ended
September 30,





Nine Months
Ended
September 30,2009

2010

Change

2009

2010

Change($ in thousands)Research and development

$
3,513

$
4,945

$
1,432


41
%
$
11,145

$
13,207

$
2,062


19
%


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Research
and development expenses increased by $1,432,000 from the three months ended September 30, 2009 to the three months ended September 30, 2010. The increase was
primarily due to recording a charge of $2,570,000 to write-off certain excess inventory during the third quarter of 2010, a restructuring charge of $164,000 recorded in connection with the
September restructuring, offset by a decrease in stock-based compensation of $176,000, a decrease of $96,000 in occupancy costs, a partial reversal of the May 2010 restructuring charge of $118,000,
and a net decrease of product development costs, that included lab expenses, materials, supplies, temporary help, salaries and benefits, and prototype expenses of $912,000.

In
comparing the nine months ended September 30, 2009 to the nine months ended September 30, 2010, research and development expenses increased by $2,062,000. The increase
was primarily due recording a charge of $2,570,000 to write-off certain excess inventory during the third quarter of 2010, restructuring expenses of $589,000, partially offset by a $38,000
decrease in stock-based compensation, a decrease of $279,000 in occupancy costs and by a net decrease of $780,000 in of product development costs, that include lab expenses, materials, supplies,
temporary help, salaries and benefits, and prototype expenses.

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

Three Months
Ended
September 30,





Nine Months
Ended
September 30,2009

2010

Change

2009

2010

Change($ in thousands)Selling, general and administrative

$
3,145

$
2,347

$
(798
)

-25
%
$
8,728

$
9,112

$
384


4
%


Selling,
general and administrative expenses decreased by $798,000 from the three months ended September 30, 2009 to the three months ended September 30, 2010. The decrease
was primarily due to a $575,000 decrease in salaries and benefits and decrease of $51,000 in public company costs, and a decrease of $298,000 in other expenses, that include occupancy costs,
recruiting, marketing, travel,
supplies, and repairs and maintenance, offset by an increase in stock- based compensation expenses of $94,000, and an increase of patent expenses of $33,000.

In
comparing the nine months ended September 30, 2009 to the nine months ended September 30, 2010, selling, general and administrative expenses increased by $384,000. The
increase was primarily due to an increase in stock-based compensation expenses of $1,310,000, restructuring charges of $132,000, an increase of patent expenses of $251,000, and an increase of $157,000
in public company expenses, partially offset by a decrease of $610,000 for salaries and benefits, a $231,000 decrease in occupancy costs, a decrease of $70,000 in travel expenses and a decrease of
$555,000 in other expenses, that include recruiting, marketing, supplies, and repairs and maintenance.

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

Three Months
Ended
September 30,





Nine Months
Ended
September 30,2009

2010

Change

2009

2010

Change($ in thousands)Interest Income

$
5

$
1

$
(4
)

80
%
$
67

$
18

$
(49
)

-73
%


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

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

Three Months
Ended
September 30,





Nine Months
Ended
September 30,2009

2010

Change

2009

2010

Change($ in thousands)Interest Expense

$
246

$
106

$
(140
)

-57
%
$
826

$
451

$
(375
)

-45
%


The
decrease in interest expense from the three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2010 is attributable to
the year over year decrease in our debt obligations.

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

Three Months Ended September 30,





Nine Months Ended September 30,2009

2010

Change

2009

2010

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

$
(710
)
$
(130
)
$
580


-82
%
$
(710
)
$
3,117

$
3,827


-539
%


In
connection with the September and December 2009 equity offerings, we issued warrants to purchase an aggregate of 6,482,509 shares of common stock. The fair value of the warrants is
recorded in the liability section of the balance sheet and at September 30, 2010 was estimated at $1.8 million. The fair value of the warrant liability will be determined at the end of
each reporting period with the resulting gains and losses recorded as the change in fair value of warrant liability on the statement of operations. For the three month period ended
September 30, 2010, we realized an expense of $130,000 and for the nine month period ended September 30, 2010 we realized a gain of $3.1 million, respectively, due to the
change in the fair value of the warrant liability. This gain is principally a result of the decrease of our stock price between December 31, 2009 and September 30, 2010. During the nine
months ended September 30, 2010, warrants for 502,231 common shares were exercised from the September 30, 2009 equity offering at an exercise price of $0.3124.



