UNITED
STATES





SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 or 15(d) OFTHE
      SECURITIES EXCHANGE ACT OF 1934for
      the quarterly period ended March 31, 2010ORo
            TRANSITION
      REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
  EXCHANGEACT
      OF 1934 for the Transition Period from toCommission
      file number: 001-16781





CAREPAYMENT
      TECHNOLOGIES, INC.(Exact
      Name of Registrant as Specified in its
Charter)





Oregon
            
            91-1758621(State
      or Other Jurisdiction of
            
            (I.R.S.
      Employer Identification No.)Incorporation
      or Organization)





5300
      Meadows Rd, Suite 400, Lake Oswego, Oregon
            
            97035(Address
      of Principal Executive
            
            (Zip
      Code)Offices)





(Registrant’s
Telephone Number, Including Area Code): 503-419-3564





Former
Name:  microHelix, Inc.





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.


Yes o No x





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files).


Yes o No x





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






Large accelerated
      filer o
            Accelerated filer
      oNon-accelerated
      filer   o
            Smaller reporting
      company x





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


Yes o  No x





Shares of
Common Stock outstanding as of May 14, 2010 were:






Class A
            1,390,616Class B
            6,510,0928,900,708




On March
31, 2010, the Company’s shareholders authorized the Company to effect a 1-for-10
reverse stock split of its Common Stock and subsequent conversion of each share
of Common Stock into one share of Class A Common Stock.  The
consolidated financial statements, notes, and other references to share and per
share data contained in this Report have been retroactively restated to reflect
such reverse stock split and conversion for all periods presented.







CarePayment
Technologies, Inc.


Quarterly
Report on Form 10-Q


Quarter
Ended March 31, 2010





TABLE
OF CONTENTS





PagePART
      I.   Financial Information
            3ITEM
      1.   Condensed Consolidated Financial Statements
      (Unaudited)Condensed
      consolidated balance sheets as of March 31, 2010 and December 31,
      2009
            3Condensed
      consolidated statements of operations for the three months ended March 31,
      2010 and 2009
            4Condensed
      consolidated statements of cash flows for the three months ended March 31,
      2010 and 2009
            5Notes
      to condensed consolidated financial statements
            6ITEM
      2.   Management’s Discussion And Analysis Of Financial
      Condition And Results Of Operations
            16ITEM
      4T.   Controls And Procedures
            19PART
      II.   Other Information
            20ITEM
      2.   Unregistered Sales Of Equity Securities And Use Of
      Proceeds
            20ITEM
      6.   Exhibits
            20SIGNATURE
            20







PART
I — FINANCIAL INFORMATION





ITEM 1. FINANCIAL STATEMENTS —
UNAUDITED








CAREPAYMENT
TECHNOLOGIES, INC.





CONDENSED
CONSOLIDATED BALANCE SHEETS


(UNAUDITED)


March
31, 2010 and December 31, 2009





2010
            
            
            2009AssetsCurrent
      Assets:Cash
      and cash equivalents
            
            $
            23,264
            
            
            $
            69,097Related
      party receivable
            
            
            557,666
            
            
            
            --Prepaid
      expenses
            
            
            36,080
            
            
            
            --Total
      current assets
            
            
            617,010
            
            
            
            69,097Property
      and equipment, net
            
            
            458,333
            
            
            
            500,000Servicing
      rights, net
            
            
            9,454,500
            
            
            
            9,550,000Total
      assets
            
            $
            10,529,843
            
            
            $
            10,119,097Liabilities
      and Shareholders' DeficitCurrent
      Liabilities:Accounts
      payable
            
            $
            1,154,263
            
            
            $
            797,751Accrued
      interest
            
            
            396,589
            
            
            
            324,082Accrued
      liabilities
            
            
            175,193
            
            
            
            --Current
      maturities of notes payable, net of debt discount
            
            
            94,190
            
            
            
            294,190Total
      current liabilities
            
            
            1,820,235
            
            
            
            1,416,023Notes
      payable, net of current potion
            
            
            884,775
            
            
            
            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
            
            
            8,896,486
            
            
            
            8,805,140Total
      liabilities
            
            
            11,601,496
            
            
            
            11,209,438Shareholders'
      Deficit:CarePayment
      Technologies, Inc. shareholders’ deficit:Common
      stock, no par value: Class A 65,000,000 shares authorized, 1,390,616 and
      1,383,286 issued and outstanding at March 31, 2010 and December 31, 2009,
      respectively; Class B 10,000,000 shares authorized, no shares issued or
      outstanding at March 31, 2010 and December 31, 2009
            
            
            18,022,850
            
            
            
            18,022,591Additional
      paid-in capital
            
            
            11,773,640
            
            
            
            11,755,211Accumulated
      deficit
            
            
            (30,870,568
            )
            
            
            (30,868,143
            )Total
      CarePayment Technologies, Inc. shareholders' deficit
            
            
            (1,074,078
            )
            
            
            (1,090,341
            )Noncontrolling
      interest
            
            
            2,425
            
            
            
            --Total
      shareholders’ deficit
            
            
            (1,071,653
            )
            
            
            (1,090,341
            )Total
      liabilities and shareholders’ deficit
            
            $
            10,529,843
            
            
            $
            10,119,097





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




Page
3


CAREPAYMENT
TECHNOLOGIES, INC.





