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HELICOS BIOSCIENCES CORP 10-Q 2010

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 March 31, 2010

OR

o

 

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

Commission File Number 001-33484

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

Delaware
(State or other jurisdiction of
incorporation or organization)
  05-0587367
(I.R.S. Employer
Identification No.)

One Kendall Square, Building 700, Cambridge, MA 02139
(617) 264-1800
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

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

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

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

Large accelerated filer o   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller reporting company)
  Smaller reporting company ý

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

        The number of shares of the registrant's Common Stock, $.001 par value, outstanding as of April 30, 2010, was 79,923,677 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)

   

 

Consolidated Balance Sheets as of December 31, 2009 and March 31, 2010

 
3

 

Consolidated Statements of Operations for the three months ended March 31, 2009 and 2010 and the period from May 9, 2003 (date of inception) through March 31, 2010

 
4

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and 2010 and the period from May 9, 2003 (date of inception) through March 31, 2010

 
5

 

Notes to Consolidated Financial Statements

 
6

Item 2.

 

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

 
16

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 
28

Item 4.

 

Controls and Procedures

 
28

Part II—Other Information

   

Item 1.

 

Legal Proceedings

 
29

Item 1A.

 

Risk Factors

 
29

Item 2.

 

Unregistered Sale of Equity Securities and Use of Proceeds

 
29

Item 3.

 

Defaults upon Senior Securities

 
32

Item 4.

 

Removed and Reserved

 
32

Item 5.

 

Other Information

 
32

Item 6.

 

Exhibits

 
32

SIGNATURES

 
33

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,
2009
  March 31,
2010
 

ASSETS

             

Current assets

             
 

Cash and cash equivalents

  $ 15,930   $ 11,305  
 

Accounts receivable

    848     151  
 

Unbilled receivables

    496     527  
 

Inventory

    6,827     7,867  
 

Prepaid expenses and other current assets

    424     363  
           
     

Total current assets

    24,525     20,213  

Property and equipment, net

    1,706     1,338  

Restricted cash

    225     225  

Other assets

    79     76  
           
     

Total assets

  $ 26,535   $ 21,852  
           

LIABILITIES AND STOCKHOLDERS' EQUITY

             

Current liabilities

             
 

Accounts payable

  $ 1,005   $ 2,405  
 

Accrued expenses and other current liabilities

    3,632     2,962  
 

Deferred revenue

    5,705     6,324  
 

Current portion of long-term debt

    2,773     4,276  
           
     

Total current liabilities

    13,115     15,967  

Long-term debt, net of current portion

    2,081      

Warrants

    5,253     3,660  

Other long-term liabilities

    400     400  
           
     

Total liabilities

    20,849     20,027  

Commitments and contingencies

             

Stockholders' equity

             
 

Preferred stock: par value $0.001 per share; 5,000,000 shares authorized at December 31, 2009 and March 31, 2010, respectively; no shares issued and outstanding December 31, 2009 and March 31, 2010

         
 

Common stock: par value $0.001 per share; 120,000,000 shares authorized at December 31, 2009 and March 31, 2010, respectively; 79,370,610 and 79,669,712 shares issued and outstanding at December 31, 2009 and March 31, 2010, respectively

    79     80  
 

Additional paid-in capital

    173,272     175,750  
 

Deficit accumulated during the development stage

    (167,665 )   (174,005 )
           
     

Total stockholders' equity

    5,686     1,825  
           
     

Total liabilities and stockholders' equity

  $ 26,535   $ 21,852  
           

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
March 31,
  Period from
May 9, 2003
(date of inception)
through
March 31, 2010
 
 
  2009   2010  

Product revenue

  $ 963   $ 42   $ 2,403  

Grant revenue

    239     527     2,741  
               
   

Total revenue

    1,202     569     5,144  
               

Costs and expenses

                   
 

Cost of product revenue

    521     72     1,321  
 

Research and development

    4,093     4,046     98,662  
 

Selling, general and administrative

    2,851     4,072     64,508  
               
 

Total costs and expenses

    7,465     8,190     164,491  
               
   

Operating loss

    (6,263 )   (7,621 )   (159,347 )
 

Interest income

    40     12     4,146  
 

Interest expense

    (305 )   (183 )   (4,075 )
 

Change in fair value of warrant liability

        1,452     3,411  
               
   

Net loss

    (6,528 )   (6,340 )   (155,865 )

Beneficial conversion feature related to Series B redeemable convertible preferred stock

            (18,140 )
               

Net loss attributable to common stockholders

  $ (6,528 ) $ (6,340 ) $ (174,005 )
               

Net loss attributable to common stockholders per share—basic and diluted

  $ (0.10 ) $ (0.08 )      
                 

Weighted average number of common shares used in computation—basic and diluted

    63,498,663     79,259,874        
                 

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)

 
  Three Months Ended
March 31,
  Period from
May 9, 2003
(date of inception)
through
March 31, 2010
 
 
  2009   2010  

Cash flows from operating activities:

                   

Net loss

  $ (6,528 ) $ (6,340 ) $ (155,865 )

Adjustments to reconcile net loss to cash used in operating activities:

                   
 

Depreciation and amortization

    687     385     8,424  
 

Amortization of lease incentive

    (37 )   (4 )   (474 )
 

Common stock issued for licenses

            147  
 

Stock-based compensation expense

    1,062     2,015     16,725  
 

Noncash interest expense related to debt and warrants

    89     82     959  
 

Noncash expense related to change in fair value of warrant liability

        (1,452 )   (3,411 )
 

Provisions on inventory

            3,276  
 

Loss on disposal of property and equipment

        10     36  

Changes in operating assets and liabilities:

                   
 

Accounts receivable

    192     697     (151 )
 

Unbilled receivable

    (34 )   (31 )   (277 )
 

Inventory

    132     (1,040 )   (11,398 )
 

