UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-K





þ
            ANNUAL REPORT UNDER SECTION 13
      or 15(d) OF THE SECURITIES EXCHANGEACT OF
    1934





For
the fiscal year ended December 31, 2009





 ̈
            TRANSITION REPORT UNDER SECTION
      13 or 15(d) OF THE SECURITIESEXCHANGE ACT OF
      1934





For
the transition period
from        to





Commission
file number: 001-16781




microHelix,
Inc.


(Exact
Name of Registrant as Specified in Its Charter)





Oregon
              91-1758621(State or Other Jurisdiction of Incorporation or
                Organization)
              (I.R.S. Employer Identification No.)5300 Meadows, Suite 400, Lake Oswego,
                Oregon
              97035(Address of Principal Executive Offices)
              (Zip Code)





(Issuer's
Telephone Number, Including Area Code):


(503)
419-3505




Securities
registered under Section 12(g) of the Exchange Act:





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


Yes ̈ Noþ




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.


Yesþ No ̈




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.


Yesþ No ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained in this form, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K, or any amendments to this Form 10-K.


þ




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.





Large
      accelerated filer  ̈
                  Accelerated
      filer ̈Non-accelerated
      filer    ̈
                  Smaller
      reporting companyþ





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


Yes  ̈ Noþ ■





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates, as of December 31, 2009, was approximately $18,277 based
upon the last sale price reported for such date on the NASDAQ OTC
Market.





There
were 13,832,844 shares of the issuer's Common Stock outstanding as of March 5,
2010.





Transitional Small Business
Disclosure Format: Yes ̈Noþ













PART
I





This
Annual Report on Form 10-K contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, as
amended.  Such statements reflect management's current view and
estimates of future economic and market circumstances, industry conditions,
company performance and financial results.  Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates" and
variations of such words and similar expressions are intended to identify such
forward-looking statements.  These statements are subject to risks and
uncertainties that could cause our future results to differ materially from the
results discussed herein.  Factors that might cause such a difference
include, but are not limited to, those discussed elsewhere in this Annual Report
on Form 10-K.  We do not intend, and undertake no obligation, to
update any such forward-looking statements to reflect events or circumstances
that occur after the date of this filing.





Item
1. Business





Overview





Until
September 28, 2007, when microHelix, Inc. ("we," "us," "our," "microHelix"
or the "Company”) suspended manufacturing operations and concluded the
disposition of its assets to its secured creditors, the Company was a
manufacturer of custom cable assemblies and mechanical assemblies for the
medical and commercial original equipment manufacturer (OEM)
markets.  Continuing deterioration of our financial condition during
April and May 2007 caused us to voluntarily surrender our assets to our secured
creditors on May 31, 2007 and wind up our affairs.  In connection with
the windup, we stopped paying our unsecured creditors for goods and services
provided prior to May 21, 2007.  The Company and its wholly owned
subsidiary, Moore Electronics, Inc. ("Moore"), operated for the benefit of the
secured creditors until September 2007, at which time it ceased manufacturing
operations and became a shell company.  Effective January 1, 2010, we
are no longer considered a shell company.





Effective
December 30 and 31, 2009, microHelix entered into agreements pursuant to which
it, with two other parties, formed a limited liability company, WS Technologies
LLC ("WS Technologies"), that acquired the right to service and collect consumer
receivables generated by hospitals, on a recourse basis, with regard to the
hospital ("Receivables"), together with certain software that is used to perform
that service.  WS Technologies then redeemed all but half of one
membership unit (a "Unit") held by each of  the other two parties,
with the result that microHelix now owns 99% of WS Technologies. See further
discussion in Note 1 to the consolidated financial statements. The agreements
are as follows.





Contribution
Agreement (the "Aequitas Contribution Agreement") dated December 30, 2009
between WS Technologies and Aequitas Capital Management, Inc.
("Aequitas"):





Under the
Aequitas Contribution Agreement, Aequitas contributed the exclusive right to
service and receive compensation and origination fees for all Receivables owned
and generated in the future by CarePayment, LLC, together with certain assets
required to perform that service, including the CarePayment proprietary
accounting software system (the "Software"). In exchange for that contribution,
WS Technologies issued units representing a 28% ownership interest in WS
Technologies to Aequitas.





Contribution
Agreement (the "CarePayment Contribution Agreement") dated December 30,
2009 between WS Technologies and CarePayment, LLC ("Carepayment"):





Under the
CarePayment Contribution Agreement, CarePayment contributed the service marks
CarePayment® and CarePayment.com and the Internet domain name
"CarePayment.com."  In exchange for that contribution, WS Technologies
issued units representing a 22% ownership interest in WS Technologies to
CarePayment.  WS Technologies intends to use the CarePayment brand in
the ordinary course of its business and in connection with providing services to
its customers.





Contribution
Agreement (the "microHelix Contribution Agreement") dated December 30, 2009
between WS Technologies and the Company:





Under the
microHelix Contribution Agreement, the Company contributed 1,000,000 shares of
its Series D Preferred Stock (the "Series D Preferred") and warrants to purchase
65,100,917 shares of Class B Common Stock of microHelix at an exercise price of
$0.001 per share (the "Warrants").  In exchange for that contribution,
WS Technologies issued units representing a 50% ownership interest in WS
Technologies to microHelix.  The Warrants expire on December 31,
2014.





Servicing
Agreement (the "Servicing Agreement") dated December 31, 2009 between WS
Technologies and CarePayment:





Under the
Servicing Agreement, CarePayment grants WS Technologies the exclusive right to
collect, administer and service all Receivables purchased or controlled by
CarePayment.  CarePayment also appoints WS Technologies as a
non-exclusive originator of Receivables purchased or controlled by CarePayment,
including negotiating with hospitals on behalf CarePayment with respect to such
services.


1





Royalty
Agreement ("Royalty Agreement") dated December 31, 2009 between WS Technologies
and Aequitas:





Under the
Royalty Agreement, WS Technologies pays Aequitas a royalty based on new products
(the "Products") developed by WS Technologies or co-developed by WS Technologies
and Aequitas or its affiliates and that are based on or use the
Software.  The royalty is equal to (i) 1.0% of the net revenue
received by WS Technologies and generated by the Products that utilize funding
provided by Aequitas or its affiliates and (ii) 7.0% of the face amount, or such
other percentage as the parties may agree, of receivables serviced by WS
Technologies that do not utilize such funding.





Trademark
License Agreement ("Trademark License") dated December 31, 2009 between WS
Technologies and Aequitas Holdings, Inc.  ("Aequitas
Holdings"):





Under the
Trademark License, WS Technologies grants the non-exclusive use of the
CarePayment name and service mark to Aequitas Holdings and its
affiliates.  Aequitas Holdings may also sublicense the use of the
CarePayment name and trademark to its business partners that are involved in the
marketing and sale of Aequitas Holdings’ products or joint products with those
business partners.





Administrative
Services Agreement dated December 31, 2009 (the "Administrative Services
Agreement") between Aequitas and WS Technologies:





Aequitas
provides WS Technologies management support services such as accounting,
financial services, human resources and information technology
services.  The total fee for the services is approximately $65,100 per
month.  The fees will increase by 3% on January 1 of each year,
beginning January 1, 2011.  Either party may change the services
(including terminating a particular service) upon 180 days prior written notice
to the other party, and the Administrative Services Agreement is terminable by
either party on 180 days notice.





Redemption
Agreement dated December 31, 2009 between WS Technologies and Aequitas (the
"Aequitas Redemption Agreement"):





Under the
Aequitas Redemption Agreement, WS Technologies redeemed all but half of one Unit
of WS Technologies held by Aequitas in WS Technologies in exchange for 600,000
shares of Series D Preferred Stock of the Company.





Redemption
Agreement dated December 31, 2009 between WS Technologies and CarePayment
(the "CarePayment Redemption Agreement"):





Under the
CarePayment Redemption Agreement, WS Technologies redeemed all but half of one
Unit of WS Technologies held by CarePayment in WS Technologies for 400,000
shares of Series D Preferred Stock of the Company and the Warrants.





Sublease
Agreement ("Sublease") dated December 31, 2009 between WS Technologies and
Aequitas:





WS
Technologies leases certain office space and personal property from Aequitas
pursuant to the Sublease.  The rent for the real property is $12,424
per month, and will increase by 3% each year beginning January 1,
2011.  The rent for the personal property is $6,262 per month, and WS
Technologies also pays all personal property taxes related to the personal
property it uses under the Sublease.  The term of the Sublease ends on
October 31, 2014.





First
Amendment to the Third Amended and Restated Promissory Note (the "Note
Amendment") dated December 31, 2009 between microHelix and MH Financial
Associates, LLC ("MH Financial"):





Under the
terms of the Note Amendment, MH Financial agreed to extend the maturity date of
the Third Amended and Restated Promissory Note (the "Note") to December 31,
2011.  In addition, the interest rate on the principal amounts
outstanding under the Note will be decreased from 20% to 8% per annum after the
Company makes a $400,000 payment of principal under the Note.  The
Note, as amended by the Note Amendment, continues to be secured by substantially
all of the assets of the Company.





First
Amendment to Multiple Advance Promissory Note (the "Amended Aequitas Note")
dated December 31, 2009 among microHelix, Moore Electronics, Inc. and
Aequitas.





Under the
Amended Aequitas Note, the maximum principal amount microHelix may borrow is
increased to $360,000, and the maturity date is extended to March 31,
2010.





Investor
Rights Agreement ("Investor Rights Agreement") dated December 31, 2009
among microHelix, Aequitas and CarePayment:


2





Under the
Investor Rights Agreement, microHelix agrees that, as long as Aequitas and
CarePayment (or their affiliates) own securities in microHelix, microHelix will
pay all expenses incurred by Aequitas and CarePayment in connection with the
preparation and filing with the Securities and Exchange Commission of reports or
other documents related to microHelix or any securities owned by Aequitas and
CarePayment in microHelix.  In addition, if microHelix fails to redeem
the Series D Preferred Stock by January 31, 2013 in accordance with Section
4.1(b) of the Certificate of Designation for the Series D Preferred Stock,
(i) Aequitas will have the right to exchange all of its shares of Series D
Preferred Stock for 55.5 Units of WS Technologies to Aequitas, and CarePayment
or its assignee will have the right to exchange all of its shares of
Series D Preferred Stock for 42.5 Units, which could result in Aequitas and
CarePayment together owning 99% of WS Technologies.





Aequitas
is an affiliate of MH Financial, one of the Company's largest
shareholders.  The Company's two board members, Mr. Thomas Sidley and
Mr. Donald Megrath, are affiliates of Aequitas.  CarePayment is a
wholly owned subsidiary of Aequitas Commercial Finance, LLC, which is a
subsidiary of Aequitas Holdings, LLC.





The
Company does not consider the assets acquired to be a "business" as defined in
the instructions to Form 10-K.  Rather, the Company completed the
acquisition of disparate assets from two different sources in an attempt to
create a business under which the Company can begin to operate
again.  Therefore, no financial statements for those assets have been
included with this Form 10-K.





microHelix
issued 1,000,000 shares of Series D Preferred Stock and the Warrants to WS
Technologies pursuant to the microHelix Contribution Agreement described in Item
1.01 above.  Holders of the Series D Preferred Stock  are
entitled to receive a preferred dividend of $0.50 per share per annum when, as
and if declared, and a liquidation preference of $10 per share, plus cumulative
unpaid dividends.  The Company may redeem all of the Series D
Preferred Stock at any time upon ten days' prior written notice, and is required
to redeem all of the Series D Preferred Stock in January 2013 at a purchase
price equal to the liquidation preference in effect on January 1,
2013.  If the Company is unable to redeem the Series D Preferred Stock
with cash or other immediately available funds for any reason, the Company will
cause WS Technologies to issue to the holders of the Series D Preferred
Stock an aggregate 99% ownership interest in the equity of WS Technologies as
consideration for the redemption of the Series D Preferred Stock.





The
Warrants are exercisable at a price of $0.001 per share of Class B Common Stock,
and expire on December 31, 2014.  The Company has agreed to use
commercially reasonable efforts to call as soon as possible a shareholders’
meeting for the purpose of amending its Amended and Restated Articles of
Incorporation, as amended to include enough authorized shares of Class B Common
Stock to permit exercise of the Warrant in full.  The Warrant may not
be exercised until such an amendment has been completed.  If, for any
reason, the Company does not authorize Class B Common Stock, then the Warrants
will be exercisable for shares of Common Stock.  The Company intends
that new Class B Common Stock will have preferential voting rights and the
ability to elect a majority of the Company's Board of
Directors.  Existing shareholders are expected to receive shares of
Class A Common Stock which the Company anticipates will have one vote per
share and will have the right to elect a minority of the Board of
Directors.





On
December 22, 2009, MH Financial Associates, LLC elected to convert all of its
shares of Series C Preferred Stock into 186,047 shares of Common
Stock.





On
December 30, 2009, MH Financial Associates, LLC exercised a warrant to purchase
3,084,856 shares of Common Stock, Aequitas Capital Management, Inc. exercised a
warrant to purchase 1,066,667 shares of Common Stock, Aequitas Catalyst Fund,
LLC exercised warrants to purchase a total of 4,366,602 shares of Common Stock,
Thurman Holdings I, LP exercised warrants to purchase a total of 2,822,867
shares of Common Stock, and CTK Capital Corporation exercised a warrant to
purchase 332,384 shares of Common Stock.





The
issuance of the Series D Preferred Stock, the Warrants and the Common Stock upon
exercise of warrants described above was exempt from registration under the
Securities Act of 1933, as amended (the " Securities Act"), and microHelix
amended its Amended and Restated Articles of Incorporation, as amended, on
December 30, 2009 by filing a Certificate of Designation with the Oregon
Secretary of State designating 1,200,000 shares of its Preferred Stock as Series
D Preferred Stock.  One million shares of Series D Preferred
Stock were issued to WS Technologies on December 30, 2009.  WS
Technologies transferred 600,000 shares of the Series D Preferred Stock to
Aequitas pursuant to the Aequitas Redemption Agreement, and it transferred
400,000 shares of the Series D Preferred Stock to CarePayment pursuant to the
CarePayment Redemption Agreement.  The rights of the holders of
microHelix's Common Stock may be materially limited by the issuance of Series D
Preferred Stock in that the Series D Preferred Stock holders have superior
liquidation preferences over the Common Stock holders in the event of any
liquidation, dissolution or winding up of microHelix, either voluntary or
involuntary.  In any such event, the assets of microHelix would be
distributed in the following order:





·
            First,
      to the holders of the Series D Preferred Stock until they receive an
      amount equal to $10.00 per share (as adjusted for stock splits, stock
      dividends, reclassification and the like), plus all cumulative but unpaid
      dividends for each share of Series D Preferred Stock then held by
      them.  The holders of the Series D Preferred Stock will be
      entitled to receive a cumulative annual dividend of $0.50 per
      share.


