Helix Wind, Corp. - FORM 10-Q/A

Attached files

file	filename
EX-31.1 - CERTIFICATION - Helix Wind, Corp.	helix_10qa-ex3101.htm
EX-32.1 - CERTIFICATION - Helix Wind, Corp.	helix_10qa-ex3201.htm
EX-31.2 - CERTIFICATION - Helix Wind, Corp.	helix_10qa-ex3102.htm
EX-32.2 - CERTIFICATION - Helix Wind, Corp.	helix_10qa-ex3202.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q /A

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 000-52107

HELIX WIND, CORP.

(Exact name of registrant as specified in its charter)

Nevada	20-4069588
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

13125 Danielson Street, Suite 101
Poway, California	92064
(Address of principal executive offices)	(Zip Code)

(866) 246-4354

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report.)

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 þ

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 such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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 o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of July 27 , 2011 there were 1,750,000,000 shares of common stock outstanding.

Explanatory Note

This Form 10-Q/A is being filed as Amendment No. 1 to our Quarterly Report on Form 10-Q for the period ended March 31, 2011, filed with the SEC on April 25, 2011 (“Original Quarterly Report”), in response to the SEC’s comments thereto, for the purpose of revising the following:

●

Correction of an error reported in derivative liability in its financial statements for the period ended March 31, 2011. The Company had previously recorded an increase in its derivative liability and a charge to interest expense for potential shares outstanding if all common stock equivalents were converted that would be in excess of the Company’s authorized amount. These potential shares, however, were already accounted for in the derivative liability calculation. This restatement included revisions to the following notes thereto: Note 2-Basis of Presentation and Summary of Significant Accounting Policies, in Restatement and in Going Concern, Note 6-Derivative Liabilities and in the following Items: Item 2-Management’s Discussion and Analysis of Financial Condition and Results of Operations, under Other income and expense, Net income, Going Concern and Liquidity and Capital Resources and Item 1A - Risk Factors, in the first paragraph of the first risk factor and the ninth risk factor.

Except for the foregoing amended disclosure, this Form 10-Q/A has not been amended or updated to reflect events that occurred after April 25, 2011, the filing date of the Original Quarterly Report. Accordingly, this Form 10-Q/A should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Quarterly Report, including any amendments to those filings.

HELIX WIND, CORP.

Quarterly Report on Form 10-Q for the period ended March 31, 2011

INDEX

	Page
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Shareholders’ Deficit	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7-24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	32
Item 4T. Controls and Procedures.	32
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.	34
Item 1A. Risk Factors.	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	40
Item 3. Defaults Upon Senior Securities.	41
Item 4. (Removed and Reserved)	41
Item 5. Other Information.	41
Item 6. Exhibits.	42

PART I - FINANCIAL INFORMATION

HELIX WIND, CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

Item 1. Financial Statements

	March 31, 2011 (Unaudited)			December 31, 2010
	(As restated)			(As restated)
ASSETS

CURRENT ASSETS

Cash	$	67,764		$	87,395
Prepaid expenses and other current assets		15,301			2,475
		83,065			89,870

EQUIPMENT, net		267,285			291,981
PATENTS		91,750			79,916

Total assets	$	442,100		$	461,767

LIABILITIES AND SHAREHOLDERS’ DEFICIT

CURRENT LIABILITIES
Accounts payable	$	971,592		$	936,858
Accrued compensation		291,117			291,117
Accrued interest		450,607			380,977
Other accrued liabilities		94,404			94,404
Accrued taxes		16,114			16,114
Deferred revenue		-			34,494
Short term debt		543,164			543,164
Convertible notes payable to related party, net of discount		144,837			144,837
Convertible notes payable, net of discount		66,493			53,265
Derivative liability		3,915,790			4,120,046
		6,494,118			6,615,276
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ DEFICIT
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued or outstanding		-			-
Common stock, $0.0001 par value, 1,750,000,000 shares authorized, 1,750,000,000 and 1,021,482,054 issued and outstanding as of March 31, 2011 and December 31, 2010, respectively		175,000			102,148
Additional paid in capital		38,420,726			37,735,035
Accumulated deficit		( 44,647,744	)		( 43,990,692	)

Total shareholders’ deficit		( 6,052,018	)		( 6,153,509	)
Total liabilities and shareholders’ deficit	$	442,100		$	461,767

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

HELIX WIND CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended
	March 31, 2011			March 31, 2010
	(As restated)
REVENUES	$	-		$	5,637

COST OF SALES		-			4,454

GROSS MARGIN		-			1,183

OPERATING COSTS AND EXPENSES
Research and development		15,286			93,301
Selling, general and administrative		306,367			608,169
Total operating expenses		321,653			701,470

LOSS FROM OPERATIONS		(321,653	)		(700,287	)

OTHER INCOME (EXPENSES)
Other income		100,457			5,042
Other expense		-			(2,158,591	)
Interest expense		( 1,613,600	)		(4,784,109	)
Loss on debt extinguishment					-
Change in fair value of derivative liability		1,178,544			25,930,072
Total other income (expense)		( 334,599	)		18,992,414

INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES	$	( 656,252	)	$	18,292,127

PROVISION FOR INCOME TAXES		(800	)		(800	)

NET INCOME (LOSS)	$	( 657,052	)	$	18,291,327

Basic and diluted net income (loss) per share attributable to common stockholders	$	(0.00)		$	0.40

Weighted average number of common shares outstanding		1,578,822,670			45,231,582

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

HELIX WIND, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

(Unaudited)

	Common Stock				Additional Paid-in		Accumulated			Total Shareholders’
	Shares		Par Value		Capital		Deficit			Deficit
	(As restated)		(As restated)		(As restated)		(As restated)			(As restated)
BALANCE – December 31, 2009		39,256,550	$	3,926	$	22,888,624	$	(55,909,285	)	$	(33,016,735	)

Share based payments		-		-		153,928		-			153,928

Stock issued upon note conversions and warrants exercised		921,071,430		92,107		11,347,272		-			11,439,379

New stock issuance		61,154,074		6,115		3,345,211		-			3,351,326

Net income		-		-		-		11,918,593			11,918,593

BALANCE–December 31, 2010		1,021,482,054	$	102,148	$	37,735,035	$	( 43,990,692	)	$	( 6,153,509	)

Share based payments						52,618					52,618

Stock issued upon note conversions		728,517,946		72,852		633,073					705,925

Net (loss)								( 657,052	)		( 657,052	)

BALANCE–March 31, 2011		1,750,000,000	$	175,000	$	38,420,726	$	( 44,647,744	)	$	( 6,052,018	)

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

HELIX WIND, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended
	March 31, 2011			March 31, 2010
	(As restated)
OPERATING ACTIVITIES
Net income (loss)	$	( 657,052	)	$	18,291,327
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		24,793			33,488
Stock based compensation		52,618			(735,654	)
Change in fair value of derivative warrant liability		(1,178,544	)		(25,930,073	)
Interest in connection with derivative liability		1,260,907			1,747,662
Net loss on sale of equipment		1,543			-
Amortization of debt discount		13,228			-
Gain on issuance of stock for company expenses		-			(5,042	)
Write off of debt discount on converted debt		225,752			1,686,675
Loss on acquisition agreement termination		-			2,158,591
Issuance of stock for consulting services		-			240,000
Issuance of stock for fundraising		-			577,000
Issuance of stock for payment of debt		-			1,887,000
Changes in operating assets and liabilities:
Accounts receivable		-			875
Due from investor		-			(592,000	)
Inventory		-			3,254
Other current assets		(12,826	)		8,356
Accounts payable		34,734			136,984
Accrued compensation		-			83,061
Accrued interest		113,184			54,280
Related party payable		-			(59,043	)
Deferred revenue		(34,494	)		-
Accrued liabilities		-			(1,838	)
Net cash used in operating activities		(156,157	)		(415,097	)

INVESTING ACTIVITIES
Purchase of equipment		(1,640	)		-
Patents		(11,834	)
Net cash used in investing activities		(13,474	)		-

FINANCING ACTIVITIES
Proceeds from short term notes payable		150,000			715,000
Principal payments on short term notes		-			(299,621	)
Net cash provided by financing activities		150,000			415,379

Net increase in cash		(19,631	)		282

Cash – beginning of period		87,395			-

Cash – end of period	$	67,764		$	282

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for taxes	$	800		$	-

SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
Accrued interest on convertible notes payable converted to additional paid in capital	$	43,554		$	142,594
Financing charge for violation of St. George note	$	1,113,464		$	438,750
Issuance of St. George note	$	202,500		$	779,500
Discount on St. George note at issuance	$	(52,500	)	$	(187,500	)
Issuance of convertible note in lieu of liabilities owed to former CEO	$	-		$	144,837
Interest charge for penalty in violation of short term debt	$	-		$	20,000
Reclass of derivative liability to additional paid in capital due to conversion of notes payable	$	436,619		$	1,416,620
Escrow for shares of former employee related to St. George bridge financing	$	-		$	480
Conversion of convertible notes payable to additional paid in capital	$	225,752		$	1,686,675
Conversion of warrants to additional paid in capital	$	-		$	737,124
Conversion of convertible notes payable and warrants into common stock and new issuances	$	-		$	2,166

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

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

1.	ORGANIZATION

Helix Wind, Corp. (“Helix Wind”) was incorporated under the laws of the State of Nevada on January 10, 2006 (Inception) and has its headquarters located in Poway, California. Helix Wind was originally named Terrapin Enterprises, Inc. On February 11, 2009, Helix Wind's wholly-owned subsidiary, Helix Wind Acquisition Corp. was merged with and into Helix Wind, Inc. (“Subsidiary”), which survived and became Helix Wind’s wholly-owned subsidiary (the “Merger”). On April 16, 2009, Helix Wind changed its name from Clearview Acquisitions, Inc. to Helix Wind, Corp., pursuant to an Amendment to its Articles of Incorporation filed with the Secretary of State of Nevada. Unless the context specifies otherwise, as discussed in Note 2, references to the “Company” refers to Subsidiary prior to the Merger, and Helix Wind, Corp. and the Subsidiary combined thereafter.

2.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The summary of significant accounting policies presented below is designed to assist in understanding the Company’s condensed consolidated financial statements. Such financial statements and accompanying notes are the representation of the Company’s management, who is responsible for their integrity and objectivity.

