##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from           to
 Commission file number: 33-20897-D
 
 HELIX BIOMEDIX, INC.
 Delaware
(State or other jurisdiction of
incorporation or organization)
    
    91-2099117
(I.R.S. Employer Identification No.)
 22122-20 th Avenue SE, Suite 148, Bothell, Washington 98021
 (425) 402-8400
 þ o
 o þ
  Number of SharesClass
    
    Outstanding at August 1, 2006Common Stock, $0.001 par value
    
    22,788,863
 o þ




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##### 



HELIX BIOMEDIX, INC.
FORM 10-QSB
TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Balance Sheets
(unaudited) as of June 30, 2006
and December 31,
2005
    
    
    1Condensed Statements of
Operations (unaudited) for the
three and six months ended June
30, 2006 and 2005 and for the
period from inception (November
7, 1988) to June 30, 2006 and
2005
    
    
    2Condensed Statements of Cash
Flows (unaudited) for the six
months ended June 30, 2006 and
2005 and for the period from
inception (November 7, 1988) to
June 30, 2006 and
2005
    
    
    3Notes to Condensed Financial
Statements (unaudited)
    
    
    4Item 2. Managements Discussion and Analysis or Plan
of Operation
    
    
    9Item 3. Controls and Procedures
    
    
    20PART II  OTHER INFORMATIONItem 4. Submission of Matters to Vote of Security
Holders
    
    
    21Item 6. Exhibits
    
    
    22Signatures
    
    
    23EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. Financial Statements.
 HELIX BIOMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 CONDENSED BALANCE SHEETS
  June 30,
    
    
    December 31,2006
    
    
    2005ASSETSCurrent assets:Cash and cash
equivalents
    
    $
    3,851,778
    
    
    $
    2,827,959Inventory
    
    
    
    
    
    
    35,316Prepaid expenses and other current
assets
    
    
    94,357
    
    
    
    120,351Total current
assets
    
    
    3,946,135
    
    
    
    2,983,626Property and equipment,
net
    
    
    151,616
    
    
    
    168,063Patents pending and approved,
net
    
    
    473,820
    
    
    
    505,908Other assets,
net
    
    
    76,991
    
    
    
    84,343Total assets
    
    $
    4,648,562
    
    
    $
    3,741,940LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts
payable
    
    $
    73,101
    
    
    $
    57,993Accrued
expenses
    
    
    55,467
    
    
    
    166,366Total current
liabilities
    
    
    128,568
    
    
    
    224,359Commitments and contingenciesStockholders equity:Preferred stock, $0.001 par value, 25,000,000 shares authorized;
no shares issued or outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value, 100,000,000 shares authorized;
22,788,514 shares outstanding at June 30, 2006,
20,190,514 shares outstanding at December 31,
2005
    
    
    22,788
    
    
    
    20,190Additional paid-in
capital
    
    
    26,808,577
    
    
    
    23,906,974Deferred stock
compensation
    
    
    
    
    
    
    (105,000
    )Deficit accumulated during the development
stage
    
    
    (22,311,371
    )
    
    
    (20,304,583
    )Total stockholders
equity
    
    
    4,519,994
    
    
    
    3,517,581Total liabilities and stockholders
equity
    
    $
    4,648,562
    
    
    $
    3,741,940
  1




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HELIX BIOMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 CONDENSED STATEMENTS OF OPERATIONS
    Inception(November 7, 1988)To June 30, 2006
    
    
    Three months ended June 30,
    
    
    Six months ended June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenue:Licensing
    
    $
    323,720
    
    
    $
    30,073
    
    
    $
    15,000
    
    
    $
    35,099
    
    
    $
    15,000Peptide sales
    
    
    104,414
    
    
    
    
    
    
    
    40,414
    
    
    
    13,000
    
    
    
    40,414428,134
    
    
    
    30,073
    
    
    
    55,414
    
    
    
    48,099
    
    
    
    55,414Operating expenses:Cost of peptide sales
    
    
    240,709
    
    
    
    151,368
    
    
    
    40,414
    
    
    
    156,371
    
    
    
    40,414Research and development
    
    
    6,024,330
    
    
    
    267,879
    
    
    
    231,090
    
    
    
    494,085
    
    
    
    421,131Depreciation and amortization
    
    
    990,894
    
    
    
    45,413
    
    
    
    42,743
    
    
    
    90,336
    
    
    
    84,769Accounting, legal and professional
    
    
    2,310,445
    
    
    
    70,763
    
    
    
    92,202
    
    
    
    136,421
    
    
    
    202,167Consulting fees
    
    
    2,869,309
    
    
    
    1,881
    
    
    
    27,110
    
    
    
    4,929
    
    
    
    49,119General and administrative
    
    
    9,098,790
    
    
    
    698,471
    
    
    
    471,394
    
    
    
    1,208,389
    
    
    
    880,255Total operating expenses
    
    
    21,534,477
    
    
    
    1,235,775
    
    
    
    904,953
    
    
    
    2,090,531
    
    
    
    1,677,855Loss from operations
    
    
    (21,106,343
    )
    
    
    (1,205,702
    )
    
    
    (849,539
    )
    
    
    (2,042,432
    )
    
    
    (1,622,441
    )Other (income) expense:Gain on settlement of lawsuit
    
    
    (48,574
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    1,459,442
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest income
    
    
    (205,840
    )
    
    
    (21,183
    )
    
    
    (11,255
    )
    
    
    (35,644
    )
    
    
    (18,372
    )1,205,028
    
    
    
    (21,183
    )
    
    
    (11,255
    )
    
    
    (35,644
    )
    
    
    (18,372
    )Net loss
    
    $
    (22,311,371
    )
    
    $
    (1,184,519
    )
    
    $
    (838,284
    )
    
    $
    (2,006,788
    )
    
    $
    (1,604,069
    )Basic and diluted net loss per share
    
    
    
    
    
    $
    (0.05
    )
    
    $
    (0.05
    )
    
    $
    (0.09
    )
    
    $
    (0.10
    )Weighted average shares outstanding
    
    
    
    
    
    
    22,788,514
    
    
    
    16,851,669
    
    
    
    21,890,276
    
    
    
    15,489,871
  2




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HELIX BIOMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 CONDENSED STATEMENTS OF CASH FLOWS
    Inception
    
    
    Six months ended June 30,(November 7, 1988)toJune 30, 2006
    
    
    2006
    
    
    2005Cash Flows from Operating ActivitiesNet loss
    
    $
    (22,311,371
    )
    
    $
    (2,006,788
    )
    
    $
    (1,604,069
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation and amortization
    
    
    991,074
    
    
    
    90,336
    
    
    
    84,769Amortization of debt discount to interest expense
    
    
    728,552
    
    
    
    
    
    
    
    Stock-based compensation costs
    
    
    4,503,685
    
    
    
    425,179
    
    
    
    127,158Interest expense converted to common stock
    
    
    231,180
    
    
    
    


    
    
    
    Research and development
    
    
    53,000
    
    
    
    
    
    
    
    Loss (gain) on disposal of equipment
    
    
    (2,865
    )
    
    
    3,588
    
    
    
    Changes in operating assets and liabilities:Inventory
    
    
    
    
    
    
    35,316
    
    
    
    Prepaid expenses and other current assets
    
    
    (79,647
    )
    
    
    25,994
    
    
    
    (24,896
    )Other assets
    
    
    (67,400
    )
    
    
    
    
    
    
    Accounts payable  related party
    
    
    341,602
    
    
    
    
    
    
    
    Accounts payable and accrued expenses
    
    
    205,180
    
    
    
    (95,791
    )
    
    
    78,266Net cash used in operating activities
    
    
    (15,407,010
    )
    
    
    (1,522,166
    )
    
    
    (1,338,772
    )Cash Flows from Investing ActivitiesInvestment in Helix Delaware
    
    
    (10
    )
    
    
    
    
    
    
    Proceeds from sale of assets
    
    
    8,900
    
    
    
    
    
    
    
    1,500Purchase of property and equipment
    
    
    (660,980
    )
    
    
    (38,037
    )
    
    
    (53,874
    )Increase in capitalized patents
    
    
    (654,944
    )
    
    

    

    
    
    
    (22.525
    )Net cash used in investing activities
    
    
    (1,307,034
    )
    
    
    (38,037
    )
    
    
    (74,899
    )Cash Flows from Financing ActivitiesCash received in reverse acquisition
    
    
    634,497
    
    
    
    
    
    
    
    Proceeds from notes payable
    
    
    3,089,894
    
    
    
    
    
    
    
    Proceeds from notes payable  related party
    
    
    379,579
    
    
    
    
    
    
    
    Repayments from notes payable  related party
    
    
    (163,154
    )
    
    
    
    
    
    
    Proceeds from issuance of common stock
    
    
    14,580,770
    
    
    
    2,584,022
    
    
    
    2,504,989Proceeds from exercise/exchange of stock options and warrants
    
    
    2,044,236
    
    
    
    

    
    
    
    1,337,085Net cash provided by financing activities
    
    
    20,565,822
    
    
    
    2,584,022
    
    
    
    3,842,074Net increase in cash and cash equivalents
    
    
    3,851,778
    
    
    
    1,023,819
    
    
    
    2,428,403Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    2,827,959
    
    
    
    1,908,028Cash and cash equivalents at end of period
    
    $
    3,851,778
    
    
    $
    3,851,778
    
    
    $
    4,336,431
  3




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##### Table of Contents



HELIX BIOMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
 
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 1. Basis of Presentation
     2. Accounting for Stock Options
 Share-Based Payment Accounting for Stock Issued to Employees Accounting for Stock-Based
Compensation
   4




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HELIX BIOMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
  Three Months Ended June 30, 2006
    
    
    Six Months Ended June 30, 2006As Reported
    
    
    If Reported
    
    
    As Reported
    
    
    If ReportedFollowing
    
    
    Following
    
    
    Following
    
    
    FollowingFAS 123(R)
    
    
    APB 25
    
    
    FAS123(R)
    
    
    APB 25Loss from operations
    
    $
    (1,205,702
    )
    
    $
    (1,039,170
    )
    
    $
    (2,042,432
    )
    
    $
    (1,751,087
    )Net loss
    
    $
    (1,184,519
    )
    
    $
    (1,017,987
    )
    
    $
    (2,006,788
    )
    
    $
    (1,715,443
    )Basic and diluted net loss per share
    
    $
    (0.05
    )
    
    $
    (0.04
    )
    
    $
    (0.09
    )
    
    $
    (0.08
    )
  Three Months
    
    Six MonthsEnded
    
    EndedJune 30, 2006
    
    June 30, 2006Risk-free interest
rate
    
    
    5.06
    %
    
    
    4.97
    %Expected dividend
yield
    
    
    0
    
    
    
    0Expected term in
years
    
    
    6.25
    
    
    
    6.25Expected
volatility
    
    
    100
    %
    
    
    100
    %
  5




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##### Table of Contents



HELIX BIOMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
  Three months
    
    
    Six monthsended
    
    
    endedJune 30, 2005
    
    
    June 30, 2005Net lossAs reported
    
    $
    (838,284
    )
    
    $
    (1,604,069
    )Add: Stock-based employee compensation expense
included in reported net loss
    
    
    52,500
    
    
    
    105,000Deduct: Stock-based employee compensation expense
determined
under fair value based method for all awards
    
    
    (159,026
    )
    
    
    (320,491
    )Pro forma net loss
    
    $
    (944,810
    )
    
    $
    (1,819,560
    )Net loss per share-basic and dilutedAs reported
    
    $
    (0.05
    )
    
    $
    (0.10
    )Pro forma net loss
    
    $
    (0.06
    )
    
    $
    (0.12
    )
 3. Loss per Share
  Three months ended June 30
    
    Six months ended June 302006
    
    2005
    
    2006
    
    2005Weighted average outstanding options
    
    
    2,730,626
    
    
    
    2,495,448
    
    
    
    2,687,746
    
    
    
    2,495,925Weighted average outstanding warrants
    
    
    2,852,357
    
    
    
    6,263,844
    
    
    
    2,747,443
    
    
    
    7,117,503
 4. Stock-Based Compensation
 Stock Option Plan
    6




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##### Table of Contents



HELIX BIOMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateShares Subject
    
    
    Exercise Price
    
    
    Contractual
    
    
    Intrinsicto Options
    
    
    per Share
    
    
    Life
    
    
    ValueOutstanding, December 31, 2005
    
    
    2,592,000
    
    
    $
    1.38Granted
    
    
    165,000
    
    
    $
    0.96Exercised
    
    
    Forfeited
    
    
    Expired
    
    
    Outstanding, June 30, 2006
    
    
    2,757,000
    
    
    $
    1.35
    
    
    
    6.44
    
    
    $
    90,490Exercisable, June 30, 2006
    
    
    2,333,970
    
    
    $
    1.33
    
    
    
    6.10
    
    
    $
    77,335
    Options Outstanding
    
    
    Options ExercisableWeightedAverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedRemaining
    
    
    Average
    
    
    
    
    
    
    AverageContractual Life
    
    
    Exercise
    
    
    
    
    
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    
    (Years)
    
    
    Price
    
    
    Shares
    
    
    Price$0.70 - $0.85
    
    
    280,500
    
    
    
    6.36
    
    
    $
    0.76
    
    
    
    213,000
    
    
    $
    0.73$1.00
    
    
    899,000
    
    
    
    6.00
    
    
    $
    1.00
    
    
    
    815,000
    
    
    $
    1.00$1.20 - $1.50
    
    
    718,750
    
    
    
    6.31
    
    
    $
    1.48
    
    
    
    668,750
    
    
    $
    1.48$1.65 - $2.00
    
    
    858,750
    
    
    
    7.04
    
    
    $
    1.81
    
    
    
    637,220
    
    
    $
    1.81$0.70 - $2.00
    
    
    2,757,000
    
    
    
    6.44
    
    
    $
    1.35
    
    
    
    2,333,970
    
    
    $
    1.33
 5. Stockholders Equity
   7




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HELIX BIOMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
    
    
    2001/2002 Warrants (warrants to purchase shares of the Companys common
stock issued as part of the units described in the private placement memorandum dated May
2001): The Company offered to issue either (a) 0.82 shares of common stock for each warrant
share tendered; or (b) 1.0 share of common stock for each warrant share tendered upon payment
of $0.25 for each warrant share tendered.
    
    2002/2003 Warrants (warrants to purchase shares of the Companys common
stock issued as part of the units described in the private placement memorandum dated
September 2002, and amended December 2002): The Company offered to issue either (a) 0.84
shares of common stock for each warrant share tendered; or (b) 1.0 share of common stock for
each warrant share tendered upon payment of $0.25 for each warrant share tendered.
    
    2003 Warrants (warrants to purchase shares of the Companys common stock
issued as part of the units described in the private placement memorandum dated November
2003): The Company offered to issue either (a) 0.37 shares of common stock for each warrant
share tendered; or (b) 1.0 share of common stock for each warrant share tendered upon payment
of $0.56 for each warrant share tendered.
    
    2004 Warrants (warrants to purchase shares of the Companys common stock
issued as part of the units described in the private placement memorandum dated March 2004):
The Company offered to issue either (a) 0.60 shares of common stock for each warrant share
tendered; or (b) 1.0 share of common stock for each warrant share tendered upon payment of
$0.50 for each warrant share tendered.
   8




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##### Table of Contents



ITEM 2. Managements Discussion and Analysis or Plan of Operation.
 Forward-Looking Statements
  
    
    statements concerning possible or assumed future results of operations, trends in
financial results and business plans, including those relating to earnings growth and
revenue growth;
    
    statements about our product development schedule;
    
    statements about our future capital requirements and the sufficiency of our cash, cash
equivalents, investments, and any other sources to meet these requirements;
    
    statements about our plans, objectives, expectations and intentions; and
    
    other statements that are not historical facts.
   Business Overview
   
    
    Skin care  we have developed four peptides capable of stimulating aspects of the skins
innate ability to regenerate.
    
    Pharmaceutical  six of our peptides have demonstrated promising results in the areas of
topical anti-infectives and wound healing.
 9




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Skin Care:
 TM TM TM TM
 Pharmaceutical:
 Staphylococcus aureus in vivo S.
aureus, Pseudomonas
aeruginosa,
   Results of Operations
   10




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Liquidity and Capital Resources
      11




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
    
    the ability to attract collaborative agreement partners;
    
    the ability to generate revenue under licensing agreements; and
    
    the costs of filing, prosecuting, enforcing, and defending patents, patent
applications, patent claims, and trademarks.
  Critical Accounting Policies and Estimates
  
    
    Revenue Recognition.We have generated limited revenue from licensing fees. We
recognize revenue from licensing fees when delivery has occurred and no future obligations
exist. Royalties from licensees, if any, are based on third-party sales and recorded as
earned in accordance with the contract terms when third-party results are reliably measured
and collection is reasonably assured.
    
    Research and Development Costs.These costs, including personnel costs, supplies and
other indirect research and development costs, are expensed as incurred. In instances where
we enter into agreements with third parties for research and development activities, which
may include personnel costs, supplies and other costs associated with such collaborative
agreements, we expense these items as incurred.
    
    Capitalization of Patent Costs.We capitalize the third-party costs associated with
filing patents or entering into licenses associated with our underlying technology. Our
policy for the capitalization of patent costs is to begin amortization of these costs at
the time they are incurred. We review our patent portfolio to determine whether any such
costs have been impaired and are no longer being used in our research and development
activities. To the extent we no longer use certain patents, the associated costs will be
written-off at that time.
    
    Valuation of Stock Options and Warrants.On January 1, 2006, we adopted the fair value
recognition provisions of Financial Accounting Standards Board (FASB) Statement No.
123(R), Share-Based Payment(SFAS 123R). Prior to January 1, 2006, we accounted for
share-based payments under the recognition and measurement provisions of APB Opinion No.
25, Accounting for Stock Issued to Employees(APB 25), and related Interpretations, as
permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation(SFAS 123).
In accordance with APB 25, no compensation cost was required to be recognized for options
granted that had an exercise price equal to the market value of the underlying common stock
on the date of grant.We adopted SFAS 123R using the modified-prospective-transition method. Under this method,
compensation cost recognized for the six months ended June 30, 2006 includes: a) compensation
cost for all share-based payments granted prior to, but not yet vested as of, December 31,
2005, based on the grant-date fair value estimated in accordance with the original provisions
of SFAS 123, and b) compensation cost for all share-based payments granted subsequent to
December 31, 2005, based on the grant-date fair value estimated in accordance with the
provisions of SFAS 123R. The results for the prior periods have not been restated.Effective January 1, 2006, we adopted the fair value attribution method for recognizing
compensation expense. Previously under the disclosure-only provisions of SFAS 123, we
accounted for stock compensation using the intrinsic value method prescribed in APB 25. For
all unvested options outstanding as of January 1, 2006, the previously measured but
unrecognized compensation expense, based on the fair value at the original grant date, will
be recognized ratably over the remaining vesting period. For share-based payments
granted subsequent to January 1, 2006, compensation expense, based on the fair value on the
date of grant, will be recognized on a straight-line basis over the vesting period.
 12




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Certain Factors That May Affect Our Business and Future Results
  We will need to raise additional capital to fund our operations, and our failure to obtain funding
when needed may force us to delay, reduce or eliminate our product development programs or
collaboration efforts.
  
    
    commercialize our product candidates;
    
    fund our pre-clinical studies;
    
    continue our research and development activities;
    
    finance our general and administrative expenses; and
    
    prepare, file, prosecute, maintain, enforce and defend patent and other proprietary rights.
   
    
    our ability to enter into revenue producing agreements;
    
    the progress, expansion and cost of our pre-clinical and research and development activities;
    
    any future decisions we may make about the scope and prioritization of the programs we pursue;
    
    the development of new product candidates or uses for our antimicrobial peptide technologies;
    
    changes in regulatory policies or laws that affect our operations; and
    
    competing technological and market developments.
  13




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We expect to continue to incur substantial losses, and we may never achieve profitability.
 in-vitro in-vivo
 We are at an early stage of product development and do not yet have commercially marketable
products to provide material revenue.
  We need to enter strategic alliances with third parties to develop, test and produce commercially
viable products.
  Because of the specialized nature of our business, the termination of relationships with key
management and scientific personnel or the inability to recruit and retain additional personnel
could prevent us from developing our technologies, conducting clinical trials and obtaining
financing.
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We rely on collaborators to assist in the research and development activities necessary for the
commercialization of our product candidates. If our collaborators do not perform as expected, we
may not be able to commercialize our product candidates.
  Clinical trials for our product candidates, and those for our partners and licensees, are expensive
and time consuming and their outcome is uncertain.
  Our partners and licensees or we may choose to, or may be required to, suspend, repeat or terminate
any initiated clinical trials if they are not conducted in accordance with regulatory requirements,
the results are negative or inconclusive or the trials are not well designed.
  We face substantial competition in our product development efforts from pharmaceutical and
biotechnology companies, universities and other not-for-profit institutions.
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We face product liability risks and may not be able to obtain adequate insurance to protect against
losses.
  If we are unable to protect our proprietary rights, we may not be able to compete effectively.
      If the use of our technologies conflicts with the rights of others, we could be subject to
expensive litigation or be required to obtain licenses from others to develop or market
antimicrobial peptides.
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A third party may claim that we infringe upon its proprietary rights.
  
    
    we may become liable for substantial damages for past infringement if a court decides
that our technology infringes upon a competitors patent;
    
    a court may prohibit us from selling or licensing our product without a license from
the patent holder, which may not be available on commercially acceptable terms, if at all,
or which may require us to pay substantial royalties or grant cross licenses to our
patents; and
    
    we may have to redesign our technology or product candidate so that it does not
infringe upon others patent rights, which may not be possible or could require substantial
funds or time.
  Our rights to use peptides and technologies licensed to us by third parties are not within our
control, and we may not be able to implement our antimicrobial peptide technology without these
peptides and technologies.
   If our principal stockholders, executive officers and directors choose to act together, they may be
able to control our management and operations, acting in their own best interests and not
necessarily those of other stockholders.
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Future sales of our common stock could negatively affect our stock price.
   Our common stock may experience extreme price and volume fluctuations, which could lead to costly
litigation for us and make an investment in us less appealing.
  
    
    announcements about our collaborators or licensees;
    
    results of our pre-clinical trials;
    
    announcements of technological innovations or new products or services by us or our competitors;
    
    announcements concerning our competitors or the biotechnology industry in general;
    
    new regulatory pronouncements and changes in regulatory guidelines;
    
    general and industry-specific economic conditions;
    
    additions or departures of our key personnel;
    
    changes in financial estimates or recommendations by securities analysts;
    
    variations in our quarterly results; and
    
    changes in accounting principles.
  Our certificate of incorporation, bylaws and stockholder rights agreement may delay or prevent a
change in our management.
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
    
    authorize the issuance of preferred stock that can be created and issued by the board of
directors without prior stockholder approval, commonly referred to as blank check
preferred stock, with rights senior to those of our common stock;
    
    authorize our board of directors to issue dilutive shares of common stock upon certain events; and
    
    provide for a classified board of directors.
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ITEM 3. Controls and Procedures.
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PART II  OTHER INFORMATION
 
 ITEM 4. Submission of Matters to a Vote of Security Holders.
  1.
    
    To elect two Class III directors, to serve until the 2009 Annual Meeting of
Stockholders and until his successor is elected and qualified:
 Nominee
    
    For
    
    WithheldWeston Anson
    
    11,514,900
    
    113,157R. Stephen Beatty
    
    11,561,124
    
    66,933
 2.
    
    To ratify the appointment of KPMG LLP as the Companys independent auditor for the
fiscal year ending December 31, 2006:
 For
    
    Against
    
    Abstain11,582,795
    
    33,026
    
    12,236
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ITEM 6. Exhibits.
 Exhibit Number(Referenced toItem 601 ofRegulation S-B)
    
    Exhibit Description3.1
    
    Certificate of Incorporation of
Helix BioMedix, Inc. (incorporated
by reference from Exhibit 3-a to the
Companys Form 10-KSB for the year
ended December 31, 2000)3.2
    
    Certificate of Amendment to the
Certificate of Incorporation of
Helix BioMedix, Inc. (incorporated
by reference from Exhibit 3.3 to the
Companys Form 10-KSB/A for the year
ended December 31, 2002)3.3
    
    Bylaws of Helix BioMedix, Inc.
(incorporated by reference from
Exhibit 3-b to the Companys Form
10-KSB for the year ended December
31, 2000)31.1
    
    Certification of the Companys Chief
Executive Officer Pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 193431.2
    
    Certification of the Companys Chief
Financial Officer Pursuant to Rule
13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 193432.1
    
    Certification of the Companys Chief
Executive Officer Pursuant to 18
U.S.C. Section 135032.2
    
    Certification of the Companys Chief
Financial Officer Pursuant to 18
U.S.C. Section 1350
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SIGNATURES
  August 10, 2006HELIX BIOMEDIX, INC.(Registrant)By: /s/ R. STEPHEN BEATTYR. Stephen Beatty
President and Chief Executive Officer
(Principal Executive Officer)By: /s/ David H. KirskeDavid H. Kirske
Vice President and Chief Financial Officer
(Principal Financial Officer)
 23