Prepaid expenses and other current assets

    (103 )   61     (688 )
 

Deferred revenue

    (492 )   619     6,324  
 

Accounts payable

    (184 )   1,400     2,405  
 

Accrued expenses and other current liabilities

    230     (413 )   3,526  
 

Other long-term liabilities

    (25 )       557  
               
   

Net cash used in operating activities

    (5,011 )   (4,011 )   (129,885 )
               

Cash flows from investing activities:

                   

Purchases of property and equipment

    (8 )   (25 )   (9,539 )

Decrease (increase) in restricted cash

            (225 )

Purchases of short-term investments

            (34,709 )

Maturities of short-term investments

            34,709  
               
   

Net cash used in investing activities

    (8 )   (25 )   (9,764 )
               

Cash flows from financing activities:

                   

Proceeds from debt issuances

            22,256  

Payments on debt

    (817 )   (659 )   (18,251 )

Payments of debt issuance costs

            (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 and common stock warrants

        69     32,876  

Proceeds from issuance of restricted common stock

    1     1     339  

Payments to employees for cancelled restricted common stock

            (104 )

Proceeds from exercise of stock options

    2         104  
               
   

Net cash (used in) provided by financing activities

    (814 )   (589 )   150,954  
               

Net (decrease) increase in cash and cash equivalents

    (5,833 )   (4,625 )   11,305  

Cash and cash equivalents, beginning of period

    19,713     15,930      
               

Cash and cash equivalents, end of period

  $ 13,880   $ 11,305   $ 11,305  
               

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 March 31, 2010, as defined by the Financial Accounting Standards Board ("FASB"). The Company's fiscal year ends on December 31. The Company operates as one reportable segment.

        In the first quarter of 2010, the Company began a process of considering alternatives to the Company's existing long-term strategic focus, including a repositioning of the Company in the genetic analysis markets. The Company believes that an adjustment to its existing strategy would better position the Company to take advantage of the unique capabilities of its proprietary platform and to address the growing competition in the genetic research marketplace. Although the Company made progress during 2009 in the genetic research market as demonstrated by its growing installed base and the number of peer reviewed publications referencing its single molecule sequencing technology, the Company believes that it must consider a number of alternatives to improving shareholder value and, as a result, have embarked upon this process with a view toward repositioning Helicos' highly differentiated single molecule sequencing solution. In this regard, the Company has continued its relationship with Thomas Weisel Partners LLC (TWP), a nationally recognized investment bank, to assist the Company with its evaluation and execution of strategic alternatives and long term financing strategy. The Company has also engaged a variety of consultants in the genomic research, services and diagnostics industries to evaluate available alternatives.

        In particular, the Company believes that Helicos' technology is uniquely suited for applications in molecular diagnostics. The Company believes that diagnostics applications may benefit from the specific features for which the Helicos System is uniquely suited, including the platform's quantitative accuracy, the use of small sample quantities in simple preparation methods, and high throughput, as well as lack of biases typically seen with sample amplification.

        The Company anticipates the repositioning evaluation process will take at least several months. There can be no assurance, however, that the Company will be successful in re-focusing its long-term strategy or that any transaction it undertakes to implement a change in strategy will ultimately be completed or, if one is undertaken, there can be no assurance regarding its terms, timing or sources of funding. During this time, Helicos will focus its limited resources on satisfying current customer needs and stabilizing system performance, which has varied at some customer and placement sites. In addition, new initiatives will be prioritized to those that reduce operational risk and conserve resources while the company considers its strategic alternatives and direction.

        In connection with its repositioning strategy, on May 11, 2010, the Board of Directors of the Company approved a reduction in headcount and restructuring plan (the "Restructuring Plan") which involves the consolidation and reorganization of its operations in order to reduce operating costs. The Restructuring Plan has resulted in the elimination of approximately 40 positions during the second

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Table of Contents


HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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


fiscal quarter of 2010. Employees directly affected by the Restructuring Plan were notified on May 13, 2010, and have been provided with severance arrangements including outplacement assistance.

        Since inception, the Company has incurred losses and has not generated positive cash flows from operations. The Company expects its losses to continue for a considerable period of time as the Company reevaluates its long-term strategic focus and consider various alternatives to reposition the business, including by exploring various opportunities in the genetic analysis markets. These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders' equity. As of March 31, 2010 and May 14, 2010, the Company had $11.3 million and $8.7 million, respectively, in cash and cash equivalents. The Company will, before the end of the third quarter of 2010, require significant additional capital to fund its operations. Because the Company's present capital resources are not sufficient to fund its planned operations for a twelve month period as of the date of the Annual Report on Form 10-K, for the year ended December 31, 2009, the Company's current financial resources raise substantial doubt about its ability to continue as a going concern.

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

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

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

        It is management's opinion that the accompanying 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

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Table of Contents


HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

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


with the consolidated financial statements for the year ended December 31, 2009 included in the Company's Form 10-K.

2. Summary of Significant Accounting Policies

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

Revenue recognition

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

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

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

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

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

Recent Accounting Pronouncements

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

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)

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

3. Inventory

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

 
  December 31,
2009
  March 31,
2010
 

Raw materials

  $ 372   $ 105  

Work in process

    2,462     2,193  

Finished goods

    3,993     5,569  
           

Total inventory

  $ 6,827   $ 7,867  
           

4. Net Loss per Share

        Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company's potential dilutive shares, which include outstanding common stock options, unvested restricted stock and warrants, have not been included in the computation of diluted net loss per share for both periods as the result would be antidilutive. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share. Because the Company reported a net loss for the three months ended March 31, 2009 and 2010, all potential common shares have been excluded from the computation of the dilutive net loss per share for all periods presented because the effect would have been antidilutive. Such potential common shares consist of the following:

 
  March 31,  
 
  2009   2010  

Stock options

    3,916,068     4,462,083  

Unvested restricted stock

    961,836     964,686  

Warrants

    25,762,333     28,231,376  
           

    30,640,237     33,658,145  
           

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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 (in thousands):

 
  Three months ended
March 31,
 
 
  2009   2010  

Selling, general and administrative

  $ 681   $ 1,469  

Research and development

    381     546  
           

Total

  $ 1,062   $ 2,015  
           

        During the three months ended March 31, 2009, the Company granted 1,409,521 stock options at an exercise price of $1.04 per share and 82,260 stock options at an exercise price of $0.78 per share. During the three months ended March 31, 2009, the Company granted 745,895 shares of restricted stock. During the three months ended March 31, 2010, the Company granted 8,750 stock options at an exercise price of $1.00 per share. During the three months ended March 31, 2010, the Company granted 374,866 shares of restricted stock.