Restatement

The Company is restating its financial statements for the period ended March 31, 2011 for a correction of an error reported for that period. The Company had previously recorded an increase in its derivative liability and a charge to interest expense for potential shares outstanding if all common stock equivalents were converted that would be in excess of the Company’s authorized amount. These potential shares, however, were already accounted for in the derivative liability calculation. The effects of the restated amounts, net of income taxes, for the year ended December 31, 2010 and the period ended March 31, 2011, are as follows:


	December 31, 2010 AS FILED	December 31, 2010 AS RESTATED	March 31, 2011 AS FILED	March 31, 2011 AS RESTATED

Derivative liability	$7,652,022	$4,120,046	$7,792,605	$3,915,790
Total current liabilities	$10,147,252	$6,615,276	$10,370,933	$6,494,118
Total stockholders’ deficit	($9,685,485)	($6,153,509)	($9,928,833)	($6,052,018)
Interest expense			$1,958,439	$1,613,600
Total other expense			$679,438	$334,599
Net loss			$1,001,891	$657,052
Earnings per share - basic			$0.00	$0.00
Earnings per share - diluted			$0.00	$0.00

Reverse Merger Accounting

Since former Subsidiary security holders owned, after the Merger, approximately 80% of Helix Wind’s shares of common stock, and as a result of certain other factors, including that all members of the Company’s executive management are from Subsidiary. Subsidiary is deemed to be the acquiring company for accounting purposes and the Merger was accounted for as a reverse merger and a recapitalization in accordance with generally accepted accounting principles in the United States (“GAAP”). These condensed consolidated financial statements reflect the historical results of Subsidiary prior to the Merger and that of the combined Company following the Merger, and do not include the historical financial results of Helix Wind prior to the completion of the Merger. Common stock and the corresponding capital amounts of the Company pre-Merger have been retroactively restated as capital stock shares reflecting the exchange ratio in the Merger. In conjunction with the Merger, the Company received cash of $270,229 and assumed net liabilities of $66,414.

Condensed Consolidated Financial Statements

The accompanying unaudited condensed consolidated financial statements reflect the financial position, results of operations and cash flows of Subsidiary (as discussed above). The accompanying unaudited condensed consolidated financial statements of Subsidiary have been prepared in accordance with GAAP for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, these interim financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011, or for any other period. Amounts related to disclosures of December 31, 2010 balances within those interim condensed consolidated financial statements were derived from the audited 2010 consolidated financial statements and notes thereto filed on Form 10-K on March 31, 2011.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

2.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for Subsidiary included in Helix Wind’s Form 10-K filed on March 31, 2011 with the SEC. In preparing these condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the condensed consolidated financial statements and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Going Concern

The accompanying condensed consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has a working capital deficit of $2,495,263 excluding the derivative liability of $ 3,915,790 , and accumulated deficit of $ 44,647,744 at March 31, 2011, recurring losses from operations and negative cash flow from operating activities of $156,157 for the quarter ended March 31, 2011. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

The Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to obtain additional financing as may be required, and ultimately to attain profitability. During 2010 and the first quarter of 2011, the Company raised funds through the issuance of convertible notes payable to investors and through a private placement of the Company’s securities to investors to provide additional working capital. The Company plans to obtain additional financing through the sale of debt or equity securities.

The Company currently has insufficient capital and personnel to fulfill orders for its products and has had to severely curtail its operations beginning in February 2010. The Company is seeking additional capital to be able to ramp its operations back up, and is exploring other alternatives for its intellectual property and other assets. There can be no assurances that the Company will be able to obtain sufficient capital for its operations, or that there will be other alternatives for its intellectual property and other assets.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiary. All intercompany transactions and balances have been eliminated in consolidation.

Trade Accounts Receivable

The Company records trade accounts receivable when its customers are invoiced for products delivered and/or services provided. Management develops an estimate of an allowance for doubtful accounts based on the Company’s current economic circumstances and its own judgment as to the likelihood of ultimate payment. Although the Company expects to collect most of the amounts due, actual collections may differ from these estimated amounts. Actual receivables are written off against the allowance for doubtful accounts when the Company has determined the balance will not be collected. The balance in the allowance for doubtful accounts is $72,643 as of March 31, 2011 and December 31, 2010.

The Company does not require collateral from its customers, but performs ongoing credit evaluations of its customers’ financial condition. Credit risk with respect to the accounts receivable is limited because of the large number of customers included in the Company’s customer base and the geographic dispersion of those customers.

Patents

Patents represent external legal costs incurred for filing patent applications and their maintenance, and purchased patents. Amortization for patents is recorded using the straight-line method over the lesser of the life of the patent or its estimated useful life. No amortization has been taken on these expenditures in accordance with Company policy not to depreciate patents until the patent has been approved and issued by the United States Patent Office or by the various international patent authorities.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

2.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventory

The Company has historically contracted with East West Consulting, Ltd. (“East West”) in Thailand to manage the outsourcing of manufacturing for the Company’s wind turbines. East West directly places orders with suppliers based on a demand schedule provided by the Company. Each supplier holds various quantities in their finished goods inventory for a specified period before it is shipped on behalf of the Company. For finished goods, inventory title passes to the Company when payments have been made to East West for these items. Payments that the Company makes to East West for inventory that is still in process are recognized as prepaid inventory. The suppliers bear the risk of loss during manufacturing as they are fully insured for product within their warehouse. The Company records its finished goods inventory at the lower of cost (first in first out) or net realizable value. At March 31, 2011 and December 31, 2010, the Company’s inventory totaled $0 as an inventory reserve for $88,564 was recorded for the inventory at various suppliers. In addition, the Company makes progress payments to East West for inventory being manufactured but not yet completed in the form of prepaid inventory. There was no prepaid inventory at March 31, 2011 or December 31, 2010. On January 23, 2011, the Company received notice from East West that East West deems the Professional Services Agreement dated June 14, 2008 between the Company and East West to be “null and void” due to the Company's past due amounts owed to East West and not being able to resolve the outstanding balance at this time.

Impairment of Long-Lived Assets

Long-lived assets must be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted net cash flows from such asset, an impairment loss is recognized. Impairment losses are calculated as the difference between the cost basis of an asset and its estimated fair value. No impairment losses were recognized at March 31, 2011 or December 31, 2010.

Equipment

Equipment is stated at cost, and is being depreciated using the straight-line method over the estimated useful lives of the related assets ranging from three to five years. Non Recurring Equipment (NRE) tooling that was placed in service and paid in full as of March 31, 2011 and December 31, 2010 is capitalized and being depreciated over 5 years. Tooling that had been partially paid for as of March 31, 2011 and December 31, 2010 was recognized as a prepaid noncurrent asset. Costs and expenses incurred during the planning and operating stages of the Company’s website are expensed as incurred. Costs incurred in the website application and infrastructure development stages are capitalized by the Company and amortized to expense over the website’s estimated useful life or period of benefit. Expenditures for repairs and maintenance are charged to expense in the period incurred. At the time of retirement or other disposition of equipment and website development, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recorded in results of operations.

Advertising

The Company expenses advertising costs as incurred. During the three months ended March 31, 2011 and 2010, the Company incurred and expensed $1,950 and $4,730, respectively, in advertising expenses, which are included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Research and Development Costs

Costs incurred for research and development are expensed as incurred. Purchased materials that do not have an alternative future use and the cost to develop prototypes of production equipment are also expensed. Costs incurred after the production process is viable and a working model of the equipment has been completed will be capitalized as long-lived assets. For the three months ended March 31, 2011 and 2010, research and development costs incurred were $15,286 and $93,301, respectively.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

2.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Deferred Revenue

The Company receives a deposit for up to 50% of the sales price when the purchase order is received from a customer, which is recorded as deferred revenue until the product is shipped. The Company did not receive any purchase orders from domestic and international customers to purchase Company product during the quarter ended March 31, 2011. The Company had deferred revenue of $0 and $34,494 as of March 31, 2011 and December 31, 2010, respectively. The balance from December 31, 2010 was reclassified to accounts payable as production of units has currently been suspended.

Income Taxes

In July 2009, ASC 740, Income Taxes, (formally FIN 48, Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109) establishes a single model to address accounting for uncertain tax positions. ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted the provisions of ASC-740. Upon adoption, the Company recognized no adjustment in the amount of unrecognized tax benefits.

Share Based Compensation

The Company accounts for its share-based compensation in accordance with ASC 718-20 (formerly SFAS 123-R, Share Based Payment). Share-based compensation cost is measured at the date of grant, based on the calculated fair value of the stock-based award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the award).

The Company estimates the fair value of employee stock options granted using the Black-Scholes Option Pricing Model. Key assumptions used to estimate the fair value of stock options include the exercise price of the award, the fair value of the Company’s common stock on the date of grant, the expected option term, the risk free interest rate at the date of grant, the expected volatility and the expected annual dividend yield on the Company’s common stock.

Revenue Recognition

The Company’s revenues are recorded in accordance with the FASB ASC No. 605, “Revenue Recognition” The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. In instances where final acceptance of the product is specified by the customer or is uncertain, revenue is deferred until all acceptance criteria have been met.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

2.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Value of Financial Instruments

The fair value accounting guidance defines fair value 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.” The definition is based on an exit price rather than an entry price, regardless of whether the entity plans to hold or sell the asset. This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:

●	Level 1: Observable inputs such as quoted prices in active markets;

●	Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

●	Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying value of the derivative liability is considered to approximate fair market value, as the input and assumptions used in its valuation are based on significant other observable inputs of variable reference rates and volatilities.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

2.	BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basic and Diluted Net Income (Loss) per Common Share

The Company calculates basic and diluted net income (loss) per common share using the weighted average number of common shares outstanding during the periods presented.

Potentially dilutive common stock equivalents would include the common stock issuable upon the exercise of warrants, stock options and convertible debt. As of March 31, 2011, the weighted average number of common shares outstanding totaled 1,578,822,670. However, the total diluted common stock equivalents at March 31, 2011 totaled 1,750,000,000 which equals the total authorized common shares for the Company.

Recently Adopted Accounting Pronouncements

In October 2009, the FASB issued authoritative guidance that amends earlier guidance addressing the accounting for contractual arrangements in which an entity provides multiple products or services (deliverables) to a customer. The amendments address the unit of accounting for arrangements involving multiple deliverables and how arrangement consideration should be allocated to the separate units of accounting, when applicable, by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific nor third-party evidence is available. The amendments also require that arrangement consideration be allocated at the inception of an arrangement to all deliverables using the relative selling price method. The guidance is effective for fiscal years beginning on or after June 15, 2010, with earlier application permitted. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial position, results of operations and cash flows.

In October 2009, the FASB issued authoritative guidance that amends earlier guidance for revenue arrangements that include both tangible products and software elements. Tangible products containing software components and non-software components that function together to deliver the tangible product’s essential functionality are no longer within the scope of guidance for recognizing revenue from the sale of software, but would be accounted for in accordance with other authoritative guidance. The guidance is effective for fiscal years beginning on or after June 15, 2010, with earlier application permitted. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial position, results of operations and cash flows.

In January 2010, the FASB issued revised authoritative guidance that requires more robust disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements, and the transfers between Levels 1, 2 and 3. This guidance is effective for interim and annual reporting periods beginning after December 15, 2009 (which is January 1, 2010 for the Company) except for the disclosures about purchases, sales, issuances, and settlements in the roll forward activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years (which is January 1, 2011 for the Company). Early application is encouraged. The revised guidance was adopted as of January 1, 2010. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial position, results of operations and cash flows.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

3.	RELATED PARTY TRANSACTIONS AND CONVERTIBLE NOTES PAYABLE TO RELATED PARTIES

As of March 31, 2011 and December 31, 2010, the Company had no related party receivables or accounts payables.

EQUIPMENT

Equipment consisted of the following as of March 31, 2011 and December 31, 2010:

	March 31, 2011			December 31, 2010

Equipment	$	47,897		$	49,260
NRE tooling		424,903			424,903
Test facility		83,477			83,477
Leasehold improvements		10,254			10,254
Web site development costs		13,566			13,566
		580,097			581,460
Accumulated depreciation		(312,812	)		(289,479	)

	$	267,285		$	291,981

DEBT

Short Term Debt

Short term debt was $543,164 as of March 31, 2011 and December 31, 2010.

At March 31, 2011 short term debt includes $348,164 and $100,000 received from two non-related parties during 2009. The two promissory notes have a term of 1 year and accrue interest at prime (3.25% at March 31, 2011) plus 1%. Also included in short term debt is a promissory note from a related party totaling $95,000, which was purchased from two non related parties in the first quarter 2011. The promissory note has the same terms and conditions with an interest rate of 20%.

At December 31, 2010, this included two promissory notes from non-related parties totaling $95,000. The promissory notes have an interest rate of 20% and were extended in the first quarter 2010. In addition, short term debt includes $348,164 and $100,000 received from two non-related parties during 2009. The two promissory notes have a term of 1 year and accrue interest at prime (3.25% at December 31, 2010) plus 1%.

Convertible Notes Payable and Convertible Notes Payable to Related Party

Convertible notes payable totaled $4,288,831 as of March 31, 2011 as described below. In connection with the convertible notes payable issued, the Company issued an aggregate of 15,797,888 warrants. As of March 31, 2011, there were 12,994,028 outstanding warrants. All of the convertible notes payable and warrants contain an anti-dilution provision which “re-set” the related conversion rate and exercise price if any subsequent equity linked instruments are issued with rates lower than those of the outstanding equity linked instruments. The accounting literature related to the embedded conversion feature and warrants issued in connection with the convertible notes payable is discussed under note 6 below.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

5.	DEBT (Continued)

	Amount		Discount			Convertible Notes Payable, net of discount		Convertible Notes Payable Related Party, net of discount

Exchange Notes	$	763,328	$	(709,216	)	$	54,112	$	-
Reverse Merger Notes		100,000		(95,799	)		4,201		-
New Convertible Notes		3,425,503		(3,272,486	)		8,180		144,837
	$	4,288,831	$	(4,077,501	)	$	66,493	$	144,837

Exchange Notes – Convertible Notes Payable and Convertible Notes Payable to Related Party, net of discount

During the period ended March 31, 2011, $52,065 of the Exchange Notes was converted into common stock (the unamortized debt discount related to the converted notes was immediately charged to interest expense on the day the notes were converted). The Company is amortizing the remaining portion of debt discount using the effective interest method over the term of the convertible notes payable which is three years. During the period ended March 31, 2011, there was $4,208 amortized under this amortization method.

Reverse Merger Notes-Convertible Notes Payable, net of discount

During the period ended March 31, 2011, there were no conversions of Reverse Merger Notes. The Company is amortizing the debt discount using the effective interest method over the term of the convertible notes payable which is three years. During the period ended March 31, 2011, there was $840 amortized under this amortization method.

New Convertible Notes-Convertible Notes Payable, net of discount

During the period ended March 31, 2011, $173,687 of the New Convertible Notes was converted into common stock (the unamortized debt discount related to the converted notes was immediately charged to interest expense on the day the note was converted). The Company is amortizing the remaining portion of debt discount using the effective interest method over the term of the convertible notes payable which is three years. During the period ended March 31, 2011 there was $8,180 amortized under this amortization method.

During the period ended March 31, 2011, the Company’s activity related to convertible notes payable issued to St. George Investments is as follows:

During the period ended March 31, 2011, the Company’s notes payable balance with St. George increased by $1,315,964. Included in the total amount of the increase during the period, $202,500 was issued under a Note Purchase Agreement as described below, and $1,113,464 of the increase was a result of certain liquidity defaults under previous financings with St. George Investments.

Note Purchase Agreement

During the period ended March 31, 2011, the Company closed a financing transaction under a Note Purchase Agreement with St. George Investments. Under this agreement, the Company issued convertible notes payable in the aggregate principal amount of $72,500 (the “First Note”). The Purchase Agreement also provides that, subject to meeting certain conditions, and no Event of Default has occurred under any of the notes, the Investor may, in its sole and absolute discretion, issue to the Company up to $455,000 of notes pursuant to seven additional notes in the principal amount of $65,000 each (the “Additional Notes”) on or about each two week anniversary of the issuance of the First Note during the seven consecutive two week periods immediately following such issuance of the First Note, for a total aggregate additional net cash amount of $350,000 (after deducting the original issue discount amounts of $15,000 for each Additional Note).

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

5.	DEBT (Continued)

First Note and Additional Notes

During the period, the Company issued the First Note plus two additional notes of $65,000 each for a total of $202,500 for the period ended March 31, 2011.

The First Note matures six months from the date of issuance. If there is a default the Note will accrue interest at the rate of 15% per annum. The number of shares of Common Stock to be issued upon such conversion of the First Note shall be determined by dividing (i) the conversion amount under the First Note by (ii) the lower of (1) 100% of the volume-weighted average price of the Company’s Common Stock (the “VWAP”) for the three (3) trading days with the lowest VWAP during the twenty (20) trading days immediately preceding the date set forth on the notice of conversion, or (2) 50% of the lower of (A) the average VWAP over the five (5) trading days immediately preceding the date set forth in the notice of conversion or (B) the VWAP on the day immediately preceding the date set forth in the notice of conversion.

The First Note provides that upon each occurrence of any of the triggering events the outstanding balance under the First Note shall be immediately and automatically increased to 125% of the outstanding balance in effect immediately prior to the occurrence of such Trigger Event, and upon the first occurrence of a Trigger Event, (i) the outstanding balance, as adjusted above, shall accrue interest at the rate of 15% per annum until the First Note is repaid in full, and (ii) the Investor shall have the right, at any time thereafter until the First Note is repaid in full, to (a) accelerate the outstanding balance under the First Note, and (b) exercise default remedies under and according to the terms of the First Note; provided, however, that in no event shall the balance adjustment be applied more than two times. The Trigger Events include the following: (i) a decline in the five-day average daily dollar volume of the Company Common Stock in its primary market to less than $10,000 of volume per day; (ii) a decline in the average VWAP for the Common Stock during any consecutive five day trading period to a per share price of less than one half of one cent ($0.0005); (iii) the occurrence of any Event of Default under the First Note (other than an Event of Default for a Trigger Event which remains uncured or is not waived) that is not cured for a period exceeding ten business days after notice of a declaration of such Event of Default from Investor, or is not waived in writing by the Investor. An Event of Default under the First Note includes (i) a failure to pay any amount due under the First Note when due; (ii) a failure to deliver shares upon conversion of the First Note; (iii) the Company breaches any covenant, representation or other term or condition in the Purchase Agreement, Note or other transaction document; (iv) having insufficient authorized shares; (v) an uncured Trigger Event; or (vi) upon bankruptcy events.

Each of the seven Additional Notes in the principal amount of $65,000 have substantially similar terms to the terms of the First Note. The amount to be provided under each Additional Note is $50,000 after the original issue discount.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

5.	DEBT (Continued)

Purchase and Exchange Agreement and Forbearance Agreement

On March 21, 2011, the Company executed a Purchase and Exchange Agreement (the “First Exchange Agreement”) with St. George Investments pursuant to which, among other things, the Company agreed to exchange four outstanding convertible promissory notes in the aggregate amount of $1,176,347 for a secured convertible note payable in the amount of $1,176,347 (the “First Note”), and the Company executed a Purchase and Exchange Agreement (the “Second Exchange Agreement”) with St. George Investments pursuant to which, among other things, the Company agreed to exchange fourteen outstanding convertible promissory notes in the aggregate amount of $1,430,441 for a secured convertible note payable in the amount of $1,430,441 (the “Second Note”). The First Note and Second Note are both secured by all of the assets of the Company pursuant to the terms of a Security Agreement for each of the First Note and Second Note. The Company’s obligations under the First Note and Second Note are also guaranteed by the Company’s subsidiary, Helix Wind, Inc., pursuant to the terms of a Guaranty for each of the First Note and Second Note.

The First Exchange Agreement, Second Exchange Agreement, First Note, Second Note, Security Agreements and Guaranties are referred to herein as the “Exchange Agreements”. The Exchange Agreements also contain representations, warranties and indemnifications by the Company and the Investor.

As consideration for the Exchange Agreements, Investor agreed to pay the Company the sum of $100,000 which sum was not added to the balance of the notes and is included in other income on the accompanying statement of operations. In connection with the Exchange Documents, the Company and Investor also entered into a Forbearance Agreement pursuant to which, among other things:

●

St. George Investments agreed to refrain and forbear from exercising and enforcing any of its remedies under the Convertible Secured Promissory Note dated March 30, 2010 (the “March 2010 Note”) in the original principal amount of $779,500, or under applicable laws, with respect to the defaults, for a period of 90 days from the date of the Forbearance Agreement;

●

Provided that the Company pays St. George Investments the sum of $1,500,000 in cash on or before the 90th day from the date of the Forbearance Agreement, St. George Investments agrees that, upon receipt of the payment, each of the First Note, Second Note and March 2010 Note (collectively, the “Notes”) shall be terminated and the Company shall be released from all obligations and liabilities thereunder; and

●

Notwithstanding anything to the contrary in the Exchange Agreements or in that certain Note Purchase Agreement between the Company and Borrower dated January 18, 2011 (the “January 2011 Purchase Agreement”) , so long as (1) no Event of Default (as defined in the First Note and Second Note) (and in the case of the March 2010 Note, no new Event of Default after the date of the Forbearance Agreement) has occurred under any of the Notes, (2) each of the representations and warranties of Borrower in the Exchange Agreements and the January 2011 Purchase Agreement remain true and correct as of the date of purchase of each Additional Note, (3) the Company has increased its authorized shares of common stock to not less than 5,000,000,000 shares as of the date of purchase of such Additional Note, and (4) the Company has complied with all of its obligations and covenants herein, in the Notes, in the Exchange Agreements and in the January 2011 Purchase Agreement as of such date, the Company agrees to deliver to Borrower the sum of $50,000 (the “Additional Note Purchase Price”) on or around each of April 1, 2011, April 15, 2011, May 1, 2011, May 15, 2011 and June 1, 2011 as consideration for those certain Additional Notes (the “Additional Notes”) as defined in the January 2011 Purchase Agreement.

Defaults on Convertible Notes payable

On February 15, 2011, the Company received a notice from St. George Investments, LLC, a Illinois limited liability company (“St. George”) notifying the Company that a liquidity default had occurred under the convertible secured promissory note, dated March 30, 2010, in the principal amount of $779,500 and a series of four convertible secured promissory notes each with a principal balance of $130,000 made by the Company in favor of St. George (the “Note”). Also, on February 15, 2011, the

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

5.	DEBT (Continued)

Company received a second notice from St. George Investments, LLC, a Illinois limited liability company (“St. George”) notifying the Company that a liquidity default had occurred under a series of convertible secured promissory notes dated August 10, 2010 (principal balance of $72,500), August 30, 2010, September 15, 2010, and September 30, 2010, each with a principal balance of $65,000, made by the Company in favor of St. George (the “Note”).

As of March 31, 2011, the St. George notes had a balance of $3,280,666.

Convertible Notes Payable, Related Party, net of discount

During the year ended December 31, 2010, the Company issued a convertible note payable to Ian Gardner, a former officer of the Company. The note has a principal balance of $144,837 and is convertible into common stock of the Company at a rate of $0.50. The note accrues interest at a rate of 9% per annum and all principal and accrued interest is due on August 22, 2012. The convertible feature on this convertible note payable does not contain any re-set features and is convertible at fixed rates.

The Company analyzed this note for possible discounts on the conversion feature and concluded there is no beneficial conversion feature since the stock price on the date of issuance is less than the conversion rate of $0.50. The stock price on the date of issuance was $0.20.

As of March 31, 2011, convertible notes payable, related party, net of discount is $144,837.

Warrants

At March 31, 2011, the fair value of all warrants issued in connection with convertible notes payable is estimated to be $0. Management estimated the fair value of the warrants based upon the application of the Black-Sholes option-pricing model using the following assumptions: expected life of three to five years; risk free interest rate of (1.32% - 2.69%); volatility of (75%) and expected dividend yield of zero. At the date of issuance of the exchange notes, the related Black-Sholes assumptions were: expected life of three years; risk free interest rate of 1.32%; volatility of 59% and expected dividend yield of zero.

6.	DERIVATIVE LIABILITIES

The Company issued financial instruments in the form of warrants and convertible notes payable with conversion features. All of the convertible notes payable and warrants contain an anti-dilution provision which “re-set” the related conversion rate and exercise price if any subsequent equity linked instruments are issued with rates lower than those of the outstanding equity linked instruments. The Company also issued two convertible notes payable during the period ended March 31, 2011 with variable conversion rates.

The conversion features of both the convertible notes payable and warrants were analyzed for derivative liabilities under GAAP and the Company has determined that they meet the definition of a derivative liability due to the contracts obligations. Derivative instruments shall also be measured at fair value at each reporting period with gains and losses recognized in current earnings. The Company calculated the fair value of these instruments using the Black-Scholes pricing model. The significant assumptions used in the calculation of the instruments fair value are detailed in the table below.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

6.	DERIVATIVE LIABILITIES (Continued)

Derivative Liability - Embedded Conversion Features

During the period ended March 31, 2011, the Company recorded a derivative liability of $1,766,238 for the issuance of convertible notes payable. During the period ended March 31, 2011, $225,752 of convertible notes payable was converted into common stock of the Company. The Company performed a final mark-to-market adjustment for the derivative liability related to the convertible notes and the carrying amount of the derivative liability related to the conversion feature of $447,111 was re-classed to additional paid in capital on the date of conversion in the accompanying statements of shareholders’ deficit. During the period ended March 31, 2011, the Company recognized a gain of $1,523,383 based on the change in fair value (mark-to-market adjustment) of the derivative liability associated with the embedded conversion features in the accompanying statement of operations. The value of the derivative liability associated with the embedded conversion features was $3,915,789 at March 31, 2011.

These derivative liabilities have been measured in accordance with fair value measurements, as defined by GAAP. The valuation assumptions are classified within Level 1 inputs and Level 2 inputs. The following table represents the Company’s derivative liability activity for both the embedded conversion features and the warrants:

December 31, 2010	$	4,120,046
Issuance of derivative financial instruments		1,421,399
Conversion or cancellation of derivative financial instruments		(447,111	)
Mark-to-market adjustment to fair value at March 31, 2011		(1,178,544	)
March 31, 2011	$	3,915,790

These instruments were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The instruments do not qualify for hedge accounting, and as such, all future changes in the fair value will be recognized currently in earnings until such time as the instruments are exercised, converted or expire. The following assumptions were used to determine the fair value of the derivative liabilities for the period ended March 31, 2011 and the year ended December 31, 2010:

Weighted- average volatility		59% - 75%
Expected dividends		0.0%
Expected term	3 to 5 years
Risk-free rate	1.32% to 2.95%

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

7.	INCOME TAXES

There was no income tax expense recorded for the three months ended March 31, 2011 due to the Company’s net losses and a 100% valuation allowance on deferred tax assets.

8.	STOCK BASED COMPENSATION

Stock-based compensation cost is measured at the date of grant, based on the calculated fair value of the stock-based award, and is recognized as expense over the employee’s requisite service period (generally the vesting period of the award).

On February 9, 2009, the Company’s Board of Directors adopted the 2009 Equity Incentive Plan authorizing the Board of Directors or a committee to issue options exercisable for up to an aggregate of 13,700,000 shares of common stock. The Company's Share Employee Incentive Stock Option Plan was approved by the shareholders of the Company and the definitive Schedule 14C Information Statement was filed with the SEC on July 14, 2009.

The following weighted average assumptions were used in estimating the fair value of certain share-based payment arrangements as of March 31, 2011 and March 31, 2010:

Annual dividends	0
Expected volatility		59% -75%
Risk-free interest rate		1.76% - 2.70%
Expected life	5 years

Since there is insufficient stock price history that is at least equal to the expected or contractual terms of the Company’s options, the Company has calculated volatility using the historical volatility of similar public entities in the Company’s industry. In making this determination and identifying a similar public company, the Company considered the industry, stage, life cycle, size and financial leverage of such other entities. This resulted in an expected volatility of 59% to 75%.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

8.	STOCK BASED COMPENSATION (Continued)

The expected option term in years is calculated using an average of the vesting period and the option term, in accordance with the “simplified method” for “plain vanilla” stock options allowed under GAAP.

The risk free interest rate is the rate on a zero-coupon U.S. Treasury bond with a remaining term equal to the expected option term. The expected volatility is derived from an industry-based index, in accordance with the calculated value method.

The Company is required to estimate the number of forfeitures expected to occur and record expense based upon the number of awards expected to vest. At March 31, 2011, the Company expects all remaining awards issued will be fully vested over the expected life of the awards. During the period ended March 31, 2011, 4,990,000 employee options were forfeited. The Company made no adjustment for compensation previously recognized on these forfeitures as these awards were vested on the forfeiture date.

Stock Option Activity

A summary of stock option activity for the period ended March 31, 2011 and March 31, 2010 is as follows:

	Number Shares			Weighted Average Exercise Price

Options outstanding at December 31, 2009		11,051,240		$	0.58
Granted		-			-
Exercised		-			-
Forfeited		(1,663,248	)		0.50
Options outstanding at March 31, 2010		9,387,992		$	0.58

Options outstanding at December 31, 2010		7,700,000		$	0.03
Granted		-			-
Exercised		-			-
Forfeited		(4,990,000	)		0.01
Options outstanding at March 31, 2011		2,710,000		$	0.05

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

8.	STOCK BASED COMPENSATION (Continued)

The following table summarizes information about stock options outstanding and exercisable as of March 31, 2011 and March 31, 2010:

	March 31, 2011				March 31, 2010
	Outstanding		Exercisable		Outstanding		Exercisable

Number of shares		2,710,000		1,578,263		9,387,992		9,173,240
Weighted average remaining contractual life		4.11		4.08		3.87		3.87
Weighted average exercise price per share	$	0.05	$	0.06	$	0.58	$	0.55
Aggregate intrinsic value	$	-	$	-	$	-	$	-

The closing price at March 31, 2011 and March 31, 2010 was $0.0007 and $0.11, respectively.

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price as of March 31, 2011 and the weighted average exercise price multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on March 31, 2011. This intrinsic value will vary as the Company’s stock price fluctuates.

Compensation expense arising from stock option grants was $52,618 and $735,654 for the quarters ended March 31, 2011 and 2010, respectively.

The amount of unrecognized compensation cost related to non-vested awards at March 31, 2011 was $287,716. The weighted average period in which this amount is expected to be recognized is 4.11 years.

Stock options outstanding and exercisable at March 31, 2011, and the related exercise price and remaining contractual life are as follows:

		Options Outstanding					Options Exercisable
Exercise Price		Number of Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life of Options Outstanding	Number of Options Exercisable		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life of Options Exercisable

$	0.01		2,510,000	$	0.01	4.21 yrs		1,426,179	$	0.01	4.21 yrs
$	0.50		200,000		0.50	2.87 yrs		152,084		0.50	2.87 yrs

			2,710,000	$	0.05	4.11 yrs		1,578,263	$	0.06	4.08 yrs

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

9.	COMMON STOCK

Common Stock Issued

We are authorized to issue up to 1,750,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. Although the Company does not know the exact amount of dilution which may occur, the number of common shares outstanding on a diluted basis which would result from the conversion or exercise of all outstanding convertible notes, warrants and options is 1,750,000,000.

10.	COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company signed a revocable lease agreement with Apex Telecom, LLC to rent office space at 13125 Danielson Street, Poway, California, 92064. The license period is on a month-to-month basis effective April 19, 2010 through March 31, 2011, subject to certain provisions, at a current rate of $3,230 per month. The Company has extended the license period on a month to month basis at the same rate through May 31, 2011 with the landlord.

The Company leases a test facility in California for $300 per month under a lease which expired on October 31, 2008. Under a new lease effective November 1, 2008, the rent increased to $450 per month. The initial term of this lease is November 1, 2008 through October 31, 2009, with a one-year renewal option for each of the next five years which calls for no increase in rent during the renewal periods. The lease was renewed November 1, 2009. The company is terminating this lease effective April 30, 2011.

Manufacturing Agreement

The Company entered into a three year contract with East West of Thailand on June 14, 2008 to manage the manufacturing and distribution of its products. The contract can be cancelled due to gross nonperformance from East West or the failure to meet milestones. Milestones disclosed in the contract include: development of supply chain, understanding of design package of product to be manufactured, identifying approved suppliers, placing orders based on production planning and managing the implementation of a logistics warehouse for customer orders. If the contract is cancelled due to nonperformance or failure to meet the documented milestones, the Company is not obligated to pay the remainder of the contract. The monthly management fee payable to East West of $16,270 expired in June 2010. The Company paid $0 in management fees to East West during the three months ended March 31, 2011 and March 31, 2010. The East West accounts payable was $0 and $138,295 at March 31, 2011 and March 31, 2010, respectively and the Company had a commitment to pay East West $237,505 for cost related to the prospective manufacturing of inventory and tooling. The Company will record the $237,505 as part of its inventory, tooling and other expenses when legal title transfers from East West to the Company consistent with the Company’s policy for inventory as described in Note 2. On January 23, 2011, the Company received notice from East West that East West deems the Professional Services Agreement dated June 14, 2008 between the Company and East West to be “null and void” due to the Company's past due amounts owed to East West and not being able to resolve the outstanding balance at this time.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

10.	COMMITMENTS AND CONTINGENCIES (Continued)

Legal Matters

From time to time, claims are made against the Company in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting the Company from selling one or more products or engaging in other activities. The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on the Company’s results of operations for that period or future periods.

On March 5, 2010, the Company received a summons to appear in the Supreme Court of the State of New York, County of New York, in a lawsuit filed by Crystal Research Associates, LLC (“Crystal”) alleging the Company failed to pay for services rendered by Crystal in the amount of $33,750. The Company intends to negotiate a payment plan to resolve the outstanding balance and is currently in communication with Crystal management to reach agreement on terms. The total outstanding balance is recorded in accounts payable as of March 31, 2011.

On March 23, 2010, the Company received a Writ of Summons issued from the Superior Court of the State of New Hampshire, Rockingham County, to respond to a lawsuit filed by Alternative Energies, LLC (“Waterline”) relating to claims against the Company under its distribution contract with Waterline. The lawsuit does not specify an amount of damages claimed, however the Company did receive a claim directly from Waterline seeking damages of approximately $250,000. Management does not agree with this claim and is currently defending itself. The Company’s legal counsel responded to the Writ of Summons on May 4, 2010. Waterline was a former distributor of the Company’s products.

Effective April 1, 2010, the Company completed a Settlement Agreement and Mutual Release with Kenneth O. Morgan pursuant to which the Company paid Kenneth O. Morgan the amount of $150,000 in settlement of the previously announced litigation between the parties. Pursuant to the terms of the Settlement Agreement, Kenneth O. Morgan has agreed to dismiss his lawsuit against the Company and Scott Weinbrandt, and the Company has agreed to dismiss its counterclaims against Kenneth O. Morgan.

On May 21, 2010, a complaint was filed by Ian Gardner, the Company's former CEO and a director, against the Company and a director and officer of the Company asserting causes of action against the defendants for breach of certain contracts, breach of the covenants of good faith and fair dealing, fraud in the inducement, intentional and negligent misrepresentation, alter ego and declaratory relief. Mr. Gardner's suit seeks approximately $150,000 in stated damages as well as additional unstated damages. The Company has accrued its anticipated obligation of approximately $95,000 in the financial statements as of December 31, 2010. The Company has denied these allegations. This case is currently pending.

On September 29, 2010, the Company received a summons to appear in the Superior Court in the State of California, County of San Diego, in a lawsuit filed by Gordon & Rees LLP alleging the Company failed to pay for legal services rendered in the amount of $107,110. The Company did not respond to the lawsuit within the 30 day period required to respond. On March 8, 2011, the Superior Court of California, County of San Diego granted Gordon & Rees LLP’s request for a default judgment in the amount of $110,938 in the previously announced lawsuit against the Company. The Company does not have the cash to pay the judgment and expects the default judgment to have a material adverse effect on the Company and its assets. The total outstanding balance is recorded in accounts payable as of March 31, 2011.

On October 6, 2010, the Company received notice issued from the Superior Court of the State of California, County of Orange, of a lawsuit filed by Bluewater Partners, S.A. (“Bluewater”) against the Company seeking damages in the amount of $647,254 relating to allegations that the Company breached its obligations to repay Bluewater under promissory notes issued by the Company. The Company has promissory notes due to Bluewater recorded in short term debt on the balance sheet in the amount of $348,164 (before accrued interest), but does not believe any additional amounts are owed to Bluewater. The Company does not have sufficient capital resources as of the date of this report to repay any amounts to Bluewater, and the Company has not responded to the lawsuit as of the date of this report. On March 2, 2011, the Company received notice that the Superior Court of the State of California, County of Orange (the “Court”) had granted Bluewater Partners, S.A. (“Bluewater”) request for a default judgment in the amount of $647,254 in the previously announced litigation involving the Bluewater promissory notes with the Company. Management does not believe the Company owes any amounts over what has been recorded however, the Company does not have the cash to pay the judgment and expects the default judgment to have a material adverse effect on the Company and its assets.

HELIX WIND, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011 (as restated)

(Unaudited)

10.	COMMITMENTS AND CONTINGENCIES (Continued)

On January 21, 2011, the Company received notice from legal counsel for Squar, Milner, Peterson, Miranda & Williamson, LLP (“Squar Milner”), the Company’s former independent auditor, that Squar Milner has requested a default judgment in its lawsuit against the Company. Squar Milner filed a lawsuit in Orange County Superior Court regarding the alleged unpaid balanced owed by the Company to Squar Milner in the amount of approximately $73,000. Any judgment against the Company resulting from the lawsuit would have a material adverse effect on the Company. The total outstanding balance is recorded in accounts payable as of March 31, 2011

On March 18, 2011, the Company received notice that on March 11, 2011 East West Consulting, Ltd. and Steve Polaski (the “East West Parties”) filed a complaint in the Superior Court of the State of California, County of San Diego, against the Company and Kevin Claudio relating to a professional services agreement and employment agreement between the parties, and the conversion of certain accounts receivable into shares of Company stock. The East West Parties are seeking damages in the sum of over $4,000,000. Management does not believe the Company is obligated to East West for this claim, however any judgment against the Company resulting from the lawsuit would have a material adverse effect on the Company and its assets.

Executive Compensation

An employment agreement executed with the Company’s Chief Financial Officer (CFO) on April 22, 2010 calls for a base salary of $200,000 per annum May 1, 2010 through December 31, 2010; $225,000 per annum January 1, 2011 through December 31, 2011; and $250,000 per annum beginning January 1, 2012. In addition to salary, the CFO has earned and is entitled to $100,000 in total bonuses from 2009 and 2010, which is accrued in the Company’s financials as of March 31, 2011.

11.	SUBSEQUENT EVENTS

Recent new accounting standards require that management disclose the date to which subsequent events have been evaluated and the basis for such date. Accordingly, management has evaluated subsequent events through April 25, 2011, the date upon which the financial statements were issued. Other than as disclosed in Note 11, management noted no subsequent events which it believes would have a material effect on the accompanying consolidated financial statements.

On April 6, 2011, the Company received $50,000 as part of the Note Purchase Agreement executed on March 21, 2011 from the financing transaction with St. George Investments, LLC, an Illinois limited liability company. Reference is made to the Company’s Current Report on Form 8-K that was filed with the SEC on March 23, 2011, and the exhibits of that report, for a complete discussion of the terms and conditions of the Notes and related financing.

On April 19, 2011, the Company received $50,000 as part of the Note Purchase Agreement executed on March 21, 2011 from the financing transaction with St. George Investments, LLC, an Illinois limited liability company. Reference is made to the Company’s Current Report on Form 8-K that was filed with the SEC on March 23, 2011, and the exhibits of that report, for a complete discussion of the terms and conditions of the Notes and related financing.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements and Factors Affecting Future Results

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or the "Securities Act," and Section 21E of the Securities Exchange Act of 1934 or the "Exchange Act." These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or anticipated results.

In some cases, you can identify forward looking statements by terms such as "may," "intend," "might," "will," "should," "could," "would," "expect," "believe," "anticipate," "estimate," "predict," "potential," or the negative of these terms. These terms and similar expressions are intended to identify forward-looking statements. The forward-looking statements in this report are based upon management's current expectations and belief, which management believes are reasonable. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor or combination of factors, or factors we are aware of, may cause actual results to differ materially from those contained in any forward looking statements. You are cautioned not to place undue reliance on any forward-looking statements. These statements represent our estimates and assumptions only as of the date of this report. Except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including:

	●	new competitors are likely to emerge and new technologies may further increase competition;

	●	our operating costs may increase beyond our current expectations and we may be unable to fully implement our current business plan;

	●	our ability to obtain future financing or funds when needed;

	●	our ability to successfully obtain a diverse customer base;

	●	our ability to protect our intellectual property through patents, trademarks, copyrights and confidentiality agreements;

	●	our ability to attract and retain a qualified employee base;

	●	our ability to respond to new developments in technology and new applications of existing technology before our competitors;

	●	acquisitions, business combinations, strategic partnerships, divestures, and other significant transactions may involve additional uncertainties; and

	●	our ability to maintain and execute a successful business strategy.

Other risks and uncertainties include such factors, among others, as market acceptance and market demand for our products and services, pricing, the changing regulatory environment, the effect of our accounting policies, potential seasonality, industry trends, adequacy of our financial resources to execute our business plan, our ability to attract, retain and motivate key technical, marketing and management personnel, and other risks described from time to time in periodic and current reports we file with the United States Securities and Exchange Commission, or the "SEC." You should consider carefully the statements under "Item 1A. Risk Factors" and other sections of this report, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements.

Basis of Presentation

The following management’s discussion and analysis is intended to provide additional information regarding the significant changes and trends which influenced our financial performance for the three month period ended March 31, 2011. This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes as set forth in this report.

Certain statements contained in this Quarterly Report on Form 10-Q are forward-looking in nature and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance or achievements to be materially different from any future results. For a discussion of some of the factors that might cause such a difference, see the Forward-Looking Statements section above or Item 1A – Risk Factors in this Quarterly Report on Form 10-Q.

Overview

Helix Wind is a small wind solutions company focused on the renewable alternative energy market. We develop or acquire small wind products and solutions for different vertical markets worldwide. The Company’s headquarters are located in Poway, California (San Diego area).

Helix Wind provides energy independence utilizing wind, a resource that never runs out. Wind power is an abundant, renewable, emissions free energy source that can be utilized on large and small scales. At the soul of Helix Wind lies the belief that energy self sufficiency is a responsible and proactive goal that addresses the ever-increasing consequences of legacy energy supply systems.

In January 2011, the Company was awarded a Notice of Allowance from the United States Patent and Trademark Office relating to a United States patent application that was filed in 2007. The application broadly covers segmented, helical rotors used in wind-driven turbines and the Company believes this patent will restrict the ability of its competitors from making, using, or selling wind turbines similar to the Company's S322 and S594 products.

Effective as of March 11, 2011, the Board of Directors of the Company appointed James Tilton to the Board of Directors to fill one of the vacancies existing on the Board of Directors, and appointed Mr. Tilton as the Company’s Chief Operating Officer. Kevin Claudio resigned from the Company’s Board of Directors effective as of March 11, 2011. His resignation was not due to any disagreements with the Company. Mr. Claudio currently serves as the Chief Financial Officer of the Company.

There is substantial doubt about our ability to continue as a “going concern” because the Company has incurred continuing losses from operations; has a significant working capital deficit; and has outstanding liabilities which significantly exceed its existing cash resources.

Plan of Operations

Helix Wind’s strategy is to pursue selected opportunities that are characterized by reasonable entry costs, favorable economic terms, high reserve potential relative to capital expenditures and the availability of existing technical data that may be further developed using current technology.

