10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2010

OR

¨ 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 registrant 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

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant 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 registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

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

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

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

As of April 30, 2010, 25,653,512 shares of the registrant’s common stock were issued and outstanding.

HELIX BIOMEDIX, INC.

FORM 10-Q

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	1
Condensed Balance Sheets (unaudited)	1
Condensed Statements of Operations (unaudited)	2
Condensed Statements of Stockholders’ Deficit (unaudited)	3
Condensed Statements of Cash Flows (unaudited)	4
Notes to Condensed Financial Statements (unaudited)	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3. Quantitative and Qualitative Disclosure About Market Risk	18
Item 4. Controls and Procedures	18
PART II - OTHER INFORMATION
Item 1A. Risk Factors	19
Item 6. Exhibits	20
Signatures	21

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements.

HELIX BIOMEDIX, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

	March 31, 2010			December 31, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	3,593,044		$	1,344,719
Accounts receivable, net		52,034			55,685
Inventory		200,576			202,815
Prepaid expenses and other current assets		65,743			34,461
Total current assets		3,911,397			1,637,680
Deposits		8,522			8,522
Property and equipment, net		73,953			84,880
Intangible assets, net		264,896			281,838
Total assets	$	4,258,768		$	2,012,920
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	63,594		$	66,455
Accrued compensation and benefits		45,891			29,697
Accrued expenses		70,035			46,502
Deferred revenue		22,525			—
Total current liabilities		202,045			142,654
Deferred rent, non-current		24,033			6,008
Convertible notes payable		1,573,129			1,319,532
Convertible notes payable, related party		7,623,510			5,016,860
Accrued interest on convertible notes payable		125,425			96,897
Accrued interest on convertible notes payable, related party		715,398			599,694
Total liabilities		10,263,540			7,181,645
Commitments and contingencies
Stockholders’ deficit:
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 March 31, 2010, and December 31, 2009		25,654			25,654
Additional paid-in capital		30,754,083			30,663,081
Accumulated deficit		(36,784,509	)		(35,857,460	)
Total stockholders’ deficit		(6,004,772	)		(5,168,725	)
Total liabilities and stockholders’ deficit	$	4,258,768		$	2,012,920

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

1

HELIX BIOMEDIX, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended March 31,
	2010			2009
Revenue:
Licensing and development fees	$	36,558		$	34,777
Peptide and consumer product sales		33,160			42,529
Administrative services revenue, related party		—			9,945
Total revenue		69,718			87,251
Cost of revenue:
Cost of peptide and consumer product sales		24,489			38,582
Cost of administrative service revenue, related party		—			9,750
Total cost of revenue		24,489			48,332
Gross profit		45,229			38,919
Operating expenses:
Research and development		167,672			160,414
Marketing and business development		126,238			115,973
General and administrative		359,745			361,868
Accounting, legal and professional fees		121,607			184,725
Depreciation and amortization		29,082			33,472
Total operating expenses		804,344			856,452
Loss from operations		(759,115	)		(817,533	)
Other income (expense):
Interest income		345			5,043
Interest expense on convertible notes payable		(28,528	)		(14,081	)
Interest expense on convertible notes payable, related party		(115,704	)		(81,227	)
Accretion of discount on convertible notes payable		(9,097	)		(4,657	)
Accretion of discount on convertible notes payable, related party		(14,950	)		(7,288	)
Other income (expense), net		(167,934	)		(102,210	)
Net loss and comprehensive loss	$	(927,049	)	$	(919,743	)
Basic and diluted net loss per share	$	(0.04	)	$	(0.04	)
Weighted average shares outstanding		25,653,512			25,653,512

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

2

HELIX BIOMEDIX, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ DEFICIT

For the Year Ended December 31, 2009 and for the Three Months Ended March 31, 2010

(Unaudited)

	Common Stock			Additional Paid-in Capital		Accumulated Deficit			Stockholders’ Deficit
	Number of Shares	Amount
Balance at December 31, 2008	25,653,512	$	25,654	$	30,342,249	$	(32,082,425	)	$	(1,714,522	)
Stock-based compensation	—		—		101,970		—			101,970
Relative fair value of detachable warrants issued with convertible notes payable	—		—		218,862		—			218,862
Net loss	—		—		—		(3,775,035	)		(3,775,035	)
Balance at December 31, 2009	25,653,512		25,654		30,663,081		(35,857,460	)		(5,168,725	)
Stock-based compensation	—		—		27,202		—			27,202
Relative fair value of detachable warrants issued with convertible notes payable	—		—		63,800		—			63,800
Net loss	—		—		—		(927,049	)		(927,049	)
Balance at March 31, 2010	25,653,512	$	25,654	$	30,754,083	$	(36,784,509	)	$	(6,004,772	)

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

3

HELIX BIOMEDIX, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months ended March 31,
	2010			2009
Cash flows from operating activities
Net loss	$	(927,049	)	$	(919,743	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		29,082			33,472
Stock-based compensation expense		27,202			31,612
Interest expense on convertible notes payable		28,528			14,081
Interest expense on convertible notes payable, related party		115,704			81,227
Accretion of discount on convertible notes payable		9,097			4,657
Accretion of discount on convertible notes payable, related party		14,950			7,288
Changes in assets and liabilities:
Accounts receivable, net		3,651			6,128
Inventory		2,239			(109,493	)
Prepaid expenses and other current assets		(31,282	)		(67,755	)
Accounts payable		(2,861	)		55,442
Accrued compensation and benefits		16,194			(61,009	)
Other accrued expenses		41,558			(3,650	)
Deferred revenue		22,525			—
Net cash used in operating activities		(650,462	)		(927,743	)
Cash flows from investing activities
Release of restricted cash from convertible debt subscription		—			970,000
Purchases of property and equipment		(1,213	)		—
Net cash provided by (used in) investing activities		(1,213	)		970,000
Cash flows from financing activities
Proceeds from issuance of convertible notes payable and detachable warrants		250,000			404,000
Proceeds from issuance of convertible notes payable and detachable warrants, related party		2,650,000			2,100,000
Net cash provided by financing activities		2,900,000			2,504,000
Net increase in cash and cash equivalents		2,248,325			2,546,257
Cash and cash equivalents at beginning of period		1,344,719			984,844
Cash and cash equivalents at end of period	$	3,593,044		$	3,531,101
Non-cash investing and financing activities
Issuance of convertible notes payable and detachable warrants in exchange for release of restricted cash	$	—		$	970,000

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 accompanying unaudited condensed financial statements of Helix BioMedix, Inc. (the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted for interim financial information in accordance with the SEC rules and regulations for quarterly reporting. These condensed financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2009, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2010.

Use of Estimates

The preparation of the Company’s financial statements in conformity with U.S. GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of revenue and expenses during the reporting periods. In the opinion of management, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the Company’s financial position and its results of operations and cash flows for the periods indicated. Significant items subject to such estimates and assumptions include, but are not limited to, revenue recognition, impairments of long-lived assets including intangible assets, valuation allowances for receivables, inventories and deferred income tax assets; and valuation of stock-based compensation, notes payable and obligations related to derivative instruments. Actual results could differ from those estimates.

The results of operations for the three months ended March 31, 2010 are not necessarily indicative of the results of operations that may be achieved for the entire year ending December 31, 2010.

Recent Accounting Pronouncements

In October 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2009-13, Multiple-Deliverable Revenue Arrangements (ASU 2009-13), to establish requirements that an entity must meet in order to recognize revenue from the sale of a delivered item that is part of a multiple-element arrangement when other items have not yet been delivered. ASU 2009-13 eliminates the requirement that all undelivered elements must have vendor-specific objective evidence (VSOE) or third-party evidence (TPE) before an entity can recognize the portion of an overall arrangement fee that is attributable to items that already have been delivered. Under the provisions of ASU 2009-13, in the absence of VSOE or TPE, entities are permitted to estimate the selling prices for one or more delivered and undelivered elements in a multiple-element arrangement and allocate the arrangement fee to the elements based on their relative selling prices. ASU 2009-13 is effective prospectively for multiple-deliverable revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, although early adoption is permitted. The impact, if any, of adopting ASU 2009-13 will depend on the nature and terms of the Company’s future revenue arrangements.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures—Improving Disclosures about Fair Value Measurements (ASU 2010-06), which requires new disclosures regarding transfers in and out of Level 1 and 2 and activity within Level 3 fair value measurements and clarifies existing disclosures of inputs and valuation techniques for Level 2 and 3 fair value measurements. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosure of activity within Level 3 fair value measurements, which is effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The objective of ASU 2010-06 is to improve disclosures related to fair value measurements and, thus, increase the transparency in financial reporting. The Company adopted the provisions of ASU 2010-06 effective January 1, 2010 and the adoption of this ASU had no impact on the Company’s financial position, results of operations or cash flows.

5

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 2. Financing Events

2008 Debt Financing – Convertible Note Payable, Related Party, Issued on February 14, 2008 and Amended on June 27, 2008

On February 14, 2008, the Company issued to RBFSC, Inc. (RBFSC), a related party, a convertible promissory note (the 2008 Note) in the principal amount of $3,000,000 with an interest rate of 8% per annum, which was subsequently amended on June 27, 2008 (the 2008 Amended Note). The 2008 Amended Note, which is due and payable on July 1, 2011, includes a call option which gives the holder the right to demand repayment in the case of default and a put option which allows the Company to prepay the unpaid balance of the 2008 Amended Note and related accrued interest at any time and without penalty. The Company is required to separately account for the fair values of these embedded features on the balance sheet with changes in value recognized in the statement of operations as the features are not clearly and closely related to the convertible note debt instrument. At the amendment date and each subsequent reporting date, the Company determined that these call and put options had no value based on an analysis of the rights and the likelihood of these features being exercised.

Interest expense related to the 2008 Amended Note (based on the stated rate of 8%) for each of the three months ended March 31, 2010 and 2009 was $59,178.

2009 Debt Financing – Convertible Notes Payable Issued on February 10 and March 5, 2009

During the first quarter of 2009, the Company issued to accredited investors convertible promissory notes in an aggregate principal amount of $3,474,000 (the 2009 Notes) and five-year warrants to purchase an aggregate of 868,500 shares of the Company’s common stock at an exercise price of $1.00 per share (the 2009 Warrants). The 2009 Notes bear interest at the rate of 8% per annum and are due and payable on July 1, 2011 and are convertible:

(i) upon the consummation by the Company of an equity financing with proceeds to the Company of at least $7,500,000 whereupon the 2009 Notes shall be converted automatically into shares of the Company’s capital stock issued in the equity financing at a price equal to the lesser of the per share price of the securities issued and sold in the equity financing and $1.00;

(ii) upon the consummation of a sale of substantially all of the Company’s assets or a merger or consolidation of the Company in which the Company’s stockholders will hold, in the aggregate, less than 50% of the voting power of the combined entity whereupon the 2009 Notes shall be converted automatically into shares of the Company’s common stock at a price equal to the lesser of the per share price attributed to the Company’s common stock in connection with such transaction and $1.00; or

(iii) voluntarily at and as of the maturity date into shares of the Company’s common stock at a price equal to $1.00 per share.

The Company determined the relative fair value of the 2009 Warrants to be $218,862 and recorded this amount as a discount to the 2009 Notes, with a corresponding credit to additional paid-in capital.

The 2009 Notes are being accreted from their carrying value of $3,255,138 at the issuance dates to their settlement amount of $3,474,000 at July 1, 2011 through the statement of operations using the effective interest method. From the issuance dates through March 31, 2010, accretion of discount related to the 2009 Notes totaled $103,936, $22,682 of which was recorded during the first quarter of 2010. Financing costs associated with the issuance of the 2009 Notes and 2009 Warrants were not material and therefore were expensed as incurred.

For the three months ended March 31, 2010 and 2009, interest expense resulting from the stated interest rate related to the 2009 Notes was $68,528 and $36,130, respectively. The effective interest rate related to the 2009 Notes for the period from the issuance dates through March 31, 2010, including accretion of discount, was 10.6%.

The 2009 Notes also include a call option, which gives the holders the right to demand repayment in the case of default, and a put option, which allows the Company to prepay the unpaid balance of the 2009 Notes and accrued interest at any time and without penalty. The Company determined that these embedded features were clearly and closely related to the debt instruments and therefore were not required to be accounted for separately from the 2009 Notes.

Holders of the 2009 Notes include two related parties: 1) a member of the Company’s Board of Directors who purchased a convertible note in the principal amount of $100,000 and received a warrant to purchase 25,000 shares of the Company’s common stock and 2) Cardinal Court LLC which purchased a convertible note in the principal amount of $2,000,000 and received a warrant to purchase 500,000 shares of the Company’s common stock. The Vice President and Treasurer of Cardinal Court LLC is Frank T. Nickell, who is also the President and a director of RBFSC and owns an interest that allows him to exercise significant influence.

6

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

2010 Debt Financing – Convertible Notes Payable Issued on March 5, 2010

On March 5, 2010, the Company issued to accredited investors convertible promissory notes in an aggregate principal amount of $2,900,000 (the 2010 Notes) and five-year warrants to purchase an aggregate of 725,000 shares of the Company’s common stock at an exercise price of $0.80 per share (the 2010 Warrants). The 2010 Notes bear interest at the rate of 8% per annum and are due and payable on July 1, 2013 and are convertible:

(i) upon the consummation by the Company of an equity financing with proceeds to the Company of at least $7,500,000 whereupon the 2010 Notes shall be converted automatically into shares of the Company’s capital stock issued in the equity financing at a price equal to the lesser of the per share price of the securities issued and sold in the equity financing and $0.80;

(ii) upon the consummation of a sale of substantially all of the Company’s assets or a merger or consolidation of the Company in which the Company’s stockholders will hold, in the aggregate, less than 50% of the voting power of the combined entity whereupon the 2010 Notes shall be converted automatically into shares of the Company’s common stock at a price equal to the lesser of the per share price attributed to the Company’s common stock in connection with such transaction and $0.80; or

(iii) voluntarily at and as of the maturity date into shares of the Company’s common stock at a price equal to $0.80.

The Company determined the relative fair value of the 2010 Warrants to be $63,800 and recorded this amount as a discount to the 2010 Notes, with a corresponding credit to additional paid-in capital.

The 2010 Notes are being accreted from their carrying value of $2,836,200 at the issuance date to their settlement amount of $2,900,000 at July 1, 2013 through the statement of operations using the effective interest method. From the issuance date through March 31, 2010, accretion of discount related to the 2010 Notes totaled $1,365. Financing costs associated with the issuance of the 2010 Notes and 2010 Warrants were not material and therefore were expensed as incurred.

For the three months ended March 31, 2010, interest expense resulting from the stated interest rate related to the 2010 Notes was $16,526. The effective interest rate related to the 2010 Notes for the period from the issuance date through March 31, 2010, including accretion of discount, was 8.7%.

The 2010 Notes also include a call option, which gives the holders the right to demand repayment in the case of default (which includes a default under the 2008 Amended Note or the 2009 Notes), and a put option, which allows the Company to prepay the unpaid balance of the 2010 Notes and accrued interest at any time and without penalty. The Company determined that these embedded features were clearly and closely related to the debt instruments and therefore were not required to be accounted for separately from the 2010 Notes.

The holders of the 2010 Notes include three related parties: 1) two members of the Company’s Board of Directors who purchased convertible notes in an aggregate principal amount of $450,000 and received warrants to purchase an aggregate of 112,500 shares of the Company’s common stock and 2) RBFSC which purchased a convertible note in the principal amount of $2,200,000 and received a warrant to purchase 550,000 shares of the Company’s common stock.

Note 3. Fair Value of Financial Instruments

The inputs used to measure fair value are summarized in the three broad levels listed below:

• Level 1 — Quoted prices in active markets for identical securities;

• Level 2 — Other significant observable inputs (including quoted prices in active markets for similar securities); and

• Level 3 — Significant unobservable inputs (including the Company’s own assumptions in determining fair value of investments).

The following table sets forth by level, within the fair value hierarchy, financial assets and liabilities accounted for at fair value as of March 31, 2010. As required by ASC 820-10, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	March 31, 2010		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money Market Funds	$	3,243,870	$	3,243,870	$	—	$	—

The carrying amount of the Company’s cash, accounts receivable, accounts payable, accrued compensation and benefits, and accrued expenses approximated their estimated fair values at March 31, 2010 and December 31, 2009 because of the short-term nature of these instruments. As there is no established market for the Company’s convertible notes, the Company estimated the fair value of its convertible notes payable, including related party, using market-based parameters for the various components of the convertible notes. The fair value of the accrued interest on convertible notes payable, including related party, was estimated as the present value of expected future payments, discounted by an interest rate commensurate with the risk-free interest rate for an equivalent maturity term.

7

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The table below summarizes the carrying values and estimated fair values for certain of the Company’s financial instruments at March 31, 2010 and December 31, 2009.

	March 31, 2010				December 31, 2009
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Liabilities:
Convertible notes payable	$	1,573,129	$	1,796,058	$	1,319,532	$	1,116,240
Convertible notes payable, related party		7,623,510		8,350,759		5,016,860		4,143,250
Accrued interest on convertible notes payable		125,425		124,722		96,897		95,746
Accrued interest on convertible notes payable, related party		715,398		711,065		599,694		592,569
Total	$	10,037,462	$	10,982,604	$	7,032,983	$	5,947,805

Note 4. Stock-Based Compensation

The Helix BioMedix 2000 Stock Option Plan (the 2000 Plan), approved by the Company’s stockholders in 2000, is administered by non-employee directors who are authorized to grant stock options to the Company’s employees, consultants, and directors. Stock options are granted at exercise prices equal to the closing market value of the Company’s common stock on the grant date. Stock options granted to employees are typically incentive stock options, as defined and governed by Section 422 of the Internal Revenue Code, and generally vest over a three-year period with 1/3 of the total shares vesting after a year from the date of grant and 1/36 of the total shares vesting monthly thereafter. Options granted to non-employee directors are nonqualified stock options with a vesting period ranging from immediately upon grant to quarterly over one year. All options granted to employees and non-employee directors expire 10 years from the grant date.

During the three months ended March 31, 2010 and 2009, the Company granted 445,000 and 120,000 stock options, respectively, with a weighted-average grant date fair value of $0.26 and $0.38 per share, respectively, using the Black-Scholes option pricing model with the following assumptions:

	Three Months Ended March 31,
	2010	2009
Risk-free interest rate	2.35% – 2.77%	1.89%
Expected dividend yield	0	0
Expected term in years	5.0 – 6.0 years	5.50
Expected volatility	107% – 109 %	101%

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. For the three months ended March 31, 2010 and 2009, the Company calculated expected volatility based on the annualized daily historical volatility of the Company’s stock price commensurate with the expected term of the option and other factors, including peer company data. The Company estimates the expected term as the average of the vesting period and the contractual term. The Company will continue to use this method of estimation until it has sufficient historical data to provide reasonable estimates of expected lives of stock options. 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 pricing model and, ultimately, the expense that will be recognized over the life of the option. The Company recognizes compensation expense for only the portion of options that is expected to vest. Therefore, the Company applies an estimated forfeiture rate that is derived from historical employee termination behavior. Forfeiture rates are revised in subsequent periods if actual forfeitures differ from those estimates.

The amount of stock-based compensation expense recognized in the three months ended March 31, 2010 and 2009 related to stock options was $27,202 and $31,612, respectively. As of March 31, 2010, total unrecognized stock-based compensation related to non-vested stock options was approximately $148,885, which is expected to be recognized over a weighted-average period of approximately 2.2 years.

8

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

A summary of the Company’s stock compensation expense for the three months ended March 31, 2010 and 2009 is as follows:

	Three Months Ended March 31,
	2010		2009
Research and development	$	1,811	$	378
Marketing and business development		7,598		5,005
General and administrative		17,793		26,229
Total stock-based compensation	$	27,202	$	31,612

A summary of the Company’s stock option activity for the three months ended March 31, 2010 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, 2009	3,111,250	$	1.04
Granted	445,000	$	0.32
Exercised	—		—
Forfeited	—		—
Expired	—		—
Outstanding, March 31, 2010	3,556,250	$	0.95	5.10	$	3,750
Exercisable, March 31, 2010	2,970,194	$	1.07	4.21	$	2,250

The aggregate intrinsic value in the table above is based on the Company’s closing stock price of $0.28 on March 31, 2010, which would have been received by the optionees had all of the options with exercise prices less than $0.28 been exercised on that date.

As of March 31, 2010, there were 5,355,000 shares of common stock reserved for issuance pursuant to the 2000 Plan, of which 1,798,750 shares remained available for future grants. Additional information regarding options outstanding as of March 31, 2010, 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
$0.19 – $0.57	1,225,500	8.63	$0.44	646,389	$0.53
$0.70 – $1.00	1,284,500	4.02	$0.91	1,277,555	$0.92
$1.20 – $1.80	956,250	2.04	$1.58	956,250	$1.58
$1.85 – $1.94	90,000	4.80	$1.88	90,000	$1.88
$0.19 – $1.94	3,556,250	5.10	$0.95	2,970,194	$1.07

Note 5. Stockholders’ Equity

During the first quarter of 2010, the Company issued warrants to purchase 725,000 shares of the Company’s common stock with an exercise price of $0.80 per share in connection with the issuance of convertible promissory notes in the aggregate principal amount of $2,900,000, and during the first quarter of 2009, the Company issued warrants to purchase 868,500 shares of the Company’s common stock with an exercise price of $1.00 per share in connection with the issuance of convertible promissory notes in the aggregate principal amount of $3,474,000 (see Note 2). As of March 31, 2010, the Company had warrants outstanding to purchase 4,877,319 shares of the Company’s common stock with exercise prices ranging from $0.25 to $6.00 per share.

9

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Note 6. Net Loss per Share

Net 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 March 31,
	2010	2009
Weighted average outstanding options	3,378,472	3,373,305
Weighted average outstanding warrants	4,443,708	3,908,444

Note 7. Property and Equipment

Property and equipment consisted of the following as of March 31, 2010 and December 31, 2009:

	March 31, 2010			December 31, 2009
Machinery and equipment	$	565,717		$	564,504
Website development costs		42,520			42,520
Furniture and fixtures		55,614			55,614
Leasehold improvements		43,993			43,993
		707,844			706,631
Less accumulated depreciation		(633,891	)		(621,751	)
Property and equipment, net	$	73,953		$	84,880

Aggregate depreciation expense for property and equipment during the three months ended March 31, 2010 and 2009 was $12,140 and $13,753, respectively.

Note 8. Intangible Assets

Identifiable intangible assets consisted of the following as of March 31, 2010 and December 31, 2009:

	March 31, 2010			December 31, 2009
Antimicrobial technology	$	222,187		$	222,187
Licensing agreements		61,391			61,391
Patents, pending and approved		834,301			834,301
Total intangible assets		1,117,879			1,117,879
Less accumulated amortization		(852,983	)		(836,041	)
Intangible assets, net	$	264,896		$	281,838

Amortization expense for intangible assets during the three months ended March 31, 2010 and 2009 was $16,942 and $19,719, respectively.

Note 9. Total Comprehensive Loss

Total comprehensive loss for the three months ended March 31, 2010 was $927,049 compared to $919,743 for the same period in 2009. There was no difference between net loss as reported and total comprehensive loss for either of the periods presented.

Note 10. Liquidity and Capital Resources

For the three months ended March 31, 2010, the Company incurred a net loss of $927,049. At March 31, 2010, the Company had $3,593,044 in cash and cash equivalents. For the three months ended March 31, 2010, cash used in operations was $650,462, cash used in investing activities was $1,213, consisting of a purchase of capital assets, and cash provided by financing activities was $2,900,000, which represented the proceeds from the issuance of the 2010 Notes and 2010 Warrants.

Based on the current status of the Company’s operating and product commercialization development plans, the Company estimates that its existing cash and cash equivalents will be sufficient to fund its operations, continue with work towards its prescription (Rx) product development and support the continued expansion of its consumer program through the remainder of 2010. The Company will need substantial additional capital in order to maintain the current level of operations, continue commercialization of its technology and advance its pharmaceutical programs beyond 2010. Accordingly, the Company will need to raise additional

10

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

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, the Company may not be able to satisfy its existing obligations, including the repayment of the aggregate outstanding principal and accrued interest due on the 2008 Note and 2009 Notes by July 1, 2011 and the 2010 Notes by July 1, 2013, or may be required to severely reduce the scope of its operations, which would significantly impede its ability to proceed with current operational plans and could lead to the discontinuation of its business.

The amount of capital the Company will need in the future will depend on many factors, including capital expenditures and hiring plans to accommodate future growth, research and development plans, future demand for the Company’s products and technology, and general economic conditions.

Note 11. Concentration of Risks

The Company maintains its cash balances in one financial institution, which at times may exceed federally insured limits. As of March 31, 2010, the Company maintained approximately $3,244,000 at a major financial institution in a money market account insured by the Securities Investor Protection Corporation up to $500,000 per account. To date the Company has not experienced any losses in its money market account.

A significant portion of the Company’s revenue is derived from a concentrated number of customers. The following individual customers accounted for 10% or more of revenue for the three months ended March 31, 2010 and 2009:

	Three Months Ended March 31,
	2010		2009
Customer A	87	%	78	%
Customer B	—		13	%

Note 12. Subsequent Events

2010 Financing – Subsequent Closing

As of May 6, 2010, the Company has received an additional $300,000 as subscription deposits from accredited investors for a subsequent closing of the Company’s 2010 offering of unsecured convertible promissory notes and warrants (see Note 2 for a description of the 2010 Notes and 2010 Warrants). These subscription deposits are held as restricted cash until the completion of the closing, expected to be on or about May 10, 2010, at which point the Company will issue convertible promissory notes and warrants to subscribing investors and the restrictions on use of the funds will be released.

11

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Our disclosure and analysis in this Quarterly Report on Form 10-Q 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 “may,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “could,” “future,” “target,” 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. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the factors described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009. 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. Except as required by law, 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 (SEC) after the date of this Quarterly Report.

This information should be read in conjunction with the condensed financial statements and the notes included in Item 1 of Part I of this Quarterly Report and the audited financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2009.

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 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 a proprietary library containing a broad array of these synthetic bioactive peptides. Our business strategy is to develop and out-license to third parties the rights to use these proprietary peptides in diverse fields of application and to commercialize our own branded products. We have developed numerous peptides with unique sequences in the following two broad areas of application:

• Consumer skin care products — we have developed a wide range of peptides capable of improving different aspects of the skin’s appearance, texture, tone and barrier function and are marketing these peptides as innovative ingredients for cosmetic use; and

• Prescription (Rx) products — certain of our peptides have demonstrated promising results in the areas of infection control, wound healing and immune modulation and are being developed for Rx applications.

Our goal is to increase our focus on our pharmaceutical programs, and one of our ongoing objectives is to press forward with the clinical development of our lead Rx candidates. To that end, we continue to explore both potential partnership opportunities with pharmaceutical companies and potential sources of funding to support in-house clinical development work. We continue to believe that in-house clinical development will be required to advance these programs prior to partnering with a pharmaceutical company. Additional funding will be required to support further development of our pharmaceutical programs.

We generate revenue through license agreements with skin care product manufacturers and through collaborative development agreements, as well as by selling proprietary branded skin care products through distribution channels and through our dedicated ecommerce website.

We make available on our website at www.helixbiomedix.com, free of charge, copies of our Annual Reports on Forms 10-K, Quarterly Reports on Forms 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after filing or furnishing the information to the SEC. Information contained on our website is not part of, and is not incorporated into, this Quarterly Report on Form 10-Q. Our filings with the SEC are also available to the public at the SEC’s website at www.sec.gov.

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Critical Accounting Policies and Estimates

The preparation of our condensed financial statements in conformity with United States Generally Accepted Accounting Principles (U.S. GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates and judgments under different assumptions and conditions. We have discussed the critical accounting policies and estimates that we used in the preparation of our financial statements in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of the Operations – Critical Accounting Policies and Estimates”, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed with the SEC on March 24, 2010. There have been no material changes to those critical accounting policies or the underlying accounting estimates or judgments.

Results of Operations

As of March 31, 2010, our accumulated deficit was approximately $36,784,500. We may continue to incur substantial operating 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. Our net loss for the three months ended March 31, 2010 was approximately $927,000, or $0.04 per share, reflecting an increase of $7,300 from a net loss of approximately $919,700, or $0.04 per share, for the same period in 2009. The increase in net loss for the first quarter of 2010 compared to the same period in 2009 was primarily due to increases in interest expense and accretion of debt discount associated with outstanding notes payable, partially offset by a decrease in operating expenses. The decrease in operating expenses was primarily attributable to decreases in legal fees associated with intellectual property protection and general corporate matters, consulting fees and stock-based compensation, partially offset by increases in compensation and benefits expenses resulting from additional personnel.

Revenue

Revenue in the three months ended March 31, 2010 and 2009 consisted primarily of license fees, development fees, peptide sales, consumer product sales and administrative services revenue as summarized in the table below.

	Three Months Ended March 31,				Change
	2010		2009
License and development fees	$	36,558	$	34,777	5.1	%
Peptide and consumer product sales		33,160		42,529	(22.0	)%
Administrative services revenue, related party		—		9,945	—
Total revenue	$	69,718	$	87,251	(20.1	)%

Revenue for the three months ended March 31, 2010 compared to the same period last year decreased by approximately $17,500, or 20.1%. License fees, which are derived from royalty arrangements, increased by approximately $1,800, or 5.1%, for the first three months of 2010 compared to the same period in 2009. We did not generate any development fees for either the three months ended March 31, 2010 or 2009.