3





·
            Second,
      any remaining assets of microHelix would be distributed pro rata to the
      holders of Common Stock based on the number of shares of Common Stock then
      held by each holder.





Patents
and Intellectual Property





The
Company had no patents or patent applications pending as of the date of this
report.





The
Company currently owns the trademark "MICROHELIX" that is listed on the
principal register of the United States Patent and Trademark
Office.  The Company's intellectual property also includes common law
trademarks, service marks and trade names.





Effective
with the agreements entered into on December 30, 2009, WS Technologies owns the
trademark, “CarePayment®.”





Employees





The
Company had 21 full-time employees and no part-time employees in the United
States as of March 31, 2010.





Where
You Can Find More Information





On June
11, 2007, the Company filed a Form 15 with the Securities and Exchange
Commission terminating is registration under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and suspended its duty to
file reports under Sections 13 and 15(d) of the Exchange Act.  On
March 25, 2009, the Company voluntarily filed its annual and quarterly reports
for 2007 and quarterly reports for 2008 with the Securities and Exchange
Commission.





The
Company is not currently subject to the information requirements of the
Securities Exchange Act of 1934, as amended.  However, we voluntarily
file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission.  You may
inspect and copy any document we file with the SEC at the SEC's Public Reference
Room in Washington, D.C. at 100 F Street, N.E., Washington, D.C. 20549, on
official business days from 10:00 a.m. to 3:00 p.m.  You may
obtain information on the operation of the SEC's Public Reference Room by
calling (800) SEC-0330.  You may also purchase copies of our SEC
filings by writing to the SEC, Public Reference Section, 100 F Street,
N.W., Washington, D.C. 20549.  Our SEC filings are also available on
the SEC's website at http://www.sec.gov.





Item
1A.  RiskFactors





The
Company is subject to various risks that could have a material adverse effect on
it, including without limitation the following:





We
are dependent on the performance of a single subsidiary and line of
business.





The
Company's only operating assets are held by its subsidiary WS Technologies LLC
("WS Technologies"), which itself has only one line of business.  We
have no significant assets or financial resources other than WS
Technologies.





The
Company has a limited operating history in its current business.





Prior to
January 1, 2010, the Company had never operated a hospital receivables servicing
business. Our business plan must be considered in light of the risks, expenses
and problems frequently encountered by companies in their early stages of
development.  Specifically, such risks include a failure to anticipate
and adapt to a developing market and an inability to attract, retain and
motivate qualified personnel.  There can be no assurance that the
Company will be successful in addressing such risks.  To the extent
that we are not successful in addressing these risks, our business, results of
operations and financial condition will be materially and adversely
affected.  There can be no assurance that the Company will ever
achieve or sustain profitability.





The
provision of hospital Receivables (as defined below) servicing is a new business
for the Company.  We have no experience in such a
business.  Although we hired certain employees from Aequitas Capital
Management, Inc. who have previously provided such services to CarePayment, LLC
("CarePayment"), there is no assurance that we will be able to provide
satisfactory services to CarePayment through such employees, or such other
employees or contractors as we may retain.





Our
activities for the foreseeable future will be limited to servicing hospital
Receivables, CarePayment being our only direct customer.  Our
inability to diversify our activities into a number of areas may subject us to
economic fluctuations related to the business of CarePayment and therefore
increase the risks associated with our operations.  CarePayment's
ability to acquire Receivables for us to service depends on its ability to
acquire adequate funding sources.  The inability of CarePayment to
acquire a sufficient amount of Receivables for us to service would have a
material adverse effect on us.


4





A
deterioration in the economic or inflationary environment in the United States
may have a material adverse effect on us.





The
Company's performance may be affected by economic or inflationary conditions in
the United States.  If the United States economy deteriorates or if
there is a significant rise in inflation, personal bankruptcy filings may
increase, and the ability of hospital customers to pay their debts could be
adversely affected.  This may in turn adversely impact our financial
condition, results of operations, revenue and stock price.





The
recent financial turmoil affecting the banking system and financial markets and
the possibility that financial institutions may consolidate, go out of business
or be taken over by the federal government have resulted in a tightening in
credit markets.  These and other economic factors could have a
material adverse effect on us.





Adequate
financing may not be available when needed.





Additional
sources of funding will be required for us to continue
operations.  There is no assurance that the Company can raise working
capital or that any capital will be available to the Company at
all.  Failure to obtain financing when needed could result in
curtailing operations, acquisitions or mergers and investors could lose some or
all of their investment.





We
may be unable to manage growth adequately.





The
implementation of our business plan requires an effective planning and
management process. We anticipate significant growth and will need to
continually improve our financial and management controls, reporting systems and
procedures on a timely basis and expand, train and manage our
personnel.  There can be no assurance that our systems, procedures or
controls will be adequate to support our operations or that our management will
be able to achieve the rapid execution necessary to successfully implement our
business plan.





The
Company has many conflicts of interest.





Most of
the Company's agreements are with affiliates.  Although we believe
that the terms and conditions of the agreements with such parties are fair and
reasonable to the Company, such terms and conditions may not be as favorable to
us as those that could be obtained from independent third parties.  In
addition, the Company's officers and directors participate in other competing
business ventures.





There
is no public market for our securities.





There is
currently no active public market for the Company's securities.  No
predictions can be made as to whether a trading market will ever develop for any
of the Company's securities.  The sale of Company securities is not
being registered under the Securities Act, or any state securities laws, and
such securities may not be resold or otherwise transferred unless they are
subsequently registered under the Securities Act and applicable state laws, or
unless exemptions from registration are available.  Accordingly,
investors may not be able to liquidate their investment in any of the Company's
securities.





Rule
144 is not available for the resale of Company securities.





The
Company has been a "shell company" as defined in the Securities
Act.  Therefore,


Rule 144
will not be available for the resale of Company securities until the following
conditions are met:





·
            The
      Company must be subject to the reporting requirements of section 13 or
      15(d) of the Exchange Act.


·
            The
      Company must have filed all reports and other materials required to be
      filed by section 13 or 15(d) of the Exchange Act, as applicable, during
      the preceding 12 months, other than Form 8-K reports;
  and


·
            One
      year must have elapsed since the Company has filed current "Form 10
      information" with the Securities and Exchange Commission reflecting its
      status as an entity that is no longer a shell
  company.





The
Company has not yet satisfied the above conditions, and there can be no
assurance that the Company will ever satisfy the above
conditions.  The unavailability of Rule 144 may prevent an investor
from liquidating its investment in the Company's securities.





The
Company does not intend to pay dividends on Common Stock in the foreseeable
future.





For the
foreseeable future, we intend to retain any earnings to finance the development
and expansion of the Company, and we do not anticipate paying any cash dividends
on any of our Common Stock.  Any future determination to pay dividends
will be at the discretion of the Board of Directors and will be dependent on
then-existing conditions, including the Company's financial condition and
results of operations, capital requirements, contractual restrictions, business
prospects and other factors that the Board of Directors considers
relevant.


5





Disruptions
in service or damages to our data center or operations center, or other software
or systems failures, could adversely affect our business.





The
Company's data center and operations center are essential to our
business.  Our operations depend on our ability to maintain and
protect our computer systems.  We intend to conduct business
continuity planning and maintain insurance against fires, floods, other natural
disasters and general business interruptions to mitigate the adverse effects of
a disruption, relocation or change in operating environment at our offices.
However, our planning and insurance coverage may not be adequate in any
particular case. The occurrence of any of these events could result in
interruptions, could impair or prohibit our ability to provide services and
materially adversely impact us.





In
addition, despite the implementation of security measures, the Company's
infrastructure, data center and systems, including the internet and related
systems, are vulnerable to physical break-ins, hackers, improper employee or
contractor access, computer viruses, programming errors, denial-of-service
attacks, terrorist attacks or other attacks by third parties or similar
disruptive problems. Any of these can cause system failure, including network,
software or hardware failure, which can result in service disruptions or
increased response time for our products and services. As a result, the Company
may be required to expend significant capital and other resources to protect
against security breaches and hackers or to alleviate problems caused by such
breaches.





We also
rely on a limited number of suppliers to provide us with a variety of products
and services, including telecommunications and data processing services
necessary for operations and software developers for the development and
maintenance of certain software products we use to provide
solutions.  If these suppliers do not fulfill their contractual
obligations or choose to discontinue their products or services, our business
and operations could be disrupted, our brand and reputation could be harmed and
we could be materially and adversely affected.





We may be unable to protect our
intellectual property.





We rely,
and expect to continue to rely, on a combination of copyright, trademark and
trade secret laws and contractual restrictions to establish and protect our
technology. We do not currently have any issued patents or registered
copyrights, and have only one registered trademark.  There can be no
assurance that the steps we have taken will be adequate to prevent
misappropriation of our technology or other proprietary rights, or that our
competitors will not independently develop technologies that are substantially
equivalent or superior to our technology.  To the extent we become
involved in litigation to enforce or defend our intellectual property rights,
such litigation can be a lengthy and costly process causing diversion of our
effort, resources and management with no guarantee of success.





We face significant competition for
our services.





The
markets for our services are intensely competitive, continually evolving and, in
some cases, subject to rapid technological change.  We face
competition from many servicing and collections companies and other technology
companies within segments of the revenue and payment cycle markets. Most of our
competition is significantly larger and has greater financial resources than we
do.  We may not be able to compete successfully with these companies,
and these or other competitors may commercialize products, services or
technologies that render our services obsolete or less
marketable.





Some
hospitals perform the services we offer for themselves.





Some
hospitals perform the services we offer for themselves, or plan to do so, or
belong to alliances that perform such services, or plan to do so.  The
ability of hospitals to replicate our services may adversely affect the terms
and conditions the Company is able to negotiate in agreements with hospitals, or
may prevent the Company from negotiating any such agreements





Recent
developments in the healthcare industry could adversely affect our
business.





National
healthcare reform legislation was signed into law on March 23,
2010.  This reform legislation attempts to address the issues of
increasing access to and affordability of healthcare, increasing effectiveness
of care, reducing inefficiencies and costs, emphasizing preventive care, and
enhancing the fiscal sustainability of the federal healthcare
programs.  It is not yet clear how this reform legislation may affect
the services provided by the Company.  In addition, there are
currently numerous federal, state and private initiatives and studies seeking
ways to increase the use of information technology in healthcare as a means of
improving care and reducing costs. These initiatives may result in additional or
costly legal and regulatory requirements that are applicable to us and our
customers, may encourage more companies to enter our markets, and may provide
advantages to our competitors.  Any such legislation or initiatives,
whether private or governmental, may result in a reduction of expenditures by
the customers or potential customers of the hospitals serviced by the Company,
which could have a material adverse effect on us. We cannot predict what
healthcare initiatives, if any, will be enacted and implemented, or the effect
any future legislation or regulation will have on us.


6





Even if
general expenditures by industry constituents remain the same or increase, other
developments in the healthcare industry may result in reduced spending on the
Company's services or in some or all of the specific markets we serve or are
planning to serve. In addition, expectations regarding pending or potential
industry developments may also affect the budgeting processes of the hospitals
serviced by the Company and spending plans with respect to the types of products
and services the Company provides.





The
healthcare industry has changed significantly in recent years, and the Company
expects that significant changes will continue to occur.  The timing
and impact of developments in the healthcare industry are difficult to
predict.  There can be no assurance that the markets for the services
provided by the Company will continue to exist at current levels or that we will
have adequate technical, financial and marketing resources to react to changes
in those markets.





We
face potential liability concerning disclosure of health-related
information.





The
Health Insurance Portability and Accountability Act of 1996 ("HIPAA") required
the United States Department of Health and Human Services to adopt standards to
protect the privacy and security of individually identifiable health-related
information. The department released final regulations containing privacy
standards in December 2000 and published revisions to the final regulations in
August 2002. The privacy regulations extensively regulate the use and disclosure
of individually identifiable health-related information. The regulations also
provide patients with significant new rights related to understanding and
controlling how their health information is used or disclosed.




The
Company may come into contact with protected health-related
information.  Although we will take measures to ensure that we comply
with all applicable laws and regulations, including HIPAA, if there is a breach,
we may be subject to various penalties and damages and may be required to incur
costs to mitigate the impact of the breach on affected individuals.




We
face potential liability related to our handling and storage of personal
consumer information.




The
privacy of consumers’ personal information is protected by various federal and
state laws.  Any penetration of our network security or other
misappropriation of consumers' personal information could subject us to
liability.  Other potential misuses of personal information, such as
for unauthorized marketing purposes, could also result in claims against us.
These claims could result in litigation. In addition, the Federal Trade
Commission and several states have investigated the use by certain internet
companies of personal information. We could incur unanticipated expenses,
especially in connection with our settlement database, if and when new
regulations regarding the use of personal information are enacted.




Changes in governmental laws and
regulations could increase our costs and liabilities or impact our
operations.





Changes
in laws and regulations and the manner in which they are interpreted or applied
may alter our business environment. This could affect our results of operations
or increase our liabilities. These negative impacts could result from changes in
collection laws, laws related to credit reporting or consumer bankruptcy,
accounting standards, taxation requirements, employment laws and communications
laws, among others.  We may become subject to additional liabilities
in the future resulting from changes in laws and regulations that could result
in a material adverse effect on us.




We
are subject to examinations and challenges by tax authorities.





Our
industry is relatively new and unique and, as a result, there is not a set of
well defined laws, regulations or case law for us to follow that match our
particular facts and circumstances for some tax positions. Therefore, certain
tax positions we take are based on industry practice, tax advice and drawing
similarities of our facts and circumstances to those in case law relating to
other industries. These tax positions may relate to tax compliance, sales and
use, franchise, gross receipts, payroll, property and income tax issues,
including tax base and apportionment. Challenges made by tax authorities to our
application of tax rules may result in adjustments to the timing or amount of
taxable income or deductions or the allocation of income among tax jurisdictions
and in inconsistent positions between different jurisdictions on similar
matters. If any such challenges are made and are not resolved in our favor, they
could have a material adverse effect on us.


