UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K/A


(Amendment
No. 1)





R
            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:


Title
      of each class
              
              Name
      of each exchange on which registeredClass
      A Warrants to purchase one share of common stock
              
              None





Securities
registered under Section 12(b) of the Exchange
Act:    None





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


Yes ̈ NoR




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


Yes ̈ NoR




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.


YesR
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 companyR





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


Yes  ̈ NoR





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 1,383,286 shares of the issuer's Common Stock outstanding as of March 5,
2010.





Transitional Small Business
Disclosure Format: Yes ̈NoR





EXPLANATORY NOTES





Amendment to Annual
Report.This
Amendment No. 1 (this "Amendment") on Form 10-K/A is being filed in response to
comments the Registrant received from the Staff of the Securities and Exchange
Commission (the "Commission" or the "SEC") regarding the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, as originally
filed with the SEC on March 31, 2010 (the "Original Form 10-K").  This
Amendment amends and restates the Original Form 10-K in its entirety to provide
a complete presentation.





Except as
necessary to respond to the Staff's comments or as explained in these
Explanatory Notes, the Registrant has not modified or updated disclosures
presented in the Original Form 10-K.  Accordingly, this Amendment does not
reflect events occurring after the date of filing of the Original Form 10-K or
modify or update those disclosures, including the exhibits to the Original Form
10-K, affected by subsequent events. As such, this Amendment should be read
in conjunction with the Original Form 10-K and the Registrant's other reports
filed with the SEC subsequent to the filing of the Original Form 10-K, including
any amendments to those filings.





As
required by Rule 12b-15 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), currently dated certifications by the Registrant's
principal executive officer and principal financial officer are filed as
exhibits to this Amendment.





Reverse Stock Split.On
March 31, 2010, at the annual meeting of the shareholders, the Company’s
shareholders voted to amend the Company’s Amended and Restated Articles of
Incorporation, as amended (the “Articles”), to effect a reverse stock split (the
“Reverse Stock Split”) of our Common Stock.  Pursuant to the Reverse Stock
Split, each ten shares of Common Stock held by a shareholder immediately prior
to the Reverse Stock Split were combined and reclassified as one share of fully
paid and nonassessable Common Stock.  The consolidated financial statements
and the information in this report have been retroactively restated to reflect
share and per share data related to such Reverse Stock Split for all periods
presented.





Potential Liability Regarding
Exchange Act Reporting Deficiencies.  We stopped filing Exchange Act
reports in June 2007 in connection with the surrender of our assets to our
secured creditors.  Starting in March 2009, our Board of Directors was
actively seeking opportunities to acquire a business or assets sufficient to
operate a business.   Therefore, in March 2009 we again started filing
reports under the Exchange Act; at that time, we filed all annual and quarterly
reports that would have been due during the period from June 2007 to March
2009.  We did not, however, file current reports on Form 8-K to disclose
reportable events that occurred during that period, including the following
reportable events:





·
            Effective
      June 16, 2007, Steven G. Ashton resigned as our President, CEO and
      Assistant Secretary.  Effective June 18, 2007, our Board of Directors
      appointed James E. Horswill as our
President.





·
            Effective
      November 28, 2007, James M. Williams resigned as our sole director and the
      Board of Directors appointed James E. Horswill to replace
    him.





·
            On
      December 11, 2007, we held the 2007 annual meeting of shareholders at
      which our shareholders voted upon the election of Mr. Horswill as our
      director, to serve until the next annual meeting of the
      shareholders.  At that meeting, 959,190 shares of our common stock
      were voted in favor of Mr. Horswill's election.  There were no votes
      withheld, abstentions or broker nonvotes with respect to the matter voted
      on at the annual meeting.  No proxies were solicited in connection
      with this meeting.





·
            On
      January 15, 2008, we held a special meeting of shareholders at which our
      shareholders voted upon an amendment to our Articles, to increase the
      number of authorized shares of common stock to 75,000,000 and to increase
      the number of authorized shares of preferred stock to 10,000,000.  At
      that meeting, 861,642 shares of our common stock and 279,070 shares of our
      Series C Preferred Stock, voting as separate voting groups, were voted in
      favor of the amendment.  There were no votes cast against,
      abstentions or broker nonvotes with respect to the matter voted on at the
      special meeting.  No proxies were solicited in connection with this
      meeting.





·
            On
      March 19, 2008, we held a special meeting of shareholders at which our
      shareholders voted upon:  (1) the election of each of Thomas A.
      Sidley and Donald H. Megrath as directors, each to serve until the next
      annual meeting of the shareholders, and (2) an amendment to the Articles
      to approve a 15-for-1 reverse stock split of our common stock.  At
      that meeting, a total of 124,955 shares of our common stock and Series C
      Preferred Stock (voting on an as-converted basis), voting as a single
      voting group, voted in favor of Mr. Sidley's and Mr. Megrath's election,
      and a total of 106,351 shares of our common stock and 279,070 shares of
      our Series C Preferred Stock, voting as separate voting groups, were voted
      in favor of the amendment to the Articles.  There were no votes cast
      against, withheld, abstentions or broker nonvotes with regard to any of
      the matters voted on at the special meeting.  No proxies were
      solicited in connection with this
meeting.





·
            On
      June 27, 2008, we entered into an Advisory Services Agreement with
      Aequitas Capital Management, Inc. ("Aequitas") pursuant to which we pay
      Aequitas a monthly fee of $15,000 in exchange for Aequitas providing us
      with strategy development, strategic planning, marketing, corporate
      development and other advisory services.  We also agreed to pay
      Aequitas a success fee of up to 5% upon completion of debt or equity
      placements or acquisitions of targets identified by Aequitas.  We can
      terminate the Advisory Services Agreement upon six months'
      notice.





·
            On
      June 27, 2008, we entered into a Third Amendment to Agreement Regarding
      Amendment of Promissory Note and Third Amended and Restated Promissory
      Note, each with MH Financial Associates, LLC ("MH Financial"), pursuant to
      which MH Financial made an additional loan to us of up to $500,000. 
      In connection with that additional loan, we delivered to MH Financial
      warrants to purchase up to 106,667 shares of our common
    stock.





We
believe we have been current in our Exchange Act report filings since March
2009.





Based on
our belief that none of our securities were registered under the Exchange Act
since at least June 2007, we have referred to filing our Exchange Act reports
"voluntarily" since that time.   As explained below, however, we may
have been required to file Exchange Act reports through August 2010 and
therefore should not have referred to filing any prior Exchange Act reports on a
voluntary basis. We have revised our disclosures in this Annual Report on Form
10-K/A to remove all references to "voluntary" reporting.





