<PAGE>
                                                                   EXHIBIT 10.40


                              NOTICE OF GRANT AWARD

 SMALL BUSINESS INNOVATION RESEARCH PROG                  Issue Date: 03/20/2002
 Department of Health and Human Services
 National Institutes Of Health
 NATIONAL INSTITUTE OF MENTAL HEALTH


 Grant Number:           1 R43 MH65011-01
 Principal Investigator: HADJICOSTIS, ANDY N PHD
 Project Title:          Miniature 24-Channel Interactive Neural Probe Amplifier

 SASS, DICK
 PRESIDENT
 MICROHELIX, INC
 116125 SW 72ND AVE
 PORTLAND, OR 97224
 UNITED STATES



 Budget Period: 03/20/2002 - 08/19/2002
 Project Period: 03/20/2002 - 08/19/2002

 Dear Business official:

 The National Institutes of Health hereby awards a grant in the amount of
 $191,083(see "Award Calculation" in Section 1) to MICROHELIX, INC. in support
 of the above referenced project. This award is pursuant to the authority of 42
 USC 241 42 CFR PART 52 15 USC 638 and is subject to terms and conditions
 referenced below.

 Acceptance of this award including the Terms and Conditions is acknowledged by
 the grantee when funds are drawn down or otherwise obtained from the grant
 payment system.

 Award recipients are responsible for reporting inventions derived or reduced to
 practice in the performance of work under this grant. Rights to inventions vest
 with the grantee organization provided certain requirements are met and there
 is acknowledgement of NIH support. In addition, recipients must ensure that
 patent and license activities are consistent with their responsibility to make
 unique research resources developed under this award available to the
 scientific community, in accordance with NIH policy. For additional
 information, please visit http://www.iedison.gov.

 If you have any questions about this award, please contact the individual(s)
 referenced in the information below.

 Sincerely yours,





 Kathy Hancock
 Grants Management Officer
 NATIONAL INSTITUTE OF MENTAL HEALTH

 See additional information below
<PAGE>
 SECTION I - AWARD DATA 1 R43 MH65011-01

 AWARD CALCULATION (U.S. Dollars):

<TABLE>
<S>                                                                   <C>
 Salaries and Wages                                                   $ 51,100
 Fringe Benefits                                                      $ 16,352
 Personnel Costs                                                      $ 67,452
 Consultant Services                                                  $ 17,100
 Equipment                                                            $ 22,650
 Supplies                                                             $ 10,785
 Travel Costs                                                         $  4,800
 Other Costs                                                          $ 11,700
 Federal Direct Costs                                                 $134,487
 Federal F&A Costs                                                    $ 44,095
 APPROVED BUDGET                                                      $178,582
 Fee                                                                  $ 12,501
 TOTAL FEDERAL AWARD AMOUNT                                           $191,083
</TABLE>



 FISCAL INFORMATION:
 CFDA Number:     93.242
 EIN:             1911758621A1
 Document Number: R3MH65011A

  IC/   CAN       FY2002

  MH / 8429315    191,083

 NIH ADMINISTRATIVE DATA:
  PCC: TT-B  OC: 41.4A /Processed: HANCOCKK 020314 0325


 SECTION II  PAYMENT/HOTLINE INFORMATION - 1 R43 MH65011-01

 For Payment and HHS Office of Inspector General Hotline Information, see the
 NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm

 SECTION III - TERMS AND CONDITIONS - 1 R43 MH65011-01

 This award is based on the application submitted to, and as approved by, the
 NIH on the above-titled project and is subject to the terms and conditions
 incorporated either directly or by reference in the following:

 a. The grant program legislation and program regulation cited in this Notice of
 Grant Award.

 b. The restrictions on the expenditure of federal funds in appropriations acts,
 to the extent those restrictions are pertinent to the award.

 c. 45 CFR Part 74 or 45 CFR Part 92 as applicable.

 d. The NIH Grants Policy Statement, including addenda in effect as of the
 beginning date of the budget period.

 e. This award notice, INCLUDING THE TERMS AND CONDITIONS CITED BELOW.

 (see NIH Home Page at http://grants.nih.gov/grants/policy/awardconditions.htm
 for certain references cited above.)

 Carry over of an unobligated balance into the next budget period requires
 Grants Management Officer prior approval.

 Treatment of Program Income:
 Additional Costs

 SECTION IV- ADDITIONAL TERMS AND CONDITIONS - 1 R43 MH65011-01
<PAGE>
 Allowable costs conducted by for-profit organizations will be determined by
 applying the cost principles of Contracts with Commercial Organizations set
 forth in 48 CFR, Subpart 31.2. Administrative regulations are found in 45 CFR,
 Part 74.

 Prior approval, where required, must be obtained in writing from the Grants
 Management contact shown on this Notice of Grant Award.