        For the three months ended March 31, 2009 and 2010, the fair value of stock options was estimated on the date of grant using the Black-Scholes option valuation model with the following assumptions:

 
  Three months ended
March 31,
 
 
  2009   2010  

Expected volatility

    63.0 %   91.0 %

Expected life in years

    6.0     6.0  

Weighted average risk-free interest rate

    1.7 %   2.6 %

Expected dividends

    0.0 %   0.0 %

6. Fair Value Measurement

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

        Marketable securities are considered to be impaired when a decline in fair value below cost basis is determined to be other-than-temporary. The Company evaluates whether a decline in fair value below cost basis is other-than-temporary using available evidence regarding its investments. In the event that the cost basis of a security significantly exceeds its fair value, the Company evaluates, among other factors, the duration of the period that, and extent to which, the fair value is less than cost basis, the financial health of and business outlook for the issuer, including industry and sector performance, and

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

6. Fair Value Measurement (Continued)


operational and financing cash flow factors, overall market conditions and trends, the Company's intent to sell the investment and if it is more likely than not that the Company would be required to sell the investment before its anticipated recovery. Once a decline in fair value is determined to be other-than-temporary, a write-down is recorded in the consolidated statements of operations and a new cost basis in the security is established. In April 2009, the Company adopted new accounting guidance which provides additional guidance in assessing the credit and noncredit component of an other-than-temporary impairment event for debt securities and modifies the presentation and disclosures when an other-than-temporary impairment event for debt securities has occurred. The adoption of this new accounting guidance did not have a significant impact on the Company's financial statements.

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

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

 
  Quoted Prices
in Active
Markets
(Level 1)
  Other
Observable
Inputs
(Level 2)
  Unobservable
Inputs
(Level 3)
  Total  

($ in thousands)

                         

Money market funds

  $   $ 3,053   $   $ 3,053  

Warrant liability

            5,253     5,253  
                   

  $   $ 3,053   $ 5,253   $ 8,306  
                   

        The Company's warrant liability was valued at December 31, 2009 using a Black-Scholes model and is therefore classified as Level 3.

        The following tables roll forward the fair value of our warrant liability, whose fair value is determined by Level 3 inputs for the 2009 periods presented:

Balance at December 31, 2008

  $  
       
 

Issuance of new warrants

    7,212  
 

Change in fair value

    (1,959 )
       

Balance at December 31, 2009

  $ 5,253  
       

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

6. Fair Value Measurement (Continued)

        The following table represents the Company's assets and liabilities measured at fair value on a recurring basis at March 31, 2010:

 
  Quoted Prices
in Active
Markets
(Level 1)
  Other
Observable
Inputs
(Level 2)
  Unobservable
Inputs
(Level 3)
  Total  

($ in thousands)

                         

Money market funds

  $   $ 3,053   $   $ 3,053  

Warrant liability

            3,660     3,660  
                   

  $   $ 3,053   $ 3,660   $ 6,713  
                   

        The Company's cash equivalents were valued at March 31, 2010 using calculated net asset values and are therefore classified as Level 2. The Company's warrant liability was valued at March 31, 2010 using a Black-Scholes model and is therefore classified as Level 3.

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

Balance at December 31, 2009

  $ 5,253  
       
 

Exercise warrants

    (141 )
 

Change in fair value

    (1,452 )
       

Balance at March 31, 2010

  $ 3,660  
       

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

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

7. Common Stock and Warrant Liability

September 2009 Financing

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

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

7. Common Stock and Warrant Liability (Continued)

        In connection with the September 2009 Offering, the Company issued warrants to purchase an aggregate of 2,322,509 shares of common stock which become exercisable on or after the six month anniversary following the closing of the transaction. The warrants have an exercise price of $2.61 per share and have a five and a half year term. The fair value of the warrants was estimated at $4.5 million using a Black-Scholes model with the following assumptions: expected volatility of 100%, risk free interest rate of 2.49%, expected life of five and a half years and no dividends. Expected volatility was based on the volatility contractually specified in the warrant agreements. Due to a price adjustment clause included in the warrant agreements, the warrants were deemed to be a liability and, therefore, the fair value of the warrants was recorded in the liability section of the balance sheet. As such, the warrants will be revalued each reporting period, with the resulting gains and losses recorded as the change in fair value of warrant liability on the statement of operations. In connection with the December 2009 Offering, the exercise price for the warrants issued in this transaction was subsequently reduced to $0.31 per share in accordance with the terms of the warrant. For the three month period ending March 31, 2010 the Company recorded a gain in the amount of $0.6 million for the change in the fair value of the warrant liability. During the three months ended March 31, 2010, 223,213 warrant shares from the September 2009 Offering were exercised into common stock at a exercise price of $0.31.

