Table of Contents



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

FORM 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                             to


Commission File Number 001-33484

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

Delaware(State or other jurisdiction of
incorporation or organization)

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


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

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

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

Large accelerated filer o

Accelerated filer o

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

Smaller reporting company ý


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

The number of shares of the registrant's Common Stock, $.001 par value, outstanding as of July 31, 2009, was 64,656,471 shares.



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Table of Contents



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



PagePart IFinancial InformationItem 1.

Consolidated Financial Statements (Unaudited)

3Consolidated Balance Sheets as of December 31, 2008 and June 30, 2009

3Consolidated Statements of Operations for the three and six months ended June 30, 2008 and
2009 and the period from May 9, 2003 (date of inception) through June 30, 2009

4Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2009 and the
period from May 9, 2003 (date of inception) through June 30, 2009

5Notes to Consolidated Financial Statements

6Item 2.

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

12Item 3.

Quantitative and Qualitative Disclosures about Market Risk

22Item 4.

Controls and Procedures

22Part IIOther InformationItem 1.

Legal Proceedings

23Item 1A.

Risk Factors

23Item 2.

Unregistered Sale of Equity Securities and Use of Proceeds

24Item 3.

Defaults upon Senior Securities

26Item 4.

Submission of Matters to a Vote of Security Holders

26Item 5.

Other Information

27Item 6.

Exhibits

27SIGNATURES

28


2

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Table of Contents

Part IFinancial Information

Item 1.    Consolidated Financial Statements

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

December 31,
2008

June 30,
2009ASSETSCurrent assetsCash and cash equivalents

$
19,713

$
8,384Accounts receivable


223


99Unbilled government grant receivable


205


213Inventory


6,830


7,093Prepaid expenses and other current assets


235


427Total current assets


27,206


16,216Property and equipment, net


4,016


2,685Restricted cash


225


225Other assets


13


9Total assets

$
31,460

$
19,135LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilitiesAccounts payable

$
789

$
1,208Accrued expenses and other current liabilities


1,652


1,184Deferred revenue


623


500Current portion of long-term debt


3,323


2,976Total current liabilities


6,387


5,868Long-term debt, net of current portion


4,535


3,359Other long-term liabilities


35


Total liabilities


10,957


9,227Commitments and contingenciesStockholders' equityPreferred stock: par value $0.001 per share; 5,000,000 shares authorized at December 31, 2008 and June 30, 2009; no shares issued and outstanding
at December 31, 2008 and June 30, 2009





Common stock: par value $0.001 per share; 120,000,000 shares authorized at December 31, 2008 and June 30, 2009; 63,808,282 and 64,712,434 shares
issued and outstanding at December 31, 2008 and June 30, 2009, respectively


64


65Additional paid-in capital


160,144


162,353Deficit accumulated during the development stage


(139,705
)

(152,510
)Total stockholders' equity


20,503


9,908Total liabilities and stockholders' equity

$
31,460

$
19,135


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

3

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Table of Contents

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

Three Months Ended
June 30,

Six Months Ended
June 30,Period from
May 9, 2003
(date of inception)
through June 30, 20092008

2009

2008

2009Product revenue

$


$
158

$


$
1,121

$
1,157Grant revenue


251


213


364


452


1,965Total revenue


251


371


364


1,573


3,122Costs and expensesCost of product revenue





124





645


655Research and development


7,083


3,539


12,788


7,632


83,992Selling, general and administrative


4,830


2,732


11,014


5,583


53,538Total costs and expenses


11,913


6,395


23,802


13,860


138,185Operating loss


(11,662
)

(6,024
)

(23,438
)

(12,287
)

(135,063
)Interest income


145


22


483


62


4,121Interest expense


(370
)

(275
)

(730
)

(580
)

(3,428
)Net loss


(11,887
)

(6,277
)

(23,685
)

(12,805
)

(134,370
)Beneficial conversion feature related to Series B redeemable convertible preferred stock














(18,140
)Net loss attributable to common stockholders

$
(11,887
)
$
(6,277
)
$
(23,685
)
$
(12,805
)
$
(152,510
)Net loss attributable to common stockholders per sharebasic and diluted

$
(0.57
)
$
(0.10
)
$
(1.14
)
$
(0.20
)Weighted average number of common shares used in computationbasic and diluted


20,726,679


63,561,410


20,707,628


63,530,036


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

4

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

Six Months Ended
June 30,Period from
May 9, 2003
(date of inception)
through June 30, 20092008

2009Cash flows from operating activities:Net loss

$
(23,685
)
$
(12,805
)
$
(134,370
)Adjustments to reconcile net loss to cash used in operating activities:Depreciation and amortization


1,177


1,339


7,070Amortization of lease incentive


(74
)

(74
)

(439
)Common stock issued for licenses








147Stock-based compensation expense


2,273


2,195


11,624Noncash interest expense related to debt and warrants


139


175


727Provisions on inventory








1,577Changes in operating assets and liabilities:Accounts receivable





124


(99
)Unbilled government grant receivable


(134
)

(8
)

(213
)Inventory


(5,301
)

(263
)

(8,925
)Prepaid expenses and other current assets


14


(192
)

(427
)Deferred revenue





(123
)

500Accounts payable


(347
)

419


1,208Accrued expenses and other current liabilities


1,051


(386
)

1,443Other long-term liabilities


(115
)

(31
)

161Net cash used in operating activities


(25,002
)

(9,630
)

(120,016
)Cash flows from investing activities:Purchases of property and equipment


(2,635
)

(8
)

(9,500
)Increase in restricted cash


(10,000
)




(225
)Purchases of short-term investments








(34,709
)Maturities of short-term investments








34,709Net cash used in investing activities


(12,635
)

(8
)

(9,725
)Cash flows from financing activities:Proceeds from debt issuances


9,850





22,256Payments on debt


(482
)