Revenues

We generate substantially all of our net sales from the sale of small wind turbines. Helix Wind uses a mix of a direct and indirect distribution model. Direct sales personnel were employed to offer extra coverage of the United States as a vast majority of our lead generation is from this area. Our distribution network structure is built on a non-exclusivity of territory but exclusivity of leads. Therefore, we define a reasonable territory the distributors can cover from a sales and service point of view. We demand no reselling of our products as well as define a retail price which must be adhered to by all distributors, as a condition of their agreement with Helix Wind. Pricing in the Euro zone is subject to the fluctuation of the exchange rate between the euro and U.S. dollar. Distributors must adhere to the price guidelines which are based on our U.S. retail price, subject to adjustment each quarter to take into account the currency exchange on the last day of the previous quarter. Confirmation of an order is given on receipt of a signed purchase agreement with a 50% deposit in U.S. dollars. Sales are recognized and title and risk is passed on delivery to customers in the United States and by delivery CIF to international locations. Our customers do not have extended payment terms or rights of cancellation under these contracts.

Cost of Sales

Our cost of sales includes the cost of raw material and components such as blades, rotors, invertors, mono poles and other components. Other items contributing to our cost of sales are the direct assembly labor and manufactured overhead from our component suppliers and East West, a Thailand company that managed the manufacturing and distribution of our products. Overall, we would expect our cost of sales per unit to decrease as production lots ramp to meet the product demands from our customers.

Gross Profit

Gross profit is affected by numerous factors, including our average selling prices, distributor discounts, foreign exchange rates, and our manufacturing costs. Another factor impacting gross profits is the ramp of production going forward. As a result of the above, gross profits may vary from quarter to quarter and year to year.

Research and development.

Research and development expense consists primarily of salaries and personnel-related costs and the cost of products, materials and outside services used in our process and product research and development activities.

Selling, general and administrative

Selling, general and administrative expense consists primarily of salaries and other personnel-related costs, professional fees, insurance costs, travel expense, other selling expenses as well as share based compensation expense relating to stock options. We expect these expenses to increase in the near term, both in absolute dollars and as a percentage of net sales, in order to support the growth of our business as we expand our sales and marketing efforts, improve our information processes and systems and implement the financial reporting, compliance and other infrastructure required by a public company. Over time, we expect selling, general and administrative expense to decline as a percentage of net sales as our net sales increase.

Other Expenses

Interest expense, net of amounts capitalized, is incurred on various debt financings as well as the amount recorded for the derivative liability associated with convertible notes and warrants. Any interest income earned on our cash, cash equivalents and marketable securities is netted in other expenses as it is immaterial.

Use of estimates

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, net sales and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to inventories, intangible assets, income taxes, warranty obligations, marketable securities valuation, derivative financial instrument valuation, end-of-life collection and recycling, contingencies and litigation and share based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Results of Operations – For the three months ended March 31, 2011 compared to the three months ended March 31, 2010

Revenues

Revenue decreased by $5,637 from $5,637 for the three months ended March 31, 2010 to $0 for the three months ended March 31, 2011, as a result of shipping 1 S322 model to a customer during the first quarter of 2010. The Company recorded no sales during the first quarter of 2011.

Cost of Revenues

The cost of revenues of $4,454 for the three months ended March 31, 2010 represented the direct product costs from the manufacturer associated with the bill of material for the S-322 received by the customer in the first quarter of 2010. Due to the decrease in sales, the cost of revenues decreased $4,454 to $0 for the three months ended March 31, 2011.

Gross Profit

Gross profit decreased by $1,183 from $1,183 in the three months ended March 31, 2010 to $0 in the three months ended March 31, 2011, reflecting a decrease in revenue.

Research and development

Cost incurred for research and development are expensed as incurred. Research and development expense decreased by $78,015 from $93,301 for the three months ended March 31, 2010 to $15,286 for the three months ended March 31, 2011, as a result of a $13,730 decrease in the amount recorded for share based compensation expense related to stock options as well as a $64,285 decrease in product development costs.

Selling, general, and administrative

Selling, general and administrative expense decreased by $301,802 from $608,169 in the three months ended March 31, 2010 to $306,367 in the three months ended March 31, 2011, primarily as a result of compensation to management and employees decreasing by $163,917, shipping costs decreasing by $32,108, professional fees decreasing by $716,157, financing costs related to replenishment of common stock decreasing by $132,000, rent decreasing by $11,685, telephone costs decreasing by $4,771, outside services decreasing by $29,117, taxes decreasing by $6,393, and depreciation decreasing by $8,695. These decreases were offset by an increase of $802,002 for share based payments related to stock options, and various other expenses increasing by $1,039.

Other expense

Other expenses increased by $ 19,327,013 , from income of $18,992,414 in the three months ended March 31, 2010 to an expense of $ 334,599 in the three months ended March 31, 2011, primarily as a result in the change in the fair value of the derivative increasing by $ 24,406,689 , and interest expense relating to the fair value of the convertible notes and other expenses decreasing by $5,079,676.

Provision for income taxes

We made no provision for income taxes for the three months ended March 31, 2011 and 2010 due to net losses incurred except for minimum tax liabilities. We have determined that due to our continuing operating losses as well as the uncertainty of the timing of profitability in future periods, we should fully reserve our deferred tax assets.

Net Loss

Net income decreased by $ 18,948,379 from net income of $18,291,327 for the three months ended March 31, 2010 to a net loss of $ 657,052 for the three months ended March 31, 2011, primarily as a result of the increase in the change of the fair value of the derivative liability of $ 24,406,689 , an increase in share based compensation of $788,272, a decrease in interest expense relating to the fair value of the convertible notes and other expenses of $5,079,676, all non-cash charges. The remaining amount of the decrease relates to various operating expenses.

Going Concern

There is substantial doubt about our ability to continue as a “going concern” because the Company has incurred continuing losses for operations, has negative working capital of $2,495,263 excluding the derivative liability of $ 3,915,790 and accumulated deficit of $ 44,647,744 at March 31, 2011.

Financial Condition and Liquidity

Liquidity and Capital Resources

Cash flow information is as follows:

	Three Months Ended March 31,						Twelve Months Ended March 31,
	2011			2010			2011			2010
	(in thousands)						(in thousands)
Operating activities	$	(156	)	$	(415	)	$	(1,398	)	$	(2,878	)
Investing activities	$	(13	)	$	-		$	(27	)	$	(292	)
Financing activities	$	150		$	415		$	1,492		$	2,870

Cash used in operating activities was approximately $156,000 and $415,000 for the period ended March 31, 2011 and March 31, 2010, respectively. The $156,000 cash used for the period ended March 31, 2011 was primarily the result of the net loss of approximately $ 657,000 and a $1,178,000 decrease in the change in fair value of the derivative warrant liability, offset by interest recorded in connection with the derivative liability of approximately $ 1,260,000 , a write off of debt discount on converted debt of approximately $225,000, accrued interest on convertible notes of approximately $113,000 and other changes of approximately $79,000. The $415,000 cash used for the period ended March 31, 2010 was primarily the result of the net income of approximately $18,300,000 and a $26,000,000 decrease in the change in fair value of the derivative warrant liability, a $735,000 decrease in stock based compensation, and funds due from an investor of $592,000, offset by interest recorded in connection with the derivative liability of approximately $1,747,000, a write off of debt discount on converted debt of approximately $1,686,000, a non cash loss of $2,158,000 on termination of an acquisition agreement, issuance of common stock of $2,700,000 for services and other changes of approximately $321,000.

Cash used in investing activities was approximately $13,000 and $0 for the period ended March 31, 2011 and March 31, 2010, respectively, and was a result of our investment in the patent of our wind turbine technology.

Cash provided by financing activities was approximately $150,000 and $415,000 for the period ended March 31, 2011 and March 31, 2010, respectively, which was the result of proceeds received from short-term financing from convertible notes with St. George Investments in first quarter 2011 and $715,000 of proceeds received in first quarter 2010 of which $685,000 was received from convertible notes with St. George Investments and $30,000 was received as part of a short term loan with Bluewater Partners. In addition, a principal payment of $300,000 was made in first quarter 2010 offsetting the aggregate short term note balance with Bluewater Partners.

As of March 31, 2011 and December 31, 2010, Helix Wind had a working capital deficit of $ 6,411,053 and $ 6,525,406 respectively. The negative working capital at March 31, 2011 results primarily from the derivative liability relating to the convertible notes and fair value of the warrants of $ 3,915,790 , short term debt of $543,164, accrued interest of $450,607, accounts payable of $971,592, accrued compensation of $291,117, and other charges to various accounts totaling $238,783. The negative working capital at December 31, 2010 results primarily from the derivative liability relating to the convertible notes and fair value of the warrants of $ 4,120,046 , short term debt of $543,164, accrued interest of $380,977, accounts payable of $936,858, accrued compensation of $291,117, and other charges to various accounts totaling $253,244. The loss of $ 657,052 for the three months ended March 31, 2011 was comprised of expenses of $15,286 for research and development, $1,950 for sales and marketing, share based compensation for stock options of $52,618, and offset by a net decrease of $1,178,544 resulting from the change in fair value of the derivative liability relating to the convertible notes and fair value of warrants and interest, other income of $100,457 and the balance for working capital relating to general and administrative expenses. The income of $18,291,327 for the three months ended March 31, 2010 was comprised of a decrease of $25,930,072 in change in fair value of derivative liabilities, offset by a loss of $2,158,591 on abundant Renewable Energy purchase agreement termination, interest expense of $4,784,109 and the balance in the company’s first quarter 2010 operating expenses.

The Company has funded its operations to date through the private offering of debt and equity securities.

The Company expects significant capital expenditures during the next 12 months, contingent upon raising capital. We currently anticipate that we will need substantial cash and liquidity for operations for the next 12 months and we do not have sufficient cash on hand to meet this requirement. These anticipated expenditures are for manufacturing of systems, infrastructure, overhead, and working capital purposes.

The Company presently does not have any available credit, bank financing or other external sources of liquidity. Due to its brief history and historical operating losses, the Company’s operations have not been a source of liquidity. The Company will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, the Company may need to sell additional shares of its common stock or borrow funds from private lenders. There can be no assurance that the Company will be successful in obtaining additional funding.

The Company will need additional investments in order to continue operations. Additional investments are being sought, but the Company cannot guarantee that it will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, the trading price of the Company’s common stock and a downturn in the U.S. stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Additionally, because the Company has exhausted all of its authorized shares of common stock, the Company will need to amend its articles of incorporation to authorize the issuance of additional shares before it can sell any additional shares. The Company believes it will be difficult or impossible to raise additional funding without amending its Articles of Incorporation to increase its authorized shares. Even if the Company is able to raise the funds required, it is possible that it could incur unexpected costs and expenses, fail to collect significant amounts owed to it, or experience unexpected cash requirements that would force it to seek alternative financing. Further, if the Company amends its articles of incorporation to increase its authorized shares and issues additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of the Company’s common stock.

Effective January 20, 2011, the Company’s previously announced purchase order with its distributor SWG Energy, Inc. to provide twenty-four (24) S594 wind turbines for the Oklahoma Medical Research Foundation has been cancelled due to the Company's failue to perform in a timely fashion and each Party’s inability to finalize definitive terms, conditions and timeline to perform under the purchase order at this time.

Off-balance sheet arrangements

We have no off-balance sheet arrangements.