In
connection with our initial public offering in November 2001, we registered
under Section 12(b) of the Exchange Act our common stock, Class A Warrants to
purchase our common stock, Class B Warrants to purchase our common stock and
units consisting of our common stock and such warrants.  Immediately
following our initial public offering our securities were listed on the Boston
Stock Exchange.





All of
our securities, other than our Class A Warrants, were then deregistered under
Section 12(b) of the Exchange Act during 2002 or 2005.   Our Class A
Warrants were overlooked and were not deregistered until August 2010.  None
of our Class A Warrants were ever exercised and they expired by their terms in
November 2003.  We may have potential monetary liability to investors who
traded in our common stock during the period from June 2007 through March 2009
to the extent that, as a result of our failure to deregister the Class A
Warrants before August 2010, we were required to file Exchange Act reports
during that period but did not do so.  We can provide no assurance that any
such potential liability would not be materially adverse to us.





Additionally,
certain of our Exchange Act reports filed since January 1, 2005 have incorrectly
identified our securities as registered under Section 12(g), rather than Section
12(b), of the Exchange Act.  No class of our securities has ever been held
of record by more than 300 persons and, therefore, no class of our securities
has ever been registered, or required to be registered, under Section
12(g).  Prior references to registration under Section 12(g) in our
Exchange Act filings were in error.





PART
I





This
Annual Report on Form 10-K contains forward-looking statements.  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





microHelix,
Inc ("we," "us," "our," "microHelix" or the "Company”) was incorporated as an
Oregon corporation in 1991.  From inception until September 28, 2007, we
manufactured custom cable assemblies and mechanical assemblies for the medical
and commercial original equipment manufacturer (OEM) markets.  We were
experiencing considerable competition by late 2006 as our customers aggressively
outsourced competing products from offshore suppliers.  In the first
quarter of 2007, a customer that accounted for over 30% of our revenues
experienced a recall of one of its major products by the U.S. Food and Drug
Administration.  As a result the customer cancelled its orders with us,
leaving us with large amounts of inventory on hand and significantly reduced
revenue.





On May
31, 2007 we informed our three secured creditors, BFI Business Finance, VenCore
Solution, LLC and MH Financial Associates, LLC ("MH Financial"), that we were
unable to continue business operations due to continuing operating losses and a
lack of working capital.  At that time we voluntarily surrendered our
assets to these secured creditors, following which we and our wholly owned
subsidiary, Moore Electronics, Inc. ("Moore"), operated for the benefit of the
secured creditors until September 2007, when we ceased manufacturing operations
and became a shell company.  MH Financial was at that time, and currently
is, an affiliate of ours due to its ownership of shares of our capital
stock.





Following
September 2007 and continuing until December 31, 2009, we had no
operations.  Our Board of Directors, however, determined to maintain us as
a shell company to seek opportunities to acquire a business or assets sufficient
to operate a business.  To help facilitate our search for suitable business
acquisition opportunities, among other goals, on June 27, 2008 we entered into
an advisory services agreement with Aequitas Capital Management, Inc.
(“Aequitas”) to provide us with strategy development, strategic planning,
marketing, corporate development and other advisory services.  In exchange
for the services to be provided by Aequitas under that agreement, we issued to
Aequitas warrants to purchase 106,667 shares of our Common Stock at an exercise
price of $0.01 per share.





Effective
at the end of December 2009, we acquired certain assets and rights that enabled
us to begin building a business that services accounts receivable for other
parties.  The assets and rights we acquired had been previously developed
by Aequitas and its affiliate, CarePayment, LLC (“CarePayment”), under the
CarePayment® brand for servicing accounts receivable generated by hospitals in
connection with providing health care services to their patients.  The
assets and rights we acquired included the exclusive right to administer,
service and collect patient accounts receivables generated by hospitals and
purchased by CarePayment or its affiliates, and a proprietary software product
that is used to manage the servicing.  Typically CarePayment or one of its
affiliates purchase patient accounts receivables from hospitals and we then
administer, service and collect them on behalf of CarePayment for a fee. 
Although we intend to grow our business to include servicing of accounts
receivable on behalf of other parties, currently CarePayment is our only
customer.





Acquisition
Agreements





We
acquired the assets and rights to begin building our receivables servicing
business through a number of agreements that were effective on December 30 and
31, 2009.  We, Aequitas and CarePayment formed an Oregon limited liability
company called WS Technologies LLC ("WS Technologies").  We contributed
shares of our newly authorized Series D Convertible Preferred Stock ("Series D
Preferred") and warrants to purchase shares of our Class B Common Stock (“Class
B Warrants”) to WS Technologies.  Aequitas and CarePayment contributed to
WS Technologies the CarePayment® assets and rights described in the foregoing
paragraph.  WS Technologies then distributed the shares of Series D
Preferred to Aequitas and CarePayment, and the Class B Warrants to CarePayment
to redeem all but half of one membership unit (a "Unit") held by each of
them.  Following these transactions, we own 99% of WS Technologies, and
Aequitas and CarePayment each own 0.5% of WS Technologies.





Prior to
the transactions described above and below, the assets we acquired were owned by
various entities affiliated with Aequitas. Aequitas, an investment management
company, was performing the servicing function on behalf of CarePayment as an
administrative process without dedicated management.  We have hired
management with the necessary operational expertise to develop a strategic plan
to effectively utilize the acquired assets, develop processes, and provide
supervision and staff training.


1





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.





Aequitas
and CarePayment are affiliates of each other due to their common control by
Aequitas Holdings, LLC (“Holdings”).  Aequitas is a wholly owned subsidiary
of Holdings.  CarePayment is a wholly owned subsidiary of Aequitas
Commercial Finance, LLC (“ACF”), which itself is a wholly owned subsidiary of
Holdings.  On December 30, 2009, prior to the contribution of assets,
Holdings and its affiliates owned 13.1% of the Company’s common stock and
controlled 46.3% of the Company on a fully diluted basis.





The
agreements related to the creation of WS Technologies are:





·
            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, which controlled approximately 46% of our capital stock at the
      time, contributed the exclusive right to service and receive compensation
      and origination fees for all receivables owned and acquired  in
      the future by CarePayment 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.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, we contributed 1,000,000 shares of our Series D
      Preferred and warrants to purchase 6,510,092 shares of our newly
      authorized Class B Common Stock at an exercise price of $0.01 per share
      (the "Class B Warrants").  In exchange for that contribution, WS
      Technologies issued Units representing a 50% ownership interest in WS
      Technologies to us.  The Class B Warrants expire on December 31,
      2014.  As described above, WS Technologies subsequently distributed
      the Class B Warrants to CarePayment in connection with redeeming all but
      one-half of one Unit held by CarePayment in WS Technologies (see the
      description of the CarePayment Redemption Agreement
  below).





