10QSB

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-QSB

(Mark One)

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

For the quarterly period ended September 30, 2007

OR

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

For the transition period from              to             

Commission file number: 33-20897-D

HELIX BIOMEDIX, INC.

(Exact name of small business issuer as specified in its charter)

Delaware	91-2099117
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

22118-20^th Avenue SE, Suite 204, Bothell, Washington 98021

(Address of principal executive offices)

(425) 402-8400

(Issuer’s telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the issuer was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes  x    No  ¨

Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:

Class	Number of Shares Outstanding at November 5, 2007
Common Stock, $0.001 par value	25,653,512

Transitional Small Business Disclosure Format (check one):    Yes  ¨    No  x

HELIX BIOMEDIX, INC.

FORM 10-QSB

TABLE OF CONTENTS

			Page
PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements	1
		Condensed Balance Sheets (unaudited) as of September 30, 2007 and December 31, 2006	1
		Condensed Statements of Operations (unaudited) for the three and nine months ended September 30, 2007 and 2006	2
		Condensed Statements of Stockholders’ Equity (unaudited) for the year ended December 31, 2006 and for the nine months ended September 30, 2007	3
		Condensed Statements of Cash Flows (unaudited) for the nine months ended September 30, 2007 and 2006	4
		Notes to Condensed Financial Statements (unaudited)	5
	Item 2.	Management’s Discussion and Analysis or Plan of Operation	11
	Item 3.	Controls and Procedures	19
PART II - OTHER INFORMATION
	Item 5.	Other Information	20
	Item 6.	Exhibits	20
Signatures			21

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements.

HELIX BIOMEDIX, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

	September 30, 2007			December 31, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	1,203,329		$	1,276,901
Marketable securities		800,000			980,000
Accounts receivable		192,378			—
Inventory		39,031			—
Prepaid expenses and other current assets		34,441			93,342
Total current assets		2,269,179			2,350,243
Property and equipment
Machinery and equipment		546,664			523,797
Furniture and fixtures		48,486			46,734
Leasehold improvements		43,993			43,993
		639,143			614,524
Less: accumulated depreciation		(490,067	)		(419,796	)
Property and equipment, net		149,076			194,728
Other assets:
Deposits		8,522			4,211
Antimicrobial technology, net		17,853			26,213
Licensing agreement, net		40,719			43,416
Patents pending and approved, net		393,599			441,733
Other assets, net		460,693			515,573
Total assets	$	2,878,948		$	3,060,544
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	103,587		$	65,549
Accrued payroll		38,620			108,603
Accrued expenses		71,130			27,315
Deferred revenue		130,000			61,000
Total current liabilities		343,337			262,467
Deferred rent		1,837			—
Total liabilities		345,174			262,467
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 25,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, $0.001 par value, 100,000,000 shares authorized; 25,653,512 shares outstanding at September 30, 2007, 22,788,514 shares outstanding at December 31, 2006		25,654			22,788
Additional paid-in capital		29,184,448			26,908,198
Accumulated deficit		(26,676,328	)		(24,132,909	)
Total stockholders’ equity		2,533,774		$	2,798,077
Total liabilities and stockholders’ equity	$	2,878,948		$	3,060,544

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

1

HELIX BIOMEDIX, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2007			2006			2007			2006
Revenue:
Licensing and development fees	$	105,971		$	3,841		$	152,212		$	38,940
Peptide sales		53,397			15,000			141,832			28,000
Peptide sales to related party		—			—			64,400			—
Total revenue		159,368			18,841			358,444			66,940
Operating expenses:
Cost of peptide sales		53,277			6,620			63,698			162,991
Other cost of revenue		20,396			—			20,396			—
Research and development		174,615			278,256			582,570			772,341
Depreciation and amortization		44,172			46,141			132,138			136,477
Accounting, legal and professional fees		140,909			73,602			423,132			210,023
General and administrative		650,228			504,783			1,752,271			1,718,101
Total operating expenses		1,083,597			909,402			2,974,205			2,999,933
Loss from operations		(924,229	)		(890,561	)		(2,615,761	)		(2,932,993	)
Other income:
Interest income		24,461			20,054			72,342			55,698
		24,461			20,054			72,342			55,698
Net loss	$	(899,768	)	$	(870,507	)	$	(2,543,419	)	$	(2,877,295	)
Basic and diluted net loss per share	$	(0.04	)	$	(0.04	)	$	(0.10	)	$	(0.13	)
Weighted average shares outstanding		25,653,512			22,788,514			24,966,608			22,192,979

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

2

HELIX BIOMEDIX, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Year Ended December 31, 2006 and for the Nine Months Ended September 30, 2007

(Unaudited)

	Common Stock
	Number of Shares	Amount		Additional Paid-in Capital			Deferred Stock Compensation			Accumulated Deficit			Stockholders’ Equity
Balance at December 31, 2005	20,190,514	$	20,190	$	23,906,974		$	(105,000	)	$	(20,304,583	)	$	3,517,581
Adjustment to reclassify deferred compensation to additional paid in capital upon adoption of FAS123R	—		—		(105,000	)		105,000			—			—
Proceeds from 2006 Private Placement, net	2,598,000		2,598		2,581,423			—			—			2,584,021
Stock-based compensation	—		—		524,801			—			—			524,801
Net loss for the year	—		—		—			—			(3,828,326	)		(3,828,326	)
Balance at December 31, 2006	22,788,514		22,788		26,908,198			—			(24,132,909	)		2,798,077
Proceeds from 2007 Private Placement, net	2,864,998		2,866		2,140,492			—			—			2,143,358
Stock-based compensation	—		—		135,758			—			—			135,758
Net loss	—		—		—			—			(2,543,419	)		(2,543,419	)
Balance at September 30, 2007	25,653,512	$	25,654	$	29,184,448		$	—		$	(26,676,328	)	$	2,533,774

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

3

HELIX BIOMEDIX, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months ended September 30,
	2007			2006
Cash Flows from Operating Activities
Net loss	$	(2,543,419	)	$	(2,877,295	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		132,138			136,477
Stock-based compensation costs		135,758			507,051
Loss on disposal of equipment		—			3,588
Changes in operating assets and liabilities:
Accounts receivable		(192,378	)		—
Inventory		(39,031	)		35,316
Prepaid expenses and other current assets		58,901			20,614
Deposits		(4,311	)		(4,202	)
Accounts payable		38,038			20,139
Accrued payroll		(69,983	)		(20,569	)
Accrued expenses and deferred rent		45,652			(64,891	)
Deferred revenue		69,000			—
Net cash used in operating activities		(2,369,635	)		(2,243,772	)
Cash Flows from Investing Activities
Purchases of marketable securities		(1,300,000	)		—
Proceeds from sales of marketable securities		1,480,000			—
Purchase of property and equipment		(27,295	)		(38,037	)
Net cash provided by (used in) investing activities		152,705			(38,037	)
Cash Flows from Financing Activities
Proceeds from issuance of common stock and warrants, net		2,143,358			2,584,022
Net cash provided by financing activities		2,143,358			2,584,022
Net increase (decrease) in cash and cash equivalents		(73,572	)		302,213
Cash and cash equivalents at beginning of period		1,276,901			2,827,959
Cash and cash equivalents at end of period	$	1,203,329		$	3,130,172

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

4

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation and Preparation

The unaudited condensed financial statements of Helix BioMedix, Inc., (the “Company”) as of September 30, 2007, and for the three and nine months ended September 30, 2007 and 2006, have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required to be presented for complete financial statements. The accompanying financial statements reflect all adjustments (consisting of normal recurring items) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Actual results could differ from those estimates.

The financial statements and related disclosures have been prepared with the assumption that users of the interim financial information have read or have access to the audited financial statements for the preceding fiscal year. Accordingly, these financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Form 10-KSB for the year ended December 31, 2006, and filed with the Securities and Exchange Commission on March 26, 2007.

During the third quarter of 2007, the Company moved from the development stage of its business to the commercialization stage, commencing its planned principal operations. The Company has consistently generated more than insignificant revenue throughout the first nine months of 2007, which the Company believes is key evidence that the Company’s technology has been accepted in the marketplace and is being commercialized. Management therefore believes that there is substantial evidence to no longer present the Company’s financial statements as those of a development stage company.

The results of operations for the three and nine months ended September 30, 2007, are not necessarily indicative of the results of operations that may be achieved for the entire year ending December 31, 2007.

Revenue Recognition

The Company generates revenue from peptide sales at cost, technology licenses and joint development agreements. Revenue under technology licenses may include up-front payments and royalties from product sales. Revenue associated with joint development agreements primarily consists of payments for completion of development milestones. For agreements with multiple elements, the Company follows the Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables,” to determine whether each element can be separated into a unit of accounting based on the following criteria: 1) the delivered items have value to the customer on a stand-alone basis; 2) any undelivered items have objective and reliable evidence of fair value; and 3) delivery or performance of the undelivered items that have a right of return is probable and within the Company’s control. If the criteria are not met, elements included in an arrangement are accounted for as a single unit of accounting and revenue is deferred until the period in which the final deliverable is provided. If there is objective and reliable evidence of fair value for all units of accounting in an arrangement, the Company allocates revenue among the separate units of accounting based on their estimated fair values.

• Peptide Sales. Peptide sales are recognized when title transfers to the customer, typically upon shipment, and collection is reasonably assured. Peptides are usually sold at cost.

• Licensing Fees. The Company recognizes up-front payments at the point when persuasive evidence of an agreement exists, delivery has occurred or services have been performed, the price is fixed and determinable and collection is reasonably assured. Royalties from licensees are recorded as earned when royalty results are reliably measured and collection is reasonably assured. The Company relies on the licensees to provide royalty information as it cannot be reasonably estimated. Royalty reports are generally due to the Company during the last month of each calendar quarter and are based on sales or manufacturing activities during the preceding three months.

5

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

• Development Fees. The Company records revenue associated with performance milestones as earned when it has completed the specific milestones as defined in the joint development agreements and there are no uncertainties or contingencies regarding collection of the related payment. Payments received for which the earnings process is not complete are recorded as deferred revenue.

Reclassifications

Reclassifications of prior years’ balances have been made to conform to the current format.

In an effort to provide investors with more details, certain amounts in the Condensed Statements of Cash Flows have been reclassified into individual line items. Specifically, for the nine months ended September 30, 2007 and 2006, changes in accounts receivable as reported in the Condensed Statements of Cash Flows were separated from prepaid expenses and other assets. Similarly, changes in accounts payable, accrued payroll, and accrued expenses were separated into individual line items.

On the Condensed Balance Sheets, costs related to deferred revenue has been reclassified to the assets section and presented in the prepaid expenses and other current assets line item. On the Condensed Statements of Operations, consulting fees have been combined into general and administrative expenses as they were not significant for the periods presented. These reclassifications had no material impact on the financial results in the periods presented.

Recent Accounting Pronouncements

Except as described below, there have been no significant changes in recent accounting pronouncements during the nine months ended September 30, 2007, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-KSB for the year ended December 31, 2006.

In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48 (“FIN 48”), “Accounting for Income Tax Uncertainties,” which clarifies the accounting and disclosure for uncertainty in income taxes recognized in the financial statements in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold a tax position is required to meet before being recognized in the financial statements. It also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting for interim periods, disclosure and transition. Under FIN 48, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. The Company adopted FIN 48 effective January 1, 2007. The adoption of FIN 48 did not have a material impact on the Company’s financial statements.

In June 2007, the Emerging Issues Task Force (“EITF”) reached a final consensus on Issue No. 07-3 (“EITF 07-3), “Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities”. EITF 07-3 requires that non-refundable advance payments for future research and development activities be recorded as an asset when the advance payments are made. Capitalized amounts should be recognized as expense when the goods are delivered or services are rendered. If the goods are no longer expected to be delivered nor the services expected to be performed, the Company would be required to expense the related capitalized advance payments. EITF 07-3 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2007. Adoption is on a prospective basis. Early adoption or retrospective application of EITF 07-3 is not permitted. The Company does not expect the adoption of EITF 07-3 to have a significant impact on its financial statements.

Note 2. Stock-Based Compensation

Stock-Based Compensation

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option valuation model. The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and the Company’s experience. Options granted are valued using the single option valuation approach, and the resulting expense is recognized using the cliff, straight-line attribution method,

6

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

consistent with the single option valuation approach. In accordance with the provisions of SFAS No. 123R, stock-based compensation expense is recognized only for those options expected to vest. During the three months ended September 30, 2007, the Company granted 75,000 options with an estimated weighted-average fair value of $0.59 per share. There were no stock options granted during the three months ended September 30, 2006. During the nine months ended September 30, 2007 and 2006, the Company granted 195,000 and 165,000 options, respectively, with an estimated weighted-average fair value of $0.61 and $0.78 per share, respectively.

The following weighted-average assumptions were used in the Black-Scholes option pricing model to determine the fair value of stock options granted in the periods indicated:

	Three months ended September 30,			Nine months ended September 30,
	2007		2006	2007		2006
Risk-free interest rate	4.42	%	—	4.52	%	4.97	%
Expected dividend yield	0		—	0		0
Expected term in years	6.25		—	6.25		6.25
Expected volatility	100	%	—	100	%	100	%

The risk-free rate is based on the implied yield available on U.S. Treasury zero–coupon issues with an equivalent remaining term. The Company does not anticipate declaring dividends in the foreseeable future. Expected volatility is based on implied volatility of outstanding warrants to purchase the Company’s common stock, annualized daily historical volatility of its stock price commensurate with the expected term of the option, and other factors, including peer company data. Expected term of the options represents the estimated period of time from grant until exercise and is based on historical experience of similar awards, contractual terms, vesting schedules, and expectations of future employee behavior. The Company’s stock price volatility and option term involves management’s best estimates at that time, both of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the option.

The Company applies an estimated forfeiture rate that is derived from historical employee termination behavior. In connection with the departure of the Company’s Chief Operating Officer on October 5, 2007, 166,666 unvested stock options were forfeited. The effect of this forfeiture on the stock-based compensation expense for the three and nine months ended September 30, 2007 was not material.

For the three months ended September 30, 2007 and 2006, stock-based compensation expense was approximately $58,200 and $81,900, respectively. For the nine months ended September 30, 2007 and 2006, stock-based compensation expense was approximately $135,800 and $507,100, respectively.

Stock Option Plan

The Helix BioMedix 2000 Stock Option Plan (“the 2000 Plan”) provides for the issuance of incentive and non-qualified stock options to employees, directors, officers, and consultants and is administered by non-employee directors. The 2000 Plan specifically provides the Company with the ability to repurchase, upon termination of an optionee’s employment, up to 10,000 shares acquired by the optionee through the exercise of options granted thereunder at the then-current fair market value of such shares.

Stock options to purchase the Company’s common stock are granted at the fair market value on the date of grant. Options generally become exercisable beginning one year from the date of grant and expire 10 years from the date of grant. Options granted to non-employee directors are typically non-qualified stock options with a vesting period ranging from immediately upon grant to quarterly over one year. Stock options granted to employees are typically incentive stock options and vest at the rate of 33.33% after one year, and 2.78% per month thereafter.

7

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

A summary of the Company’s stock option activity for the nine months ended September 30, 2007, is presented in the following table:

	Shares Subject to Options		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding, December 31, 2006	2,918,944		$	1.28	5.82	$	60,435
Granted	195,000		$	0.75
Exercised	—			—
Forfeited	(11,250	)	$	0.76
Expired	(207,500	)	$	1.21
Outstanding, September 30, 2007	2,895,194		$	1.26	4.83	$	124,415
Exercisable, September 30, 2007	2,554,083		$	1.32	4.98	$	66,490

The aggregate intrinsic value in the table above is based on the Company’s closing stock price of $0.93 on September 28, 2007, which would have been received by the optionees had all of the options with exercise prices less than $0.93 been exercised on that date. As of September 30, 2007, total unrecognized stock-based compensation related to non-vested stock options was approximately $63,200, which is expected to be recognized over a weighted-average period of approximately 17 months.

The Company has a policy of issuing new shares to satisfy share option exercises.

The Company has 5,355,000 shares of common stock reserved for issuance pursuant to the 2000 Plan. As of September 30, 2007, 2,459,806 shares remained available for grants. Additional information regarding options outstanding as of September 30, 2007, is as follows:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
$0.70-$0.85	695,500	4.44	$	0.75	384,667	$	0.76
$1.00-$1.00	799,000	5.42	$	1.00	799,000	$	1.00
$1.20-$1.75	723,750	5.00	$	1.51	708,472	$	1.51
$1.80-$2.00	676,944	4.34	$	1.82	661,944	$	1.82
$0.70-$2.00	2,895,194	4.83	$	1.26	2,554,083	$	1.32

Note 3. Stockholders’ Equity

On March 5, 2007, the Company closed a private equity financing, receiving cash of approximately $2.0 million in exchange for 2,666,666 shares of $0.001 par value common stock. In a second closing held on March 26, 2007, the Company received cash of $148,750 in exchange for 198,332 shares of $0.001 par value common stock.

On March 3, 2006, the Company closed a private equity financing, receiving cash of approximately $2.4 million in exchange for 2,383,000 shares of $0.001 par value common stock and warrants to purchase up to 238,300 shares of $0.001 par value common stock. The warrants have a 5-year term and a per share purchase price of $1.00. In a second closing held on March 10, 2006, the Company received $215,000 in exchange for 215,000 shares of $0.001 par value common stock and warrants to purchase up to 21,500 shares of $0.001 par value common stock. The warrants have a 5-year term and a per share purchase price of $1.00.

The net proceeds of these offerings are being used to continue ongoing research and development efforts, to fund the out-licensing initiatives for the Company’s peptides and other commercialization activities, and for general corporate purposes.

8

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 4. Loss per Share

Loss per share has been computed by dividing net loss by the weighted-average number of shares outstanding during the period. Diluted per share amounts reflect potential dilution from the exercise or conversion of securities into common stock. The Company’s capital structure includes common stock options and common stock warrants, all of which have been excluded from net loss per share calculations as they are antidilutive, as follows:

	Three months ended September 30,		Nine months ended September 30,
	2007	2006	2007	2006
Weighted average outstanding options	2,867,436	2,672,774	2,885,240	2,654,884
Weighted average outstanding warrants	2,700,544	2,865,544	2,700,544	2,787,243

Note 5. Marketable Securities

Marketable securities consisted of the following as of September 30, 2007:

	Market Value		Gross Unrealized Gains	Gross Unrealized Losses	Amortized Cost
Corporate and municipal auction or floating rate securities with contractual maturities of 8 years to 39 years	$	800,000	—	—	$	800,000

Note 6. Identifiable Intangible Assets

Identifiable intangible assets, which are included in other assets, consisted of the following as of September 30, 2007, and December 31, 2006:

	September 30, 2007			December 31, 2006
Antimicrobial technology	$	222,187		$	222,187
Licensing agreements		61,391			61,391
Patents, pending and approved		834,301			834,301
Total identifiable intangible assets		1,117,879			1,117,879
Less accumulated amortization		(665,708	)		(606,517	)
Identifiable intangible assets, net	$	452,171		$	511,362

Note 7. Related-Party Transactions

Effective as of April 18, 2007, the Company entered into a License Agreement (the “License Agreement”) with DermaVentures, LLC (“DermaVentures”), an Illinois limited liability company in which the Company owns a 25% membership interest pursuant to the DermaVentures Operating Agreement. Pursuant to the License Agreement, the Company granted to DermaVentures a non-exclusive license under certain patents and related technology to formulate certain of the Company’s proprietary peptides into cosmetics and over-the-counter personal care products and to market and sell those products in North and Central America. The initial term of the License Agreement is five years. In consideration for the license, DermaVentures agreed to pay the Company royalties on its sales of products containing the Company’s proprietary peptides as set forth in the License Agreement.

In addition, effective as of April 18, 2007, the Company entered into a Management Services Agreement (the “Services Agreement”) with DermaVentures and RMS Group, LLC, a member and the sole manager of DermaVentures (“RMS”). Pursuant to the Services Agreement, the Company agreed to provide certain management services to DermaVentures in exchange for a management fee of $400,000 payable as a cash flow distribution to the Company in connection with its ownership interest in DermaVentures after $1,200,000 in cash flow is distributed to RMS. The Company may terminate the Services Agreement upon 30 days prior written notice to the other parties, at which time the Company’s membership interest in DermaVentures shall be reduced to 10%; provided, however, that

9

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

during the first year after the effective date, the Company may only terminate the Services Agreement for cause. Either DermaVentures or RMS may terminate the Services Agreement at any time with or without cause upon 30 days prior written notice to the Company, at which time the Company’s membership interest in DermaVentures shall be reduced to 10% unless the Company agrees to bear the costs for any necessary replacement management services thereafter.

During the nine months ended September 30, 2007, the Company sold $64,400 of peptides to DermaVentures. The inventory sold in this transaction had zero cost as it was written down to its estimated net realizable value in the second quarter of 2006.

Note 8. Liquidity and Capital Resources

At September 30, 2007, the Company’s cash, cash equivalents and marketable securities totaled approximately $2.0 million, a decrease of approximately $253,600 from December 31, 2006. The decrease from December 31, 2006, was primarily attributable to the cash used in operations during the first nine months of 2007 of approximately $2.4 million, partially offset by the net proceeds of approximately $2.1 million the Company received from a private equity financing that closed in the first quarter of 2007. The Company incurred losses from operations for both the year ended December 31, 2006, and the nine months ended September 30, 2007.

Based on the current status of its operating plans and product commercialization development, the Company estimates that its existing cash, cash equivalents and marketable securities will be sufficient to fund its operations through June 30, 2008. The Company will need additional capital in order to maintain its current level of operations, continue commercialization of its technology and initiate its pharmaceutical programs. Accordingly, the Company is making preparations to raise additional funding, which may include debt and/or equity financing. However, there is no assurance that additional funding will be available on favorable terms, if at all. If the Company is unable to obtain the necessary additional funding, it would be required to reduce the scope of operations, which in turn may impede its ability to proceed with current operational plans and business strategies.

The availability of additional capital to the Company is uncertain. Any equity financing would likely result in dilution to the Company’s existing stockholders, and debt financing, if available, would likely include restrictive covenants. The Company’s ability to obtain financing, if at all, will depend on many factors including, but not limited to, its ability to generate material revenue under existing and new licensing or joint development agreements and successful execution of its product commercialization plans.

Note 9. Purchase Commitments

On August 2, 2007, the Company entered into an agreement with Peptisyntha, Inc. for the purchase of a certain peptide over a period of eighteen months from the agreement date. The aggregate consideration for orders under this agreement over the eighteen-month period will be $234,000. As of September 30, 2007, the Company has not placed any orders to purchase peptides under this agreement.

Note 10. Subsequent Event

On October 18, 2007, the Company announced that Robin L. Carmichael has been appointed Vice President – Marketing and Business Development, effective as of October 31, 2007. The Company entered into an employment letter agreement with Ms. Carmichael, pursuant to which Ms. Carmichael will receive an annual salary of $200,000 and will be eligible to receive options to purchase up to 150,000 shares of common stock, vesting over three years, and options to purchase up to an additional 100,000 shares of common stock upon the achievement of certain milestones. In addition, Ms. Carmichael will be entitled to receive a severance benefit equal to six months of her then-current base monthly salary if her employment is terminated either by the Company without cause or by Ms. Carmichael for good reason, as defined in the employment agreement, subject to certain limitations set forth therein.

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ITEM 2. Management’s Discussion and Analysis or Plan of Operation.

Forward-Looking Statements

Our disclosure and analysis in this Quarterly Report and in the documents incorporated by reference contain forward-looking statements, which provide our current expectations or forecasts of future events. Forward-looking statements include, without limitation:

• statements concerning possible or assumed future results of operations, trends in financial results and business plans, including those relating to earnings growth and revenue growth;

• statements about our product development schedule;

• statements about our future capital requirements and the sufficiency of our cash, cash equivalents, investments, and any other sources to meet these requirements;

• statements about our plans, objectives, expectations, and intentions; and

• other statements that are not historical facts.

Words such as “believe,” “anticipate,” “expect,” and “intend” and similar expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including our dependence on a limited number of suppliers and third parties for development and commercialization activities. Other factors described in “Certain Factors That May Affect Our Business and Future Results” in this Quarterly Report and in our Annual Report on Form 10-KSB for the year ended December 31, 2006 could also affect actual results. You should carefully consider these factors in evaluating our forward-looking statements.

You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. You should, however, review the factors and risks we describe in the reports we file from time to time with the Securities and Exchange Commission, or SEC, after the date of this Quarterly Report.

Business Overview

Helix BioMedix, Inc. is a biopharmaceutical company with an extensive library of structurally diverse bioactive peptides and patents covering hundreds of thousands of peptide sequences. Our mission is to enrich clinical practice and the patient/consumer experience by developing and commercializing topically-applied products which offer the health, beauty and safety benefits of our advanced bioactive small molecule peptide technology. Our vision is to be recognized as the world leader in the identification, qualification and commercialization of natural and synthetic peptides.

We have developed short, small-chain peptides with anti-infective, anti-inflammatory properties such as the stimulation of cell proliferation and migration. These peptides are targeted for use as ingredients in cosmetics and as new topical therapeutics. Possible applications include anti-aging skin care, acne treatment, wound healing, and the treatment of fungal dermatoses.

To establish a foundation for our initial commercialization efforts, we successfully identified and characterized bioactivities exhibited by natural innate-immunity peptide sequences that have potential cosmetic and therapeutic applications. By re-engineering these peptides, we created small, cost-effective bioactive molecules that not only are capable of delivering demonstrable benefits in skin care products but also have the potential to deliver therapeutic benefits as topically applied dermatological products. Subsequently, we have leveraged our knowledge of peptide sequences to expand the application of such molecules to multiple areas within dermatology.

During the third quarter of 2007, we moved from the development stage of our business to the commercialization stage, commencing our planned principal operations. We have consistently generated more than

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insignificant revenue throughout the first nine months of 2007, which we believe is key evidence that our technology has been accepted in the marketplace and is being commercialized. We therefore believe that there is substantial evidence to no longer present our financial statements as those of a development stage company. We anticipate the continued commercialization of our technology for the remainder of 2007 to be consistent with the levels experienced during the first nine months of 2007.

Our website is located at www.helixbiomedix.com. Information contained on our website is not part of, and is not incorporated into, this Quarterly Report. Our filings with the SEC are available without charge on our website.

Consumer Programs

In 2004, we initiated our first license agreements with personal care manufacturers and materials suppliers for inclusion of our peptides in anti-acne and anti-aging skin care products. We rely on these industry supplier licensees to develop new product opportunities that incorporate our peptides and to create both awareness and demand for our technology among their personal care customer companies.

We believe our peptide technology further holds potential as a technology platform for personal care industry leaders. We collaborate directly with leading personal care companies to identify opportunities for strengthening their brand position with proprietary products featuring our peptide technology.

In 2006, we initiated our first efforts to directly participate in the development of validated products that apply our peptide technology. The first such product was developed through a license agreement with DermaVentures, LLC (“DermaVentures”), a related party, and is planned for market introduction in the fourth quarter of 2007.

Our strategy moving forward is to develop products with the intent of positioning ourselves closer to the consumer end of the product development life cycle. We believe that this closer alignment to the end product has the potential to provide higher revenues as compared to simply licensing peptides for use as ingredients within a product. For example, we are currently developing a skin care system that is planned for introduction into the marketplace by partnering with a personal care marketing company.

Anti-Acne Programs

We believe one of our lead peptides for use in skin care promises significant benefits for the over-the-counter acne treatment market. The skin care benefits of this peptide derive from its ability to bind to a pro-inflammatory substance on the cell wall of the acne-causing bacteria. This pro-inflammatory substance is known to cause much of the redness and discomfort associated with acne breakouts but, when bound to our peptide, is rendered inactive. Laboratory and clinical testing indicate additional benefits and a higher level of consumer satisfaction associated with formulations that contain our peptide.

There are currently a number of product development initiatives incorporating this peptide into anti-acne formulations. We believe the use of this peptide is advantageous for globally marketed anti-acne products, not only because it supports more favorable outcomes with salicylic acid–based treatment products, but because it may obviate the need for benzyol peroxide, an ingredient that is limited in application due to regulatory restrictions in certain markets. This peptide is scheduled for introduction in the fourth quarter of 2007 in an acne treatment system that is positioned for the North American Hispanic market. This new system is proposed to be beneficial for richer skin tones that are more prone to discoloration associated with irritating chemicals such as benzyol peroxide. The peptide is also featured in an expanding line of anti-acne products marketed through natural food and health channels of distribution.

Anti-Aging Programs

We have identified and qualified a number of peptides that target changes in the appearance of skin associated with the aging process. Because there are anti-aging skin benefits that derive from the skin’s natural healing process, much of the anti-aging aspect of our peptide library has been derived from the screening processes associated with our pharmaceutical wound healing programs.

Peptides that target improvement in the appearance of aging skin may affect one or more of the age-related skin characteristics: lines and wrinkles, loss of elasticity, loss of firmness and definition, appearance of darkened areas or general unevenness of skin tone, rough texture, and thinning of the skin.

One of our lead anti-aging peptides targets several aspects of support for the skin’s structural matrix. This peptide has been demonstrated to accelerate the migration of cells from the skin’s uppermost layer to strengthen

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areas prone to lines and wrinkles and to impart a smoother, firmer appearance. This peptide has been clinically demonstrated to provide equivalent benefits to the leading prescription anti-aging products, but without the risk of irritation associated with aggressive retinoids. This peptide has been formulated into various cosmetic skin care products that are currently in the marketplace or pending introduction in late 2007.

We believe that, through the isolation of peptides derived from naturally recurring sequences that we call Replikines™, and specific combinations of those Replikines™ that we call Combikines™, we can increase the benefits derived from peptide applications in cosmetic anti-aging skin products. On August 16, 2007, we entered into a license agreement with Goldschmidt GmbH, a wholly owned subsidiary of Evonik Goldschmidt GmbH, a leading supplier of ingredients to the personal care industry. The agreement provides exclusive rights to certain of our peptides targeted toward personal care applications.

Recently identified peptide opportunities for our anti-aging portfolio include a group of synthetic peptides that we have branded as Modukines™. These peptides work to interrupt processes that accelerate the undesirable changes in skin associated with aging, including the accelerated breakdown of collagen and elastin, the skin’s key structural components. We believe several of these Modukines™ hold commercial promise beyond the area of anti-aging skin care, as they support the skin’s resiliency.

Pharmaceutical Programs

We are developing a novel, broad-spectrum, topical anti-infective for the treatment of skin and wound infections and the prevention of Staphylococcus aureus (S. aureus) infections including those caused by MRSA (Methicillin Resistant S. aureus). These programs are based upon a first-in-class family of molecules known as lipohexapeptides (or small molecule peptides) that we developed to specifically combine the attributes of small molecule natural products with the advantages of antimicrobial peptides. This new class of anti-infective peptide has demonstrated significant improvement in activity, both in vitro and in vivo, over traditional antimicrobial peptides.

As with traditional antimicrobial peptides, our lead lipohexapeptides are rapidly cidal, fail to engender resistance in vitro, are readily synthesized and do not exhibit cross-resistance with other antibiotics. However, these molecules also have the advantage of being more stable, more active, safer, and more cost-effective to manufacture than traditional antimicrobial peptides. In addition, primarily due to acylation (addition of a lipid), these molecules are significantly more active in complex biological environments such as serum or wound fluid. As a result, lipohexapeptides exhibit potent activity in animal infection models.

In pre-clinical testing our lead molecules exhibited broad-spectrum antimicrobial activity against significant bacterial pathogens such as S. aureus, Streptococcus pyogenes, and Pseudomonas aeruginosa, and also pathogenic fungi such as Candida and Trichophyton species. This activity was maintained against antibiotic-resistant organisms such as MRSA and Vancomycin Resistant Enterococci. Our lead molecules have demonstrated significant activity in both bacterial and fungal animal infection models. In a S. aureus abraded skin infection model, our lead lipohexapeptides significantly reduced the number of bacteria following three days of once-daily dosing, and in many cases, our peptide eradicated the pathogen. In a guinea pig dermatophytosis model, our lead peptide candidates significantly reduced pathogen count and delivered clinical benefits comparable to Terbinafine, a drug approved by the Food and Drug Administration (FDA) for onchomycosis. In both animal models, toxicity was not significantly different from that without peptides.

Acne Anti-Infective

Our lipohexapeptide program is specifically directed at developing small, stable, and highly potent antimicrobials capable of delivering therapeutic benefit within the clinical environment. These molecules overcome the specific challenges typically associated with acne such as the ability to work in an oil and serum environment and the ability to kill organisms deep within a pore. The efficacy observed in the dermatophytosis model described above demonstrates the penetration and antimicrobial effects of these molecules in the hair follicle of the host.

It is our intention to advance our anti-infective programs through a combination of partnering and in-house development. We have initiated this strategy by engaging a consulting firm and we are currently contacting potential partnering candidates.

Due to the early stage of development of each of our pharmaceutical programs described above, we are unable to estimate the total costs and timing to complete product development. Additionally, we currently anticipate out-licensing certain of our pharmaceutical product candidates, and their final development will therefore depend on the efforts of third parties. The timing of entering into ongoing licensing agreements resulting in significant revenue to the company is uncertain. Thus, we presently lack the experience necessary to determine the timing of when, if ever, material net cash inflows from out-licensing projects can be expected.

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Related-Party Transactions

Effective as of April 18, 2007, we entered into a License Agreement (the “License Agreement”) with DermaVentures, an Illinois limited liability company in which we own a 25% membership interest pursuant to the DermaVentures Operating Agreement. Pursuant to the License Agreement, we granted to DermaVentures a non-exclusive license under certain patents and related technology to formulate certain proprietary peptides into cosmetics and over-the-counter personal care products and to market and sell those products in North and Central America. The initial term of the License Agreement is five years. In consideration for the license, DermaVentures agreed to pay us royalties on its sales of products containing our proprietary peptides as set forth in the License Agreement.

In addition, effective as of April 18, 2007, we entered into a Management Services Agreement (the “Services Agreement”) with DermaVentures and RMS Group, LLC, a member and the sole manager of DermaVentures (“RMS”). Pursuant to the Services Agreement, we agreed to provide certain management services to DermaVentures in exchange for a management fee of $400,000 payable as a cash flow distribution to us in connection with our ownership interest in DermaVentures after $1.2 million in cash flow is distributed to RMS. We may terminate the Services Agreement upon 30 days prior written notice to the other parties, at which time our membership interest in DermaVentures shall be reduced to 10%; provided, however, that during the first year after the effective date, we may only terminate the Services Agreement for cause. Either DermaVentures or RMS may terminate the Services Agreement at any time with or without cause upon 30 days prior written notice to us, at which time our membership interest in DermaVentures shall be reduced to 10% unless we agree to bear the costs for any necessary replacement management services thereafter.

During the nine months ended September 30, 2007, we sold $64,400 of peptides to DermaVentures. The inventory sold in this transaction had zero cost as it was written down to its estimated net realizable value in the second quarter of 2006.

Critical Accounting Policies and Estimates

The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, our management evaluates its estimates and judgments including those related to revenue recognition, research and development costs, capitalized patent costs, and valuation of stock options and warrants. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

• Revenue Recognition. We generate revenue from peptide sales at cost, technology licenses and joint development agreements. Revenue under technology licenses may include up-front payments and royalties from product sales. Revenue associated with joint development agreements primarily consists of payments for completion of development milestones. For agreements with multiple elements, we follow the Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables,” to determine whether each element can be separated into a unit of accounting based on the following criteria: 1) the delivered items have value to the customer on a stand-alone basis, 2) any undelivered items have objective and reliable evidence of fair value, and 3) delivery or performance of the undelivered items that have a right of return is probable and within our control. If the criteria are not met, elements included in an arrangement are accounted for as a single unit of accounting and revenue is deferred until the period in which the final deliverable is provided. If there is objective and reliable evidence of fair value for all units of accounting in an arrangement, we allocate revenue among the separate units of accounting based on their estimated fair values.