        In connection with the September 2009 Offering, the Company entered into a registration rights agreement (the "September 2009 Registration Rights Agreement") with each of the investors. The Registration Rights Agreement provides that the Company will file a "resale" registration statement covering all of the shares of common stock and the shares of common stock issuable upon exercise of the warrants, up to the maximum number of shares able to be registered pursuant to applicable SEC regulations, within 15 days of the closing of the September 2009 Offering. The Company currently maintains an effective registration statement relating to these shares (File No. 333-162240). Under the terms of the September 2009 Registration Rights Agreement, the Company is obligated to maintain the effectiveness of the "resale" registration statement until all securities therein are sold or are otherwise can be sold pursuant to Rule 144, without any restrictions. A cash penalty at the rate of 2% per month will be triggered for any filing or effectiveness failures or 1% in the event of suspensions of prospectus delivery or if, at any time after six months following the closing of the September 2009 Offering, the Company ceases to be current in its periodic reports with the SEC. The aggregate penalty accrued with respect to each investor may not exceed 12% of the original purchase price paid by that investor. The Company has not recorded an amount associated with the contingent obligation regarding the cash penalties as of March 31, 2010 as the Company believes that the contingent obligation to make future payments is not probable.

December 2009 Financing

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

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

7. Common Stock and Warrant Liability (Continued)


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

        In connection with the December 2009 Offering, the Company issued warrants to purchase an aggregate of 4,160,000 shares of common stock. The warrants have an exercise price of $1.44 per share and have a five and a half year term. The fair value of the warrants was estimated at $2.7 million using a Black-Scholes model with the following assumptions: expected volatility of 100%, risk free interest rate of 2.43%, expected life of five and a half years and no dividends. Expected volatility was based on the volatility contractually specified in the warrant agreements. Due to a price adjustment clause included in the warrant agreements, the warrants were deemed to be a liability and, therefore, the fair value of the warrants was recorded in the liability section of the balance sheet. As such, the warrants will be revalued each reporting period, with the resulting gains and losses recorded as the change in fair value of warrant liability on the income statement. The Company recorded a gain in the amount of $0.9 million for the change in the fair value of the warrant liability for the three month period ending March 31, 2010.

8. Debt

        As of December 31, 2009 and March 31, 2010, the outstanding balance on a loan and security agreement was $4.9 million and $4.3 million, respectively.

        As of March 31, 2010, loan payable payments are due as follows (in thousands):

 

2010

  $ 2,364  
 

2011

    2,439  

Thereafter

     
       

Total future minimum payments

    4,803  

Less: amount representing interest

    (923 )

Less: debt discount

    (587 )

Add: amortization of debt discount

    983  
       

Carrying value of debt

  $ 4,276  
       

        As of March 31, 2010, the loan and security agreement did not require the Company to comply with any financial covenants.

        The loan and security agreement contains a subjective material adverse clause, which allows the debt holders to call the loans upon a material adverse event. Based on an updated assessment of the terms of the loan and security agreement, the entire balance due is classified in the current liabilities section in the accompanying balance sheet at March 31, 2010.

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HELICOS BIOSCIENCES CORPORATION (a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(unaudited)

9. Subsequent Event

        On May 11, 2010, the Board of Directors of Helicos Corporation approved a reduction in headcount and restructuring plan (the "Restructuring Plan") which involves the consolidation and reorganization of its operations in order to reduce operating costs. The Restructuring Plan has resulted in the elimination of approximately 40 positions during the second fiscal quarter of 2010. Employees directly affected by the Restructuring Plan were notified on May 13, 2010, and have been provided with severance arrangements including outplacement assistance. These actions were approved as part of the Company's previously announced efforts to consider alternatives to its existing long-term strategic focus, including a repositioning of the Company in the genetic analysis markets. The Company estimates that the total restructuring expenses to be incurred in connection with the Restructuring Plan will be in the range of $550,000 to $650,000. Of this total, the Company estimates $550,000 relates to employee severance benefits. The Company expects that these restructuring payments will be reflected in its financial results beginning in the second fiscal quarter 2010 and continuing through the first fiscal quarter 2011. Cash outlays incurred in connection with these restructuring activities are estimated to be in the range of $550,000 to $650,000.

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

Forward-Looking Statements

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

Business Overview

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

        Our Helicos® Genetic Analysis Platform is designed to obtain sequencing information by repetitively performing a cycle of biochemical reactions on individual DNA or RNA molecules and imaging the results after each cycle. The platform consists of an instrument called the HeliScope™ Single Molecule Sequencer, an image analysis computer tower called the HeliScope™ Analysis Engine, associated reagents, which are chemicals used in the sequencing process, and disposable supplies. The information generated from using our tSMS products may lead to improved drug therapies, personalized medical treatments and more accurate diagnostics for cancer and other diseases.

        In the first quarter of 2010, we began a process of considering alternatives to our existing long-term strategic focus, including a repositioning of the Company in the genetic analysis markets. We believe that an adjustment to our existing strategy would better position us to take advantage of the unique capabilities of our proprietary platform and to address the growing competition in the genetic research marketplace. Although we made progress during 2009 in the genetic research market as demonstrated by our growing installed base and the number of peer reviewed publications referencing our single molecule sequencing technology, we believe that we must consider a number of alternatives to improving shareholder value and, as a result, have embarked upon this process with a view toward repositioning our highly differentiated single molecule sequencing solution. In this regard, we have continued our relationship with Thomas Weisel Partners LLC (TWP), a nationally recognized investment bank, to assist us with our evaluation and execution of strategic alternatives and long term financing strategy. We have also engaged a variety of consultants in the genomic research, services and diagnostics industries to evaluate available alternatives.

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        In particular, we believe that our technology is uniquely suited for applications in molecular diagnostics. We believe that diagnostics applications may benefit from the specific features for which the Helicos System is uniquely suited, including the platform's quantitative accuracy, the use of small sample quantities in simple preparation methods, and high throughput, as well as lack of biases typically seen with sample amplification.

        We anticipate the repositioning evaluation process will take at least several months. There can be no assurance, however, that we will be successful in re-focusing our long-term strategy or that any transaction we undertake to implement a change in strategy will ultimately be completed or, if one is undertaken, there can be no assurance regarding its terms, timing or sources of funding. During this time, we will focus our limited resources on satisfying current customer needs and stabilizing system performance, which has varied at some customer and placement sites. In addition, new initiatives will be prioritized to those that reduce operational risk and conserve resources while the company considers its strategic alternatives and direction.

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

        Through March 31, 2010, we have received cumulative sales orders for ten Helicos Systems. In addition, we have one system installed at The Broad Institute, Inc. on a no cost basis, and have three systems at leading academic institutions for scientific and commercial evaluation. During 2009, we recognized revenue on two of the ten sales orders. We have not recognized revenue on system sales during the three month period ended March 31, 2010. We have shipped seven units that have not met our revenue recognition requirements.

        We believe that we have incurred the substantial majority of the costs related to the development of the initial version of our Helicos System. Any future shipments, as well as shipments that have occurred but have not yet generated revenue, 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. 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 and are reevaluating our long-term strategic focus, we cannot predict the percentage of our revenues that we will derive from sales of proprietary reagents and disposable supplies.

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

        Since inception, we have incurred losses and have not generated positive cash flows from operations. We expect our losses to continue for a considerable period of time as we reevaluate our long-term strategic focus and consider various alternatives to reposition our business, by exploring various opportunities including the use of our technology for diagnostic applications in the genetic analysis market. These losses, among other things, have had and will continue to have an adverse effect

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on our working capital, total assets and stockholders' equity. As of March 31, 2010 and May 14, 2010, we had $11.3 million and $8.7 million, respectively, in cash and cash equivalents. We will, before the end of the third quarter of 2010, require significant additional capital to fund our operations. Because our present capital resources are not sufficient to fund our planned operations for a twelve month period as of the date of our Annual Report on Form 10-K for the year ended December 31, 2009, our current financial resources raise substantial doubt about our ability to continue as a going concern. A result of our failure to raise capital as and when needed would have a material negative impact on our financial condition and would have a material adverse impact on the viability of our company to continue as a going concern.

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

Financial Overview

Product revenue

        Product revenue for the three months ended March 31, 2009 consists of $829,000 in revenue from the sale of systems and an additional $134,000 of revenue recognized from the sale of proprietary reagents to customers. Product revenue for the three months ended March 31, 2010 primarily consists of $42,000 of revenue recognized from the sale of proprietary reagents to customers.

Grant revenue

        In September 2006, we were awarded a grant from the National Human Genome Research Institute ("NHGRI"), a branch of the National Institutes of Health ("NIH"), pursuant to which were eligible to receive reimbursement of our research expenses of up to $2.0 million through August 2009. In connection with this award we recognized $239,000 in revenue during the three months ended March 31, 2009. We have fully expended all available funds under this grant as of December 31, 2009.

        In September 2009, we were awarded another grant from the NHGRI, pursuant to which we are eligible to receive reimbursement of our research expenses of up to $2.9 million through August 2011. The two year grant is part of the Sequencing Technology Development Program representing one of NHGRI's signature projects for the American Recovery and Reinvestment Act's effort to jumpstart the economy and create or save millions of jobs. This project, a part of NIH's "Grand Opportunities" program, is designed to support large-scale, high impact research projects that are expected to accelerate critical scientific breakthroughs and enable growth and investment in biomedical research and development. In connection with this award we recognized $490,000 in revenue for the three months ended March 31, 2010.

        In April 2010, we were awarded another grant from the NHGRI, pursuant to which we are eligible to receive reimbursement of our research expenses of up to $1.6 million through February 2013. The three year grant is part of the True Direct Single Molecule RNA Sequencing Program representing one of NHGRI's signature projects for the American Recovery and Reinvestment Act's effort to jumpstart the economy and create or save millions of jobs. This project, a part of NIH's "Grand Opportunities" program, is designed to support large-scale, high impact research projects that are expected to accelerate critical scientific breakthroughs and enable growth and investment in biomedical research and development. In connection with this award we recognized $37,000 in revenue for the three months ended March 31, 2010.

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Cost of product revenue

        Cost of product revenue for the three months ended March 31, 2010 consists of costs associated with the sale of proprietary reagents.

Research and development expenses

        Research and development expenses consist of costs associated with scientific research activities, and engineering development efforts. Such costs primarily include salaries, benefits and stock-based compensation; lab and engineering supplies; investment in equipment; consulting fees; and facility related costs, including rent and depreciation. During the three months ended March 31, 2010 and 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, 2009 and the first quarter of 2010 to both maintain and enhance the initial version of the Helicos System in addition to development of new and different genetic analysis assays which will extend the capability of the initial version.

        Research and development expenses for the three months ended March 31, 2009 and 2010 were $4.1 million and $4.0 million, respectively. In addition to our ongoing research and development efforts, we have incurred start-up manufacturing costs related to the assembly, testing and performance validation of the Helicos System. These costs were accounted for as research and development expenses in our pre-commercialization phase as we prepared to ship the first Helicos System, which occurred on March 5, 2008. We reached technological feasibility of the Helicos System in December 2007 and, as a result, we began to record the cost of the Helicos System in inventory.

        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 three months ended March 31, 2009 and 2010 were $2.9 million and $4.1 million, respectively.

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Overview of Results of Operations

Three months ended March 31, 2009 compared to three months ended March 31, 2010

        Product revenue.    We recognized $963,000 and $42,000 of product revenue during the three months ended March 31, 2009 and 2010, respectively. Product revenue recognized during the three months ended March 31, 2009 consists of $829,000 of revenue from the sale of an instrument that was shipped in 2008, as well as $134,000 of revenue from the sale of proprietary reagents to customers. Product revenue recognized during the three months ended March 31, 2010 consists of $42,000 of revenue from the sale of proprietary reagents to customers.

        Grant revenue.    We recognized $239,000 and $527,000 of grant revenue during the three months ended March 31, 2009 and 2010, respectively. Grant revenue recognized during the three months ended March 31, 2009 and 2010 related to the reimbursement of expenses in connection with our government research grants.

        Cost of product revenue.    We recorded $521,000 and $72,000 as cost of product revenue during the three months ended March 31, 2009 and 2010, 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 months ended March 31, 2009 and 2010 were as follows:

 
  Three months ended
March 31,
   
   
 
 
  2009   2010   Change  

($ in thousands)

                         

Research and development

  $ 4,093   $ 4,046   $ (47 )   -1 %

        Research and development expenses decreased by $47,000 from the three months ended March 31, 2009 to the three months ended March 31, 2010. The majority of the decrease was due to a $0.2 million decrease in occupancy cost, offset by an increase of $0.2 million in stock based compensation expense.

        Selling, general and administrative expenses.    Selling, general and administrative expenses during the three months ended March 31, 2009 and 2010 were as follows:

 
  Three months ended
March 31,
   
   
 
 
  2009   2010   Change  

($ in thousands)

                         

Selling, general and administrative

  $ 2,851   $ 4,072   $ 1,221     43 %

        Selling, general and administrative expenses increased by $1.2 million from the three months ended March 31, 2009 to the three months ended March 31, 2010. The largest contributors to this increase was a $0.3 million increase in our salary and benefit expenses and a $0.8 million increase in stock compensation expense. These increases are due to the issuance of restricted stock and the associated employment tax expense in the three month period ending March 31, 2010.

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        Interest income.    Interest income for the three months ended March 31, 2009 and 2010 was as follows:

 
  Three months ended
March 31,
   
   
 
 
  2009   2010   Change  

($ in thousands)

                         

Interest income

  $ 40   $ 12   $ (28 )   -70 %

        The decrease in interest income from the three months ended March 31, 2009 compared to the three months ended March 31, 2010 was due primarily to decreased cash balances during the three months ended March 31, 2010 compared to the three months ended March 31, 2009.

        Interest expense.    Interest expense for the three months ended March 31, 2009 and 2010 was as follows:

 
  Three months ended
March 31,
   
   
 
 
  2009   2010   Change  

($ in thousands)

                         

Interest expense

  $ 305   $ 183   $ (122 )   -40 %

        The decrease in interest expense from the three months ended March 31, 2009 compared to the three months ended March 31, 2010 is attributable to the year over year decrease in our long-term debt obligations.

        Change in fair value of warrant liability.    Change in fair value of warrant liability for the three months ended March 31, 2009 and 2010 was as follows:

 
  Three months ended
March 31,
   
   
 
 
  2009   2010   Change  

($ in thousands)

                         

Change in fair value of warrant liability

  $   $ 1,452   $ 1,452     100 %

        In connection with the September and December 2009 equity offerings, we issued warrants to purchase an aggregate of 6,482,509 shares of common stock. The fair value of the warrants is recorded in the liability section of the balance sheet and at March 31, 2010 was estimated at $3.7 million. The fair value of the warrant liability will be determined at the end of each reporting period with the resulting gains and losses recorded as the change in fair value of warrant liability on the income statement. For the three month period ended March 31, 2010, we realized a gain of $1.5 million due to the change in the fair value of the warrant liability. This gain is principally a result of the decrease of our stock price between December 31, 2009 and March 31, 2010. Future changes in the fair value of the warrant liability will be due primarily to fluctuations in the value of our common stock. During the three months ended March 31, 2010, 223,213 warrant shares from the September 2009 equity offering were exercised into common stock at a exercise price of $0.31.

Liquidity and Capital Resources

        We have incurred losses since our inception in May 2003 and, as of March 31, 2010 we have an accumulated deficit of $174.1 million. We have financed our operations to date principally through the sale of common stock and preferred stock, including our IPO, two private placements of common stock and warrants, an underwritten offering of common stock and warrants, debt financing and interest earned on investments. Through March 31, 2010, we have received net proceeds of $80.3 million

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through the issuance of common stock, including our IPO, private placements and an underwritten offering of common stock and warrants, $66.8 million from the issuance of preferred stock, $2.5 million in debt financing from a lender to finance equipment purchases, and $19.6 million in debt financing from a lender for working capital, capital expenditures and general corporate purposes. Working capital as of December 31, 2009 was $11.4 million, consisting of $24.5 million in current assets and $13.1 million in current liabilities. Working capital as of March 31, 2010 was $4.2 million, consisting of $20.2 million in current assets and $16.0 million in current liabilities. Our cash and cash equivalents are held in interest-bearing cash accounts. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily to achieve liquidity and capital preservation.

        The following table summarizes our net decrease in cash and cash equivalents for the three months ended March 31, 2009 and 2010:

 
  Three months ended
March 31,
 
 
  2009   2010  

($ in thousands)

             

Net cash used in:

             
 

Operating activities

  $ (5,011 ) $ (4,011 )
 

Investing activities

    (8 )   (25 )
 

Financing activities

    (814 )   (589 )
           

Net decrease in cash and cash equivalents

  $ (5,833 ) $ (4,625 )
           

        Net cash used in operating activities was $5.0 million for the three months ended March 31, 2009 compared to $4.0 million for the three months ended March 31, 2010. The $1.0 million decrease was primarily due to a decrease in the net loss of $0.2 million, an increase in the change of accounts receivables of $0.5 million, an increase in prepaid and other current assets of $0.2 million, an increase in deferred revenue of $1.1 million, an increase in the change in accounts payable of $1.6 million, and a increase in non-cash stock-based compensation expense of $1.0 million, offset by an increase in inventory of $1.2 million, a decrease in the change in accrued expenses and other current liabilities of $0.6 million, and a decrease in non-cash expenses related to the fair value of the warrant liability of $1.5 million and a decrease in depreciation and amortization expense of $0.3 million.