·
            Servicing Agreement (the
      "Servicing Agreement") dated December 31, 2009 between WS
      Technologies and CarePayment.  Under the Servicing Agreement,
      CarePayment granted WS Technologies the exclusive right to collect,
      administer and service all receivables purchased or controlled by
      CarePayment or its affiliates.  CarePayment also appointed WS
      Technologies as a non-exclusive originator of receivables purchased or
      controlled by CarePayment, including the right to negotiate with hospitals
      on behalf of CarePayment with respect to the collection, administration
      and servicing of receivables purchased by CarePayment or its affiliates
      from hospitals.  The term of the Servicing Agreement ends on December
      31, 2034.





·
            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 ("Products") developed by WS
      Technologies or co-developed by WS Technologies and Aequitas that are
      based on or use the Software.  The royalty is calculated as
      either (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 or (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.Under the Trademark License, WS
      Technologies granted 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.  Under the
      Administrative Services Agreement, 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; the Administrative
      Services Agreement is terminable by either party on 180 days
      notice.


2


·
            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.





·
            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 and the Class B
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. Under the terms of the Note Amendment, MH
      Financial extended the maturity date of the Third Amended and Restated
      Promissory Note (the "MH Note") to December 31, 2011.  In
      addition, the interest rate on the principal amounts outstanding under the
      MH Note will be decreased from 20% to 8% per annum after the Company makes
      a $400,000 payment of principal under the MH Note.  The MH 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 amongmicroHelix, Moore Electronics,
      Inc. and Aequitas.  Under the Amended Aequitas Note, the
      maximum principal amount microHelix may borrow was increased to $360,000,
      and the maturity date was extended to March 31,
  2010.





·
            Investor Rights Agreement
      ("Investor Rights Agreement") dated December 31, 2009 among
      microHelix, Aequitas and CarePayment.Under the
      Investor Rights Agreement, microHelix agreed 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 SEC 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 by January 31, 2013 in accordance with Section 4.1(b) of
      the Certificate of Designation for the Series D Preferred, (i)
      Aequitas will have the right to exchange all of its shares of
      Series D Preferred for 55.5 Units of WS Technologies, and CarePayment
      or its assignee will have the right to exchange all of its shares of
      Series D Preferred for 42.5 Units, which could result in Aequitas and
      CarePayment together owning 99% of WS
  Technologies.


3


Following
the transactions described above, our current corporate structure and
relationships with certain affiliates are depicted in the following
diagram:











·
            Aequitas
      controls approximately 46% of the issued and outstanding shares of the
      Company’s Common Stock on a fully-diluted
basis.


·
            The
      Company also owns Moore Electronics, Inc., which is a non-operating
      subsidiary.





The
Receivables Servicing Business and Competition





On
January 1, 2010 and as a result of the transactions described above, our
subsidiary, WS Technologies began building a business to service hospital
patient receivables for an affiliate of the Company, CarePayment.





Generally,
a majority of a hospital's accounts receivable are paid by medical insurance,
Medicare and Medicaid.  The balance of accounts receivable due directly
from the patient is not always a priority for many hospitals, due primarily to
the effort and expense required to collect those balances from individual
patients.CarePayment, acting
alone or through its affiliates, purchases patient receivables from
hospitals.  Our subsidiary, WS Technologies, administers, services and
collects the receivables on behalf of CarePayment; CarePayment retains ownership
of the receivables.





A patient
whose health care receivable is acquired by CarePayment becomes a CarePayment®
finance card customer and is issued a CarePayment® card, which has an initial
outstanding balance equal to the receivable purchased by CarePayment. 
Balances due on the CarePayment ® card are generally payable over 25 months with
no interest.  From the customer's perspective, the CarePayment ® card
functions much like a credit card even though WS Technologies advances no credit
to the customer.  In addition to servicing these receivables, WS
Technologies analyzes potential receivable acquisitions for CarePayment and
recommends a course of action when it determines that collection efforts for
existing receivables are no longer effective.





In
exchange for its services, WS Technologies receives origination fees at the time
CarePayment purchases and delivers receivables to WS Technologies for servicing,
a monthly servicing fee based on the total principal amount of receivables being
serviced, and a quarterly fee based upon a percentage of CarePayment's quarterly
net income, adjusted for certain items.  WS Technologies’ servicing
agreement with CarePayment provides for CarePayment to pay additional
compensation during the first six months of 2010 to cover the Company’s start up
costs as WS Technologies begins building a receivables servicing business. 
This compensation is equal to the Company's actual monthly losses for the first
quarter of 2010 and an amount equal to 50% of actual monthly losses for the
second quarter of 2010.


4


The
market for servicing hospital patient receivables is intensely
competitive.  We face competition from many servicing and collections
companies and other technology companies that operate within segments of the
revenue and payment cycle markets.  Many of our competitors are
significantly larger than us and have greater financial resources than we
do.




WS
Technologies contracts with various vendors to issue the CarePayment® finance
card product, send customer statements, accept payments, and transmit all
transaction history back to WS Technologies.  Since WS Technologies is
responsible for the CarePayment® finance card's compliance with various laws and
regulations relating to consumer credit, these vendors are selected for their
specific expertise in such areas.





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.





MicroHelix
issued 1,000,000 shares of Series D Preferred and the Class B Warrants to WS
Technologies pursuant to the microHelix Contribution Agreement described in Item
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 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
Preferredan aggregate 99% ownership interest in the equity of WS Technologies as
consideration for the redemption of the Series D Preferred.





The Class
B Warrants are exercisable at a price of $0.01 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 Articles to include enough authorized
shares of Class B Common Stock to permit exercise of the Class B Warrants in
full.  The Class B Warrants 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 Class B 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 elected to convert all of its shares of Series C
Preferred Stock into 18,605 shares of Common Stock.





On
December 30, 2009, MH Financial exercised a warrant to purchase 308,486 shares
of Common Stock, Aequitas exercised a warrant to purchase 106,667 shares of
Common Stock, Aequitas Catalyst Fund, LLC exercised warrants to purchase a total
of 436,660 shares of Common Stock, Thurman Holdings I, LP exercised warrants to
purchase a total of 282,287 shares of Common Stock, and CTK Capital Corporation
exercised a warrant to purchase 33,238 shares of Common Stock.





The
issuance of the Series D Preferred, the Class B Warrants and the Common Stock
issuable 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.  One million shares of Series D Preferred were
issued to WS Technologies on December 30, 2009.  WS Technologies
transferred 600,000 shares of the Series D Preferred to Aequitas pursuant to the
Aequitas Redemption Agreement, and it transferred 400,000 shares of the Series D
Preferred 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 in that the Series D Preferred 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 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 then held by them.  The holders
      of the Series D Preferred will be entitled to receive a cumulative annual
      dividend of $0.50 per share.





·
            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.


5


Patents
and Intellectual Property





WS
Technologies owns the CarePayment® proprietary accounting software system, which
it uses to collect hospital accounts receivable.  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. Effective with the agreements entered into on December 30, 2009, WS
Technologies owns the trademark, “CarePayment®,” the service mark
“CarePayment.com” and the Internet domain name “CarePayment.com.”





The
Company's intellectual property also includes common law trademarks, service
marks and trade names.





Employees





The
Company had 21 full-time employees and no part-time employees in the United
States as of March 31, 2010.  Of these 21 employees, 13 engage in
collection activities as part of the WS Technologies' servicing department, five
engage in sales and marketing activities for WS Technologies, and one provides
various administrative support services.  The remaining two employees are
executives who provide management-level services to us.





We and WS
Technologies outsource certain administrative support services to Aequitas
pursuant to the terms of an Administrative Services Agreement dated December 31,
2009.  Such services include accounting, treasury, budgeting and other
financial services, financial reporting and tax planning services, human
resources services and information technology services.





Where
You Can Find More Information





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,
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  servicing is a new business for the
Company.  We have no experience in such a business.  Although we hired
certain employees from Aequitas who have previously provided such services to
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.


6


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.


7


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.


8


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.





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.


9


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.




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 and the 1 for 10 reverse stock split approved by the
Company’s shareholders at the annual meeting of the shareholders on March 31,
2010.




The
prices shown represent interdealer prices without adjustments for retail
mark-ups, mark-downs or commissions and consequently may not represent actual
transactions.


10


Common
Stock "MHLN.PK"





2009 Fiscal Quarters
                  
                  High
                  
                  
                  LowFirst
      Quarter
                  
                  $
                  1.00
                  
                  
                  $
                  1.00Second
      Quarter
                  
                  $
                  1.00
                  
                  
                  $
                  1.00Third
      Quarter
                  
                  $
                  1.00
                  
                  
                  $
                  0.20Fourth
      Quarter
                  
                  $
                  0.70
                  
                  
                  $
                  0.15




2008 Fiscal Quarters
                  
                  High
                  
                  
                  LowFirst
      Quarter
                  
                  $
                  3.00
                  
                  
                  $
                  1.20Second
      Quarter
                  
                  $
                  2.25
                  
                  
                  $
                  2.25Third
      Quarter
                  
                  $
                  6.00
                  
                  
                  $
                  1.80Fourth
      Quarter
                  
                  $
                  4.50
                  
                  
                  $
                  0.02




Dividends





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
therefor 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 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 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.





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 878,339 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 and the 1 for 10 reverse stock split
approved by the Company’s shareholders at the annual meeting of the shareholders
on March 31, 2010.






Overview





microHelix,
Inc. (“we,” “us,” “our,” “microHelix” or the “Company”) was incorporated as an
Oregon corporation in 1991.  From inception until September 28, 2007, we
manufactured custom cable assemblies and mechanical assemblies for the medical
and commercial original equipment manufacturer (OEM) markets.  We were
experiencing considerable competition by late 2006 as our customers aggressively
outsourced competing products from offshore suppliers.  In the first
quarter of 2007, a customer that accounted for over 30% of our revenues
experienced a recall of one of its major products by the U.S. Food and Drug
Administration.  As a result the customer cancelled its orders with us,
leaving us with large amounts of inventory on hand and significantly reduced
revenue.


11


On May
31, 2007 we informed our three secured creditors, BFI Business Finance, VenCore
Solution, LLC and MH Financial Associates, LLC ("MH Financial"), that we were
unable to continue business operations due to continuing operating losses and a
lack of working capital.  At that time we voluntarily surrendered our
assets to these secured creditors, following which we and our wholly owned
subsidiary, Moore Electronics, Inc. ("Moore"), operated for the benefit of the
secured creditors until September 2007, when we ceased manufacturing operations
and became a shell company.  MH Financial was, at that time, and currently
is, an affiliate of ours due to its ownership of shares of our capital
stock.





Following
September 2007 and continuing until December 31, 2009, we had no
operations.  Our Board of Directors, however, determined to maintain us as
a shell company to seek opportunities to acquire a business or assets sufficient
to operate a business.  To help facilitate our search for suitable business
acquisition opportunities, among other goals, on June 27, 2008 we entered into
an advisory services agreement with Aequitas Capital Management, Inc.
(“Aequitas”) to provide us with strategy development, strategic planning,
marketing, corporate development and other advisory services.  In exchange
for the services to be provided by Aequitas under that agreement, we issued to
Aequitas warrants to purchase 106,667 shares of our Common Stock at an exercise
price of $0.01 per share.





Effective
at the end of December 2009, we acquired certain assets and rights that enabled
us to begin building a business that services accounts receivable for other
parties.  The assets and rights we acquired had been previously developed
by Aequitas and its affiliate, CarePayment, LLC (“CarePayment”), under the
CarePayment® brand for servicing accounts receivable generated by hospitals in
connection with providing health care services to their patients.  The
assets and rights we acquired included the exclusive right to administer,
service and collect patient accounts receivables generated by hospitals and
purchased by CarePayment or its affiliates, and a proprietary software product
that is used to manage the servicing.  Typically CarePayment or one of its
affiliates purchase patient accounts receivable from hospitals and then we
administer, service and collect them on behalf of CarePayment for a fee. 
Although we intend to grow our business to include servicing of accounts
receivable on behalf of other parties, currently CarePayment is our only
customer.





To
facilitate building the business, on December 30, 2009, we, Aequitas and
CarePayment, LLC formed an Oregon limited liability company, WS Technologies LLC
(WS Technologies”).  We contributed shares of our newly authorized Series D
Convertible Preferred Stock ("Series D Preferred") and warrants to purchase
shares of our Class B Common Stock (the “Class B Warrants”) to WS
Technologies.  Aequitas and CarePayment contributed to WS Technologies the
CarePayment® assets and rights described in the foregoing paragraph.  WS
Technologies then distributed the shares of Series D Preferred to Aequitas and
CarePayment, and the Class B Warrants to CarePayment to redeem all but half of
one membership unit (a "Unit") held by each of them.  Following these
transactions, we own 99% of WS Technologies, and Aequitas and CarePayment each
own 0.5% of WS Technologies as of December 31, 2009.





See Item
1 for additional information regarding the Company’s business.





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 policies and related judgments and
estimates affect the preparation of the Company's consolidated financial
statements.  See also Note 1 to the Consolidated Financial
Statements.




Revenuerecognition —The Company’s revenue is primarily related to a servicing agreement with
CarePayment.  Origination fee revenue is recognized at the time CarePayment
funds its purchased receivables and the Company assumes responsibility for
servicing these receivables; a servicing fee is recognized monthly based on the
total funded receivables being serviced by the Company; and a percentage of
CarePayment’s quarterly net income is accrued for the current quarter in
accordance with the servicing agreement.





Warrants to
purchase the Company’s stock —The fair value of warrants to purchase the
Company’s stock issued for services or in exchange for assets is estimated at
the issue date using the Black-Scholes model.


12


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 to Aequitas 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.





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 "MH 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 $100,000 on November 6, 2009.   Effective as of the date
of this refinance, interest accrued on the outstanding principal balance of the
MH Note at a rate of 20% per annum.  The original maturity date of the MH
Note was December 27, 2008.  As a condition of the December 31, 2008
advance, the maturity date was extended to December 27, 2009.  On December
31, 2009, the Company was granted a note extension to December 31, 2011. 
  In addition, under the terms of that amendment, the interest rate on
the principal amount outstanding under the MH Note will be decreased from 20% to
8% per annum after the Company makes a $400,000 payment of principal under the
MH Note.  The MH 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
under the MH Note (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
assents 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 746,667 shares of Common Stock at $0.01
per share to MH Financial.  MH Financial has assigned these warrants to
certain of its investors as follows: (i) Aequitas Catalyst Fund, LLC: warrants
to purchase 116,661 shares; (ii) Thurman Holdings 1, Limited Partnership:
warrants to purchase 282,287 shares; (iii) NTC & Co. fbo Robert J. Jesenik:
warrants to purchase 7,330 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 33,238 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 106,667 shares of Common Stock at $0.01 per
share.





As
additional consideration for the $100,000 advance on February 27, 2009, the
Company issued warrants to purchase 106,667 shares of Common Stock at $0.01 per
share.





As
additional consideration for the $100,000 advance on November 6, 2009, the
Company issued warrants to purchase 106,667 shares of Common Stock at $0.01 per
share.





All of
the above reference 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, and we obtained
representations from the investors as to their status as "accredited investors"
as that term is defined in Regulation D.


13


On
December 31, 2008, the Company entered into a multiple advance promissory note
payable to Aequitas (the “Aequitas Note”).   The Aequitas 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
Aequitas Note and the Aequitas Note was amended to reflect modified payment and
maturity date information.  Under these modified terms all amounts
outstanding under the Aequitas 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; 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 under the Aequitas Note (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.





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
(“ACF”).  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





The
Company does not have any off-balance sheet arrangements.





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.





14


Item
8.  Financial Statements
and Supplementary Data





INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS





PageReport
      of Peterson Sullivan LLP  - Independent Registered Public
      Accounting Firm
                
                16Consolidated
      Balance Sheets as of December 31, 2008 and 2009
                
                17Consolidated
      Statements of Operations for the Years Ended December 31, 2008 and
      2009
                
                18Consolidated
      Statements of Shareholders' Deficit for the Years Ended December 31, 2008
      and 2009
                
                19Consolidated
      Statements of Cash Flows for the Years Ended December 31, 2008 and
      2009
                
                20Notes
      to Consolidated Financial Statements
                
                21


15





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, except for the effects of the reverse stock split described in Notes 1 and
8, as to which the date is April 1, 2010.


16





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, 197,343 and 1,383,286
      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.


17





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
                
                $
                (24.18
                )
                
                $
                (4.49
                )Weighted
      average number of shares outstanding — basic and diluted
                
                
                182,535
                
                
                
                204,345





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


18




microHelix,
Inc.





CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ DEFICIT


Years
Ended December 31, 2008 and 2009





AdditionalStock
                  
                  
                  
                  
                  
                  Preferred
                  
                  
                  Paid-In
                  
                  
                  AccumulatedShares
                  
                  
                  Amount
                  
                  
                  StockSeriesC
                  
                  
                  Capital
                  
                  
                  Deficit
                  
                  
                  TotalBalance,
      December 31, 2007
                  
                  
                  96,634
                  
                  
                  $
                  17,462,823
                  
                  
                  $
                  533,000
                  
                  
                  $
                  5,989,455
                  
                  
                  $
                  (25,537,944
                  )
                  
                  $
                  (1,552,666
                  )Common
      stock issued for exercise of warrants
                  
                  
                  100,623
                  
                  
                  
                  15,094
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  15,094Additional
      shares issued upon final calculation of reverse stock
split
                  
                  
                  86
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Warrants
      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
                  
                  
                  197,343
                  
                  
                  
                  17,477,917
                  
                  
                  
                  533,000
                  
                  
                  
                  10,342,521
                  
                  
                  
                  (29,951,223
                  )
                  
                  
                  (1,597,785
                  )Common
      stock issued for exercise of warrants
                  
                  
                  1,167,338
                  
                  
                  
                  11,674
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  11,674Warrants
      issued in conjunction with debt
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  167,830
                  
                  
                  
                  —
                  
                  
                  
                  167,830Conversion
      of Series C Preferred Stock to common stock
                  
                  
                  18,605
                  
                  
                  
                  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
                  
                  
                  1,383,286
                  
                  
                  $
                  18,022,591
                  
                  
                  $
                  —
                  
                  
                  $
                  11,755,211
                  
                  
                  $
                  (30,868,143
                  )
                  
                  $
                  (1,090,341
                  )





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


19




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
                  
                  
                  $
                  69,097





Supplemental
      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.


20


MICROHELIX,
INC.





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS





1. 
Business Activity





Nature of Operations—
microHelix, Inc ("we," "us," "our," "microHelix" or the "Company”) was
incorporated as an Oregon corporation in 1991.  From inception until
September 28, 2007, we manufactured custom cable assemblies and mechanical
assemblies for the medical and commercial original equipment manufacturer (OEM)
markets.  We were experiencing considerable competition by late 2006 as our
customers aggressively outsourced competing products from offshore
suppliers.  In the first quarter of 2007, a customer that accounted for
over 30% of our revenues experienced a recall of one of its major products by
the U.S. Food and Drug Administration.  As a result the customer cancelled
its orders with us, leaving us with large amounts of inventory on hand and
significantly reduced revenue.





On May
31, 2007 we informed our three secured creditors, BFI Business Finance, VenCore
Solution, LLC and MH Financial Associates, LLC ("MH Financial"), that we were
unable to continue business operations due to continuing operating losses and a
lack of working capital.  At that time we voluntarily surrendered our
assets to these secured creditors, following which we and our wholly owned
subsidiary, Moore Electronics, Inc. ("Moore"), operated for the benefit of the
secured creditors until September 2007, when we ceased manufacturing operations
and became a shell company.  MH Financial was at that time, and currently
is, an affiliate of of ours due to its ownership of shares of our capital
stock.





Following
September 2007 and continuing until December 31, 2009, we had no
operations.  Our Board of Directors, however, determined to maintain us as
a shell company to seek opportunities to acquire a business or assets sufficient
to operate a business.  To help facilitate our search for suitable business
acquisition opportunities, among other goals, on June 27, 2008 we entered into
an advisory services agreement with Aequitas Capital Management, Inc.
(“Aequitas”) to provide us with strategy development, strategic planning,
marketing, corporate development and other advisory services.  In exchange
for the services to be provided by Aequitas under that agreement, we issued to
Aequitas warrants to purchase 100,667 shares of our Common Stock at an exercise
price of $0.01 per share.





Effective
at the end of December 2009, we acquired certain assets and rights that enabled
us to begin building a business that services accounts receivable for other
parties.  The assets and rights we acquired had been previously developed
by Aequitas Capital Management, Inc. (“Aequitas”) and its affiliate,
CarePayment, LLC (“CarePayment”) under the CarePayment® brand for servicing
accounts receivable generated by hospitals in connection with providing health
care services to their patients.  The assets and rights we acquired
included the exclusive right to administer, service and collect patient accounts
receivables generated by hospitals and purchased by CarePayment or its
affiliates, and a proprietary software product that is used to manage the
servicing.  Typically CarePayment or one of its affiliates purchase patient
accounts receivables from hospitals and we then administer, service and collect
them on behalf of CarePayment for a fee.  Although we intend to grow our
business to include servicing of accounts receivable on behalf of other parties,
currently CarePayment is our only customer.





Aequitas and CarePayment are affiliates
due to their common control by Aequitas Holdings, LLC (“Holdings”). 
Aequitas is a wholly owned subsidiary of Holdings.  CarePaymentis a wholly owned subsidiary of
Aequitas Commercial Finance, LLC (“ACF”), which itself is a wholly owned
subsidiary of Holdings.  On December 30, 2009, prior to the contribution of
assets,Holdings and its affiliates owned
13.1% of the Company’s common stock and controlled 46.3%of the Company on a fully diluted
basis.





We
acquired the assets and rights to begin building our receivables servicing
business through a number of agreements that were effective on December 30 and
31, 2009.  We, Aequitas and CarePayment formed an Oregon limited liability
company called WS Technologies LLC ("WS Technologies").  We contributed
shares of our newly authorized Series D Convertible Preferred Stock ("Series D
Preferred") and warrants to purchase shares of our Class B Common Stock (the
“Class B Warrants”) to WS Technologies.  Aequitas and CarePayment
contributed to WS Technologies the CarePayment® assets and rights described in
the foregoing paragraph.  WS Technologies then distributed the shares of
Series D Preferred to Aequitas and CarePayment, and the Class B Warrants to
CarePayment to redeem all but half of one membership unit (a "Unit") held by
each of them.  Following these transactions, we own 99% of WS Technologies,
and Aequitas and CarePayment each own 0.5% of WS Technologies.





On
December 30, 2009, Aequitas and 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 servicingand originationagreement with
      CarePayment that expires December 31,
  2034.


21


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.  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 6,510,092 shares of Class B Common Stock of the Company (the
      “Warrants”) at an exercise price of $0.01 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 a 9% discount rate and that the cumulative
      dividends of $0.50 per share 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
      using the following assumptions:





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




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 Class B 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 Class B Warrants, and simultaneously wrote
down the servicing rights and software to equal the fair value of the Series D
Preferred and the Class B 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.





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





On
March 31, 2010, at the annual meeting of the shareholders, the Company's
shareholders voted to amend the Articles to effect a reverse stock split (the
“Reverse Stock Split”) of the Company's Common Stock. Pursuant to the Reverse
Stock Split, each ten shares of Common Stock, issued and outstanding , held by a
shareholder immediately prior to the Reverse Stock Split were combined and
reclassified as one share of fully paid and nonassessable Common Stock. 
The consolidated financial statements have been retroactively restated to
reflect share and per share data related to such Reverse Stock Split for all
periods presented.





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 acquisition.




Reclassifications and
restatements— On March 31, 2010, at the annual meeting of the
shareholders, the Company's shareholders voted to amend the Articles to effect a
reverse stock split (the “Reverse Stock Split”) of the Company's Common Stock.
Pursuant to the Reverse Stock Split, each ten shares of Common Stock held by a
shareholder immediately prior to the Reverse Stock Split were combined and
reclassified as one share of fully paid and nonassessable Common Stock. 
The consolidated financial statements have been retroactively restated to
reflect share and per share data related to such Reverse Stock Split for all
periods presented.


22




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.




Concentration
of Risk




Cash 
— 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.




Cash and Cash Equivalents
—  Cash and cash equivalents are stated at cost and include all highly
liquid debt instruments with original maturities of three months or less which
are not securing any debt or obligations.




Property and Equipment -
Property and equipment is comprised of servicing software which is stated at
original estimated fair value, net of amortization, which was $0 at December 31,
2009.  Amortization is computed using the straight-line method over the
estimated useful lives of the assets.  The estimated useful life of the
software is three years.  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 fair value of the identifiable intangible assets associated
with the acquisition of certain business 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, which is based on the servicing
agreement which expires in 2034.  The Company evaluates servicing rights
for impairment annually or whenever changes in circumstances indicate that the
carrying amount of the asset may not be recoverable by analyzing the
undiscounted future cash flows under the servicing agreement with
CarePayment.  For a description of the servicing agreement,  see Note
1.




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.  The Company will receive a servicing fee equal to 5% annually
of total funded receivables being serviced and an origination fee equal to 6% of
the original balance of newly generated funded receivables.  The servicing
agreement also provides that the Company will receive 25% of CarePayment’s
quarterly net income, adjusted for certain items.  The Company recognizes
revenue related to this agreement, which is evidence of an arrangement, at the
time the services are rendered; the servicing fee is recognized as revenue
monthly at 1/12 of the annual percent of the funded receivables being serviced
for the month; the origination fee is recognized as revenue at the time
CarePayment funds its purchased receivables and the Company assumes the
responsibility for servicing these receivables; the 25% of CarePayment’s net
income is recognized as revenue in the quarter that CarePayment records the net
income.  The collectability of the revenue recognized from these related
party transactions is considered reasonably assured.




Cost of revenue —Cost
of revenue will be comprised primarily of compensation and benefit costs for
servicing employees, costs associated with outsourcing billing, collections
and payment processing servicing, and amortization of servicing rights and
servicing software.




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.


23




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.




·
            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 been 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 6,521,838 shares of Common Stock, consisting of warrants to
purchase 6,521,838 shares of Common Stock.  At December 31, 2008, the
outstanding number of potentially dilutive common shares totaled 984,357 shares
of Common Stock, consisting of Series C Preferred Stock convertible into 18,605
shares of Common Stock, and warrants to purchase 965,752 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.


24




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.





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.  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,; provided, however, that after the occurrence of an event of default
under the note, 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 under
the note (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 86,000
warrants.  At that time total warrants and convertible preferred stock
allowed the holder to purchase approximately 57,987 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.


25


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 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 18,605 shares of Common Stock, and there are no shares of Series C
Preferred Stock outstanding as of December 31, 2009.


26


Stock Warrants —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 106,667 shares of
Common Stock at $0.01 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
106,667 shares of Common Stock at $0.01 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
106,667 shares of Common Stock at $0.01 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
                  
                  
                  —





The
relative fair value of the warrants compared to the fair value of the loan
advances was recorded as additional paid-in-capital and debt
discount.





On
December 30, 2009, in connection with the issuance of Series D Preferred Stock,
the Company issued a warrant to purchase 6,510,092 shares of common stock which
expire on December 31, 2014. 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
                  
                  
                  —





As of
December 31, 2009, the Company had 6,521,839 warrants outstanding and
exercisable as follows:





Warrants
                      
                      Exercise
      Price
                      
                      Expiration
      Date3,189
                      
                      $
                      37.50
                      
                      April
      2015487
                      
                      $
                      72.00
                      
                      June
      2016667
                      
                      $
                      75.00
                      
                      July
      201174
                      
                      $
                      4,077.00
                      
                      March
      20121,334
                      
                      $
                      0.15
                      
                      March
      20105,996
                      
                      $
                      0.01
                      
                      June
      20136,510,092
                      
                      $
                      0.01
                      
                      December
      31,
2014





Common Stock-On
December 30, 2009, MH Financial exercised a warrant to purchase 308,486
shares of Common Stock, Aequitas exercised a warrant to purchase 106,667 shares
of Common Stock, Aequitas Catalyst Fund, LLC exercised warrants to purchase a
total of 436,660 shares of Common Stock, Thurman Holdings I, LP exercised
warrants to purchase a total of 282,287 shares of Common Stock, and CTK Capital
Corporation exercised a warrant to purchase 33,238 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 100,623 shares of Common Stock for $15,094.  As of December 31,
2009, the Company has 405,118 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.


27


Warrants
for 7,330 shares of common stock were exercised on March 11, 2010, resulting in
$259 proceeds to the Company.





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.





Effective
in November 2009, the Company had fully divested its historic line of business
in the electronic circuit manufacturing business and commenced operation in its
current line of business.  As a result, the Company changed its method of
estimating expected volatility from using the Company’s actual historical stock
trades to using an index of peer companies that the Company believes better
reflects current operating activity.





On
March 31, 2010, at the annual meeting of the shareholders, the Company's
shareholders voted to amend the Articles to effect a reverse stock split (the
“Reverse Stock Split”) of the Company's Common Stock. Pursuant to the Reverse
Stock Split, each ten shares of Common Stock held by a shareholder immediately
prior to the Reverse Stock Split were combined and reclassified as one share of
fully paid and nonassessable Common Stock. The consolidated financial
statements and notes have been retroactively restated to reflect share and per
share data related to such Reverse Stock Split for all periods
presented.





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 calculated as either (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 or (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.


28


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
106,667 shares of Company stock with an exercise price of $0.01 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.





In
addition to providing advisory services to the Company, Aequitas is also the
manager of MH Financial and an affiliate of Aequitas, 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 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 878,339 shares of the Company's Common Stock under
the Plan, subject to adjustment as provided in the Plan.





Effective
February 10, 2010, the Company entered into an employment agreement with its
Executive Chairman and Chief Executive Officer (“CEO”). The CEO is also eligible
to receive an option to purchase up to 698,679 shares of the Company's fully
diluted Common Stock at an exercise price of $0.20 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.


29


Effective
February 10, 2010, the Company granted to its VP of Sales, stock options to
purchase up to 88,351 shares of the Company's fully diluted Common Stock at an
exercise price of $0.20 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.





On
March 31, 2010, at the annual meeting of the shareholders, the Company's
shareholders voted to amend the Articles to effect a reverse stock split (the
“Reverse Stock Split”) of the Company's Common Stock. Pursuant to the Reverse
Stock Split, each ten shares of Common Stock held by a shareholder immediately
prior to the Reverse Stock Split were combined and reclassified as one share of
fully paid and nonassessable Common Stock. The consolidated financial
statements and notes have been retroactively restated to reflect share and per
share data related to such Reverse Stock Split for all periods
presented.





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 President 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.





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.


30


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.




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 (see Item 1 –
Overview), 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 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.


31




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. Quistis currently
theExecutive
Chairman, and Chief Executive Officer of the Company.  Mr. Quist joined the
Company on February 7, 2010.  Prior to that, Mr. Quist served as Executive
Chairman of MedeFinance, Inc. from 2006 to 2009 and as Chief Executive Officer
and Chairman from 2001 to 2006.  Mr. Quist founded MedeFinance, Inc. in
2001.  He also founded Paradigm Integrated Networks, Inc. and Paradigm
Health, Inc. in 1994.  These companies provide electronic claims
transaction processing and revenue cycle services that leveraged technology to
create operational efficiency.  Mr. Quist attended the University of
Washington and served in the U.S. Merchant Marines.  Mr. Quist is qualified
to serve as a director of the Company due to his experience in the health care
industry and his knowledge of the Company as its Chief Executive
Officer.





Thomas Sidley is
currently a Senior Managing Director at Aequitas Capital Management, Inc.
(“Aequitas”).  Mr. Sidley joined Aequitas in April 1999; he is responsible
for Corporate Advisory Services, Portfolio Administration, and Fund Operations
and is a member of the Investment Committee.  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.  Mr. Sidley is qualified to
serve as a director of the Company due to his knowledge of the Company as its
President.





Donald Megrath joined
Aequitas Capital Management, Inc. in August 2004 where he served as Senior
Associate until April 2010.  During his tenure at Aequitas, Mr. Megrath
provided financial leadership to Aequitas’ portfolio companies.  Mr.
Megrath has a B.A. degree in Telecommunications and an M.B.A. from George Fox
University.  Mr. Megrath is qualified to serve as a director of the Company
due to his background in finance.





Patricia J. Brownwas
appointed Chief Financial Officer of the Company on December 30, 2009.  Ms.
Brown is the Senior Vice President of Finance for Aequitas. Ms. Brown joined
Aequitas in 2007, serving as Corporate Controller until December 31, 2009 when
she was appointed CFO.  Prior to Aequitas, Ms. Brown served 12 years with
The Standard, an insurance company, most recently as the Vice President of
Information Technology.  Prior to The Standard, Ms. Brown spent 11 years at
Deloitte LLP.  In 1997, she was appointed by the Governor of Oregon to
serve on the Board of the Oregon Public Employees Retirement System; she served
on the Board 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.