Contractual Obligations

Effective as of January 19, 2011, the Company closed a financing transaction under a Note Purchase Agreement with St. George Investments, LLC, an Illinois limited liability company which, among other things, the Company issued a convertible secured promissory note in the aggregate principal amount of $72,500. The Purchase Agreement also provides that, subject to meeting certain conditions, and no Event of Default has occurred under any of the notes, the Investor may, in its sole and absolute discretion, issue to the Company up to $455,000 of notes pursuant to seven additional notes in the principal amount of $65,000 each on or about each two week anniversary of the issuance of the first note during the seven consecutive two week periods immediately following such issuance of the First Note, for a total aggregate additional net cash amount of $350,000 (after deducting the original issue discount amounts of $15,000 for each additional note).

Effective as of March 21, 2011, the Company executed a Purchase and Exchange Agreement (the “First Exchange Agreement”) with St. George Investments, LLC, an Illinois limited liability company (the “Investor”) pursuant to which, among other things, the Company agreed to exchange 4 outstanding convertible promissory notes in the aggregate amount of $1,176,347 for a secured convertible promissory note in the amount of $1,176,347 (the “First Note”), and the Company executed a Purchase and Exchange Agreement (the “Second Exchange Agreement”) with the Investor pursuant to which, among other things, the Company agreed to exchange 14 outstanding convertible promissory notes in the aggregate amount of $1,430,441 for a secured convertible promissory note in the amount of $1,430,441 (the “Second Note”). The First Note and Second Note are both secured by all of the assets of the Company pursuant to the terms of a Security Agreement for each of the First Note and Second Note. The Company’s obligations under the First Note and Second Note are also guaranteed by the Company’s subsidiary, Helix Wind, Inc., pursuant to the terms of a Guaranty for each of the First Note and Second Note.

The First Exchange Agreement, Second Exchange Agreement, First Note, Second Note, Security Agreements and Guaranties are referred to herein as the “Exchange Agreements.” The Exchange Agreements also contain representations, warranties and indemnifications by the Company and the Investor.

As consideration for the Exchange Agreements, Investor agreed to pay the Company the sum of $100,000 (which sum was not added to the balance of the notes), all existing defaults under the First Note and Second Note were waived and all covenants thereunder were reset according to the terms thereof. Additionally, the First Note and Second Note have certain terms that are more favorable to the Company than the current terms of the original 18 notes which were exchanged, including a two-year term, an interest rate of 6% per annum, and an ability to extinguish the First Note and Second Note for the Company’s payment of $1,500,000 if paid within 90 days.

In connection with the Exchange Documents, the Company and Investor also entered into a Forbearance Agreement pursuant to which, among other things:

●

Investor agreed to refrain and forbear from exercising and enforcing any of its remedies under the Convertible Secured Promissory Note dated March 30, 2010 (the “March 2010 Note”) in the original principal amount of $779,500.00, or under applicable laws, with respect to the defaults, for a period of 90 days from the date of the Forbearance Agreement;

●

Provided that the Company pays the Investor the sum of $1,500,000.00 in cash on or before the 90th day from the date of the Forbearance Agreement, the Investor agrees that, upon receipt of the payment, each of the First Note, Second Note and March 2010 Note (collectively, the “Notes”) shall be terminated and the Company shall be released from all obligations and liabilities thereunder; and

●

Notwithstanding anything to the contrary in the Exchange Agreements or in that certain Note Purchase Agreement between the Company and Borrower dated January 18, 2011 (the “January 2011 Purchase Agreement”), so long as (1) no Event of Default (as defined in the First Note and Second Note) (and in the case of the March 2010 Note, no new Event of Default after the date of the Forbearance Agreement) has occurred under any of the Notes, (2) each of the representations and warranties of Borrower in the Exchange Agreements and the January 2011 Purchase Agreement remain true and correct as of the date of purchase of each Additional Note (as defined below), (3) the Company has increased its authorized shares of common stock to not less than 5,000,000,000 shares as of the date of purchase of such Additional Note, and (4) the Company has complied with all of its obligations and covenants herein, in the Notes, in the Exchange Agreements and in the January 2011 Purchase Agreement as of such date, the Company agrees to deliver to Borrower the sum of $50,000.00 (the “Additional Note Purchase Price”) on or around each of April 1, 2011, April 15, 2011, May 1, 2011, May 15, 2011 and June 1, 2011 as consideration for those certain Additional Notes (the “Additional Notes”) as defined in the January 2011 Purchase Agreement.

The Purchase and Exchange Agreements also contain numerous affirmative covenants on the Company, including, without limitation, a requirement for the Company to maintain its SEC reporting status, timely file all SEC reports, and increase its authorized shares of common stock to 5,000,000,000 within 45 days of the date of the Purchase and Exchange Agreements.

These summaries are not complete, and are qualified in their entirety by reference to the full text of the agreements that are attached as exhibits on Forms 8-K for these transactions. Readers should review those agreements for a more complete understanding of the terms and conditions associated with this transaction.

Critical Accounting Policies

Our discussion and analysis of our results of operations and liquidity and capital resources are based on our unaudited condensed consolidated financial statements as of and for the quarters ended March 31, 2011 and 2010, which have been prepared in accordance with GAAP.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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 financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates include those related to the debt discount, valuation of derivative liabilities and stock based compensation, and those associated with the realization of long-lived assets.

Long-lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of the impairment review, assets are reviewed on an asset-by-asset basis. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of each asset to future net cash flows expected to be generated by such asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount which the carrying amount of the assets exceeds the fair value of the assets. The Company has appropriately evaluated its equipment and patents for impairment as of March 31, 2011 and December 31, 2010 and through each period and does not believe that the assets are impaired as of each reporting date. Management will continue to assess the valuation of its equipment and patents as it restructures.

Derivative Liabilities and Classification

We evaluate free-standing instruments (or embedded derivatives) indexed to the Company’s common stock to properly classify such instruments within equity or as liabilities in our financial statements. Accordingly, the classification of an instrument indexed to our stock, which is carried as a liability, must be reassessed at each balance sheet date. If the classification changes as a result of events during a reporting period, the instrument is reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified.

Stock Based Compensation

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company” as defined by Rule 229.10(f)(1), we are not required to provide the information required by this Item 3.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 ("Exchange Act"), our management, under the supervision and with the participation of our Chief Operating Officer (who is our executive principal officer) and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March 31, 2011, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Operating Officer and Chief Financial Officer concluded that, as of March 31, 2011, our disclosure controls and procedures were not effective. Disclosure controls and procedures means controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

We have identified material weaknesses in our internal control over financial reporting related to the following matters:

●

We identified a lack of sufficient segregation of duties. Specifically, this material weakness is such that the design over these areas relies primarily on detective controls and could be strengthened by adding preventative controls to properly safeguard company assets.

●

Management has identified a lack of sufficient personnel in the accounting function due to our limited resources with appropriate skills, training and experience to perform certain tasks as it relates to valuation of share based payments, the valuation of warrants, and other complex debt / equity transactions. Specifically, this material weakness lead to segregation of duties issues and resulted in adjustments to the condensed consolidated financial statements and disclosures, share based payments, valuation of warrants and other equity transactions.

Our plan to remediate those material weaknesses remaining is as follows:

●

Improve the effectiveness of the accounting group by continuing to augment our existing resources with additional consultants or employees to improve segregation procedures and to assist in the analysis and recording of complex accounting transactions. We plan to mitigate the segregation of duties issues by hiring additional personnel in the accounting department once we generate significantly more revenue, or raise significant additional working capital.

●

Improve segregation procedures by strengthening cross approval of various functions including quarterly internal audit procedures where appropriate.

In the fiscal quarter ended March 31, 2011, James Tilton was appointed as the Chief Operating Officer and a director of the Company, and Kevin Claudio resigned as a director of the Company. Mr. Tilton is considered to be the principal executive officer of the Company. Other than these changes, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the most recent fiscal quarter, there has not occurred any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

On March 23, 2010, the Company received a Writ of Summons issued from the Superior Court of the State of New Hampshire, Rockingham County, to respond to a lawsuit filed by Alternative Energies, LLC (“Waterline”) relating to claims against the Company under its distribution contract with Waterline. The lawsuit does not specify an amount of damages claimed. As previously announced, the Company did receive a claim from Waterline seeking damages of approximately $250,000. The Company’s legal counsel responded to the Writ of Summons on May 4, 2010 and the Company intends to defend itself in the lawsuit. Waterline was a former distributor of the Company’s products.

On October 6, 2010, the Company received notice issued from the Superior Court of the State of California, County of Orange, of a lawsuit filed by Bluewater Partners, S.A. (“Bluewater”) against the Company seeking damages in the amount of $647,254 relating to allegations that the Company breached its obligations to repay Bluewater under promissory notes issued by the Company. The Company has promissory notes due to Bluewater recorded on its financials in the amount of $348,164 (before accrued interest), but does not believe any additional amounts are owed to Bluewater. The Company does not have sufficient capital resources as of the date of this report to repay any amounts to Bluewater, and the Company has not responded to the lawsuit as of the date of this report. On March 2, 2011, the Company received notice that the Superior Court of the State of California, County of Orange (the “Court”) had granted Bluewater Partners, S.A. (“Bluewater”) request for a default judgment in the amount of $647,254.18 in the previously announced litigation involving the Bluewater promissory notes with the Company. The Company does not have the cash to pay the judgment and expects the default judgment to have a material adverse effect on the Company and its assets.

On March 18, 2011, the Company received notice that on March 11, 2011 East West Consulting, Ltd. and Steve Polaski (the “East West Parties”) filed a complaint in the Superior Court of the State of California, County of San Diego, against the Company and Kevin Claudio relating to a professional services agreement and employment agreement between the parties, and the conversion of certain accounts receivable into shares of Company stock. The East West Parties are seeking damages in the sum of over $4,000,000. Any judgment against the Company resulting from the lawsuit would have a material adverse effect on the Company and its assets.

Item 1A. Risk Factors

This report includes forward-looking statements about our business and results of operations that are subject to risks and uncertainties. See "Forward-Looking Statements," above. Factors that could cause or contribute to such differences include those discussed below. In addition to the risk factors discussed below, we are also subject to additional risks and uncertainties not presently known to us or that we currently deem immaterial. If any of these known or unknown risks or uncertainties actually occur, our business could be harmed substantially.

Risks Related To Our Financial Condition and Our Business

Our auditors have expressed substantial doubt amount our ability to continue as a “going concern”. Accordingly, there is significant doubt about our ability to continue as a going concern.

Our business began recording minimal revenues in 2009 and we may never become profitable. As of March 31, 2011, we had an accumulated deficit of $ 44,647,744 and a negative working capital of $2,495,263 excluding the derivative liability of $ 3,915,790 . A significant amount of capital will be necessary to advance the development of our products to the point at which they will become commercially viable and these conditions raise substantial doubt about our ability to continue as a going concern.