        Net cash used in investing activities was $8,000 for the three months ended March 31, 2009 compared to $25,000 for the three months ended March 31, 2010.

        Net cash used in financing activities was $814,000 for the three months ended March 31, 2009 compared to $589,000 for the three months ended March 31, 2010. The $225,000 decrease was primarily due to a $158,000 decrease in debt payments and $69,000 in proceeds from the conversion of warrant shares into common stock.

Operating capital and capital expenditure requirements

        As of March 31, 2010 and May 14, 2010, we had $11.3 million and $8.7 million, respectively, in cash and cash equivalents. We will, before the end of the third quarter of 2010, require significant additional capital to fund our operations. Since our present capital resources are not sufficient to fund our planned operations for a twelve month period as of the date of our Annual Report on Form 10-K, our current financial resources raise substantial doubt about our ability to continue as a going concern. We may raise the funds we require to continue our operations through public or private sales of equity, from borrowings or from strategic partners. Our future capital requirements will depend on many factors, including the precise nature of our strategic repositioning. Failure to satisfy our capital requirements or any such delay would have a negative impact on our ability to continue as a going concern.

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        We shipped our first two Helicos Systems in 2008, the first of which was ultimately returned. This initial shipment to our first customer, Expression Analysis, Inc. ("EA"), was made on March 5, 2008. This system was an early version and did not consistently achieve our commercial specification levels at EA and, as a result, on January 27, 2009, we agreed to have EA return the Helicos System that was installed at EA. Following EA's return of this system, our commercial relationship with EA was suspended. EA did not make any payments for this Helicos System that was ultimately returned.

        Through March 31, 2010, we have received cumulative sales orders for ten Helicos Systems. In addition, we have one system installed at The Broad Institute, Inc. on a no cost basis, and have three systems at leading academic institutions for scientific and commercial evaluation. During 2009, we have recognized revenue on two of the ten sales orders. For the three month period ended March 31, 2010, no revenue on system sales was recognized.

        In the first quarter of 2010, we began a process of considering alternatives to our existing long-term strategic focus, including a repositioning of the company in the genetic analysis markets. We believe that an adjustment to our existing strategy would better position us to take advantage of the unique capabilities of our proprietary platform and to address the growing competition in the genetic research marketplace. Although we made progress during 2009 in the genetic research market as demonstrated by our growing installed base and the number of peer reviewed publications referencing our single molecule sequencing technology, we believe that Helicos must consider a number of alternatives to improving shareholder value and, as a result, have embarked upon this process with a view toward repositioning Helicos' highly differentiated single molecule sequencing solution. In this regard, we have continued our relationship with Thomas Weisel Partners LLC (TWP), a nationally recognized investment bank, to assist us with its evaluation and execution of strategic alternatives and long term financing strategy. We have also engaged a variety of consultants in the genomic research, services and diagnostics industries to evaluate available alternatives.

        To date, we have not achieved profitability. We expect our losses to continue for a considerable period of time as we reevaluate our long-term strategic focus and consider various alternatives to reposition our business, including by exploring various opportunities including the use of our technology for diagnostic applications in the genetic analysis market. These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders' equity. Future revenues if any, 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 and are reevaluating our long-term strategic focus, we cannot predict the percentage of our revenues that we will derive from sales of proprietary reagents and disposable supplies. We have shipped seven units that have not met our revenue recognition criteria.

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

        Our forecast of the period of time through which our financial resources will be adequate to support our operations, and the costs associated with our repositioning strategy as we reevaluate our long-term strategic focus are forward-looking statements and involve risks and uncertainties, and actual

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results could vary materially and negatively as a result of a number of factors, including the factors discussed in the "Risk Factors" section of our annual report on Form 10-K for the year ended December 31, 2009. We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

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

    the success of our efforts in considering alternatives to the Company's existing long-term strategic focus, including a repositioning of the company in the genetic analysis markets;

    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 or services;

    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, 2009 was $11.4 million, consisting of $24.5 million in current assets and $13.1 million in current liabilities. Working capital as of March 31, 2010 was $4.2 million, consisting of $20.2 million in current assets and $16.0 million in current liabilities.

License agreements and patents

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

Contractual obligations

        A summary of our contractual obligations is included in our Form 10-K for the fiscal year ended December 31, 2009. There have been no material changes to our contractual obligations previously disclosed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2009.

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

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made on a monthly basis. For the first six months interest-only payments were required. Thereafter, for the following 30 months, payments of principal and interest will be due for each advance. The outstanding balance is collateralized by the equipment purchased with the proceeds from each equipment advance. Borrowings on the credit facility in aggregate were $2.5 million at a weighted-average interest rate of 10.1% through March 31, 2010. As of December 31, 2009 and March 31, 2010, there was no outstanding balance on the credit facility.

Loan and security agreement

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

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

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

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

        The amendment further provides that our obligations under the loan agreement, as amended, are no longer secured by a cash amount of $10.0 million. As such, this amount in no longer classified as restricted cash as of December 31, 2008. Such obligations continue to be secured under various collateral documents by interests in substantially all of our personal property, including the pledge of

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the stock of our wholly-owned subsidiary, and proceeds of any intellectual property, but not by our intellectual property.

        The loan and security agreement contains a subjective material adverse clause, which allows the debt holders to call the loans upon a material adverse event. Based on an updated assessment of the terms of the loan and security agreement, the entire balance due is classified in the current liabilities section in the accompanying balance sheet at March 31, 2010.

        As of December 31, 2009 and March 31, 2010, the outstanding balance on the loan agreement was $4.9 million and $4.3 million, respectively.