We have incurred losses since our inception in May 2003 and, as of September 30, 2010, we have an accumulated deficit of
$187.6 million. We have financed our operations to date principally through the sale of common stock and preferred stock, including our IPO, two private placements of common stock and warrants,
an underwritten offering of common stock and warrants, debt financings and interest earned on investments. Through September 30, 2010, we have received net proceeds of $80.4 million
through the issuance of common stock, including our IPO, private placements and an underwritten offering of common stock and warrants, $66.8 million from the issuance of preferred stock,
$2.5 million in debt financing from a lender to finance equipment purchases, and $19.6 million in debt financing from a lender for working capital, capital expenditures and general
corporate purposes. Working capital as of December 31, 2009 was $11.4 million, consisting of $24.5 million in current assets and $13.1 million in current liabilities.
Working capital as of September 30, 2010 was $(7.0) million, consisting of $6.0 million in current assets and $13.0 million in current liabilities. Our cash and cash equivalents
are held in interest-bearing cash accounts. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily to achieve liquidity and capital preservation.

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

Nine Months Ended
September 30,2009

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

$
(15,040
)
$
(12,187
)Investing activities


(83
)

(4
)Financing activities


6,879


(1,889
)Net decrease in cash and cash equivalents

$
(8,244
)
$
(14,080
)


Net
cash used in operating activities was $15.0 million for the nine months ended September 30, 2009 compared to $12.2 million for the nine months ended
September 30, 2010. The $2.8 million decrease was primarily due to an increase in the net loss of $0.2 million, an increase in the change of accounts receivables of
$0.5 million, an increase in prepaid and other current assets of $0.4 million, an increase in deferred revenue of $2.2 million, an increase in non-cash stock-based
compensation expense of $1.3 million, a charge of $2.6 million for decrease in the net realizable value of inventory, and an impairment charge for long lived assets of
$1.9 million, offset by a decrease in accrued expenses of $0.7 million, a decrease in inventory of $0.1 million, a decrease in the change in accounts payable of
$0.2 million, a decrease related to the fair value of the warrant liability of $3.8 million and a decrease in depreciation and amortization expense of $0.9 million.

Net
cash used in investing activities was $83,000 for the nine months ended September 30, 2009 compared to $4,000 for the nine months ended September 30, 2010.

Net
cash proceeds in financing activities were $6.9 million for the nine months ended September 30, 2009 compared to net cash usage of $1.9 million for the nine
months ended September 30, 2010. The $8.8 million decrease was primarily due to a $9.2 million proceeds from the issuance of common stock and warrants in September 2009, partially
offset by a decrease in debt payments of $0.5 million.

Operating capital and capital expenditure requirements

As of September 30, 2010 and November 10, 2010, we had $1.9 million and $1.8 million, respectively, in cash
and cash equivalents. We will, during the first half of 2011, require significant additional capital to continue our operations. Because our present capital resources are not sufficient to fund our
planned operations for the twelve month period as of the date of the Annual Report on Form 10-K for the year ended December 31, 2009, our current financial resources raise
substantial doubt about our ability to continue as a going concern.

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

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

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

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

Because
of the numerous risks and uncertainties associated with our business we are unable to estimate the exact amounts of capital outlays and operating expenditures necessary to
sustain our operations.
Our future capital requirements will depend on many factors, including, but not limited to, the following:



Working
capital as of December 31, 2009 was $11.4 million, consisting of $24.5 million in current assets and $13.1 million in current liabilities. Working
capital as of September 30, 2010 was $(7.0) million, consisting of $6.0 million in current assets and $13.0 million in current liabilities.

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License agreements and patents

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

Contractual obligations

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

Line of credit facility and security agreement

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

Loan and security agreement

In December 2007, we entered into a loan and security agreement with two lenders including GE Capital Corporation, which is serving as
agent. The loan agreement provided that we may borrow up to $20.0 million at an interest rate equal to the sum of (i) the greater of (A) an interest rate based on the Federal
Reserve's three year Treasury Constant Maturities Rate and (B) 3.84% plus (ii) 6.11%. The initial term loan was made on the closing date in an aggregate principal amount equal to
$10.0 million.

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

In
connection with the execution of the June 2008 amendment to the loan and security agreement with two lenders including GE Capital Corporation, we issued warrants to the two lenders to
purchase

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

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

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

As
further discussed below under the caption "Bridge Financing and Senior Debt Restructuring (November 2010)" we restructured the loan and security agreement during the fourth quarter of
2010.

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

As
of December 31, 2009 and September 30, 2010, the outstanding balance on the loan agreement was $4.9 million and $3.0 million, respectively.

Private Placement in Public Equity Offering (December 2008)

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

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

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within
the last ten years. The relative fair value of the warrants was recorded in the equity section of the balance sheet.

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

Private Placement in Public Equity Offering (September 2009)

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

In
connection with the September 2009 Offering, we issued warrants to purchase an aggregate of 2,322,509 shares of common stock which become exercisable on or after the six month
anniversary following the closing of the transaction. The warrants have an exercise price of $2.61 per share and have a five and a half year term. The fair value of the warrants was estimated at
$4.5 million using a Black-Scholes model with the following assumptions: expected volatility of 100%, risk free interest rate of 2.49%, expected life of five and a half years and no dividends.
Expected volatility was based on the volatility contractually specified in the warrant agreements. Due to a price adjustment clause included in the warrant agreements, the warrants were deemed to be a
liability and, therefore, the fair value of the warrants was recorded in the liability section of the balance sheet. As such, the warrants will be revalued each reporting period, with the resulting
gains and losses recorded as the change in fair value of warrant liability on the income statement. In connection with the December 2009 Offering, the exercise price for the warrants issued in this
transaction was subsequently reduced to $0.3124 per share in accordance with the terms of the warrant. For the three month period ending September 30, 2010 we recorded an expense in the amount
of $0.1 million, for the nine month period ending September 30, 2010 we recorded a gain in the amount of $1.1 million, respectively, for the change in the fair value of the
warrant liability. During the nine months ended September 30, 2010, 502,231 warrant shares from the September 2009 Offering were exercised into common stock at an exercise price of $0.3124,
respectively.

In
connection with the September 2009 Offering, we entered into a registration rights agreement (the "September 2009 Registration Rights Agreement") with each of the investors. The
September 2009

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

Underwritten Offering (December 2009)

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

In
connection with the December 2009 Offering, we issued warrants to purchase an aggregate of 4,160,000 shares of common stock. The warrants have an exercise price of $1.44 per share and
have a five and a half year term. The fair value of the warrants was estimated at $2.7 million using a Black-Scholes model with the following assumptions: expected volatility of 100%, risk free
interest rate of 2.43%, expected life of five and a half years and no dividends. Expected volatility was based on the volatility contractually specified in the warrant agreements. Due to a price
adjustment clause included in the warrant agreements, the warrants were deemed to be a liability and, therefore, the fair value of the warrants was recorded in the liability section of the balance
sheet. As such, the warrants will be revalued each reporting period, with the resulting gains and losses recorded as the change in fair value
of warrant liability on the income statement. For the three month period ending September 30, 2010 we recorded an expense in the amount of $0.1 million, for the nine month period ending
September 30, 2010 we recorded a gain in the amount of $2.0 million, respectively, for the change in the fair value of the warrant liability.

Bridge Financing and Senior Debt Restructuring (November 2010)

We entered the fourth quarter of 2010 without any prospects of securing long-term financing from outside investors. An
Independent Committee of the Board evaluated the alternatives available to us and determined that a bridge financing lead by certain inside investors was in the best interests of our stakeholders in
view of our current financial and operating condition, and would best position us to continue operations for the remainder of 2010 and into 2011. The Independent Committee met multiple times to
consider the alternatives and reached the conclusion that the bridge financing was the best alternative for generating value for stakeholders. As a result, we entered into an insider bridge loan
facility with two of the four venture capital firms which decided to participate in the bridge

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financing
and whose representatives are members of the Board. In connection with this transaction, we entered into a Subordinated Secured Note Purchase Agreement (the "Note Purchase Agreement") with
investment funds affiliated with Atlas Venture and Flagship Ventures (the "Purchasers"), pursuant to which we have agreed to sell to the Purchasers, and the Purchasers have agreed to purchase, up to
an aggregate of $4,000,000 of convertible promissory notes (the "Notes"), a portion of which is committed and a portion of which is optional (the "Bridge Debt Financing"). Upon the effective date of
the Note Purchase Agreement, the Purchasers purchased Notes having an aggregate principal amount of $333,333. Subject to our continued compliance with the terms of the Note Purchase Agreement,
including that there not be an event of default thereunder, upon notice from us the Purchasers are committed to purchase an aggregate of an additional $333,333 of Notes in each of five subsequent
closings, for a total aggregate committed amount of $2,000,000. The Purchasers also have the right, but not the obligation, upon our request to purchase up to an additional $2,000,000 of Notes on or
before December 31, 2012.

The
Notes will accrue interest at a rate of 10% per annum plus a risk premium as described below. The outstanding principal and any unpaid accrued interest on all of the Notes shall be
due and payable in full (i) upon demand by the Purchasers, which demand shall be no earlier than December 31, 2012, (ii) upon our receiving at least $10,000,000 in proceeds from a
subsequent equity financing, (iii) upon a change of control of our company or (iv) upon an event of default. A Purchaser may elect to convert principal and interest outstanding under any
of the Notes upon the closing of any future round of equity or debt financing of our company into shares of the securities issued at such financing. Simultaneous with execution of the Note Purchase
Agreement, we entered into an Amendment to the Amended and Restated Investor Rights Agreement with the requisite parties, dated as of March 1, 2006, by and among us and the parties specified
therein, including the Purchasers (the "IRA Amendment"), pursuant to which the Purchasers will be entitled to demand and piggyback registration
rights consistent with the terms of the Purchasers' existing registration rights for any securities issued upon conversion of the Notes.

Our
obligations under the Notes are subordinated to the indebtedness incurred by us under the Loan and Security Agreement among us, certain lenders (the "Lenders") and General Electric
Capital Corporation ("GE"), as agent, dated as of December 31, 2007, as amended (the "Loan Agreement"). Our obligations under the Notes are secured by a security interest on all of our assets,
including our intellectual property, that, with regard to all of our assets other than the cause of action that is the subject of the intellectual property litigation against Pacific Biosciences,
Illumina and Life Technologies (and any recovery therefrom) (the "Cause of Action"), is junior to the Lenders' first priority security interest under the Loan Agreement, and with regard to the Cause
of Action, is junior to the Lenders' first priority security interest under the Loan Agreement and the second priority security interest of the Company's outside legal counsel that is representing the
Company in the Cause of Action (the "Outside IP Litigation Counsel").

As
an inducement for the Purchasers to purchase the Notes, we entered into a Risk Premium Payment Agreement, dated as of November 16, 2010, with the Purchasers (the "Risk Premium
Agreement") simultaneous with the execution of, and as required by, the Note Purchase Agreement. Under the terms of the Risk Premium Agreement, we have agreed to pay the Purchasers the following
portions of the consideration we receive (the "Payment Consideration") in Liquidity Transactions, as defined below: (i) until the aggregate Payment Consideration equals $10 million, 60%
of the Payment Consideration; (ii) for aggregate Payment Consideration from $10 million to $20 million, 50% of the Payment Consideration; (iii) for aggregate Payment
Consideration from $20 million to $30 million, 40% of the Payment Consideration; (iv) for aggregate Payment Consideration from $30 million to $40 million, 30% of the
Payment Consideration; and (v) for aggregate Payment Consideration in excess of $40 million, 10% of the Payment Consideration (any such payments, "Risk Premium Payments"). For purposes
of determining amounts payable under the Risk Premium Agreement, the Payment

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Consideration
will not include amounts we use to first satisfy specified existing obligations, including obligations under the Loan Agreement, under professional contingency arrangements (including
the contingency fee arrangement between us and Outside IP Litigation Counsel relating to the Cause of Action) and obligations that may arise under existing technology license agreements (the "Existing
IP Licensing Agreements") between us and each of Arizona Technology Enterprises, Roche Diagnostics GMBH and Roche Diagnostics Corporation, and California Institute of Technology (as previously
disclosed by us, under the Existing IP Licensing Agreements, we are obligated to pay license fees in connection with the licensing, sublicensing, legal settlements, or sales of specified intellectual
property or services provided to third parties ranging from a single digit percentage up to one-half of the income from those activities). For purposes of the Risk Premium Agreement and subject to
various provisions therein, the following shall constitute Liquidity Transactions: (A) the receipt by us of payments from third parties relating to the intellectual property portfolio of our
company, including payments received as a license or other settlement in patent infringement litigation brought by us ("IP Licensing Events"); (B) a merger of our company in which there is a
change of control; and (C) the sale or exclusive license by our company of all or substantially all of its assets or intellectual property.

In
connection with the Bridge Debt Financing, on November 16, 2010, our company, GE and the Lenders executed the Fourth Amendment to the Loan and Security Agreement, dated
November 16, 2010 (the "Fourth Amendment"). Pursuant to the Fourth Amendment, GE and the Lenders waived various existing events of default and consented to our incurrence of indebtedness and
grant of a junior security interest to the Purchasers under the Note Purchase Agreement. We amended warrants previously issued to the Lenders to re-price the Warrants from $4.80 to $0.01
and GE and the Lenders agreed to defer a $200,000 payment due January 31, 2011 to the term loan maturity date. In addition, subject to our continued compliance with the terms of the Loan
Agreement, including that there not be an event of default thereunder, GE and the Lenders agreed to defer up to five additional principal monthly payments with respect to the term loan. Also pursuant
to the Fourth Amendment, we agreed to grant the Lenders a first priority security interest in all of our intellectual property and to pay the Lenders an additional $50,000 to $200,000 (depending upon
how many principal payments are deferred) upon the full repayment of all outstanding amounts due with respect to the term loans. Under the terms of the Loan and Security Agreement prior to its
amendment by the Fourth Amendment, the scope of the Lenders' first priority security interest included all of our assets other than intellectual property.