Peptide and consumer product sales decreased by approximately $9,400, or 22.0%, for the three months ended March 31, 2010 compared to the same period in the previous year. The decrease, which primarily consisted of a 25.9% reduction in peptide sales, reflected a decline in the manufacturing of products containing our peptides by certain of our customers during the first three months of 2010. Sales of consumer products increased slightly in the first quarter of 2010 compared to the same period in 2009. Consumer product sales for the three months ended March 31, 2010 and 2009 accounted for 5.0% and 2.9% of total revenue, respectively.

Administrative services revenue reflects revenue received from DermaVentures, LLC, a related party, for marketing costs associated with DermaVentures’ product line and other out-of-pocket expenses we incurred on DermaVentures’ behalf. As we terminated our Management Services Agreement with DermaVentures in September 2009, we did not have any administrative services revenue during the three months ended March 31, 2010, compared to revenue of $9,945 in the same period in 2009. Administrative services revenue was typically invoiced to DermaVentures at or near cost and therefore had no material net effect on our gross profit or net loss.

Cost of Revenue and Gross Margin

Cost of revenue consists of (1) cost of peptides and materials associated with consumer products and (2) cost of administrative services revenue from DermaVentures, a related party, which includes primarily marketing campaign costs associated with DermaVentures’ product line and other out-of-pocket expenses we incurred on DermaVentures’ behalf. Gross profit is the difference between revenue and cost of revenue, and gross margin is gross profit expressed as a percentage of total revenue. Revenue mix affects our gross margin because our margins from license and development fees are higher than our margins from peptide sales and administrative services revenue.

13

Cost of revenue and gross margin for the three months ended March 31, 2010 and 2009 are summarized in the table below.

	Three Months Ended March 31,						Change
	2010			2009
Cost of peptide and consumer product sales	$	24,489		$	38,582		(36.5	)%
Percentage of total revenue		35.1	%		44.2	%
Percentage of related revenue		73.9	%		90.7	%
Cost of administrative services revenue, related party	$	—		$	9,750		—
Percentage of total revenue		—			11.2	%
Percentage of related revenue		—			98.0	%
Total cost of revenue	$	24,489		$	48,332		(49.3	)%
Percentage of revenue		35.1	%		55.4	%
Gross profit	$	45,229		$	38,919		16.2	%
Gross margin		64.9	%		44.6	%

Cost of peptide and consumer product sales for the three months ended March 31, 2010 decreased by approximately $14,100, or 36.5%, compared to the same period in 2009. Peptides and consumer products sold in the first three months of 2010 resulted in 26.1% margin compared to 9.3% margin for the same period in 2009. The increase in gross margin related to peptide and consumer product sales was due primarily to the product mix. Our gross margin may also be influenced by customer mix as we sell peptides at cost or near cost to certain customers based on the terms of respective licensing arrangements. Sales of our consumer products generate a higher gross margin compared to sales of peptides; however, as this revenue is still a small percentage of total revenue, it has not made a significant contribution to gross margin.

Since we terminated our Management Services Agreement with DermaVentures in September 2009, we did not incur any cost of administrative services revenue during the three months ended March 31, 2010, compared to $9,750 of cost incurred in the same period in 2009. Cost of administrative services revenue for the first quarter of 2009 consisted primarily of marketing service expenses. As administrative services revenue was invoiced at or near cost, the margin related to this revenue was immaterial.

Research and Development

Research and development (R&D) expenses consist primarily of compensation and benefit expenses, stock-based compensation expense, cost of external studies and trials, and contract and other outside service fees related to our R&D activities. R&D expenses for the three months ended March 31, 2010 and 2009 are summarized in the table below.

	Three Months Ended March 31,						Change
	2010			2009
Research and development	$	167,672		$	160,414		4.5	%
Percentage of total revenue		240.5	%		183.9	%

R&D expenses for the three months ended March 31, 2010 increased by approximately $7,300, or 4.5%, compared to the same period in 2009. This increase was primarily attributable to increases in stock-based compensation expense and R&D activities. We anticipate R&D expenses to increase in absolute dollars for the remainder of 2010 as we expect to incur expenses on external testing and studies related to the development of our new consumer products as a well as our Rx programs.

Marketing and Business Development

Marketing and business development (M&BD) expenses consist primarily of compensation and benefit expenses, stock-based compensation expense, consulting fees and various marketing costs. M&BD expenses for the three months ended March 31, 2010 and 2009 are summarized in the table below.

	Three Months Ended March 31,						Change
	2010			2009
Marketing and business development	$	126,238		$	115,973		8.9	%
Percentage of total revenue		181.1	%		132.9	%

M&BD expenses for the three months ended March 31, 2010 increased by approximately $10,300, or 8.9%, compared to the same period in 2009. The increase was primarily attributable to increases in product marketing expenses, compensation and benefit expenses due to an increase in M&BD personnel and stock-based compensation expense. We anticipate M&BD expenses to increase in absolute dollars for the remainder of 2010 as we expect to incur increased expenses on advertising, market testing and promotions for our current products as well as for new skin care products we plan to introduce in 2010.

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General and Administrative

General and administrative (G&A) expenses consist primarily of salaries and benefit expenses, stock-based compensation expense, consulting fees and general corporate expenditures. G&A expenses for the three months ended March 31, 2010 and 2009 are summarized in the table below.

	Three Months Ended March 31,						Change
	2010			2009
General and administrative	$	359,745		$	361,868		(0.6	)%
Percentage of total revenue		516.0	%		414.7	%

G&A expenses for the three months ended March 31, 2010 decreased by approximately $2,100, or 0.6%, compared to the same period in 2009. The decrease was primarily due to decreases in stock-based compensation expense and other general corporate expenses, partially offset by an increase in consulting fees. We anticipate G&A expenses for the remainder of 2010 to increase compared to the first three months of 2010 as we expect to incur additional expenses related to compliance with the Sarbanes-Oxley Act of 2002.

Accounting, Legal and Professional Fees

Accounting, legal and professional fees for the three months ended March 31, 2010 and 2009 are summarized in the table below.

	Three Months Ended March 31,						Change
	2010			2009
Accounting, legal and professional fees	$	121,607		$	184,725		(34.2	)%
Percentage of total revenue		174.4	%		211.7	%

Accounting, legal and professional fees for the three months ended March 31, 2010 decreased by approximately $63,100, or 34.2%, compared to the same period in 2009. The decrease was primarily due to decreases in legal fees associated with intellectual property protection and general corporate matters.

For the remainder of 2010, we anticipate accounting, legal and professional fees to increase compared to the first quarter of 2010 as we expect to incur additional accounting expenses associated with our compliance with the Sarbanes-Oxley Act as well as higher legal expenses related to distribution and licensing agreements and intellectual property protection.

Depreciation and Amortization

Depreciation and amortization expenses for the three months ended March 31, 2010 and 2009 are summarized in the table below.

	Three Months Ended March 31,						Change
	2010			2009
Depreciation and amortization expenses	$	29,082		$	33,472		(13.1	)%
Percentage of total revenue		41.7	%		38.4	%

Depreciation and amortization expenses for the three months ended March 31, 2010 decreased by approximately $4,400, or 13.1%, compared to the same period in 2009. The decrease for the three months ended March 31, 2010 was primarily due to reduced depreciation from assets becoming fully depreciated. For the remainder of 2010, we expect depreciation and amortization expenses to be consistent with the levels experienced in the first quarter of 2010.

Other Income (Expense)

Other income (expense) consists of interest income, interest expense related to our outstanding convertible notes payable and accretion of discount on the convertible notes payable.

15

Other income (expense), net for the three months ended March 31, 2010 and 2009 is summarized in the table below.

	Three Months Ended March 31,						Change
	2010			2009
Interest income	$	345		$	5,043		(93.2	)%
Interest expense on convertible notes payable		(28,528	)		(14,081	)	102.6	%
Interest expense on convertible notes payable, related party		(115,704	)		(81,227	)	42.4	%
Accretion of discount on convertible notes payable		(9,097	)		(4,657	)	95.3	%
Accretion of discount on convertible notes payable, related party		(14,950	)		(7,288	)	105.1	%
Other income (expense), net	$	(167,934	)	$	(102,210	)	64.3	%

Interest Income. Interest income for the three months ended March 31, 2010 decreased by approximately $4,700, or 93.2%, compared to the same period in 2009, due primarily to lower prevailing interest rates. For the remainder of 2010, we expect interest income to decrease due to our decreasing balance in cash and cash equivalents.

Interest Expense on Convertible Notes Payable, Including Related Party. For the three months ended March 31, 2010, interest expense related to our outstanding convertible notes payable, including related party, increased by approximately $48,900, or 51.3%, to $144,232 from $95,308 for the same period in 2009. Interest expense in the first quarter of 2010 was significantly higher due to interest expense incurred from the convertible promissory notes issued during the first quarter of 2009 (the 2009 Notes) and also the convertible promissory notes issued in March 2010 (the 2010 Notes). We anticipate future quarterly interest expense associated with our outstanding convertible notes payable to be higher than the levels experienced in the first quarter of 2010 as subsequent quarters will include a full three months of interest expense on the 2010 Notes.

Accretion of Discount on Convertible Notes Payable, Including Related Party. For the three months ended March 31, 2010, accretion of discount on the outstanding convertible notes payable was $24,047, an increase of approximately $12,100, or 101.3%, from $11,945 for the three months ended March 31, 2009. The increase was primarily because the accretion of discount for the first quarter of 2010 consisted of expenses for the full three months for the 2009 Notes whereas the accretion of discount for the first quarter of 2009 was incurred only for a portion of that period. We anticipate future quarterly accretion of discount on the 2010 Notes and 2009 Notes to be higher than the level experienced in the first quarter of 2010 as subsequent quarters will include a full three months of accretion on the 2010 Notes.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily through the private sale of debt and equity securities. Our principal sources of liquidity are cash and cash equivalents. As of March 31, 2010, we had approximately $3,593,000 in cash and cash equivalents, compared to approximately $1,344,700 in cash and cash equivalents at December 31, 2009. The increase in cash and cash equivalents from December 31, 2009 was primarily attributable to the proceeds of $2,900,000 from our issuance of convertible notes payable in March 2010, partially offset by cash used in operations and a purchase of capital assets totaling approximately $651,700.

Cash Flows from Operating Activities

Cash used in operating activities for the three months ended March 31, 2010 and 2009 was approximately $650,500 and $927,700, respectively, in each case derived primarily from the net loss for the period plus the net effect of non-cash expenses. Our operating cash flows are also influenced by our working capital needs to support growth, in particular fluctuations in inventory, accounts receivable, accounts payable and other current assets and liabilities. We continue to experience negative cash flows from operating activities due to the cash requirements to support our current level of operations while investing in activities to expand our product lines and revenue base. During the three months ended March 31, 2010, cash flows from operating activities included a decrease in inventory and increases in accrued compensation and benefits, deferred revenue, other accrued expenses and prepaid expenses. The primary working capital uses of cash for the three months ended March 31, 2009 were due to increases in inventory and prepaid expenses and other current assets as well as a decrease in accrued compensation and benefits, partially offset by an increase in trade payables.

Inventory, which consists of peptides held for resale and our proprietary branded skin care products, decreased by approximately $2,200 for the three months ended March 31, 2010 and increased by approximately $109,500 for the three months ended March 31, 2009. The decrease in the first quarter of 2010 was due to sales of peptides, offset by an increase in inventory of skin care products in anticipation of increased customer demand. The increase in the first quarter of 2009 was due primarily to our purchase of peptides to fulfill a purchase agreement entered in August 2007.

Accrued compensation and benefits increased by approximately $16,200 in the three months ended March 31, 2010 due principally to an increase in accrued paid time-off, and decreased by approximately $61,000 in the three months ended March 31, 2009 due primarily to payments related to retroactive salary increases for two executives.

Deferred revenue increased by approximately $22,500 in the three months ended March 31, 2010 due to a product prepayment by a customer. There was no change in deferred revenue in the three months ended March 31, 2009.

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Cash Flows from Investing Activities

For the three months ended March 31, 2010, cash used in investing activities was approximately $1,200 due to a purchase of capital assets. For the three months ended March 31, 2009, cash provided by investing activities was $970,000 which represented a reclassification of funds from restricted cash to cash and cash equivalents following the completion of the convertible promissory note and warrant offering in 2009.

Cash Flows from Financing Activities

For the three months ended March 31, 2010, cash provided by financing activities was $2,900,000, which represented the aggregate proceeds from our issuance of convertible promissory notes and warrants in March 2010. For the three months ended March 31, 2009, cash provided by financing activities was $2,504,000, which reflected the aggregate proceeds of $3,474,000 from our issuance of convertible promissory notes and warrants in February and March 2009 less $970,000 of cash deposits which had already been received as of December 31, 2008.

Based on the current status of our operating and product commercialization development plans, we estimate that our existing cash and cash equivalents will be sufficient to fund our operations, continue with work towards our Rx product development and support the continued expansion of our consumer program through the remainder of 2010. We will need substantial additional capital in order to maintain the current level of operations, continue commercialization of our technology and advance our pharmaceutical programs beyond 2010. Accordingly, we will need 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 may not be able to satisfy our existing obligations, including the repayment of the 2008 Note and 2009 Notes by July 1, 2011 and the 2010 Notes by July 1, 2013, or may be required to severely reduce the scope of our operations, which would significantly impede our ability to proceed with current operational plans and could lead to the discontinuation of our business.

The amount of capital we will need in the future will depend on many factors, including capital expenditures and hiring plans to accommodate future growth, research and development plans, future demand for our products and technology, and general economic conditions.

Contractual Obligations

The following table summarizes our contractual obligations and the effect such obligations are expected to have on liquidity in future periods as of March 31, 2010:

Contractual Obligations	Remainder of 2010		2011 - 2012		2013 - 2015		Total
Operating lease	$	37,446	$	156,203	$	208,911	$	402,560
Convertible notes payable and related accrued interest (1)		—		7,946,761		3,671,638		11,618,399
Total contractual obligations	$	37,446	$	8,102,964	$	3,880,549	$	12,020,959

(1) Interest is accrued at the rate of 8% per annum and is due and payable on the earlier of July 1, 2011 in the case of the 2008 and 2009 notes and July 1, 2013 in the case of the 2010 notes, or when called by the note holders upon an event of default, including in the event we file for bankruptcy.

Recent Accounting Pronouncements

See Note 1, “Summary of Significant Accounting Policies – Recent Accounting Pronouncements” in our Notes to Condensed Financial Statements.