Private Placement in Public Equity Offering (December 2008)

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

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

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

Private Placement in Public Equity Offering (September 2009)

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

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a total of 3,281,252 units, each unit consisting of (a) one share of common stock and (b) one warrant to purchase 0.50 shares of common stock at an exercise price equal to $2.61 per share, at a purchase price equal to $2.24 per unit (together, the "September 2009 Offering"). The closing of the transaction occurred on September 18, 2009. In connection with the September 2009 Offering, we raised approximately $10.0 million in gross proceeds. We paid $646,000 in placement agent fees and offering expenses and expect to use the remaining net proceeds of $9.4 million for general corporate purposes.

        In connection with the September 2009 Offering, we issued warrants to purchase an aggregate of 2,322,509 shares of common stock which become exercisable on or after the six month anniversary following the closing of the transaction. The warrants have an exercise price of $2.61 per share and have a five and a half year term. The fair value of the warrants was estimated at $4.5 million using a Black-Scholes model with the following assumptions: expected volatility of 100%, risk free interest rate of 2.49%, expected life of five and a half years and no dividends. Expected volatility was based on the volatility contractually specified in the warrant agreements. Due to a price adjustment clause included in the warrant agreements, the warrants were deemed to be a liability and, therefore, the fair value of the warrants was recorded in the liability section of the balance sheet. As such, the warrants will be revalued each reporting period, with the resulting gains and losses recorded as the change in fair value of warrant liability on the income statement. In connection with the December 2009 Offering, the exercise price for the warrants issued in this transaction was subsequently reduced to $0.31 per share in accordance with the terms of the warrant. For the three month period ending March 31, 2010 we recorded a gain in the amount of $0.6 million for the change in the fair value of the warrant liability. During the three months ended March 31, 2010, 223,213 warrant shares from the September 2009 Offering were exercised into common stock at a exercise price of $0.31.

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

Underwritten Offering (December 2009)

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

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manufacturing expenses associated with the commercial version of our Helicos System. The closing of the transaction occurred on December 21, 2009.

        In connection with the December 2009 Offering, we issued warrants to purchase an aggregate of 4,160,000 shares of common stock. The warrants have an exercise price of $1.44 per share and have a five and a half year term. The fair value of the warrants was estimated at $2.7 million using a Black-Scholes model with the following assumptions: expected volatility of 100%, risk free interest rate of 2.43%, expected life of five and a half years and no dividends. Expected volatility was based on the volatility contractually specified in the warrant agreements. Due to a price adjustment clause included in the warrant agreements, the warrants were deemed to be a liability and, therefore, the fair value of the warrants was recorded in the liability section of the balance sheet. As such, the warrants will be revalued each reporting period, with the resulting gains and losses recorded as the change in fair value of warrant liability on the income statement. We recorded a gain in the amount of $0.9 million for the change in the fair value of the warrant liability for the three month period ending March 31, 2010.

Off-balance sheet arrangements

        During the three months ended March 31, 2009 and 2010, we did not engage in any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

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

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

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

Item 4.    Controls and Procedures

        Our management, with the participation of our principal executive officer (PEO) and principal financial officer (PFO), has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of March 31, 2010. Based on that evaluation, our PEO and PFO have concluded that our disclosure controls and procedures were effective at the reasonable level of assurance.

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

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Part II—Other Information

Item 1.    Legal Proceedings

        We are not party to any material pending or threatened litigation.

Item 1A.    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. Other than the additional risk factor set forth below, there have been no material changes to the risk factors previously disclosed in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2009.

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

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

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

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

Use of Proceeds from Public Offering of Common Stock

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

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

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

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

Recent Sales of Unregistered Securities

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

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and development activities, funding marketing initiatives and funding manufacturing expenses associated with the commercial version of our Helicos System. The warrants have a five and a half year term and become exercisable on or after the six month anniversary following the closing of the transaction. The closing of the transaction occurred on September 18, 2009. The September 2009 Offering was consummated in reliance on the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act").

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

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

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

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Issuer Purchases of Equity Securities

        During the first quarter of 2010, we purchased 269,046 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 three months ended March 31, 2010:

Period
  Total Number of
Shares Purchased
  Average Price
Paid Per Share
($)
 

January 1 to 31, 2010

    128,340   $ 1.05  

February 1 to 28, 2010

    7,452     1.02  

March 1 to 31, 2010

    133,254     0.79  
             
 

Total

    269,046        
             

        Upon the termination of employees during the quarter ended March 31, 2010, 29,931 unvested restricted shares were forfeited. The following table provides information about our forfeited restricted shares for the three months ended March 31, 2010:

Period
  Total Number of
Shares Forfeited
  Average Price
Per Share
($)
 

January 1 to 31, 2010

    25,070   $ 1.10  

February 1 to 28, 2010

    4,861     1.02  

March 1 to 31, 2010

         
             
 

Total

    29,931        
             

Item 3.    Defaults upon Senior Securities

        None.

Item 4.    (Removed and Reserved)

Item 5.    Other Information

        None.

Item 6.    Exhibits

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

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SIGNATURES

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

    HELICOS BIOSCIENCES CORPORATION

Dated: May 17, 2010

 

By:

 

/s/ RONALD A. LOWY

    Name:   Ronald A. Lowy
    Title:   President and Chief Executive Officer
(Principal Executive Officer)

Dated: May 17, 2010

 

By:

 

/s/ JEFFREY R. MOORE

    Name:   Jeffrey R. Moore
    Title:   Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

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EXHIBIT INDEX

Exhibit No.  
Description
  10.1 * Letter Agreement, dated February 11, 2010, by and between Stephen J. Lombardi and Helicos BioSciences Corporation (Incorporated by reference herein to Exhibit 10.1 to the Company's Form 8-K, filed with the Securities and Exchange Commission on February 12, 2010).

 

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

*
Previously filed.

34



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