(1,694
)

(15,964
)Payments of debt issuance costs


(20
)




(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








17,811Proceeds from issuance of restricted common stock





1


340Payments to employees for cancelled restricted common stock


(41
)




(104
)Proceeds from exercise of stock options


9


2


52Net cash provided by (used in) financing activities


9,316


(1,691
)

138,125Net (decrease) increase in cash and cash equivalents


(28,321
)

(11,329
)

8,384Cash and cash equivalents, beginning of period


52,683


19,713


Cash and cash equivalents, end of period

$
24,362

$
8,384

$
8,384Supplemental disclosure of cash flow informationCash paid during the year for interest

$
499

$
492

$
2,273Transfers from inventory to property and equipment

$


$


$
255Noncash financing activities:Issuance of redeemable convertible preferred stock warrants

$


$


$
95Issuance of common stock warrants

$
337

$


$
6,021Conversion of bridge loan to equity

$


$


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

$


$


$
18,140Conversion of preferred stock to common stock

$


$


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

$


$


$
162


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

5

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Nature of the Business and Basis of Presentation

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

The
Company has had limited operations to date and its activities have consisted primarily of raising capital, conducting research and development and recruiting personnel. Accordingly,
the Company is considered to be in the development stage at June 30, 2009, as defined by the Financial Accounting Standards Board ("FASB") in Statement of Financial Accounting Standards
("SFAS") No. 7, "Accounting and Reporting by Development Stage Enterprises." The Company's fiscal year ends on December 31. The Company operates as one reportable segment.

Since
inception, the Company has incurred losses and has not generated positive cash flows from operations. The Company expects such losses to continue for at least two years as it
continues to develop and commercialize its products. In December 2008, the Company implemented a 30% reduction in its workforce and took other measures to reduce its future operating costs. As of
June 30, 2009 and August 14, 2009, the Company had $8.4 million and $5.0 million, respectively, in cash and cash equivalents. The Company believes that its existing cash and cash
equivalents and receipts from customers on sales of products, coupled with the implementation of significant additional expense reduction initiatives, will be sufficient to fund its operations into
the first quarter of 2010. If the Company's current operating plan including forecasted sales for the remainder of 2009 does not materialize or if adequate additional funds are not available when
required, the Company will be required to further delay, reduce or eliminate research and development programs, reduce or eliminate commercialization efforts, obtain funds through arrangements with
collaborators or others on terms unfavorable to the Company, or pursue merger or divestiture or other strategies.

The
Company is actively engaged in discussions with potential strategic partners regarding various financing alternatives and is actively pursuing financing strategies, including equity
or debt financings or other sources of funding, such as collaborations, licensing arrangements, joint ventures or partnerships. The worldwide financial markets are continuing to experience turmoil in
2009. These events have materially and adversely impacted the availability of financing to a wide variety of companies, particularly early-stage companies such as Helicos. Adequate additional funding
may not be available to the Company on acceptable terms, or at all. The Company's failure to raise capital as and when needed would have a negative impact on its financial condition and would have a
material adverse impact on the viability of the Company's ability to pursue its business strategies.

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

The
preparation of financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and
expenses,

6

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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)

and
related disclosure of contingent liabilities at the dates of the financial statements. Actual amounts may differ from these estimates, different assumptions or conditions.

It
is management's opinion that the accompanying interim consolidated financial statements reflect all adjustments (which are normal and recurring) that are necessary for a fair
statement of the results for the interim periods. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended
December 31, 2008 included in the Company's Form 10-K.

2. Summary of Significant Accounting Policies

In the Company's Form 10-K for the fiscal year ended December 31, 2008, our significant accounting policies were identified.

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 Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements," or SAB No. 104 and Emerging Issues Task
Force No. 00-21, "Accounting for Multiple Element Revenue Arrangements." SAB No. 104 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 collectibility is reasonably assured. EITF No. 00-21 provides 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.

In
instances where 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.

During
the six months ended June 30, 2009, the Company obtained customer acceptance on an instrument system that was previously shipped to a customer in 2008 and, accordingly,
recognized revenue of $829,000 in the six months ended June 30, 2009. In addition, product revenue includes $280,000 of revenue recognized from the sale of proprietary reagents to customers in
the six months ended June 30, 2009.

7

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

2. Summary of Significant Accounting Policies (Continued)

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" ("SFAS 141(R)"). This statement requires an
acquiring company to measure all assets
acquired and liabilities assumed, including contingent considerations and all contractual contingencies, at fair value as of the acquisition date. In addition, an acquiring company is required to
capitalize in-process research and development and either amortize it over the life of the product, or write it off if the project is abandoned or impaired. The statement is effective for
transactions occurring on or after January 1, 2009. The adoption of SFAS 141(R) did not have a material impact on the Company's consolidated financial statements during the six months
ended June 30, 2009. However, this statement will affect the accounting for any acquisition in the future.

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

In
April 2009, the FASB issued FASB Staff Position FAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments," or FSP
FAS 107-1 and APB 28-1. FSP FAS 107-1 and APB 28-1, amends SFAS No. 107, "Disclosures about Fair Value of Financial
Instruments," to require disclosures about fair value of financial instruments in interim as well as in annual financial statements. This FSP also amends APB Opinion No. 28, "Interim Financial
Reporting," to require those disclosures in all interim financial statements. This standard was effective for periods ending after June 15, 2009. There was no significant impact to the
Company's consolidated financial statements from the adoption of this standard.

In
June 2009, the FASB issued the following new accounting standards:



Effective
this quarter, the Company implemented SFAS 165, which establishes general standards of accounting for, and disclosure of, events that occur after the balance sheet date
but before financial statements are issued. The adoption of SFAS 165 did not impact the Company's financial position or results of operations. Management evaluated all events or transactions
that occurred after June 30, 2009 up through August 14, 2009, the date these financial statements were issued. During this period, the Company did not have any material recognizable
subsequent events.