In
connection with the Bridge Debt Financing and the Fourth Amendment and as security for our obligations under our contingency fee arrangement with Outside IP Litigation Counsel
relating to the Cause of Action, we entered into a Subordinated Security Agreement with Outside IP Litigation Counsel pursuant to which we agreed to grant Outside IP Litigation Counsel a second
priority security interest in the Cause of Action. Under the terms of the contingency fee arrangement, we are obligated to pay Outside IP Litigation Counsel up to 40% of the proceeds paid to us
in connection with the settlement, judgment, or other resolution of the Cause of Action or certain business transactions resulting from or relating to the Cause of Action.

In
approving the transactions relating to the Bridge Debt Financing and the Fourth Amendment, our Board of Directors approved a management incentive plan pursuant to which participants
in the plan will be entitled to receive, in the aggregate, an amount equal to 7.5% of the Payment Consideration resulting from IP Licensing Events (which, as noted above, represents gross proceeds
from IP Licensing Events less various contractual and contingent payments described above) (the "Management Incentive Plan"). The specific terms of the Management Incentive Plan, administration and
all payments to be made to management thereunder will be under the control and direction of the Compensation Committee of our Board of Directors.

The
agreements and arrangements described above and all of the transactions contemplated by those agreements were approved by (an independent committee of our Board of Directors. In
addition,

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Noubar
B. Afeyan, PhD, who is the founder, a Managing Partner and the Chief Executive Officer of Flagship Ventures, and Peter Barrett, who is a Partner of Atlas Venture, abstained from the vote of our
Board of Directors approving the transactions.

Off-balance sheet arrangements

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

Critical Accounting Policies and Estimates

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

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

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

Item 4.    Controls and Procedures

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

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

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Part IIOther Information

Item 1.    Legal Proceedings

On August 27, 2010, we filed a lawsuit against Pacific Biosciences of California, Inc. ("Pacific Biosciences") in the
United States District Court for the District of Delaware (CA. No. 10-735-SLR) alleging that Pacific Biosciences infringes U.S. Patent Nos. 7,645,596,
("'596 Patent"), 7,037,687, ("'687 Patent"), 7,169,560, ("'560 Patent"), and 7,767,400, ("'400 Patent"). On October 22, 2010, we filed an amended complaint naming
Illumina, Inc. ("Illumina") and Life Technologies Corporation ("Life Technologies") as additional defendants. In the amended complaint, we further allege that Life Technologies infringes the
'596 Patent, the '687 Patent, and the '560 Patent, and that Illumina infringes the '687 Patent, the '560 Patent, and U.S. Patent
No. 7,593,109 ("'109 Patent). Helicos accuses Pacific Biosciences of willful patent infringement based at least on its manufacture, use, and sale of its Single Molecule Real Time
("SMRTTM") DNA sequencing technology. Helicos accuses Life Technologies of willful patent infringement based at least on its manufacture, use, and offer for sale of its Single Molecule
Real-Time DNA Sequencing of a Quantum-dot Nanocrystal technology for single molecule sequencing of DNA. Helicos accuses Illumina of willful patent infringement based at least
on its manufacture, use, offer for sale, sale, and importation of its sequencing technology for single molecule sequencing of DNA including its Genome Analyzer, HiSeq 2000, and its Sq Module in
combination with its iScan and HiScan platforms. Helicos is seeking a permanent injunction enjoining each of the defendants from further infringement as well as compensatory and punitive damages,
costs, and attorneys' fees, interest, and other relief as determined by the Court. The Court has yet to conduct a scheduling conference or to set a trial date.

Item 1A.    Risk Factors

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

RISKS RELATED TO OUR BUSINESS

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

We are implementing a new strategic focus and plan to deploy our limited resources by focusing our intellectual property monetization
and concentrating our research and development efforts in targeted areas designed to achieve tangible proof-of-concept goals, which may enable us to seek partnership
opportunities with companies interested in next-generation sequencing, or to pursue other funding and strategic alternatives. In addition, on October 14, 2010, we announced the
launch of a technology licensing program for our Single Molecule Sequencing Platform. While our new business opportunities will rely upon the capabilities of our proprietary Helicos®
Genetic Analysis Platform and the strength of our intellectual property portfolio, the business model will be materially different than that which we have engaged in before. We are unable to give any
assurance we will be commercially successful in our new business strategy. Our failure to be commercially successful in any such new

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business
opportunity would materially adversely impact our business, financial condition, results of operations and prospects and could ultimately require that we cease operations.