 Intellectual property rights: Normally, the awardee organization retains the
 principal worldwide patent rights to any invention developed with United States
 Government support. UNDER TITLE 37 Code of Federal Regulations Part 401, the
 Government receives a royalty-free license for its use, reserves the right to
 require the patent holder to license others in certain circumstances, and
 requires that anyone exclusively licensed to sell the invention in the United
 States must normally manufacture it substantially in the United States.

 Rights and obligations related to inventions created or reduced to practice as
 a result of this award are detailed in 35 U.S.C. 205 and 37 CFR Part 401. These
 inventions must be reported to the Extramural Invention Reporting and
 Technology Resources Branch, OPERA, NIH, 6701 Rockledge Drive, MSC 7750,
 Bethesda, MD 20892-7750, (301) 435-1986. For additional information, access the
 NIH link on the Interagency Edison web site (www.iedison.gov) which includes an
 electronic invention reporting system, reference information and the text to 37
 CFR 401.

 To the extent authorized by 35 U.S.C., Section 205, the Government will not
 make public any information disclosing an NIH-supported invention for a 4-year
 period to allow the awardee organization a reasonable time to file a patent
 application, nor will the Government release any information that is part of
 that patent application.

 PAYMENT INFORMATION: The awardee organization will receive information and
 forms from the Payment Management System of the Department of Health and Human
 Services regarding requests for cash, manners of payment, and associated
 reporting requirements. Payment may be made at any time. Requests for advance
 funding must be timed to coincide with the organization's immediate cash needs,
 thus keeping to a minimum the amount of Federal cash held in recipient bank
 accounts. The telephone number for the Payment Management System Office (301)
 443-1660.

 The fixed fee provided as part of this Notice of Grant Award is in addition to
 direct and facilities and administrative costs. The fee is to be drawn down
 from the DHHS Payment Management System in increments proportionate to the draw
 down of costs.

 This award represents the final year of the competitive segment for this grant.
 Therefore, as stated in the NIH Grants Policy Statement, March 2001, pages
 148-9, a Financial Status Report (OMB 269) must be submitted within 90 days of
 the expiration date. In addition, unless an application for competitive renewal
 is funded, grant closeout documents consisting of a Final Invention Statement
 (HHS 568), (not applicable to training, construction, conference or cancer
 education grants) and a final progress report must also be submitted within 90
 days of the expiration date.

 The Final Progress Report may be typed on plain white paper and should include,
 at a minimum, a summary statement of progress toward the achievement of the
 originally stated aims, a list of results (positive or negative) considered
 significant, and a list of publications resulting from the project as well as
 plans for further publications. An original and one copy are required.

 The Final Progress Report and Final Invention Statement should be sent to the
 awarding component.

 The Financial Status Report should be submitted electronically to the Office of
 Financial Management (OFM), NIH. Information about the electronic transmittal
 of FSRs can be obtained from OFM by calling (301) 402-5297. Other Financial
 Status Reports may be mailed to:

 OFFICE OF FINANCIAL MANAGEMENT
 GRANTS ACCOUNTING BRANCH
 NATIONAL INSTI TUT ES OF HEALTH
 31 CENTER DRIVE ROOM B1B05A MSC 2050
 BETHESDA MD 20892-2050

 Grantees may submit prior approval requests for NIH grants and cooperative
 agreements via
<PAGE>
 e-mail as detailed in the NIH Guide announcement OD-00-009. The announcement
 can be found at
 http://grants.nih.gov/grants/guide/notice-files/NOT-OD-00-009.html. Prior
 approval requests for this grant should be directed to the Grants Management
 Specialist listed below.

 Direct inquiries regarding scientific programmatic issues to the program
 official listed below.

 Direct inquiries regarding fiscal and administrative matters to the grants
 management specialist listed below.


 Margaret Grabb, Program Official
 Phone: 301-443-3563     Email: mgrabb@mail.nih.gov  Fax: 301-443-1731

 Cheryl A Nathaniel, Grants Specialist
 Phone: (301) 402-7191   Email: cni5b@nih.gov  Fax: (301) 402-7827


 SPREADSHEET GRANT NUMBER: 1
 R43 MH65011-01 P.I.:
 HADJICOSTIS, ANDY N
 INSTITUTION: MICROHELIX, INC.

<TABLE>
<CAPTION>
                                  YEAR  01

<S>                               <C>
 Salaries and Wages                51,100
 Fringe Benefits                   16,352
 Personnel Costs                   67,452
 Consultant Services               17,100
 Equipment                         22,650
 Supplies                          10,785
 Travel Costs                       4,800
 Other Costs                       11,700
 TOTAL FEDERAL DC                 134,487
 TOTAL FEDERAL F&A                 44,095
 TOTAL COST                       178,582
 FEE                               12,501
</TABLE>