SFAS 168
replaces SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles", to establish the "FASB Accounting Standards Codification" as the source of
authoritative accounting

8

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

2. Summary of Significant Accounting Policies (Continued)

principles
recognized by the FASB to be applied by nongovernmental entities in preparation of financial statements in conformity with generally accepted accounting principles in the United States.
SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The Company does not expect the adoption of this standard to have an impact on its financial
position or results of operations.

3. Inventory

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

December 31,
2008

June 30,
2009Raw materials

$
1,277

$
1,182Work in process


3,238


2,901Finished goods


2,315


3,010Total inventory

$
6,830

$
7,093


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 six months ended June 30, 2008
and 2009, all potential common shares have been excluded from the computation of the dilutive net loss per share for all periods presented. Such potential common shares consist of the following:

June 30,2008

2009Stock options


2,456,011


3,994,197Unvested restricted stock


250,485


1,026,135Warrants


110,000


25,762,3332,816,496


30,782,665


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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

5. Stock-Based Compensation

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

Three months ended

Six months endedJune 30, 2008

June 30, 2009

June 30, 2008

June 30, 2009($ in thousands)Selling, general and administrative

$
700

$
721

$
1,621

$
1,402Research and development


340


412


652


793Total stock-based compensation expense

$
1,040

$
1,133

$
2,273

$
2,195


During
the six months ended June 30, 2008, the Company granted 148,333 stock options at an exercise price of $12.36 per share, 50,600 stock options at an exercise price of $6.15
per share, 23,812 stock options at an exercise price of $6.99 per share, 151,850 stock options at an exercise price of $5.93 per share and 44,718 stock options at an exercise price of $4.93 per share.
During the six months ended June 30, 2008, the Company granted 50,000 shares of restricted stock.

In
connection with the Company's 2008 Corporate Retention Program, in the first quarter of 2009, the Company granted stock options and restricted stock to all employees. During the six
months ended June 30, 2009, the Company granted 1,409,521 stock options at an exercise price of $1.04 per share, 82,260 stock options at an exercise price of $0.78 per share, 100,000 stock
options at an exercise price of $0.62 per share, and 5,000 stock options at an exercise price of $0.54 per share. During the six months ended June 30, 2009, the Company granted 890,895 shares
of restricted stock.

For
the six months ended June 30, 2008 and 2009, the fair value of stock options was estimated on the date of grant using the Black-Scholes option valuation model with the
following assumptions:

Six months endedJune 30, 2008

June 30, 2009Expected volatility

65.6%

63.2%Expected option life

6 years

6 yearsWeighted average risk-free interest rate

3.0%

2.1%Expected annual dividend yield

none

none


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 in accordance with the provisions of SFAS
No. 115, "Accounting for Certain Investments in Debt and Equity Securities." 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.

10

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

6. Fair Value Measurement (Continued)

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 FASB Staff Position, FSP, FAS 115-2 and FAS 124-2, "Recognition and Presentation of Other-Than-Temporary Impairment." This
standard 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 standard 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 June 30, 2009 and December 31, 2008 are measured in accordance with SFAS
No. 157, "Fair Value Measurements," or SFAS No. 157. 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.

At
December 31, 2008, the Company's cash and cash equivalents consisted entirely of cash deposits. The following table represents the Company's assets and liabilities measured at
fair value on a recurring basis at June 30, 2009:

Quoted Prices
in Active
Markets
(Level 1)

Other
Observable
Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

Total($ in thousands)Money market funds

$


$
6,700

$


$
6,700$


$
6,700

$


$
6,700


In
accordance with SFAS No. 157, the Company's cash equivalents were valued at June 30, 2009 using calculated net asset values and are therefore classified as
Level 2.

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Table of Contents

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

Forward Looking Statements

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

Business Overview

We are a life sciences company focused on innovative genetic analysis technologies for the research, drug discovery and clinical
diagnostics markets. Our products are based on our proprietary True Single Molecule Sequencing (tSMS) technology which enables rapid analysis of large quantities of genetic material by
directly sequencing single molecules of DNA or single DNA copies of RNA. This approach differs from current methods of sequencing DNA 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.

We
believe that our tSMS technology will represent the first comprehensive and universal solution for single molecule genetic analysis and that its adoption can expand the market for
genetic analysis while substantially lowering the cost of individual analyses. Our goal is to enable production-level genetic analysis on an unprecedented scale by providing scientists and clinicians
with the ability to compare genes and genomes from thousands of individuals. If our tSMS-based products are successful, the information generated from using these products may lead to
improved drug therapies, personalized medical treatments and more accurate diagnostics for cancer and other diseases.

Our
Helicos Genetic Analysis Platform is designed to obtain sequencing information by repetitively performing a cycle of biochemical reactions on individual DNA 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.

The
imaging capability of the HeliScope Sequencer is designed to accommodate performance beyond what is needed to meet the platform's initial goals, providing the flexibility to
introduce substantial throughput and cost improvements in the future without major changes to or replacement of the instrument. We believe that the Helicos Genetic Analysis Platform will ultimately
enable the
automated, parallel sequencing of billions of individual DNA molecules at orders of magnitude of greater speed and lower cost than other sequencing systems.

We
shipped our first two Helicos Systems in 2008, one of which was ultimately returned. During the first quarter of 2009, we placed a third Helicos System at the Broad Institute of MIT
and Harvard,

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at
no cost. Also in the first quarter of 2009, we installed a fourth Helicos System at an institution for scientific and commercial evaluation. During the second quarter of 2009, we shipped and
installed two additional Helicos Systems, one of which is at an institution for scientific and commercial evaluation. We believe that we have incurred the substantial majority of the costs related to
the development of the initial version of our Helicos System. In anticipation of future orders, shipments and placements, we are assembling and are testing multiple production units of our Helicos
System. These future shipments of the Helicos Systems will be subject to various customer evaluation periods with acceptance criteria, and we expect the customer evaluation period to extend beyond the
fiscal quarters in which commercial units are shipped. We continue to secure orders for the Helicos System and recognized revenue from one of our initial 2008 instrument shipments during the first
quarter of 2009. Future revenues from sales of our instruments, proprietary reagents and disposable supplies will depend on individual customer agreements, timing of the installation and turnover to
customer, customers' use of the system and our ability to maintain our proprietary position on the reagents and disposable supplies. Because we have limited experience in the commercialization of our
Helicos System, we cannot predict the percentage of our revenues that we will derive from sales of proprietary reagents and disposable supplies. However, over time we would expect the sales of the
reagents and disposable supplies to increase as our installed base of instruments grows and usage of these instruments increases.

In
December 2008, we raised approximately $17.8 million, after deducting placement agent fees and estimated offering expenses, through the issuance of 42,753,869 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.
Our cash burn during the first six months of 2009 was $11.3 million. Since inception, we have incurred losses and have not generated positive cash flows from operations. We expect such losses
to continue for at least two years as we continue to develop and commercialize our products. In December 2008, we implemented a 30% reduction in our workforce and took other measures to reduce our
future operating costs. As of June 30, 2009 and August 14, 2009, we had $8.4 million and $5.0 million, respectively, in cash and cash equivalents. We believe that our existing
cash and cash equivalents and receipts from customers on sales of products, coupled with the implementation of significant additional expense reduction initiatives, will be sufficient to fund our
operations into the first quarter of 2010. If our current operating plan including forecasted sales for the remainder of 2009 does not materialize or if adequate additional funds are not available
when required, we will be required to further delay, reduce or eliminate research and development programs, reduce or eliminate commercialization efforts, obtain funds through arrangements with
collaborators or others on terms unfavorable to us, or pursue merger or divestiture or other strategies.

We
are actively engaged in discussions with potential strategic partners regarding various financing alternatives and are actively pursuing financing strategies, including equity or debt
financings or other
sources of funding, such as collaborations, licensing arrangements, joint ventures or partnerships. The worldwide financial markets are continuing to experience turmoil in 2009. These events have
materially and adversely impacted the availability of financing to a wide variety of companies, particularly early-stage companies such as Helicos. Adequate additional funding may not be available to
us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and would have a material adverse impact on the viability of
our ability to pursue our business strategies.

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 June 30,
2009, as defined by the Financial Accounting Standards Board ("FASB") in Statement of Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development Stage Enterprises."
Our fiscal

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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

Grant revenue

In September 2006, we were awarded a grant from the National Human Genome Research Institute, a branch of the National Institutes of
Health, pursuant to which we are eligible to receive reimbursement of our research expenses of up to $2.0 million through August 2009. We recognized revenue during the three months ended
June 30, 2008 and 2009 of $251,000 and $213,000, respectively, in connection with this award. During the six months ended June 30, 2008 and 2009, we recognized revenue of $364,000 and
$452,000, respectively, in connection with this award. We have fully expended all available funds under the grant as of June 30, 2009.

Product revenue

Product revenue for the six months ended June 30, 2009 primarily consists of $829,000 of revenue recognized from the sale of an
instrument that was shipped in 2008, as well as $280,000 of revenue recognized from the sale of proprietary reagents to customers.

Cost of product revenue

Cost of product revenue for the six months ended June 30, 2009 primarily consists of costs associated with the sale of
instruments and proprietary reagents.

Research and development expenses

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

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

Research
and development expenses for the six months ended June 30, 2008 and 2009 were $12.8 million and $7.6 million, respectively. From 2008 to 2009, expenses
decreased as we focused more of our efforts on manufacturing activities and spent less time on research and development activities. The decrease is also due to the reduction in force implemented in
December 2008.

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.

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We
believe that the Helicos System can potentially access a wide range of genetic analysis tests useful to the basic, pharmaceutical, and biomedical research and diagnostic markets. In
addition, we have envisioned a series of performance enhancements to the chemistries and consumables used on the initial Helicos System which potentially serve to greatly enhance the sequencing
throughput. Each of these research and development projects is dependent upon achieving technical objectives, which are inherently uncertain. As a result of these uncertainties, we are unable to
predict to what extent we will receive cash inflows from the sale of future tests or from the future enhanced throughput. Our inability to complete these new research and development projects in a
timely manner would significantly increase our capital requirements and would adversely impact our liquidity.

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 six months ended June 30, 2008 and 2009 were $11.0 million and $5.6 million, respectively. The decrease is due
to the reduction in force implemented in December 2008, as well as a significant reduction in costs associated with ERP system enhancements, public company expenses, investor relations programs, and
outside consultant costs related to Sarbanes-Oxley compliance.

Restructuring

In December 2008, we implemented a work force reduction plan that resulted in the reduction of approximately 30% of our workforce (the
"Reduction in Force Plan"). The Reduction in Force Plan was designed to reduce our operating costs and direct our resources to continue advancing towards our near term goals. Employees directly
affected by the Reduction in Force Plan were provided with severance payments and outplacement assistance.

We
incurred restructuring charges relating to one-time termination benefits of approximately $433,000 in the fourth quarter of 2008. These charges represent employee
severance and termination costs which were paid out during the fourth quarter of 2008 and the first quarter of 2009.

We
estimate that this restructuring will result in annual cost savings of approximately $3.8 million, including salaries and benefits.