7





We
are dependent on key personnel and the loss of one or more of our senior
management team could have a material adverse effect on us.





Our
business strongly depends upon the services and management experience of our
senior management team.  If any of our executive officers resign or
otherwise are unable to serve, our management expertise and our ability to
effectively execute our business strategy could be diminished.





We
may not be able to hire and retain enough sufficiently trained employees to
support our operations, and/or we may experience high rates of personnel
turnover.





Our
industry is very labor-intensive, and companies in our industry typically
experience a high rate of employee turnover.  We will not be able to
service our clients' receivables effectively, continue our growth or operate
profitably if we cannot hire and retain qualified personnel.  Further,
high turnover rate among our employees could increase our recruiting and
training costs and may limit the number of experienced personnel available to
service our receivables.





The
Company may not be able to successfully anticipate, invest in or adopt
technological advances within our industry.





The
Company's business relies on computer and telecommunications technologies, and
our ability to integrate new technologies into our business is essential to our
competitive position and our success.  We may not be successful in
anticipating, managing, or adopting technological changes on a timely
basis.  Computer and telecommunications technologies are evolving
rapidly and are characterized by short product life cycles.  While we
believe that our existing information systems are sufficient to meet our current
and foreseeable demands and continued expansion, our future growth may require
additional investment in these systems.  We depend on having the
capital resources necessary to invest in new technologies to service
receivables.  There can be no assurance that we will have adequate
capital resources available.  We may not be able to anticipate, manage
or adopt technological advances within our industry, which could result in our
services becoming obsolete and no longer in demand.





Item
1B.  Unresolved
Staff Comments.





Not
applicable.





Item
2.  Properties





Our
principal offices are located in leased office space at 5300 Meadows Road, Suite
400, Lake Oswego, Oregon, 97035.  We believe that these facilities are
suitable for the foreseeable future.





Item
3.  Legal
Proceedings





From time
to time the Company may become involved in ordinary, routine, or regulatory
legal proceedings incidental to the Company's business.





As of the
date of this report, the Company is not engaged in any legal proceedings nor is
the Company aware of any pending or threatened legal proceedings that, singly or
in the aggregate, could have a material adverse effect on the
Company.





Item
4. Submission of Matters
to a Vote of Security Holders





Not
applicable.


8





PART
II





Item
5.Market for Common Equity
and Related Stockholder Matters and Small Business Issuer Purchases of Equity
Securities





There is
no established public trading market for the Company's securities.  As
of the date of this Report the Company's Common Stock trades on the "pink
sheets" under the symbol MHLN.PK.  The table below sets forth for the
periods indicated the high and low bid prices for the Common Stock as reported
by NASDAQ from January 1, 2008 through December 31,
2009.  The prices in the table are the high and low bid prices as
reported by NASDAQ, adjusted to reflect the impact of the 1 for 15 reverse stock
split of the Company's Common Stock on March 19, 2008. The prices shown
represent interdealer prices without adjustments for retail mark-ups, mark-downs
or commissions and consequently may not represent actual
transactions.





Common
Stock "MHLN.PK"





2009 Fiscal Quarters
                      
                      High
                      
                      
                      LowFirst
      Quarter
                      
                      $
                      0.10
                      
                      
                      $
                      0.10Second
      Quarter
                      
                      $
                      0.10
                      
                      
                      $
                      0.10Third
      Quarter
                      
                      $
                      0.10
                      
                      
                      $
                      0.02Fourth
      Quarter
                      
                      $
                      0.07
                      
                      
                      $
                      0.015




2008 Fiscal Quarters
                  
                  High
                  
                  
                  LowFirst
      Quarter
                  
                  $
                  0.30
                  
                  
                  $
                  0.12Second
      Quarter
                  
                  $
                  0.225
                  
                  
                  $
                  0.225Third
      Quarter
                  
                  $
                  0.60
                  
                  
                  $
                  0.18Fourth
      Quarter
                  
                  $
                  0.45
                  
                  
                  $
                  0.002




Holders
of shares of Common Stock are entitled to receive such dividends, if any, as may
be declared by the Company's Board of Directors out of funds legally available
therefore and, upon the Company's liquidation, dissolution or winding up, are
entitled to share ratably in all net assets available for distribution to such
shareholders.  The holders of the Company's Series D Preferred Stock
have superior liquidation rights over the holders of the Common
Stock.  The Company has not, to date, declared or paid any cash
dividends to its Common Stock holders.





Recent
Sales of Unregistered Securities





Other
than as reported in our quarterly reports on Form 10-Q and current reports on
Form 8-K, we did not sell any equity securities that were not registered under
the Securities Act of 1933 during the year ended December 31, 2009.





Shareholders
of Record





As of
December 31, 2009, there were approximately 60 shareholders of record of the
Company's Common Stock.  There are two shareholders of record of the
Company’s Series D Preferred Stock.





Securities
Authorized for Issuance Under Equity Compensation Plans





Effective
February 10, 2010, the Company's Board of Directors adopted the microHelix, Inc.
2010 Stock Incentive Plan (the "Plan").  The Plan will be administered
by a committee of the Board of Directors, or if the Board of Directors has not
appointed a committee, the Board of Directors.  The Company's
employees and directors are eligible to receive awards under the
Plan.  The Plan authorizes the award of stock options (which may
constitute incentive stock options or non statutory stock options) and
restricted stock.  The Company is authorized to issue up to 8,783,383
shares of the Company's Common Stock under the Plan, subject to adjustment as
provided in the Plan.




Item 6.Selected
Financial Data




Not
Applicable




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




All of
the references to share and per share data below have been retroactively
restated to reflect the reverse stock split for all periods presented due to the
1 for 15 reverse stock split approved by the Company's shareholders at a special
meeting of shareholders on March 19, 2008.


9


Overview





Until
September 28, 2007, when microHelix, Inc. ("we," "us," "our," "microHelix"
or the "Company”) suspended manufacturing operations and concluded the
disposition of its assets to its secured creditors, the Company was a
manufacturer of custom cable assemblies and mechanical assemblies for the
medical and commercial original equipment manufacturer (OEM)
markets.  Continuing deterioration of our financial condition during
April and May 2007 caused us to voluntarily surrender our assets to our secured
creditors on May 31, 2007 and wind up our affairs.  In connection with
the windup, we stopped paying our unsecured creditors for goods and services
provided prior to May 21, 2007.  The Company and its wholly owned
subsidiary, Moore Electronics, Inc. ("Moore"), operated for the benefit of the
secured creditors until September 2007, at which time it ceased manufacturing
operations and became a shell company.  Effective January 1, 2010, we
are no longer considered a shell company.





Effective
December 30 and 31, 2009, microHelix, Inc. ("microHelix" or the "Company")
entered into agreements pursuant to which it, with Aequitas Capital Management,
Inc.  (“Aequitas”) and CarePayment, LLC (“CarePayment”), formed a
limited liability company, WS Technologies LLC ("WS Technologies"), that
acquired the right to service and collect consumer receivables generated by
hospitals on a recourse basis with regard to the hospital ("Receivables"),
together with certain software that is used to perform that
service.  WS Technologies then redeemed all but half of one membership
unit (a "Unit") held by each of the other two parties, with the result that
microHelix now owns 99% of WS Technologies.  Thus, operations of the
Company with these business assets commenced  January 1,
2010.





Critical
Accounting Policies and Estimates





The
discussion and analysis of the Company’s financial condition and results of
operations is based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States.  The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities.  Because Moore continued to operate
during the windup period, management continued to evaluate its estimates for
Moore on a going concern basis that assumed continued operations, including
those related to product returns, bad debts, inventories, prepaid expenses,
intangible assets, income taxes, warranty obligations and other
contingencies.  The Company's MicroCoax Assembly Division’s assets
were evaluated for impairment and the value of its remaining assets was adjusted
to $17,000, which is the value the Company received from the sale of the
MicroCoax assets to an unrelated third party on July 12,
2007.  The Company based the estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which formed the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources.  The Company believes the following critical accounting
policy and related judgments and estimates affect the preparation of the
Company's consolidated financial statements.  See also Note 1 to the
Consolidated Financial Statements.




Revenue Recognition—The
Company had no revenues for the years ended December 31, 2009 and
2008.  Beginning January 1, 2010, the Company will recognize revenue
in conjunction with a servicing agreement with
CarePayment.  CarePayment will pay the Company  a servicing
fee based on an amount equal to 5%  annually of total funded
receivables being serviced, an origination fee equal to 6% of the original
balance of newly generated funded receivables, and a “back end fee” based on 25%
of CarePayment’s quarterly net income, adjusted for certain
items.  CarePayment will pay the Company an additional servicing fee
equal to WS Technologies’ actual monthly losses for the first quarter of 2010
and equal to 50% of actual monthly losses for the second quarter of
2010.




Results
of Operations





Year
ended December 31, 2009 compared with year ended December 31, 2008





The
Company had no business activity during 2009 or 2008.  See Item 1 –
Overview.




Total
operating expenses, which included only general and administrative expenses,
were $403,300 in 2009, compared to $4,061,564 in 2008.  The decrease
was due primarily to warrants issued for financial advisory services during
2008.





Net other
expense for 2009 was $513,620 compared to net other expense of $351,715 for
2008.  The difference was due to net other expense in 2009 being
comprised exclusively of interest and debt financing costs, whereas 2008
reflected income associated with debt forgiveness and change in the warrant
valuation offset by the higher amortization of note discount, loan restructuring
expenses, and higher interest rates which became effective in 2008.





Net loss
for 2009 was $916,920 compared to a net loss of $4,413,279 in
2008.


10


Liquidity
and Capital Resources





As of
December 31, 2009, the Company had $69,097 of cash. Cash used in operating
activities during 2009 was $241,010 compared to cash used in operating
activities of $291,907 during 2008.





For the
year ended December 31, 2009 the Company had cash provided by financing
activities of $211,674 as compared to $384,543 for the year ended December 31,
2008.  The primary source of cash from financing activities for the
years ended December 31, 2009 and 2008 were advances on notes payable from the
Company’s secured creditor.





The
following description of the Company's principal debt at December 31, 2009
should be read in the context of the foregoing paragraph.  See also
Notes 4, 8 and 11 to the Company's Consolidated Financial
Statements.





On June
27, 2008 the Company refinanced a promissory note from MH Financial by issuing a
note payable (the "Note") to MH Financial in the amount of
$977,743.  The loan amount included $477,743 that was owed to MH
Financial as of June 27, 2008 and an additional loan of up to
$500,000.  The Company was advanced $200,000 on June 27, 2008,
$100,000 on December 31, 2008, $100,000 on February 27, 2009, and was advanced
$100,000 on November 6, 2009.   Effective as of the date of this
refinance, interest  accrued on the outstanding principal balance of
the loan at a rate of 20% per annum.  The original due date of the
loan was December 27, 2008 and, as a condition of the December 31, 2008 advance,
the due date was extended to December 27, 2009.  On December 31, 2009, the
Company was granted a note extension to December 31, 2011.  Under the
terms of this note amendment, MH Financial agreed to extend the maturity date of
the Note to December 31, 2011.  In addition, the interest rate on the
principal amounts outstanding under the Note will be decreased from 20% to 8%
per annum after the Company makes a $400,000 payment of principal under the
Note.  The Note continues to be secured by substantially all the
assets of the Company.  Unless otherwise agreed or required by
applicable law, payments will be applied first to expenses for which the Company
is liable hereunder (including unpaid collection costs and late charges), next
to accrued and unpaid interest, and the balance to principal.  In
addition, the outstanding principal balance and all accrued and unpaid interest
will be due and payable in the event of (x) a sale of all or substantially all
of the assets of the Company, or (y) the transfer of ownership or beneficial
interest, by merger or otherwise, of 50% or more of the stock of the
Company.





As an
additional consideration for the initial disbursement on June 30, 2008, the
Company also issued warrants to purchase 7,466,666 shares of Common Stock at
$0.001 per share to MH Financial Associates, LLC.  MH Financial Associates,
LLC has assigned these warrants to certain of its investors as follows: (i)
Aequitas Catalyst  Fund, LLC: warrants to purchase 1,166,601 shares;
(ii) Thurman Holdings 1, Limited Partnership: warrants to purchase 2,822,867
shares; (iii) NTC & Co. fbo Robert J. Jesenik: warrants to purchase 73,291
shares and (iv) CTK Capital Corporation, a corporation controlled by James M.
Williams, former Chairman of the Company’s Board of Directors: warrants to
purchase 332,384 shares.  These warrants were exercised on the dates
noted below.




As
additional consideration for the $100,000 advance on December 31, 2008, the
Company issued warrants to purchase 1,066,667 shares of Common Stock at $0.001
per share.





As
additional consideration for the $100,000 advance on February 27, 2009, the
Company issued warrants to purchase 1,066,667 shares of Common Stock at $0.001
per share.





As
additional consideration for the $100,000 advance on November 6, 2009, the
Company issued warrants to purchase 1,066,667 shares of Common Stock at $0.001
per share.





All of
the above referenced warrants were exercised on December 30, 2009, except for
the warrants in favor of NTC & Co.  fbo Robert
J.  Jesenik, which were exercised on March 11, 2010.





In all of
the above cases, warrants to purchase Common Stock were issued in reliance on
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), and we obtained representations from the investors as to
their status as "accredited investors" as that term is defined in
Regulation D.





On
December 31, 2008, the Company entered into a multiple advance promissory note
payable to Aequitas Capital Management, Inc.   The note is a
multiple advance note, with a maximum advance amount of
$360,000.  Effective December 31, 2009, there will be no additional
advances made under the note and the note was amended and was modified to
reflect modified payment and maturity date information.  Under these
modified terms all amounts outstanding under this note are due and payable on
the earliest of the following:  (a) March 31, 2010; (b) the
closing of a loan or other financing provided to the Company by a senior lender
or other source in an amount sufficient to pay off this note; (c) the
closing of a private investment in public equity financing and/or any other
financing event with gross proceeds to the Company in excess of $1,000,000 (each
of (a) through (c) is individually the "Maturity Date");
provided, however, that after the occurrence of an Event of Default, the
outstanding principal and all accrued interest will be payable on
demand.  Unless otherwise agreed or required by applicable law,
payments will be applied first to expenses for which the Company is liable
hereunder (including unpaid collection costs and late charges), next to accrued
and unpaid interest, and the balance to principal.  In addition, the
outstanding principal balance and all accrued and unpaid interest will be due
and payable in the event of (x) a sale of all or substantially all of the assets
of the Company, or (y) the transfer of ownership or beneficial interest, by
merger or otherwise, of 50% or more of the stock of the
Company.