Subsequent Events

As of May 6, 2010, we have received an additional $300,000 as subscription deposits from accredited investors for a subsequent closing of our 2010 offering of unsecured convertible promissory notes and warrants (see Note 2 of our Notes to Condensed Financial Statements). These subscription deposits are classified as restricted cash until the completion of the closing, expected to be on or about May 10, 2010, at which point we will issue convertible promissory notes and warrants to subscribing investors and the restrictions on use of the funds will be released.

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ITEM 3. Quantitative and Qualitative Disclosure About Market Risk.

Not applicable.

ITEM 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Acting Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on that evaluation, the Chief Executive Officer and Acting Chief Financial Officer concluded that our disclosure controls and procedures were functioning effectively as of the end of the period covered by this report to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Acting Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

(b) Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

18

PART II - OTHER INFORMATION

ITEM 1A. Risk Factors.

There are numerous factors that affect our business and results of operations, many of which are beyond our control. Please see our Annual Report on Form 10-K for the year ended December 31, 2009 for a description of some of the risks and uncertainties that we face. There have been no material changes in our risk factors from those described in that Annual Report. If any of those risks were to occur, our business, operating results and financial condition could be seriously harmed.

19

ITEM 6. Exhibits.

			Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith	Form	Period Ending	Exhibit	Filing Date
2.1	Proposal for Approval of Reincorporation of Helix BioMedix, Inc., a Colorado corporation, from Colorado to Delaware		10-KSB	12/31/00	2	4/16/01
3.1	Certificate of Ownership and Merger of Helix BioMedix, Inc. a Delaware corporation and Helix BioMedix, Inc., a Louisiana corporation		10-KSB/A	12/31/02	3.1	4/30/03
3.2	Certificate of Incorporation of Helix BioMedix, Inc.		10-KSB/A	12/31/00	3-A	5/18/01
3.3	Certificate of Amendment to the Certificate of Incorporation of Helix BioMedix, Inc.		10-KSB/A	12/31/02	3.3	4/30/03
3.4	Bylaws of Helix BioMedix, Inc.		10-KSB/A	12/31/00	3-B	5/18/01
4.1	Rights Agreement dated August 21, 2003		10-KSB	12/31/03	10.27	3/26/04
4.2	Acceptance and Acknowledgement of Appointment dated January 4, 2004		10-KSB	12/31/03	10.28	3/26/04
10.16	Form of Convertible Note and Warrant Purchase Agreement between the Company and the other parties thereto	X
10.17*	International Distribution Agreement dated as of March 3, 2010 between the Company and RubyDerm Bio Inc.	X
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	X
31.2	Certification of the Company’s Acting Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934	X
32.1	Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350	X
32.2	Certification of the Company’s Acting Chief Financial Officer pursuant to 18 U.S.C. Section 1350	X

* Pursuant to a request for confidential treatment, portions of this Exhibit have been redacted from the publicly-filed document and have been furnished separately to the Securities and Exchange Commission as required by Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

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SIGNATURES

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

May 6, 2010

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

21

EX-10.16

Exhibit 10.16

CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT

This Convertible Note and Warrant Purchase Agreement (the “Agreement”) is made as of             , 2010, by and between Helix BioMedix, Inc., a Delaware corporation (the “Company”), and the undersigned (the “Investor”).

1. Purchase and Sale; Closing.

1.1 Purchase of Note. Subject to the terms and conditions of this Agreement, the Company agrees to sell to the Investor, and the Investor agrees to purchase from the Company, a Convertible Promissory Note (the “Note”) in substantially the form attached hereto as Exhibit A in the principal amount set forth on the signature page hereto. The Note will be convertible into equity securities of the Company upon the terms and conditions contained in the form of Note attached hereto as Exhibit A. Shares of equity securities of the Company issued upon conversion of the Note are referred to herein as the “Note Shares.”

1.2 Purchase of Warrant. Subject to the terms and conditions of this Agreement, the Company agrees to sell to the Investor, and the Investor agrees to purchase from the Company, a Warrant (the “Warrant”) in substantially the form attached hereto as Exhibit B. The Warrant will be exercisable for shares of the Company’s Common Stock upon the terms and conditions contained in the form of Warrant attached hereto as Exhibit B. Shares of the Company’s Common Stock issued upon exercise of the Warrant are referred to herein as the “Warrant Shares.” The Note, the Warrant, the Note Shares and the Warrant Shares are sometimes collectively referred to herein as the “Securities.”

1.3 Closing. The closing of the sale and issuance of the Note and Warrant shall be held at such time and place upon which the Company and the Investor shall agree (hereinafter referred to as the “Closing”). The date of the Closing is referred to herein as the “Closing Date.”

2. Representations of the Company.

The Company represents and warrants to the Investor as follows:

2.1 Organization and Standing. The Company is a corporation duly organized and existing under, and by virtue of, the laws of the State of Delaware and is in good standing under such laws.

2.2 Corporate Power. The Company will have at the Closing all requisite legal and corporate power and authority to execute and deliver this Agreement, to sell and issue the Securities and to carry out and perform its obligations under the terms of this Agreement.

2.3 Authorization. All corporate action on the part of the Company necessary for the authorization, execution, delivery and performance of this Agreement by the Company, the authorization, sale, issuance and delivery of the Note and the Warrant and the performance of all of the Company’s obligations hereunder and thereunder has been taken or will be taken prior to the Closing. This Agreement, the Note and Warrant, when executed and delivered by the Company, shall constitute valid and binding obligations of the Company, enforceable in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies. The Note Shares, when issued in compliance with the provisions of the Note, will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances, assuming that the Investor takes the Note Shares with no notice thereof, other than any liens or encumbrances created by or imposed upon the Investor; provided, however, that the Note Shares will be

subject to restrictions on transfer under state and/or federal securities laws. The Warrant Shares, when issued in compliance with the provisions of the Warrant, will be validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances, assuming that the Investor takes the Warrant Shares with no notice thereof, other than any liens or encumbrances created by or imposed upon the Investor; provided, however, that the Warrant Shares will be subject to restrictions on transfer under state and/or federal securities laws.

2.4 No Finder’s Fees. No person is entitled, directly or indirectly, to compensation from the Company by reason of any contract or understanding or contact with the Company as a finder or broker in connection with this sale and purchase of the Note and Warrant contemplated by this Agreement. The Company agrees to indemnify and hold the Investor harmless against and respect of any claim of brokerage or other commissions or similar fees relative to this Agreement or the transactions contemplated hereby which arises as a result of a contract or understanding made by the Company with any such broker or finder in connection with this sale and purchase of the Note and Warrant contemplated by this Agreement.

3. Representations of Investors. The Investor hereby represents and warrants to the Company with respect to its purchase of the Note and Warrant as follows:

3.1 Investment. The Investor understands that the investment in the Securities is a speculative investment and represents that it is aware of the business affairs and financial condition of the Company and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Note and Warrant, and that it is purchasing the Note and Warrant for investment for its own account only and not with a view to, or for resale in connection with, any “distribution” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) or applicable state securities laws. The Investor further represents that it understands that the Securities have not been registered under the Securities Act or applicable state securities laws by reason of specific exemptions therefrom, which exemptions depend upon, among other things, the bona fide nature of the Investor’s investment intent as expressed herein. The Investor acknowledges and understands that the Securities must be held indefinitely unless subsequently registered under the Securities Act and qualified under applicable state securities laws or unless exemptions from such registration and qualification requirements are available and that the Company is under no obligation to register or qualify the Securities.

3.2 Accredited Investor. The Investor is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act.

3.3 Access to Data. The Investor acknowledges that it has received and reviewed this Agreement and exhibits hereto. The Investor has had an opportunity to discuss the Company’s business, management and financial affairs with its officers and directors. The Investor understands that such discussions as well as any written information issued by the Company were intended to describe the aspects of the Company’s business and prospects which it believes to be material but were not necessarily a thorough or exhaustive description.

3.4 No Finder’s Fees. No person is entitled, directly or indirectly, to compensation from the Investor by reason of any contract or understanding or contact with the Investor as a finder or broker in connection with the sale and purchase of the Note and Warrant contemplated by this Agreement. Investor agrees to indemnify and hold the Company harmless against and in respect of any claim for brokerage or other commissions or similar fees relative to this Agreement or the transactions contemplated hereby which arises as a result of a contract or understanding made by the Investor with any such broker or finder in connection with the sale and purchase of the Note and Warrant contemplated by this Agreement.

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3.5 Legends. The Investor understands that the Securities, and any securities issued in respect thereof or exchange therefor, may bear one or all of the following legends:

(a) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.”

(b) Any legend required by the blue sky laws of any state to the extent such laws are applicable to the Securities represented by the certificate so legended.

4. Condition to Investor’s Obligations at Closing. The Investor’s obligation to purchase the Note and Warrant at the Closing is subject to the fulfillment on or prior to the Closing Date of the following condition:

4.1 Representations and Warranties Correct. The representations and warranties made by the Company in Section 2 hereof shall be true and correct when made and shall be true and correct on the Closing Date.

5. Conditions to the Company’s Obligations at Closing. The Company’s obligation to sell and issue the Note and Warrant at the Closing is subject to the fulfillment of the following conditions:

5.1 Representations and Warranties Correct. The representations and warranties made by the Investor in Section 3 hereof shall be true and correct when made and shall be true and correct on the Closing Date.

5.2 Qualifications. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Securities pursuant to this Agreement shall be obtained and effective as of the Closing.

5.3 Board Approval. The Company’s Board of Directors shall have authorized the sale and issuance of the Securities.

6. Miscellaneous.

6.1 Governing Law; Venue. This Agreement, the Note and the Warrant shall in all respects be governed by and construed and enforced in accordance with the laws of the State of Washington, as such laws apply to contracts entered into and wholly to be performed within such state. The parties expressly stipulate that any litigation under this Agreement shall be brought in the state courts of King County, Washington or in the United States District Court for the Western District of Washington. The parties agree to submit to the exclusive jurisdiction and venue of those courts.

6.2 Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto, provided, however, that the rights of the Investor to purchase the Note and Warrant shall not be assignable without the consent of the Company and provided further that the Company may not assign its rights hereunder.

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6.3 Entire Agreement; Amendment. This Agreement, the Note, the Warrant and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought.

6.4 Notices, etc. All notices and other communications under this Agreement shall be in writing and shall be delivered in person, via facsimile machine, sent by documented overnight delivery service, or mailed by registered or certified mail, return receipt requested, postage prepaid, addressed (a) if to the Investor, at the address of the Investor set forth on the signature page of this Agreement, or (b) if to the Company, to the attention of its President at its principal offices at 22118 20th Avenue SE, Suite 204, Bothell, WA 98021. Unless otherwise specified in this Agreement, all such notices and other written communications shall be effective (and considered delivered and received for the purposes of this Agreement) (i) if delivered, upon delivery, (ii) if by facsimile machine during normal business hours upon transmission with confirmation of receipt by the receiving party’s facsimile terminal and if not sent during normal business hours, then on the next day, (iii) if sent by documented overnight delivery service, on the date following the date on which such notice is delivered to such overnight delivery service for mailing, or (iv) if mailed via first-class regular mail, three (3) day after depositing in the U.S. Mail.

6.5 Expenses; Attorneys Fees. Each of the Company and the Investor shall each bear its own expenses incurred on its behalf with respect to this Agreement and the transactions contemplated hereby. Notwithstanding the foregoing, if any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of this Agreement, the Note or the Warrant, the prevailing party shall be entitled to reasonable attorney’s fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

6.6 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the party or parties actually executing such counterparts, and all of which together shall constitute one instrument.

6.7 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not considered in construing or interpreting this Agreement.

[Remainder of Page Intentionally Left Blank]

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The foregoing Agreement is hereby executed as of the date first above written.

COMPANY:

HELIX BIOMEDIX, INC.

By:
	R. Stephen Beatty, President and
	Chief Executive Officer

INVESTOR :

Print name

Investment Amount: $        

By:

Signature

Its:

Title

Address:

Facsimile:

Soc. Sec. No. or Tax ID:

[Signature Page to Convertible Note and Warrant Purchase Agreement]

-5-

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS (i) SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS AND (ii) AT THE OPTION OF THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED HAS BEEN DELIVERED TO THE COMPANY.

HELIX BIOMEDIX, INC.

CONVERTIBLE PROMISSORY NOTE

March 5, 2010

$[        ] Bothell, Washington

FOR VALUE RECEIVED, Helix BioMedix, Inc., a Delaware corporation (“Company”), promises to pay to [        ] (“Holder”), or his registered assigns, the principal sum of [        ] Dollars ($[        ]), or such lesser amount as shall then equal the outstanding principal amount hereof, together with interest from the date of this Note on the unpaid principal balance at a rate equal to eight percent (8%) per annum, computed on the basis of the actual number of days elapsed. All unpaid principal, together with any then unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on the earlier of (i) July 1, 2013 (the “Maturity Date”) or (ii) when such amounts are declared due and payable by the Holder or made automatically due and payable, in each case upon or after the occurrence of an Event of Default (as defined below). This Note is issued pursuant to the Convertible Note Purchase Agreement of even date herewith (as amended, modified or supplemented, the “Purchase Agreement”) between Company and the Investor (as defined in the Purchase Agreement) and is one of several convertible promissory notes issued on or about the date hereof (the “Notes”).

The following is a statement of the rights of Holder and the conditions to which this Note is subject, and to which the Holder hereof, by the acceptance of this Note, agrees:

1. Definitions. As used in this Note, the following capitalized terms have the following meanings:

(a) “Company” includes the corporation initially executing this Note and any Person which shall succeed to or assume the obligations of Company under this Note.

(b) “Holder” shall mean the Person specified in the introductory paragraph of this Note or any Person who shall at the time be the registered holder of this Note.

(c) “Person” shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.

2. Interest. Accrued interest on this Note shall be payable at such time as the outstanding principal amount hereof shall be paid in full.

3. Events of Default. The occurrence of any of the following shall constitute an “Event of Default” under this Note:

(a) Failure to Pay. Company shall fail in any material respect to pay any principal payment, any interest or other payment required under the terms of this Note on the date due and such payment shall not have been made within fifteen (15) days of Company’s receipt of Holder’s written notice to Company of such failure to pay; or

(b) Breaches of Covenants. Company shall fail in any material respect to observe or perform any covenant, obligation, condition or agreement contained in this Note (other than those covenants specified in Section 3(a) hereof) and such failure shall continue for thirty (30) days after Company’s receipt of Holder’s written notice to Company thereof; or

(c) Representations and Warranties. Any representation or warranty made by Company to Holder in this Note shall be untrue in any material respect when made; or

(d) Voluntary Bankruptcy or Insolvency Proceedings. Company shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) admit in writing its inability to pay its debts generally as they mature, (iii) make a general assignment for the benefit of its or any of its creditors, (iv) be dissolved or liquidated in full or in part, (v) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vi) take any action for the purpose of effecting any of the foregoing; or

(e) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Company or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Company or the debts thereof under any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within sixty (60) days of commencement; or

(f) Cross Default. Upon an “Event of Default” under those certain convertible promissory notes issued by the Company on February 14, 2008, February 10, 2009 and March 5, 2009 (as defined therein).

4. Rights of Holder upon Default. Upon the occurrence or existence of any Event of Default (other than an Event of Default referred to in Sections 3(d) and 3(e) hereof) and at any time thereafter during the continuance of such Event of Default, Holder may, by written notice to Company, declare all outstanding obligations payable by Company hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding. Upon the occurrence or existence of any Event of Default described in Sections 3(d) and 3(e) hereof, immediately and without notice, all outstanding obligations payable by Company hereunder shall automatically become immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived, anything contained herein to the contrary notwithstanding. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Holder may exercise any other right, power or remedy permitted to it by law, either by suit in equity or by action at law, or both.

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5. Conversion.

(a) Automatic Conversion upon Equity Financing. Upon the closing (or first in a series of closings) of the next equity financing in which Company sells shares of its equity securities (the “Equity Securities”) for an aggregate consideration of at least $7,500,000 (including the aggregate principal and accrued interest due on the Notes) (the “Equity Financing”), the principal and accrued interest due on this Note shall automatically be converted into shares of the Equity Securities as set forth in Section 5(d) below. The conversion shall be deemed to have occurred as of the date of such closing or the date of the first closing in a series of closings. As a condition precedent (which may be waived by the Company) to conversion of this Note as provided for in this Section 5(a), the Holder will be required to execute the definitive Stock Purchase Agreement and such other agreements prepared in connection with the Equity Financing. The number of shares of Equity Securities into which this Note shall be automatically converted shall be determined by dividing the principal and accrued interest due on this Note as of the date of conversion by an amount equal to the lesser of (i) the per share price of the Equity Securities issued and sold in the Equity Financing and (ii) $0.80.

(b) Automatic Conversion upon Corporate Transaction. Upon the closing of a sale of substantially all of the Company’s assets or a merger or consolidation of the Company in which the Company’s stockholders will hold, in the aggregate, less than 50% of the voting power of the combined entity, the principal and accrued interest due on this Note shall automatically be converted into shares of the Company’s Common Stock as set forth in Section 5(d) below. The conversion shall be deemed to have occurred as of the date of such closing. The number of shares of Common Stock into which this Note shall be automatically converted shall be determined by dividing the principal and accrued interest due on this Note as of the date of conversion by an amount equal to the lesser of (i) the per share price attributed to the Company’s Common Stock in connection with such transaction and (ii) $0.80.

(c) Voluntary Conversion at Maturity Date. At and as of the Maturity Date, to the extent this Note is still outstanding and has not otherwise been converted or repaid in full, the Holder will have the option, in its sole discretion, to convert this Note into shares of the Company’s Common Stock. The number of shares of Common Stock into which this Note may be voluntarily converted shall be determined by dividing the principal and accrued interest due on this Note as of the date of conversion by $0.80.

(d) Issuance of Securities on Conversion. As soon as practicable after conversion of this Note, Company, at its expense, will cause to be issued in the name of and delivered to the Holder a certificate or certificates representing the number of fully paid and nonassessable shares of the Equity Securities or Common Stock (as applicable) to which Holder shall be entitled upon such conversion. No fractional shares will be issued upon conversion of this Note.

(e) Termination of Rights. All rights with respect to this Note shall terminate upon conversion hereof in accordance with this Section 5, whether or not this Note has been surrendered. Notwithstanding the foregoing, the Holder agrees to surrender this Note to Company for cancellation as soon as is practicable following conversion of this Note.

6. Successors and Assigns. Subject to the restrictions on transfer described in Section 8 below, the rights and obligations of Company and Holder shall be binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.

7. Waiver and Amendment. Any provision of this Note may be amended, waived or modified upon the written consent of Company and Holder.

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8. Transfer of this Note or Securities Issuable Upon Conversion Hereof. With respect to any contemplated offer, sale or other disposition of this Note or securities into which such Note may be converted, the Holder will first give written notice to Company prior thereto, describing briefly the manner thereof, together with a written opinion of the Holder’s counsel to the effect that such offer, sale or other disposition may be effected without registration or qualification under any federal or state law then in effect. Promptly upon receiving such written notice and reasonably satisfactory opinion, if so requested, Company, as promptly as practicable, shall notify the Holder that the Holder may sell or otherwise dispose of this Note or such securities, all in accordance with the terms of the notice delivered to Company. If a determination has been made pursuant to this Section 8 that the opinion of counsel for the Holder is not reasonably satisfactory to Company, then Company shall so notify the Holder promptly after such determination has been made. The Note thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act of 1933, as amended (the “Act”), unless in the opinion of counsel for Company such legend is not required in order to ensure compliance with the Act. Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.

9. Notices. All notices and other communications under this Note shall be in writing and shall be delivered in person, via facsimile machine, sent by documented overnight delivery service, or mailed by registered or certified mail, return receipt requested, postage prepaid, addressed (a) if to the Holder, at the address of the Holder set forth in the Purchase Agreement, or (b) if to the Company, to the attention of its President at its principal offices at 22118 20th Avenue SE, Suite 204, Bothell, WA 98021. Unless otherwise specified in this Note, all such notices and other written communications shall be effective (and considered delivered and received for the purposes of this Note) (i) if delivered, upon delivery, (ii) if by facsimile machine during normal business hours upon transmission with confirmation of receipt by the receiving party’s facsimile terminal and if not sent during normal business hours, then on the next day, (iii) if sent by documented overnight delivery service, on the date following the date on which such notice is delivered to such overnight delivery service for mailing, or (iv) if mailed via first-class regular mail, three (3) day after depositing in the U.S. Mail.

10. No Stockholder Rights. Nothing contained in this Note shall be construed as conferring upon the Holder or any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholder for the election of directors of Company or any other matters or any rights whatsoever as a stockholder of Company; and no dividends or interest shall be payable or accrued in respect of this Note or the interest represented hereby or the equity securities obtainable hereunder until, and only to the extent that, this Note shall have been converted.

11. Payment; Prepayment.

(a) Payment shall be made in lawful tender of the United States.

(b) Company shall have the right to prepay at any time, without penalty, in whole or in part, the unpaid principal and interest due on this Note.

12. Governing Law; Venue. This Note and all actions arising out of or in connection with this Note shall be governed by and construed in accordance with the laws of the State of Washington, without regard to the conflicts of law provisions of the State of Washington or of any other state. The parties expressly stipulate that any litigation under this Agreement shall be brought in the state courts of King County, Washington or in the United States District Court for the Western District of Washington. The parties agree to submit to the exclusive jurisdiction and venue of those courts.

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ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.

IN WITNESS WHEREOF, Company has caused this Note to be issued as of the date first written above.

HELIX BIOMEDIX, INC.,
a Delaware corporation
By:
	R. Stephen Beatty, President and
	Chief Executive Officer

Acknowledged and Agreed:

HOLDER:

[                             ]

Address:

Facsimile:

[Signature Page to Convertible Promissory Note]

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THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS (i) SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS AND (ii) AT THE OPTION OF THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED HAS BEEN DELIVERED TO THE COMPANY.

Holder(s): [                            ]	Warrant Number: W-[        ]
	No. of Shares For Which this Warrant is Initially Exercisable: [        ]
Issue Date: March 5, 2010	Termination Date: March 5, 2015

WARRANT FOR THE

PURCHASE OF SHARES OF COMMON STOCK

OF

HELIX BIOMEDIX, INC.

THIS CERTIFIES THAT, for valuable consideration, the undersigned, together with her successors and permitted assigns (the “Holder”) is entitled to purchase, subject to the terms set forth below, up to [    ] shares of duly authorized, validly issued, fully paid and nonassessable shares of common stock, $0.001 par value per share (the “Common Stock”), of Helix BioMedix, Inc., a Delaware corporation (the “Company”).

1. Exercise of Warrant. The terms and conditions upon which this Warrant may be exercised, and the Common Stock covered hereby (the “Warrant Stock”) may be purchased, are as follows:

(a) Term. Subject to the terms hereof, the purchase right represented by this Warrant may be exercised in whole or in part, but not as to a fractional share of Warrant Stock, at any time and from time to time until March 5, 2015.

(b) Number of Shares. The number of shares of Common Stock for which this Warrant is initially exercisable is the amount set forth above the Holder’s signature and on page one of this Warrant, which number is subject to adjustment pursuant to Section 2 of this Warrant.

(c) Purchase Price. The per share purchase price for the shares of Common Stock to be issued upon exercise of this Warrant shall be equal to $0.80 per share (the “Warrant Price”).

(d) Method of Exercise. The exercise of the purchase rights evidenced by this Warrant shall be effected by (a) the surrender of the Warrant, together with a duly executed copy of the form of a subscription attached hereto, to the Company at its principal offices at 22118 20th Avenue SE, Suite 204, Bothell, WA 98021 (or such other office or agency of the Company as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company) and (b) the delivery of the purchase price in an amount equal to the number of shares for which the purchase rights hereunder are being exercised multiplied by the Warrant Price, which amount may be paid by cashier’s check payable to the Company’s order or by wire transfer to the Company’s account. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business

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on the day on which this Warrant shall have been surrendered to the Company together with the purchase price as provided herein or at such later date as may be specified in the executed form of subscription, and at such time the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such exercise as provided herein shall be deemed to have become the holder or holders of record thereof.

(e) Exercise by Exchange. In addition to and without limiting the rights of the Holder under the terms hereof, at the Holder’s option, and if approved by the Company, this Warrant may be exercised during the term specified under Section 1(a) by being exchanged in whole or in part prior to its expiration for a number of shares of Common Stock having an aggregate fair market value on the date of such exercise equal to the difference between (x) the fair market value of the number of shares of Common Stock subject to this Warrant designated by the Holder hereof on the date of the exercise and (y) the aggregate Warrant Price for such shares in effect at such times. The following formula illustrates how many shares would then be issued upon exercise pursuant to this Section 1(e):

Let:	FMV	=	Fair market value per share of Common Stock at date of exercise.
	WP	=	Warrant Price at date of exercise.
	N	=	Number of shares desired to be exercised.
	X	=	Number of shares issued upon exercise.
Therefore:		X	=	(FMV)(N)-(WP)(N)               FMV

Upon any such exercise, the number of shares of Common Stock purchasable upon exercise of this Warrant shall be reduced by such designated number of shares of Common Stock and, if a balance of purchasable shares of Common Stock remains after such exercise, the Company shall execute and deliver to the Holder hereof a new warrant for such balance of shares of Common Stock.

No payment to the Company of any cash or other consideration shall be required from the Holder of this Warrant in connection with any exercise of this Warrant by exchange pursuant to this Section 1(e). Such exchange shall be effective upon the date of receipt by the Company of the original Warrant surrendered for cancellation and a written request from the Holder hereof that the exchange pursuant to this section be made, or at such later date as may be specified in such request.

For the purposes of this Warrant, the “fair market value” of any number of shares of Common Stock shall mean:

(i) as long as the Common Stock is traded on the Over-The-Counter Bulletin Board (or equivalent recognized source of quotations), an amount equal to the average of the high and low reported trading prices of one share of such securities for the three (3) trading days prior to the surrender of this Warrant for exchange in accordance with the terms hereof; or

(ii) in all other cases, the fair value as determined in good faith by the Board of Directors of the Company and reasonably agreed to by the Holder.

(f) Issuance of Shares. As soon as reasonably practicable after each exercise of this Warrant, in whole or in part, the Company at its expense will cause to be issued in the name of and delivered to the Holder hereof or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct,

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(i) a certificate or certificates for the number of duly authorized validly issued, fully paid and nonassessable shares of Common Stock to which such Holder shall be entitled upon such exercise, and

(ii) in case such exercise is in part only, a new warrant or warrants of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Common Stock (without giving effect to any adjustment thereof) to the number of such shares called for on the face of this Warrant minus the number of such shares designated by the Holder upon such exercise as provided herein.

2. Certain Adjustments.

(a) Mergers, Consolidations or Sale of Assets. If at any time after the date hereof while this Warrant remains outstanding and unexpired there shall be a capital reorganization (other than a combination or subdivision of Warrant Stock otherwise provided for herein), or a merger or consolidation of the Company with or into another corporation, or the sale of the Company’s properties and assets as, or substantially as, an entirety to any other person, then, as a part of such reorganization, merger, consolidation or sale, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified in this Warrant and upon payment of the purchase price, the number of shares of stock or other securities, cash or property of the Company or the successor corporation resulting from such reorganization, merger, consolidation or sale, to which a Holder of the Common Stock deliverable upon exercise of this Warrant would have been entitled under the provisions of the agreement in such reorganization, merger, consolidation or sale if this Warrant had been exercised immediately before that reorganization, merger, consolidation or sale. In any such case, appropriate adjustment (as determined reasonably and in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Warrant with respect to the rights and interests of the Holder after the reorganization, merger, consolidation or sale to the end that the provisions of this Warrant (including adjustment of the Warrant Price then in effect and the number of shares of Warrant Stock) shall be applicable after that event, as near as reasonably may be, in relation to any shares or other property deliverable after that event upon exercise of this Warrant.

(b) Splits and Subdivisions; Dividends. In the event the Company should at any time or from time to time while this Warrant remains outstanding and unexpired effect or fix a record date for the effectuation of a split or subdivision of the outstanding shares of its Common Stock or the determination of the holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or warrants, options or other rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as the “Common Stock Equivalents”) without payment of any consideration by such holder for the additional shares of Common Stock or Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of distribution, split or subdivision if no record date is fixed), the per share Warrant Price shall be appropriately increased in proportion to such increase (or potential increase) of outstanding shares.

(c) Combination of Shares. If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, the per share purchase price shall be appropriately increased and the number of shares of Warrant Stock shall be appropriately decreased in proportion to such decrease in outstanding shares.

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(d) Certificate as to Adjustments. In the case of each adjustment or readjustment of the Warrant Price pursuant to this Section 2, the Company at its expense will promptly compute such adjustment or readjustment in accordance with the terms hereof and cause a certificate, signed by the Company’s principal financial officer, setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based to be delivered to the Holder of this Warrant. The Company will furnish or cause to be furnished to such Holder a certificate setting forth:

(i) Such adjustments and readjustments;

(ii) The purchase price at the time in effect and how it was calculated; and

(iii) The number of shares of Warrant Stock and the amount, if any, of other property at the time receivable upon the exercise of the Warrant.

(e) Notices of Record Date, etc. In the event of:

(i) Any taking by the Company of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend payable at the same rate as that of the last such cash dividend theretofore paid) or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right; or

(ii) Any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of all or substantially all of assets of the Company to any other person or any consolidation or merger involving the Company; or

(iii) Any voluntary or involuntary dissolution, liquidation or winding-up of the Company; the Company will mail to the Holder of this Warrant at least ten (10) business days prior to the earliest date specified therein, a notice specifying:

(1) The date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right; and

(2) The date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding-up is expected to become effective and the record date for determining stockholders entitled to vote thereon and the time.

3. Fractional Shares. No fractional shares shall be issued in connection with any exercise of this Warrant. In lieu of the issuance of such fractional share, the Company shall make a cash payment equal to the then fair market value of such fractional share as determined in good faith by the Company’s Board of Directors.

4. No Privilege of Stock Ownership. Prior to the exercise of this Warrant, the Holder shall not be entitled, by virtue of holding this Warrant, to any rights of a stockholder of the Company, including (without limitation) the right to vote, receive dividends or other distributions, exercise preemptive rights or be notified of stockholder meetings, and such Holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company. Nothing in this Section 4, however, shall limit the right of the Holder to be provided the notices described in Section 2 hereof, or to participate in distributions described in Section 2 hereof if the Holder exercises this Warrant.

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5. Limitation of Liability. Except as otherwise provided herein, in the absence of affirmative action by the Holder hereof to purchase the Warrant Stock, no mere enumeration herein of the rights or privileges of the Holder hereof shall give rise to any obligation of such Holder to purchase any securities or any liability of such Holder for the purchase price or as a stockholder of the Company, whether such obligation or liability is asserted by the Company or by creditors of the Company.

6. Representations and Warranties of the Holder. The Holder represents and warrants to the Company as follows:

(a) Purchase Entirely for Own Account. This Warrant is issued to the Holder in reliance upon such Holder’s representation to the Company, which by the Holder’s execution of this Warrant the Holder hereby confirms, that the Warrant and Warrant Stock are being acquired for investment for the Holder’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof in violation of the federal or state securities laws.

(b) Investment Experience. The Holder represents that it can bear the economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Warrant and the Warrant Stock. If an entity, the Holder also represents it has not been organized solely for the purpose of acquiring the Warrant or the Warrant Stock.

(c) Restricted Securities. The Holder understands that the Warrant being issued hereunder and the Warrant Stock to be purchased hereunder are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act of 1933, as amended (the “Securities Act”), only in certain limited circumstances. In this connection, the Holder represents that it is familiar with Securities and Exchange Commission Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

(d) Legends. It is understood that the certificates evidencing the Warrant Stock may bear a legend substantially in the following form:

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS (COLLECTIVELY, THE “SECURITIES LAWS”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER THE SECURITIES LAWS (i) UNLESS SOLD PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES LAWS AND (ii) THE COMPANY, IF IT SO REQUESTS, HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”

In addition, the certificates evidencing the Warrant Stock may bear any legend required by the Company’s charter documents or the laws of the State of Washington and any other state in which the securities will be issued.

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7. Transfers and Exchanges.

(a) The Holder may not sell, hypothecate, pledge or otherwise dispose of any interest in the Warrant or the Warrant Stock unless such transfer would not violate any provision of this Section 7.

(b) Subject to the conditions of this Section 7, upon delivery to the Company of a duly completed and executed Assignment in substantially the form attached hereto, a new warrant shall be issued to the transferee therein named. All new warrants issued in connection with transfers or exchanges shall not require the signature of the new Holder hereof and shall be identical in form and provision to this Warrant except as to the number of shares.

(c) It shall be a condition to any transfer of this Warrant that the transferee shall be an accredited investor, within the meaning of the Securities Act, and that the Company shall have received, at the time of such transfer or exercise (i) a representation letter, or at the option of the Company, a legal opinion, in form and substance reasonably satisfactory to the Company and its counsel, reciting the pertinent circumstances surrounding the proposed transfer and stating that such transfer is exempt from the prospectus and registration requirements of the Securities Act and applicable state securities laws and (ii) a statement in writing from, and signed by, any proposed transferees containing the same representations and warranties as set forth in Section 6 hereof and agreeing to be bound by the provisions of this Section 7, such statement to be in the form of Assignment attached hereto. Notwithstanding the foregoing, as long as the transfer of this Warrant is in compliance with applicable securities laws and there are no significant issues of fact (such as whether or not the Holder is an “affiliate,” as such term is defined in Rule 144 of the Securities Act) or unusual questions of law, the requirement of a representation letter or legal opinion shall not apply to (a) the transfer of this Warrant or any part thereof to a partnership of which the Holder is a partner or to the beneficial owners or affiliates of such partnership, (b) the transfer of this Warrant or any part thereof to beneficial owners, employees or affiliates of the Holder, (c) bona fide gifts to a member of a Holder’s immediate family or trustee for a member of a Holder’s immediate family, (d) transfers by will upon the death of a Holder, or (e) transfers pursuant to a divorce or dissolution of the marriage of a Holder.

(d) Ownership of Warrants. The Company may treat the person in whose name any Warrant is registered on the register kept by the Company or its transfer agent as the owner and Holder thereof for all purposes, notwithstanding any notice to the contrary. A Warrant, if properly assigned, may be exercised by a new Holder without a new Warrant first having been issued. Nothing in this Section 7(d) shall relieve the Holder of his obligations under Section 7(c) hereof.

8. Successors and Assigns. The terms and provisions of this Warrant shall be binding upon the Company and the Holder and their respective successors and assigns, subject at all times to the restrictions set forth herein.

9. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company of evidence reasonably satisfactory to it and its counsel of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to the Company, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new warrant of like tenor and dated as of such cancellation, in lieu of this Warrant.

10. Saturdays, Sundays, Holiday, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday or Sunday or shall be a legal holiday in the State of Washington, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

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11. Amendments and Waivers. Any term of this Warrant may be amended and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the Holder. Any such amendment or waiver shall be binding on the parties.

12. Governing Law; Venue. The terms and conditions of this Warrant shall be governed by and construed in accordance with the law of the State of Washington, without regard to conflict of law provisions. The parties expressly stipulate that any litigation under this Warrant shall be brought in the state courts of King County, Washington or in the United States District Court for the Western District of Washington. The parties agree to submit to the exclusive jurisdiction and venue of those courts.

13. Notices. All notices and other communications under this Warrant shall be in writing and shall be delivered in person, via facsimile machine, sent by documented overnight delivery service, or mailed by registered or certified mail, return receipt requested, postage prepaid, addressed (a) if to the Holder, at the registered address of such Holder as set forth in the register kept at the principal office of the Company, or (b) if to the Company, to the attention of its President at its principal offices at 22118 20th Avenue SE, Suite 204, Bothell, WA 98021, provided that the exercise of any Warrant shall be effected in the manner provided in Section 1. Unless otherwise specified in this Warrant, all such notices and other written communications shall be effective (and considered delivered and received for the purposes of this Agreement) (i) if delivered, upon delivery, (ii) if by facsimile machine during normal business hours upon transmission with confirmation of receipt by the receiving party’s facsimile terminal and if not sent during normal business hours, then on the next day, (iii) if sent by documented overnight delivery service, on the date following the date on which such notice is delivered to such overnight delivery service for mailing, or (iv) if mailed via first-class regular mail, three (3) day after depositing in the U.S. Mail.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties have executed this Warrant effective as of the date first written above.

THE COMPANY:
HELIX BIOMEDIX, INC., a Delaware corporation
By:
Name:	R. Stephen Beatty,
	President and Chief Executive Officer

Address:	22118 20th Avenue SE, Suite 204
	Bothell, WA 98021
Telephone:	(425) 402-8400
Facsimile:	(425) 806-2999

Number of shares for which this warrant is initially exercisable: [    ]

HOLDER:

[                             ]

Address:

Facsimile:

Soc. Sec. No. or Tax ID:

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SUBSCRIPTION

Helix BioMedix, Inc.

22118 20th Avenue SE, Suite 204

Bothell, WA 98021

Ladies and Gentlemen:

The undersigned hereby elects to purchase, pursuant to the provisions of the Warrant dated March 5, 2010, held by the undersigned,      shares of Common Stock of Helix BioMedix, Inc., a Delaware corporation, and tenders herewith payment of the purchase price of such shares in full.

The undersigned hereby confirms and acknowledges the investment representations and warranties made in Section 6 of the Warrant and accepts such shares subject to the restrictions of the Warrant, copies of which are available from the Secretary of the Company.

Date:	Print Name(s):
	Signature:
	Title if applicable:
	Signature:
	Title if applicable:
	Address:

Warrant Subscription

FORM OF ASSIGNMENT

The undersigned hereby assigns this Warrant to

(Print or type name, address and zip code of assignee)

Please insert Social Security or other identifying number of assignee:

and irrevocably appoints              as agent to transfer this Warrant on the books of the Company. The agent may substitute another to act for him or it.

Date:                     

Signed:

(All owners must sign exactly as name(s) appear(s) on the front of this Warrant)

The undersigned assignee hereby confirms and acknowledges the investment representations and warranties made in Section 6 of the Warrant and agrees to be bound by the obligations set forth in the Warrant, copies of which are available from the Secretary of the Company.

Date:	By:
	Name:
	Title:

Warrant Form of Assignment

EX-10.17

Exhibit 10.17

INTERNATIONAL DISTRIBUTION AGREEMENT

This International Distribution Agreement (this “Agreement”), dated as of March 3, 2010 (the “Effective Date”), is made by and between Helix BioMedix, Inc (“Helix”), a company incorporated under the laws of the State of Delaware, USA, with its principal office at 22118 20^th Ave SE # 204, Bothell, Washington 98021 USA (“Helix”), and the company identified below (“Distributor”).

Name of Distributor	RubyDerm Bio Inc.
Principal Address of Distributor	3F Moojin Building, 60 Nonhyun-Dong, Kangnam-Gu, Seoul, Korea
Phone/Facsimile	Phone: 82 2 3446 7588 Facsimile: 82 2 3446 7589
E-mail Address	***
Form and Jurisdiction of Distributor’s Business	Seoul Korea

RECITALS

A. Helix is engaged in the development, manufacture and marketing of skin care, tissue repair and dermatology products.

B. Distributor desires to distribute certain of Helix’s skin care, wound care and anti-microbial products, and Helix desires to grant to Distributor the right to distribute such products, all according to the terms set forth in this Agreement.

AGREEMENTS

NOW, THEREFORE, in consideration of the mutual promises set forth in this Agreement, Helix and Distributor hereby agree as follows:

1. Definitions

Capitalized terms used in this Agreement and not otherwise defined will have the meanings set forth below:

“Confidential Information” means information that has or could have commercial value or other utility in the business or prospective business of the other party, or information that the receiving party ought in good faith from the circumstances of its disclosure consider to be confidential, including, but not limited to, ideas, methods, design concepts, inventions, policies, products, technology, business plans, advertising and marketing plans and strategies, formulas, patterns, Helix’s customer lists, financial information, and compilations of information. Confidential Information may be transmitted orally, in writing, as photocopies, photographs, computer files, notes, memos, faxes, letters, e-mails, files, reports, surveys, presentations, business plans, financial documents, analyses, video and audio tapes, or any other manner or method of transmitting information whether prepared by the disclosing party to this Agreement or a third party on the disclosing party’s behalf. Confidential Information does not include information that is: (a) known to such party prior to the receipt from the other party, or (b) generally known or available in the industry or to the general public through no act or fault of such party, or (c) acquired in good faith from a third party that has no obligation of confidentiality with respect to such information, or (d) subject to the

Confidential treatment has been requested for portions of this Distribution Agreement. This Distribution Agreement 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.

provisions of Section 15, required to be disclosed by applicable law, by order of court or the rules, regulations, or order of any governmental agency, or (e) independently developed for one party by employees or agents of that party who do not have access to the Confidential Information of the other party.

“Market” means the retail and/or wholesale sectors identified in paragraph 1 of Schedule A, as the same may be amended from time to time by mutual written agreement of the parties.

“Products” means the final proprietary skin care, wound care and anti-microbial products made by or for Helix identified on Schedule A, which may be modified by Helix from time to time.

“Terms of Sale” means Helix’s standard terms of sale, which may be modified by Helix from time to time. A copy of Helix’s current standard terms of sale is attached hereto as Schedule B.

“Territory” means the geographical area identified on Schedule A, as the same is amended from time to time by mutual written agreement of the parties.

“Trademarks” means the trademarks of Helix identified on Schedule A, as the same may be amended from time to time by mutual written agreement of the parties.

2. Appointment

Subject to the terms and conditions of this Agreement, Helix hereby appoints Distributor as a distributor of the Products in the Market and in the Territory, such appointment being exclusive to Distributor with respect to the Market within the Territory. Distributor may distribute Products only to persons and entities located and taking delivery within the Territory. Furthermore, Products distributed by Distributor for further distribution may be distributed only through subdistributors approved by Helix. Distributor is specifically excluded from selling Products to the accounts listed on Schedule A (“Excluded Accounts”). Notwithstanding any other provision of this Agreement, Helix may sell Products to any Excluded Account in the Market in the Territory. Further, nothing in this Agreement shall be construed as limiting in any manner Helix’s marketing or distribution activities, or its appointment of other dealers, distributors, licensees or agents, in each case other than with respect to the Market within the Territory.

3. Relationship of the Parties

3.1 Independent Contractors

Distributor is an independent contractor to Helix and will have no right, authority or power to create any obligation or responsibility, express or implied, on behalf of or in the name of Helix. This Agreement does not construct any relationship between Distributor and Helix such as agent, partnership, joint venture, or employer and employee. Helix is in no manner associated with or otherwise connected with the actual performance of this Agreement on the part of Distributor, nor with Distributor’s employment of other persons or incurring of other expenses. Except as expressly provided herein, Helix shall have no right to exercise any control over the activities or operations of Distributor.

3.2 Distributor’s Employees

Distributor is solely responsible for the employment, direction and control of its employees and agents. Distributor shall indemnify and hold Helix harmless against any cost or liability arising from, or as a result of, Distributor’s employment, direction or control of its employees and agents.

*** Confidential treatment requested

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3.3 Distributor’s Taxes

Helix shall not be liable for any taxes, duties and other government assessments in any jurisdiction which are incurred or arise in connection with or related to Distributor’s business activities (under this Agreement or otherwise), other than Helix’s US income taxes, and all such taxes will be the financial responsibility of Distributor. Distributor agrees to indemnify, defend and hold Helix harmless from any such taxes or claims, causes of action, costs (including, without limitation, reasonable attorneys’ fees) and any other liabilities of any nature whatsoever related to such taxes, duties or other government assessments.

4. Purchase of Products by Distributor

4.1 Terms and Conditions

All sales of Products by Helix to Distributor will be subject to, and governed by, the terms and conditions of this Agreement and the Terms of Sale. The terms and conditions of this Agreement, including the Terms of Sale, will supersede the terms and conditions of any purchase order, acknowledgment or similar document at any time submitted by Distributor.

4.2 Pricing

All Products will be sold to Distributor at the prices set forth in Helix’s pricing schedule attached hereto as Schedule C through the date specified on Schedule C. Prices may be increased *** thereafter upon *** written notice by Helix. New prices will apply to all orders made after such notice period.

4.3 Payments

Distributor shall make payment to Helix in United States Dollars. Payment for an order shall be made in advance by wire transfer, Visa, MasterCard or American Express.

4.4 Initial Order

Within *** days after the Effective Date (unless extended by mutually written agreement of the parties), Distributor shall deliver to Helix a purchase order for at least the quantity or aggregate value of Products described on Schedule A, for delivery as specified on Schedule A.

4.5 Subsequent Orders; Frequency; Minimum Size

Distributor shall place orders not more frequently than once per month and each order will specify a minimum of the quantity or aggregate value of Products described on Schedule A.

4.6 Forecasts

Distributor shall, on a calendar quarterly basis, provide Helix with a good-faith forecast of its requirements for Products, to include such data and periods as may be reasonably requested by Helix.

4.7 Lead Time

Helix shall not be required to deliver Products ordered by Distributor prior to *** days after receipt of each respective purchase order.

*** Confidential treatment requested

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4.8 Product Changes or Discontinuance

Helix may at any time make any changes in, or discontinue the sale of, any specific Product or variation thereof. Helix shall give *** days’ notice to Distributor of any planned discontinuance or *** days’ notice of any planned significant change in the Products, prior to such discontinuance or change.

5. Efforts, Resources and Other Obligations of Distributor

In addition to its other obligations under this Agreement, Distributor shall:

5.1 Achieve the performance standards set forth on Schedule A (the “Performance Standards”).

5.2 Use its best efforts to successfully publicize, advertize and otherwise market (including, without limitation, inclusion of the Products in Distributor’s catalogs and other promotional materials) and distribute the Products on a continuing basis in the Market in the Territory.

5.3 Provide and maintain, at Distributor’s expense, all personnel, facilities, equipment and other resources necessary in order to effectively market and distribute the Products in the Market in the Territory.

5.4 Maintain adequate stock levels of Products to meet the needs of its customers.

5.5 Train its sales personnel so that they are knowledgeable of the Products and capable of effectively presenting, promoting, demonstrating and supporting the Products in the Market in the Territory.

5.6 Provide prompt attention to, and resolution of, inquiries from customers in the Market in the Territory.

5.7 Respond to all customer leads supplied by Helix in a timely fashion, and bid only Helix Products for all such leads and, if requested, provide an audit of all leads supplied by Helix.

5.8 Conduct business in a manner that reflects favorably at all times on the Products and the good name, goodwill and reputation of Helix.

5.9 As requested by Helix and at Distributor’s sole expense, (a) secure and maintain in its own name (unless directed by Helix to secure, in the name of Helix), any and all registrations, permits, licenses, approvals, and other governmental actions required to import, handle, market, sell, demonstrate, use and distribute Products in the Market in the Territory, and (b) provide to Helix quarterly progress reports on any such action, and provide to Helix copies of all registrations, permits, licenses, approvals, certificates, correspondence and other documentation related to any such action.

5.10 Provide all customer service and support for the Products in the Market in the Territory. Distributor agrees and acknowledges that Helix will have no obligation to provide customer service and support of any kind in the Market in the Territory.

5.11 To keep Helix informed as to any problems encountered with the Products and any resolutions arrived at for those problems, and to communicate promptly to Helix any and all modifications, design changes or improvements of the Products suggested by any customer, employee or agent. Distributor further agrees that Helix shall have and is hereby assigned any and all right, title and interest in and to any such suggested modifications, design changes, or improvements of the Products, without the payment of any additional consideration therefor either to Distributor, or its employees, agents or customers.

*** Confidential treatment requested

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6. Restrictions

In addition to its other restrictions under this Agreement, Distributor shall not:

6.1 Sell, use or transfer any Products outside the Market or Territory. Distributor shall not sell or transfer any Products to a party if Distributor knows or has reason to know that such party intends to directly or indirectly market, sell, transfer or use the Products outside the Market or Territory.

6.2 Make any representations or warranties to any third party that purport to bind Helix.

6.3 Modify, reformulate or alter the composition of any Product or its packaging in any way without Helix’s prior written approval. Distributor is expressly forbidden from altering, removing, obscuring or modifying any label, Trademark or other Helix symbol from any Product or printed materials provided under this Agreement, including, but not limited to, Product marketing and training materials provided by Helix. Furthermore, Distributor shall solely use Product marketing and training materials that have been approved and authorized by Helix in writing.

6.4 Distribute in the Market in the Territory any third party product that Helix reasonably considers is competitive to any Helix Product. A complete list of all skin care, tissue repair and dermatology products currently distributed by Distributor is set forth on Schedule D and Helix acknowledges that such products shall be deemed not to compete with the Products.

6.5 Engage in any deceptive, misleading or unethical practices that are detrimental to Helix, the Products or the public.

6.6 Make false or misleading representations, advertisements or claims with regard to the Products or Helix.

7. Obligations of Helix

In addition to its other obligations under this Agreement, Helix shall:

7.1 Provide to Distributor such amounts of Product marketing and training materials as Helix determines reasonable in its sole discretion, all in the English language unless otherwise agreed by Helix.

7.2 Keep Distributor informed of any Product complaints that are, in Helix’s reasonable judgment, important concerning the quality and performance of Products.

7.3 Provide technical specifications and other information currently available and reasonably required to support Distributor’s securing of registrations, permits, licenses, approvals and other governmental actions required to import, handle, market, sell, demonstrate, use or distribute Products in the Territory.

8. Reports; Quality Assurance

8.1 Reports

Distributor shall provide to Helix the written reports in the form and frequency described on Schedule E.

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8.2 Quality Assurance

Distributor shall maintain a quality assurance program that is acceptable to Helix. Helix shall have the right during the term of this Agreement, upon reasonable notice and during regular business hours, to visit Distributor to inspect records and data directly related to the distribution and sale of Products for the purpose of confirming compliance with this Agreement and the quality assurance program. Distributor agrees to implement any reasonable corrective action requested by Helix resulting from such review.

9. Intellectual Property

9.1 Helix’s Rights

The Products involve valuable patent, copyright, trade secret, trade name, trademark and other proprietary rights of Helix, including, but not limited to, the Trademarks. No title to or ownership of any such proprietary right is transferred to Distributor under this Agreement or by use of any Trademark, patent or other proprietary right. Helix reserves all such proprietary rights. Distributor will not infringe, misappropriate or violate any proprietary rights of Helix. Without limiting the generality of the foregoing, Distributor will not register or attempt to register, directly or indirectly, within the Territory or elsewhere, any such patents, copyrights, trade names, trademarks or other proprietary rights (including URLs that utilize, or that are substantially similar to, the Trademarks) other than in the name of Helix and as expressly directed by Helix in writing.

9.2 Nonexclusive License Grant

Subject to the terms and conditions of this Agreement, Helix hereby grants to Distributor a nonexclusive license to use the Trademarks solely in connection with the sale and offering for sale of Products in the Market in the Territory.

9.3 Use of Trademarks and Trade Names

Distributor shall not use the name of Helix or its trade names, Trademarks, logos or any equivalent thereof in any publicity or advertising, or in any other manner whatsoever, without the prior written consent of Helix.

9.4 Enforcement

Distributor will immediately notify Helix of any infringement, misappropriation or violation of any of Helix’s proprietary rights relating to Products, Trademarks or the activities of Distributor hereunder. In the event of any such infringement, misappropriation or violation relating to the activities of Distributor or any of its employees, agents, representatives or customers, Distributor will, at Distributor’s expense but subject to Helix’s consent, take all steps reasonably necessary to terminate said infringement, misappropriation, or violation. Distributor will obtain Helix’s consent before initiating any legal proceeding in connection with such infringement, misappropriation or violation. Helix may, at its option, expense and recovery (if any), assume control of any such proceeding. If Helix assumes such control, Helix will have exclusive control over the prosecution and settlement of the proceeding and Distributor will provide such assistance related to such proceeding as Helix may reasonably request and assist Helix in enforcing any settlement or order made in connection with such proceeding.

9.5 Assignments

On the termination or expiration of this Agreement, Distributor will assign to Helix or such other person or entity as Helix may designate all rights, registrations, reservations, licenses, permits and similar items made or obtained by Distributor relating to the Products or any proprietary rights of Helix.

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9.6 Translation

Distributor may translate the Product sales literature, training materials and other documentation provided by Helix only with Helix’s prior written consent Distributor hereby assigns to Helix all proprietary rights in and to any such translated versions of the documentation. Distributor agrees to, and shall cause its employees, agents and consultants to, execute such documents and to perform such acts as may be reasonably necessary to perfect and/or register such assignment in all relevant jurisdictions.

10. Term of Agreement; Termination; Appointment of Successor

10.1 Term

Unless earlier terminated as provided herein, the term of this Agreement will commence on the Effective Date of this Agreement and will terminate on the date set forth on Schedule A.

10.2 Termination

This Agreement may be terminated:

(a) by Helix for convenience upon ninety (90) days’ prior notice; or

(b) by either party if the other party breaches this Agreement and fails to cure such breach within thirty (30) days of written notice from the other party describing such breach; or

(c) by Helix giving ten (10) days’ prior notice in the event (i) the Distributor fails to achieve the Performance Standards or (ii) there is a proposed or completed change in control or management of Distributor which is unacceptable to Helix; or

(d) by either party giving the other party ten (10) days’ prior notice in the event (i) the other party ceases to function as an ongoing concern and conduct its operations in the normal course of business, (ii) the other party becomes insolvent or bankrupt, (iii) the other party makes an assignment for the benefit of creditors, or (iv) a trustee or receiver shall be appointed for the other party.

10.3 Inventory

Helix shall deliver, and Distributor shall pay to Helix the purchase price and other expenses of, all Products for which orders were accepted prior to termination of this Agreement. Within thirty (30) days after the date of termination or expiration of this Agreement (the “Termination Date”), Distributor shall provide Helix with a written inventory of all Products in its stock as of the Termination Date (the “Inventory”). Except in the event of a termination by Helix for breach pursuant to Section 10.2(b), Distributor shall have the right to sell off the Inventory in the Market in the Territory at its normal prices for a period of six (6) months after the Termination Date. Following such six (6) month period, Distributor shall either destroy, or surrender to Helix at no cost to Helix, all remaining Inventory.

10.4 Survival

All accrued obligations and the provisions of Sections 3, 4.3, 5.8, 5.11, 6.1, 6.2, 6.3, 6.5, 6.6, 9.1, 9.3, 9.4, 9.5, 10.3, 10.4, 10.5, and 14 through 21 will survive expiration or termination of this Agreement and will remain effective in accordance with their terms.

10.5 Acknowledgment

Any expiration or termination of this Agreement will be final and absolute. Distributor waives any right, either express or implied by applicable law or otherwise, to renewal of this Agreement or to any damages or compensation for any expiration or termination of this Agreement in accordance with this Section 10. Each of the parties have considered the possibility of such expiration or termination and the possibility of loss and damage resulting there from in making expenditures pursuant to the performance of this Agreement. It is the express intent and agreement of the parties that neither will be liable to the other for damages or otherwise by reason of the expiration or termination of this Agreement as provided for herein.

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10.6 Appointment of Successor Distributor

(a) If Distributor terminates this Agreement, Helix may, at any time prior to the effective date of such termination, announce a successor distributor, if any, and both Helix and Distributor agree to allow such successor distributor to take all actions necessary or helpful to make itself known as Helix’s distributor in the Market in the Territory, able to do business from a specified date, that date being the day after the effective termination of this Agreement.

(b) If Helix terminates this Agreement, Helix may, no earlier than twenty (20) days prior to the effective date of such termination, announce a successor, if any, and allow such successor distributor to make itself known as Helix’s distributor in the Market in the Territory, able to do business from a specified date, that date being the day after termination hereof.

11. Compliance with Laws; Foreign Corrupt Practices Act

11.1 General

Distributor shall at all times comply with all applicable laws and regulations in selling Products and in otherwise exercising rights or performing obligations hereunder. Neither party shall have to perform any obligations set forth in this Agreement if such performance would violate applicable law.

11.2 Foreign Corrupt Practices Act

In performance of its activities, duties and obligations under this Agreement, Distributor shall comply with the U.S. Foreign Corrupt Practices Act (“FCPA”). Distributor represents and warrants that it is familiar with the obligations and restrictions of the FCPA, and that it and its employees and agents will comply with the provisions of the FCPA.

11.3 Compliance With Export Laws

Distributor will comply with all applicable export laws, restrictions, and regulations of any United States or foreign agency or authority and not to export or re-export, or allow the export or re-export of any product, technology or information it obtains or learns pursuant to this Agreement (or any direct product thereof) in violation of any such laws, restrictions or regulations. Distributor shall obtain and bear all expenses relating to any necessary licenses and/or exemptions with respect to the export from the U.S. of the Products to the Territory in compliance with all applicable laws and regulations.

12. Assignment

Neither this Agreement nor any rights or obligations hereunder may be assigned or transferred by Distributor, either voluntarily or by operation of law, without Helix’s written consent. Any purported assignment or transfer in violation of this section shall be void. This Agreement will be binding upon and inure to the benefit of the parties and their permitted successors and assigns.

13. Insurance

At all times that Distributor is purchasing Products from Helix, Helix and Distributor shall maintain appropriate insurance coverage for Distributor’s activities under this Agreement (including, without limitation, comprehensive general liability and automobile liability insurance with limits of not less than ***). Such insurance will name Helix as an additional insured, contain a waiver of any rights of the insurer

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to subrogation against Helix and afford Helix not less than thirty (30) days advance notice of any cancellation or material change. Upon Helix’s request, Distributor shall provide Helix with such certificates of insurance and other evidence of such insurance as Helix may reasonably request.

14. Indemnification

14.1 By Distributor

Distributor shall indemnify, defend and hold Helix and its officers, directors, agents and employees harmless from and against any and all third party and governmental claims, including related suits, losses, liabilities, damages, expenses and court costs (including reasonable attorneys’ fees), that may arise on account of Distributor’s activities, or those of its employees or agents (including, without limitation, direct and indirect subdistributors), including without limitation, providing unauthorized representations or warranties to its customers or breaching any term, representation or warranty of this Agreement, provided Distributor is promptly notified of any and all threats, claims and proceedings related thereto and given reasonable assistance and the opportunity to assume sole control over the defense and all negotiations for a settlement or compromise; Distributor will not be responsible for any settlement it does not approve in writing.