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)





Three
      Months Ended
              March
      312010
            
            
            2009Service
      fees revenue
            
            $
            1,304,717
            
            
            $
            --Cost
      of revenue
            
            
            1,123,482
            
            
            
            --Gross
      margin
            
            
            181,235
            
            
            
            --Operating
      Expenses:Sales,
      general and administrative
            
            
            890,224
            
            
            
            131,901Loss
      from operations
            
            
            (708,989
            )
            
            
            (131,901
            )Other
      income (expense):Loss
      reimbursement
            
            
            873,371
            
            
            
            --Interest
      expense
            
            
            (164,049
            )
            
            
            (77,770
            )Other
      income (expense), net
            
            
            709,322
            
            
            
            (77,770
            )Net
      income (loss) before income tax
            
            
            333
            
            
            
            (209,671
            )Income
      tax expense
            
            
            333
            
            
            
            --Net
      income (loss)
            
            
            --
            
            
            
            (209,671
            )Less:
      Net income attributable to noncontrolling interest
            
            
            (2,425
            )
            
            
            --Net
      loss attributable to CarePayment Technologies, Inc.
            
            $
            (2,425
            )
            
            $
            (209,671
            )Net
      loss per share
              Basic
      and diluted
            
            $
            (0.00
            )
            
            $
            (1.06
            )Weighted
      average number of shares outstanding
              Basic
      and diluted
            
            
            1,384,915
            
            
            
            197,379








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





Page
4


CAREPAYMENT
TECHNOLOGIES, INC.





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)








Three
      Months Ended
              March
      312010
            
            
            2009Cash
      Flows Provided by (Used In) Operating Activities:Net
      income (loss)
            
            $
            --
            
            
            $
            (209,671
            )Adjustments
      to reconcile net income (loss) to cash provided by (used in) operating
      activities:Amortization
      of intangibles
            
            
            137,167
            
            
            
            --Accretion
      of mandatorily redeemable preferred stock discount
            
            
            91,346
            
            
            
            --Stock-based
      compensation
            
            
            18,429
            
            
            
            --Common
      stock issued for services
            
            
            --
            
            
            
            1,001Amortization
      of debt discount
            
            
            --
            
            
            
            32,940Change
      in assets and liabilities:Increase
      in assets:Related
      party receivable
            
            
            (557,666
            )
            
            
            --Prepaid
      expenses
            
            
            (36,080
            )
            
            
            (16,666
            )Increase
      in liabilities:Accounts
      payable
            
            
            356,512
            
            
            
            --Accrued
      interest
            
            
            72,507
            
            
            
            --Accrued
      liabilities
            
            
            175,193
            
            
            
            30,076Net
      cash provided by (used in) operating activities
            
            
            257,408
            
            
            
            (162,320
            )Cash
      Flows Provided By (Used In) Financing Activities:Payments
      on notes payable
            
            
            (303,500
            )
            
            
            --Proceeds
      from revolving credit line
            
            
            31,000
            
            
            
            --Payment
      on revolving credit line
            
            
            (31,000
            )
            
            
            --Proceeds
      from exercise of warrants
            
            
            259
            
            
            
            --Proceeds
      from issue of notes payable to shareholders
            
            
            --
            
            
            
            100,000Net
      cash provided by (used in) financing activities
            
            
            (303,241
            )
            
            
            100,000Change
      in cash
            
            
            (45,833
            )
            
            
            (62,320
            )Cash,
      beginning of period
            
            
            69,097
            
            
            
            98,433Cash,
      end of period
            
            $
            23,264
            
            
            $
            36,113Supplemental
      Disclosure of Cash Flow InformationCash
      paid for interest
            
            $
            196
            
            
            $
            --Cash
      paid for income taxes
            
            $
            333
            
            
            $
            --Supplemental
      Disclosure of Non-cash Financing Activities:Warrants
      issued to lenders-recorded as debt discount
            
            $
            --
            
            
            $
            94,114Refinance
      of accrued liability to note payable
            
            $
            --
            
            
            $
            101,834








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




Page
5


CAREPAYMENT
TECHNOLOGIES, INC.





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





1.  Business




Overview


CarePayment
Technologies, Inc. (formerly microHelix, Inc.) (“we,” “us,” “our,” “CarePayment”
or the “Company”), was organized as an Oregon corporation in
1991.  Until September 28, 2007, when it suspended manufacturing
operations and concluded the disposition of its assets to its secured creditors,
the Company was a manufacturer of custom cable assemblies and mechanical
assemblies for the medical and commercial original equipment manufacturer (OEM)
markets.  Continuing deterioration of its financial condition during
April and May 2007 caused it to voluntarily surrender its assets to its secured
creditors on May 31, 2007 and wind up its affairs.  In connection
with the windup, the Company stopped paying its unsecured creditors for goods
and services provided prior to May 21, 2007.  The Company and its
wholly owned subsidiary, Moore Electronics, Inc. ("Moore"), operated for the
benefit of the secured creditors until September 2007, at which time they ceased
manufacturing operations and the Company became a shell company.  As a
result of the transactions described in the following paragraph, effective
January 1, 2010, the Company is no longer considered a shell
company.





Effective
December 30 and 31, 2009, the Company entered into agreements pursuant to
which it, with two other parties, formed a limited liability company, CP
Technologies LLC ("CP Technologies") (formerly WS Technologies LLC), that
acquired the rights to a proprietary hospital patient finance product,
CarePayment®, that had been developed by Aequitas Capital Management, Inc.
(Aequitas).  These rights include ownership of the CarePayment® brand,
exclusive rights to administer, service and collect consumer receivables
generated by hospitals, on a recourse basis with regard to the hospital
("Receivables"), under the CarePayment® name, together with certain software
that is used to perform those services.  CP Technologies then redeemed
all but half of one membership Unit held by each of the other two parties, with
the result that the Company now owns 99% of CP Technologies.





Currently,
Company’s Class A Common Stock trades on the Pink Sheets under the symbol
CPYT.PK.





On
June 11, 2007 the Company filed a Form 15 with the Securities and Exchange
Commission (“SEC”) terminating its registration under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) and suspended
its duty to file reports under Sections 13 and 15(d) of the Exchange
Act.  On March 25, 2009, the Company voluntarily filed its annual
and quarterly reports for 2007 and quarterly reports for 2008 with the
SEC.  The Company is not currently subject to the information
requirements of the Exchange Act.  However, the Company voluntarily
files annual, quarterly and current reports, proxy statements and other
information with the SEC.  On April 30, 2010, the Company filed a Form
10 with the SEC to register its Class A Common Stock under the Exchange
Act.  As of the date of this Report, such Form 10 is being reviewed by
the SEC.  The Company cannot predict when such registration will be
declared effective, but the Company intends to continue voluntarily filing
reports and information under the Exchange Act until then.







2.  Summary
of Significant Accounting Policies




Basis
of presentation:


The
unaudited condensed consolidated financial statements have been prepared by the
management of CarePayment and in the opinion of management include all material
adjustments (consisting of normal recurring accruals) which are necessary to
present fairly the Company’s financial position and operating results for the
periods indicated. The results of operations for the three months ended
March 31, 2010 are not necessarily indicative of the results to be expected
for the entire year ending December 31, 2010.





Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted from the interim financial statements presented in this
quarterly Report on Form 10-Q pursuant to the rules and regulations of the
SEC  These unaudited condensed consolidated financial statements
should be read in conjunction with the Consolidated Financial Statements
and notes thereto included in the Company’s Form 10-K for the year ended
December 31, 2009.




6


Estimates
and assumptions:


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.




Principles
of consolidation:


The
consolidated financial statements include the accounts of CarePayment, its
wholly owned subsidiary, Moore and its 99% owned subsidiary, CP Technologies.
All intercompany transactions have been eliminated.




Concentration
of credit risk:


Receivables— The
Company’s  receivables are all with a related party.  The
Company does not anticipate any collection issues.





Revenue from one source— The
Company currently generates all its revenue through one servicing agreement with
a related party.





Cash and investments —
The Company maintains its cash in bank accounts; at times, the balances in these
accounts 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, which approximates fair value, and include
investments with maturities of three months or less at the date of
acquisition.  Cash and cash equivalents consist of bank
deposits.




Property
and equipment:


Property
and equipment is comprised of servicing software which is stated at original
estimated fair value, net of accumulated amortization.  Amortization is
computed using the straight-line method over the estimated useful lives of the
assets. The estimated useful life of the software is 3
years.  The Company evaluates long-lived assets for impairment
annually or whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.  Amortization
expense was $41,667 for the three months ended March 31, 2010.




Servicing
rights:


Servicing
rights represent the cost of identifiable intangible assets associated with the
acquisition of certain business assets not allocated to other specific
assets.  Effective January 1, 2010, the Company began to amortize
the cost associated with this asset on a straight line basis over an estimated
useful life of 25 years.  The Company evaluates servicing rights for
impairment annually or whenever events or changes in circumstances indicate that
the carrying amount of the asset may not be recoverable by analyzing the
undiscounted and discounted future cash flows under the servicing agreement with
CarePayment, LLC.  Amortization expense was $95,500 for the three
months ended March 31, 2010.




Revenue
recognition:


The
Company’s revenue is primarily related to a servicing agreement with
CarePayment, LLC.  Origination fee revenue is recognized at the time
CarePayment, LLC funds the receivables being serviced; a servicing fee is
recognized monthly based on the total funded receivables being serviced; and a
percentage of CarePayment, LLC’s quarterly net income is accrued for the current
quarter.




Cost
of revenue:


Cost of
revenue is 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.





7


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 March 31, 2010 and December 31, 2009.  Tax
years that remain subject to examination by federal and state authorities are
the years ended 2006 through 2009.




Stock-based
compensation:


Stock-based
compensation cost is estimated at the grant date based on the award’s fair value
and is recognized as expense over the requisite service period using the
straight-line attribution method.  Stock-based compensation for stock
options granted is estimated using the Black-Scholes option pricing
model.




Earnings
(loss) per common share:


Basic
earnings per common share, (“EPS”), and loss per common share are calculated by
dividing net income (loss) attributable to the Company by the weighted average
number of shares of common stock outstanding during the period. Fully diluted
EPS and loss per share assume the conversion of all potentially dilutive
securities and are calculated by dividing net income (loss) by the sum of the
weighted average number of shares of common stock outstanding plus potentially
dilutive securities determined using the treasury stock method.  Dilutive
loss per share does not consider the impact of potentially dilutive securities
in periods in which there is a loss because the inclusion of the potential
dilutive securities would have an anti-dilutive effect.




Comprehensive
income/loss:


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




Operating
Segments and Reporting Units:


The
Company operates as a single business segment and reporting unit.




Recently
Adopted Accounting Standards:


In
February 2010, the Financial Accounting Standards Board (“FASB”) issued amended
guidance on subsequent events. Under this amended guidance, SEC filers are no
longer required to disclose the date through which subsequent events have been
evaluated in originally issued and revised financial statements. This guidance
was effective immediately and the Company adopted these new requirements for the
period ended March 31, 2010.




Recently
Issued Accounting Standards:


In
January 2010, the FASB issued guidance to amend the disclosure requirements
related to recurring and nonrecurring fair value measurements. The guidance
requires disclosure of transfers of assets and liabilities between Level 1 and
Level 2 of the fair value measurement hierarchy, including the reasons and the
timing of the transfers and information on purchases, sales, issuance, and
settlements on a gross basis in the reconciliation of the assets and liabilities
measured under Level 3 of the fair value measurement hierarchy. This guidance is
effective for the Company beginning January 1, 2011. The Company does not
expect the adoption of this guidance will have an impact on its consolidated
financial position or results of operations.





3. Notes
Payable





A summary
of the Company's notes payable outstanding as of March 31, 2010 and
December 31, 2009 is as follows:





2010
            
            
            2009MH
      Financial Associates, LLC
            
            $
            874,243
            
            
            $
            977,743Aequitas
      Capital Management, Inc.
            
            
            94,190
            
            
            
            294,190Other
            
            
            10,532
            
            
            
            10,532Total
      Notes Payable
            
            
            978,965
            
            
            
            1,282,465Current
      maturities
            
            
            (94,190
            )
            
            
            (294,190
            )Notes
      Payable, less current maturities
            
            $
            884,775
            
            
            $
            988,275





8


On
June 27, 2008, the Company refinanced the note payable to MH Financial
Associates, LLC (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, at
which time all unpaid interest and principal are due.  In addition,
the interest rate on the principal amounts outstanding under the note will be
decreased from 20% to 8% per annum after the Company makes principal payments
totaling $400,000.  As of March 31, 2010, the Company has made
principal payments of $103,500; the interest rate on the loan will decrease
after the Company makes additional principal payments of
$296,500.  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.  The maturity date was further extended on March 31, 2010
to be September 30, 2010.  Under these modified terms all amounts
outstanding under this note are due and payable on the earliest of the
following:  (a) September 30, 2010; (b) the closing of
a loan or other financing provided to the Company by a senior lender or other
source in an amount sufficient to pay off this note; (c) the closing of a
private investment in public equity financing and/or any other financing event
with gross proceeds to the Company in excess of $1,000,000 (each of (a) through
(c) is individually the "Maturity Date");
provided, however, that after the occurrence of an Event of Default, the
outstanding principal and all accrued interest will be payable on
demand.  Unless otherwise agreed or required by applicable law,
payments will be applied first to expenses for which the Company is liable 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.





On
January 15, 2010, CarePayment entered into agreements pursuant to which it
could borrow up to a maximum of $500,000 from Aequitas Commercial Finance, LLC
(“ACF”), an affiliate of Aequitas.  The Company was advanced $31,000
on January 14, 2010, which was repaid on February 12, 2010.  As
of March 31, 2010, there are no outstanding advances under these agreements
with ACF.  These agreements expired on March 31, 2010.







4. Mandatorily
Redeemable Convertible Preferred Stock





On
December 30, 2009, the Company issued 1,000,000 shares of Series D
Convertible Preferred Stock (“Series D Preferred”) pursuant to the CP
Technologies’ transaction described in Note 1 above.  Holders of the
Series D Preferred receive a preferred dividend of $0.50 per share per annum,
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 holders of Series D Preferred
will have the right to exchange all shares of Series D Preferred for an
aggregate 99% ownership interest in CP Technologies.





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 to
interest expense over the period to redemption in January 2013 using the level
yield method.  The carrying value at March 31, 2010 is
$8,896,486.





9


5.  Shareholders’
Deficit




Preferred
Stock:


As of
March 31, 2010, the Company's Certificate of Designation for Series D
Preferred was amended by adding a provision allowing for the conversion of the
Series D Preferred at any time after one year after its
issuance.  Each share of Series D Preferred Stock is convertible into
such number of fully paid and nonassessable shares of Class A Common Stock of
the Company as is determined by dividing the amount of $10.00 per share (as
adjusted for stock splits, stock dividends, reclassification and the like with
respect to the Series D Preferred) by the Conversion Price (defined in the
following sentence) applicable to such share in effect on the date the
certificate is surrendered for conversion.  The Conversion Price per
share of Series D Preferred is 80% of the volume weighted average price of the
Class A Common Stock; provided, however, that in no event will the Conversion
Price be less than $1.00 per share.





Effective
April 15, 2010, the Company sold 200,000 shares of Series D Preferred for
aggregate consideration of $2,000,000, which was paid pursuant to a promissory
note that accrues interest at 5% per annum and is due in full on or before April
15, 2011 (See Note 13).




Stock
Warrants:


As of
March 31, 2010, the Company had 4,417 warrants outstanding for Class A Common
Stock and 6,510,092 warrants outstanding for Class B Common Stock which are
exercisable as follows:





Warrants
            
            
            Exercise
      Price
            
            Expiration
      Date3,189
            (1)
            
            
            $
            37.50
            
            
            April
      2015487
            (1)
            
            
            $
            72.00
            
            
            June
      2016667
            (1)
            
            
            $
            75.00
            
            
            July
      201174
            (1)
            
            
            $
            4,077.00
            
            
            March
      20126,510,092
            (2)
            
            
            $
            0.01
            
            
            December
      31, 2014


________________


(1)
            Warrants
      are exercisable for Class A Common
Stock


(2)
            Warrants
      are exercisable for Class B Common Stock.  The Warrants were
      exercised in full on April 2, 2010 (See Note
  13).





Warrants
for 7,330 shares of Class A Common Stock were exercised on March 11, 2010,
resulting in $259 proceeds to the Company.





On April
15, 2010, the Company issued warrants for the purchase of up to 1,200,000 shares
of the Company's Class A Common Stock at an exercise price of $0.001 per share
(See Note 13).




Common
Stock:


At the
annual meeting of the shareholders on March 31, 2010, 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.





At the
annual meeting of the shareholders on March 31, 2010, the Company's
shareholders also voted to amend the Articles to create two classes of Common
Stock, Class A Common Stock and Class B Common Stock.  The Articles
authorize 75 million shares of Common Stock, of which 65 million shares are
designated as Class A Common Stock and 10 million shares are designated as Class
B Common Stock.  Holders of Class A Common Stock are entitled to one
vote per share, and holders of Class B Common Stock are entitled to ten votes
per share, on any matter submitted to the shareholders.  Effective
immediately after the Reverse Stock Split, each share of Common Stock
outstanding was automatically converted into one share of Class A Common
Stock.





The
condensed consolidated financial statements and notes thereto have been
retroactively restated to reflect the Reverse Stock Split and such conversion
for all periods presented.





10


6.  Revenue




Fees
Revenue


Beginning
January 1, 2010, the Company began recognizing revenue in conjunction with
a servicing agreement with CarePayment, LLC.  CarePayment, LLC pays
the Company a servicing fee 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,
LLC’s quarterly net income, adjusted for certain items.  The Company
recognized revenue related to this servicing agreement of $1,304,717 for the
three months ended March 31, 2010.




7.  Other
Income (Expense)




Loss
Reimbursement


CarePayment,
LLC agreed to pay the Company an additional fee 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. This
additional fee is compensation for the initial responsibilities under the
agreement for the Company to transition the servicing operations of the existing
outstanding accounts from the previous servicing company.  For the
three months ended March 31, 2010, the Company recorded this loss
reimbursement of $873,371 as other income.




Interest
Expense


Interest
expense of $164,049 for the three months ended March 31, 2010 includes $91,346
of accretion of the discount on the mandatorily redeemable preferred stock (See
Note 4).  Interest expense of $77,770 for the three months ended March
31, 2009 includes $32,940 of amortization of debt discount.




8.  Earnings
(Loss) per Common Share





The
shares used in the computation of the Company’s basic and diluted loss per
common share are reconciled as follows:


Three
      Months Ended
              March
      312010
            
            
            2009Weighted
      average basic common shares outstanding
            
            1,384,915
            
            
            197,379Dilutive
      effect of convertible preferred stock
            
            (1)
            
            
            (2)Dilutive
      effect of warrants
            
            (1)
            
            
            (2)Dilutive
      effect of employee stock options
            
            (1)
            
            
            --Weighted
      average diluted common shares outstanding
            
            1,384,915
            
            
            197,379


________________


(1)
            Common
      stock equivalents outstanding for the three months ended March 31,
      2010 excluded in the computation of diluted EPS because their effect would
      be anti-dilutive as a result of applying the treasury stock method
      are:  warrants to purchase 6,510,092 shares of Class B Common
      Stock, warrants to purchase 4,417 shares of Class A Common Stock, 1
      million shares of Series D Preferred Stock convertible to purchase
      1,000,000 shares of Class A Common Stock, and stock options to purchase
      787,030 shares of Class A Common
Stock.


(2)
            Common
      stock equivalents outstanding for the three months ended March 31,
      2009 excluded in the computation of diluted EPS because their effect would
      be anti-dilutive as a result of applying the treasury stock method
      are:  warrants to purchase 1,072,414 shares of Class A Common
      Stock and Series C Preferred Stock convertible to purchase 18,605 shares
      of Class A Common Stock.







9.  Employee
Benefit Plans




Stock
Incentive Plan


In
February 2010, the Company adopted the 2010 Stock Option Plan (the "Plan")
pursuant to which the Company may grant restricted stock and stock options for
the benefit of selected employees and directors. The Plan authorized grants of
878,338 shares of Class A Common Stock. Grants are issued at prices equal to the
estimated fair market value of the stock as defined in the plan on the date of
the grant, vest over various terms (generally three years), and expire ten years
from the date of the grant.  The Plan allows vesting based upon
performance criteria; all current grants outstanding are time-based vesting
instruments.  Certain option and share awards provide for accelerated
vesting if there is a change in control of the Company (as defined in the
Plan).  The fair value of share based options granted is calculated
using the Black-Scholes option pricing model. A total of 91,308 shares of Class
A Common Stock remained reserved for issuance under the Plan at March 31,
2010.





11


The
Company accounts for stock-based compensation by estimating the fair value of
options granted using a Black-Scholes option valuation model.  The
Company recognizes the expense for grants of stock options on a straight-line
basis in the statement of operations as operating expense based on their fair
value over the requisite service period.





For stock
options issued in March 2010, the following assumptions were used:





Expected
      life (in years)
            
            
            5.5Expected
      volatility
            
            
            40.90
            %Risk-free
      interest rate
            
            
            2.58
            %Expected
      dividend
            
            
            —Weighted
      average fair value per share
            
            $
            0.061





Expected
volatilities are based on historic volatilities from traded shares of a selected
publicly traded peer group. Historic volatility has been calculated using the
previous two years’ daily share closing price of the index companies. The
Company has no historical data to estimate forfeitures. The expected term of
options granted is the safe harbor period approved by the Securities and
Exchange Commission using the vesting period and the contract life as factors.
The risk-free rate for periods matching the contractual life of the option is
based on the U.S. Treasury yield curve in effect at the time of
grant.





A summary
of option activity under the Plan as of March 31, 2010 and changes during the
three months ended is presented below:


Number
      of Shares
            
            
            Weighted
              Average
              Exercise
              Price
            
            
            Weighted
              Average
              Remaining
              Contractual
      Life (years)
            
            
            Aggregate
              Intrinsic
              ValueOptions
      outstanding at December31,
    2009
            
            
            --Granted
            
            
            787,030
            
            
            $
            0.20Cancelled
            
            
            --Exercised
            
            
            --Options
      outstanding at March 31,
      2010
            
            
            787,030
            
            
            $
            0.20
            
            
            
            9.9
            
            
            $
            2,991Options
      exercisable at March 31,
      2010
            
            
            262,343
            
            
            $
            0.20
            
            
            
            9.9
            
            
            $
            997





The
Company recorded compensation expense for the estimated fair value of options
issued of $18,429 for the three months ended March 31, 2010.  As
of March 31, 2010, the Company had $29,580 of unrecognized compensation
cost related to unvested share-based compensation arrangements granted under the
Plan. The unamortized cost is expected to be recognized over a weighted-average
period of 1.9 years.




401(k)
Savings Plan


CarePayment
employees are eligible to participate in a 401(k) Savings Plan.  The
Company matches 100% of the first 3% of eligible compensation and 50% of the
next 2% of eligible compensation that employees contribute to the plan; the
Company’s matching contributions vest immediately.  The Company
recorded expense of $11,051 for the three months ended March 31,
2010.







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 March 31, 2010,
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:





12


Year
            
            
            Required
      Minimum Payment2010
            
            
            $168,0002011
            
            
            $229,0002012
            
            
            $233,0002013
            
            
            $238,0002014
            
            
            $202,000




For the
three months ended March 31, 2010 and 2009, the Company incurred rent expense of
$56,058 and $15,000, respectively.




Off-Balance
Sheet Arrangements:


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




Litigation:


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




11.  Fair
Value Measures




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 assets or
liabilities.


Level 2 –
            Observable
      inputs other than Level 1 prices such as quoted prices for similar assets
      or liabilities; quoted prices in markets that are not active; or other
      inputs that are observable or can be corroborated by observable market
      data for substantially the full term of the assets or
      liabilities.


Level 3 –
            Valuations
      derived from valuation techniques in which one or more significant inputs
      or significant value drivers are
unobservable.




Fair
Value of Financial Instruments:


The
carrying value of the Company's cash and cash equivalents, related party
receivable, accounts payable and other accrued liabilities approximate their
fair values due to the relatively short maturities of those
instruments.





The fair
value of the Company’s mandatorily redeemable Series D Preferred issued on
December 30, 2009 (Note 4), was determined using a discounted cash flow on
December 31, 2009; the assumptions used in the fair value calculation at
December 31, 2009 would be the same at March 31, 2010.  The difference
between the fair value at issue date and the redemption value is being
accreted into expense over the period to redemption in January 2013 using the
level yield method.  The carrying value of the Series D Preferred at
March 31, 2010 is $8,896,486, which approximates fair value.





The fair
value of the notes payable was calculated using our estimated borrowing rate for
similar types of borrowing arrangements for the periods ended March 31,
2010 and December 31, 2009.  The Company’s estimated borrowing
rate has not changed; therefore, the carrying amounts reflected in the unaudited
condensed consolidated balance sheets for notes payable approximate fair
value.




12.  Related-Party
Transactions





Effective
January 1, 2010, Aequitas began providing CP Technologies certain
management support services such as accounting, financial, human resources and
information technology services, under the terms of the Administrative Services
Agreement dated December 31, 2009.  The total fee for the
services is approximately $65,100 per month.  The fees will increase
by 3% on January 1 of each year, beginning January 1,
2011.  Either party may change the services (including terminating a
particular service) upon 180 days prior written notice to the other party, and
the Administrative Services Agreement is terminable by either party on 180 days
notice.  The Company paid fees under the Administrative Services
Agreement to Aequitas of $195,300 for the three months ended March 31,
2010.





13


Under the
terms of the Sublease dated December 31, 2009 between CP Technologies and
Aequitas, CP 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 CP
Technologies also pays all personal property taxes related to the personal
property it uses under the Sublease.  The Company paid fees under the
Sublease to Aequitas of $56,058 for the three months ended March 31,
2010.





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 services to the Company relating to
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 for such
services.  In addition, Aequitas will receive a success fee in the
event of certain transactions entered into by the Company.  The
Company paid fees under the Advisory Agreement to Aequitas of $45,000 for the
three months ended March 31, 2010.





Effective
December 31, 2009, a Royalty Agreement was entered into between CP
Technologies and Aequitas, whereby CP Technologies pays Aequitas a royalty based
on new products (the "Products") developed by CP Technologies or co-developed by
CP Technologies and Aequitas or its affiliates and that are based on or use the
Software.  The royalty is equal to (i) 1.0% of the net revenue
received by CP Technologies and generated by the Products that utilize funding
provided by Aequitas or its affiliates, and (ii) 7.0% of the face amount, or
such other percentage as the parties may agree, of receivables serviced by CP
Technologies that do not utilize such funding.  The Company paid fees
under the Royalty Agreement to Aequitas of $0 for the three months ended
March 31, 2010.





Beginning
January 1, 2010, the Company recognized revenue in conjunction with a
servicing agreement with CarePayment, LLC.  CarePayment, LLC pays the
Company a servicing fee based on the total funded receivables being serviced, an
origination fee on newly generated funded receivables, and a “back end fee”
based on  CarePayment, LLC’s quarterly net income, adjusted for
certain items.  The Company received fee revenue under this agreement
of $1,304,717 for the three months ended March 31, 2010.





CarePayment,
LLC also pays the Company an additional fee 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.  The Company
received $873,371 under this agreement for the first three months ended
March 31, 2010 (See Note 7).





The
Company has notes payable to Aequitas and its affiliates, MH Financial and ACF,
as described in Notes 1 and 3.  The Company recorded interest expense
on the note payable to MH Financial of $61,811 and $38,145 for the three months
ended March 31, 2010 and 2009, respectively. The Company also recorded interest
expense on the note payable to Aequitas of $10,696 and $6,592 for the three
months ended March 31, 2010 and 2009, respectively.  The Company paid
$196 of interest expense to ACF for the three months ended March 31,
2010.





As of
March 31, 2010, the Company had a receivable of $557,666, due from CarePayment,
LLC.  The Company had accrued interest payable to MH Financial of
$344,523 and $282,711 as of March 31, 2010 and December 31, 2009,
respectively.  Additionally, the Company had accrued interest payable
to Aequitas of $52,066 and $41,371 as of March 31, 2010 and December 31,
2009.




13.  Subsequent
Events





On April
15, 2010, the Company sold 200,000 shares of Series D Preferred to Aequitas
CarePayment Founders Fund, LLC (“Founders Fund”) for a purchase price of $10.00
per share.  The Company received a promissory note from Founders Fund
for $2,000,000 which bears interest at 5% per annum and is due April 15,
2011.  In connection with the sale of the Series D Preferred,
effective April 15, 2010, and for no additional consideration, the Company
issued a warrant to Founders Fund to purchase up to 1,200,000 shares of the
Company's Class A Common Stock at an exercise price of $0.001 per
share.  The warrant expires on April 15, 2015.


14


In
connection with the formation of CP Technologies, the Company contributed to CP
Technologies 1,000,000 shares of its Series D Preferred, and warrants to
purchase 65,100,917 shares of Class B Common Stock of the Company at an exercise
price of $0.001 per share in exchange for Units representing a 50% ownership
interest in CP Technologies (See Notes 1 and 4).  On December 31,
2009, CP Technologies redeemed from Aequitas and CarePayment, LLC all but one
half Unit each of their CP Technologies ownership Units in exchange for all of
the Company’s Series D Preferred and the Warrants that were held by CP
Technologies, resulting in the Company owning 99% of CP
Technologies.  On March 31, 2010 the Company's shareholders approved a
1-for-10 reverse stock split of the Company's Common Stock, with the result that
the Warrants became exercisable for 6,510,092 shares of Class B Common Stock at
an exercise price of $0.01 per share.  The Warrants were exercised in
full on April 2, 2010 by Aequitas Holdings, LLC, an affiliate of and as the
assignee of CarePayment, LLC resulting in $65,101 proceeds to the
Company.





15


ITEM
2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





The
following discussion provides information that management believes is relevant
to an assessment and understanding of the Company's operations and financial
condition.  This discussion should be read in conjunction with the
unaudited condensed consolidated financial statements and accompanying
notes.




Forward-Looking
Statements




This
Quarterly Report on Form 10-Q contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, as amended.
Such statements reflect management's current view and estimates of future
economic and market circumstances, industry conditions, company performance and
financial results. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and variations of such words and similar
expressions are intended to identify such forward-looking
statements.  These statements are subject to risks and uncertainties
that could cause our future results to differ materially from the results
discussed herein.  Factors that might cause such a difference include,
but are not limited to, those discussed elsewhere in this Quarterly Report on
Form 10-Q.  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.




Overview




CarePayment
Technologies, Inc. (formerly microHelix, Inc.) ("we," "us," "our," "CarePayment”
or the “Company”) was organized as an Oregon corporation in
1991.  Until September 28, 2007, when it suspended manufacturing
operations and concluded the disposition of its assets to its secured creditors,
the Company was a manufacturer of custom cable assemblies and mechanical
assemblies for the medical and commercial original equipment manufacturer (OEM)
markets.  Continuing deterioration of its financial condition during
April and May 2007 caused it to voluntarily surrender its assets to its secured
creditors on May 31, 2007 and wind up its affairs.  In connection with
the windup, the Company stopped paying its unsecured creditors for goods and
services provided prior to May 21, 2007.  The Company and its wholly
owned subsidiary, Moore Electronics, Inc. ("Moore"), operated for the benefit of
the secured creditors until September 2007, at which time they ceased
manufacturing operations and the Company became a shell company.  As a
result of the transactions described in the following paragraph, effective
January 1, 2010 the Company is no longer considered a shell
company.





Effective
December 30 and 31, 2009, the Company entered into agreements pursuant to
which it, with two other parties, formed a limited liability company, CP
Technologies LLC ("CP Technologies") (formerly WS Technologies LLC), that
acquired the rights to a proprietary hospital patient finance product,
CarePayment®, that had been developed by Aequitas Capital Management, Inc.
(“Aequitas”).  These rights include ownership of the CarePayment®
brand, exclusive rights to administer, service and collect consumer receivables
generated by hospitals on a recourse basis with regard to the hospital
("Receivables"), under the CarePayment® name, together with certain software
that is used to perform those services.  CP Technologies then redeemed
all but half of one membership unit  held by each of the other two
parties, with the result that the Company now owns 99% of CP
Technologies.





On
December 30, 2009, Aequitas and CarePayment, LLC, contributed the following
assets to CP Technologies, for which CP Technologies issued Units representing a
50% ownership interest:





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


2.
            Accounting
      software required to perform the servicing of CarePayment
      receivables.


3.
            The  CarePayment®service
      mark and branding.





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





1.
            One
      million shares of Series D Convertible Preferred Stock (“Series D
      Preferred”).  Series D Preferred shares are mandatorily
      redeemable on January 31, 2013 and have a preferred dividend of $0.50
      per annum, and a liquidation preference of $10.00 per share plus
      cumulative unpaid dividends.


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





16


These
transactions are recorded at the estimated fair value of the assets received by
CP 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 free cash
      flow projections (Level 3 inputs in the fair value hierarchy) that the
      assets would provide to CP Technologies.  The resulting fair
      value was $13,617,140.


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


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





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





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





As of the
date of this Report the Company’s Class A Common Stock trades on the Pink Sheets
under the symbol CPYT.PK.





On
June 11, 2007 the Company filed a Form 15 with the Securities and Exchange
Commission ("SEC") terminating its registration under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and suspended
its duty to file reports under Sections 13 and 15(d) of the Exchange
Act.  On March 25, 2009, the Company voluntarily filed its annual and
quarterly reports for 2007 and quarterly reports for 2008 with the
SEC.  The Company is not currently subject to the information
requirements of the Exchange Act.  However, the Company voluntarily
files annual, quarterly and current reports, proxy statements and other
information with the SEC.   On April 30, 2010, the Company filed
a Form 10 with the SEC to register its Class A Common Stock under the Exchange
Act.  As of the date of this Report, such Form 10 is being reviewed by
the SEC.  The Company cannot predict when such registration will be
declared effective, but the Company intends to continue voluntarily filing
reports and information under the Exchange Act until then.




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. 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 critical accounting policy and related judgments and
estimates identified in Note 2 to the Condensed Consolidated Financial
Statements (Unaudited) contained in this Report affect the preparation of the
Company's consolidated financial statements.





17


RESULTS
OF OPERATIONS





The
following discussion should be read in the context of the above overview and
Note 2 to the Condensed Consolidated Financial Statements (Unaudited) contained
in this Report.




THREE
MONTHS ENDED MARCH 31, 2010 AND 2009




Revenues:


Beginning
January 1, 2010, the Company began recognizing revenue in conjunction with
a servicing agreement with its affiliate, CarePayment, LLC. CarePayment,
LLC pays the Company a servicing fee 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, LLC’s quarterly net income, adjusted for certain
items.  The Company recorded fee revenues of $1,304,717 in the first
three months of operations.




Cost
of Revenues:


Cost of
revenue is comprised primarily of compensation and benefit costs for servicing
employees, costs associated with outsourcing billing, collection and
payment processing servicing, and the amortization of the servicing rights and
servicing software.  For the three months ended March 31, 2010,
compensation expense was $303,784, outsourced processing and collections
services were $679,530, and amortization expense was
$137,167.  Outsourced services from four primary vendors include
hosting and maintenance of cardholder accounts including all customer
transaction processing, collection and mailing services, card processing and
customer service administration,




Operating
Expenses:


Operating
expenses for the three months ended March 31, 2010 were $890,224 as compared to
$131,901 for the same period in 2009.  The sales, general and
administrative expenses for the three months ended March 31, 2010 related to the
servicing operations which began on January 1, 2010 while the expense for the
same period in 2009 related to managing a shell company and preparing voluntary
filings of reports with the SEC.





Operating
expenses for the three months ended March 31, 2010 were comprised of the
following:  sales and marketing expense of approximately $291,000;
legal, consulting and other professional fees of approximately $179,000;
executive compensation of approximately $106,000; related party agreements with
Aequitas for office and equipment lease expense of $56,000, accounting services
of $195,000 and advisory services of $45,000; and general office expense of
approximately $18,000.




Other
Income (Expense):


Loss
reimbursement –The Company has an agreement with CarePayment, LLC in
which CarePayment, LLC reimburses the Company an additional fee 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. This
additional fee is compensation for the initial responsibilities under the
agreement for the Company to transition the servicing operations of the existing
outstanding accounts from the previous servicing company.





Interest expense
–Interest expense of $164,049 for the three months ended March 31, 2010
includes $91,346 of the accreted discount on the Series D
Preferred.  See Note 4 to the Condensed Consolidated Financial
Statements (Unaudited) contained in this Report.  Interest expense of
$77,770 for the three months ended March 31, 2009 includes $32,940 of warrant
discount expense.




Net
Income:


Net
income for the three months ended March 31, 2010 was $0 as the result of the
loss reimbursement agreement whereby CarePayment, LLC reimbursed the Company for
its losses of $873,371 for the first quarter of 2010.  The loss
reimbursement, which is
compensation for additional responsibilities under the agreement for the company
to transition the servicing operations for the existing outstanding accounts
from the previous servicing company,is recorded as other
income.




LIQUIDITY
AND CAPITAL RESOURCES





Asof March 31, 2010,
the Company had $23,264 of cash.  Cash provided by operating
activities during the three-month period ended March 31, 2010 was $257,408
compared to cash used in operating activities of $162,320 in the same period a
year ago. Cash provided from operating activities during the first three months
of 2010 included net income of $0 adjusted for amortization of $137,167,
interest expense related to the accretion of the discount on the mandatorily
redeemable Series D Preferred Stock of $91,346, $18,429 of stock-based
compensation expense, and $10,466 related to the net change in assets and
liabilities.





18


For the
three months ended March 31, 2010, the Company used $303,241 for financing
activities as compared to $100,000 of cash provided by financing activities
during the first three months of 2009.  The primary use of cash for
financing activities for the three month period ending March 31, 2010 was
$303,500 for repayment on notes payable.





On March
31, 2010, the Company’s shareholders authorized the Company to effect a 1-for-10
reverse stock split of its Common Stock and subsequent conversion of each share
of Common Stock into one share of Class A Common Stock.  The
consolidated financial statements, notes, and other references to share and per
share data contained in this Report have been retroactively restated to reflect
such reverse stock split and conversion for all periods presented.







Off-Balance
Sheet Arrangements


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




ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK


Not
applicable





ITEM
4.  CONTROLS AND PROCEDURES





Attached
as exhibits to this Quarterly Report on Form 10-Q 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 4 includes information concerning the controls and
controls evaluation referenced in the Certifications.  This Item 4
should be read in conjunction with the Certifications for a more complete
understanding of the matters presented.





The
Company’s Chief Executive Officer and Chief Financial Officer evaluated the
effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15
under the Securities Exchange Act of 1934 as of March 31,
2010.





Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that the Company’s 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 our management, including the Company’s Chief
Executive Officer and Chief Financial Officer, to allow timely decisions
regarding required disclosure.





The
Company restarted operations on January 1, 2010 and has not had sufficient time
or financial resources to design and implement adequate disclosure controls and
procedures.  The Company is in the process of doing so, and
anticipates that it will complete these activities during 2010.





There
were no changes to the Company’s internal controls during the three months ended
March 31, 2010.





19


PART
II.  OTHER INFORMATION





ITEM
1.  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
2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





On March
11, 2010, warrants were exercised for the purchase of 7,330 shares of Class A
Common Stock, resulting in net proceeds for the Company of $259.





ITEM
6.  EXHIBITS





(a) Exhibits:


3.1(1)
            
            Second
      Amended and Restated Articles of Incorporation of CarePayment
      Technologies, Inc3.2(2)
            
            Amended
      and Restated Bylaws of CarePayment Technologies, Inc.31.1(3)
            
            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
      200231.2(3)
            
            Certification
      of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1(3)
            
            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
      200232.2(3)
            
            Certification
      of Principal 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 Form 8-K filed on April 6,
    2010.(2)
            Incorporated
      by reference to the Company's Form 10 filed on April 30,
    2010.(3)
            Filed
      herewith.







SIGNATURE





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





Signature
            
            Title
            
            Date/s/ James T. Quist
            
            
            
            May
      17, 2010James
      T. Quist
            
            Chief
      Executive Officer





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