11





On
January 15, 2010, the Company entered into agreements pursuant to
which it may borrow up to a maximum of $500,000 from Aequitas Commercial
Finance, LLC .  Through March 31, 2010, the Company was advanced
$31,000 on January 14, 2010, which  advance was repaid on February 12,
2010.  As of March 31, 2010, there are no outstanding advances under
these agreements with ACF.





Off
Balance Sheet Arrangements





Discussion
of our off balance sheet arrangements is presented in the “Notes to the
Consolidated Financial Statements” in Part II, Item 8, Note 10 – “Commitments
and Contingencies”.





Recent
Accounting Developments




The
Company has adopted the Financial Accounting Standards Board (the "FASB")
Accounting Standards Codification (the "Codification"), which is now the single
source of authoritative U.S. generally accepted accounting principles ("GAAP")
recognized by the FASB. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative
U.S. GAAP for SEC registrants. All other accounting literature not included
in the Codification is nonauthoritative. The adoption of the Codification had no
impact on the Company's Consolidated Financial Statements.




In
June 2009, the FASB issued a standard that requires an enterprise to perform a
qualitative analysis to determine whether its variable interests give it a
controlling financial interest in a Variable Interest Entity ("VIE"). Under the
standard, an enterprise has a controlling financial interest when it has
(a) the power to direct the activities of a VIE that most significantly
impact the entity's economic performance and (b) the obligation to absorb
losses of the entity or the right to receive benefits from the entity that could
potentially be significant to the VIE. An enterprise that holds a controlling
financial interest is deemed to be the primary beneficiary and is required to
consolidate the VIE. This standard is effective beginning in the first quarter
of 2010. In February 2010, the FASB deferred this standard for certain entities
that apply the specialized accounting guidance for investment companies or that
have the attributes of investment companies. The Company is currently evaluating
the potential impact that this standard may have on its Consolidated Financial
Statements.




In
June 2009, the FASB issued a standard that eliminates the concept of a
qualifying special-purpose entity ("QSPE"), changes the requirements for
derecognizing financial assets, and requires additional disclosures to enhance
information reported to users of financial statements by providing greater
transparency about transfers of financial assets, including securitization
transactions, and an entity's continuing involvement in and exposure to the
risks related to transferred financial assets. The standard also clarifies the
requirements for isolation and limitations on portions of financial assets that
are eligible for sale accounting. The standard is effective beginning in 2010.
The Company does not expect this standard to have a material impact on its
Consolidated Financial Statements.




In
September 2009, the FASB issued a standard regarding fair value measurements and
disclosures for alternative investments in certain entities that calculate net
asset value per share (or its equivalent). This standard permits, but does not
require, the Company to measure the fair value of an alternative investment on
the basis of the net asset value per share if the net asset value of the
investment is calculated in a manner consistent with established measurement
principles as of its measurement date. This standard is effective beginning in
2010. The Company does not expect this standard to have a material impact on its
Consolidated Financial Statements.




Item
8.  Financial
Statements and Supplementary Data





INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS





PageReport
      of Peterson Sullivan LLP  - Independent Registered Public
      Accounting Firm
                
                13Consolidated
      Balance Sheets as of December 31, 2008 and 2009
                
                14Consolidated
      Statements of Operations for the Years Ended December 31, 2008 and
      2009
                
                15Consolidated
      Statements of Shareholders' Deficit for the Years Ended December 31, 2008
      and 2009
                
                16Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2008 and
      2009
                
                17Notes
      to Consolidated Financial Statements
                
                18




12




REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To the
Board of Directors


microHelix,
Inc.


Lake
Oswego, Oregon





We have
audited the accompanying consolidated balance sheets of microHelix, Inc. and
Subsidiaries, ("the Company") as of December 31, 2009 and 2008, and
the related consolidated statements of operations, shareholders' deficit, and
cash flows for the years then ended.  These consolidated financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  The
Company has determined that it is not required to have, nor were we engaged to
perform, an audit of its internal control over financial
reporting.  Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting.  Accordingly, we express no such opinion.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of microHelix, Inc. and
Subsidiaries, as of December 31, 2009 and 2008, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.




/S/
PETERSON SULLIVAN LLP





Seattle,
Washington


March 31,
2010




13






microHelix,
Inc.


CONSOLIDATED
BALANCE SHEETS


December
31, 2008 and 2009





2008
                              
                              
                              2009AssetsCurrent
      Assets:Cash
                              
                              $
                              98,433
                              
                              
                              $
                              69,097Total
      current assets
                              
                              
                              98,433
                              
                              
                              
                              69,097Property
      and equipment, net
                              
                              
                              —
                              
                              
                              
                              500,000Servicing
      rights
                              
                              
                              —
                              
                              
                              
                              9,550,000Total
      assets
                              
                              $
                              98,433
                              
                              
                              $
                              10,119,097Liabilities
      and Shareholders' DeficitCurrent
      Liabilities:Accounts
      payable
                              
                              $
                              744,542
                              
                              
                              $
                              797,751Accrued
      liabilities
                              
                              
                              257,515
                              
                              
                              
                              324,082Current
      portion of notes payable
                              
                              
                              694,161
                              
                              
                              
                              294,190Total
      current liabilities
                              
                              
                              1,696,218
                              
                              
                              
                              1,416,023Notes
      payable, net of current portion
                              
                              
                              —
                              
                              
                              
                              988,275Mandatorily
      redeemable preferred stock, no par value, 1,200,000 shares authorized,
      1,000,000 shares issued and outstanding, liquidation preference of
      $10,000,000
                              
                              
                              —
                              
                              
                              
                              8,805,140Total liabilities
                              
                              
                              1,696,218
                              
                              
                              
                              11,209,438Shareholders'
      Deficit:Preferred
      stock – Series C, convertible, no par value, 10,000,000 shares
      authorized, 279,070 and zero, shares issued and outstanding at
      December 31, 2008 and 2009, respectively
                              
                              
                              533,000
                              
                              
                              
                              —Common
      stock, no par value, 75,000,000 shares authorized, 1,973,421 and
      13,832,844 shares issued and outstanding at December 31, 2008 and
      2009, respectively
                              
                              
                              17,477,917
                              
                              
                              
                              18,022,591Additional
      paid-in capital
                              
                              
                              10,342,521
                              
                              
                              
                              11,755,211Accumulated
      deficit
                              
                              
                              (29,951,223
                              )
                              
                              
                              (30,868,143
                              )Total
      shareholders' deficit
                              
                              
                              (1,597,785
                              )
                              
                              
                              (1,090,341
                              )Total
      liabilities and shareholders' deficit
                              
                              $
                              98,433
                              
                              
                              $
                              10,119,097





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


14





microHelix,
Inc.





CONSOLIDATED
STATEMENTS OF OPERATIONS


Years
Ended December 31, 2008 and 2009





2008
                
                
                2009Operating
      Expenses:General
      and administrative
                
                $
                4,061,564
                
                
                $
                403,300Total
      operating expenses
                
                
                4,061,564
                
                
                
                403,300Loss
      from operations
                
                
                (4,061,564
                )
                
                
                (403,300
                )Other
      income (expense):Other
      income
                
                
                30,785
                
                
                
                —Warrant
      valuation gain
                
                
                62,822
                
                
                
                —Debt
      forgiveness
                
                
                329,742
                
                
                
                —Interest
      expense
                
                
                (775,064
                )
                
                
                (513,620
                )Total
      other income (expense)
                
                
                (351,715
                )
                
                
                (513,620
                )Net
      loss
                
                $
                (4,413,279
                )
                
                $
                (916,920
                )Loss
      per common share — basic and diluted
                
                $
                (2.42
                )
                
                $
                (0.45
                )Weighted
      average number of shares outstanding — basic and diluted
                
                
                1,825,346
                
                
                
                2,043,441





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


15




microHelix,
Inc.





CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ DEFICIT


Years
Ended December 31, 2008 and 2009





AdditionalCommon Stock
                
                
                Preferred
                
                
                Paid-in
                
                
                AccumulatedShares
                
                
                Amount
                
                
                Stock Series C
                
                
                Capital
                
                
                Deficit
                
                
                TotalBalance,
      December 31, 2007
                
                
                966,339
                
                
                $
                17,462,823
                
                
                $
                533,000
                
                
                $
                5,989,455
                
                
                $
                (25,537,944
                )
                
                $
                (1,552,666
                )Common
      stock issued for exercise of warrants
                
                
                1,006,229
                
                
                
                15,094
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                15,094Additional
      shares issued upon final calculation of reverse stock
split
                
                
                853Warrants
      issued in conjunction with debt
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                754,095
                
                
                
                
                
                
                
                754,095Warrants
      issued for advisory services
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                3,598,971
                
                
                
                
                
                
                
                3,598,971Net
      loss for the year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (4,413,279
                )
                
                
                (4,413,279
                )Balance
      , December 31, 2008
                
                
                1,973,421
                
                
                $
                17,477,917
                
                
                $
                533,000
                
                
                $
                10,342,521
                
                
                $
                (29,951,223
                )
                
                $
                (1,597,785
                )Common
      stock issued for exercise of warrants
                
                
                11,673,376
                
                
                
                11,674
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                11,674Warrants
      issued in conjunction with debt
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                167,830
                
                
                
                
                
                
                
                167,830Conversion
      of Series C Preferred Stock to common stock
                
                
                186,047
                
                
                
                533,000
                
                
                
                (533,000
                )Warrants
      issued for acquisition of business assets
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,244,860
                
                
                
                
                
                
                
                1,244,860Net
      loss for the year
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (916,920
                )
                
                
                (916,920
                )Balance
      , December 31, 2009
                
                
                13,832,844
                
                
                $
                18,022,591
                
                
                $
                —
                
                
                $
                11,755,211
                
                
                $
                (30,868,143
                )
                
                $
                (1,090,341
                )




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


16





microHelix,
Inc.


CONSOLIDATED
STATEMENTS OF CASH FLOWS


Years
Ended December 31, 2008 and 2009





2008
                    
                    
                    2009Cash
      Flows Used In Operating Activities:Net
      loss
                    
                    $
                    (4,413,279
                    )
                    
                    $
                    (916,920
                    )Adjustments
      to reconcile net loss to cash used in operating
activities:Debt
      forgiveness
                    
                    
                    (329,742
                    )
                    
                    
                    —Warrant
      valuation gain
                    
                    
                    (62,822
                    )
                    
                    
                    —Interest
      expense-amortization
                    
                    
                    659,981
                    
                    
                    
                    261,944Warrants
      issued for advisory services
                    
                    
                    3,598,971
                    
                    
                    
                    —Change
      in operating assets and liabilities:(Increase)
      Decrease in assets:Prepaid
      expenses and other current assets
                    
                    
                    22,917
                    
                    
                    
                    —Increase
      (Decrease) in liabilities:Accounts
      payable
                    
                    
                    (57,786
                    )
                    
                    
                    53,209Accrued
      liabilities
                    
                    
                    289,853
                    
                    
                    
                    360,757Net
      cash used in operating activities
                    
                    
                    (291,907
                    )
                    
                    
                    (241,010
                    )Cash
      Flows Provided by Financing Activities:Proceeds
      from exercise of warrants
                    
                    
                    15,094
                    
                    
                    
                    11,674Proceeds
      from issuance of notes payable to shareholders
                    
                    
                    369,449
                    
                    
                    
                    200,000Net
      cash provided by financing activities
                    
                    
                    384,543
                    
                    
                    
                    211,674Change
      in cash
                    
                    
                    92,636
                    
                    
                    
                    (29,336
                    )Cash,
      beginning of year
                    
                    
                    5,797
                    
                    
                    
                    98,433Cash,
      end of year
                    
                    $
                    98,433
                    
                    
                    $
                    69,097Supplemental
      disclosure of cash flow information — Cash paid for
    interest
                    
                    $
                    —
                    
                    
                    $
                    —Supplemental
      disclosure of non-cash Investing and Financing Activities:Common
      stock warrants for asset acquisition
                    
                    $
                    —
                    
                    
                    $
                    1,244,860Preferred
      stock issued for asset acquisition
                    
                    $
                    —
                    
                    
                    $
                    8,805,140Warrants
      issued to lenders-recorded as debt discount
                    
                    $
                    754,095
                    
                    
                    $
                    167,830Reclassification
      of note payable to accounts payable
                    
                    $
                    63,137
                    
                    
                    $
                    —Refinance
      of accrued interest to note payable
                    
                    $
                    283,224
                    
                    
                    $
                    —Refinance
      of accrued liability to note payable
                    
                    $
                    —
                    
                    
                    $
                    294,190




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


17





MICROHELIX,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





1.  Business
Activity





Nature of Operations— Until
September 28, 2007, when microHelix, Inc. (“the Company”) suspended
manufacturing operations and concluded the disposition of its assets to its
secured creditors, the Company was a manufacturer of custom cable assemblies and
mechanical assemblies for the medical and commercial original equipment
manufacturer (OEM) markets.  On May 31, 2007, the Company
surrendered substantially all its assets to its secured creditors and concluded
the disposition of all the Company's assets September 28, 2007, after which
microHelix became a shell company.  Effective with the agreements
described and discussed below, the Company is no longer a shell
company.





Effective
December 30 and 31, 2009, the Company entered into agreements pursuant to which
it, with two other related parties, formed a limited liability company, WS
Technologies LLC ("WS Technologies"), that acquired the right to service and
collect consumer receivables generated by hospitals on a recourse basis with
regard to the hospital ("Receivables"), together with certain software that will
be used to perform that service.  WS Technologies then redeemed all
but half of one membership unit (a "Unit") held by each of the other two
parties, with the result that the Company now owns 99% of WS
Technologies.





On
December 30, 2009, Aequitas Capital  Management, Inc (“Aequitas”) and
CarePayment, LLC,  (“CarePayment”) contributed the following assets to
WS Technologies, for which WS Technologies issued units representing 50%
ownership interest:





1.
            Exclusive rights to service
      receivables owned and generated in the future by
      CarePayment.  In conjunction with these rights, WS Technologies
      entered into a servicing and origination agreement with CarePayment
      that expires December 31,
2034.