A
summary of restructuring activity at June 30, 2009 is as follows:

Balance
December 31,
2008

Payments/
Settlements

Balance
June 30,
2009($ in thousands)Employee severance, benefits and related costs:Research and development

$
69

$
(69
)
$
Selling, general and administrative


64


(64
)

Total

$
133

$
(133
)
$



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Overview of Results of Operations

Three and six months ended June 30, 2008 compared to three and six months ended June 30, 2009

Grant revenue.We recognized $251,000 and $364,000 of grant revenue during the three and six months ended June 30, 2008,
respectively, and
$213,000 and $452,000 of grant revenue during the three and six months ended June 30, 2009, respectively. Grant revenue recognized during the three and six months ended June 30, 2008 and
2009 related to the reimbursement of expenses in connection with our government research grant.

Product revenue.We did not recognize product revenue during the three and six months ended June 30,
2008. We recognized $158,000 and $1.1 million of product revenue during the three and six months ended June 30, 2009, respectively. Product revenue recognized during the three months
ended June 30, 2009 primarily consists of revenue from the sale of proprietary reagents to customers. Product revenue recognized during the six months ended June 30, 2009 primarily
consists of $829,000 of revenue from the sale of an instrument that was shipped in 2008, while the remaining amount consists of revenue from the sale of proprietary reagents to customers.

Cost of product revenue.We did not record any cost of product revenue during the three and six months ended June 30, 2008. We
recorded
$124,000 and $645,000 as cost of product revenue during the three and six months ended June 30, 2008 and 2009, respectively. Cost of product revenue consists of costs associated with the sale
and placement of instruments and sale of proprietary reagents.

Research and development expenses.Research and development expenses during the three and six months ended June 30, 2008 and 2009
were as
follows:

Three months ended
June 30,





Six months ended
June 30,2008

2009

Change

2008

2009

Change($ in thousands)Research and development

$
7,083

$
3,539

$
(3,544
)

-50
%
$
12,788

$
7,632

$
(5,156
)

-40
%


Research
and development expenses decreased by $3.5 million from the three months ended June 30, 2008 to the three months ended June 30, 2009. The majority of the
decrease was due to a $2.3 million decrease in the charge for labor and overhead costs associated with the under-utilization of the manufacturing facility. In addition, our salary and benefit
expenses decreased by $768,000 as a result of cost savings that were realized from the Reduction in Force Plan implemented in December 2008. There was also a $592,000 decrease in product development
costs, which included lab expenses, materials, supplies, temporary help and prototype expenses. In addition to our overall reduction in operating costs, our product development costs decreased as we
moved toward manufacturing and production activities. These decreases were offset by a $72,000 increase in stock-based compensation expense from the three months ended June 30, 2008 to the
three months ended June 30, 2009.

In
comparing the six months ended June 30, 2008 to the six months ended June 30, 2009, research and development expenses decreased $5.2 million. The decrease was due
to a $2.2 million decrease in product development costs, which included lab expenses, materials, supplies, temporary help and prototype expenses. In addition to our overall reduction in
operating costs, our product development costs decreased as we moved toward manufacturing and production activities. There was also a $1.7 million decrease in the charge for labor and overhead
costs associated with the under-utilization of the manufacturing facility. In addition, our salary and benefit expenses decreased by $1.4 million as a result of cost savings that were realized
from the Reduction in Force Plan implemented in December 2008. These decreases were offset by a $141,000 increase in stock-based compensation expense from the six months ended June 30, 2008 to
the six months ended June 30, 2009. We expect our research

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and
development expenses to stay consistent throughout the remainder of 2009. However, as we gain commercial traction we will need to invest in future versions of our system.

Selling, general and administrative expenses.Selling, general and administrative expenses during the three and six months ended
June 30, 2008
and 2009 were as follows:

Three months ended
June 30,





Six months ended
June 30,2008

2009

Change

2008

2009

Change($ in thousands)Selling, general and administrative

$
4,830

$
2,732

$
(2,098
)

-43
%
$
11,014

$
5,583

$
(5,431
)

-49
%


Selling,
general and administrative expenses decreased by $2.1 million from the three months ended June 30, 2008 to the three months ended June 30, 2009. The largest
contributor to the decrease is an $874,000 decrease in our salary and benefit expenses. This was a result of cost savings that were realized from the Reduction in Force Plan implemented in December
2008. In addition, our expenses related to public company activities decreased by $674,000. Such activities include investor relations programs, business insurance, and outside consulting fees
associated with Sarbanes-Oxley compliance. We also spent $212,000 less on marketing programs and $285,000 less on costs associated with certain outside legal expenses.

In
comparing the six months ended June 30, 2008 to the six months ended June 30, 2009, selling, general and administrative expenses decreased $5.4 million. The
decrease was again due to a $2.0 million decrease in our salary and benefit expenses. This was a result of cost savings that were realized from the Reduction in Force Plan implemented in
December 2008. In addition, our expenses related to public company activities decreased by $1.3 million. Such activities include investor relations programs, business insurance, and outside
consulting fees associated with Sarbanes-Oxley compliance. We also spent $657,000 less on costs associated with certain outside legal expenses, $519,000 less on marketing programs, and $289,000 less
on travel expenses. In addition, our stock-based compensation expense decreased by $219,000 from the six months ended June 30, 2008 to the six months ended June 30, 2009. We expect our
selling, general and administrative expenses to stay consistent throughout the remainder of 2009. However, as we gain commercial traction we will need to expand our sales, marketing, and
administrative functions.

Interest income.Interest income for the three and six months ended June 30, 2008 and 2009 was as follows:

Three months ended
June 30,





Six months ended
June 30,2008

2009

Change

2008

2009

Change($ in thousands)Interest income

$
145

$
22

$
(123
)

-85
%
$
483

$
62

$
(421
)

-87
%


The
decrease in interest income from the three and six months ended June 30, 2008 compared to the three and six months ended June 30, 2009 was due primarily to decreased
interest rates during the six months ended June 30, 2009 compared to the six months ended June 30, 2008, and to a lesser extent, lower cash balances.

