Annual Reports

 
Quarterly Reports

  • 10-Q (Aug 14, 2012)
  • 10-Q (May 14, 2012)
  • 10-Q (Nov 16, 2011)
  • 10-Q (Nov 14, 2011)
  • 10-Q (Aug 12, 2011)
  • 10-Q (May 13, 2011)

 
8-K

 
Other

HELICOS BIOSCIENCES CORP 10-Q 2009

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.1

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)    

ý

 

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

For the quarterly period ended June 30, 2009

OR

o

 

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

For 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.


Table of Contents


HELICOS BIOSCIENCES CORPORATION (a development stage company)


Table of Contents

 
   
  Page

Part I—Financial Information

   

Item 1.

 

Consolidated Financial Statements (Unaudited)

 
3

 

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

 
3

 

Consolidated 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

 
4

 

Consolidated 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

 
5

 

Notes to Consolidated Financial Statements

 
6

Item 2.

 

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

 
12

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 
22

Item 4.

 

Controls and Procedures

 
22

Part II—Other Information

   

Item 1.

 

Legal Proceedings

 
23

Item 1A.

 

Risk Factors

 
23

Item 2.

 

Unregistered Sale of Equity Securities and Use of Proceeds

 
24

Item 3.

 

Defaults upon Senior Securities

 
26

Item 4.

 

Submission of Matters to a Vote of Security Holders

 
26

Item 5.

 

Other Information

 
27

Item 6.

 

Exhibits

 
27

SIGNATURES

 
28

2


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,
2009
 

ASSETS

             

Current assets

             
 

Cash and cash equivalents

  $ 19,713   $ 8,384  
 

Accounts receivable

    223     99  
 

Unbilled government grant receivable

    205     213  
 

Inventory

    6,830     7,093  
 

Prepaid expenses and other current assets

    235     427  
           
     

Total current assets

    27,206     16,216  

Property and equipment, net

    4,016     2,685  

Restricted cash

    225     225  

Other assets

    13     9  
           
     

Total assets

  $ 31,460   $ 19,135  
           

LIABILITIES AND STOCKHOLDERS' EQUITY

             

Current liabilities

             
 

Accounts payable

  $ 789   $ 1,208  
 

Accrued expenses and other current liabilities

    1,652     1,184  
 

Deferred revenue

    623     500  
 

Current portion of long-term debt

    3,323     2,976  
           
     

Total current liabilities

    6,387     5,868  

Long-term debt, net of current portion

    4,535     3,359  

Other long-term liabilities

    35      
           
     

Total liabilities

    10,957     9,227  

Commitments and contingencies

             

Stockholders' equity

             
 

Preferred 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     65  
 

Additional paid-in capital

    160,144     162,353  
 

Deficit accumulated during the development stage

    (139,705 )   (152,510 )
           
     

Total stockholders' equity

    20,503     9,908  
           
     

Total liabilities and stockholders' equity

  $ 31,460   $ 19,135  
           

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

3


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, 2009
 
 
  2008   2009   2008   2009  

Product revenue

  $   $ 158   $   $ 1,121   $ 1,157  

Grant revenue

    251     213     364     452     1,965  
                       
   

Total revenue

    251     371     364     1,573     3,122  
                       

Costs and expenses

                               
 

Cost of product revenue

        124         645     655  
 

Research and development

    7,083     3,539     12,788     7,632     83,992  
 

Selling, general and administrative

    4,830     2,732     11,014     5,583     53,538  
                       
 

Total costs and expenses

    11,913     6,395     23,802     13,860     138,185  
                       
   

Operating loss

    (11,662 )   (6,024 )   (23,438 )   (12,287 )   (135,063 )
 

Interest income

    145     22     483     62     4,121  
 

Interest 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


Table of Contents


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, 2009
 
 
  2008   2009  

Cash 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     7,070  
 

Amortization of lease incentive

    (74 )   (74 )   (439 )
 

Common stock issued for licenses

            147  
 

Stock-based compensation expense

    2,273     2,195     11,624  
 

Noncash interest expense related to debt and warrants

    139     175     727  
 

Provisions on inventory

            1,577  

Changes 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 )   500  
 

Accounts payable

    (347 )   419     1,208  
 

Accrued expenses and other current liabilities

    1,051     (386 )   1,443  
 

Other long-term liabilities

    (115 )   (31 )   161  
               
   

Net 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

            34,709  
               

Net cash used in investing activities

    (12,635 )   (8 )   (9,725 )
               

Cash flows from financing activities:

                   

Proceeds from debt issuances

    9,850         22,256  

Payments on debt

    (482 )   (1,694 )   (15,964 )

Payments of debt issuance costs

    (20 )       (194 )