2.
            Accounting
      software, systems and processes required to perform the
      servicing





3.
            The  CarePayment®service
      mark and branding





On
December 30, 2009, the Company contributed the following assets to WS
Technologies, for which WS Technologies issued units representing 50% ownership
interest:





1.
            1,000,000
      shares of Series D Preferred Stock (“Series D
      Preferred”).  Series D Preferred shares are mandatorily
      redeemable in January 2013 and have a preferred dividend of $0.50 per
      annum, and a liquidation preference of $10.00 per share plus cumulative
      unpaid dividends.




2.
            Warrants
      to purchase 65,100,917 shares of Class B Common Stock of the Company (the
      “Warrants”) at an exercise price of $0.001 per share, with an expiration
      date of December 31, 2014.




These
transactions are recorded at the estimated fair value of the assets received by
WS Technologies in exchange for its ownership units. We derived our estimate of
fair value of each of the assets as described below:




1.
            The
      fair value of the servicing rights and accounting software received was
      estimated using a discounted cash flow model using the future cash flow
      projections (Level 3 inputs in the fair value hierarchy) that the assets
      would provide to WS Technologies.  The resulting fair value was
      $13,617,140.




2.
            The
      fair value of the Series D Preferred was determined using a dividend
      discount model assuming dividends will be accrued and received at the
      mandatory redemption date (Level 3 inputs in the fair value
      hierarchy). The resulting fair value of the Series D Preferred was
      $8,805,140.




3.
            The
      fair value of the Warrants was calculated using the Black Scholes
      model.  The resulting fair value was
  $1,244,860.




On
December 31, 2009, WS Technologies redeemed from Aequitas and CarePayment all
but one half unit each of their WS Technologies ownership units in exchange for
all of the Company’s Series D Preferred and the Warrants that were held by WS
Technologies, resulting in the Company owning 99% of WS
Technologies.  WS Technologies recorded the transaction at the fair
value of the Series D Preferred and the Warrants, and simultaneously wrote down
the servicing rights and software to equal the fair value of the Series D
Preferred and the Warrants.  Additionally, the resulting value of the
servicing rights and software assets were allocated first to the software at
$500,000, which is based on actual development costs, less accumulated
amortization, incurred by Aequitas, with the remaining value of $9,550,000 to
servicing rights.  Management believes that the Aequitas unamortized
cost approximates fair value for the software.


18





For
purposes of these consolidated financial statements, the above described
transactions were deemed to have occurred simultaneously on December 31,
2009.





2.  Summary
of Significant Accounting Policies





Principles of
Consolidation—The consolidated financial statements include the accounts
of microHelix, Inc. (including its MicroCoax Assembly Solutions division) its
wholly owned subsidiary, Moore Electronics, Inc. (“Moore”) and its 99% owned
subsidiary, WS Technologies.  All intercompany transactions have been
eliminated.  Noncontrolling interest is not presented as the transaction
forming WS Technologies was accounted for as an asset acquisition, as opposed to
a business acquistion.





Use of Estimates — The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period.  Actual results
could differ from those estimates.





Cash Equivalents — For the
purpose of the statements of cash flows, cash equivalents include all highly
liquid debt instruments with original maturities of three months or less which
are not securing any debt or obligations.  The Company maintains its
cash in bank accounts which, at times, may exceed federally insured
limits.  The Company has not experienced any losses in such
accounts.




Property and Equipment -
Property and equipment are stated at cost, with depreciation computed using the
straight-line method over the estimated useful lives of the related assets. The
Company evaluates long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.




Servicing Rights — Servicing
rights represent the cost of identifiable intangible assets associated with the
acquisition of certain business assets not allocated to other specific
assets.  Effective January 1, 2010, the cost associated with this
asset will be amortized on a straight line basis over an estimated useful life
of 25 years.




Long-lived Assets — The Company reviews long-lived assets to be
held-and-used for impairment whenever events or changes in circumstances
indicate the carrying amount of the assets may not be recoverable.  If the
sum of the undiscounted expected future cash flows over the remaining useful
life of a long-lived asset is less than its carrying amount, the asset is
considered to be impaired.  Impairment losses are measured as the amount by
which the carrying amount of the asset exceeds the fair value of the
asset.  When fair values are not available, the Company estimates fair
value using the expected future cash flows discounted at a rate commensurate
with the risks associated with the recovery of the asset.  Assets to be
disposed of are reported at the lower of carrying amount or fair value less
costs to sell.




Revenue Recognition — The
Company had no sales in 2008 or 2009.  Beginning January 1, 2010, the
Company will recognize revenue in conjunction with a servicing agreement
with CarePayment.  CarePayment will pay the Company  a
servicing fee based on an amount equal to 5%  annually of total funded
receivables being serviced, an origination fee equal to 6% of the original
balance of newly generated funded receivables, and a “back end fee” based on 25%
of CarePayment’s quarterly net income, adjusted for certain
items.  CarePayment will pay the Company an additional servicing fee
equal to WS Technologies’ actual monthly losses for the first quarter of 2010
and equal to 50% of actual monthly losses for the second quarter of
2010.




Income Taxes — The Company
accounts for income taxes under an asset and liability approach that requires
the recognition of deferred tax assets and liabilities that are determined based
on the differences between the financial statement bases and tax bases of assets
and liabilities using enacted tax rates.  A valuation allowance is
recorded to reduce a deferred tax asset to that portion of the deferred tax
asset that is expected to more likely than not be realized.





The
Company reports a liability, if any for unrecognized tax benefits resulting from
uncertain income tax positions taken or expected to be taken in an income tax
return.  Estimated interest and penalties, if any are recorded as a
component of interest expense and other expense, respectively.  No
liability has been recorded for uncertain tax positions, or related interest or
penalties as of December 31, 2008 and 2009.  Tax years that remain
subject to examination by federal and state authorities are the years ended 2006
through 2009.




Fair Value—Fair value is
defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants at the
measurement date. It establishes a fair value
hierarchy that distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources (observable
inputs) and (2) an entity's own assumptions about market participant assumptions
developed based on the best information available in the circumstances
(unobservable inputs). The fair value hierarchy consists of three broad levels,
which gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1) and the lowest priority to
unobservable inputs (Level 3). The three levels of the fair value hierarchy are
described below:




·
            Level
      1 – Unadjusted quoted prices in active markets that are accessible at the
      measurement date for identical, unrestricted assets or
      liabilities.




·
            Level
      2 – Inputs other than quoted prices included within Level 1 that are
      observable for the asset or liability, either directly or indirectly,
      including quoted prices for similar assets or liabilities in active
      markets; quoted prices for identical or similar assets or liabilities in
      markets that are not active; inputs other than quoted prices that are
      observable for the asset or liability (e.g., interest rates); and inputs
      that are derived principally from or corroborated by observable market
      data by correlation or other
means.


19




·
            Level
      3 – Inputs that are both significant to the fair value measurement and
      unobservable.




Fair Value of Financial
Instruments — The carrying value of the Company's accounts payable, other
accrued liabilities, and current notes payable approximate their estimated fair
values due to the relatively short maturities of those
instruments.  The fair value of long term notes payable is not
practicable to determine due to unique terms.




Comprehensive Loss — The
Company has no components of Other Comprehensive Income (Loss) and, accordingly,
no statement of Comprehensive Income (Loss) has be included in the
accompanying  Consolidated Financial Statements.




Net Loss per Share — Basic
loss per share is computed by dividing net loss attributable to common
stockholders by the weighted average number of common shares
outstanding.   Because the Company recorded a loss for the years
ended December 31, 2009 and 2008, the issuance of shares from the
conversion of preferred stock or warrants would be
anti-dilutive.  Basic and diluted losses per common share were
identical for these periods.  The Company computes dilutive shares
using the treasury method.





At
December 31, 2009, the outstanding number of potentially dilutive common
shares totaled 65,218,340 shares of Common Stock, consisting of warrants to
purchase 65,218,340 shares of Common Stock.  At December 31,
2008, the outstanding number of potentially dilutive common shares totaled
9,843,512 shares of Common Stock, consisting of Series C Preferred Stock
convertible into 186,047 shares of Common Stock, and warrants to purchase
9,657,465 shares of Common Stock.





Operating Segments and Reporting
Units — The Company operates as a single business segment and reporting
unit.





3.  Summary
of Recent Accounting Pronouncements




The
Company has adopted the Financial Accounting Standards Board (the "FASB")
Accounting Standards Codification (the "Codification"), which is now the single
source of authoritative U.S. generally accepted accounting principles ("GAAP")
recognized by the FASB. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative
U.S. GAAP for SEC registrants. All other accounting literature not included
in the Codification is nonauthoritative. The adoption of the Codification had no
impact on the Company's Consolidated Financial Statements.




In June
2009, the FASB issued a standard that requires an enterprise to perform a
qualitative analysis to determine whether its variable interests give it a
controlling financial interest in a Variable Interest Entity ("VIE"). Under the
standard, an enterprise has a controlling financial interest when it has
(a) the power to direct the activities of a VIE that most significantly
impact the entity's economic performance and (b) the obligation to absorb
losses of the entity or the right to receive benefits from the entity that could
potentially be significant to the VIE. An enterprise that holds a controlling
financial interest is deemed to be the primary beneficiary and is required to
consolidate the VIE. This standard is effective beginning in the first quarter
of 2010. In February 2010, the FASB deferred this standard for certain entities
that apply the specialized accounting guidance for investment companies or that
have the attributes of investment companies. The Company does not expect this
standard to have an impact on its Consolidated Financial
Statements.




In June
2009, the FASB issued a standard that eliminates the concept of a qualifying
special-purpose entity ("QSPE"), changes the requirements for derecognizing
financial assets, and requires additional disclosures to enhance information
reported to users of financial statements by providing greater transparency
about transfers of financial assets, including securitization transactions, and
an entity's continuing involvement in and exposure to the risks related to
transferred financial assets. The standard also clarifies the requirements for
isolation and limitations on portions of financial assets that are eligible for
sale accounting. The standard is effective beginning in 2010. The Company does
not expect this standard to have an impact on its Consolidated Financial
Statements.




In
September 2009, the FASB issued a standard regarding fair value measurements and
disclosures for alternative investments in certain entities that calculate net
asset value per share (or its equivalent). This standard permits, but does not
require, the Company to measure the fair value of an alternative investment on
the basis of the net asset value per share if the net asset value of the
investment is calculated in a manner consistent with established measurement
principles as of its measurement date. This standard is effective beginning in
2010. The Company does not expect this standard to have a material impact on its
Consolidated Financial Statements.


20





4.  Notes
Payable





A summary
of the Company's notes payable outstanding as of December 31, 2009 and 2008 is
as follows:





2008
                    
                    
                    2009MH
      Financial Associates, LLC
                    
                    $
                    777,743
                    
                    
                    $
                    977,743Aequitas
      Capital Management, Inc.
                    
                    
                    
                    
                    
                    
                    294,190Other
                    
                    
                    10,532
                    
                    
                    
                    10,532Total
      Notes Payable
                    
                    
                    788,275
                    
                    
                    
                    1,282,465Debt
      discountsWarrants
      issued with MH Financial note
                    
                    
                    (
      94,114
                    )
                    
                    $
                    —Notes
      Payable, net
                    
                    
                    694,161
                    
                    
                    
                    1,282,465Current
      maturities
                    
                    
                    (694,161
                    )
                    
                    
                    (294,190
                    )$
                    —
                    
                    
                    $
                    988,275





On June
27, 2008 the Company refinanced the  note from MH Financial by issuing
a new note payable in the amount of $977,743.  The loan amount
included $477,743 that was owed to MH Financial as of June 27, 2008 and an
additional loan of up to $500,000.  The Company was advanced $200,000
on June 27, 2008, $100,000 on December 31, 2008, $100,000 on February 27, 2009,
and $100,000 on November 6, 2009.  Effective as of the date of this
refinance, interest accrued on the outstanding principal balance of the loan at
a rate of 20% per annum.  The original due date of the loan was
December 27, 2008 and, as a condition of the December 31, 2008 advance, the due
date was extended to December 27, 2009.  On December 31, 2009, the
Company was granted a note extension to December 31, 2011.  In
addition, the interest rate on the principal amounts outstanding under the Note
will be decreased from 20% to 8% per annum after the Company reduces the
principal balance of the Note by $400,000.  The Note continues to be
secured by substantially all of the assets of the Company.





On
December 31, 2008, the Company entered into a multiple advance promissory note
payable to Aequitas Capital Management, Inc.   The note is a
multiple advance note, with a maximum advance amount of
$360,000.  Effective December 31, 2009, there will be no additional
advances made under the note and the note was amended and was modified to
reflect modified payment and maturity date information.  Under these
modified terms all amounts outstanding under this note are due and payable on
the earliest of the following:  (a) March 31, 2010; (b) the
closing of a loan or other financing provided to the Company by a senior lender
or other source in an amount sufficient to pay off this note; (c) the
closing of a private investment in public equity financing and/or any other
financing event with gross proceeds to the Company in excess of $1,000,000 (each
of (a) through (c) is individually the "Maturity Date");
provided, however, that after the occurrence of an Event of Default, the
outstanding principal and all accrued interest will be payable on
demand.  Unless otherwise agreed or required by applicable law,
payments will be applied first to expenses for which the Company is liable
hereunder (including unpaid collection costs and late charges), next to accrued
and unpaid interest, and the balance to principal.  In addition, the
outstanding principal balance and all accrued and unpaid interest will be due
and payable in the event of (x) a sale of all or substantially all of the assets
of the Company, or (y) the transfer of ownership or beneficial interest, by
merger or otherwise, of 50% or more of the stock of the Company.





5.
Liability for Potentially Dilutive Securities in Excess of Authorized Number of
Common Shares





The
Company accounts for potential shares that can be converted to common stock,
which are in excess of authorized shares, as a liability that is recorded at
fair value.  Total potential outstanding common stock exceeded the
Company’s authorized shares on March 12, 2007 when the Company restructured its
debt with MH Financial.  In this process the Company issued 860,000
warrants.  At that time total warrants and convertible preferred stock
allowed the holder to purchase approximately 579,867 shares over the current
authorized amount.  The fair value of the warrants in excess of the
authorized shares at March 12, 2007 was  recognized as a liability on
March 12, 2007.  This liability was required to be evaluated at each
reporting date with any change in value included in the other income/(expense)
until such time as enough shares were authorized to cover all potentially
convertible instruments.  The Company increased its authorized shares
in 2008 such that the potentially dilutive securities no longer exceeded the
authorized number of common shares.  As such, the Company reversed the
remaining $62,822 liability to income during the year ended December 31,
2008.