• Peptide Sales. We recognize revenue from peptide sales when title transfers to the customer, typically upon shipment, and collection is reasonably assured. In the future, peptide sales may be transacted directly between the licensees and a third-party manufacturer, which could have an adverse effect on our revenue, but should not materially affect net income as peptides are typically sold at cost.

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• Licensing Fees. We recognize up-front payments at the point when persuasive evidence of an agreement exists, delivery has occurred or services have been performed, the price is fixed and determinable and collection is reasonably assured. Royalties from licensees are recorded as earned when royalty results are reliably measured and collection is reasonably assured. We rely on the licensees to provide us with royalty information as we cannot reasonably estimate it. Royalty reports are generally due to us during the last month of each calendar quarter and are based on sales or manufacturing activities during the preceding three months.

• Development Fees. We record revenue associated with performance milestones as earned when we have completed the specific milestones as defined in the joint development agreements and there are no uncertainties or contingencies regarding collection of the related payment. Payments received for which the earnings process is not complete are recorded as deferred revenue.

• Research and Development Costs. These costs, including personnel costs, supplies and other indirect research and development costs, are expensed as incurred. In instances where we enter into agreements with third parties for research and development activities, which may include personnel costs, supplies and other costs associated with such joint development agreements, we expense these items as incurred.

• Capitalization of Patent Costs. We capitalize the third-party costs associated with filing patents or entering into licenses associated with our underlying technology. Our policy for the capitalization of patent costs is to begin amortization of these costs at the time they are incurred. We review our patent portfolio to determine whether any such costs have been impaired and are no longer being used in our research and development activities and commercialization efforts. To the extent we no longer use certain patents, the associated costs will be written-off at that time.

• Valuation of Stock Options and Warrants. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option valuation model. The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and our experience. Options granted are valued using the single option valuation approach, and the resulting expense is recognized using the cliff, straight-line attribution method, consistent with the single option valuation approach. Compensation expense is recognized only for those options expected to vest. Stock options and warrants issued to non-employees are accounted for using the fair value method prescribed by Emerging Issues Task Force (“EITF”) Issue No. 96-18 and EITF Issue No. 00-18.

Results of Operations

As of September 30, 2007, our accumulated deficit was approximately $26.7 million. We may continue to incur substantial operational losses over the next several years, due principally to the costs associated with our current level of operations, continued commercialization of our technology, and initiation of our pharmaceutical programs. Revenue is typically generated from peptide sales at cost, technology licenses and joint development agreements. Our ability to achieve a consistent level of revenue depends largely on our ability to continue to successfully commercialize our proprietary peptide technology through royalty-bearing licenses, as well as developing and selling products via collaborations with strategic partners. Even if we are successful in the aforementioned activities, our operations may not be profitable. In addition, any payments under licensing arrangements are subject to significant fluctuations in both timing and amount. Therefore, our operating results for any period may fluctuate significantly and may not be comparable to the operating results for any other period.

Revenue

Revenue for the three months ended September 30, 2007, was approximately $159,400, an increase of $140,500 from the same period in 2006. For the first nine months of 2007, revenue was approximately $358,400, an increase of approximately $291,500 from $66,900 from the same period in 2006. Of the total revenue for the nine months ended September 30, 2007, $64,400, or 18.0%, was from sales of peptides to DermaVentures, a related party. The increase in revenue for the three and nine months ended September 30, 2007, primarily consisted of increases in peptide sales, licensing fees and development fees.

Operating Expenses

Cost of Peptide Sales. Cost of peptide sales consists of cost of peptides purchased for resale at or near cost. Cost of peptide sales was approximately $53,300 for the three months ended September 30, 2007, compared to $6,600 for the three months ended September 30, 2006. Cost of peptide sales was approximately $63,700 for the nine months

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ended September 30, 2007, compared to $163,000 for the nine months ended September 30, 2006. Cost of peptide sales to DermaVentures, a related party, was zero for the nine months ended September 30, 2007. The decrease in cost of sales for the nine months ended September 30, 2007, compared to the same period in 2006 was a result of $151,400 of inventory written down to its estimated net realizable value in the second quarter of 2006. As we replenish inventory, we anticipate that future sales of peptides will result in a higher cost of sales than the level we have experienced during the nine months ended September 30, 2007.

Other Cost of Revenue. Other cost of revenue primarily consists of the cost of peptides provided for development activities related to a joint development agreement. Other cost of revenue for the three and nine months ended September 30, 2007, was approximately $20,400. There was no other cost of revenue for the three and nine months ended September 30, 2006.

Research and Development Expenses. Research and development (“R&D”) expenses consist primarily of salaries and benefit expenses, stock-based compensation, costs of external studies and trials, contract and other outside service fees related to our research and development efforts, and costs incurred for patent maintenance. R&D expenses were approximately $174,600 for the three months ended September 30, 2007, compared to approximately $278,300 for the same period in 2006. For the nine months ended September 30, 2007, R&D expenses were approximately $582,600 compared to $772,300 for the same period in 2006. The decreases of $103,700, or 37.3%, and $189,700, or 24.6%, in R&D expenses for the three months and nine months ended September 30, 2007, respectively, compared to the same periods in 2006 were primarily due to lower spending in lab consumables and external studies, and decreased stock-based compensation, partially offset by an increase in expenses related to R&D consulting fees. We expect R&D expenses during the remainder of 2007 to remain generally in line with the levels experienced during the first nine months of 2007.

Depreciation and Amortization Expenses. Depreciation and amortization expenses were approximately $44,200 for the three months ended September 30, 2007, a decrease of $2,000, or 4.3%, from the same period in 2006. For the nine months ended September 30, 2007, depreciation and amortization expenses were approximately $132,100, a decrease of $4,300, or 3.2%, from $136,400 for the first nine months of 2006. The slight decreases in depreciation and amortization expenses in the three and nine months ended September 30, 2007, compared to the same periods in 2006 were primarily due to incremental depreciation expenses from assets purchased in 2007 being offset by reduced depreciation from other assets becoming fully depreciated. We expect depreciation and amortization expenses for the remainder of 2007 to remain relatively consistent with levels experienced in the first nine months of the year.

Accounting, Legal and Professional Fees Expenses. Accounting, legal and professional fees expenses were approximately $140,900 for the three months ended September 30, 2007, an increase of $67,300, or 91.4%, compared to $73,600 for the three months ended September 30, 2006. Accounting, legal and professional fees expenses were approximately $423,100 for the nine months ended September 30, 2007, an increase of $213,100, or 101.5%, compared to $210,000 for the same period in 2006. The increases in accounting, legal and professional fees expenses in the three and nine months ended September 30, 2007, compared to the same periods in 2006 were primarily attributable to higher audit fees and higher legal costs associated with increased activities in the out-licensing of our technology.

General and Administrative Expenses. General and administrative (“G&A”) expenses consist primarily of salaries and benefit expenses, consulting fees, various corporate costs, facilities and other overhead expenses. G&A expenses were approximately $650,200 for the three months ended September 30, 2007, compared to approximately $504,800 for the same period in 2006. For the nine months ended September 30, 2007, G&A expenses were approximately $1.75 million compared to $1.72 million for the same period in 2006. The increases of approximately $145,400, or 28.8%, and $34,200, or 2.0%, in G&A expenses for the three months and nine months ended September 30, 2007, respectively, compared to the same periods in 2006 were primarily due to an increase in employee-related expenses, additional facility costs resulting from the expansion of leased space beginning in December of 2006, and compliance costs associated with the Sarbanes-Oxley Act of 2002, partially offset by a decrease in stock-based compensation. We anticipate G&A expenses during the remainder of 2007 to increase as a result of compliance costs associated with the Sarbanes-Oxley Act of 2002.

Other Income. Other income, comprised solely of interest income, was approximately $24,500 for the three months ended September 30, 2007, an increase of $4,400, or 21.9%, from $20,100 for the three months ended September 30, 2006. For the nine months ended September 30, 2007, other income was approximately $72,300, an increase of $16,600, or 29.8%, from $55,700 for the same period in 2006. The increases in other income for the three and nine months ended September 30, 2007, compared to the same periods in 2006 were primarily attributable to higher interest rates and a higher average balance of marketable securities in 2007 compared to 2006.

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Liquidity and Capital Resources

Since inception, we have financed our operations primarily through the private sales of debt and equity securities. Our principal sources of liquidity are cash, cash equivalents and marketable securities. At September 30, 2007, our balance of cash, cash equivalents and marketable securities totaled approximately $2.0 million, a decrease of approximately $253,600 from December 31, 2006. The decrease from December 31, 2006, was attributable to the cash used of approximately $2.4 million in operations during the first nine months of 2007, partially offset by the net proceeds of approximately $2.1 million received from a private equity financing that closed in the first quarter of 2007. We incurred losses from operations for both the year ended December 31, 2006, and the nine months ended September 30, 2007. We may continue to incur additional losses for the foreseeable future.

Cash used in operating activities for the nine months ended September 30, 2007, was approximately $2.4 million, derived principally from our net loss for the period, adjusted by non-cash expenses and changes in working capital components. Working capital uses of cash were primarily from increases in accounts receivable and inventory, and a reduction in accrued payroll, partially offset by a decrease in prepaid expenses and increases in accounts payable, accrued expenses and deferred revenue. Cash used in operating activities for the nine months ended September 30, 2006, was approximately $2.2 million, due primarily to the net loss for the period and decreases in accrued payroll and accrued expenses, partially offset by adjustments of non-cash expenses, and decreases in inventory and prepaid assets.

Cash provided by investing activities during the nine months ended September 30, 2007, was approximately $152,700, due primarily to the net sales of marketable securities, partially offset by purchases of capital equipment. Cash used in investing activities during the nine months ended September 30, 2006, was approximately $38,000, due to purchases of capital equipment.

Cash provided by financing activities for the nine months ended September 30, 2007, was approximately $2.1 million. On March 5, 2007, we closed a private equity financing, receiving cash of approximately $2.0 million in exchange for 2,666,666 shares of $0.001 par value common stock. In a second closing held on March 26, 2007, we received cash of $148,750 in exchange for 198,332 shares of $0.001 par value common stock.

Cash provided by financing activities for the nine months ended September 30, 2006, was approximately $2.6 million. On March 3, 2006, we closed a private equity financing, receiving cash of approximately $2.4 million in exchange for 2,383,000 shares of $0.001 par value common stock and warrants to purchase up to 238,300 additional shares of $0.001 par value common stock. The warrants have a 5-year term and a per exercise purchase price of $1.00. In a second closing held on March 10, 2006, we received $215,000 in exchange for 215,000 shares of $0.001 par value common stock and warrants to purchase up to 21,500 shares of $0.001 par value common stock. The warrants have a 5-year term and a per share exercise price of $1.00.

Our net cash used in operations has exceeded our cash generated from operations for every year since our inception. Based on the current status of our operating plans and product commercialization development, we estimate that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations through June 30, 2008. We will need additional capital in order to maintain the current level of operations, continue commercialization of our technology and initiate our pharmaceutical programs. Accordingly, we are making preparations to raise additional funding, which may include debt and/or equity financing. However, there is no assurance that additional funding will be available on favorable terms, if at all. If we are unable to obtain the necessary additional funding, we would be required to reduce the scope of operations, which in turn may impede our ability to proceed with current operational plans and business strategies.

The availability of additional capital to us is uncertain. Any equity financing would likely result in dilution to our existing stockholders, and debt financing, if available, would likely include restrictive covenants. Our ability to obtain financing, if at all, will depend on many factors including, but not limited to, our ability to generate material revenue under existing and new licensing or joint development agreements and successful execution of our product commercialization plans.

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Purchase Commitments

On August 2, 2007, we entered into an agreement with Peptisyntha, Inc. for the purchase of a certain peptide over a period of eighteen months from the agreement date. The aggregate consideration for orders under this agreement over the eighteen-month period will be $234,000. As of September 30, 2007, we have not placed any orders to purchase peptides under this agreement.

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Certain Factors That May Affect Our Business and Future Results

Please see our Annual Report on Form 10-KSB for the year ended December 31, 2006, for a description of some of the risks and uncertainties that we face. Please also note the following additional risk factor that should be carefully considered with respect to our business. If any of such risks were to occur, our business, operating results and financial condition could be seriously harmed.

Although we are no longer a development stage company, there can be no assurance that we will be able to continue to commercialize our technology.

Effective during the third quarter of 2007, based on our consistent revenue streams throughout the first nine months of 2007 which we believe is key evidence that our technology has been accepted in the marketplace and is being commercialized, we no longer characterize ourselves as, or present our financial statements as those of, a development stage company. However, there can be no assurance that we will be able to continue to commercialize our technology, that any such commercialization will generate significant future revenue, or that we will attain profitability. We incurred a net loss of approximately $2.5 million for the nine months ended September 30, 2007, and had accumulated deficit of approximately $26.7 million as of such date. If we are unable to continue to commercialize our technology, our business, operating results and financial condition will be materially adversely affected.

ITEM 3. Controls and Procedures.

As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information required to be included in our periodic SEC filings.

There has been no change during the quarter in our internal control over financial reporting 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 5. Other Information.

Effective as of October 31, 2007, Robin L. Carmichael was appointed Vice President – Marketing and Business Development. We entered into an employment letter agreement with Ms. Carmichael, pursuant to which Ms. Carmichael will receive an annual salary of $200,000 and will be eligible to receive options to purchase up to 150,000 shares of common stock, vesting over three years, and options to purchase up to an additional 100,000 shares of common stock upon the achievement of certain milestones. In addition, Ms. Carmichael will be entitled to receive a severance benefit equal to six months of her then-current base monthly salary if her employment is terminated either by us without cause or by Ms. Carmichael for good reason, as defined in the employment agreement, subject to certain limitations set forth therein.

ITEM 6. Exhibits.

Exhibit Number (Referenced to Item 601 of Regulation S-B)	Exhibit Description
2.1	Proposal for Approval of Reincorporation of Helix BioMedix, Inc., a Colorado corporation, from Colorado to Delaware (incorporated by reference from Exhibit 2 to the Company’s Form 10-KSB for the year ended December 31, 2000)
3.1	Certificate of Ownership and Merger of Helix BioMedix, Inc., a Delaware corporation, and Helix BioMedix, Inc., a Louisiana corporation (incorporated by reference from Exhibit 2 to the Company’s Form 10-KSB for the year ended December 31, 2000)
3.2	Certificate of Incorporation of Helix BioMedix, Inc. (incorporated by reference from Exhibit 3-a to the Company’s Form 10-KSB for the year ended December 31, 2000)
3.3	Certificate of Amendment to the Certificate of Incorporation of Helix BioMedix, Inc. (incorporated by reference from Exhibit 3.3 to the Company’s Form 10-KSB/A for the year ended December 31, 2002)
3.4	Bylaws of Helix BioMedix, Inc. (incorporated by reference from Exhibit 3-b to the Company’s Form 10-KSB for the year ended December 31, 2000)
10.8(b)	Third Amendment to Employment Agreement dated effective June 15, 2007 between the Company and Dr. Timothy J. Falla
10.9(b)	Third Amendment to Employment Agreement dated effective June 15, 2007 between the Company and R. Stephen Beatty
10.10(a)	First Amendment to Employment Letter Agreement dated effective June 15, 2007 between the Company and David H. Kirske
10.24(a)*	First Amended and Restated License Agreement dated September 12, 2007 between the Company and Grant Industries, Inc.
10.27*	License Agreement dated August 16, 2007 between the Company and Goldschmidt GmbH
10.28	Employment Letter Agreement dated October 8, 2007 between the Company and Robin L. Carmichael
31.1	Certification of the Company’s Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
31.2	Certification of the Company’s Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934
32.1	Certification of the Company’s Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
32.2	Certification of the Company’s Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

* Confidential treatment has been requested for confidential commercial and financial information pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

November 8, 2007

HELIX BIOMEDIX, INC.
(Registrant)
By:	/s/ R. Stephen Beatty
	R. Stephen Beatty
	President and Chief Executive Officer (Principal Executive Officer)

By:	/s/ David H. Kirske
	David H. Kirske Vice President and Chief Financial Officer
	(Principal Financial Officer)

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EX-10.8(B)

Exhibit 10.8(b)

THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

This THIRD AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is made and entered into effective as of June 15, 2007 by and between HELIX BIOMEDIX, INC., a Delaware corporation (“Helix”), and TIMOTHY FALLA, PH.D. (“Executive”).

RECITALS

WHEREAS, Helix and Executive entered into an Employment Agreement effective July 1, 2003, as amended (the “Agreement”); and

WHEREAS, Helix and Executive wish to further amend the Agreement as provided herein.

AGREEMENT

NOW, THEREFORE, in consideration of the premises, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. The first sentence of Section 5(b) of the Agreement is hereby amended and restated in its entirety as follows:

“Upon termination by the Company without Cause (as defined below), the Company shall pay Executive any unpaid annual base salary, any amount due but not paid under any Company incentive compensation plan, earned but unused vacation and bonuses due (if any) for services already performed (subject to normal withholding and other deductions) to the effective date of termination of employment; and monthly severance payments equivalent to six (6) months base salary.”

2. The last sentence of Section 5(b) of the Agreement is hereby amended and restated in its entirety as follows:

“Executive will have the duty to mitigate the costs to the Company by attempting to obtain other employment within a reasonable time after termination. During the period Executive is entitled to receive severance payments hereunder, the monthly payment otherwise due from the Company shall be reduced by fifty percent (50%) of Executive’s monthly compensation from such other employment.”

3. The effective date of this Amendment shall be June 15, 2007.

4. The parties hereto hereby acknowledge the continuing effect of the Agreement except as specifically modified by this Amendment.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

HELIX BIOMEDIX, INC.		EXECUTIVE:
By:	/s/ R. Stephen Beatty		/s/ Timothy Falla, Ph.D.
	R. Stephen Beatty		Timothy Falla, Ph.D.
	President and CEO

EX-10.9(B)

Exhibit 10.9(b)

THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

This THIRD AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is made and entered into effective as of June 15, 2007 by and between HELIX BIOMEDIX, INC., a Delaware corporation (“Helix”), and R. STEPHEN BEATTY (“Executive”).

RECITALS

WHEREAS, Helix and Executive entered into an Employment Agreement effective July 1, 2003, as amended (the “Agreement”); and

WHEREAS, Helix and Executive wish to further amend the Agreement as provided herein.

AGREEMENT

NOW, THEREFORE, in consideration of the premises, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. The last sentence of Section 5(b) of the Agreement is hereby amended and restated in its entirety as follows:

“Executive will have the duty to mitigate the costs to the Company by attempting to obtain other employment within a reasonable time after termination. During the period Executive is entitled to receive severance payments hereunder, the monthly payment otherwise due from the Company shall be reduced by fifty percent (50%) of Executive’s monthly compensation from such other employment.”

2. Section 3(e) of the Agreement is hereby amended to add the following provisions:

(2) Company will maintain a policy of insurance for directors’ and officers’ liability with such coverage as may be determined by the Board. Executive will be included within that policy of insurance with the premiums paid by Company.

(3) For purposes of this Section 3(e), vacation shall not include time spent by Executive at events attended by (i) persons who hold or represent the holders of at least 20% of the Company’s outstanding voting stock; or (ii) any person with whom the Company has an existing Consulting Agreement as long as a material purpose of such time is Company-related. The Company hereby acknowledges that Executive intends to attend certain national bridge-related events during each year at which a significant percentage of the Company’s current stockholders are present. The Company encourages such participation by Executive and hereby acknowledges that it will reimburse Executive for the reasonable costs of attending such events and that the time associated with such events will not be considered as vacation. The Company reserves the right to review this situation on a year-by-year basis.

3. The effective date of this Amendment shall be June 15, 2007.

4. The parties hereto hereby acknowledge the continuing effect of the Agreement except as specifically modified by this Amendment.

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

HELIX BIOMEDIX, INC.		EXECUTIVE:
By:	/s/ Jeffrey A. Miller		/s/ R. Stephen Beatty
	Jeffrey A. Miller, Ph.D		R. Stephen Beatty
	Director

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EX-10.10(A)

Exhibit 10.10(a)

FIRST AMENDMENT TO EMPLOYMENT LETTER AGREEMENT

This FIRST AMENDMENT TO EMPLOYMENT LETTER AGREEMENT (this “Amendment”) is made and entered into effective as of June 15, 2007 by and between HELIX BIOMEDIX, INC., a Delaware corporation (“Helix”), and DAVID H. KIRSKE. (“Employee”).

RECITALS

WHEREAS, Helix and Employee entered into a letter agreement dated July 2, 2004 (the “Agreement”); and

WHEREAS, Helix and Employee wish to amend the Agreement as provided herein.

AGREEMENT

NOW, THEREFORE, in consideration of the premises, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. The last paragraph of Section 4 of the Agreement is hereby amended and restated in its entirety as follows:

“ANNUAL REVIEW:

The Board of Directors shall review your compensation and performance annually, and you shall be eligible for an increase in your base salary or other compensation based on such review.”

2. The first paragraph of Section 7 of the Agreement is hereby amended and restated in its entirety as follows:

“Your employment with the Company will be on an “at will” basis, meaning that either you or the Company may terminate your employment at any time for any reason or no reason, without further obligation or liability. Notwithstanding the foregoing, in the event that the Company terminates this employment relationship without Cause (as defined below) or you terminate this employment relationship with Good Reason (as defined below), the Company will pay you any unpaid annual base salary, any amount due but not paid under any Company incentive compensation plan, earned but unused vacation and bonuses due (if any) for services already performed (subject to normal withholding and other deductions) to the effective date of termination of employment; and monthly severance payments equivalent to six (6) months base salary. These payments will be made in accordance with the Company’s customary payroll schedule, minus deductions required by law. In addition, any options to purchase capital stock of the Company held by you on the date of such termination shall automatically be deemed to be fully vested and exercisable. The Company will issue and file appropriate tax documents in connection with any severance payments. Payment of the above-described severance compensation and benefits is conditioned on the execution by you of a full mutual release of all claims related to your employment with or termination from the Company in substantially the form attached hereto as Exhibit A. Such a release will not include accrued and unpaid wages and benefits, claims to industrial insurance, vested pension benefits or indemnification rights. You will have the duty to mitigate the costs to the Company by attempting to obtain other employment within a reasonable time after termination. During the period you are entitled to receive severance payments hereunder, the monthly payment otherwise due from the Company shall be reduced by fifty percent (50%) of your monthly compensation from such other employment. For purposes hereof, the term “Cause” shall mean if you (i) are convicted of a felony or any crime involving dishonesty, breach of trust, or physical harm to any person or relating to the business of the Company or any successor company (or enter a pleas of guilty or nolo contendere with respect thereto); (ii) repeatedly report to work under the influence of alcohol or illegal drugs;

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(iii) substantially and repeatedly fail to perform the duties as reasonably directed by the President of the Company or any successor company, (iv) are found by a court of competent jurisdiction to have made unauthorized use or disclosure of confidential information or trade secrets; or (v) engage in gross negligence or willful misconduct in carrying out your duties as an employee of the Company or any successor company, and the term “Good Reason” shall mean the occurrence of any of the following events without your consent: (i) a demotion or other material reduction in the nature or status of your responsibilities or (ii) a material reduction in your annual base salary or any failure by the Company to satisfy its duty to compensate you as required hereunder.”

3. Exhibit A attached hereto shall become Exhibit A to the Agreement:

4. The effective date of this Amendment shall be June 15, 2007.

5. The parties hereto hereby acknowledge the continuing effect of the Agreement except as specifically modified by this Amendment.

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

HELIX BIOMEDIX, INC.		EMPLOYEE:
By:	/s/ R. Stephen Beatty		/s/ David H. Kirske
	R. Stephen Beatty		David H. Kirske
	President and CEO

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EXHIBIT A

WAIVER AND RELEASE

For and in consideration of the severance payments and benefits set out in the agreement attached hereto, the undersigned (“Employee”), on behalf of himself and his agents, heirs, successors and assigns, expressly waives any claims against Helix BioMedix, Inc. (the “Company”) and releases the Company (including its officers, directors, stockholders, managers, agents and representatives) from any and all claims, demands, liabilities, damages, obligations, actions or causes of action of any kind, known or unknown, past or present, arising out of, relating to, or in connection with Employee’s employment, termination of employment, or the holding of any office with the Company or any other related entity. The claims released by the Employee include, but are not limited to, claims for defamation, libel, invasion of privacy, intentional or negligent infliction of emotional distress, wrongful termination, constructive discharge, breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, fraud, or for violation of any federal, state or other governmental statute or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, the federal Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Employment Retirement Income Security Program or any other legal limitation on the employment relationship.

This Waiver and Release shall not waive or release claims (1) where the events in dispute first arise after execution of this Waiver and Release; (2) for rights or benefits due under the agreement attached hereto; or (3) relating to Employee’s rights to indemnity as a corporate officer of Company.

Employee agrees he has been provided the opportunity to consider whether to enter into this Waiver and Release and has voluntarily chosen to enter into it on this date. This Waiver and Release shall be effective when signed. Employee acknowledges that he is voluntarily executing this Waiver and Release, that he has carefully read and fully understands all aspects of this Waiver and Release and the attached agreement, that he has not relied upon any representations or statements not set forth herein or made by the Company’s agents or representatives, that he has been advised to consult with an attorney prior to executing this Waiver and Release, and that, in fact, he has consulted with an attorney of his choice as to the subject matter and effect of this Waiver and Release.

Dated:                         , 20     Employee

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EX-10.24(A)

Exhibit 10.24(a)

FIRST AMENDED AND RESTATED LICENSE AGREEMENT

This First Amended and Restated License Agreement (the “Agreement”) is entered into and effective as of September 12, 2007 (the “Effective Date”), by and between Helix BioMedix, Inc. a Delaware corporation with its principal place of business at 22118 20th Avenue SE, Suite 204, Bothell, WA 98021 (“Licensor”), and Grant Industries, Inc. a New Jersey corporation with its principal place of business at 103 Main Avenue, Elmwood Park, NJ 07407 (“Licensee”). Licensor and Licensee each may be referred to in this Agreement individually as a “Party” or collectively as the “Parties.”

RECITALS

A. The Parties entered into a Non-Exclusive License Agreement effective December 12, 2006 (the “Prior Agreement”).

B. The Parties entered into a First Amendment to License Agreement effective May 2, 2007 (the “First Amendment”), which amended Sections 3.1 and 4.1 of the Prior Agreement, concerning, respectively, royalty payment schedules and certain progress reports.

C. The Parties now wish to amend and restate the Prior Agreement in its entirety to, among other things, render the license herein exclusive with respect to a certain Peptide, to add an additional Peptide to the exclusive license hereunder, and to incorporate the amendments set forth in the First Amendment.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, do agree as follows:

This Agreement is effective as of the Effective Date and amends, restates, and supersedes in its entirety the Prior Agreement, as amended by the First Amendment. This Agreement shall not impair or otherwise affect any right or obligation of either Party existing under the Prior Agreement (as amended) prior to the effectiveness hereof.

1 – DEFINITIONS

For the purposes of this Agreement, the following words and phrases shall have the following meanings:

1.1 “Affiliate” means any entity that directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with another entity. For purposes of this definition only, “control”, and, with correlative meanings, the terms “controlled

Confidential treatment has been requested for portions of this exhibit. This exhibit omits the information subject to the confidential treatment request. Omissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

by” and “under common control with” shall mean (a) the possession, directly or indirectly, of the power to direct the management or policies of a party, whether through the ownership of voting securities or by contract relating to voting rights or corporate governance, or (b) the ownership, directly or indirectly, of more than twenty-five percent (25%) of the voting securities or other ownership interest of a party; provided that, if local law restricts foreign ownership, control will be established by direct or indirect ownership of the maximum ownership percentage that may, under such local law, be owned by foreign interests.

1.2 “Applicable Law” means the applicable laws, rules, and regulations, including any rules, regulations, guidelines, or other requirements of the Regulatory Authorities, that may be in effect from time to time in the Territory.

1.3 “Confidential Information” means the terms and conditions of this Agreement, all non-public information related to the Peptides, all Know-How, and all other information, data, reports and other records that a Party to this Agreement receives from the other Party to this Agreement.

1.4 “GAAP” means United States generally accepted accounting principles consistently applied.

1.5 “Know-How” means trade secrets, knowledge, information, expertise, data, materials and know-how that are owned, have been developed and/or created or are developed during the term of this Agreement by or for the Licensor related to the research, development, use or manufacture of the Peptides.

1.6 “Market” means the cosmetic- and over-the-counter- personal-care products market.

1.7 “Net Revenue” means ***

1.8 “Patents” means the patents and patent applications set forth in Exhibit A.

1.9 “Peptides” means Licensor’s proprietary bioactive peptides described in Exhibit A attached to this Agreement. Licensor may add peptides that are proprietary to Licensor to Exhibit A at its sole discretion.

1.10 “Peptide A”, “Peptide B” and “Peptide C” have the meanings given in Exhibit A.

1.11 “Premix” means a formulation other than a final formulation that is manufactured by Licensee and that incorporates any single Peptide (as defined above), regardless of what ingredients (of Licensee or any third party) other than Peptide may be included in such formulation.

1.12 “Regulatory Authorities” means any applicable governmental entities regulating or otherwise exercising authority in the Territory.

*** Confidential treatment requested

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1.13 “Royalties” means the royalties payable by Licensee set forth in Exhibit C, which shall be paid in accordance with Section 3.

1.14 “Sublicensee” means any third party to which rights hereunder are sublicensed in accordance with Section 2.2 (including any further sublicensees of a sublicensee).

1.15 “Territory” means the countries or other geographic areas set forth in Exhibit B, as such exhibit may be amended from time to time pursuant to the terms hereof.

2 – LICENSE GRANT

2.1 License. Subject to the terms and conditions of this Agreement, Licensor hereby grants to Licensee a right and license, under the Patents and the Know-How, to (i) purchase the Peptides in pure form, at Licensee’s expense, from a manufacturer approved in advance by Licensor in writing (or from Licensor, subject to availability and on terms as may be agreed between Licensee and Licensor); (ii) formulate the Peptides into Premix; provided that no Premix may contain more than one Peptide; and (iii) market, sell and distribute the Premix to manufacturers in the Market in accordance with Section 2.2, in each case in the Territory and for commercial purposes only. The licenses granted herein shall be non-exclusive with respect to Peptide A, and Licensee acknowledges and agrees that Licensor intends to grant the same or similar rights to other parties. The licenses granted herein with respect to Peptide B and Peptide C shall be exclusive (including as against Licensor) with respect to the rights granted in Section 2.1(ii) and (iii).

2.2 Sublicense. Subject to the terms and conditions of this Agreement, Licensee may grant rights to third parties that purchase Premix from Licensee to (i) market, sell and distribute such Premix to manufacturers in the Market and (ii) incorporate such Premix into final products within the Market and market, sell and distribute such final products, in each case in the Territory and for commercial purposes only. Licensee shall notify Licensor of the identity of each Sublicensee promptly after any sublicense of rights is made hereunder. Licensee shall recommend in writing to each Sublicensee that Peptide (considered in pure form) be present in any final formulation at a concentration level not less than those set forth in Exhibit A with respect to each Peptide, and as agreed between the Parties with respect to any Peptide that may be added to Exhibit A pursuant to Section 1.9. Further, Licensee shall use its best efforts to prevent any use, sale, marketing or distribution of Premix or any product containing Premix by any third party in a manner inconsistent with the terms or intent of this Agreement, and failing such prevention, to promptly notify Licensor of any such inconsistent use, sale, marketing or distribution by a third party.

2.3 No Other Rights. Except as expressly set forth in this Agreement, Licensor shall retain all right, title and interest in and to the Patents, the Peptides and all Know-How, and nothing in this Agreement shall be construed to confer any rights upon Licensee by implication, estoppel or otherwise other than as expressly set forth in this Agreement.

2.4 Modification of Territory. Exhibit B may be amended from time to time upon request by Licensee and with the consent of Licensor, which consent shall not be unreasonably

*** Confidential treatment requested

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withheld. Without limiting the generality of the foregoing, Licensor’s withholding of consent shall be deemed reasonable as to a country or geographic region if at the time of the request by Licensee, Licensor is or is considering doing business (directly or indirectly) with respect to such country or geographic region, which business involves or may involve any Peptide.

2.5 No Assignment of Improvements. For avoidance of doubt, Licensee does not assign or otherwise transfer to Licensor hereunder any right, title or interest in or to any improvements or inventions relating to, based upon, or derived from the Peptides that may be made by Licensee in connection with its performance under this Agreement.

3 – PAYMENTS

3.1 Royalties. Royalties will be paid within thirty (30) days after the end of each three-month period ending the last day of February, May, August, and November during the term of this Agreement, with respect to royalty-bearing sales occurring in that three-month period. Such payment will be accompanied by a statement with information set forth in Exhibit D indicating the associated Net Revenue (including currency conversions) itemized by Premix (including quantity sold), Royalties payable, and the concentration of Peptide(s) in each Premix. At Licensor’s request, Licensee will also provide to Licensor records of Licensee that fairly reflect the Net Revenue attributable to a particular three-month period.

3.2 Minimum Royalties. Licensee agrees to comply with the minimum Royalty payment obligations set forth in Exhibit C hereto during the term of this Agreement.

3.3 Payment Method. All amounts payable by Licensee to Licensor pursuant to this Agreement shall be paid in U.S. dollars by wire transfer in immediately available funds to an account designated by Licensor. Any payments or portions thereof due hereunder which are not paid on the date such payments are due under this Agreement shall bear interest at a rate equal to the lesser of (i) the prime rate as published in The Wall Street Journal, Western Edition, on the first day of each calendar month in which such payments are overdue, plus seven percentage points, or if less, (ii) the maximum rate permitted by law, calculated on the number of days such payment is delinquent, compounded monthly.

4 – REPORTS

4.1 Progress Reports. Each calendar quarter during the term, the Parties shall discuss via teleconference or other agreed-upon means the progress of the Agreement, in connection with which Licensee shall (a) describe any commercialization activities with respect to the Peptides and any other work relating to the Peptides that it has performed, or caused to be performed, since the last such report, (b) evaluate the work performed in relation to the goals of this Agreement and Licensee’s work plans and (c) provide such other information as may be required by this Agreement or reasonably requested by Licensor relating to such activities.

*** Confidential treatment requested

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4.2 Record Retention. Licensee shall maintain complete and accurate books, records and accounts that fairly reflect Peptide concentrations and quantities sold by customer in sufficient detail and in accordance with GAAP to confirm Licensee’s compliance with the terms and conditions of this Agreement and the accuracy of any payments required hereunder, which books, records and accounts shall be retained by Licensee until the later of (i) three (3) years after the end of the period to which such books, records and accounts pertain and (ii) such longer period as may be required under Applicable Law.

4.3 Audit. Licensor shall have the right to have an independent certified public accounting firm of nationally recognized standing, reasonably acceptable to Licensee, have access during normal business hours, and upon reasonable prior written notice, to such records of the Licensee as may be reasonably necessary to verify compliance by Licensee with the terms and conditions of this Agreement and the accuracy of any payments required hereunder for any three-month period described in Section 3.1 ending not more than forty-eight (48) months prior to the date of such request; provided, however, that Licensor shall not have the right to conduct more than one such audit in any twelve (12)-month period. Licensor shall bear the cost of such audit unless the audit reveals a variance in any payments required hereunder of more than 5%, in which case Licensee shall bear the cost of the audit.

4.4 Payment of Additional Amounts. If, based on the results of an audit, additional payments are owed by Licensee, it shall make such additional payments, with interest from the date originally due at the rate of 1% per month, within thirty (30) days after the date on which the accounting firm’s written report is delivered to Licensee.

4.5 Confidentiality. Licensor shall treat all information subject to review under this Section 4 in accordance with the confidentiality provisions of Section 6 of this Agreement.

5 – INFRINGEMENT

5.1 Infringement. In the event that Licensee learns of (i) any infringement of any of the Patents or (ii) any misappropriation of any of the Know-How, Licensee shall promptly inform Licensor in writing and Licensor may elect to initiate and prosecute legal proceedings with respect thereto at Licensor’s cost and expense. In the event that Licensor elects not to pursue such legal proceedings, Licensee shall have the right to do so at Licensee’s cost and expense.

5.2 Cooperation. In any infringement suit instituted by Licensor or Licensee pursuant to this Agreement, Licensor or Licensee as the case may be shall, at the other Party’s request and expense, cooperate in all reasonable respects and, to the extent possible, have its employees testify when requested and make available relevant records, papers, information, samples, specimens and the like.

*** Confidential treatment requested

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6 – CONFIDENTIAL INFORMATION

6.1 Confidential Information. Each Party (“Receiving Party”) shall treat the terms and conditions of this Agreement and all of the Confidential Information that it receives from the other Party (“Disclosing Party”) as secret, confidential, and proprietary of the Disclosing Party and shall not disclose or use such Confidential Information of the Disclosing Party without the prior written consent of the Disclosing Party for any purpose except as expressly permitted under this Agreement. The Receiving Party shall develop and implement such procedures as may be required to prevent the intentional or negligent disclosure to third parties of such Confidential Information of the Disclosing Party, including, but not limited to, requiring each of its employees having access to Confidential Information of the Disclosing Party to enter into a proprietary information agreement consistent with, and no less protective of the Disclosing Party’s rights in the Confidential Information than, the terms set forth in this Section 6 and in this Agreement. Notwithstanding the foregoing, each Party shall have the right to disclose Confidential Information as required by law (using reasonable best efforts to redact, where permitted by law), and to its auditors, accountants, potential investors and potential acquirers under appropriate non-disclosure agreements.

6.2 Exclusions. Notwithstanding the foregoing, nothing in this Agreement shall prevent the disclosure or use by the Receiving Party of the Disclosing Party’s Confidential Information that:

(a) prior to the transmittal thereof to the Receiving Party was of general public knowledge;

(b) becomes, subsequent to the time of transmittal to the Receiving Party, a matter of general public knowledge otherwise than as a consequence of a breach by the Receiving Party of any obligation under this Agreement;

(c) is made public by the Disclosing Party;

(d) was in the possession of the Receiving Party in documentary form prior to the time of disclosure thereof to the Receiving Party by the Disclosing Party, and is held by the Receiving Party free of any obligation of confidence to the Disclosing Party or any third party; or

(e) is received in good faith from a third party having the right to disclose it, who did not obtain such Confidential Information from the Disclosing Party and who imposes no obligation of secrecy on the Receiving Party with respect to such Confidential Information.

7 – REPRESENTATIONS AND WARRANTIES

7.1 Representations and Warranties of Licensor. Licensor represents and warrants that: (i) there are no actions or claims pending, nor to the best of its knowledge, threatened, against Licensor alleging infringement of any patent, copyright, trademark or other intellectual property right relative to the Peptides; (ii) the grant of rights and licenses by Licensor to Licensee under this Agreement is not inconsistent with the terms and conditions of any obligations of Licensor; (iii) no authorization or consent is required for Licensor to grant the rights and licenses under this Agreement or for Licensor to enter into this Agreement; and (iv) Licensor is duly organized and in good standing in its state of incorporation.

*** Confidential treatment requested

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7.2 Representations and Warranties of Licensee. Licensee represents and warrants that: (i) the grant of rights and licenses by Licensee to Licensor under this Agreement is not inconsistent with the terms and conditions of any obligations of Licensee; (ii) no authorization or consent is required for Licensee to grant the rights and licenses under this Agreement or for Licensee to enter into this Agreement; and (iii) Licensee is duly organized and in good standing in its state of incorporation.

8 – DISCLAIMER OF WARRANTIES / LIMITATIONS OF LIABILITY

8.1 Disclaimer of Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY OR ITS DIRECTORS, OFFICERS, STOCKHOLDERS, EMPLOYEES, AGENTS OR AFFILIATES MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF PATENTS, ISSUED OR PENDING, NON-INFRINGEMENT OR THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY LICENSOR THAT THE PRACTICE BY LICENSEE OF THE LICENSE GRANTED HEREUNDER SHALL NOT INFRINGE THE INTELLECTUAL PROPERTY OF ANY THIRD PARTY.

8.2 Limitation of Remedies. EXCEPT FOR EITHER PARTY’S OBLIGATIONS UNDER SECTION 9 (INDEMNIFICATION) OR A BREACH OF A PARTY’S OBLIGATIONS UNDER SECTION 6 (CONFIDENTIAL INFORMATION) IN NO EVENT SHALL EITHER PARTY OR ITS DIRECTORS, OFFICERS, STOCKHOLDERS, EMPLOYEES, AGENTS OR AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGE OR INJURY TO PROPERTY OR LOST PROFITS, REGARDLESS OF WHETHER SUCH PARTY SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING.

8.3 Limitation of Liability. EXCEPT FOR EITHER PARTY’S OBLIGATIONS UNDER SECTION 9 (INDEMNIFICATION) OR A BREACH OF A PARTY’S OBLIGATIONS UNDER SECTION 6 (CONFIDENTIAL INFORMATION), THE MAXIMUM TOTAL LIABILITY OF ONE PARTY TO THE OTHER FOR ANY AND ALL CLAIMS RELATING TO OR ARISING UNDER THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNTS PAID UNDER THIS AGREEMENT.

EACH PARTY ACKNOWLEDGES THAT THE OTHER PARTY RELIED UPON THE INCLUSION OF THE LIMITATIONS OF REMEDIES AND LIABILITY SET FORTH IN THIS SECTION 8 IN CONSIDERATION OF ENTERING INTO THIS AGREEMENT.

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9 – INDEMNIFICATION

9.1 By Licensee. Licensee shall at all times during the term of this Agreement and thereafter indemnify defend and hold Licensor and its directors, officers, stockholders, employees, agents and affiliates (collectively, “Licensor Indemnitees”) harmless against any and all liabilities, losses, fines, penalties, damages, expenses of any kind whatsoever, including legal expenses and reasonable attorneys’ fees (collectively, “Losses”) that arise out of any claim, action, demand, suit, or proceeding brought against a Licensor Indemnitee by any third party after the Effective Date, to the extent attributable to or resulting from Licensee’s production, manufacture, testing, marketing, sale, distribution, use, consumption, advertisement or promotion of Licensee’s products or services (including, without limitation, any products that contain, incorporate or are based on Peptides). Licensee’s indemnification obligations under this Section 9.1 shall not apply to any Losses to the extent that they are directly attributable to the grossly negligent activities or intentional misconduct of any of the Licensor Indemnitees.

9.2 By Licensor. Licensor shall at all times during the term of this Agreement and thereafter indemnify defend and hold Licensee and its directors, officers, stockholders, employees, agents and affiliates (collectively, “Licensee Indemnitees”) harmless against any and all Losses that arise out of any claim, action, suit, or proceeding brought against a Licensee Indemnitee by any third party after the Effective Date, to the extent attributable to or resulting from personal injury or death caused by a Peptide considered in isolation (and not attributable to or resulting from the combination of any Peptide(s) with any other substance or material or any act or omission of Licensee or a Sublicensee). Licensor’s indemnification obligations under this Section 9.2 shall not apply to any Losses to the extent that they are directly attributable to the grossly negligent activities or intentional misconduct of any of the Licensee Indemnitees.

9.3 Certain Procedures Regarding Indemnification. All claims for indemnification under this Agreement shall be made as follows:

(a) In the event a third-party claim, action, suit, or proceeding is made against a party entitled to indemnification under this Section 9 (the “Indemnitee”) for which the Indemnitee would be entitled to indemnification hereunder (a “Claim”), the Indemnitee shall notify the Indemnitor of such Claim, specifying the nature and the amount of the Claim (the “Claim Notice”). The Claim Notice must be delivered promptly after the Indemnitee becomes aware of the Claim, provided that the failure of the Indemnitee to comply with such requirement shall not relieve the party required to indemnify a person under Section 9 (the “Indemnitor”) of its obligations hereunder unless the Indemnitor is materially prejudiced in the defense of the Claim due to such failure on the part of the Indemnitee. The Indemnitor shall have the right to undertake and control the defense of any Claim at its expense through counsel of its own choosing (subject to the Indemnitee’s consent to such counsel, which consent may not be unreasonably withheld or delayed). If the Indemnitor undertakes the defense of a Claim: (i) the Indemnitor shall not permit to exist any lien, encumbrance or other adverse charge upon any asset of the Indemnitee; (ii) the Indemnitor may not settle such action without first obtaining the written consent of the Indemnitee, which consent will not be unreasonably withheld or delayed, except for settlements solely covering monetary matters for which the Indemnitor acknowledges responsibility for payment; and (iii) the Indemnitor shall permit the Indemnitee (at the Indemnitee’s sole cost and expense) to participate in such settlement or defense through counsel chosen by the Indemnitee.

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(b) The Indemnitee agrees to preserve and provide access to all evidence in its possession or control that may be useful in defending against a Claim and to provide reasonable cooperation in the defense thereof or in the prosecution of any action against a third party in connection therewith at the Indemnitor’s expense. The Indemnitor’s defense of any Claim or demand shall not constitute an admission or concession of liability therefor or otherwise operate in derogation of any rights the Indemnitor may have against the Indemnitee or any third party. So long as the Indemnitor is reasonably contesting any such Claim in good faith, the Indemnitee shall not pay or settle any such Claim.

(c) If the Indemnitor elects not to undertake the defense of the Claim, the Indemnitee shall have the right to assume the defense of the Claim through counsel of its own choosing and contest, settle or compromise the Claim in the exercise of its exclusive discretion at the expense of the Indemnitor. All reasonable expenses incurred by the Indemnitee pursuant to this Section 9.3(c) shall be reimbursed by the Indemnitor within twenty (20) days of receipt of competent written evidence of such expenses.

10 – INSURANCE

10.1 General Liability. During the term of this Agreement, each Party shall maintain commercial general liability insurance in amounts not less than *** dollars ($***) per occurrence and *** dollars ($***) annual aggregate from an underwriter who has an A.M. Best rating of A-VII or better, and naming the other Party as an additional insured. Such commercial general liability insurance shall include but not be limited to contractual and product liability coverage for each Party’s indemnification obligations under Section 9 of this Agreement. The general liability insurance shall include worldwide coverage, including defense of claims and incidents outside of the United States and its territories. The liability policies required under this Section 10 shall be written as primary and non-contributing to not in excess of any coverage the other Party may choose to maintain. The minimum amounts of insurance coverage required under this Section 10 shall not be construed to create a limit of each Party’s liability with respect to its indemnification obligations under Section 9 of this Agreement.

10.2 Notification. Each Party shall provide the other Party with written evidence of such insurance at any time during the term of this Agreement promptly upon the request of the other Party. Each Party shall provide the other Party with written notice at least fifteen (15) days prior to the cancellation, non-renewal or material change in such insurance. If a Party does not obtain replacement insurance providing comparable coverage prior to the expiration of such fifteen (15) day period, the other Party shall have the right to terminate this Agreement effective at the end of such fifteen (15) day period without notice or any additional waiting periods.

10.3 Term of Insurance. Each Party shall maintain such commercial general liability insurance beyond the expiration or termination of this Agreement during the period that any products containing, incorporating or based on any Peptide are commercially marketed, distributed or sold by Licensee or any Sublicensee.

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11 – EXPORT CONTROLS

Licensee shall comply with and shall, at Seller’s request, demonstrate such compliance with, the U.S. Foreign Corrupt Practices Act and all applicable export laws, restrictions, and regulations of any U.S. or foreign agency or authority, and shall obtain, and bear all expenses relating to, any necessary licenses and/or exemptions with respect to the export from the U.S. by Licensee or its agents of any Peptide (or any product or material containing, incorporating or based on any Peptide) or any technology or information it obtains or learns pursuant to this Agreement (or any direct product thereof).

12 – MARKS

12.1 Non-Use of Marks. Licensee shall not use the names, logos, trademarks or service marks of Licensor nor any adaptation thereof in any advertising, promotional or sales literature without Licensor’s prior written consent, except that Licensee may state that it is licensed by Licensor hereunder and may identify the inventors of Licensor’s patents and/or patent applications.

13 – TERMINATION

13.1 Term. The term of the Agreement shall begin on the Effective Date and shall continue until December 31, 2009, unless terminated at an earlier date pursuant to the terms and conditions set forth below in this Section 13. This Agreement shall automatically renew for successive one (1) year terms provided the Minimum Royalty Payment requirements set forth in Exhibit C are achieved in the prior year and unless either Party provides written notice to the other Party at least sixty (60) days prior to the end of the applicable term.

13.2 Termination for Breach. Upon any material breach of any provision of this Agreement by a Party (the “Breaching Party”), the other Party (the “Non-Breaching Party”) shall have a right to give written notice thereof (“Notice of Default”) to the Breaching Party. If the Breaching Party does not cure such material breach within thirty (30) days after the date of the Notice of Default, the Non-Breaching Party shall have the right to terminate this Agreement by a second written notice (“Notice of Termination”) to the Breaching Party. If the Non-Breaching Party sends a Notice of Termination to the Breaching Party, this Agreement will automatically terminate on the date of such Notice of Termination. Termination of the Agreement by Licensor under this Section 13.2 shall not relieve Licensee of its obligation to pay any Royalties or other fees owing at the time of termination, if any, and shall not impair any accrued right of Licensor hereunder.

13.3 Termination for Bankruptcy. To the extent permitted by applicable law, each Party shall have the right to immediately terminate this Agreement by giving written notice to the other Party, in the event the other Party: (i) provides notice of its intent to file (or does actually file without providing said notice) a petition in bankruptcy; (ii) attempts to make an assignment hereof for the benefit of creditors or otherwise; (iii) discontinues or dissolves its business; or (iv) if a receiver is appointed for it.

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13.4 Effect of Termination. Upon termination or expiration of this Agreement for any reason: (i) the rights granted to Licensee hereunder shall immediately terminate; and (ii) nothing herein shall be construed to release any party from any obligation that matured prior to the effective date of such termination.

13.5 Survival. Sections 2.3, 3, 4.2, 4.5, 6, 8, 9, 15 and 17 of this Agreement shall survive the termination or expiration of this Agreement.

14 – NOTICES AND OTHER COMMUNICATIONS

Any notice or other communication pursuant to this Agreement shall be sufficiently made or given if sent to such Party by certified first class mail, return receipt requested, postage prepaid, by reputable overnight courier, or by facsimile (with confirmation emission) addressed to it at its address below or as it shall designate by written notice given to the other Party:

In the case of Licensor:

Helix BioMedix, Inc.

22118 20th Avenue SE

Suite 204

Bothell, WA 98021

Fax: (425) 806-2999

Attn: President

In the case of Licensee:

Grant Industries

103 Main Avenue

Elmwood Park, NJ 07407

Fax: (201) 791-0038

Attn: President

All notices sent by first class mail shall be deemed to have been given four (4) business days after deposit, all notices sent by overnight courier or facsimile shall be deemed to have been given one (1) business day after deposit or transmission, as applicable.

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15 – DISPUTE RESOLUTION

Any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration conducted in New York, New York and administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Notwithstanding the foregoing, either Party may, without waiving any remedy under this Agreement, seek from any court having jurisdiction thereof any interim or provisional relief that is necessary to protect the rights or property of that Party from immediate and irreparable injury, loss, or damage.

16 – PRESS RELEASES

Neither Party shall issue any press release or other similar public communication relating to this Agreement unless approved in advance and in writing by the other Party, which approval shall not be unreasonably withheld or delayed, except for those communications required by Applicable Law.

17 – MISCELLANEOUS PROVISIONS

18.1 Force Majeure. Neither Party shall be held liable or responsible to the other Party or be deemed to have defaulted under or breached this Agreement for failure to delay in fulfilling or performing any term of this Agreement when such failure of delay is caused by or results from events beyond the reasonable control of the non-performing Party, including fires, floods, embargoes, shortages, epidemics, quarantines, war, acts of terrorism, acts of war (whether war be declared or not), insurrections, riots, civil commotion, strikes, lockouts or other labor disturbances, acts of God or acts, omissions or delays in acting by any governmental authority. The non-performing Party shall notify the other Party of such force majeure within ten (10) days after such occurrence by giving written notice to the other Party stating the nature of the event, its anticipated duration, and any action being taken to avoid or minimize its effect. The suspension of performance shall be of no greater scope and no longer duration than is necessary.

18.2 Assignment. Without the prior written consent of the other Party, neither Party shall sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties hereunder; provided, however, that Licensor may assign or transfer this Agreement or any of its rights or obligations hereunder without the consent of the Licensee to any third party with which it may merge or consolidate, or to which it may transfer all or substantially all of its assets. Any purported assignment or transfer in violation of this Section 18.2 shall be void ab initio and of no force or effect.

18.3 Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of either Party under this Agreement will not be materially and adversely affected thereby, (a) such provision shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provisions or by its severance herefrom, and (d) in lieu of such

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illegal, invalid or unenforceable provision there shall be added automatically as a part of this Agreement a legal, valid and enforceable provisions as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and reasonably acceptable to the Parties herein. To the fullest extent permitted by applicable law, each Party hereby waives any provision of law that would render any provision prohibited or unenforceable in any respect.

18.4 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflicts of law provisions thereof.

18.5 Entire Agreement. This Agreement sets forth and constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and all prior agreements, understating, promises and representations, whether written or oral, with respect thereto are superseded hereby. Each Party confirms that it is not relying on any representations or warranties of the other Party except as specifically set forth herein. No amendment, modification, release or discharge shall be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties.

18.6 No Waiver. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit hereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. The waiver by either Party hereto of any right hereunder or of the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by said other Party whether of a similar nature or otherwise.

18.7 Attorneys Fees; Equitable Remedies. If either Party brings an action to enforce any rights arising out of or relating to this Agreement, the prevailing Party in such action shall be entitled to recover from the losing Party its reasonable fees, costs and expenses in connection with such action, including reasonable attorneys’ fees. The Parties acknowledge and agree that any breach of this Agreement will cause irreparable harm to the non-breaching party, which shall entitle the non-breaching Party to injunctive relief in addition to all other available legal remedies.

18.8 No Benefit to Third Parties. The representations, warranties, covenants and agreement set forth in this Agreement are for the sole benefit of the Parties hereto and their successors and permitted assigns, and they shall not be construed as conferring any rights on any other parties.

18.9 Further Assurances. Each Party shall duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents and instruments, as may be necessary or as the other Party may reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes, or to better assure and confirm unto such other Party its rights and remedies under this Agreement.

18.10 Construction. Except where the context otherwise requires, wherever used, the singular shall include the plural, the plural the singular, the use of any gender shall be applicable

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to all genders and the word “or” is used in the inclusive sense (and/or). The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The term “including” as used here mean including, without limiting the generality of any description preceding such term. The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction shall be applied against either Party hereto.

[Signature page follows]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the date set forth above.

HELIX BIOMEDIX, INC.		GRANT INDUSTRIES
(“Licensor”)		(“Licensee”)
By:	/s/ R. Stephen Beatty	By:	/s/ David Granatell
Name:	R. Stephen Beatty	Name:	David Granatell
Title:	President & CEO	Title:	Executive Director

[SIGNATURE PAGE TO FIRST AMENDED AND RESTATED LICENSE AGREEMENT]

EXHIBIT A

PATENTS, PEPTIDES, AND MINIMUM RECOMMENDED CONCENTRATIONS

Patents:

***

Peptides:

Name	P-No.	Primary Sequence
*** (“Peptide A”)	***	***
*** (“Peptide B”)	***	***
*** (“Peptide C”)	***	***

Minimum Recommended Concentrations (for final, marketable formulations after dilution of Premix):

***

Maximum percentage of Peptide in Premix product: ***%.

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EXHIBIT B

TERRITORY

United States

Canada

Germany

France

United Kingdom

Italy

Ireland

Spain

Benelux

Switzerland

Poland

China

Hong Kong

Taiwan

South Korea

Japan

Malyasia

Thailand

Vietnam

Philippines

Singapore

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EXHIBIT C

ROYALTY RATES AND MINIMUMS

Royalties

Licensee shall pay to Licensor Royalties in the amount of *** percent (***%) of all Net Revenue, in accordance with the terms set forth in the Agreement.

Minimum Royalty Payments:

Licensor shall have the right to terminate this Agreement and/or remove a Peptide from Exhibit A (at Licensor’s option) if Licensee fails to make the following minimum royalty payments for the applicable calendar year during the term of this Agreement (provided that the minimum amounts for 2006 and 2007 shall include payments made or accrued under the Prior Agreement):

            ***

Should Licensor exercise its right to terminate this Agreement or remove a Peptide from Exhibit A due to Licensee’s failure to meet minimum royalty payments, Licensee may, during the one-year period following notice from Licensor to Licensee of such termination or removal, continue to sell Premix (or Premix containing such removed Peptide, as the case may be) solely to Sublicensees existing as of the date of such notice, subject to the other terms of this Agreement.

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EXHIBIT D

ROYALTY REPORT

Monthly Sales Report – Grant Industries

For the month

of:

Date	Customer Name	Peptide Description	Peptide Conc in Premix	Premix Amount (kg)	Net Revenue		Royalty Rate (***%)
								—
								—
								—
								—
								—
								—
								—
								—
								—
								—
								—
Total					$	—	$	—

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EX-10.27

Exhibit 10.27

LICENSE AGREEMENT

This License Agreement (the “Agreement”) is entered into as of August 16, 2007 (the “Effective Date”) between Goldschmidt GmbH, a German company with its principle place of business at Goldschmidtstrasse 100, 45127 Essen, Germany (“Licensee”) and Helix BioMedix, Inc., a Delaware, United States corporation with its principle place of business at 22118 20^th Avenue SE, Suite 204, Bothell, WA 98021, U.S.A. (“Licensor”).

1. Certain Definitions.

1.1 “Affiliate” of a party means an entity directly or indirectly controlling, controlled by or under common control with that party, where control means the ownership or control, directly or indirectly, of more than 50% of all of the voting power of the shares (or other securities or rights) entitled to vote for the election of directors or other governing authority, as of the Effective Date of this Agreement or hereafter during the term of this Agreement; provided that such entity shall be considered an Affiliate only for the time during which such control exists.

1.2 “Combination(s)” means any product combination made by incorporation of one or more other active ingredient(s) with a Product.

1.3 “Disclosing Party” means a party hereto that discloses its Proprietary Information to the other party.

1.4 “Final Formulations” means any final personal care formulation made by customers of Licensee that incorporates one or more Peptides (themselves incorporated in Product(s) or Combination(s)) and that is marketable to end customers as a cosmetic or, as the case may be in certain jurisdictions, as a non-prescription drug if qualified as such under the relevant national regulatory system.

1.5 “Improvements” means any and all new experiences, findings, improvements, modifications, developments and/or inventions, whether patentable or not, pertaining to Peptides. Notwithstanding the foregoing: (i) Improvements shall not include specific formulations, including but not limited to Products, Combinations and Final Formulations, developed by either party or its customers respectively, containing any Peptide; and (ii) Improvements shall include peptides and other molecules other than the Peptides (as defined herein) only if such an additional peptide or other molecule is derived from a Peptide claimed in the First Application.

1.6 “Licensed Area” means the use of any Peptide, Product or any Combination in a Final Formulation that is marketable to end customers as a cosmetic or, as the case may be in certain jurisdictions, as a non-prescription drug if qualified as such under the relevant national regulatory system.

Confidential treatment has been requested for portions of this exhibit. This exhibit omits the information subject to the confidential treatment request. Omissions are designated as ***. A complete version of this exhibit has been filed separately with the Securities and Exchange Commission.

1.7 “Net Sales Value” means: ***

1.8 “Peptide(s)” means any of Licensor’s proprietary bioactive peptides claimed in the Subject IP.

1.9 “Product(s)” means any formulation, such as but not limited to any dispersion, solution or gel, incorporating one or more Peptides as active ingredients, that is made by or for Licensee and marketed by Licensee to third parties solely for use in Final Formulations.

1.10 “Proprietary Information” of a Disclosing Party means the following, to the extent previously, currently or subsequently disclosed to the other party hereunder or otherwise: information relating to (i) Products, ingredients, items, substances and Combinations thereof developed, produced and/or sold by the Disclosing Party, in particular their properties, composition, or structure of technology or the manufacture or processing thereof or machines therefor or (ii) to the Disclosing Party’s business (including, without limitation, names and expertise of employees and consultants, know-how, formulas, processes, ideas, inventions (whether patentable or not), schematics, and other technical, business, financial, customer and product development plans, forecasts, strategies and information). In particular, but without limitation, the Peptides and their properties, composition, or structure, and the Technology, are Proprietary Information of Licensor.

1.11 “Receiving Party” means a party hereto that receives Proprietary Information of the other party.

1.12 “Royalty Period” shall mean, throughout the term of this Agreement, semi-annual periods starting from January 1 until June 30 and July 1 until December 31. If this Agreement ends in between such periods the last Royalty Period shall end at the same time as this Agreement.

1.13 “Subject IP” means the US patent applications No. *** (“First Application”) and No. *** (“Second Application”) and any continuations, divisionals, reissues, registrations, confirmations, term extensions or reexaminations thereof, any subsequent filings in any country claiming priority therefrom, and any and all discoveries or inventions embodied within the foregoing that are owned by Licensor as of the Effective Date; provided that Subject IP excludes continuations-in-part. Notwithstanding the foregoing, with respect to the Second Application, Subject IP includes only the peptides *** and the associated rights covered by the Second Application.

1.14 “Technology” means inventions (whether or not patentable), ideas, processes, formulas and know-how owned by Licensor as of the date of this Agreement and relating to the Peptides.

1.15 “Territory” means ***.

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2. License Grant. Subject to all the terms and limitations of this Agreement, Licensor hereby grants Licensee a license under the Subject IP and the Technology within the scope described in this Section 2 and Section 3. This license is limited to and may be exercised solely for the purposes of: (i) performing evaluation and testing of the Peptides to determine their suitability as ingredients in Products, Combinations and Final Formulations, including without limitation toxicity and effectiveness tests and trials; (ii) making Peptides or having made Peptides by a toll-manufacturer and/or sourcing Peptides from third parties (in each case at Licensee’s expense); provided that any toll-manufacture by or sourcing of Peptides from a company that is not located in *** shall require the prior approval of Licensor; (iii) making, or having made by a toll-manufacturer, Products and/or Combinations; and (iv) marketing (including selling and offering to sell) Products and Combinations solely in the Licensed Area and solely in (including importing and exporting them within) the Territory. Licensee will not make or market Final Formulations. Licensee will notify Licensor promptly after the engagement of any toll-manufacturer or other third party as provided in subsections (ii) and (iii) above, such notice to include the identity of such third party and the manufacturing tasks for which the third party is engaged.

3. License Scope. Licensee’s license is exclusive (including as against Licensor) for the purposes stated in Section 2(iii) and (iv) and includes the right to grant sublicenses to Licensee’s worldwide customers solely to permit those customers to use the Products and Combinations and to make or have made and to market or have marketed Final Formulations (but not to market or otherwise distribute the Products or Combinations other than as incorporated into Final Formulations).

4. Right of First Offer. Licensor will promptly notify Licensee of any additional peptide or other molecule that is derived from a peptide or peptides claimed in the Second Application, that has ***, and that is developed by or for Licensor within a period of 5 (five) years from the Effective Date (a “Subject Peptide”). Licensee may, within 60 (sixty) days of such notice from Licensor, notify Licensor that Licensee wishes to negotiate for an exclusive license to the Subject Peptide(s) (the “Licensee ROFO Notice”). The parties agree to negotiate in good faith for the exclusive license to Licensee of the Subject Peptide(s) during the 60 (sixty) day period following the effectiveness of the Licensee ROFO Notice. If (i) the Licensee ROFO Notice is not timely given by Licensee or (ii) the parties do not enter into a written agreement for such license during such 60-day period, the right of first offer described in this section shall terminate with respect to the Subject Peptide(s) that is/are the subject of Licensor’s particular offer and such Subject Peptide(s) shall, as between the parties, be and remain the sole property of Licensor without restriction.

5. Improvements. Any Improvements (whether or not patentable or copyrightable) that either party develops shall be owned solely by such party. Such party shall have the right, at its own expense and solely in its own name, to apply for, prosecute and defend its proprietary rights with respect thereto. Each party will promptly disclose to the other party any Improvements made by or for it within a period of 5 (five) years from the Effective Date. Each party hereby licenses to the other party any Improvements made

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by or for it during such 5-year period as follows: (i) Licensor hereby grants to Licensee a worldwide, royalty-free, non-exclusive, perpetual license to fully exploit any such Improvements that are within the Licensed Area; and (ii) Licensee hereby grants back to Licensor a worldwide, royalty-free, non-exclusive, perpetual license to fully exploit any such Improvements that are outside the Licensed Area (provided that this provision will not be deemed to grant to either party any right or license not expressly granted herein, including, without limitation, any right to disclose Proprietary Information of the respective other party).

6. Marketing Efforts. Licensee will use reasonable commercial efforts to successfully market Products and/or Combinations on a continuous basis for incorporation into Final Formulations by its customers under its license. As part of such efforts, but without limitation, Licensee will feature the Products and/or Combinations in a prominent location in its relevant catalogs, actively seek customers for Products and/or Combinations, and provide formulary and sales support to its customers at levels meeting or exceeding industry standards.

7. Marks; Marking.

7.1 Except as expressly provided herein or subsequently authorized by Licensor in writing, (i) Licensee will not use or register any mark, name, or designation of Licensor anywhere in the world and (ii) Licensee has no right or license with respect to any mark, name, or designation of or used by Licensor. Use of any Licensor mark and any related goodwill will inure to Licensor’s benefit.

7.2 Unless otherwise indicated by Licensor in writing, Licensee will mark all Product and Combination packaging, in easily readable, non-obscured type, with applicable patent notices (including “pat.” or “patent” and the applicable patent numbers) and notices of patent pending. In addition, Licensee will ask its customers to mark all packaging of Final Formulations in the same manner as described above.

8.***; Royalties; Audit.

8.1***

8.2***

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8.3 Licensee will pay Licensor a running royalty on Net Sales Value from the sale or other disposition of Products and Combinations at the following rates with respect to the following periods during the term hereof:

Years (from the Effective Date)	Royalty Rate
1 through 5	*** percent
6 through 10	*** percent
11 through 15	*** percent
16 and thereafter	*** percent

If the grant of a patent covering all or part of the Subject IP in a particular region or country is revoked or such a patent is abandoned, but a patent application pertaining to Subject IP and covering at least one Peptide, Product or Combination being commercialized by Licensee hereunder is pending in such region or country, the applicable royalty rate as set forth in this Section 8.3 after the date of revocation or abandonment shall be reduced by *** with respect to such region or country as to any affected Product or Combination, unless and until a patent as to such region or country pertaining to Subject IP and covering such Peptide Product or Combination is in place and the necessary rights therein are controlled by Licensor or Licensee; provided that such reduction shall not apply to any Product or Combination that contains any Peptide that is not affected by such revocation or abandonment. If a patent or patents covering the Subject IP in a particular region or country is/are finally revoked or finally abandoned and no patent application or patent covering at least one Peptide Product or Combination being commercialized by Licensee hereunder is pending in such region or country, ***

8.4 Licensee guarantees that earned running royalties will equal or exceed a minimum amount of US-$*** US dollars) with respect to the period from the Effective Date through the end of 2010 (the “Initial Period”). If earned running royalties with respect to the Initial Period fall short of the minimum amount specified above, then Licensee shall pay to Licensor, within 30 days after the end of 2010, the difference between such earned running royalties and such minimum amount, it being understood that total payment required pursuant to this Section 8.4 for the Initial Period will not exceed the minimum amount specified above.

The parties will negotiate in good faith to agree upon minimum royalties with respect to each of calendar years 2011 through 2013 by the end of the Initial Period, and thereafter with respect to each individual calendar year of each three-calendar-year period remaining during the term hereof (and any shorter period that may remain at the end of the term hereof), such agreement to be reached in each case not later than the end of the last calendar year as to which minimum royalties then apply. The parties shall enter into such negotiations 4 (four) months before the end of the Initial Period or, with respect to any other period, 4 (four) months before the end of the prior period as to which agreement has been reached. Provided an agreement has been reached, if as to any calendar year during the term after 2010 earned running royalties fall short of the minimum amount agreed with respect to such calendar year, then Licensee shall pay to Licensor, within 30 days after the end of such calendar year of shortfall, the difference between such earned running royalties and the minimum amount agreed for such calendar year, it being understood that total payment required pursuant to this Section 8.4 for the calendar year of shortfall will not exceed the minimum amount agreed upon for such calendar year.

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If such agreement is not reached with respect to 2011 through 2013 by the end of the Initial Period, or with respect to any other three-year period before the end of the prior period as to which agreement has been reached, then with respect to any such failure to agree the license granted to Licensee hereunder shall become nonexclusive, effective from the beginning of the first calendar year as to which no such agreement was reached and continuing until the termination or expiration of this Agreement. Further, any and all requirements with respect to minimum royalties and each party’s rights and obligations relating thereto according to this Section 8.4 or any other section of this Agreement shall terminate automatically at the time the license becomes nonexclusive (except that rights accrued to that time will not be affected).

No claim for a minimum royalty payment, either in whole nor in part, shall arise according to this Section 8.4, if this Agreement is terminated in accordance with Section 12.2(ii), 12.3(i) or 12.3(ii).

8.5 Running Royalties as set forth in Section 8.3 shall be paid within 30 (thirty) days of the end of a Royalty Period with respect to royalty-bearing sales occurring in that period, and will be accompanied by a statement indicating the associated Net Sales Value and royalties payable (including currency conversions), itemized by Products and Combinations, and also identifying the Licensee customers or other third parties to which such Net Sales Value is attributable and the amount of such Net Sales Value that is attributable to each such customer or other third party. Royalties shall be paid by Licensee in U.S. dollars, with currency conversions calculated based upon the applicable closing exchange rates quoted by the Deutsche Bank foreign exchange desk on the last business day of the applicable Royalty Period. Any amount payable hereunder that is not paid on the date that it becomes due will bear interest, calculated based on the number of days such payment is late and compounded monthly, at a rate of the lesser of (i) 0.5 % per month or (ii) the maximum rate permitted by applicable law.

8.6 The payments to be made by Licensee to Licensor pursuant to this Agreement shall not be reduced by any taxes, expenses, fees or other withholdings levied upon said payments under the laws of the Federal Republic of Germany, unless all of the following requirements are met: (i) The amount by which the payments are reduced is a tax imposed on income and is not an excise, franchise, turnover, value added tax or any other type of levy or duty; (ii) the tax is imposed on Licensor under the laws of the Federal Republic of Germany and the Double Taxation Convention between the Federal Republic of Germany and the U.S.A., and Licensee is required by law to withhold the tax from payments to Licensor and to pay the tax withheld to the relevant tax authorities; and (iii) Licensee furnishes to Licensor, without undue delay, a tax receipt for the tax withheld. All taxes, licenses, fees or other levies and duties imposed upon or which arise because of payments to Licensor by Licensee under the laws of the Federal Republic of Germany, other than those which meet the above requirements shall be paid and absorbed by Licensee. All taxes, licenses, fees or other levies or duties imposed upon such payments under the laws of the United States of America

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shall be borne by Licensor. The parties acknowledge and agree that as of the Effective Date, the applicable Double Taxation Convention withholding rate is 0%, and that as such no withholding by Licensee as described in this section will by made by Licensee absent a change in the Double Taxation Convention, provided the German tax authorities have issued to Licensee an official certificate of exemption (“Freistellungsbescheinigung”).

8.7 Within 20 (twenty) days after the beginning of each calendar quarter, Licensee will report to Licensor the Net Sales Value generated during the previous calendar quarter, and identifying the associated customers or other third parties to which such Net Sales Value is attributable and the amount of such Net Sales Value that is attributable to each such customer or other third party.

8.8 Licensee shall keep and maintain detailed and accurate books and records with regard to Net Sales Value, royalties, and the calculation thereof. A reputable independent certified public accounting firm selected by Licensor shall be entitled to review and audit such books and records from time to time during normal business hours upon reasonable notice to Licensee and at Licensor’s expense for the sole purpose of confirming the accuracy and completeness of all royalty payments; provided that Licensee will bear any such expense if the review or audit shows an underpayment of more than 5% for any Royalty Period or in the aggregate.

9. No Restriction on Competition; Nonsolicitation. Nothing in this Agreement shall be deemed to prohibit Licensee from developing, making, using, marketing or otherwise distributing or promoting products competitive with Products and/or Combinations or Final Formulations produced hereunder, provided that Licensee does not breach any provision of this Agreement (including, without limitation, Section 10 (Confidentiality) or disparage the Peptides or any Products and/or Combinations or Final Formulations produced hereunder. However, during the term of this Agreement and for one year thereafter, neither party, will solicit any employee or consultant of the other to leave the employ of the other; the foregoing does not prohibit mass media “want ads” not specifically directed towards employees or consultants of a party.

10. Confidentiality. Each party recognizes the confidential nature of the other party’s Proprietary Information, the importance to the business of the other party and that neither party would enter into this Agreement without assurance that such information and the value thereof will be protected as provided in this Section 10 and elsewhere in this Agreement.

Accordingly, each party agrees as follows:

10.1 The Receiving Party agrees: (i) to hold the Disclosing Party’s Proprietary Information in confidence and to take reasonable precautions to protect such Proprietary Information (including, without limitation, all precautions the Receiving Party employs with respect to its confidential materials); (ii) not to divulge (except to Affiliates, customers, and toll-manufacturers of Licensee as far as necessary for Licensee to

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practice the rights granted under its license hereunder, provided that such Affiliates, customers or toll-manufacturers have first entered into a confidentiality agreement with Licensee with provisions no less restrictive than those set forth in this Section 10) any such Proprietary Information or any information derived therefrom to any third person except as expressly authorized in this Agreement; (iii) not to make any use whatsoever at any time of such Proprietary Information except as expressly authorized in this Agreement; and (iv) not to remove or export from the United States or reexport any such Proprietary Information or any direct product thereof (e.g., Peptides, or Products and/or Combinations or Final Formulations by whomever made) except in compliance with and with all licenses and approvals required under applicable U.S. and foreign export laws and regulations, including without limitation, those of the U.S. Department of Commerce. Any employee given access to any such Proprietary Information must have a legitimate “need to know” and shall be similarly bound in writing if he/she is not already bound by confidentiality and restricted-use terms not less severe than those stipulated herein.

10.2 Without granting any right or license, the Disclosing Party agrees that clauses (i), (ii) and (iii) of Section 10.1 shall not apply with respect to information the Receiving Party can document: (i) is in or (through no improper action or inaction by the Receiving Party or any Affiliate, agent or employee) enters the public domain (and is readily available without substantial effort); or (ii) was rightfully in its possession or known by it prior to receipt from the Disclosing Party; or (iii) was rightfully disclosed to it by another person without restriction; or (iv) was independently developed by it by persons without access to such information and without use of any Proprietary Information of the Disclosing Party. The Receiving Party must promptly notify the Disclosing Party of any information it believes comes within any circumstance listed in the immediately preceding sentence and will bear the burden of proving the existence of any such circumstance by clear and convincing evidence. In addition, the Receiving Party may make disclosures required by law, provided that the Receiving Party gives the Disclosing Party prompt written notice of such requirement prior to such disclosure, uses reasonable efforts to limit disclosure and to obtain confidential treatment or a protective order, and has allowed the Disclosing Party to participate in the proceeding. Each party’s obligations under Section 10.1 will apply only to disclosures made during the term of this Agreement; however, such obligations will continue for a period of 10 (ten) years from the date of first disclosure with respect to disclosures made during that period.

10.3 Immediately upon termination of this Agreement, the Receiving Party will turn over to the Disclosing Party all Proprietary Information of the Disclosing Party and all documents or media containing any such Proprietary Information and any and all copies or extracts thereof.

10.4 The Receiving Party acknowledges and agrees that due to the unique nature of the Disclosing Party’s Proprietary Information, there can be no adequate remedy at law for any breach of its obligations hereunder, that any such breach may allow the Receiving Party or third parties to unfairly compete with the Disclosing Party

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resulting in irreparable harm to the Disclosing Party, and therefore, that upon any such breach or any threat thereof, the Disclosing Party shall be entitled to appropriate equitable relief (without the posting of any bond) in addition to whatever remedies it might have at law and to be indemnified by the Receiving Party from any loss or harm, including, without limitation, lost profits and reasonable attorney’s fees, in connection with any breach or enforcement of the Receiving Party’s obligations hereunder or the unauthorized use or release of any such Proprietary Information. The Receiving Party will notify the Disclosing Party in writing immediately upon the occurrence of any such unauthorized release or other breach. Any breach of this Section 10 will constitute a material breach of this Agreement.

11. Patent Matters; Third Party Rights.

11.1 Licensor retains the sole right and discretion to file and prosecute patent applications and maintain patents in the Territory relating to the Peptides, Subject IP and Technology and any Improvements or other developments or inventions made by or for Licensor, except as otherwise set forth in the following sentence. Licensee will not attempt to file or prosecute any such patent applications or maintain any such patent (i) except as Licensor may, at its sole discretion, approve in writing and (ii) except that Licensee may continue maintenance of patents issued in the Territory and licensed hereunder and may file and prosecute patent applications covering Peptides, in each case if Licensor elects not to do so, and at Licensee’s expense. Licensor shall notify Licensee, in due time before the expiry of the international phase of the PCT procedure, as to which PCT countries Licensor will seek patents in the national phase of the PCT procedure so that Licensee may seek patent protection in the countries as to which Licensor does not elect to seek such protection. Licensee shall pay for Net Sales Value of Products and Combinations with respect to sales or other dispositions into countries where it maintains such patents or files and prosecutes such applications a royalty at ***% of the otherwise applicable royalty rate.

11.2 Licensor agrees to file, and make reasonable commercial efforts to prosecute national patent applications and maintain any patents granted upon such applications, at least for the countries listed in Exhibit A.

11.3 If Licensee becomes aware of any product or activity of any third party that may involve infringement or violation of any Subject IP in the Territory, then Licensee shall promptly notify Licensor in writing of such actual or potential infringement or violation. Licensor may in its discretion take or not take whatever action it believes is appropriate in response to any actual or potential infringement or violation of Subject IP; if Licensor elects to take action, Licensee will fully cooperate therewith at Licensor’s expense, including joining as a party if necessary.

11.4 If Licensor does not, within 90 days after receipt of a notice from Licensee in accordance with Section 11.3 of a patent infringement within the scope of the then-remaining exclusivity of Licensee’s license hereunder, commence action directed toward restraining or enjoining such infringement of Subject IP, Licensee, so long as

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such exclusivity remains in effect, may take such legally permissible action as it deems necessary or appropriate to enforce the Subject IP and restrain such infringement. Licensor agrees to cooperate reasonably, at Licensee’s expense, in any such action Licensee initiates or wishes to initiate, including supplying essential documentary evidence and making essential witnesses then in Licensor’s employment available. As part of such cooperation, Licensee may join or include Licensor as a party if necessary, although such joinder or inclusion shall be entirely at Licensee’s expense. Nothing in this Section 11.4 allows Licensee or requires Licensor to disclose Proprietary Information of Licensor.

11.5 If Licensor initiates and prosecutes any action under Section 11.3, all legal expense (including court costs and attorneys’ fees) shall be borne by Licensor and Licensor shall be entitled to all amounts awarded by way of judgment, settlement or compromise. Similarly, if Licensee initiates and prosecutes an action under Section 11.4, all legal expenses (including court costs and attorneys’ fees) shall be borne by Licensee and Licensee shall be entitled to all amounts awarded by way of judgment, settlement, or compromise.

11.6 Licensor and Licensee agree to work cooperatively regarding issues concerning Subject IP and similar matters and to exercise reasonable business judgment in carrying out the objectives of this Agreement to avoid exposing either party to liability under patent or similar laws in any of the countries in the Territory.

11.7 Licensor shall be responsible for a freedom to operate study concerning all Peptides that have passed the Toxicity Tests (as defined in Section 12.3(i)), with a scope to include ***. Licensor will make reasonable commercial efforts to determine the initial results of such study within 60 days after the Toxicity Tests have been completed and notice of the results of the Toxicity Tests has been given by Licensee to Licensor, and to finalize such study within 60 days after such initial results are due hereunder. Licensor shall disclose to Licensee promptly after determination of initial results and after completion of the entire study the results of such freedom to operate study to the extent that Licensor determines such disclosure may be made without waiving any legal privilege (and any such information disclosed shall in any event be Proprietary Information of Licensor). The costs of such freedom to operate study conducted by Licensor shall be borne by Licensor.

Licensee shall be responsible for a freedom to operate study concerning all Peptides that have passed the Toxicity Tests, with a scope to include ***. Licensee will make reasonable commercial efforts to determine the initial results of such study within 60 days after completion of the Toxicity Tests, and to finalize such study within 60 days after such initial results are due hereunder. Licensee shall disclose to Licensor promptly after its completion the results of such freedom to operate study to the extent that Licensee determines such disclosure may be made without waiving any legal privilege (and any such information disclosed shall in any event be Proprietary Information of Licensee). Licensee shall be responsible for any freedom to operate study concerning the Peptides that have passed the Toxicity Tests outside the territories of ***, and

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further for any freedom to operate study concerning Peptides Licensee elects to commercialize other than those that pass the Toxicity Tests, with respect to any country in the Territory. Licensee shall furthermore be responsible for any freedom to operate study concerning any Products and Combinations in the Territory. Licensee may decide at its own discretion for which countries of the Territory it shall carry out such studies depending on the results of its worldwide patent searches. The costs of all such freedom to operate studies conducted by Licensee shall be borne by Licensee.

12. Term and Termination.

12.1 This Agreement will remain in effect from the Effective Date until the expiration of the last-to-expire patent included in the Subject IP licensed hereunder, unless terminated pursuant to this Section 12.

12.2 Either party may terminate this Agreement:

(i) upon 30 days’ notice if for any period of three consecutive years after 2010 during the term of this Agreement earned running royalties fall short of the minimum amounts agreed to pursuant to Section 8.4 with respect to each of such three years (regardless of whether such shortfall has been paid by Licensee as required by Section 8.4), provided Licensee still holds an exclusive license at that time. Notice of termination under this Section 12.2(i) must be given within 60 days after the end of any such consecutive three-year period of shortfall. No claim for a minimum royalty payment, either in whole nor in part, shall arise for the calendar year in which such termination becomes effective.

(ii) upon notice to the other party if such party concludes, in its reasonable discretion, that the freedom to operate studies for *** to be performed pursuant to Section 11.7 reveal a serious risk of future patent infringement from the commercialization of the Peptides that have passed the Toxicity Tests and, in consequence thereof, a Peptide portfolio consisting of a minimum of one Peptide from the First Application (*** to be considered as “one” Peptide) and one Peptide from the Second Application (a “Minimum Peptide Portfolio”) (a) can be reasonably marketed neither in ***; or (b) can only be reasonably marketed in ***, but not in ***; or (c) can only be reasonably marketed in *** but not in ***, due to such infringement risk. Notice of termination under this Section 12.2(ii) must be given within 60 (sixty) days after each party’s disclosure of the final results of the freedom to operate study to be performed by such party in accordance with Section 11.7. In case none of the Peptides that pass the Toxicity Tests can be reasonably marketed due to a risk of future patent infringement, Licensee may request from Licensor a refund of *** payments already made by Licensee to Licensor according to Section 8.1 upon termination.

(iii) upon 30 days’ notice, if a party materially breaches a material provision of this Agreement (including without limitation any breach of Licensee’s obligation to pay running royalties in accordance with Section 8) unless the breach is cured within the notice period.

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12.3 In addition to the termination rights stipulated in Section 12.2, Licensee may immediately terminate this Agreement:

(i) upon notice to Licensor given within 30 days after completion of the Toxicity Tests, but no later than October 31, 2007, if the results of toxicity testing (AMES tests) on following Peptides claimed in the First Application, namely ***, together with the results of the toxicity testing (AMES tests) already performed with respect to *** (together, the “Toxicity Tests”), are such that a Peptide portfolio consisting of at least two Peptides (*** to be considered as “one” Peptide) from the First Application and at least one Peptide from the Second Application (a “Larger Peptide Portfolio”) ultimately has not passed the Toxicity Tests. Licensee shall be entitled to terminate the Agreement according to this Section 12.3(i), even if the Minimum Peptide Portfolio as defined 12.2(ii) has passed the Toxicity Tests. Furthermore, if a Larger Peptide Portfolio has not passed the Toxicity Tests, Licensee’s obligation to make *** payments according to Section 8.1 shall be reduced to ***% (*** percent) of the amounts specified in Section 8.1. If Licensee has already submitted such *** payments to Licensor by the time of giving notice, Licensee may request a refund of ***% (*** percent) of the *** payments already made.

(ii) upon notice to Licensor given within 60 (sixty) days after each party’s disclosure of the final results of the freedom to operate study to be performed by such party in accordance with Section 11.7, if Licensee, in its reasonable discretion, concludes, based on the results of the freedom to operate studies that the Larger Peptide Portfolio (as defined in 12.3 (i)), having passed the Toxicity Tests, (a) can reasonably be marketed neither in ***; or (b) can only be reasonably marketed in ***, but not in ***; or (c) can only be reasonably marketed in ***, but not in ***, due to an infringement risk. Licensee shall be entitled to terminate the Agreement according to this Section 12.3 (ii), even if, as a conclusion from the results of the freedom to operate studies, the Minimum Peptide Portfolio (as defined 12.2 (ii)), having passed the Toxicity Tests, would be marketable in ***.

12.4 In the event of any termination of this Agreement, all the rights and licenses granted Licensee under this Agreement and Licensee’s obligation under Section 6 shall terminate and Licensor’s obligations to negotiate or provide goods, services, facilities, technology or information shall cease but all other provisions of this Agreement will continue in accordance with their terms. Notwithstanding the foregoing, upon termination Licensee shall be entitled to finish all Products and Combinations which are already under manufacture at the date of the termination notice, and to continue the sale of the Products/ Combinations for a period of not more than 9 (nine) months thereafter, unless Licensor has terminated this Agreement according to Section 12.2 (iii). Licensee’s obligations to make royalty payments pursuant to Section 8 and Licensor’s right to verify the royalty payments as set out in Section 8.8 shall remain unaffected.

12.5 Neither party shall incur any liability whatsoever for any damage, loss or expenses of any kind suffered or incurred by the other arising from or incident to any termination of this Agreement (or any part thereof) by such party which complies with the terms of the Agreement whether or not such party is aware of any such damage, loss or expenses.

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12.6 Termination is not the sole remedy under this Agreement and, whether or not termination is effected, all other remedies will remain available.

13. Warranties and Representations

13.1 Licensor warrants and represents that, as of the Effective Date:

(i) it owns the entire right, title and interest in each Peptide and the Subject IP hereunder, free and clear of any claim or right of any third party, including any governmental authority;

(ii) it has the sole and exclusive right to enter into and to perform this Agreement;

(iii) it has not entered into any agreement, commitment or understanding that would preclude, frustrate or impede the ability of the parties to enter into and perform this Agreement;

(iv) it has not provided, directly or indirectly, any Peptides, samples thereof or any Proprietary Information relating to Technology to any third party other than under confidentiality and use restrictions at least as rigorous as those in the Confidentiality Agreement entered into by the parties on April 12, 2006;

(v) it has no knowledge of any infringement by any third party of the Subject IP; and

(vi) to it’s knowledge, the Peptides themselves (considered in isolation from their use in any Product, Combination, Final Formulation or otherwise) do not infringe the intellectual property rights of any third party existing as of the Effective Date of this Agreement.

13.2 Licensee warrants and represents that, as of the Effective Date:

(i) it has the sole and exclusive right to enter into and to perform this Agreement; and

(ii) it has not entered into any agreement, commitment or understanding that would preclude, frustrate or impede the ability of the parties to enter into and perform this Agreement.

13.3 If due to an actual or potential infringement of a third party intellectual property right by commercialization of a Peptide, Licensee is no longer reasonably able to sell a Product or Combination incorporating such Peptide and Licensor does not

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provide to Licensee a non-infringing Peptide which is acceptable to Licensee as a suitable alternative to the infringing Peptide, the minimum royalties (to the extent then agreed upon and in place) applicable pursuant to Section 8.4 to the period during which such sales may thereafter not reasonably be made, shall be reduced according to the portion of total Net Sales Value generated by the Product or Combination incorporating the infringing Peptide over the most recent calendar year during which such sales were made, applied pro rata.

14. Indemnification.

14.1 Licensor shall indemnify, defend and hold Licensee harmless from any claims, demands, lawsuits, charges or damages (including attorneys’ fees and expenses) (collectively “Costs”) arising out of or relating to infringement by the Peptides per se (considered in isolation from their use in any Product, Combination, Final Formulation or otherwise), through Licensee’s commercialization of Products or Combinations as permitted hereunder, of the intellectual property rights of any third party; provided that the aggregate liability of Licensor under this Section 14.1 and Section 14.3 shall not exceed ***

14.2 Licensee shall be responsible for compliance with all applicable laws and regulations relating to the manufacture, labeling, commercialization, transportation, sale and use of Peptides, Products and Combinations by or for Licensee and, as applicable, for obtaining any necessary government permits or licenses for such activities. Licensee shall indemnify, defend and hold Licensor harmless, from any Costs arising out of or relating to the manufacture, labeling, commercialization, transportation, sale or use of Peptides, Products and Combinations by or for Licensee, including without limitation product liability and infringement claims of third parties, to the extent that such infringement claims are not based on an infringement of third party rights by a Peptide per se (considered in isolation from its use in any Product, Combination, Final Formulation or otherwise) incorporated in such Product or Combination.