Brian A. Oliver was appointed
Secretary of the Company on December 30, 2009.  Mr. Oliver joined Aequitas
in 1997 and currently is an Executive Vice President of Aequitas.  Aequitas
is an alternative investment firm providing equity and commercial finance
products to the middle-market, healthcare and energy sectors.  Before
joining Aequitas, Mr. Oliver spent over 15 years in corporate banking 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.


32


Section
16(a) Beneficial Ownership Reporting Compliance





Until
recently, the Company believed it did not have a class of equity securities
registered pursuant to Section 12 of the Exchange Act.  (For more
information, see the disclosure under the caption “Potential Liability Regarding
Exchange Act Reporting Deficiencies” in the Explanatory Notes to the
Amendment.)  Accordingly, the Company’s officers and directors did not
file reports under Section 16(a) of the Exchange Act that may have been due
during the period from June 2007 through March 2009 with respect to acquisitions
and/or dispositions of the Company’s equity securities made by any of them
during that period.





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 included 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.


33




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 and Series D Preferred 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; and (v) Aequitas and its affiliates 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 5,
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 and the 1 for 10 reverse stock split approved by the Company’s shareholders
at the annual meeting of the shareholders on March 31, 2010.




The
percent of class set forth below is based on the following issued and
outstanding shares as of March 5, 2010:





Common
Stock                               
1,383,286


Series D
Preferred Stock         
       1,000,000





Shares Beneficially OwnedName of Beneficial Owner
                          
                          Common
                            Stock
                          
                          
                          Series
      D
                            Preferred
                            Stock
                          
                          
                          Percent
      of ClassAequitas
      Capital Management Inc. (1)
                          
                          
                          6,616,759
                          
                          
                          
                          0
                          
                          
                          
                          83.8
                          %Aequitas
      Catalyst Fund LLC
                          
                          
                          462,603
                          
                          
                          
                          0
                          
                          
                          
                          33.4
                          %Thurman
      Holdings 1, Limited Partnership
                          
                          
                          297,620
                          
                          
                          
                          0
                          
                          
                          
                          21.5
                          %MH
      Financial, LLC
                          
                          
                          384,380
                          
                          
                          
                          0
                          
                          
                          
                          27.8
                          %James
      M. Williams (2)
                          
                          
                          174,328
                          
                          
                          
                          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
                          
                          
                          
                          *Aequitas
      and its affiliates as a group (7
                          
                          
                          7,463,741
                          
                          
                          
                          
                          
                          
                          
                          94.6
                          %persons)
                          
                          
                          
                          
                          
                          
                          1,000,000
                          
                          
                          
                          100.0
                          %





(1) Includes
warrants to purchase 6,510,092 shares of Class B Common Stock.


(2)
Includes 107,479 shares held by CTK Corporation and 66,849 shares held by an
IRA, both of which are controlled by Mr. Williams.




*Aequitas
Management, LLC ("AML") may be deemed to have the indirect power to determine
voting and investment decisions with respect to shares of the Company held by
Aequitas, Aequitas Catalyst Fund, LLC ("Catalyst Fund"), MH Financial, Aequitas
Commercial Finance, LLC ("ACF"), and CarePayment, LLC.  All voting and
investment decisions with respect to shares of the Company held by these
entities are directly determined by each entity's, or its manager's, Public
Securities Investment Committee ("PSIC").  Each PSIC is composed of at
least three members.  The members of the PSICs are appointed as
follows:





·
            The
      members of the PSIC of Aequitas are appointed by its board of directors,
      which is elected by Aequitas Holdings, LLC, the sole shareholder of
      Aequitas.  MH Financial, ACF and CarePayment, LLC are each managed by
      Aequitas and the PSIC of Aequitas makes voting and investment decisions
      regarding shares of the Company held by each of MH Financial, ACF and
      CarePayment, LLC.


·
            Catalyst
      Fund is managed by Aequitas Investment Management, LLC ("AIM").  The
      PSIC of AIM makes voting and investment decisions regarding shares of the
      Company held by Catalyst Fund.  The members of the PSIC of AIM are
      appointed by its manager, Aequitas.





Andrew N.
MacRitchie, Thomas A. Sidley, and William C. McCormick are the current members
of each PSIC.  The appointment by Aequitas Holdings, Aequitas and AIM of
their respective PSIC members must be approved by at least three members of AML
holding, in the aggregate, at least 50% of the membership interests of
AML.  Accordingly, AML may be deemed to have indirect voting and investment
power with respect to shares of the Company held by Aequitas Holdings, Aequitas,
Founders Fund and Catalyst Fund.


34


**Investment and voting
decisions with respect to the shares of the Company held by Thurman Holdings I,
Limited Partnership are determined by its general partner, Thurman Advisors,
LLC, which is controlled by its three managers.  The current managers of
Thurman Advisors, LLC are Robert J. Jesenik, Thane Cleland and Harry W. Gabriel,
Jr.





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
including accounting, treasury, budgeting and other financial services,
financial reporting and tax planning services, human resources services and
information technology services including providing an infrastructure platform,
software management, voice and data services and desktop and platform support
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  additional compensation in an
amount equal to the Company’s 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.  Success fees are payable to Aequitas for securing new debt or
equity and range from 1.5% to 5% of the transaction depending on the type of
facility; success fees for a completed acquisition in which the target was
introduced by Aequitas range from 2.5% to 5% depending on the total purchase
price.  The agreement also provides for mutually agreed upon fees for the
sale or purchase of assets.





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 calculated as either (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 or (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.


35


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
      Fees
                    
                    
                    -
                    
                    
                    
                    -Tax
      Fees
                    
                    
                    10,000
                    
                    
                    
                    7,100All
      Other Fees
                    
                    
                    -
                    
                    
                    
                    -Totals
                    
                    $
                    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.


36


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.


37





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 Plan14.1(9)
                      
                      Policy
      on Business Ethics for Directors, Officers and
  Employees.21.1(10)
                      
                      Subsidiaries.31.1(11)
                      
                      Certification
      of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2(11)
                      
                      Certification
      of 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(11)
                      
                      Certification
      of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2(11)
                      
                      Certification
      of 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


38


(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





(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)
              Incorporated
      by reference to the Company's Annual Report on Form 10-K for the fiscal
      year ended December 31, 2009(11)
              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 (Principal Executive Officer)/ s/ PATRICIA J. BROWNPatricia
      J. BrownChief
      Financial Officer (Principal Financial and Accounting
    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/
      JAMES T. QUIST
              
              Director
              
              December
      21, 2010James
      T. Quist/s/
      BRIAN A. OLIVER
              
              Director
              
              December
      21, 2010Brian
      A. Oliver


39