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Interest expense.Interest expense for the three and six months ended June 30, 2008 and 2009 was as follows:

Three months ended
June 30,





Six months ended
June 30,2008

2009

Change

2008

2009

Change($ in thousands)Interest expense

$
370

$
275

$
(95
)

-26
%
$
730

$
580

$
(150
)

-21
%


The
decrease in interest expense from the three and six months ended June 30, 2008 compared to the three and six months ended June 30, 2009 is attributable to the year over
year decrease in our long-term debt obligations.

Liquidity and Capital Resources

We have incurred losses since our inception in May 2003 and, as of June 30, 2009 we had an accumulated deficit of
$152.5 million. We have financed our operations to date principally through the sale of preferred stock and common stock, including our IPO and a private placement of common stock and warrants,
debt financing and interest earned on investments. Through June 30, 2009, we have received net proceeds of $66.8 million from the issuance of preferred stock, $65.3 million
through the issuance of common stock, including our IPO and a private placement of common stock and warrants, $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, 2008 was $20.8 million,
consisting of $27.2 million in current assets and $6.4 million in current liabilities. Working capital as of June 30, 2009 was $10.3 million, consisting of
$16.2 million in current assets and $5.9 million in current liabilities. Our cash and cash equivalents are held in interest-bearing cash accounts. Cash in excess of immediate
requirements is invested in accordance with our investment policy, primarily to achieve liquidity and capital preservation.

The
following table summarizes our net decrease in cash and cash equivalents for the six months ended June 30, 2008 and 2009:

Six months ended
June 30,2008

2009($ in thousands)Net cash (used in) provided by:Operating activities

$
(25,002
)
$
(9,630
)Investing activities


(12,635
)

(8
)Financing activities


9,316


(1,691
)Net decrease in cash and cash equivalents

$
(28,321
)
$
(11,329
)


Net
cash used in operating activities was $25.0 million for the six months ended June 30, 2008 compared to $9.6 million for the six months ended June 30,
2009. The $15.4 million decrease was primarily due to a decrease in the net loss of $10.9 million, a decrease in inventory purchases of $5.0 million, and an increase in the change
of accounts payable of $766,000, partially offset by a decrease in the change in accrued expenses and other current liabilities of $1.4 million.

Net
cash used in investing activities was $12.6 million for the six months ended June 30, 2008 compared to $8,000 for the six months ended June 30, 2009. The
$12.6 million decrease was due to a $10.0 million decrease in restricted cash, as well as a $2.6 million decrease in the cash used for purchases of property and equipment.

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Net
cash provided by financing activities was $9.3 million for the six months ended June 30, 2008 compared to net cash used in financing activities of $1.7 million
for the six months ended June 30, 2009. The $11.0 million decrease was primarily due to a $9.9 million decrease in proceeds from debt issuances, as well as a $1.2 million
increase in debt payments.

Operating capital and capital expenditure requirements

We shipped our first two Helicos Genetic Analysis Systems in 2008, one of which was ultimately returned. During the first
quarter of 2009, we placed a third Helicos System at the Broad Institute of MIT and Harvard, at no cost. Also in the first quarter of 2009, we installed a fourth Helicos System at an institution for
scientific and commercial evaluation. During the second quarter of 2009, we shipped and installed two additional Helicos Systems, one of which is at an institution for scientific and commercial
evaluation. To date, we have not achieved profitability. We anticipate that we will continue to incur substantial net losses for at least two years as we continue our efforts in commercializing the
Helicos System and develop the corporate infrastructure required to manufacture and sell our products. We continue to secure orders for the Helicos System, and we expect to generate additional
instrument revenue during 2009. Future revenues from sales of our instruments, proprietary reagents and disposable supplies will depend on individual customer agreements, timing of the installation
and turnover to customer, customers' use of the system and our ability to maintain our proprietary position on the reagents and disposable supplies. Because we have limited experience in the
commercialization of our Helicos System, we cannot predict the percentage of our revenues that we will derive from sales of proprietary reagents and disposable supplies. However, over time we would
expect the sales of the reagents and disposable supplies to increase as our installed base of instruments grows and usage of these instruments increases.

Since
inception, we have incurred losses and have not generated positive cash flows from operations. We expect such losses to continue for at least two years as we continue to develop
and commercialize our products. In December 2008, we implemented a 30% reduction in our workforce and took other measures to reduce our future operating costs. As of June 30, 2009 and
August 14, 2009, we had $8.4 million and $5.0 million, respectively, in cash and cash equivalents. We believe that our existing cash and cash equivalents and receipts from customers on
sales of products, coupled with the implementation of significant additional expense reduction initiatives, will be sufficient to fund our operations into the first quarter of 2010. If our current
operating plan including forecasted sales for the remainder of 2009 does not materialize or if adequate additional funds are not available when required, we will be required to further delay, reduce
or eliminate research and development programs, reduce or eliminate commercialization efforts, obtain funds through arrangements with collaborators or others on terms unfavorable to us, or pursue
merger or divestiture or other strategies.

We
are actively engaged in discussions with potential strategic partners regarding various financing alternatives and are actively pursuing financing strategies, including equity or debt
financings or other sources of funding, such as collaborations, licensing arrangements, joint ventures or partnerships. The worldwide financial markets are continuing to experience turmoil in 2009.
These events have materially and adversely impacted the availability of financing to a wide variety of companies, particularly early-stage companies such as Helicos. Adequate additional funding may
not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and would have a material adverse impact
on the viability of our ability to pursue our business strategies.

Our
forecast of the period of time through which our financial resources will be adequate to support our operations, the costs to complete development of products and the cost to
commercialize our future products are forward-looking statements and involve risks and uncertainties, and actual results could vary materially and negatively as a result of a number of factors,
including the factors discussed in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2008 and under Part II
Item 1A herein. We have based these estimates on

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assumptions
that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

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



Working
capital as of December 31, 2008 was $20.8 million, consisting of $27.2 million in current assets and $6.4 million in current liabilities. Working
capital as of June 30, 2009 was $10.3 million, consisting of $16.2 million in current assets and $5.9 million in current liabilities.

Contractual obligations

A summary of our contractual obligations is included in our Form 10-K for the fiscal year ended December 31,
2008. There have been no material changes to our contractual obligations previously disclosed in Item 7 of the Company's Annual Report on Form 10-K for the year ended
December 31, 2008.

License agreements and patents

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

Line of credit facility and security agreement

In June 2006, we entered into a line of credit facility and security agreement with General Electric Capital Corporation ("GE
Capital"). The credit facility 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. As of June 30, 2009, advances on the credit facility were
$2.5 million at a weighted-average interest rate of 10.1%. As of December 31, 2008 and June 30, 2009, the outstanding balance on the credit facility was $799,000 and $357,000,
respectively.

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Loan and security agreement

In December 2007, we entered into a loan and security agreement with two lenders including GE Capital, 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. 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 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. 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, we issued warrants to the two lenders to purchase an
aggregate of 110,000 shares of common stock. The warrants have an exercise price of $4.80 per share and expire in June 2014. The fair value of the warrants was estimated at $337,000 using a
Black-Scholes model with the following assumptions: expected volatility of 65.4%, risk free interest rate of 3.4%, expected life of six years and no dividends. Expected volatility was based on the
volatility of similar entities in the life sciences industry of comparable size of market capitalization and financial position that completed initial public offerings within the last ten years. The
fair value of the warrants was recorded as equity and a debt discount and will be amortized to interest expense over the term of the loan.

In
December 2008, we entered into an additional amendment to the loan and security agreement with certain lenders including GE Capital. 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 is no
longer classified as restricted cash. 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
of December 31, 2008 and June 30, 2009, the outstanding balance on the loan agreement was $7.1 million and $5.8 million, respectively. The carrying amount
of the loan agreement approximates its fair value at December 31, 2008 and June 30, 2009.

Private Placement in Public Equity Offering

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

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common
stock (collectively, the "Shares") and (ii) one warrant (collectively, the "Warrants") 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 "Offering"). The Warrants have a five year term and became exercisable immediately
following the closing of the transaction. The closing of the transaction occurred on December 23, 2008. In connection with the 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 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 $4,449,397 using a Black-Scholes model with the following assumptions: expected volatility of
66.15%, risk free interest rate of 1.53%, expected life of five years and no dividends. Expected volatility was based on the volatility of similar entities in the life sciences industry of comparable
size of market capitalization and financial position that completed initial public offerings within the last ten years. The relative fair value of the warrants was recorded in the equity section of
the balance sheet.

Off-balance sheet arrangements

During the six months ended June 30, 2008 and 2009, 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, 2008, 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 net operating losses and tax credit carryforwards. We reviewed our policies and determined that those policies remain our critical accounting policies for the six months ended
June 30, 2009. We did not make any changes in those policies during the six months ended June 30, 2009.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Our exposure to market risk is limited to our cash and cash equivalents. 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 and cash equivalents in interest-bearing bank accounts. As all of our investments are cash deposits and money market funds in global banks, they are subject to minimal interest rate
risk.

Item 4.    Controls and Procedures

Our management, with the participation of our principal executive officer (PEO) and principal financial officer (PFO), has evaluated
the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), as of June 30, 2009. 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

Not applicable.

Item 1A.    Risk Factors

RISK FACTORS

The Company cautions investors that its future performance and results and, therefore, any forward-looking
statements are subject to risks and uncertainties. Various factors may cause the Company's future results to differ materially from those projected in any forward-looking statements. These factors
were disclosed, but are not limited to, the items in the Company's most recent Annual Report on Form 10-K, Part I, Item 1A. The following risk factors have been
revised from the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2008.

RISKS RELATED TO OUR BUSINESS

In or before the fourth quarter of 2009, we will need to raise additional funding, which may not be available on favorable terms, if at all, or without dilution to our
stockholders. If we do not raise the necessary funds, we will need to cut back or terminate some or all aspects of our operations, which would materially adversely affect our business prospects.

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



The
worldwide financial markets are currently experiencing turmoil. These events have materially and adversely impacted the availability of financing to a wide variety of companies,
particularly early-stage companies such as Helicos. We do not know whether the additional capital which we will require will be available when and as needed, on favorable terms if at all, or that our
actual cash requirements will not be greater than anticipated. In addition, if we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our
stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we obtain additional debt
financing, a substantial portion of our

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operating
cash flow may be dedicated to the payment of principal and interest on such indebtedness, and the terms of the debt securities issued could impose significant restrictions on our operations.
If we raise additional funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our technologies or products, or grant licenses on terms that
are not favorable to us. If our current operating plan including forecasted sales in 2009 does not materialize or if adequate additional funds are not available to us when required, we will be
required to further delay, reduce or eliminate research and development programs, reduce or eliminate commercialization efforts, obtain funds through arrangements with collaborators or others on terms
unfavorable to us, or pursue merger or divestiture or other strategies.

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 in the year ended December 31, 2008 and $12.8 million in the six months ended June 30,
2009. As of June 30, 2009, we had an accumulated deficit of $152.5 million. These losses have resulted principally from costs incurred in our research and development programs and from
our selling, general and administrative expenses. In the six months ended June 30, 2009, we used cash in operating activities of $9.6 million and had capital expenditures totaling
$8,000. As of June 30, 2009 and August 14, 2009, we had $8.4 million and $5.0 million, respectively, in cash and cash equivalents.

We
will need to generate significant revenue to achieve profitability. As of June 30, 2009, we had shipped six Helicos Genetic Analysis Systems and have only
recognized revenue from one of these initial shipments. Moreover, one of the systems that had been shipped in 2008 was returned in 2009. Because our products will be subject to various customer
evaluation periods with acceptance criteria, we expect the customer evaluation period and our ability to have any recognizable revenue from additional initial sales, if any, to extend beyond the
fiscal quarters in which the products are shipped. Moreover, even after we begin selling our products on a commercial scale, we expect our losses to continue for at least the next two years as a
result of ongoing research and development expenses, as well as increased manufacturing, sales and marketing expenses. These losses, among other
things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders' equity. Because of the numerous risks and uncertainties associated with our product
development and commercialization efforts, we are unable to predict when we will become profitable, and we may never become profitable. Even if we do achieve profitability, we may not be able to
sustain or increase profitability on a quarterly or annual basis. If we are unable to achieve and then maintain profitability, the market value of our common stock will decline.

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

Use of Proceeds from Private Placement in Public Equity Offering

On December 19, 2008, we announced that we had entered into a securities purchase agreement with certain investors pursuant to
which it has agreed to sell a total of 42,753,869 units (the "Units"), each Unit consisting of (i) one share of common stock (collectively, the "Shares") and (ii) one warrant
(collectively, the "Warrants") 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 "Offering") for gross proceeds of $18.6 million. We paid $0.8 million in placement agent fees and offering expenses and expect to use the
remaining net proceeds of $17.8 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 Shares and Warrants were immediately separable and

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were
issued separately. The Warrants have a five year term and became exercisable immediately following the closing of the transaction. The closing of the transaction occurred on December 23,
2008.

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 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 obtained approval of the Offering at our annual meeting of stockholders, which was held on June 3, 2009.

In
connection with the Offering, we have entered into a registration rights agreement (the "Registration Rights Agreement") with each of the investors. The Registration Rights Agreement
provides that we file a "resale" registration statement (the "Registration Statement") covering all of the Shares and the shares issuable upon exercise of the Warrants (the "Warrant Shares"),
up to the maximum number of shares able to be registered pursuant to applicable Securities and Exchange Commission ("SEC") regulations, within 30 days of the closing of the Offering. We filed
the Registration Statement with the SEC on January 22, 2009 (File No. 333-156885), which was declared effective by the SEC on April 28, 2009. Under the terms of the
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 if, at any time after six months following the
closing of the Offering, we cease to be current in 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.

Issuer Purchases of Equity Securities

During the first half of 2009, we purchased 11,627 restricted shares from employees to cover withholding taxes due from the employees
at the time the shares vested. The following table provides information about these purchases of restricted shares for the six months ended June 30, 2009:

Period

Total Number of
Shares Purchased

Average Price
Paid Per Share
($)January 1 to 31, 2009


480

$
0.60February 1 to 28, 2009





March 1 to 31, 2009





April 1 to 30, 2009


11,147

$
0.63May 1 to 31, 2009





June 1 to 30, 2009





Total


11,627


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Upon
the termination of employees during the six months ended June 30, 2009, 9,440 unvested restricted shares were forfeited. The following table provides information about our
forfeited restricted shares for the six months ended June 30, 2009:

Period

Total Number of
Shares Forfeited

Average Price
Per Share
($)January 1 to 31, 2009





February 1 to 28, 2009


6,250

$
0.58March 1 to 31, 2009





April 1 to 30, 2009





May 1 to 31, 2009





June 1 to 30, 2009


3,190

$
0.48Total


9,440


Item 3.    Defaults upon Senior Securities

Not applicable.

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

On June 3, 2009, the Company held its 2009 Annual Meeting of Stockholders. Out of 64,655,624 shares of common stock
entitled to vote at the annual meeting, 61,774,921 shares were present in person or represented by proxy. The matters voted on and the results of the vote were as follows:

(a)   Peter
Barrett, PhD, Robert F. Higgins and Theo Melas-Kyriazi were elected to continue to serve as the Company's directors until the 2012 annual meeting of
stockholders or until their successors are duly elected and qualified. The results of the vote were as follows:

For

WithheldPeter Barrett, PhD


60,455,886


1,319,035Robert F. Higgins


60,789,219


985,702Theo Melas-Kyriazi


61,558,019


216,902


(b)   The
appointment of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2009
was ratified. The results of the vote were as follows:

For

Against

Abstain

Non-Votes61,733,716


476


40,729


0


(c)   The
removal of certain share issuance limitations in warrants to purchase common stock issued in December 2008 was approved. The results of the vote were as
follows:

For

Against

Abstain

Non-Votes57,725,664


56,227


27,265


3,965,765


(d)   The
amendment to the Company's Fourth Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company's outstanding common stock at an
exchange ratio of (i) one-for-10, (ii) one-for-25 or (iii) any amount in between one-for-10 and
one-for-25 and to

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authorize
the Company's Board of Directors to implement the reverse stock split at any time prior to the 2010 annual meeting of stockholders was approved. The results of the vote were as follows:

For

Against

Abstain

Non-Votes61,178,089


575,748


21,084


0


(e)   The
amendment to the Company's Fourth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 120,000,000 to
200,000,000 and authorize the Company's Board of Directors to implement the increase in the number of authorized shares at any time prior to the 2010 annual meeting of stockholders if the reverse
stock split is not implemented was approved. The results of the vote were as follows:

For

Against

Abstain

Non-Votes60,919,412


828,083


27,426


0


Item 5.    Other Information

None.

Item 6.    Exhibits

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

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SIGNATURES

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

Dated: August 14, 2009

/s/ RONALD A. LOWY Ronald A. Lowy Chief Executive Officer
(Principal Executive Officer)Dated: August 14, 2009

/s/ STEPHEN P. HALL Stephen P. Hall Senior Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)


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EXHIBIT INDEX

31.1

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

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

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


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