14.3 All claims for indemnification under this Agreement shall be made as follows:

(i) In the event a third-party claim, action, suit, or proceeding is made against a party entitled to indemnification under this Section 14 (the “Indemnitee”) for which the Indemnitee would be entitled to indemnification hereunder (a “Claim”), the Indemnitee shall notify the Indemnitor of such Claim, specifying the nature and the amount of the Claim (the “Claim Notice”). The Claim Notice must be delivered promptly after the Indemnitee becomes aware of the Claim, provided that the failure of the Indemnitee to comply with such requirement shall not relieve the party required to indemnify a person under Section 14 (the “Indemnitor”) of its obligations hereunder unless the Indemnitor is materially prejudiced in the defense of the Claim due to such failure on the part of the Indemnitee. The Indemnitor shall have the right to undertake and control the defense of any Claim at its expense through counsel of its own choosing

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(subject to the Indemnitee’s consent to such counsel, which consent may not be unreasonably withheld or delayed). If the Indemnitor undertakes the defense of a Claim: (i) the Indemnitor shall not permit to exist any lien, encumbrance or other adverse charge upon any asset of the Indemnitee; (ii) the Indemnitor may not settle such action without first obtaining the written consent of the Indemnitee, which consent will not be unreasonably withheld or delayed, except for settlements solely covering monetary matters for which the Indemnitor acknowledges responsibility for payment; and (iii) the Indemnitor shall permit the Indemnitee (at the Indemnitee’s sole cost and expense) to participate in such settlement or defense through counsel chosen by the Indemnitee.

(ii) The Indemnitee agrees to preserve and provide access to all evidence in its possession or control that may be useful in defending against a Claim and to provide reasonable cooperation in the defense thereof or in the prosecution of any action against a third party in connection therewith at the Indemnitor’s expense. The Indemnitor’s defense of any Claim or demand shall not constitute an admission or concession of liability therefor or otherwise operate in derogation of any rights the Indemnitor may have against the Indemnitee or any third party. So long as the Indemnitor is reasonably contesting any such Claim in good faith, the Indemnitee shall not pay or settle any such Claim.

(iii) If the Indemnitor elects not to undertake the defense of the Claim, the Indemnitee shall have the right to assume the defense of the Claim through counsel of its own choosing and contest, settle or compromise the Claim in the exercise of its exclusive discretion at the expense of the Indemnitor. All reasonable expenses incurred by the Indemnitee pursuant to this Section 14.3(iii) shall be reimbursed by the Indemnitor within twenty (20) days of receipt of competent written evidence of such expenses.

15. INCIDENTAL AND CONSEQUENTIAL DAMAGES. NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY WILL BE LIABLE TO THE OTHER UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT. THE LIMITATIONS IN THIS SECTION 15 SHALL NOT APPLY TO OBLIGATIONS OF EITHER PARTY UNDER SECTION 14 (INDEMNIFICATION), BREACHES BY EITHER PARTY OF SECTION 10 (CONFIDENTIALITY), INTENTIONAL MISCONDUCT OR FRAUD OF EITHER PARTY OR TO INTENTIONAL ACTIONS OF LICENSEE BEYOND THE SCOPE OF THE LICENSE GRANT HEREUNDER. FURTHER, THIS SECTION DOES NOT LIMIT LIABILITY FOR BODILY INJURY OF A PERSON.

16. LIMITATION OF OBLIGATIONS AND LIABILITY. NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER THEORY FOR COST OF PROCUREMENT OF SUBSTITUTE GOODS, SERVICES,

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TECHNOLOGY OR RIGHTS. FURTHER, EXCEPT FOR OBLIGATIONS OF EITHER PARTY UNDER SECTION 14 (INDEMNIFICATION), WHICH ARE NOT LIMITED BY THIS SENTENCE, NEITHER PARTY WILL BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT FOR ANY AMOUNTS AGGREGATING IN EXCESS OF US-$*** (*** US DOLLARS). THIS SECTION DOES NOT LIMIT LIABILITY FOR INTENTIONAL MISCONDUCT, FRAUD OR BODILY INJURY OF A PERSON.

17. Insurance.

17.1 During the term of this Agreement, each party shall maintain commercial general liability insurance in amounts not less than $*** per occurrence and $*** annual aggregate. Such commercial general liability insurance shall include but not be limited to contractual and product liability coverage. The general liability insurance shall include worldwide coverage. The liability policies required under this Section 17 shall be written as primary and non-contributing to not in excess of any coverage the other party may choose to maintain. The minimum amounts of insurance coverage required under this Section 17 shall not be construed to create a limit of a party’s liability hereunder.

17.2 Each party shall provide the other party with written evidence of such insurance at any time during the term of this Agreement promptly upon the request of the other party. Each party shall provide the other party with written notice at least 15 days prior to any cancellation, non-renewal or material change in such insurance. If a party does not obtain replacement insurance providing comparable coverage prior to the expiration of such 15-day period, the other party shall have the right to terminate this Agreement effective at the end of such 15-day period without any additional waiting periods.

17.3 Each party shall maintain such commercial general liability insurance beyond the expiration or termination of this Agreement during the period that any Products and/or Combinations are commercially marketed, distributed or sold under this Agreement.

18. Export Control. Licensee shall comply with and shall, at Licensor’s request, demonstrate such compliance with, the U.S. Foreign Corrupt Practices Act and all applicable export laws, restrictions, and regulations of any U.S. or foreign agency or authority, and shall obtain, and bear all expenses relating to, any necessary licenses and/or exemptions with respect to the export from the U.S. or elsewhere by Licensee or its agents of any Peptide (or any product or material containing, incorporating or based on any Peptide) or any Technology or other technology or information it obtains or learns pursuant to this Agreement (or any direct product thereof).

19. Independent Contractors. The parties are independent contractors and not partners, joint venturers or otherwise affiliated and neither has any right or authority to bind the other in any way.

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20. Assignment. The rights and obligations of the parties under this Agreement may not be assigned or transferred (and any attempt to do so will be void), except that: (i) rights to payment of money may be assigned; and (ii) this Agreement and the rights and obligations hereunder may be assigned by a party to an Affiliate or acquiror of all or substantially all of its assets, business or capital stock.

21. WARRANTY DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN SECTION 13, LICENSOR MAKES NO WARRANTY WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING. LICENSEE MAKES NO WARRANTY WITH RESPECT TO ANY IMPROVEMENTS, GOODS, SERVICES, RIGHTS OR OTHER SUBJECT MATTER TO BE FURNISHED TO LICENSOR PURSUANT TO SECTION 5 AND HEREBY DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING.

22. Miscellaneous.

22.1 Amendment and Waiver. Except as otherwise expressly provided herein, any provision of this Agreement may be amended and the observance of any provision of this Agreement may be waived (either generally or any particular instance and either retroactively or prospectively) only with the written consent of the parties.

22.2 Governing Law. This Agreement shall be governed by and construed under the laws of the State of New York and the United States without regard to conflicts of laws provisions thereof and without regard to the United Nations Convention on Contracts for the International Sale of Goods.

22.3 Arbitration. Any dispute relating to the validity, performance, construction or interpretation of this Agreement which cannot be resolved amicably between the parties shall be submitted to binding arbitration to be held in New York, New York in accordance with the Rules of Arbitration of the International Chamber of Commerce. The arbitration and any pre-arbitral proceedings shall be conducted in English and all documents shall be construed from the English versions thereof. The decision of the arbitrators in any arbitration proceeding between the parties under this Section 22.3 shall be (i) in writing, stating the reasons therefore; (ii) based solely on the terms and conditions of this Agreement, as interpreted in accordance with the laws of the State New York and the United States, (iii) final and binding upon the parties hereto; and (iv) enforceable in any court of competent jurisdiction. However, in urgent cases each party shall have the right to seek preliminary and permanent injunctive relief in any court located in New York, New York, or, if such courts lack jurisdiction, in any court of competent jurisdiction.

*** Confidential treatment requested

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22.4 Headings. Headings and captions are for convenience only and are not to be used in the interpretation of this Agreement.

22.5 Notices. All notices, requests, and other communications hereunder shall be in writing. Any notice, request, or other communication hereunder shall be deemed duly given: (a) when delivered personally to the recipient; (b) 1 business day after being sent to the recipient by reputable overnight courier service (charges prepaid); or (c) 1 business day after being sent to the recipient by fax, and addressed to the intended recipient as set forth below:

If to Licensee:		If to Licensor:
Address:	Goldschmidt GmbH	Address:	Helix BioMedix, Inc.
	Goldschmidtstrasse 100		22118 20thAvenue SE
	45127 Essen		Suite 204
	Germany		Bothell, WA 98021
Fax:	***		USA
Attn:	Legal Department	Fax:	(425) 806-2999
		Attn:	Chief Financial Officer

Copy to:
Fax:	***
Attn:	VP and General Manager Personal Care

Either party may change the address or other contact information to which notices, requests, and other communications hereunder are to be delivered by giving the other party notice in the manner set forth herein.

22.6 Entire Agreement. This Agreement supersedes all proposals, oral or written, all negotiations, conversations, or discussions between or among the parties relating to the subject matter of this Agreement and all past dealing or industry custom.

22.7 Force Majeure. Neither party hereto shall be responsible for any failure to perform its obligations under this Agreement (other than obligations to pay money or obligations under Section 10 (Confidentiality)) if such failure is caused by acts of God, war, strikes, revolutions, lack or failure of transportation facilities, laws or governmental regulations or other causes that are beyond the reasonable control of such party. Obligations hereunder, however, shall in no event be excused but shall be suspended only until the cessation of any cause of such failure. In the event that such force majeure should obstruct performance of this Agreement for more than six (6) months, the parties hereto shall consult with each other to determine whether this Agreement should be modified. The party facing an event of force majeure shall use diligent commercial efforts in order to remedy that situation as well as to minimize its effects. A case of force majeure shall be notified to the other party within 5 days after its occurrence.

*** Confidential treatment requested

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22.8 Severability. If any provision of this Agreement is held illegal, invalid or unenforceable by a court of competent jurisdiction or the arbitration tribunal, that provision will be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable.

22.9 No Implied License. Each party recognizes that Licensor grants no license, by implication or otherwise, except for the licenses expressly set forth in this Agreement.

22.10 Counterparts. This Agreement may be executed in one or more counterparts (including by means of facsimile), each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

22.11 Basis of Bargain. Each party recognizes and agrees that the warranty disclaimers and liability and remedy limitations in this Agreement are material bargained for bases of this Agreement and that they have been taken into account and reflected in determining the consideration to be given by each party under this Agreement and in the decision by each party to enter into this Agreement.

[Signature page follows]

*** Confidential treatment requested

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The parties have entered into this Agreement as of the date first written above.

LICENSEE:		LICENSOR:
GOLDSCHMIDT GMBH		HELIX BIOMEDIX, INC.
By:	/s/ Peter Lersch	By:	/s/ David Kirske
Name:	Dr. Peter Lersch	Name:	David Kirske
Title:	Head of R&D Care Ingredients/Biotechnology	Title:	VP and Chief Financial Officer

GOLDSCHMIDT GMBH
By:	/s/ Astrid Wedler
Name:	Astrid Wedler
Title:	Legal Counsel

[SIGNATURE PAGE TO LICENSE AGREEMENT]

EXHIBIT A

PATENT APPLICATIONS

(FILING JURISDICTIONS)

***

*** Confidential treatment requested

EX-10.28

Exhibit 10.28

Helix BioMedix, Inc.

22118 – 20^th Avenue SE, Suite 204

Bothell, WA 98021

October 8, 2007

Robin L. Carmichael

221 W. 48^th Street

Kansas City, MO 64112

Dear Robin:

It is with great pleasure that I am offering you the position of Vice President – Marketing and Business Development at Helix BioMedix, Inc. (the “Company”). Subject to the fulfillment of any conditions imposed by this letter, the terms of your position with the Company will be as set forth below:

1. Position:

You will be the Company’s Vice President – Marketing and Business Development, reporting to the Company’s Chief Executive Officer. You will be responsible for overseeing all operations involving the Company’s marketing/business development functions, including product/portfolio strategy and direction; identification, pursuit and negotiation of technology licenses and collaborative partnerships; and organizational strategy.

You agree to the best of your ability and experience that you will at all times loyally, honestly, and conscientiously perform all of the duties and obligations required of and from you pursuant to the express and implicit terms hereof. During the term of your employment, you further agree that: (i) you will devote all of your business time and attention to the business of the Company; (ii) the Company will be entitled to all of the benefits and profits arising from or incident to all such work services and advice; (iii) you will not render commercial or professional services of any nature to any person or organization, whether or not for compensation, without the prior written consent of the Company; and (iv) you will not directly or indirectly engage or participate in any business that is competitive in any manner with the business of the Company.

2. Start Date:

Your start date will be October 31, 2007; however, the Company acknowledges that you will perform service for your current employer for up to three (3) days during November 2007.

3. Proof of Right to Work:

For purposes of Federal immigration law, you will be required to provide the Company with documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three (3) business days of your date of hire, or our employment relationship with you may be terminated.

Robin L. Carmichael

Page 2

4. Compensation:

Base Salary:

You will be paid an annual salary of $200,000.00. Your position is classified as exempt and, as such, you will not be eligible for overtime pay. Your salary will be payable every other week pursuant to the Company’s regular payroll practices including standard withholding such as Medicare and social security taxes. The Board of Directors and/or the Compensation Committee thereof shall review your compensation and performance annually commencing in the calendar year ending December 31, 2008.

Health, Medical, and Life Insurance Benefits:

You and your family will be entitled to participate in the Company’s health, medical and life insurance plans that will be described to you in detail under separate cover. You will also be entitled to participate in the Company’s 401(k) plan and matching program.

Vacation; Sick Leave:

You will be entitled to three (3) weeks of paid vacation and one (1) week of paid sick leave per calendar year (prorated from your start date).

5. Stock Option Grants:

In connection with the commencement of your employment, the Company will recommend that the Board of Directors grant you an option to purchase 150,000 shares of the Company’s common stock with an exercise price equal to the fair market value on the date of the grant. This option will be subject to the terms of the Company’s 2000 Stock Option Plan and the applicable stock option agreement between you and the Company and is intended to be an incentive stock option to the extent allowed under applicable law.

In addition, subject to approval by the Board of Directors and satisfaction of certain performance criteria to be mutually agreed upon, you may be eligible to receive an option to purchase an additional 100,000 shares of the Company’s common stock with an exercise price equal to the fair market value on the date of the grant. This option would be subject to the terms of the Company’s 2000 Stock Option Plan and the applicable stock option agreement between you and the Company and would be intended to be an incentive stock option to the extent allowed under applicable law.

Any outstanding options shall vest and become fully exercisable upon a change of control of the Company in accordance with the terms and conditions of the Company’s 2000 Stock Option Plan.

Robin L. Carmichael

Page 3

6. PIAA:

Prior to commencement of your employment with the Company, you agree to execute and deliver to the Company and be bound by its standard form of proprietary invention and assignment agreement.

7. At-Will Employment:

Your employment with the Company will be on an “at will” basis, meaning that either you or the Company may terminate your employment at any time for any reason or no reason, without further obligation or liability. Notwithstanding the foregoing, in the event that the Company terminates this employment relationship without Cause (as defined below) or you terminate this employment relationship with Good Reason (as defined below), the Company will pay you any unpaid annual base salary, any amount due but not paid under any Company incentive compensation plan, earned but unused vacation and bonuses due (if any) for services already performed (subject to normal withholding and other deductions) to the effective date of termination of employment; and monthly severance payments equivalent to six (6) months base salary. These payments will be made in accordance with the Company’s customary payroll schedule, minus deductions required by law. Payment of the above-described severance compensation and benefits is conditioned on the execution by you of a full mutual release of all claims related to your employment with or termination from the Company. You will have the duty to mitigate the costs to the Company by attempting to obtain other employment within a reasonable time after termination. During the period you are entitled to receive severance payments hereunder, the monthly payment otherwise due from the Company shall be reduced by fifty percent (50%) of your monthly compensation from such other employment. For purposes hereof, the term “Cause” shall mean if you (i) are convicted of a felony or any crime involving dishonesty, breach of trust, or physical harm to any person or relating to the business of the Company or any successor company (or enter a pleas of guilty or nolo contendere with respect thereto); (ii) repeatedly report to work under the influence of alcohol or illegal drugs; (iii) substantially and repeatedly fail to perform the duties as reasonably directed by the Chief Executive Officer of the Company or any successor company, (iv) are found by a court of competent jurisdiction to have made unauthorized use or disclosure of confidential information or trade secrets; or (v) engage in gross negligence or willful misconduct in carrying out your duties as an employee of the Company or any successor company, and the term “Good Reason” shall mean the occurrence of any of the following events without your consent: (i) a demotion or other material reduction in the nature or status of your responsibilities or (ii) a material reduction in your annual base salary or any failure by the Company to satisfy its duty to compensate you as required hereunder.

8. Relocation Reimbursement

The Company agrees to reimburse you up to $15,000 in relocation expenses.

Robin L. Carmichael

Page 4

To indicate your acceptance of the Company’s offer, please sign and date this letter in the space provided below and return it to the undersigned. This letter, together with the PIAA referenced above and subject to the Company’s general employment policies in effect from time to time, set forth the terms of your employment with the Company and supersedes any prior representations or agreements, whether written or oral. This letter may not be modified or amended except by a written agreement, signed by the Company and by you.

With best regards,

/s/ R. Stephen Beatty

R. Stephen Beatty

President and Chief Executive Officer

Helix BioMedix, Inc.

Robin L. Carmichael

Page 5

ACCEPTED AND AGREED:

/s/ Robin L. Carmichael

Signature

October 15, 2007

Date

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

I, R. Stephen Beatty, certify that:

1. I have reviewed this Quarterly Report on Form 10-QSB of Helix BioMedix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and we have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: November 8, 2007

/s/ R. Stephen Beatty

R. Stephen Beatty

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

I, David H. Kirske, certify that:

1. I have reviewed this Quarterly Report on Form 10-QSB of Helix BioMedix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and we have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: November 8, 2007

/s/ David H. Kirske

David H. Kirske

Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350

I, R. Stephen Beatty, President and Chief Executive Officer of Helix BioMedix, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Quarterly Report on Form 10-QSB of the Company for the quarterly period ended September 30, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of September 30, 2007.

Date: November 8, 2007

/s/ R. Stephen Beatty

R. Stephen Beatty

President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350

I, David H. Kirske, Vice President and Chief Financial Officer of Helix BioMedix, Inc. (the “Company”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) the Quarterly Report on Form 10-QSB of the Company for the quarterly period ended September 30, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of September 30, 2007.

Date: November 8, 2007

/s/ David H. Kirske

David H. Kirske

Vice President and Chief Financial Officer