A
successful shift in our strategic focus will require significant organizational changes. Given the potential uncertainty about the success of our new business priorities and long term
roles within our organization, morale may be lowered, key employees may leave or be distracted and our business may experience a loss of continuity while we implement our business priorities. Our
inability to retain existing personnel would prevent us from fully exploiting our new business priorities and thereby cause a material adverse effect on our business, financial condition, results of
operations and prospects.

* During the first half of 2011, our business will require additional funding, which may not be available on favorable terms, if at all, or without potentially very
substantial dilution to our stockholders. If we do not raise the necessary funds, we will need to dramatically reduce, or even terminate all of, our operations.

Our business will require additional financial investment that we have not yet secured and we will need to raise additional capital
during the first half of 2011 in order to sustain our business and to pursue our new business priorities. The amount of additional capital we will need to raise depends on many factors,
including:



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

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transactions
on acceptable terms, or at all. If adequate additional funds are not available to us when required, we will be required to terminate some or all aspects of our operations.

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

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

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

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

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

We are a development-stage company with limited operating history. We have incurred significant losses in each fiscal year since our
inception, including net losses attributable to common stockholders of $45.7 million and $28.0 million in the years ended December 31, 2008 and 2009, respectively. As of
December 31, 2009, we had an accumulated deficit of $167.7 million. These losses have resulted principally from costs incurred in our research and development programs and from our
selling, general and administrative expenses. In the year ended December 31, 2009, we used cash in operating activities of $15.5 million and used cash in investing activities totaling
$22,000. As of December 31, 2009, September 30, 2010, and November 10, 2010, we had $15.9 million, $1.9 million and $1.8 million, respectively, in cash and
cash equivalents.

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

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

In connection with our efforts to consider alternatives to our long-term strategic focus, in May 2010 and September 2010,
we committed to reductions in headcount and restructuring plans, or the Restructuring Plans, which involved the consolidation and reorganization of our operations in order to reduce operating costs.
The Restructuring Plans involved a reduction in headcount of approximately 54 employees or two-thirds of the organization. As a result, while we begin to pursue our new business
priorities, we will rely heavily on our ability to retain our remaining employees. The loss of the service of any number of our remaining employees may significantly delay or prevent our ability to
pursue our business objectives. For example, because of the complex and technical nature of our Helicos System, any failure to retain a sufficient number of our remaining, qualified employees could
materially harm our ability to maintain our existing know-how and proprietary technology which would severely limit any ability to pursue our business priorities.

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

* We have limited resources in selling and marketing and, as a result, may be unable to successfully market and sell our products and services.

We have a small sales and marketing team. Our ability to sustain our operations depends on attracting customers for our products and
services and taking advantage of the capabilities of our proprietary technology for business opportunities that are materially different than that which we have engaged in before. To successfully
perform sales, marketing and customer support functions ourselves, we will face a number of risks, including:



* We have limited experience.

You should evaluate us in the context of the uncertainties and complexities affecting an early stage company in the life science
industries and experiencing the challenges associated with entering into new markets that are highly competitive. Based on our limited experience, we may not:



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

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

Because
of the complex and technical nature of our Helicos System and the dynamic market in which we compete, any failure to attract and retain a sufficient number of qualified employees
could materially harm our ability to implement our new business priorities. Competition for these people is intense. Each of our executive officers and other key employees could terminate his or her
relationship with us at any time. These persons' expertise would be difficult to replace and could have a material adverse effect on our ability to achieve our business goals. There can be no
assurance that we will have the financial resources or otherwise be successful in hiring or retaining qualified personnel and our failure to do so could have a material adverse effect on our business,
financial condition and results of operations.

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

Our research and the development activities 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.

* We rely on a single laboratory facility for our research and development activities.

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

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

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

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

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

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

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

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



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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.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

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

Our success depends in part on our ability to obtain and maintain intellectual property protection for our technologies. 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

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

On
August 27, 2010, we filed a lawsuit against Pacific Biosciences of California, Inc. ("Pacific Biosciences") in the United States District Court for the District of
Delaware (CA. No. 10-735-SLR) alleging that Pacific Biosciences infringes U.S. Patent Nos. 7,645,596, ("'596 Patent"), 7,037,687,
("'687 Patent"), 7,169,560, ("'560 Patent"), and 7,767,400, ("'400 Patent"). On October 22, 2010, we filed an amended complaint naming Illumina, Inc. ("Illumina")
and Life Technologies Corporation ("Life Technologies") as additional defendants. In the amended complaint, we further allege that Life Technologies infringes the '596 Patent, the
'687 Patent, and the '560 Patent, and that Illumina infringes the '687 Patent, the '560 Patent, and U.S. Patent No. 7,593,109 ("'109 Patent). Helicos
accuses Pacific Biosciences of willful patent infringement based at least on its manufacture, use, and sale of its Single Molecule Real Time ("SMRTTM") DNA sequencing technology. Helicos
accuses Life Technologies of willful patent infringement based at least on its manufacture, use, and offer for sale of its Single Molecule Real-Time DNA Sequencing of a
Quantum-dot Nanocrystal technology for single molecule sequencing of DNA. Helicos
accuses Illumina of willful patent infringement based at least on its manufacture, use, offer for sale, sale, and importation of its sequencing technology for single molecule sequencing of DNA
including its Genome Analyzer, HiSeq 2000, and its Sq Module in combination with its iScan and HiScan platforms. Helicos is seeking a permanent injunction enjoining each of the defendants from further
infringement as well as compensatory and punitive damages, costs, and attorneys' fees, interest, and other relief as determined by the Court. The Court has yet to conduct a scheduling conference or to
set a trial date.

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

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

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* 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 our technology or products infringe their patents or otherwise violate their intellectual property rights. In
addition, the technology that we license from third parties for use in our Helicos System could become subject to similar infringement claims. Infringement claims asserted against us or our licensors
may have a material adverse effect on our business, results of operations or financial condition. Any claims, either with or without merit, could be time-consuming and expensive to defend,
and could divert our management's attention away from the execution of our business plan. Moreover, any settlement or adverse judgment resulting
from the claim could require us to pay substantial amounts of money or obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of
the technology. There can be no assurance that we would be able to obtain a license on commercially reasonable terms, if at all, from third parties asserting an infringement claim; that we would be
able to develop alternative technology on a timely basis, if at all; or that we would be able to obtain a license to use a suitable alternative technology to permit us to continue offering, and our
customers to continue using, our affected products. 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 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.

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RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

* Our common stock has been delisted from The NASDAQ Global Market, which negatively impacts the price of our common stock and our ability to access the capital markets.

On June 28, 2010, we received a letter from The NASDAQ Stock Market LLC ("NASDAQ") advising that for the previous 30
consecutive business days, we failed to comply with the minimum market value of listed securities ("MVLS") requirement for continued listing on the NASDAQ Global Market pursuant to NASDAQ Marketplace
Rule 5450(b)(2)(A) and that we did not otherwise satisfy the criteria for continued listing pursuant to NASDAQ Marketplace Rule 5450(b). NASDAQ stated in its letter that in accordance
with NASDAQ Marketplace Rule 5810(c)(3)(C), we will be provided 180 calendar days, or until December 27, 2010, to regain compliance with the MVLS continued listing requirement.
MVLS is calculated by multiplying the total shares outstanding by the daily closing bid price. The NASDAQ letter also states that if, at any time before December 27, 2010, the MVLS of our
common stock closes at $50,000,000 or more for a minimum of 10 consecutive business days, the NASDAQ staff will provide us with written notification that we have achieved compliance with the MVLS
continued listing requirement and the matter will be closed. On October 12, 2010, we received a delisting determination letter from NASDAQ due to our failure to regain compliance with the
NASDAQ Global Market's minimum bid price requirement for continued listing as set forth in Listing Rule 5450(a)(1). In addition, we have not yet held our annual meeting of stockholders for
fiscal 2010 which is an additional requirement for us to comply with in order to maintain our continued listing on NASDAQ. Based on the unlikely ability of us to meet the NASDAQ MVLS requirements due
to the state of our finances and near-term business prospects, on November 12, 2010, we withdrew our appeal to NASDAQ, and, therefore, our securities were delisted from the NASDAQ Global Market
and the trading of our common stock was suspended on or before the opening of business on November 16, 2010, and a Form 25-NSE will be filed with the Securities and Exchange
Commission which will remove our securities from listing and registration on The NASDAQ Stock Market. The delisting of our common stock will significantly affect the ability of investors to trade our
securities and will significantly negatively affect the value and liquidity of our common stock. In addition, the delisting of our common stock will materially adversely affect our ability to raise
capital on terms acceptable to us or at all. Delisting from The NASDAQ Global Market will also have other negative results, including the potential loss of confidence by suppliers and employees, the
loss of institutional investor interest and fewer business development opportunities.

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* As a result of our most recent financing activities, we are subject to various obligations to creditors and others that are likely to materially reduce the total return on
equity for our common stockholders.

Our obligations to make future Risk Premium Payments under the terms of the Risk Premium Payment Agreement, together with our
obligations under the credit facility with GE and the Lenders (including the Fourth Amendment), the Note Purchase Agreement, the contingency fee arrangement with Outside IP Litigation Counsel, the
Existing IP Licensing Agreements and the Management Incentive Plan, are highly dilutive to our common shareholders and materially reduce their share of any future earnings of our company. The
agreements and obligations referenced in this risk factor are more fully described in Note 11, Subsequent Events, in the Notes to Consolidated Financial Statements, under the caption Bridge
Financing and Senior Debt Restructuring, in this Form 10-Q.

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

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

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

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



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

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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.

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

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

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

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

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

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

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



The
affirmative vote of the holders of at least 75% of our shares of capital stock entitled to vote is necessary to amend or repeal the above provisions of our certificate of
incorporation. In addition, our

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

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

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

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

We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future.
We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of
an investment in shares of our common stock will depend upon any future appreciation in its value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the
price at which our stockholders have purchased their shares.

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.

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Of
the $52.2 million of gross proceeds we received in our initial public offering, including the exercise of the over-allotment options, through December 31,
2008, we have spent approximately $3.2 million on underwriting discounts and commissions and approximately $1.8 million for payment of expenses related to our initial public offering.
Additionally, we have spent $16.6 million on pre- production research and development expenses and $10.9 million on inventory.
None of these expenses were incurred or paid, directly or indirectly, to directors or officers of ours or their associates or to persons owning 10% or more of our common stock or to any affiliates of
ours.

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

Recent Sales of Unregistered Securities

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

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

In
connection with the September 2009 Offering, we entered into a registration rights agreement (the "September 2009 Registration Rights Agreement") with each of the investors. The
September 2009 Registration Rights Agreement provides that we will file a "resale" registration statement covering all of the shares of common stock and the shares of common stock issuable upon
exercise of the warrants, up to the maximum number of shares able to be registered pursuant to applicable SEC regulations, within 15 days of the closing of the September 2009 Offering. We
currently maintain an effective registration statement relating to these shares (File No. 333-162240). Under the terms of the September 2009 Registration Rights Agreement, we are
obligated to maintain the effectiveness of the "resale" registration statement until all securities therein are sold or are otherwise can be sold pursuant to Rule 144, without any restrictions.
A cash penalty at the rate of 2% per month will be triggered for

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any
filing or effectiveness failures or 1% in the event of suspensions of prospectus delivery or if, at any time after six months following the closing of the September 2009 Offering, we cease to be
current in our periodic reports with the SEC. The aggregate penalty accrued with respect to each investor may not exceed 12% of the original purchase price paid by that investor.

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

Issuer Purchases of Equity Securities

During the quarter ended September 30, 2010, we purchased 104,307 restricted shares from employees to cover withholding taxes
due from the employees at the time the shares vested. The following table provides information about these purchases of restricted shares for the nine months ended September 30, 2010:

Period

Total Number of
Shares Purchased

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


128,340

$
1.05February 1 to 28, 2010


7,452


1.02March 1 to 31, 2010


133,254


0.79April 1 to 30, 2010


62,674


0.79May 1 to 31, 2010


39,102


0.65June 1 to 30, 2010


70,491


0.44July 1 to 31, 2010


104,307


0.45August 1 to 31, 2010





September 1 to 30, 2010





Total


545,620


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Upon
the termination of employees during the quarter ended September 30, 2010, 680,891 unvested restricted shares were forfeited. The following table provides information about
our forfeited restricted shares for the nine months ended September 30, 2010:

Period

Total Number of
Shares Forfeited

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


4,861

$
1.10February 1 to 28, 2010


25,070


1.02March 1 to 31, 2010





April 1 to 30, 2010


2,501


0.90May 1 to 31, 2010


110,223


0.63June 1 to 30, 2010


5,002


0.47July 1 to 31, 2010


391


1.04August 1 to 31, 2010


1,094


1.04September 1 to 30, 2010


679,406


0.49Total


828,548


Item 3.    Defaults upon Senior Securities

None.

Item 4.    (Removed and Reserved)

Item 5.    Other Information

None.

Item 6.    Exhibits

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

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SIGNATURES

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

HELICOS BIOSCIENCES CORPORATIONDated: November 18, 2010

By:

/s/ IVAN TRIFUNOVICHName:

Ivan Trifunovich, Ph.D.Title:

Chairman, President and Chief Executive Officer
(Principal Executive Officer)Dated: November 18, 2010

By:

/s/ JEFFREY R. MOOREName:

Jeffrey R. MooreTitle:

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


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EXHIBIT INDEX

Exhibit No.

Description10.1

Form of Retention Agreement with Management dated August 6, 201010.2

Letter Agreement, dated September 8, 2010, by and between, J. William Efcavitch and Helicos BioSciences Corporation31.1

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

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

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


*Previously
filed.


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