Proceeds from initial public offering

            49,011  

Deferred initial public offering costs

            (1,838 )

Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs

            66,405  

Proceeds from bridge loan

            350  

Proceeds from issuance of common stock

            17,811  

Proceeds from issuance of restricted common stock

        1     340  

Payments to employees for cancelled restricted common stock

    (41 )       (104 )

Proceeds from exercise of stock options

    9     2     52  
               

Net cash provided by (used in) financing activities

    9,316     (1,691 )   138,125  
               

Net (decrease) increase in cash and cash equivalents

    (28,321 )   (11,329 )   8,384  

Cash and cash equivalents, beginning of period

    52,683     19,713      
               

Cash and cash equivalents, end of period

  $ 24,362   $ 8,384   $ 8,384  
               

Supplemental disclosure of cash flow information

                   

Cash paid during the year for interest

  $ 499   $ 492   $ 2,273  

Transfers from inventory to property and equipment

  $   $   $ 255  

Noncash financing activities:

                   

Issuance of redeemable convertible preferred stock warrants

  $   $   $ 95  

Issuance of common stock warrants

  $ 337   $   $ 6,021  

Conversion of bridge loan to equity

  $   $   $ 350  

Beneficial conversion feature related to Series B redeemable convertible preferred stock

  $   $   $ 18,140  

Conversion of preferred stock to common stock

  $   $   $ 66,755  

Reclassification of preferred stock warrants to common stock warrants

  $   $   $ 162  

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

5


Table of Contents


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


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)


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


Table of Contents


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:

    SFAS No. 165, "Subsequent Events", or SFAS 165;

    SFAS No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162", or SFAS 168

        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


Table of Contents


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,
2009
 

Raw materials

  $ 1,277   $ 1,182  

Work in process

    3,238     2,901  

Finished goods

    2,315     3,010  
           

Total 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   2009  

Stock options

    2,456,011     3,994,197  

Unvested restricted stock

    250,485     1,026,135  

Warrants

    110,000     25,762,333  
           

    2,816,496     30,782,665  
           

9


Table of Contents


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 ended  
 
  June 30, 2008   June 30, 2009   June 30, 2008   June 30, 2009  

($ in thousands)

                         

Selling, general and administrative

  $ 700   $ 721   $ 1,621   $ 1,402  

Research and development

    340     412     652     793  
                   

Total 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 ended
 
  June 30, 2008   June 30, 2009

Expected volatility

  65.6%   63.2%

Expected option life

  6 years   6 years

Weighted 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


Table of Contents


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.

11


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,

12


Table of Contents


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

13


Table of Contents


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.

14


Table of Contents

        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 ) $  
               

15


Table of Contents

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

16


Table of Contents


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.

17


Table of Contents

        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.

18


Table of Contents

        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

19


Table of Contents


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:

    the rate of progress and cost of our commercialization activities;

    the success of our research and development efforts;

    the expenses we incur in marketing and selling our products;

    the revenue generated by future sales of our products;

    the timeliness of payments from our customers;

    the emergence of competing or complementary technological developments;

    the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;

    the terms and timing of any collaborative, licensing or other arrangements that we may establish; and

    the acquisition of businesses, products and technologies, although we currently have no commitments or agreements relating to any of these types of transactions.

        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.

20


Table of Contents

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

21


Table of Contents


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.

22


Table of Contents


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 level of research and development investment required to maintain and improve our technology position;

    the amount and growth rate of our revenues;

    changes in product development plans needed to address any difficulties in manufacturing or commercializing our Helicos System and enhancements to our system;

    the costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights;

    competing technological and market developments;

    our need or decision to acquire or license complementary technologies or acquire complementary businesses; and

    changes in regulatory policies or laws that affect our operations.

        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

23


Table of Contents

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

24


Table of Contents


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   $ 0.60  

February 1 to 28, 2009

         

March 1 to 31, 2009

         

April 1 to 30, 2009

    11,147   $ 0.63  

May 1 to 31, 2009

         

June 1 to 30, 2009

         
             
 

Total

    11,627        
             

25


Table of Contents

        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   $ 0.58  

March 1 to 31, 2009

         

April 1 to 30, 2009

         

May 1 to 31, 2009

         

June 1 to 30, 2009

    3,190   $ 0.48  
             
 

Total

    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   Withheld  

Peter Barrett, PhD

    60,455,886     1,319,035  

Robert F. Higgins

    60,789,219     985,702  

Theo 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-Votes  
  61,733,716     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-Votes  
  57,725,664     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

26


Table of Contents


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-Votes  
  61,178,089     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-Votes  
  60,919,412     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.

27


Table of Contents


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)

28


Table of Contents


EXHIBIT INDEX

 
   
  31.1   Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

31.2

 

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32.1

 

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

29



Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki