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, 2012

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.)

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

(Address of principal executive offices, including zip code)

(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  x     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  ¨	Smaller reporting company  x
		(Do not check if a smaller reporting company)

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, 2012, 49,720,255 shares of the registrant’s common stock were 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 and Comprehensive Loss (unaudited)	2
Condensed Statements of Stockholders’ Equity (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 Disclosures About Market Risk	18
Item 4. Controls and Procedures	18
PART II - OTHER INFORMATION
Item 1A. Risk Factors	19
Item 5. Other Information	19
Item 6. Exhibits	20
Signatures	21

PART I - FINANCIAL INFORMATION

ITEM 1.  Financial Statements.

HELIX BIOMEDIX, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

	March 31, 2012			December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	1,163,534		$	1,688,945
Accounts receivable, net		424,824			239,773
Accounts receivable,  affiliated company, net		235,265			200,935
Inventory		322,891			363,869
Deferred debt issuance costs, current		201,040			—
Prepaid expenses and other assets		80,441			64,583
Total current assets		2,427,995			2,558,105
Property and equipment, net		19,946			26,098
Intangible assets, net		129,354			146,297
Deferred debt issuance costs, non-current		251,713			—
Other long term assets		14,264			20,884
Investment in affiliated company		205,607			223,255
Total assets	$	3,048,879		$	2,974,639
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	177,035		$	125,324
Accrued compensation and benefits		48,478			87,859
Accrued expenses		114,106			55,463
Deferred revenue		7,060			—
Deferred gross profit, affiliated company		131,151			134,842
Deferred rent, current		7,748			7,155
Total current liabilities		485,578			410,643
Deferred rent, non-current		26,328			28,660
Total liabilities		511,906			439,303
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 25,000,000 shares authorized; no shares issued or outstanding		—			—
Common stock, $0.001 par value, 100,000,000 shares authorized; 49,720,255 shares outstanding at March 31, 2012 and December 31, 2011		49,721			49,721
Additional paid-in capital		49,125,928			48,542,453
Accumulated deficit		(46,638,676	)		(46,056,838	)
Total stockholders’ equity		2,536,973			2,535,336
Total liabilities and stockholders’ equity	$	3,048,879		$	2,974,639

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

1

HELIX BIOMEDIX, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

	Three months ended March 31,
	2012			2011
Revenue:
Licensing fees	$	315,092		$	171,425
Peptide and consumer product sales		252,727			134,932
Consumer product sales to affiliated company		112,603			51,271
Total revenue		680,422			357,628
Cost of revenue:
Cost of peptide and consumer product sales		157,773			91,297
Cost of consumer product sales to affiliated company		51,758			29,530
Total cost of revenue		209,531			120,827
Gross profit		470,891			236,801
Operating expenses:
Research and development		87,085			225,163
Marketing and business development		303,106			204,437
General and administrative		384,576			341,792
Accounting, legal and professional fees		219,222			165,437
Depreciation and amortization		23,095			26,617
Total operating expenses		1,017,084			963,446
Loss from operations		(546,193	)		(726,645	)
Other income (expense):
Interest income		740			1,204
Amortization of debt issuance costs		(12,117	)		—
Equity in earnings (loss) of affiliated company		(17,648	)		7,992
Change in value of option to purchase interest in affiliated company		(6,620	)		7,715
Other income (expense), net		(35,645	)		16,911
Net loss and comprehensive loss	$	(581,838	)	$	(709,734	)
Basic and diluted net loss per share	$	(0.01	)	$	(0.01	)
Weighted average shares outstanding		49,720,255			49,720,255

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

2

HELIX BIOMEDIX, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Year Ended December 31, 2011 and for the Three Months Ended March 31, 2012

(Unaudited)

	Common Stock				Additional Paid-in Capital		Accumulated Deficit			Stockholders’ Equity
	Number of Shares		Amount
Balance at December 31, 2010		49,720,255	$	49,721	$	48,392,985	$	(43,568,262	)	$	4,874,444
Stock-based compensation		—		—		149,468		—			149,468
Net loss		—		—		—		(2,488,576	)		(2,488,576	)
Balance at December 31, 2011		49,720,255		49,721		48,542,453		(46,056,838	)		2,535,336
Stock-based compensation		—		—		118,605		—			118,605
Fair value of warrants issued in connection with letter of credit		—		—		464,870		—			464,870
Net loss		—		—		—		(581,838	)		(581,838	)
Balance at March 31, 2012		49,720,255	$	49,721	$	49,125,928	$	(46,638,676	)	$	2,536,973

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,
	2012			2011
Cash flows from operating activities
Net loss	$	(581,838	)	$	(709,734	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		23,095			26,617
Stock-based compensation expense		118,605			51,128
Amortization of debt issuance costs		12,117			—
Equity in (earnings) loss of affiliated company		17,648			(7,992	)
Change in value of option to purchase interest in affiliated company		6,620			(7,715	)
Changes in assets and liabilities:
Accounts receivable, net		(185,051	)		(40,972	)
Accounts receivable from affiliated company, net		(34,330	)		(71,808	)
Inventory		40,978			(20,314	)
Prepaid expenses and other assets		(15,858	)		(64,662	)
Accounts payable		51,711			48,275
Accrued compensation and benefits		(39,381	)		10,603
Other accrued liabilities		56,904			(56,474	)
Deferred revenue		7,060			53,270
Deferred gross profit, affiliated company		(3,691	)		36,900
Net cash used in operating activities		(525,411	)		(752,878	)
Cash flows from investing activities
Purchases of property and equipment		—			(20,655	)
Net cash used in investing activities		—			(20,655	)
Net decrease in cash and cash equivalents		(525,411	)		(773,533	)
Cash and cash equivalents at beginning of period		1,688,945			4,044,309
Cash and cash equivalents at end of period	$	1,163,534		$	3,270,776

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, 2011, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2012.

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 include all normal recurring accruals and adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods indicated and to ensure that the financial statements are not misleading. Significant items subject to such estimates and assumptions include, but are not limited to, revenue recognition, impairments of long-lived assets, and valuation of receivable allowances, inventories, deferred income tax assets, stock-based compensation and option to purchase interest in affiliated company. Actual results could differ from those estimates.

The results of operations for the three months ended March 31, 2012 are not necessarily indicative of the results of operations that may be achieved for the entire year ending December 31, 2012.

Note 2.  Financing Activities

On March 9, 2012, the Company entered into an LOC Agreement (the LOC Agreement) with Frank T. Nickell, who beneficially owned approximately 40% of the Company’s outstanding common stock as of March 26, 2012, pursuant to which Mr. Nickell established an irrevocable standby letter of credit by JPMorgan Chase Bank, N.A. (JPMorgan) that allows the Company to borrow from JPMorgan up to $2.0 million. The line of credit (LOC) with JPMorgan will expire on July 1, 2013 but will automatically renew until July 1, 2014 unless terminated by JPMorgan at least 14 days prior to the end of the current term, at which time the Company may draw up to the balance remaining on the LOC. Amounts outstanding under the LOC accrue interest at the rate of 0.75% per annum and are due and payable on or before July 1, 2014. Pursuant to the LOC Agreement, the Company agreed to use commercially reasonable efforts to consummate an equity financing prior to the termination date of the LOC in which it would sell and issue shares of its common stock at a price per share of at least $0.60 for aggregate proceeds of at least $3.0 million, upon consummation of which all amounts outstanding under the LOC shall be immediately repaid.

In connection with the LOC Agreement, the Company issued to Mr. Nickell a five-year fully vested warrant to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $0.25 per share and agreed to reimburse Mr. Nickell for his reasonable expenses in connection with the LOC, including, without limitation, any interest accrued and payable by Mr. Nickell in connection with the LOC. As of March 31, 2012, reimbursements to Mr. Nickell had not been significant.

As the warrant was issued to obtain a letter of credit rather than in connection with a debt issuance, the Company measured this warrant at fair value on the inception date and accounted for it as equity in accordance with Accounting Standard Codification (ASC) 505-50-25, Equity-Based Payments to Non-Employees. The issuance of this warrant was equivalent to the payment of a loan commitment or access fee, and, therefore, the offset was recorded as deferred debt issuance costs to be amortized on a straight-line basis over the term of the LOC.

The Company estimated the fair value of this warrant to be $464,870 on March 9, 2012, based on the Black-Scholes option pricing model using an exercise period of 5 years, risk-free rate of 0.90%, volatility of 161%, and a trading price of the underlying shares of $0.25. For the three months ended March 31, 2012, the Company recognized a total of $12,117 of amortization expense related to the establishment of the LOC.

As of March 31, 2012, there were no borrowings outstanding under the LOC.

5

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

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, 2012. 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, 2012		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds	$	684,840	$	684,840	$	—	$	—
Option to purchase interest in affiliated company	$	5,742		—		—		5,742

Option to Purchase Interest in Affiliated Company. The Company estimated the fair value of the option to purchase an interest in an affiliated company to be $5,742 and $12,362 at March 31, 2012 and December 31, 2011, respectively, using the multiple of earnings method based on a number of factors and assumptions regarding the affiliated company’s potential future revenue and projected earnings before interest, tax, depreciation and amortization (EBITDA). The decrease in fair value of $6,620 was recorded in the statement of operations for the three months ended March 31, 2012.

Financial Instruments.  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, 2012 and December 31, 2011 because of the short-term nature of these instruments.

Note 4. Inventory

Inventory consisted of the following as of March 31, 2012 and December 31, 2011:

	March 31, 2012		December 31, 2011
Work in process	$	105,824	$	156,425
Finished goods		217,067		207,444
	$	322,891	$	363,869

Note 5.  Property and Equipment

Property and equipment consisted of the following as of March 31, 2012 and December 31, 2011:

	March 31, 2012			December 31, 2011
Machinery and equipment	$	520,950		$	520,950
Website development costs		63,175			63,175
Furniture and fixtures		50,441			50,441
Leasehold improvements		43,993			43,993
		678,559			678,559
Less accumulated depreciation		(658,613	)		(652,461	)
Property and equipment, net	$	19,946		$	26,098

Aggregate depreciation expense for property and equipment during the three months ended March 31, 2012 and 2011 was $6,152 and $9,674, respectively.

6

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 6.  Intangible Assets

Identifiable intangible assets consisted of the following as of March 31, 2012 and December 31, 2011:

	March 31, 2012			December 31, 2011
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		(988,525	)		(971,582	)
Intangible assets, net	$	129,354		$	146,297

Amortization expense for intangible assets was $16,943 for each of the three months ended March 31, 2012 and 2011.

Note 7.  Investment in Affiliated Company

In July 2010, the Company obtained a 30% membership interest in NuGlow Cosmaceuticals, LLC (NuGlow), a direct-response company selling specialty skin care products, in exchange for a capital contribution of $350,000. In connection with NuGlow’s capital raise in September 2011, the Company contributed an additional $42,000 to maintain its 30% interest in NuGlow. In March 2012, the Company entered into a Second Amendment to the Amended and Restated Operating Agreement with NuGlow, pursuant to which the Company consented to certain monthly payments by NuGlow in consideration for which the Company’s option to purchase the remaining interest of NuGlow (the Purchase Option) was extended from July 1, 2015 to July 1, 2017.

The Company’s cumulative investment in NuGlow is accounted for as an equity investment and is adjusted at each reporting period to reflect the Company’s share of NuGlow’s net earnings, losses, contributions and any profit distributions. The Company has elected to account for the Purchase Option at fair value on the balance sheet with changes in value recognized in the statement of operations over the life the of the Purchase Option. Additionally, at each reporting period, the Company assesses its investment in NuGlow to determine whether events or changes in circumstances indicate that the carrying amount may not be recoverable. The primary factors the Company considers in its determination are NuGlow’s financial condition and operating performance. If the decline in value is deemed to be other than temporary, the Company would recognize an impairment loss.

At December 31, 2011, the carrying value of the Company’s investment in NuGlow was $223,255. For the three months ended March 31, 2012, the Company recorded a loss $17,648 to “Equity in loss of affiliated company” which reflected its share of NuGlow’s net loss during the first quarter of 2012, thereby decreasing the value of the Company’s investment in NuGlow to $205,607 as of March 31, 2012.

NuGlow’s condensed balance sheets at March 31, 2012 and December 31, 2011 and statements of operations for the three months ended March 31, 2012 and 2011 are as follows:

	March 31, 2012 (Unaudited)			December 31, 2011 (Unaudited)
NuGlow Condensed Balance Sheets
Assets
Cash	$	19,242		$	200
Accounts receivable, net		6,373			18,276
Inventory		229,147			275,838
Prepaid expenses and other current assets		59,471			9,513
Total assets	$	314,233		$	303,827
Liabilities and members’ equity
Accounts payable and current liabilities	$	350,098		$	280,867
Members’ equity		514,661			514,661
Accumulated deficit		(550,526	)		(491,701	)
Total liabilities and members’ equity	$	314,233		$	303,827

7

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

	Three months ended (Unaudited)
	March 31, 2012 (Unaudited)			March 31, 2011 (Unaudited)
NuGlow Condensed Statements of Operations
Revenue	$	233,371		$	180,720
Cost of goods sold		(98,227	)		(87,590	)
Operating expenses		(193,969	)		(66,489	)
Net income	$	(58,825	)	$	26,641

Note 8.  Other Assets

Other assets consisted of the following as of March 31, 2012 and December 31, 2011:

	March 31, 2012		December 31, 2011
Deposits	$	8,522	$	8,522
Option to purchase interest in affiliated company (see Note 7)		5,742		12,362
Other assets	$	14,264	$	20,884

Note 9. Deferred Gross Profit, Affiliated Company

Deferred gross profit from an affiliated company consisted of the following as of March 31, 2012 and December 31, 2011:

	March 31, 2012		December 31, 2011
Deferred revenue, affiliated company	$	252,710	$	254,826
Deferred cost of revenue, affiliated company		121,559		119,984
Deferred gross profit, affiliated company	$	131,151	$	134,842

Note 10.  Stock-Based Compensation

2011 Stock Option Plan

On February 10, 2011, the Company’s board of directors adopted, and on May 25, 2011, the Company’s stockholders approved, the Helix BioMedix, Inc. 2011 Stock Option Plan (the 2011 Plan). The 2011 Plan provides for the grant of incentive stock options to employees and non-statutory stock options to employees, non-employee directors and consultants. The 2011 Plan is administered by the board of directors, which has the authority to select the individuals to whom awards are to be granted, the number of awards granted, and the vesting schedule. A total of 12,000,000 shares of common stock are reserved for issuance under the 2011 Plan. Options granted under the 2011 Plan to employees generally vest over a three-year period with 1/3 of the shares vesting after one year from the date of grant and 1/36 of the shares vesting monthly thereafter. Option awards to non-employee directors may vest fully upon grant or quarterly over one year. All option awards have a maximum term of ten years and exercise prices equal to the closing market price of the Company’s common stock on the grant date.

2000 Stock Option Plan

In 2000, the Company’s stockholders approved the Helix BioMedix 2000 Stock Option Plan (the 2000 Plan). The 2000 Plan provided for the granting of incentive stock options and nonqualified stock options to employees, directors and consultants. Options granted under the 2000 Plan generally became exercisable over periods ranging from one to three years, had a maximum term of ten years and exercise prices equal to the closing market price of the Company’s common stock on the grant date. Effective November 6, 2010, additional option awards under the 2000 Plan were discontinued. The 2000 Plan will remain in effect as to outstanding options granted prior to November 6, 2010.

Stock Option Activities

During the three months ended March 31, 2012 and 2011, the Company granted options under the 2011 Plan to purchase an aggregate of 1,200,000 and 135,000 shares of common stock, respectively, with a weighted-average fair value of $0.23 and $0.25 per share, respectively. Fair values for options granted were calculated using the Black-Scholes option pricing model with the following assumptions:

8

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

	Three months ended March 31,
	2012		2011
Risk-free interest rate		0.87% - 1.14%		2.17%
Expected dividend yield		0		0
Expected term in years	5.0-6.0 years		5.5 years
Expected volatility		147% - 157%		118%

The risk-free rate is based on the implied yield available on U.S. Treasury zero–coupon issues with a remaining term equal to the expected term of options issued. The Company does not anticipate declaring dividends in the foreseeable future. For the three months ended March 31, 2012 and 2011, 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, 2012 and 2011 related to stock options was $118,605 and $51,128, respectively. Stock-based compensation for the three months ended March 31, 2011 included an expense of approximately $36,000 related to the modifications of the terms of certain options held by the Company’s former Vice President and Chief Scientific Officer, who left in February 2011. As of March 31, 2012, total unrecognized stock-based compensation related to non-vested stock options was $246,848, which is expected to be recognized over a weighted-average period of approximately 2.4 years.

A summary of the Company’s stock compensation expense for the three months ended March 31, 2012 and 2011 is as follows:

	Three months ended March 31,
	2012		2011
Research and development	$	4,124	$	38,102
Marketing and business development		51,626		4,389
General and administrative		62,855		8,637
Total stock-based compensation	$	118,605	$	51,128

A summary of the Company’s stock option activity under both option plans for the three months ended March 31, 2012 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, 2011		3,264,207		$	0.65
Granted		1,200,000		$	0.25
Exercised		—			—
Forfeited		—			—
Expired		(395,000	)	$	0.87
Outstanding, March 31, 2012		4,069,207		$	0.51		6.16	$	10,200
Exercisable, March 31, 2012		2,924,706		$	0.60		4.83	$	2,000

The aggregate intrinsic value in the table above is based on the Company’s closing stock price of $0.25 on March 31, 2012, which would have been the closing price of shares of common stock received by the optionees had all of the options with exercise prices less than $0.25 been exercised on that date.

9

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

As of March 31, 2012, there were 12,000,000 shares of common stock reserved for issuance pursuant to the 2011 Plan, of which 10,393,000 shares remained available for future grants. Additional information regarding options outstanding as of March 31, 2012, 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
$	0.15 – $0.37		2,223,957		8.49	$	0.28		1,079,456	$	0.29
$	0.40 – $0.57		795,000		4.55	$	0.49		795,000	$	0.49
$	0.70 – $1.00		869,000		2.43	$	0.90		869,000	$	0.90
$	1.20 – $1.80		181,250		2.54	$	1.56		181,250	$	1.56
$	0.15 – $1.80		4,069,207		6.16	$	0.51		2,924,706	$	0.60

Note 11.  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,
	2012		2011
Weighted average outstanding options		3,705,526		3,903,644
Weighted average outstanding warrants		1,606,313		2,493,831

Note 12.  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, 2012, the Company maintained approximately $685,000 at major financial institutions in money market accounts insured by the Federal Deposit Insurance Corporation up to $250,000 per account or 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, 2012 and 2011:

	Three months ended March 31,
	2012			2011
Customer A		18	%		37	%
Customer B		49	%		39	%
Customer C		17	%		14	%

Note 13.  Liquidity and Capital Resources

For the three months ended March 31, 2012, the Company incurred a net loss of $581,838. At March 31, 2012, the Company had $1,163,534 in cash and cash equivalents. For the three months ended March 31, 2012, cash used in operations was $525,411.

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, together with the LOC with JPMorgan, 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 2012. 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 2012. Accordingly, the Company will need to draw down on the LOC and/or raise additional funding, which may include debt and/or equity financing. However, there is no assurance that additional funding will be available on favorable terms, if at all. If the Company is unable to obtain the necessary additional funding, the Company may not be able to satisfy its existing obligations 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.

10

HELIX BIOMEDIX, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

The amount of capital the Company will need in the future will depend on many factors, including the amount of revenue generated by the Company, 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 14.  Subsequent Events

Additional Investment in NuGlow

In connection with NuGlow’s additional capital raise in April 2012, on April 9, 2012, the Company contributed an additional $27,000 to maintain its 30% interest in NuGlow. The Company concurrently entered into a Third Amendment to the Amended and Restated Operating Agreement of NuGlow Cosmaceuticals, LLC to amend the allocation and distribution of this additional capital contribution prior to other allocations or distributions thereunder.

Operating Lease Amendment

Effective April 23, 2012, the Company entered into a Fourth Amendment to Lease with Teachers Insurance & Annuity Association of America, Inc. (Landlord) pursuant to which the Company agreed to move its office and laboratory to a new location also in Bothell, Washington on or before the later of July 1, 2012 and the date on which the Landlord completes certain tenant improvements (the Commencement Date). The new premises, consisting of approximately 6,300 square feet of office and lab space, will be leased for an additional 72 months starting from the Commencement Date. Under the terms of the amended lease, annual lease payments are expected to be approximately $79,000 for the first year, $81,000 for the second year, $84,000 for the third year, $86,000 for the fourth year, $89,000 for the fifth year and $92,000 for the sixth year, plus building operating costs. The amended lease provides the Company a moving allowance not exceeding $7,500 and a conditional abatement of one month base rent based upon the Company’s performance of the terms, covenants and conditions of the amended lease. The Company believes that any moving expenses it may incur beyond the Landlord’s allowance will not be significant.

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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, 2011. 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 unaudited 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, 2011.

Business Overview

We are a biopharmaceutical company with an extensive proprietary 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.

Our business strategy is to develop our peptide and small molecule portfolio to derive revenue from a broad base of opportunities including licensing to third parties rights to use select proprietary peptides in specific fields of application and commercializing our own branded products. Over the longer term, we intend to pursue applications for products using our technology in medical devices and pharmaceutical preparations. We have developed numerous peptides with unique sequences for use in the following two areas of application:

• Consumer skin care products — we have developed a range of peptides and small molecule technologies 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 Rx focus is on prescription-only topical preparations that would be subject to a shorter regulatory approval process under Section 510(k) of the Food, Drug and Cosmetic Act (510(k) devices). We continue to explore possible sources of funding to support further in-house development work on our pharmaceutical programs, which we believe will enhance potential partnership opportunities with pharmaceutical companies.

We generate revenue through license agreements with skin care product manufacturers as well as by selling proprietary branded skin care products through distribution channels and through our dedicated e-commerce websites.

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Critical Accounting Policies and Estimates

The preparation of our 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 year ended December 31, 2011 filed with the SEC on March 27, 2012. There have been no material changes to those critical accounting policies or the underlying accounting estimates or judgments, other than the fact that we have used similar concepts, judgments and estimates underlying our policy related to stock options issued to employees with respect to warrants issued in connection with our line of credit agreement.

Results of Operations

For the three months ended March 31, 2012, we generated revenue of approximately $680,000, representing an increase of 90% from the same period in the previous year. The favorable revenue variance was attributable to growth in royalties as well as sales of peptides and consumer products.

Our net loss for the first quarter of 2012 was approximately $582,000, or $0.01 per share, compared to a net loss of approximately $710,000, or $0.01 per share, for the same period in 2011. The decrease in net loss was principally due to an increase in gross profit, partially offset by increases in operating expenditures and non-cash expenses related to financing activities and investment in an affiliated company.

As of March 31, 2012, our accumulated deficit was approximately $46,639,000. We may continue to incur substantial operating losses over the next several years based on the estimated costs associated with our current level of operations, continued commercialization of our technology, and initiation of our pharmaceutical programs being greater than our anticipated revenue.

Revenue

Revenue in the three months ended March 31, 2012 and 2011 consisted primarily of license fees, peptide sales and consumer product sales as summarized in the table below.

	Three months ended March 31,				Change
	2012		2011
License fees	$	315,092	$	171,425		83.8	%
Peptide and consumer product sales		252,727		134,932		87.3	%
Consumer product sales to affiliated company		112,603		51,271		119.6	%
Total revenue	$	680,422	$	357,628		90.3	%

Revenue for the three months ended March 31, 2012 compared to the same period last year increased by approximately $323,000, or 90.3%. License fees, which are derived from royalty arrangements, increased by approximately $144,000, or 83.8%, for the first three months of 2012 compared to the same period in 2011, primarily attributable to increased volume of product sales by our licensees.

Peptide and consumer product sales increased by approximately $117,000, or 87.3%, for the three months ended March 31, 2012 compared to the same period in the previous year. The increase included growth of 45.9% in peptide sales, which reflected a higher usage volume of our peptides by our ingredient distributors, and 258.3% in sales of consumer products, which represented a mixture of increased sales to distributors and end user customers. Consumer product sales to an affiliated company, which consist of products sold under private labels to NuGlow Cosmaceuticals, LLC (NuGlow), a direct- response company in which we have maintained an equity investment since July 2010, grew by approximately $61,000, or 119.6%, for the first quarter of 2012 compared to the same period in 2011. The growth in our revenue from NuGlow reflected an increase in NuGlow’s sales to end user customers as well as a higher level of our products used by NuGlow for promotional purposes.

Cost of Revenue and Gross Margin

Cost of revenue consists of peptides and material costs associated with consumer products. 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 fees are higher than our margins from peptide and consumer products sales.

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Cost of revenue and gross margin for the three months ended March 31, 2012 and 2011 are summarized in the table below.

	Three months ended March 31,
	2012			2011			Change
Cost of peptide and consumer product sales	$	157,773		$	91,297			72.8	%
Percentage of total revenue		23.2	%		25.5	%
Cost of consumer product sales to affiliated company	$	51,758		$	29,530			75.3	%
Percentage of total revenue		7.6	%		8.3	%
Total cost of revenue	$	209,531		$	120,827			73.4	%
Gross profit	$	470,891		$	236,801			98.9	%
Gross margin		69.2	%		66.2	%

Cost of peptide and consumer product sales for the three months ended March 31, 2012 increased by approximately $66,000, or 72.8%, compared to the same period in 2011. Cost of consumer product sales to NuGlow for the three months ended March 31, 2012 increased by approximately $22,000, or 75.3%, compared to the same period in 2011. The increases in cost of revenue for the first quarter of 2012 compared to the same period in 2011 in general was not linear with the growth rate of revenue, due principally to the product mix and customer mix during the periods presented. Peptide and consumer product sales, including those to an affiliated company, in the first three months of 2012 resulted in a blended margin of 42.6% compared to 35.1% for the same period in 2011. The increase in gross margin related to peptide and all consumer product sales was influenced by both sales volumes and product mix. Sales of our consumer products typically generate a higher gross margin compared to sales of peptides. As such, as sales of consumer products grow at a faster rate compared to peptide sales, the blended gross margin for peptide and consumer product sales will improve.

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, 2012 and 2011 are summarized in the table below.

	Three months ended March 31,
	2012			2011			Change
Research and development	$	87,085		$	225,163			(61.3	)%
Percentage of total revenue		12.8	%		63.0	%

R&D expenses for the three months ended March 31, 2012 decreased by approximately $138,000, or 61.3%, compared to the same period in 2011. This decrease was primarily attributable to decreases in salary and benefit expenses, product efficacy study spending, consulting fees and stock-based compensation expense. For the remainder of 2012, we anticipate R&D expenses to increase compared to the level experienced in the first quarter of 2012 as we expect to incur additional spending on external testing and studies related to the product development of our new consumer products and 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, 2012 and 2011 are summarized in the table below.

	Three months ended March 31,						Change
	2012			2011
Marketing and business development	$	303,106		$	204,437			48.3	%
Percentage of total revenue		44.5	%		57.2	%

M&BD expenses for the three months ended March 31, 2012 increased by approximately $99,000, or 48.3%, compared to the same period in 2011. The increase was primarily attributable to increases in advertising and stock-based compensation expenses. For the remainder of 2012, we anticipate M&BD expenses to be consistent with the level experienced in the first quarter of 2012 in absolute dollars. We expect that stock-based compensation expense will be reduced but that we will incur higher expenses on advertising, market testing and promotions for our current products as well as for new skin care products we plan to introduce in 2012.

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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, 2012 and 2011 are summarized in the table below.

	Three months ended March 31,
	2012			2011			Change
General and administrative	$	384,576		$	341,792			12.5	%
Percentage of total revenue		56.5	%		95.6	%

G&A expenses for the three months ended March 31, 2012 increased by approximately $43,000, or 12.5%, compared to the same period in 2011. The increase was primarily due to an increase in stock-based compensation expense. For the remainder of 2012, we anticipate G&A expenses to increase from the level experienced in the first quarter as we expect to incur higher consulting fees and general corporate expenses.

Accounting, Legal and Professional Fees

Accounting, legal and professional fees for the three months ended March 31, 2012 and 2011 are summarized in the table below.

	Three months ended March 31,						Change
	2012			2011
Accounting, legal and professional fees	$	219,222		$	165,437			32.5	%
Percentage of total revenue		32.2	%		46.3	%

Accounting, legal and professional fees for the three months ended March 31, 2012 increased by approximately $54,000, or 32.5%, compared to the same period in 2011. The increase was due primarily to higher legal fees associated with the protection of our intellectual property, partially offset by a decrease in legal fees related to general corporate matters. Legal fees for general corporate matters incurred in the first quarter of 2011 included services related to our stock option plan as well as regulatory filings associated with the tender offer for our outstanding convertible notes payable and associated warrants.

For the remainder of 2012, we anticipate accounting, legal and professional fees will increase significantly as we expect to incur a much higher level of spending on legal fees related to the protection of our intellectual property.

Depreciation and Amortization

Depreciation and amortization expenses for the three months ended March 31, 2012 and 2011 are summarized in the table below.

	Three months ended March 31,						Change
	2012			2011
Depreciation and amortization	$	23,095		$	26,617			(13.2	)%
Percentage of total revenue		3.4	%		7.4	%

Depreciation and amortization expenses for the three months ended March 31, 2012 decreased by approximately $4,000, or 13.2%, compared to the same period in 2011. The decrease for the three months ended March 31, 2012 was primarily due to reduced depreciation from assets becoming fully depreciated. For the remainder of 2012, we expect depreciation and amortization expenses to be consistent with the level experienced in the first quarter of 2012.

Other Income (Expense), Net

Other income (expense), net for the three months ended March 31, 2012 and 2011 is summarized in the table below.

	Three months ended March 31,					Change
	2012			2011
Interest income	$	740		$	1,204		(38.5	)%
Amortization of debt issuance costs		(12,117	)		—	NM
Equity in earnings (loss) of affiliated company		(17,648	)		7,992		(320.8	)%
Change in value of option to purchase interest in affiliated company		(6,620	)		7,715		(185.8	)%
Other income (expense), net	$	(35,645	)	$	16,911		(310.8	)%

____________________________

NM – Not meaningful

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Interest Income. Interest income for the three months ended March 31, 2012 decreased slightly compared to the same period in 2011, due primarily to a lower average balance of cash and cash equivalents during the first quarter of 2012. For the remainder of 2012, we expect interest income to be consistent as the level experienced in the first quarter of 2012.

Amortization of Expense Related to Letter of Credit. For the three months ended March 31, 2012, we recorded approximately $12,000 of expense related to the letter of credit established on our behalf by our largest stockholder on March 9, 2012. This amount represented the amortization of the fair value of the warrants issued in connection with the letter of credit from the inception date through the reporting date.

Equity in Earnings of Affiliated Company. For the three months ended March 31, 2012, we recorded approximately $18,000 in equity in loss of affiliated company, compared to approximately $8,000 in equity in earnings of affiliated company for the same period in 2011. These amounts represented our share of NuGlow’s net income or loss for the respective periods.

Change in Value of Purchase Option, Affiliated Company. For the three months ended March 31, 2012, we recorded a loss of approximately $7,000 compared to a gain of approximately $8,000 to reflect the change in fair value of our option to purchase the remaining interest in NuGlow during the respective periods.

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 and, as of March 9, 2012, the line of credit with JP Morgan Chase Bank, N.A., as described below. As of March 31, 2012, we had approximately $1,164,000 in cash and cash equivalents, compared to approximately $1,689,000 in cash and cash equivalents at December 31, 2011. The decrease in cash and cash equivalents from December 31, 2011 was primarily attributable to cash used in operations during the first three months of 2012.

Cash Flows from Operating Activities

Cash used in operating activities for the three months ended March 31, 2012 and 2011 was approximately $525,000 and $753,000, 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.

For the three months ended March 31, 2012, changes in accounts receivable, prepaid expenses, accrued compensation and benefits and deferred gross profit used approximately $278,000 while changes in inventory, accounts payable, accrued expenses and deferred revenue provided approximately $157,000 of cash. For the three months ended March 31, 2011, changes in accounts receivable, inventory, prepaid expenses and other assets and accrued expenses used approximately $254,000 of cash, while changes in accounts payable, accrued compensation and benefits, deferred revenue and deferred gross profit provided approximately $149,000 of cash. 

Accounts receivable, including those from an affiliated company, increased by $219,000 and $113,000 for the first quarter of 2012 and 2011, respectively. The 2012 increase was due primarily to higher royalties recorded at the end of the quarter, and the 2011 increase was a result of products sales transacted in the latter part of the quarter. Inventory decreased by $41,000 for the first three months of 2012 and increased by approximately $20,000 for the same period in 2011. The fluctuations in inventory reflect our effort to manage cash flow and maintain inventory at a certain levels to meet customer required lead times.

Cash Flows from Investing Activities

For the three months ended March 31, 2012, there was no cash used in or provided by investing activities. For the three months ended March 31, 2011, cash used in investing activities of approximately $21,000 was related to payments for website development costs.

Cash Flows from Financing Activities

For the three months ended March 31, 2012 and 2011, there was no cash provided by financing activities.

On March 9, 2012, we entered into an LOC Agreement (the LOC Agreement) with Frank T. Nickell, who beneficially owned approximately 40% of our outstanding common stock as of March 26, 2012, pursuant to which Mr. Nickell established an irrevocable standby letter of credit by JPMorgan Chase Bank, N.A. (JPMorgan) to allow us to borrow from JPMorgan up to $2.0 million. The line of credit with JPMorgan (LOC) will expire on July 1, 2013 but will automatically renew until July 1, 2014 unless terminated by JPMorgan at least 14 days prior to the end of the current term, at which time we may draw up to the balance remaining on the LOC. Amounts outstanding under the LOC accrue interest at the rate of 0.75% per annum and are due and payable on or before July 1, 2014. Pursuant to the LOC Agreement, we agreed to use commercially reasonable efforts to consummate an equity financing prior to the termination date of the LOC in which we would sell and issue shares of our common stock at a price per share of at least $0.60 for aggregate proceeds of at least $3.0 million, upon consummation of which all amounts outstanding under the LOC shall be immediately repaid. In connection with the LOC Agreement, we issued to Mr. Nickell a five-year fully vested warrant to purchase 2,000,000 shares of our common stock at an exercise price of $0.25 per share and agreed to reimburse Mr. Nickell for his reasonable expenses in connection with the LOC, including, without limitation, any interest accrued and payable by Mr. Nickell in connection with the LOC. As of March 31, 2012, there were no borrowings outstanding under the LOC and reimbursements to Mr. Nickell had not been significant.

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Based on the current status of our operating and product commercialization development plans, we estimate that our existing cash and cash equivalents, together with the LOC with JPMorgan, 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 2012. 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 2012. Accordingly, we will need to draw down on the LOC and/or 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 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 the amount of revenue we generate, 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, 2012:

Contractual Obligations	Remainder of 2012		2013 through 2014		2015		Total
Operating lease	$	59,490	$	165,717	$	43,195	$	268,402
Purchase order commitments (1)		189,405		—		—		189,405
Total contractual obligations	$	248,895	$	165,717	$	43,195	$	457,807

______________________

(1)    Purchase order commitments primarily consisted of open orders for inventory.

Subsequent Events

Additional Investment in NuGlow

In connection with NuGlow’s additional capital raise in April 2012, on April 9, 2012, we contributed an additional $27,000 to maintain our 30% interest in NuGlow. We concurrently entered into a Third Amendment to the Amended and Restated Operating Agreement of NuGlow Cosmaceuticals, LLC to amend the allocation and distribution of this additional capital contribution prior to other allocations or distributions thereunder.

Operating Lease Amendment

Effective April 23, 2012, we entered into a Fourth Amendment to Lease with Teachers Insurance & Annuity Association of America, Inc. (Landlord) pursuant to which we agreed to move our office and laboratory to a new location also in Bothell, Washington on or before the later of July 1, 2012 and the date on which the Landlord completes certain tenant improvements (the Commencement Date). The new premises, consisting of approximately 6,300 square feet of office and lab space, will be leased for an additional 72 months starting from the Commencement Date. Under the terms of the amended lease, annual lease payments are expected to be approximately $79,000 for the first year, $81,000 for the second year, $84,000 for the third year, $86,000 for the fourth year, $89,000 for the fifth year and $92,000 for the sixth year, plus building operating costs. The amended lease provides us a moving allowance not exceeding $7,500 and a conditional abatement of one month base rent based upon our performance of the terms, covenants and conditions of the amended lease. We believe that any moving expenses we may incur beyond the Landlord’s allowance will not be significant.

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ITEM 3.  Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

ITEM 4.  Controls and Procedures.

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.

Change in Internal Control over Financial Reporting

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

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PART II – OTHER INFORMATION

ITEM 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, 2011 for a description of material 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.

ITEM 5.   Other Information.

Effective April 23, 2012, we entered into a Fourth Amendment to Lease (the “Fourth Lease Amendment”) with Teachers Insurance & Annuity Association of America, Inc. (the “Landlord”) in connection with the premises located at 22118 20th Avenue SE, Bothell, Washington 98021 and 22122 20th Avenue SE, Bothell, Washington 98021 (the “Initial Premises”). The Fourth Lease Amendment amends the Lease dated August 14, 2001 (the “Initial Lease”), as amended by the First Amendment to Lease dated December 6, 2005, the Second Amendment to Lease dated October 4, 2006 and the Third Amendment to Lease dated July 22, 2009 (as amended, the “Lease”). The Fourth Lease Amendment relocates the premises subject to the Lease from the Initial Premises to 6,276 square feet at 22121 17th Avenue SE, Bothell, Washington 98021 on or before the later of July 1, 2012 and the date on which the Landlord completes certain tenant improvements (the “Commencement Date”); provides us with a moving allowance of up to $7,500.00; and extends the term of the Lease for an additional 72 months commencing on the Commencement Date. The base monthly rent under the Lease shall be $6,588.00 for the initial 12 months (with a conditional abatement for January 2013), $6,785.83 for months 13 through 24, $6,989.40 for months 25 through 36, $7,199.08 for months 37 through 48, $7,415.05 for months 49 through 60, and $7,637.50 for months 61 through 72. The right of first opportunity by us under the Third Lease Amendment to lease certain office space contiguous to the Initial Premises has been deleted from the Lease.

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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
10.4(d)	Fourth Amendment to Lease between the Company and Teachers Insurance and Annuity Association of America, Inc. dated April 23, 2012	X
10.11(b)	Second Amendment dated March 6, 2012 to Amended and Restated Operating Agreement of NuGlow Cosmaceuticals, LLC among the Company, NuGlow Cosmaceuticals, LLC and Camden Street Partners, LLC	X
10.13	LOC Agreement dated March 9, 2012 between the Company and Frank T. Nickell	X
10.14	Warrant dated March 9, 2012 issued to Frank T. Nickell to purchase 2,000,000 shares of Common Stock	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
101.INS*	XBRL Instance Document	X
101.SCH*	XBRL Taxonomy Extension Schema Document	X
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document	X

________________________

* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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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 10, 2012

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 Principal Financial Officer)

EX-10.4(D)

Exhibit 10.4(d)

EX-10.11(B)

Exhibit 10.11(b)

SECOND AMENDMENT

This Second Amendment (the “Amendment”) is made and entered into this 6th day of March, 2012, by and among NuGlow Cosmaceuticals, LLC (“NuGlow”), Camden Street Partners, LLC (“Camden”) and Helix BioMedix, Inc. (“HXBM”) and amends that certain Amended and Restated Operating Agreement of NuGlow Cosmaceuticals, LLC dated July 1, 2010 by and among NuGlow, Camden and HXBM, as amended (the “LLC Agreement”).

1.  Consent/Amendment.

(a)           Pursuant to Section 5.5 of the LLC Agreement, HXBM hereby consents to the payment to Steven Sheiner of $5,000 per month in his capacity and as consideration for his services as an employee of NuGlow commencing March 1, 2012.

(b)           In consideration of the foregoing, HXBM’s purchase option described in Section 9.9(a) of the LLC Agreement shall hereby be extended until the seventh anniversary of the date of the LLC Agreement.

2.  Force and Effect.

The remainder of the LLC Agreement is not amended hereby and shall remain in full force and effect.  The parties hereby ratify and confirm the terms and conditions of the LLC Agreement, as amended by this Amendment.

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

NUGLOW COSMACEUTICALS, LLC
By:	/s/ Steven Sheiner
	Name: Steven Sheiner
	Title: Managing Member of Camden Street Partners, LLC, its Manager

CAMDEN STREET PARTNERS, LLC
By:	/s/ Steven Sheiner
	Name: Steven Sheiner
	Title: Managing Member

HELIX BIOMEDIX, INC.
By:	/s/ R. Stephen Beatty
	Name: R. Stephen Beatty
	Title: President and Chief Executive Officer

EX-10.13

Exhibit 10.13

LOC AGREEMENT

This LOC AGREEMENT (this “Agreement”) is made and entered into effective as of March 9, 2012 by and between HELIX BIOMEDIX, INC., a Delaware corporation (the “Company”), and Frank T. Nickell (“Nickell”) and supersedes in its entirety that certain LOC Agreement by and between the Company and Nickell dated effective as of March 6, 2012.

RECITALS

WHEREAS, Nickell has arranged for a line of credit (the “LOC”) to be extended to the Company by Nickell’s bank as set forth in Exhibit A hereto; and

WHEREAS, in consideration therefor, the Company hereby agrees as provided herein;

AGREEMENT

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

1.  Line of Credit.  Nickell hereby agrees to use commercially reasonable efforts to arrange for and maintain the LOC extended to the Company by Nickell’s bank as set forth in Exhibit A hereto.

2.  Equity Financing and Repayment.  The Company shall use commercially reasonable efforts to consummate an equity financing prior to the termination date of the LOC in which it would sell and issue shares of its Common Stock at a price per share of at least $0.60 for aggregate proceeds of at least $3,000,000, upon consummation of which all amounts outstanding under the LOC shall be immediately repaid, provided that all amounts outstanding under the LOC shall be repaid in any event no later than July 1, 2014.

3.  Warrant.  The Company shall grant to Nickell a five-year fully vested warrant to purchase 2,000,000 shares of the Company’s Common Stock at an exercise price equal to the closing price of the Company’s Common Stock on the date of grant.

4.  Miscellaneous.

4.1  Governing Law.  This Agreement 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.

4.2  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.

4.3  Entire Agreement; Amendment.  This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof, 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.

4.4  Expenses.  The Company shall reimburse Nickell for Nickell’s reasonable expenses in connection with the LOC, including, without limitation, any interest accrued and payable by Nickell in connection with the LOC.

5.5  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.

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

	HELIX BIOMEDIX, INC.	NICKELL:
By:	/s/ R. Stephen Beatty	/s/ Frank T. Nickell
	R. Stephen Beatty, President and	Frank T. Nickell
	Chief Executive Officer

EXHIBIT A

LOC

EX-10.14

Exhibit 10.14

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):  Frank T. Nickell	Warrant Number:  W-000530
	No. of Shares For Which this Warrant is Initially Exercisable:  2,000,000
Issue Date:  March 9, 2012	Termination Date:  March 9, 2017

WARRANT FOR THE

PURCHASE OF SHARES OF COMMON STOCK

OF

HELIX BIOMEDIX, INC.

THIS CERTIFIES THAT, for valuable consideration, the undersigned, together with his successors and permitted assigns (the “Holder”), is entitled to purchase, subject to the terms set forth below, up to 2,000,000 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 9, 2017.

(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 $0.25 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 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.

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(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.

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(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,

(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 any 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:	/s/  R. Stephen Beatty
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:  2,000,000

HOLDER:

/s/  Frank T. Nickell

Frank T. Nickell

Address:

Facsimile:

Soc. Sec. No. or Tax ID:

8

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 9, 2012, 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-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 10, 2012

/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 10, 2012

/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, 2012 (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 10, 2012

/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, 2012 (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 10, 2012

/s/ R. Stephen Beatty

R. Stephen Beatty

Acting Chief Financial Officer

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Note 3 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2012

Fair Value Disclosures [Text Block]

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, 2012. 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, 2012		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds	$	684,840	$	684,840	$	—	$	—
Option to purchase interest in affiliated company	$	5,742		—		—		5,742

Option to Purchase Interest in Affiliated Company. The Company estimated the fair value of the option to purchase an interest in an affiliated company to be $5,742 and $12,362 at March 31, 2012 and December 31, 2011, respectively, using the multiple of earnings method based on a number of factors and assumptions regarding the affiliated company’s potential future revenue and projected earnings before interest, tax, depreciation and amortization (EBITDA). The decrease in fair value of $6,620 was recorded in the statement of operations for the three months ended March 31, 2012.

Financial Instruments.  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, 2012 and December 31, 2011 because of the short-term nature of these instruments.

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Note 2 - Financing Activities

3 Months Ended

Mar. 31, 2012

Additional Financial Information Disclosure [Text Block]

Note 2.  Financing Activities

On March 9, 2012, the Company entered into an LOC Agreement (the LOC Agreement) with Frank T. Nickell, who beneficially owned approximately 40% of the Company’s outstanding common stock as of March 26, 2012, pursuant to which Mr. Nickell established an irrevocable standby letter of credit by JPMorgan Chase Bank, N.A. (JPMorgan) that allows the Company to borrow from JPMorgan up to $2.0 million. The line of credit (LOC) with JPMorgan will expire on July 1, 2013 but will automatically renew until July 1, 2014 unless terminated by JPMorgan at least 14 days prior to the end of the current term, at which time the Company may draw up to the balance remaining on the LOC. Amounts outstanding under the LOC accrue interest at the rate of 0.75% per annum and are due and payable on or before July 1, 2014. Pursuant to the LOC Agreement, the Company agreed to use commercially reasonable efforts to consummate an equity financing prior to the termination date of the LOC in which it would sell and issue shares of its common stock at a price per share of at least $0.60 for aggregate proceeds of at least $3.0 million, upon consummation of which all amounts outstanding under the LOC shall be immediately repaid.

In connection with the LOC Agreement, the Company issued to Mr. Nickell a five-year fully vested warrant to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $0.25 per share and agreed to reimburse Mr. Nickell for his reasonable expenses in connection with the LOC, including, without limitation, any interest accrued and payable by Mr. Nickell in connection with the LOC. As of March 31, 2012, reimbursements to Mr. Nickell had not been significant.

As the warrant was issued to obtain a letter of credit rather than in connection with a debt issuance, the Company measured this warrant at fair value on the inception date and accounted for it as equity in accordance with Accounting Standard Codification (ASC) 505-50-25, Equity-Based Payments to Non-Employees. The issuance of this warrant was equivalent to the payment of a loan commitment or access fee, and, therefore, the offset was recorded as deferred debt issuance costs to be amortized on a straight-line basis over the term of the LOC.

The Company estimated the fair value of this warrant to be $464,870 on March 9, 2012, based on the Black-Scholes option pricing model using an exercise period of 5 years, risk-free rate of 0.90%, volatility of 161%, and a trading price of the underlying shares of $0.25. For the three months ended March 31, 2012, the Company recognized a total of $12,117 of amortization expense related to the establishment of the LOC.

As of March 31, 2012, there were no borrowings outstanding under the LOC.

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Condensed Balance Sheets (USD $)	Mar. 31, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 1,163,534	$ 1,688,945
Accounts receivable, net	424,824	239,773
Accounts receivable, affiliated company, net	235,265	200,935
Inventory	322,891	363,869
Deferred debt issuance costs, current	201,040	0
Prepaid expenses and other assets	80,441	64,583
Total current assets	2,427,995	2,558,105
Property and equipment, net	19,946	26,098
Intangible assets, net	129,354	146,297
Deferred debt issuance costs, non-current	251,713	0
Other long term assets	14,264	20,884
Investment in affiliated company	205,607	223,255
Total assets	3,048,879	2,974,639
Current liabilities:
Accounts payable	177,035	125,324
Accrued compensation and benefits	48,478	87,859
Accrued expenses	114,106	55,463
Deferred revenue	7,060	0
Deferred gross profit, affiliated company	131,151	134,842
Deferred rent, current	7,748	7,155
Total current liabilities	485,578	410,643
Deferred rent, non-current	26,328	28,660
Total liabilities	511,906	439,303
Commitments and contingencies
Preferred stock, $0.001 par value, 25,000,000 shares authorized; no shares issued or outstanding	0	0
Common stock, $0.001 par value, 100,000,000 shares authorized; 49,720,255 shares outstanding at March 31, 2012 and December 31, 2011	49,721	49,721
Additional paid-in capital	49,125,928	48,542,453
Accumulated deficit	(46,638,676)	(46,056,838)
Total stockholders’ equity	2,536,973	2,535,336
Total liabilities and stockholders’ equity	$ 3,048,879	$ 2,974,639

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Condensed Statements of Cash Flows (Unaudited) (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash flows from operating activities
Net loss	$ (581,838)	$ (709,734)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	23,095	26,617
Stock-based compensation expense	118,605	51,128
Amortization of debt issuance costs	12,117	0
Equity in (earnings) loss of affiliated company	17,648	(7,992)
Change in value of option to purchase interest in affiliated company	6,620	(7,715)
Changes in assets and liabilities:
Accounts receivable, net	(185,051)	(40,972)
Accounts receivable from affiliated company, net	(34,330)	(71,808)
Inventory	40,978	(20,314)
Prepaid expenses and other assets	(15,858)	(64,662)
Accounts payable	51,711	48,275
Accrued compensation and benefits	(39,381)	10,603
Other accrued liabilities	56,904	(56,474)
Deferred revenue	7,060	53,270
Deferred gross profit, affiliated company	(3,691)	36,900
Net cash used in operating activities	(525,411)	(752,878)
Cash flows from investing activities
Purchases of property and equipment	0	(20,655)
Net cash used in investing activities	0	(20,655)
Net decrease in cash and cash equivalents	(525,411)	(773,533)
Cash and cash equivalents at beginning of period	1,688,945	4,044,309
Cash and cash equivalents at end of period	$ 1,163,534	$ 3,270,776

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Note 1 - Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2012

Significant Accounting Policies [Text Block]

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, 2011, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2012.

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 include all normal recurring accruals and adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods indicated and to ensure that the financial statements are not misleading. Significant items subject to such estimates and assumptions include, but are not limited to, revenue recognition, impairments of long-lived assets, and valuation of receivable allowances, inventories, deferred income tax assets, stock-based compensation and option to purchase interest in affiliated company. Actual results could differ from those estimates.

The results of operations for the three months ended March 31, 2012 are not necessarily indicative of the results of operations that may be achieved for the entire year ending December 31, 2012.

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Condensed Balance Sheets (Parentheticals) (USD $)	Mar. 31, 2012	Dec. 31, 2011
Preferred stock par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	25,000,000	25,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares outstanding	49,720,255	49,720,255

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Note 11 - Net Loss per Share

3 Months Ended

Mar. 31, 2012

Earnings Per Share [Text Block]

Note 11.  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,
	2012		2011
Weighted average outstanding options		3,705,526		3,903,644
Weighted average outstanding warrants		1,606,313		2,493,831

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Document And Entity Information	3 Months Ended
	Mar. 31, 2012	Apr. 30, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	HELIX BIOMEDIX INC
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		49,720,255
Amendment Flag	false
Entity Central Index Key	0000831749
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Mar. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1

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Note 12 - Concentration of Risks

3 Months Ended

Mar. 31, 2012

Concentration Risk Disclosure [Text Block]

Note 12.  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, 2012, the Company maintained approximately $685,000 at major financial institutions in money market accounts insured by the Federal Deposit Insurance Corporation up to $250,000 per account or 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, 2012 and 2011:

	Three months ended March 31,
	2012			2011
Customer A		18	%		37	%
Customer B		49	%		39	%
Customer C		17	%		14	%

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Condensed Statements of Operations (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Revenue:
Licensing fees	$ 315,092	$ 171,425
Peptide and consumer product sales	252,727	134,932
Consumer product sales to affiliated company	112,603	51,271
Total revenue	680,422	357,628
Cost of revenue:
Cost of peptide and consumer product sales	157,773	91,297
Cost of consumer product sales to affiliated company	51,758	29,530
Total cost of revenue	209,531	120,827
Gross profit	470,891	236,801
Research and development	87,085	225,163
Marketing and business development	303,106	204,437
General and administrative	384,576	341,792
Accounting, legal and professional fees	219,222	165,437
Depreciation and amortization	23,095	26,617
Total operating expenses	1,017,084	963,446
Loss from operations	(546,193)	(726,645)
Other income (expense):
Interest income	740	1,204
Amortization of debt issuance costs	(12,117)	0
Equity in earnings (loss) of affiliated company	(17,648)	7,992
Change in value of option to purchase interest in affiliated company	(6,620)	7,715
Other income (expense), net	(35,645)	16,911
Net loss and comprehensive loss	$ (581,838)	$ (709,734)
Basic and diluted net loss per share (in Dollars per share)	$ (0.01)	$ (0.01)
Weighted average shares outstanding (in Shares)	49,720,255	49,720,255

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Note 6 - Intangible Assets

3 Months Ended

Mar. 31, 2012

Intangible Assets Disclosure [Text Block]

Note 6.  Intangible Assets

Identifiable intangible assets consisted of the following as of March 31, 2012 and December 31, 2011:

	March 31, 2012			December 31, 2011
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		(988,525	)		(971,582	)
Intangible assets, net	$	129,354		$	146,297

Amortization expense for intangible assets was $16,943 for each of the three months ended March 31, 2012 and 2011.

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Note 5 - Property and Equipment

3 Months Ended

Mar. 31, 2012

Property, Plant and Equipment Disclosure [Text Block]

Note 5.  Property and Equipment

Property and equipment consisted of the following as of March 31, 2012 and December 31, 2011:

	March 31, 2012			December 31, 2011
Machinery and equipment	$	520,950		$	520,950
Website development costs		63,175			63,175
Furniture and fixtures		50,441			50,441
Leasehold improvements		43,993			43,993
		678,559			678,559
Less accumulated depreciation		(658,613	)		(652,461	)
Property and equipment, net	$	19,946		$	26,098

Aggregate depreciation expense for property and equipment during the three months ended March 31, 2012 and 2011 was $6,152 and $9,674, respectively.

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Note 13 - Liquidity and Capital Resources

3 Months Ended

Mar. 31, 2012

Liquidity And Capital Resources

Note 13.  Liquidity and Capital Resources

For the three months ended March 31, 2012, the Company incurred a net loss of $581,838. At March 31, 2012, the Company had $1,163,534 in cash and cash equivalents. For the three months ended March 31, 2012, cash used in operations was $525,411.

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, together with the LOC with JPMorgan, 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 2012. 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 2012. Accordingly, the Company will need to draw down on the LOC and/or raise additional funding, which may include debt and/or equity financing. However, there is no assurance that additional funding will be available on favorable terms, if at all. If the Company is unable to obtain the necessary additional funding, the Company may not be able to satisfy its existing obligations 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 the amount of revenue generated by the Company, 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.

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Note 9 - Deferred Gross Profit, Affiliated Company

3 Months Ended

Mar. 31, 2012

Deferred Revenue Related Party Disclosure [Text Block]

Note 9. Deferred Gross Profit, Affiliated Company

Deferred gross profit from an affiliated company consisted of the following as of March 31, 2012 and December 31, 2011:

	March 31, 2012		December 31, 2011
Deferred revenue, affiliated company	$	252,710	$	254,826
Deferred cost of revenue, affiliated company		121,559		119,984
Deferred gross profit, affiliated company	$	131,151	$	134,842

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Note 7 - Investment in Affiliated Company

3 Months Ended

Mar. 31, 2012

Equity Method Investments and Joint Ventures Disclosure [Text Block]

Note 7.  Investment in Affiliated Company

In July 2010, the Company obtained a 30% membership interest in NuGlow Cosmaceuticals, LLC (NuGlow), a direct-response company selling specialty skin care products, in exchange for a capital contribution of $350,000. In connection with NuGlow’s capital raise in September 2011, the Company contributed an additional $42,000 to maintain its 30% interest in NuGlow. In March 2012, the Company entered into a Second Amendment to the Amended and Restated Operating Agreement with NuGlow, pursuant to which the Company consented to certain monthly payments by NuGlow in consideration for which the Company’s option to purchase the remaining interest of NuGlow (the Purchase Option) was extended from July 1, 2015 to July 1, 2017.

The Company’s cumulative investment in NuGlow is accounted for as an equity investment and is adjusted at each reporting period to reflect the Company’s share of NuGlow’s net earnings, losses, contributions and any profit distributions. The Company has elected to account for the Purchase Option at fair value on the balance sheet with changes in value recognized in the statement of operations over the life the of the Purchase Option. Additionally, at each reporting period, the Company assesses its investment in NuGlow to determine whether events or changes in circumstances indicate that the carrying amount may not be recoverable. The primary factors the Company considers in its determination are NuGlow’s financial condition and operating performance. If the decline in value is deemed to be other than temporary, the Company would recognize an impairment loss.

At December 31, 2011, the carrying value of the Company’s investment in NuGlow was $223,255. For the three months ended March 31, 2012, the Company recorded a loss $17,648 to “Equity in loss of affiliated company” which reflected its share of NuGlow’s net loss during the first quarter of 2012, thereby decreasing the value of the Company’s investment in NuGlow to $205,607 as of March 31, 2012.

NuGlow’s condensed balance sheets at March 31, 2012 and December 31, 2011 and statements of operations for the three months ended March 31, 2012 and 2011 are as follows:

	March 31, 2012 (Unaudited)			December 31, 2011 (Unaudited)
NuGlow Condensed Balance Sheets
Assets
Cash	$	19,242		$	200
Accounts receivable, net		6,373			18,276
Inventory		229,147			275,838
Prepaid expenses and other current assets		59,471			9,513
Total assets	$	314,233		$	303,827
Liabilities and members’ equity
Accounts payable and current liabilities	$	350,098		$	280,867
Members’ equity		514,661			514,661
Accumulated deficit		(550,526	)		(491,701	)
Total liabilities and members’ equity	$	314,233		$	303,827

	Three months ended (Unaudited)
	March 31, 2012 (Unaudited)			March 31, 2011 (Unaudited)
NuGlow Condensed Statements of Operations
Revenue	$	233,371		$	180,720
Cost of goods sold		(98,227	)		(87,590	)
Operating expenses		(193,969	)		(66,489	)
Net income	$	(58,825	)	$	26,641

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Note 8 - Other Assets

3 Months Ended

Mar. 31, 2012

Other Assets Disclosure [Text Block]

Note 8.  Other Assets

Other assets consisted of the following as of March 31, 2012 and December 31, 2011:

	March 31, 2012		December 31, 2011
Deposits	$	8,522	$	8,522
Option to purchase interest in affiliated company (see Note 7)		5,742		12,362
Other assets	$	14,264	$	20,884

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Note 10 - Stock-Based Compensation

3 Months Ended

Mar. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 10.  Stock-Based Compensation

2011 Stock Option Plan

On February 10, 2011, the Company’s board of directors adopted, and on May 25, 2011, the Company’s stockholders approved, the Helix BioMedix, Inc. 2011 Stock Option Plan (the 2011 Plan). The 2011 Plan provides for the grant of incentive stock options to employees and non-statutory stock options to employees, non-employee directors and consultants. The 2011 Plan is administered by the board of directors, which has the authority to select the individuals to whom awards are to be granted, the number of awards granted, and the vesting schedule. A total of 12,000,000 shares of common stock are reserved for issuance under the 2011 Plan. Options granted under the 2011 Plan to employees generally vest over a three-year period with 1/3 of the shares vesting after one year from the date of grant and 1/36 of the shares vesting monthly thereafter. Option awards to non-employee directors may vest fully upon grant or quarterly over one year. All option awards have a maximum term of ten years and exercise prices equal to the closing market price of the Company’s common stock on the grant date.

2000 Stock Option Plan

In 2000, the Company’s stockholders approved the Helix BioMedix 2000 Stock Option Plan (the 2000 Plan). The 2000 Plan provided for the granting of incentive stock options and nonqualified stock options to employees, directors and consultants. Options granted under the 2000 Plan generally became exercisable over periods ranging from one to three years, had a maximum term of ten years and exercise prices equal to the closing market price of the Company’s common stock on the grant date. Effective November 6, 2010, additional option awards under the 2000 Plan were discontinued. The 2000 Plan will remain in effect as to outstanding options granted prior to November 6, 2010.

Stock Option Activities

During the three months ended March 31, 2012 and 2011, the Company granted options under the 2011 Plan to purchase an aggregate of 1,200,000 and 135,000 shares of common stock, respectively, with a weighted-average fair value of $0.23 and $0.25 per share, respectively. Fair values for options granted were calculated using the Black-Scholes option pricing model with the following assumptions:

	Three months ended March 31,
	2012		2011
Risk-free interest rate		0.87% - 1.14%		2.17%
Expected dividend yield		0		0
Expected term in years	5.0-6.0 years		5.5 years
Expected volatility		147% - 157%		118%

The risk-free rate is based on the implied yield available on U.S. Treasury zero–coupon issues with a remaining term equal to the expected term of options issued. The Company does not anticipate declaring dividends in the foreseeable future. For the three months ended March 31, 2012 and 2011, 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, 2012 and 2011 related to stock options was $118,605 and $51,128, respectively. Stock-based compensation for the three months ended March 31, 2011 included an expense of approximately $36,000 related to the modifications of the terms of certain options held by the Company’s former Vice President and Chief Scientific Officer, who left in February 2011. As of March 31, 2012, total unrecognized stock-based compensation related to non-vested stock options was $246,848, which is expected to be recognized over a weighted-average period of approximately 2.4 years.

A summary of the Company’s stock compensation expense for the three months ended March 31, 2012 and 2011 is as follows:

	Three months ended March 31,
	2012		2011
Research and development	$	4,124	$	38,102
Marketing and business development		51,626		4,389
General and administrative		62,855		8,637
Total stock-based compensation	$	118,605	$	51,128

A summary of the Company’s stock option activity under both option plans for the three months ended March 31, 2012 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, 2011		3,264,207		$	0.65
Granted		1,200,000		$	0.25
Exercised		—			—
Forfeited		—			—
Expired		(395,000	)	$	0.87
Outstanding, March 31, 2012		4,069,207		$	0.51		6.16	$	10,200
Exercisable, March 31, 2012		2,924,706		$	0.60		4.83	$	2,000

The aggregate intrinsic value in the table above is based on the Company’s closing stock price of $0.25 on March 31, 2012, which would have been the closing price of shares of common stock received by the optionees had all of the options with exercise prices less than $0.25 been exercised on that date.

As of March 31, 2012, there were 12,000,000 shares of common stock reserved for issuance pursuant to the 2011 Plan, of which 10,393,000 shares remained available for future grants. Additional information regarding options outstanding as of March 31, 2012, 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
$	0.15 – $0.37		2,223,957		8.49	$	0.28		1,079,456	$	0.29
$	0.40 – $0.57		795,000		4.55	$	0.49		795,000	$	0.49
$	0.70 – $1.00		869,000		2.43	$	0.90		869,000	$	0.90
$	1.20 – $1.80		181,250		2.54	$	1.56		181,250	$	1.56
$	0.15 – $1.80		4,069,207		6.16	$	0.51		2,924,706	$	0.60

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Condensed Statements of Stockholders Equity (USD $)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Balance at Dec. 31, 2010	$ 49,721	$ 48,392,985	$ (43,568,262)	$ 4,874,444
Balance (in Shares) at Dec. 31, 2010	49,720,255
Stock-based compensation		149,468		149,468
Net loss			(2,488,576)	(2,488,576)
Balance at Dec. 31, 2011	49,721	48,542,453	(46,056,838)	2,535,336
Balance (in Shares) at Dec. 31, 2011	49,720,255			49,720,255
Stock-based compensation		118,605		118,605
Fair value of warrants issued in connection with letter of credit		464,870		464,870
Net loss			(581,838)	(581,838)
Balance at Mar. 31, 2012	$ 49,721	$ 49,125,928	$ (46,638,676)	$ 2,536,973
Balance (in Shares) at Mar. 31, 2012	49,720,255			49,720,255

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Note 4 - Inventory

3 Months Ended

Mar. 31, 2012

Inventory Disclosure [Text Block]

Note 4. Inventory

Inventory consisted of the following as of March 31, 2012 and December 31, 2011:

	March 31, 2012		December 31, 2011
Work in process	$	105,824	$	156,425
Finished goods		217,067		207,444
	$	322,891	$	363,869

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Note 14 - Subsequent Events

3 Months Ended

Mar. 31, 2012

Subsequent Events [Text Block]

Note 14.  Subsequent Events

Additional Investment in NuGlow

In connection with NuGlow’s additional capital raise in April 2012, on April 9, 2012, the Company contributed an additional $27,000 to maintain its 30% interest in NuGlow. The Company concurrently entered into a Third Amendment to the Amended and Restated Operating Agreement of NuGlow Cosmaceuticals, LLC to amend the allocation and distribution of this additional capital contribution prior to other allocations or distributions thereunder.

Operating Lease Amendment

Effective April 23, 2012, the Company entered into a Fourth Amendment to Lease with Teachers Insurance & Annuity Association of America, Inc. (Landlord) pursuant to which the Company agreed to move its office and laboratory to a new location also in Bothell, Washington on or before the later of July 1, 2012 and the date on which the Landlord completes certain tenant improvements (the Commencement Date). The new premises, consisting of approximately 6,300 square feet of office and lab space, will be leased for an additional 72 months starting from the Commencement Date. Under the terms of the amended lease, annual lease payments are expected to be approximately $79,000 for the first year, $81,000 for the second year, $84,000 for the third year, $86,000 for the fourth year, $89,000 for the fifth year and $92,000 for the sixth year, plus building operating costs. The amended lease provides the Company a moving allowance not exceeding $7,500 and a conditional abatement of one month base rent based upon the Company’s performance of the terms, covenants and conditions of the amended lease. The Company believes that any moving expenses it may incur beyond the Landlord’s allowance will not be significant.