21





6.  Income
Taxes





The
components of deferred tax asset are as follows:


For the year ended
                  December 31,2008
                
                
                2009Federal
      net operating loss carry forwards
                
                $
                7,512,000
                
                
                $
                7,824,000State
      net operating loss carry forwards
                
                
                637,000
                
                
                
                639,000Deferred
      tax asset
                
                
                8,149,000
                
                
                
                8,463,000Valuation
      allowance
                
                
                (8,149,000
                )
                
                
                (8,463,000
                )Net deferred
      tax asset
                
                $
                —
                
                
                $
                —





As of
December 31, 2009 the Company had federal and state net operating loss
carry forwards of approximately $23.0 million and $14.7 million respectively,
expiring during the years 2012 through 2029.





The
utilization of the tax net operating loss carry forwards may be limited due to
ownership changes that have occurred as a result of substantial exercises of
warrants.





The
differences between the benefit for income taxes and income taxes computed using
the U.S. federal income tax rate was as follows:





For the year ended
                  December 31,2008
                
                
                2009Benefit
      computed using statutory rate (34%)
                
                $
                (1,501,000
                )
                
                $
                (312,000
                )Change
      in valuation allowance
                
                
                177,000
                
                
                
                314,000Change
      in net operating loss carry forwards based on filed income tax
      returns
                
                
                1,036,000
                
                
                
                59,000Common
      stock warrant valuation gain (permanent difference)
                
                
                597,000
                
                
                
                —Other
      permanent differences
                
                
                (18,000
                )
                
                
                —State
      income taxes
                
                
                (291,000
                )
                
                
                (61,000
                )Benefit
      for income taxes
                
                $
                —
                
                
                $
                —




Because
of the Company's current operating losses, management has provided a 100%
valuation allowance for its net deferred tax assets.





7.  Mandatorily
Redeemable Preferred Stock





On
December 30, 2009, the Company issued 1,000,000 shares of Series D Preferred
pursuant to the WS Technologies’ transaction described in Note 1
above.  Holders of the Series D Preferred are entitled to receive
a preferred dividend of $0.50 per share per annum when, as and if declared, and
a liquidation preference of $10 per share plus cumulative unpaid
dividends.  The Company may redeem all of the Series D Preferred at
any time upon ten days' prior written notice, and is required to redeem all of
the Series D Preferred Stock in January 2013 at a purchase price equal to the
liquidation preference in effect on January 1, 2013.  If the
Company is unable to redeem the Series D Preferred with cash or other
immediately available funds for any reason, the Company will cause WS
Technologies to issue to the holders of the Series D Preferred an aggregate
99% ownership interest in the equity of WS Technologies as consideration for the
redemption of the Series D Preferred Stock.





The
difference between the fair value of the Series D Preferred at December 31,
2009  of $8,805,140 and the redemption value of $10,000,000 will be
accreted into income over the period to redemption using the level yield
method.





8.  Shareholders'
Deficit





Preferred Stock — As of
December 31, 2008, the Company was authorized to issue 10,000,000 shares of
preferred stock, 279,070 of which are designated Series C Preferred Stock,
no par value ("Series C Preferred Stock"), all of which were issued and
outstanding as of December 31, 2008.  On December 22, 2009, MH
Financial Associates, LLC elected to convert all of its shares of Series C
Preferred Stock into 186,047 shares of Common Stock, and there are no shares of
Series C Preferred Stock outstanding as of December 31, 2009.


22





Stock Warrants — As of
December 31, 2008, the Company had 117,423 warrants outstanding  which
are still outstanding and exercisable at December 31, 2009:





Warrants
                      
                      
                      Exercise Price
                      
                      
                      Expiration Date31,867
                      
                      
                      $
                      3.75
                      
                      
                      April 20154,861
                      
                      
                      $
                      7.20
                      
                      
                      June 20166,667
                      
                      
                      $
                      7.50
                      
                      
                      July 2011736
                      
                      
                      $
                      407.70
                      
                      
                      March 201213,333
                      
                      
                      $
                      0.015
                      
                      
                      March 201059,958
                      
                      
                      $
                      0.001
                      
                      
                      June 2013





On
December 31, 2008 the Company received a $100,000 advance against the loan the
Company obtained from MH Financial on June 27, 2008.  As additional
consideration for this advance, the Company also issued warrants to purchase
1,066,667 shares of Common Stock at $0.001 per share.  The warrants
expire December 31, 2013.   The warrants have a fair value
relative to the fair value of the associated debt of $94,114 calculated using
the Black-Scholes option pricing model with the following
assumptions:





Expected
      life (in years)
                  
                  
                  5Expected
      volatility
                  
                  
                  285.29
                  %Risk-free
      interest rate
                  
                  
                  0.37
                  %Expected
      dividend
                  
                  
                  —





On
February 27, 2009 the Company received a $100,000 advance against the loan the
Company obtained from MH Financial on June 27, 2008.  As additional
consideration for this advance, the Company also issued warrants to purchase
1,066,667 shares of Common Stock at $0.001 per share.  The warrants
expire December 31, 2013.   The warrants have a fair value
relative to the fair value of the associated debt of $94,114 calculated using
the Black-Scholes option pricing model with the following
assumptions:





Expected
      life (in years)
                  
                  
                  5Expected
      volatility
                  
                  
                  285.29
                  %Risk-free
      interest rate
                  
                  
                  0.37
                  %Expected
      dividend
                  
                  
                  —





On
November 6, 2009 the Company received a $100,000 advance against the loan the
Company obtained from MH Financial on June 27, 2008.  As additional
consideration for this advance, the Company also issued warrants to purchase
1,066,667 shares of Common Stock at $0.001 per share.  The warrants
expire December 31, 2013.   The warrants have a fair value
relative to the fair value of the associated debt of $73,715 calculated using
the Black-Scholes option pricing model with the following
assumptions:





Expected
      life (in years)
                  
                  
                  5Expected
      volatility
                  
                  
                  42.90
                  %Risk-free
      interest rate
                  
                  
                  2.30
                  %Expected
      dividend
                  
                  
                  —


On
December 30, 2009, in connection with the issuance of Series D Preferred Stock,
the Company issued a warrant to purchase 65,100,917 shares of common stock. The
warrants had a fair value of $1,244,860. The fair value was calculated using the
Black-Scholesoption
pricing model with the following assumptions:





Expected
      life (in years)
                  
                  
                  5Expected
      volatility
                  
                  
                  42.00
                  %Risk-free
      interest rate
                  
                  
                  2.61
                  %Expected
      dividend
                  
                  
                  —





Other
than the warrants outstanding both at December 31, 2008 and 2009, all other
warrants outstanding were exercised on December 30, 2009 as described
below.  Warrants for 73,291 shares of common stock were exercised on
March 11, 2010, resulting in $260 proceeds to the Company.


23


Common Stock-On December 30,
2009, MH Financial Associates, LLC exercised a warrant to purchase 3,084,856
shares of Common Stock, Aequitas Capital Management, Inc. exercised a warrant to
purchase 1,066,667 shares of Common Stock, Aequitas Catalyst Fund, LLC exercised
warrants to purchase a total of 4,366,602 shares of Common Stock, Thurman
Holdings I, LP exercised warrants to purchase a total of 2,822,867 shares of
Common Stock, and CTK Capital Corporation exercised a warrant to purchase
332,384 shares of Common Stock.  The exercise of these warrants
resulted in proceeds to the Company of $11,674.  During 2008, MH
Financial and its affiliates exercised warrants to purchase 1,006,229 shares of
Common Stock for $15,094.  As of December 31, 2009, the Company has
4,051,184 warrants outstanding in excess of authorized shares.  The
resulting liability has not been recorded in these consolidated financial
statements as the value of the liability is not material.





On
March 19, 2008 at a special meeting of the shareholders the Company's
shareholders voted to amend the Articles to effect a reverse split of the
Company's Common Stock in which every 15 shares of Common Stock held by a
shareholder was reduced to one share of Common Stock.  The
consolidated financial statements and notes have been retroactively restated to
reflect the reverse stock split for all periods presented.





On
January 15, 2008 at a special meeting the shareholders, the Company's
shareholders voted to amend the Company’s Amended Articles of Incorporation, as
amended (the “Articles”) to increase the number of shares of Common Stock the
Company is authorized to issue to 75,000,000 and the number of shares of
Preferred Stock the Company is authorized to issue to 10,000,000
shares.





9.  Related-Party
Transactions





Effective
January 1, 2010. Aequitas provides WS Technologies management support services
such as accounting, financial services, human resources and information
technology services, under the terms of the Administrative Services Agreement
dated December 31, 2009.  The total fee for the services will be
approximately $65,100 per month.  The fees will increase by 3% on
January 1 of each year, beginning January 1, 2011.  Either party may
change the services (including terminating a particular service) upon 180 days
prior written notice to the other party, and the Administrative Services
Agreement is terminable by either party on 180 days notice.





Beginning
January 1, 2010, the Company will recognize revenue in conjunction with
a servicing agreement with CarePayment.  CarePayment will pay the
Company  a servicing fee based on an amount equal to
5%  annually of total funded receivables being serviced, an
origination fee equal to 6% of the original balance of newly generated funded
receivables, and a “back end fee” based on 25% of CarePayment’s quarterly net
income, adjusted for certain items.  CarePayment will pay the Company
an additional servicing fee equal to WS Technologies’ actual monthly losses for
the first quarter of 2010 and equal to 50% of actual monthly losses for the
second quarter of 2010.





Under the
terms of the Sublease dated December 31, 2009 between WS Technologies and
Aequitas, WS Technologies leases certain office space and personal property from
Aequitas pursuant to the Sublease.  The rent for the real property is
$12,424 per month, and will increase by 3% each year beginning January 1,
2011.  The rent for the personal property is $6,262 per month, and WS
Technologies also pays all personal property taxes related to the personal
property it uses under the Sublease.  The term of the Sublease ends on
October 31, 2014.





Effective
on December 31, 2009 the Company and Aequitas entered into an amended and
restated Advisory Agreement (“Advisory Agreement”).  Under the terms
of the Advisory Agreement Aequitas provides strategy development, strategic
planning, marketing, corporate development and such other advisory services as
the Company reasonably requests from time to time.  The Company pays
Aequitas a monthly fee of $15,000 in for such services.  In addition,
Aequitas will receive a success fee in the event of certain transactions entered
into by the Company.





Effective
December 31, 2009, a Royalty Agreement was entered into between WS Technologies
and Aequitas, whereby WS Technologies pays Aequitas a royalty based on new
products (the "Products") developed by WS Technologies or co-developed by WS
Technologies and Aequitas or its affiliates and that are based on or use the
Software.  The royalty is equal to (i) 1.0% of the net revenue
received by WS Technologies and generated by the Products that utilize funding
provided by Aequitas or its affiliates and (ii) 7.0% of the face amount, or such
other percentage as the parties may agree, of receivables serviced by WS
Technologies that do not utilize such funding.





On June
27, 2008 the Company entered into an advisory services agreement with Aequitas
under which Aequitas began to provide strategy development, strategic planning,
marketing, corporate development and other such advisory services that the
Company reasonably requests from time to time, under direction of the Company’s
Board of Directors for a monthly fee of $10,000 and reimbursement of
expenses.  During the year ending December 31, 2008 the Company
recorded $120,000 of expense for advisory services.  In addition a
warrant for 1,066,667 shares of Company stock with an exercise price of $0.001
per share was issued to Aequitas in 2008 on the inception of Aequitas service on
June 27, 2008 (see Note 8).  During the year ending December 31, 2009
the Company also recorded $60,000 of expense for occupancy of Aequitas
facilities and information technology support related thereto.


24





In
addition to providing advisory services to the Company, Aequitas is also the
manager of MH Financial Associates, LLC and an affiliate of Aequitas in the
manner or Aequitas Catalyst Fund, LLC which are two of the Company’s
largest shareholders.  Included in accounts payable at December 31,
2008 is $90,000 due to Aequitas for advisory services,
facilities occupancy, and information technology support.  This
amount and additional amounts incurred to Aequitas during the year ended
December 31, 2009 was converted to a note payable in 2009





In
addition, the Company has issued notes payable and warrants for common stock to
Aequitas and its affiliate, MH Financial as described in Notes 4 and
8.





10.  Commitments
and Contingencies





Operating
Leases —  The Company and its subsidiaries lease office space
and personal property used in their operations from an affiliate,
Aequitas.  At December 31, 2009, the Company's aggregate future
minimum payments for operating leases with the affiliate having initial or
non-cancelable lease terms greater than one year are payable as follows:





Year
                  
                  Required Minimum
                    Payment2010
                  
                  
                  $     224,0002011
                  
                  
                  229,0002012
                  
                  
                  233,0002013
                  
                  
                  238,0002014
                  
                  
                  202,000





For the
years ended December 31, 2009 and 2008, the Company incurred rent expense
of $60,000 during each year.





Litigation — From time to
time, the Company is involved as a defendant in litigation in the ordinary
course of business, the outcome of which cannot be predicted with
certainty.  As of December 31, 2009, the Company was not engaged
in any legal proceedings.





11.  Subsequent
Events.





On
January 15, 2010, microHelix executed a Promissory Note (the "Note") under which
it borrowed $500,000 from Aequitas Commercial Finance, LLC (“ACF”). Along with
Aequitas, ACF is owned by Aequitas Holdings, LLC. Interest on the principal
amount outstanding under the Note accrues at an annual rate of
8%.  microHelix will use the proceeds from the Note for working
capital, including the business conducted by its subsidiary WS
Technologies.  All amounts outstanding under the Note are due on the
earliest of:  (a) March 31, 2010, (b) a sale of all or
substantially all of the assets of microHelix or WS Technologies, or (c) the
transfer of ownership or beneficial interest, by merger or otherwise, of 50% or
more of the stock of microHelix or 25% or more of the membership interests of WS
Technologies.  The Note is secured by a lien against substantially all
of the assets of microHelix and WS Technologies pursuant to the terms of a
Commercial Security Agreement. In the event of default by microHelix, ACF may
accelerate the entire amount owed under the Note.  Under the terms of
this agreement and through March 31, 2010, the Company was advanced $31,000 on
January 14, 2010, which advance was repaid on February 12, 2010.  As
of March 31, 2010, there are no outstanding advances against the
Note.





Effective
February 10, 2010, the Company's Board of Directors adopted the microHelix, Inc.
2010 Stock Incentive Plan (the "Plan").  The Plan will be administered
by a committee of the Board of Directors, or if the Board of Directors has not
appointed a committee, the Board of Directors.  The Company's
employees and directors are eligible to receive awards under the
Plan.  The Plan authorizes the award of stock options (which may
constitute incentive stock options or nonstatutory stock options) and restricted
stock.  The Company is authorized to issue up to 8,783,383 shares of
the Company's Common Stock under the Plan, subject to adjustment as provided in
the Plan.





Effective
February 10, 2010 (the "Effective Date"), the Company entered into an employment
with the Executive Chairman and Chief Executive Officer (“CEO”). The CEO is also
eligible to receive an option to purchase up to 6,986,782 shares of the
Company's fully diluted Common Stock at an exercise price of $0.02 per
share.  Options vesting will be on the following
schedule:  (1) 1/3 on the date of grant; (2) 1/3 on February 10, 2011;
(3) 1/3 on February 10, 2012; and (4) immediate vesting on a change in control
event.  The CEO also has the opportunity to participate as a purchaser
in future private placements of the Company's equity, at least to the level of
his fully diluted ownership percentage.





Effective
February 10, 2010, the Company granted to the VP of Sales, stock options to
purchase up to 883,506 shares of the Company's fully diluted Common Stock at an
exercise price of $0.02 per share.  Options vesting will be on the
following schedule:  (1) 1/3 on the date of grant; (2) 1/3 on January
1, 2011; (3) 1/3 on January 1, 2012; and (4) immediate vesting on a change in
control event.  The options were granted pursuant to the form of stock
option agreement adopted under the Plan.


25





Item
9.  Changes in and
Disagreement With Accountants on Accounting and Financial
Disclosure




Not
Applicable





Item
9A(T).Controls and
Procedures





Attached
as exhibits to this Annual Report on Form 10-K are certifications (the
"Certifications") of the Company's principal executive officer and principal
financial officer, which are required pursuant to Rule 13a-14 of the
Exchange Act.  This Item 9A(T) of this Annual Report on Form 10-K
includes information concerning the controls and controls evaluation referenced
in the Certifications.  This Item 9A(T) of this Annual Report on
Form 10-K should be read in conjunction with the Certifications for a more
complete understanding of the matters presented.




Evaluation
of disclosure controls and procedures





The
Company's President and Chief Financial Officer evaluated the effectiveness of
its disclosure controls and procedures pursuant to Rule 13a-15 under the
Securities Exchange Act of 1934 as of December 31, 2009.  Based
on that evaluation, the Company’s CEO and Chief Financial Officer concluded that
its disclosure controls and procedures are not designed at a reasonable
assurance level nor are they effective to give reasonable assurance that the
information the Company must disclose in reports filed with the Securities and
Exchange Commission are properly recorded, processed, summarized, and reported
as required, and that such information is not accumulated and communicated to
its management, including its President and Chief Financial Officer, to allow
timely decisions regarding required disclosure.





Based on
the evaluation, the Company’s President and Chief Financial Officer, after
evaluating the effectiveness of its “disclosure controls and procedures” (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), have concluded
that, subject to the inherent limitations noted below, as of December 31,
2009, the Company’s disclosure controls and procedures were not effective due to
the existence of material weaknesses in its internal control over financial
reporting, as discussed below.




Management’s
annual report on internal control over financial reporting





Management
is responsible for establishing and maintaining internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f). The
Company’s management evaluated, under the supervision and with the participation
of our President and Chief Financial Officer, the effectiveness of the Company’s
internal control over financial reporting as of December 31,
2009.




Based on
its evaluation under the framework inInternal Control — Integrated
Framework, issued by the Committee of Sponsoring Organizations of the
Treadway Commission, the Company’s management concluded that its internal
control over financial reporting was not effective as of December 31, 2009,
due to the existence of significant deficiencies constituting material
weaknesses, as described in greater detail below. A material weakness is a
control deficiency, or combination of control deficiencies in internal control
over financial reporting, such that there is a reasonable possibility that a
material misstatement of the annual or interim financial statements will not be
prevented or detected on a timely basis.




This
report does not include an attestation report of the Company’s independent
registered public accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by the Company’s
independent registered public accounting firm pursuant to temporary rules of the
SEC that permit the Company to provide only management’s report in this annual
report.




Limitations
on Effectiveness of Controls





The
Company’s management, including our President and Chief Financial Officer, does
not expect that the Company's disclosure controls or its internal control over
financial reporting will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of a simple error or mistake.
Additional controls can be circumvented by the individual acts of some persons,
by collusion of two or more people, or by management override of the controls.
The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be
detected.


26




Material
Weaknesses Identified





In
connection with the preparation of the Company’s financial statements for the
year ended December 31, 2007, certain significant deficiencies in internal
control became evident to management that, in the aggregate, represents material
weaknesses.  These weaknesses were still present at December 31, 2009,
and include:




1.
            Insufficient
      segregation of duties in the Company’s finance and accounting functions
      due to limited personnel. During the year ended December 31, 2009,
      the Company had one person on staff that performed nearly all aspects of
      the Company’s financial reporting process, including, but not limited to,
      access to the underlying accounting records and systems, the ability to
      post and record journal entries and responsibility for the preparation of
      the financial statements. This creates certain incompatible duties and a
      lack of review over the financial reporting process that would likely
      result in a failure to detect errors in spreadsheets, calculations, or
      assumptions used to compile the financial statements and related
      disclosures as filed with the SEC. These control deficiencies could result
      in a material misstatement to our interim or annual consolidated financial
      statements that would not be prevented or
  detected.





2.
            Lack
      of financial expertise.  The Company does not have an employee
      with adequate financial expertise properly account for and disclose the
      kinds of complex transactions that occur within the Company such as
      financial instrument issuances.





3.
            Insufficient
      corporate governance policies. Although the Company does have a code of
      ethics which provides broad guidelines for corporate governance, its
      corporate governance activities and processes are not always formally
      documented.




As part
of the communications by Peterson Sullivan, LLP, (“Peterson Sullivan”), with the
Company’s Audit Committee with respect to Peterson Sullivan’s audit procedures
for fiscal 2009, Peterson Sullivan informed the audit committee that these
deficiencies constituted material weaknesses, as defined by Auditing Standard
No. 5, “An Audit of Internal Control Over Financial Reporting that is
Integrated with an Audit of Financial Statements and Related Independence Rule
and Conforming Amendments,” established by the Public Company Accounting
Oversight Board (“PCAOB”).





Plan
for Remediation of Material Weaknesses





During
2009, the Company had no active operations and minimal
transactions.  With the agreements the Company entered into on
December 30, 2009, it began regular operations on January 1,
2010.  During 2010, the Company will undertake a complete redesign of
the internal control system based on the COSO Internal Control Integrated
Framework.





Changes
in Internal Controls over Financial Reporting





There
were no significant changes in internal control over financial reporting during
the fourth quarter of 2009 that materially affected, or are reasonably likely to
materially affect, the Company’s internal control over financing
reporting.





Item 9B.  Other
Information





None.


27




Part
III





Item
10.  Directors,
Executive Officers, Promoters and Control Persons; Compliance with Section 16(a)
of the Act.





The
following table sets forth the names of the directors and officers of the
Company.  Also set forth is certain information with respect to each
such person's age at December 31, 2009, principal occupation or employment
during at least the past five years, the periods during which he or she has
served as a director of microHelix and positions currently held with
microHelix.





Name
                
                Age
                
                PositionJames
      T. Quist
                
                61
                
                Chairman
      and Chief Executive OfficerThomas
      Sidley
                
                54
                
                President
      and DirectorPatricia
      J.  Brown
                
                51
                
                Chief
      Financial OfficerBrian
      A.  Oliver
                
                45
                
                SecretaryDonald
      Megrath
                
                48
                
                Director





James T. Quist was
appointed Chairman and Chief Executive Officer of the Company on February 10,
2010.  Mr. Quist founded Mede in 2001, as a successor company to two
healthcare technology companies he founded starting in 1994. These companies
provided electronic claims transaction processing and revenue cycle services
that leveraged technology to create operational efficiency.  He
presently serves in consulting roles for several start-up technology companies
and healthcare service organizations.  Mr. Quist attended the
University of Washington and served in the U.S. Merchant Marines.





Thomas Sidley has an
extensive 20-year background in finance, banking, and asset
securitization.  He has successfully started and built two financial
services companies, as well as managed the sale and divestiture of a large
national mortgage company.  His corporate banking experience includes
senior and subordinated debt facilities, structured finance, and commercial real
estate.  Mr. Sidley is currently a Senior Managing Director at
Aequitas Capital Management, Inc., which is the manager of a shareholder of the
Company.  Mr. Sidley has a B.S. degree in Business Administration from
Portland State University and an M.B.A. with High Honors in Finance from Boston
University.





Donald Megrath is an
experienced financial and operations executive with more than 18 years of
collective consulting experience in media and technology services companies
before his involvement in the investment banking and fund management business
over the last five years.  He has served as VP Finance and CFO in
private and public companies.  Mr. Megrath is currently a Senior
Associate at Aequitas Capital Management, Inc., which is the manager of a
shareholder of the Company.  Mr. Megrath has a B.A. degree in
Telecommunications and an M.B.A. from George Fox University.





Patricia J. Brown was
appointed Chief Financial Officer of the Company on December 29,
2009.  Ms. Brown is the Senior Vice President of Finance for Aequitas
Capital Management, Inc. Ms. Brown served 12 years with The Standard, most
recently as the Vice President of Information Technology.  Prior to
The Standard, Ms. Brown spent 11 years at Deloitte &
Touche.   She previously was appointed by the Governor of Oregon
and served on the Board of the Oregon Public Employees Retirement System for
seven years, where her final position was Vice Chair.  Ms. Brown holds
a B.S. degree with honors in Business Administration from Oregon State
University, she is a Certified Public Accountant, and she is a Fellow of the
Life Management Institute.  Ms  Brown is currently Senior
Vice President, Finance at Aequitas Capital Management, Inc, which is the
manager of a shareholder of the Company.





Brian Oliver is the Executive
Vice President of Aequitas Capital Management, Inc., which is the manager of a
shareholder of the Company, and spent over 15 years in corporate banking, prior
to joining Aequitas in 1997, with particular expertise in financing
middle-market companies in a wide variety of industries. His experience includes
consulting and refinancing for distressed or high-growth companies; structuring
acquisition financing for leveraged management buyouts, real estate
transactions, and structuring working capital and equipment loans. He became an
Aequitas shareholder in 1999.  Mr. Oliver has a B.S. in Business from
Oregon State University with an emphasis in Finance and a minor in Economics. He
serves on the boards of both the Austin Entrepreneurship Program at Oregon State
University, and Adelante Community Development Corporation, a non-profit
organization focused on affordable housing development for the Latino and other
low income communities.





Officers
serve at the discretion of the Board of Directors.  There are no
family relationships among any of our directors and executive
officers.





Audit
Committee





The
members of the Audit Committee during 2009 were Thomas Sidley and Donald
Megrath.


28




Section
16(a) Beneficial Ownership Reporting Compliance





The
Company does not currently have a class of its equity securities registered
pursuant to Section 12 of the Exchange Act.





Code
of Ethics





microHelix
adopted a code of ethics on April 6, 2005 that applies to its directors,
officers and employees.  A copy of the code of ethics is attached as
an exhibit to this Annual Report on Form 10-K.





Nominees
for Board of Directors





During
2009, there were no material changes to the procedures by which security holders
may recommend nominees to the Company’s Board of Directors.





Item
11.  Executive
Compensation.





microHelix's
executive officers received no compensation for their services in 2008 or
2009.





Option
Grants in Last Fiscal Year





No
options were granted in 2009 to our named executive officers.





Option
Exercises in Last Fiscal Year and Fiscal Year End Option Values





None of
our named executive officers held any outstanding stock options at
December 31, 2009.  No stock options were exercised by our named
executive officers during 2009.





Director
Compensation





Outside
directors are eligible to be paid a $2,000 annual retainer, $350 for each Board
of Directors meeting attended and $200 for each committee meeting
attended.  The Chairman of the Board, the Compensation Committee Chair
and the Audit Committee Chair each are eligible to be paid an additional $1,000
retainer.  Outside directors are reimbursed for their out-of-pocket
expenses incurred on behalf of the Company.  Employee directors do not
receive any compensation for serving on the Board of Directors.





Due to
the financial condition of the Company, no payments or stock grants were made to
the members of the Board of Directors during 2009.  There were no
outside directors during 2009.


29




Item
12.  Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.





The
following table sets forth information, as of March 5, 2010, with respect to the
beneficial ownership of the Common Stock of the Company
by:  (i) each shareholder known by us to be the beneficial owner
of more than 5% of the Common Stock; (ii) each of our directors;
(iii) our President and Chief Financial Officer and our other
executive officers; and (iv) all executive officers and directors as a
group.  Unless otherwise indicated, the address of each person listed
below is: c/o microHelix, Inc., 5300 Meadows Road, Suite 400, Lake Oswego,
OR  97035.  Beneficial ownership is determined in accordance
with the rules of the SEC and generally includes voting or investment power with
respect to securities.  Shares of Common Stock issuable on exercise of
currently exercisable or convertible securities or securities exercisable or
convertible within 60 days of March 31, 2010 are deemed beneficially owned and
outstanding for purposes of computing the percentage owned by the person holding
such securities, but are not considered outstanding for purposes of computing
the percentage of any other person.  Unless otherwise noted, each
shareholder named in the table has sole voting and investment power with respect
to the shares set forth opposite that shareholder's name.  The shares
held have been converted to account for the 1 for 15 reverse stock split
approved by the Company's shareholders on March 19, 2008.