14.2 By Helix

Helix shall indemnify, defend and hold Distributor and its officers, directors, agents and employees harmless from liability to a third party resulting from infringement by a Product of any United States patent issued as of the first date of delivery the applicable Product or any United States copyright, provided Helix is promptly notified of any and all threats, claims and proceedings related thereto and given reasonable assistance and the opportunity to assume sole control over the defense and all negotiations for a settlement or compromise; Helix will not be responsible for any settlement it does not approve in writing. THE FOREGOING IS IN LIEU OF ANY WARRANTIES OF NONINFRINGEMENT, WHICH ARE HEREBY DISCLAIMED. The foregoing obligation of Helix does not apply with respect to Product or portions or components thereof (i) that are not supplied by Helix, (ii) that are made in whole or in part in accordance to Distributor specifications, (iii) that are modified after shipment by Helix, if the alleged infringement relates to such modification, (iv) that are combined with other products, processes or materials where the alleged infringement relates to such combination, (v) where the allegedly infringing activity continues after notification thereof or of modifications that would have avoided the alleged infringement, (vi) where use of the Product is incident to an infringement not resulting primarily from the Product or (vii) where use is not strictly in accordance with this Agreement and all applicable grants of rights, documentation and restrictions; Distributor will indemnify Helix and its officers, directors, agents, and employees from all damages, settlements, attorneys’ fees and expenses related to a claim of infringement or misappropriation excluded from Helix’s indemnity obligation by this sentence. This Section 14.2 shall not be interpreted to grant to Distributor any rights not expressly granted under this Agreement.

15. Confidentiality

15.1 General

Each party acknowledges that the Confidential Information of the other party is confidential in nature and contains trade secrets belonging to the other party. Each party understands and agrees that the disclosing party will suffer irreparable harm in the event of any unauthorized disclosure of any portion of any of such party’s Confidential Information to a third party without the prior written consent of the disclosing party. Each party shall keep the Confidential Information received from the other party in confidence, shall use such Confidential Information only for the purposes of this Agreement, and shall not disclose such Confidential Information to any person or entity, other than to its employees, agents or contractors on a need-to-know basis, without the disclosing party’s prior written consent. Each party agrees to take measures to protect the confidentiality of the other party’s Confidential Information that, in

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the aggregate, are no less protective than those measures it uses to protect the confidentiality of its own confidential or proprietary information of similar kind and import (in no event, less than commercially reasonable measures), and to advise its employees of the confidential nature of such Confidential Information and of the prohibitions on revealing such Confidential Information contained herein, and to require its agents and contractors to execute a confidentiality agreement at least as restrictive as these provisions.

15.2 Effect of Termination

Upon the discontinuance, termination or cancellation of this Agreement, the affected Confidential Information and all copies in whatever medium or form will be returned to the disclosing party or, with the disclosing party’s prior written consent, will be destroyed and the receiving party shall certify as to such destruction.

15.3 Previous Confidential Information

The provisions of this Section 15 will apply to Confidential Information provided by one party to the other party prior to the date of this Agreement.

16. Notices

Any notice, demand or communication required or permitted to be given by any provision of this Agreement shall be deemed to have been sufficiently given or served for all purposes if (a) delivered personally, (b) deposited with a pre-paid messenger, express or air courier or similar courier, or (c) transmitted by telecopier, facsimile, email or other communication equipment that transmits a facsimile of the notice to like equipment that receives and reproduces such notice. Notices will be addressed to a party at the party’s address, facsimile number or email address as set forth below. Notices shall be deemed to have been received (i) in the case of personal delivery, upon receipt, (ii) in the case of messenger, express or air courier or similar courier, two days after being deposited, and (iii) in the case of telecopier, facsimile, email or other communication equipment, the day of receipt as evidenced by a telecopier, facsimile, email or similar communication equipment confirmation statement.

If to Helix:	Helix BioMedix, Inc. 22118 - - 20th Ave SE #204 Bothell, Washington 98021
	Attn: President Fax: 425-806-2999
If to Distributor:	RubyDerm Bio Inc. 3F Moojin Building, 60 Nonhyun-Dong Kangnam-Gu, Seoul, Korea Attn: President
	Fax: 82 2 3446 7589

Either party may change the individual designated above or its contact information or both by notice in accordance with this Section 16.

17. Governing Law

This Agreement will be governed by the laws of the state of Washington, without regard to its or any other jurisdiction’s principles of conflict of law. The provisions of the United Nations Convention on Contracts for the International Sale of Goods will not apply to this Agreement.

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18. Arbitration

Any and all disputes or controversies arising out of or in connection with this Agreement will be settled by final and binding arbitration, unless otherwise agreed to by both parties. The arbitration will be held in Seattle, Washington, U.S.A., in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the “AAA Rules”) before a single arbitrator. The arbitrator appointed pursuant to the AAA Rules will be fluent in English (U.S. usage) and will be an attorney with at least ten (10) years’ experience in the cosmetic or pharmaceutical industry. All documents submitted to the arbitrator will be in English or accompanied by a certified English translation. Judgment upon the award may be entered in any court having jurisdiction, or application may be to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. All costs, fees and expenses, including attorneys’ fees, for the arbitration hearing and the costs of enforcement, and upon appeal, if any, will be borne by the party against whom the judgment is rendered or will be apportioned by the arbitrator. The provisions of this Section 18 will not preclude the application to any court for injunctive or other equitable relief to prevent breach of the Agreement by either party or to prevent the misuse or unauthorized disclosure of Confidential Information and will not preclude the issuance of such relief by any court.

19. Separability

If any provision of this Agreement is held to any extent invalid or unenforceable, such provision will be deemed amended to conform to applicable laws and to accomplish the intentions of the parties. The existence of any invalid or unenforceable provision will not void the entire Agreement.

20. Miscellaneous

The headings or titles in this Agreement are for the purposes of reference only and will not in any way affect the interpretation or construction hereof. All schedules and other attachments hereto are hereby incorporated herein and made a part of this Agreement. The failure at any time to enforce any of the terms, provisions or conditions of this Agreement will not constitute or be construed as a waiver of the same, and any single or partial exercise of any right under this Agreement will not preclude any further or other exercise of the same or the exercise of any other right. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes and cancels all prior and contemporaneous agreements, claims, representations and understandings of the parties in connection with such subject matter. This Agreement will not be modified or amended except by written agreement signed on behalf of Distributor and Helix by their respective duly authorized representatives. This Agreement may be executed in one or more counterparts, each of which will be deemed an original, and all of which together will constitute one and the same instrument. This Agreement will not be construed against the party preparing it, but will be construed as if all the parties jointly prepared the Agreement, and any uncertainty or ambiguity will not be interpreted against any one party.

21. 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.

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The parties have caused this Agreement to be executed in duplicate originals by their duly authorized representatives, effective as of the date set forth above.

HELIX BIOMEDIX, INC.		DISTRIBUTOR / RubyDerm Bio Inc.
March 3, 2010		Mar. 03, 2010
By	/s/ Robin Carmichael	By	/s/ Jerry Jung
Name	Robin Carmichael	Name	Jerry Jung
Title	VP Marketing & Business Development	Title	President

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SCHEDULE A

Market, Products, Territory, Etc.

1. Market

Cosmetic businesses such as spas, boutiques, and beauty stores, and hospitals, clinics and Physician dispensed, medical non-prescription skin care.

2. Products

Cerakine Eye, Serum, Moisturizer, Vitamin Cleanser, Oily Skin Cleanser & Acne Control Lotion and future products that may be added to the line through mutual consent.

3. Territory

Initially, South Korea, China & Japan. Based on performance, Territory may be amended through mutual consent to cover other countries where the Distributor does business

4. Trademarks

The “Helix BioMedix^®” mark, the SmartPeptide™ mark and the Cerakine™ mark.

5. Excluded Accounts

None

6. Initial Order Quantity and Delivery Timeframe

*** initial order to be delivered by a date to be agreed upon by the parties.

7. Minimum Order Quantities

Orders will be placed generally monthly or quarterly, noting that for the first 6 months of the agreement the Distributor may need to order more frequently until a sales history can be established.

8. Performance Standards

Distributor shall purchase from Helix a minimum purchase requirement of Products during the time periods described below:

March 1, 2010	through	March 31, 2011	:	***
April 1, 2011	through	March 31, 2012	:	***
April 1, 2012	through	March 31, 2013 and	:	***
and each subsequent period of April 1,	through	March 31 thereafter	:	***

9. Expiration Date of Term

March 31, 2014. Thereafter, this Agreement may be renewed for one year terms upon mutual agreement.

10. Other Matters

None

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SCHEDULE B

Standard Terms of Sale

1. Agreement. These Standard Terms of Sale (“Terms of Sale”) govern all purchase and sale transactions between Helix and Distributor involving Products supplied by Helix. Helix will not be bound by, and specifically objects to, any term, condition or other provision which is different from or in addition to the provisions of this Agreement which is proffered by Distributor in any purchase order, receipt, acceptance, confirmation, correspondence, or otherwise, unless Helix specifically agrees to such provision in a written instrument signed by Helix.

2. Acceptance. Helix shall deliver to Distributor and Distributor shall accept and pay for, all Products ordered by Distributor pursuant to an order which has been accepted by Helix, insofar as such Product complies with specifications. All orders are subject to acceptance by Helix either in writing or by shipping Product. Helix may accept any order in full or in part, and Helix’s shipment of less than all Product ordered will constitute acceptance only as to those quantities of Product shipped.

3. Firm Orders. Distributor may not modify, rescind or cancel any order, in whole or in part, without Helix’s written consent.

4. Taxes. Prices do not include sales, excise, use or other taxes, duties or fees now in effect or hereafter levied which Helix may be required to pay, excluding Helix’s local, State or Federal income taxes, or collect in connection with the sale of Product to Distributor; all such taxes, duties and fees will be for the account of Distributor who shall promptly pay Helix upon demand therefor.

5. Delivery. Helix shall use commercially reasonable efforts to meet any delivery date specified in an order. If Helix cannot meet the specified delivery date, Helix shall promptly notify Distributor of the delay and take all reasonable steps to expedite delivery. Unless otherwise specified by Helix, Product shall be delivered to Distributor F.O.B. Helix’s warehouse, Redmond, Washington or other Helix manufacturing facility. If Distributor requests shipments and/or deliveries in separate lots, Distributor shall be responsible for excess shipping charges, if any. Distributor is responsible for all transportation costs, including, but not limited to, shipping charges, premiums for freight insurance, inspection fees, customs, duties, import or export fees, assessments, and all other costs incurred in transporting the Product to the destination. Distributor shall be responsible for prosecuting any claims against any carrier arising from or relating to shipment. Helix will reasonably cooperate with Distributor with respect to such claims prosecution at Helix’s sole cost and expense.

6. Inspection. Distributor shall promptly inspect shipments of Product upon receipt and either accept or reject them for failure to conform to applicable specifications. Helix shall reimburse Distributor for any expenses related to the return of any Product that, in Helix’s reasonable determination, fails to conform to applicable specifications. Distributor will give Helix prompt written notice of rejection of nonconforming Product. Distributor shall be deemed to have accepted the Product if Distributor fails to give written notice of rejection within five (5) days of delivery of Product.

7. Warranty and Disclaimer; Returns and Limitation of Remedy. Helix warrants that all Product sold to Distributor pursuant to this Agreement, at the time of delivery to Distributor, will be substantially in accordance with the applicable specifications for the Product in effect at the time of sale by Helix to Distributor. Helix further warrants that all Product manufactured by Helix for Distributor will be free and clear of all liens and encumbrances.

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In order to bring a claim under this warranty, Distributor must give Helix written notice of any nonconformance within thirty (30) days after delivery of the Product.

This warranty shall not apply to any Product that (a) has been altered by unauthorized personnel, (b) has been misused, abused or damaged, or (c) handled contrary to Helix’s Product storage and transportation guidelines after delivery.

HELIXMAKES NO OTHER WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PRODUCT, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR WARRANTIES ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING, USAGE OF TRADE OR SAMPLES PREVIOUSLY SUPPLIED.

Distributor’s sole remedy and Helix’s sole obligation and liability under this warranty is limited, at Helix’s option, to (a) repair or replacement of any nonconforming Product, which will be returned to Helix pursuant to Helix’s then-current returns policy and procedures, or (b) repayment of, or reduction in, a reasonable portion of the Product’s purchase price. Helix will be under no obligation to accept the return of nonconforming Product contrary to this provision, or to accept return of Product that conforms to the applicable specifications for such Product.

8. Limitation of Liability. NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, EXCEPT AS MAY BE OTHERWISE REQUIRED BY LAW, HELIX WILL NOT BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY, OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) AMOUNTS THAT IN THE AGGREGATE ARE IN EXCESS OF THE AMOUNTS PAID TO HELIX HEREUNDER WITH RESPECT TO THE PRODUCT GIVING RISE TO LIABILITY OR (II) ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS OR (III) COST OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY, OR SERVICES.

9. Force Majeure. Helix will not be responsible or liable for any losses or damages caused by any delay or failure to provide Product hereunder due to strikes, differences with workers or other labor disputes, war, acts of terrorism, insurrection, revolution, riots, commotions, disorders, fires, floods, acts of God, embargoes, governmental authorizations and instructions, governmental restrictions or other acts or delays of governmental authorities, unavailability of power supplies, unavailability of materials, delays or failures attributable to Distributor, or any other cause beyond its reasonable control.

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SCHEDULE C

Pricing

Reorder #	Retail Products	***	***	***	***	***
CKR0801	Rejuvenating Eye Creme with SmartPeptides™	***	***	***	***	***
CKR0802	Restorative Moisture Crème with SmartPeptides™	***	***	***	***	***
CKR0803	Multi-Peptide Serum with SmartPeptides™	***	***	***	***	***
CKR0804	Multi-Vitamin Creme Cleanser	***	***	***	***	***

Prices valid through March 31, 2012

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SCHEDULE D

Third Party Products Distributed by Distributor

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SCHEDULE E

Reports

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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-Q 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 registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and 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 registrant, 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’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

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

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 registrant’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 registrant’s internal control over financial reporting.

Date: May 6, 2010

/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, R. Stephen Beatty, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q 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 registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(c) 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 registrant, 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;

(d) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(e) Evaluated the effectiveness of the registrant’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

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

6. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 registrant’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 registrant’s internal control over financial reporting.

Date: May 6, 2010

/s/    R. Stephen Beatty

R. Stephen Beatty

Acting 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-Q of the Company for the quarterly period ended March 31, 2010 (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.

Date: May 6, 2010

/s/    R. Stephen Beatty

R. Stephen Beatty

President and Chief Executive Officer

EX-32.2

Exhibit 32.2

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

I, R. Stephen Beatty, Acting 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-Q of the Company for the quarterly period ended March 31, 2010 (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.

Date: May 6, 2010

/s/    R. Stephen Beatty

R. Stephen Beatty

Acting Chief Financial Officer