Shares Beneficially OwnedName of Beneficial Owner
                    
                    
                    Common
                      Stock
                    
                    
                    SeriesD
                      Preferred
                      Stock
                    
                    
                    PercentofClassAequitas
      Capital Management Inc. (1)
                    
                    
                    
                    66,167,584
                    
                    
                    
                    0
                    
                    
                    
                    83.8
                    %Aequitas
      Catalyst  Fund LLC
                    
                    
                    
                    4,626,022
                    
                    
                    
                    0
                    
                    
                    
                    33.4
                    %Thurman
      Holdings 1, Limited Partnership
                    
                    
                    
                    2,976,199
                    
                    
                    
                    0
                    
                    
                    
                    21.5
                    %MH
      Financial, LLC
                    
                    
                    
                    3,843,799
                    
                    
                    
                    0
                    
                    
                    
                    27.8
                    %James
      M. Williams (2)
                    
                    
                    
                    1,743,273
                    
                    
                    
                    0
                    
                    
                    
                    12.6
                    %Aequitas
      Commercial Finance, LLC
                    
                    
                    
                    0
                    
                    
                    
                    600,000
                    
                    
                    
                    60.0
                    %CarePayment,
      LLC
                    
                    
                    
                    0
                    
                    
                    
                    400,000
                    
                    
                    
                    40.0
                    %Thomas
      Sidley
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    *Donald
      Megrath
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    *Directors
      and Officers as a Group (5 Persons)
                    
                    
                    
                    0
                    
                    
                    
                    0
                    
                    
                    
                    *





(1) Includes
warrants to purchase 65,100,917 shares of Common Stock.


(2)
Includes 1,074,786 shares held by CTK Corporation and 668,487 shares held by an
IRA, both of which are controlled by Mr. Williams.




There are
no known arrangements the operation of which may at a subsequent date result
in a change in control of the Company.





Item 13.  Certain Relationships and Related
Transactions, and Director Independence.





Effective
January 1, 2010. Aequitas provides WS Technologies management support services
such as accounting, financial services, human resources and information
technology services, under the terms of the Administrative Services Agreement
dated December 31, 2009.  The total fee for the services will be
approximately $65,100 per month.  The fees will increase by 3% on
January 1 of each year, beginning January 1, 2011.  Either party may
change the services (including terminating a particular service) upon 180 days
prior written notice to the other party, and the Administrative Services
Agreement is terminable by either party on 180 days notice.





Beginning
January 1, 2010, the Company will recognize revenue in conjunction with
a servicing agreement with CarePayment.  CarePayment will pay the
Company  a servicing fee based on an amount equal to
5%  annually of total funded receivables being serviced, an
origination fee equal to 6% of the original balance of newly generated funded
receivables, and a “back end fee” based on 25% of CarePayment’s quarterly net
income, adjusted for certain items.  CarePayment will pay the Company
an additional servicing fee equal to WS Technologies’ actual monthly losses for
the first quarter of 2010 and equal to 50% of actual monthly losses for the
second quarter of 2010.





Under the
terms of the Sublease dated December 31, 2009 between WS Technologies and
Aequitas, WS Technologies leases certain office space and personal property from
Aequitas pursuant to the Sublease.  The rent for the real property is
$12,424 per month, and will increase by 3% each year beginning January 1,
2011.  The rent for the personal property is $6,262 per month, and WS
Technologies also pays all personal property taxes related to the personal
property it uses under the Sublease.  The term of the Sublease ends on
October 31, 2014.


30





Effective
on December 31, 2009 the Company and Aequitas entered into an amended and
restated Advisory Agreement (“Advisory Agreement”).  Under the terms
of the Advisory Agreement Aequitas provides strategy development, strategic
planning, marketing, corporate development and such other advisory services as
the Company reasonably requests from time to time.  The Company pays
Aequitas a monthly fee of $15,000 in for such services.  In addition,
Aequitas will receive a success fee in the event of certain transactions entered
into by the Company.





Effective
December 31, 2009, a Royalty Agreement was entered into between WS Technologies
and Aequitas, whereby WS Technologies pays Aequitas a royalty based on new
products (the "Products") developed by WS Technologies or co-developed by WS
Technologies and Aequitas or its affiliates and that are based on or use the
Software.  The royalty is equal to (i) 1.0% of the net revenue
received by WS Technologies and generated by the Products that utilize funding
provided by Aequitas or its affiliates and (ii) 7.0% of the face amount, or such
other percentage as the parties may agree, of receivables serviced by WS
Technologies that do not utilize such funding.





On June
27, 2008 the Company entered into an advisory services agreement with Aequitas
under which Aequitas began to provide strategy development, strategic planning,
marketing, corporate development and other such advisory services that the
Company reasonably requests from time to time, under direction of the Company’s
Board of Directors for a monthly fee of $10,000 and reimbursement of
expenses.





Although
we believe that the terms and conditions of the foregoing transactions are fair
and reasonable to the Company, such terms and conditions may not be as favorable
to us as those that could be obtained from independent third
parties.  In addition, the Company's officers and directors
participate in other competing business ventures.





There
were no independent directors during 2009.




Item
14.  Principal
Accounting Fees and Services.





On
December 16, 2009, the Company approved the engagement of Peterson Sullivan LLP
to serve as the Company’s independent registered public accountants for the
fiscal year ending December 31, 2009.  During the fiscal years ended
December 31, 2006, 2007 and 2008,  and through the date hereof,
the Company did not consult Peterson Sullivan LLP with respect to the
application of accounting principles to a specified transaction, either
completed or proposed, the type of audit opinion that might be rendered on the
Company's consolidated financial statements, or any other matters or
events.





The
following table shows the fees paid or accrued by the Company for the audit and
other services provided by Peterson Sullivan LLP for 2008 and 2009.




2008
                  
                  
                  2009Audit
      Fees
                  
                  $
                  30,000
                  
                  
                  $
                  39,000Audit-Related
      FeesTax
      Fees
                  
                  
                  10,000
                  
                  
                  
                  7,100All
      Other FeesTotals
                  
                  $
                  40,000
                  
                  
                  $
                  46,100





Audit Fees.  Audit
services of Peterson Sullivan LLP for 2009 and 2008 consisted of examination of
the consolidated financial statements of the Company, quarterly reviews of the
financial statements and services related to the filings made with the
SEC.





Tax Fees.  Tax
preparation services were provided in 2009 and 2008 by Geffen Mesher &
Company, P.C.  Tax fees relate to filing the required tax reports for
the fiscal years ended December 31, 2006, 2007 and 2008.





All Other
Fees.  There were no fees billed by Peterson Sullivan LLP for
services other than as described under "Audit Fees" for the years ended December
31, 2008 or December 31, 2009.




All of
the services described above were approved by the Audit
Committee.  The Audit Committee has not adopted formal pre-approval
policies, but has the sole authority to engage the Company's outside auditing
and tax preparation firms and must approve all tax consulting and auditing
arrangements with the independent accounting firms prior to the performance of
any services.  Approval for such services is evaluated during Audit
Committee meetings and must be documented by signature of an Audit Committee
member on the engagement letter of the independent accounting
firm.


31





Item
15.  Exhibits





Exhibit
                      Number
                    
                    Description3.1(1)
                    
                    Amended
      and Restated Articles of Incorporation of microHelix, Inc., as amended
      November 16, 2001, December 5, 2003, April 8, 2005, October 28, 2005,
      October 17, 2006, January 16, 2008, March 19, 2008 and December 30,
      20093.2(2)
                    
                    Bylaws
      of microHelix, Inc.10.1(3)
                    
                    Forms
      of Warrant dated April 8, 2005 issued by microHelix, Inc. to financial
      advisors10.2(4)
                    
                    Form
      of Warrant dated October 19, 2006 issued by microHelix, Inc. to MH
      Financial Associates, LLC, as amended on March 12, 200710.3(4)
                    
                    Registration
      Rights Agreement dated October 19, 2006 between microHelix, Inc. and MH
      Financial Associates, LLC, as amended on March 12, 200710.4(4)
                    
                    Form
      of Warrant dated November 2, 2006 issued by microHelix, Inc. to MH
      Financial Associates, LLC, as amended on March 12, 200710.5(5)
                    
                    Form
      of Warrant dated March 12, 2007 issued by microHelix, Inc. to MH Financial
      Associates, LLC.10.6(5)
                    
                    Forbearance
      and Waiver Agreement dated March 12, 2007 between microHelix, Inc. and MH
      Financial Associates, LLC10.7(10)*
                    
                    Employment
      Agreement effective February 10, 2010 between microHelix, Inc. and James
      T. Quist10.8(6)
                    
                    Warrant
      to Purchase Shares of Common Stock dated June 27, 2008 between microHelix,
      Inc. and MH Financial Associates, LLC10.9(6)
                    
                    Registration
      Rights Agreement dated June 27, 2008 between microHelix, Inc and MH
      Financial Associates, LLC10.10(6)
                    
                    Loan
      Modification Agreement dated December 31, 2008 between microHelix, Inc and
      MH Financial Associates, LLC10.11(7)
                    
                    Contribution
      Agreement dated December 30, 2009 between WS Technologies LLC and Aequitas
      Capital Management, Inc.10.12(7)
                    
                    Contribution
      Agreement dated December 30, 2009 between WS Technologies LLC and
      CarePayment, LLC10.13(7)
                    
                    Contribution
      Agreement dated December 30, 2009 between WS Technologies LLC and
      microHelix, Inc.10.14(7)
                    
                    Servicing
      Agreement dated December 31, 2009 between WS Technologies LLC and
      CarePayment10.15(7)
                    
                    Royalty
      Agreement dated December 31, 2009 between WS Technologies LLC and Aequitas
      Capital Management, Inc.10.16(7)
                    
                    Trademark
      License Agreement dated December 31, 2009 between WS Technologies LLC
      and Aequitas Holdings, LLC10.17(7)
                    
                    Administrative
      Services Agreement dated December 31, 2009 between WS Technologies LLC and
      Aequitas Capital Management, Inc.10.18(7)
                    
                    Redemption
      Agreement dated December 31, 2009 between WS Technologies LLC and Aequitas
      Capital Management,
Inc.


32





10.19(7)
                    
                    Redemption
      Agreement dated December 31, 2009 between WS Technologies LLC and
      CarePayment, LLC10.20(7)
                    
                    Sublease
      Agreement dated December 31, 2009 between WS Technologies LLC and
      Aequitas Capital Management, Inc.10.21(7)
                    
                    Third
      Agreement Regarding Amendment of Promissory Note dated December 31, 2008
      between microHelix, Inc. and MH Financial Associates,
  LLC10.22(6)
                    
                    Third
      Amended and Restated Promissory Note dated December 31, 2008 issued by
      MicroHelix, Inc. to MH Financial Associates, LLC10.23(7)
                    
                    First
      Amendment to the Third Amended and Restated Promissory Note dated
      December 31, 2009 between microHelix, Inc. and MH Financial
      Associates, LLC10.24(7)
                    
                    First
      Amendment to Multiple Advance Promissory Note dated December 31, 2009
      between microHelix, Inc., Moore Electronics, Inc. and Aequitas Capital
      Management, Inc.10.25(7)
                    
                    Investor
      Rights Agreement dated December 31, 2009 among microHelix, Inc.
      Aequitas Capital Management, Inc. and CarePayment, LLC10.26(7)
                    
                    Form
      of Warrant dated December 30, 2009 by microHelix, Inc. to WS Technologies,
      Inc.10.27(7)
                    
                    WS
      Technologies LLC Operating Agreement dated December 30,
    200910.28(7)
                    
                    Amended
      and Restated Advisory Services Agreement dated December 31, 2009 between
      microHelix, Inc. and Aequitas Capital Management, Inc.10.29(8)
                    
                    Promissory
      Note dated January 15, 2010 between microHelix, Inc. and Aequitas
      Commercial Finance, LLC10.30(8)
                    
                    Commercial
      Security Agreement dated January 15, 2010 among microHelix, Inc., WS
      Technologies LLC and Aequitas Commercial Finance, LLC10.31(8)
                    
                    Subordination
      Agreement dated January 15, 2010 among microHelix, Inc., Aequitas
      Commercial Finance, LLC, Aequitas Capital Management, Inc. and MH
      Financial Associates, LLC10.32(10)
                    
                    microHelix,
      Inc. 2010 Stock Incentive Plan10.33(10)
                    
                    Multiple
      Advance Promissory Note dated December 31, 2008 among microHelix, Inc.,
      Moore Electronics, Inc. and Aequitas Capital Management, Inc.14.1(9)
                    
                    Policy
      on Business Ethics for Directors, Officers and
  Employees.21.1(10)
                    
                    Subsidiaries.31.1(10)
                    
                    Certification
      of Principal Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1(10)
                    
                    Certification
      of Principal Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002.










(1)
            Incorporated
      by reference to the Company's Annual Report on Form 10-KSB for the year
      ended December 31, 2004, Report on Form 10-K for the year ended December
      31, 2008 and to the Company's Forms 8-K filed on April 14, 2005, October
      31, 2005, October 19, 2006 and January 6,
2010





(2)
            Incorporated
      by reference to the Company's Form SB-2 filed on July 26,
    2001





(3)
            Incorporated
      by reference to the Company's Form 8-K filed on April 14, 2005 and October
      20, 2006





(4)
            Incorporated
      by reference to the Company's Forms 8-K filed on October 20, 2006 and
      March 16, 2007





(5)
            Incorporated
      by reference to the Company's Form 8-K filed on March 16,
    2007


33





(6)
            Incorporated
      by reference to the Company’s Annual Report on Form 10-K for the year
      ended December 31, 2008





(7)
            Incorporated
      by reference to the Company's Form 8-K filed on January 6,
      2010





(8)
            Incorporated
      by reference to the Company's Form 8-K filed on January 22,
      2010





(9)
            Incorporated
      by reference to the Company's Annual Report on Form 10-KSB for the year
      ended December 31, 2004





(10)
            Filed
      herewith





*
Management contract or compensatory plan or arrangement.





SIGNATURES




In
accordance with the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
this behalf by the undersigned; thereunto duly authorized, on March 31,
2010.




MICROHELIX,
      INC.By:
                /s/ James T. QuistJames
      T. QuistChief
      Executive Officer/s/ Patricia J. BrownPatricia
      J. BrownChief
      Financial Officer




In
accordance with the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.





Signature
              
              Title
              
              Date/s/ Thomas Sidley
              
              Director
              
              March
      31, 2010Thomas
      Sidley/s/ Donald Megrath
              
              Director
              
              March
      31, 2010Donald
      Megrath


34