If we continue incurring losses and fail to achieve profitability, we may have to cease our operations. Our financial condition raises substantial doubt that we will be able to continue as a “going-concern”, and our independent auditors included an explanatory paragraph regarding this uncertainty in their report on our financial statements as of March 31, 2011. These financial statements do not include any adjustments that might result from the uncertainty as to whether we will continue as a “going-concern”. Our ability to continue as a “going-concern” is dependent upon our generating cash flow sufficient to fund operations. Our business plans may not be successful in addressing these issues. If we cannot continue as a “going-concern”, you may lose your entire investment in us.

We do not have sufficient cash on hand. If we do not generate sufficient revenues from sales among other factors, we will be unable to continue our operations.

We estimate that within the next 12 months we will need substantial cash and liquidity for operations, and we do not have sufficient cash on hand to meet this requirement. Although we are seeking additional sources of debt or equity financings, there can be no assurances that we will be able to obtain any additional financing. We recognize that if we are unable to generate sufficient revenues or obtain debt or equity financing, we will not be able to earn profits and may not be able to continue operations.

There is limited history upon which to base any assumption as to the likelihood that we will prove successful, and we may not be able to continue to generate enough operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.

Additionally, as described in more detail below, the significant dilution to the current number of outstanding shares of Company common stock, which is expected to occur from the conversion of the Company’s currently outstanding convertible promissory notes and warrants makes obtaining additional financing very difficult.

We have numerous lawsuits pending against the Company, several of which have resulted in judgments against the Company, and insufficient capital resources to retain legal counsel to respond to the lawsuits; we expect additional lawsuits to occur from unpaid creditors of the Company.

As described in Part II, Item 1 “Legal Proceedings”, the Company has numerous lawsuits pending against it, several of which have resulted in judgments against the Company for substantial sums of money, and reasonably expects additional lawsuits to be filed by creditors with outstanding unsatisfied debt obligations owed to them by the Company. The Company has insufficient capital to retain legal counsel to defend itself in these actions and/or may not have any defense against the legal actions claiming the Company owes the creditor for services provided. Additionally, the Company does not have sufficient capital to pay the judgments which have been awarded against the Company The default judgments which have been awarded against the Company, and additional judgments in any of these pending lawsuits or future lawsuits, could result in the seizure of all remaining assets of the Company which would have a material adverse effect on the Company. If the judgments remain unpaid, the Company may be forced to seek the protection afforded by Chapter 7 of the federal bankruptcy laws, or seek the protection of state insolvency laws, which would have a material adverse effect on the Company and its shareholders.

We have a limited operating history and if we are not successful in continuing to grow the business, then we may have to scale back or even cease ongoing business operations.

We have a very limited history of revenues from operations (approximately $1,300,000 from inception to date). We have yet to generate positive earnings and there can be no assurance that we will ever operate profitably. Operations will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the absence of a significant operating history. We may be unable to sign customer contracts or operate on a profitable basis. As we are in the early production stage, potential investors should be aware of the difficulties normally encountered in commercializing the product. If the business plan is not successful, and we are not able to operate profitably, investors may lose some or all of their investment in us.

If we are unable to obtain additional funding, business operations will be harmed and if we do obtain additional financing then existing shareholders may suffer substantial dilution.

We anticipate that we will require substantial cash and liquidity, which we do not have at this time, to fund continued operations for the next twelve months, depending on revenue, if any, from operations. Additional capital will be required to effectively support the operations and to otherwise implement our overall business strategy. We currently do not have any contracts or commitments for additional financing. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. The inability to obtain additional capital will restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will likely be required to curtail and possibly cease operations. Any additional equity financing may involve substantial dilution to then existing shareholders.

We have significant debt obligations, and if we fail to restructure or repay or outstanding indebtedness, the lenders may take actions that would have a material adverse impact on the Company.

The Company has significant outstanding indebtedness. As of March 31, 2011, the Company had a gross aggregate outstanding principal balance of $4,288,831 in convertible debt obligations. If the lenders under these convertible notes do not convert their notes to common stock and demand repayment, the Company does not have sufficient cash to pay its debt obligations. Our failure to repay this debt could result in events of default under the convertible notes which provide the lenders with certain rights, including the right to institute an involuntary bankruptcy proceeding against the Company. If the debt remains unpaid past the due dates and the lenders choose to exercise their rights of default, the Company may be forced to seek the protection afforded by Chapter 7 of the federal bankruptcy laws which would have a material adverse effect on the Company. The Company’s default on its debt obligations or potential need to seek protection under the federal bankruptcy laws raise substantial doubt about our ability to continue as a going concern.

Because we are small and have insufficient capital, we may have to limit business activity which may result in a loss of your investment.

Because we are small and do not have much capital, we must limit our business activity. As such we may not be able to manufacture product or complete the sales and marketing efforts required to drive our sales. In that event, if we cannot generate revenues, you will lose your investment.

If we are unable to continue to retain the services of Messrs. James Tilton and Kevin Claudio, or if we are unable to successfully recruit qualified Officers and Board members, management and company personnel having experience in the small wind turbine industry, we may not be able to continue operations.

Our success depends to a significant extent upon the continued services of Mr. James Tilton, Chief Operating Officer and Mr. Kevin Claudio, Chief Financial Officer. The loss of the services of Mr. Tilton and Mr. Claudio could have a material adverse effect on our strategy and prospective business. These individuals are committed to devoting substantially all of their time and energy to us. This employee could leave us with little or no prior notice. We do not have “key person” life insurance policies covering any of our employees. Additionally, there are a limited number of qualified technical personnel with significant experience in the design, development, manufacture, and sale of our wind turbines, and we may face challenges hiring and retaining these types of employees.

In order to successfully implement and manage our business plan, we will be dependent upon, among other things, successfully recruiting qualified management and company personnel with experience in the small wind turbine business. Competition for qualified individuals is intense. There can be no assurance that we will be able to find, attract and retain new and existing employees or that we will be able to find, attract and retain qualified personnel on acceptable terms. Additionally, the Company has made efforts to identify and recruit additional members for its board of directors. However, to date, the Company has been unable to retain any additional board members, and the board members it has identified have expressed a reluctance to join the board until the Company is better capitalized.

We are a new entrant into the small wind turbine industry without profitable operating history.

As of March 31, 2011, we had an accumulated deficit of $ 44,647,744 . We expect to derive our future revenues from sales of our systems, however, the realization of these revenues is highly uncertain. We continue to devote substantial resources to expand our sales and marketing activities, further increase manufacturing capacity, and expand our research and development activities. As a result, we expect that our operating losses will increase and that we may incur operating losses for the foreseeable future.

If we are unable to successfully achieve broad market acceptance of our systems, we may not be able to generate enough revenues in the future to achieve or sustain profitability.

We are dependent on the successful commercialization of our systems. The market for small wind turbines is at an early stage of development and unproven. The technology may not gain adequate commercial acceptance or success for our business plan to succeed.

If we cannot establish and maintain relationships with distributors, we may not be able to increase revenues.

In order to increase our revenues and successfully commercialize our systems, we must establish and maintain relationships with our existing and potential distributors. A reduction, delay or cancellation of orders from one or more significant distributors could significantly reduce our revenues and could damage our reputation among our current and potential customers. We had previously signed 33 distribution agreements throughout the United States and international locations. The agreements have no termination penalties and not all of the distributors are currently active.

We were recently sued by one of our distributors and may face additional lawsuits in the future.

We were recently named in a lawsuit by one of our distributors for claims which include misrepresentation, breach of contact, breach of warranties and unfair practices under consumer protection statutes relating to our products and performance under the distribution agreement. While we believe we have defenses to these claims, there is a potential that the claims could be decided against us, which could result on our obligation to pay damages to the distributor, which would have an adverse effect on our financial condition. Additionally, we could face similar lawsuits from distributors or customers in the future.

If we can not assemble a large number of our systems, we may not meet anticipated market demand or we may not meet our product commercialization schedule.

To be successful, we will have to assemble our systems in large quantities at acceptable costs while preserving high product quality and reliability. If we cannot maintain high product quality on a large scale, our business will be adversely affected. We may encounter difficulties in scaling up production of our systems, including problems with the supply of key components, even if we are successful in developing our assembly capability, we do not know whether we will do so in time to meet our product commercialization schedule or satisfy the requirements of our customers. In addition, product enhancements need to be implemented to various components of the platform to provide better overall quality and uptime in high wind regimes. The system is now rated to support 100 mph sustained winds. The implementation of the enhancements to our system may also delay significant production by requiring additional manufacturing changes and technical support to facilitate the manufacturing process.

If we are unable to raise sufficient capital, we may not be able to pay our key suppliers.

Our ability to pay key suppliers on time will allow us to effectively manage our business. Currently we have a large outstanding liability with our product manufacturer that is inhibiting us from receiving additional units at this time. In addition, we have other large outstanding accounts payable with key suppliers that may inhibit the Company from receiving system product in the future.

If we experience quality control problems or supplier shortages from component suppliers, our revenues and profit margins may suffer.

Our dependence on third-party suppliers for components of our systems involves several risks, including limited control over pricing, availability of materials, quality and delivery schedules. Any quality control problems or interruptions in supply with respect to one or more components or increases in component costs could materially adversely affect our customer relationships, revenues and profit margins.

International expansion will subject us to risks associated with international operations that could increase our costs and decrease our profit margins.

International operations are subject to several inherent risks that could increase our costs and decrease our profit margins including:

- reduced protection of intellectual property rights;

- changes in foreign currency exchange rates;

- changes in a specific country’s economic conditions;

- trade protective measures and import or export requirements or other restrictive actions by foreign governments; and

- changes in tax laws.

If we cannot effectively manage our internal growth, our business prospects, revenues and profit margins may suffer.

If we fail to effectively manage our internal growth in a manner that minimizes strains on our resources, we could experience disruptions in our operations and ultimately be unable to generate revenues or profits. We expect that we will need to significantly expand our operations to successfully implement our business strategy. As we add marketing, sales and build our infrastructure, we expect that our operating expenses and capital requirements will increase. To effectively manage our growth, we must continue to expend funds to improve our operational, financial and management controls, and our reporting systems and procedures. In addition, we must effectively expand, train and manage our employee base. If we fail in our efforts to manage our internal growth, our prospects, revenue and profit margins may suffer.

Our technology competes against other small wind turbine technologies. Competition in our market may result in pricing pressures, reduced margins or the inability of our systems to achieve market acceptance.

We compete against several companies seeking to address the small wind turbine market. We may be unable to compete successfully against our current and potential competitors, which may result in price reductions, reduced margins and the inability to achieve market acceptance. The current level of market penetration for small wind turbines is relatively low and as the market increases, we expect competition to grow significantly. Our competition may have significantly more capital than we do and as a result, they may be able to devote greater resources to take advantage of acquisition or other opportunities more readily.

Our inability to protect our patents and proprietary rights in the United States and foreign countries could materially adversely affect our business prospects and competitive position.

Our success depends on our ability to obtain and maintain patent and other proprietary-right protection for our technology and systems in the United Stated and other countries. If we are unable to obtain or maintain these protections, we may not be able to prevent third parties from using our proprietary rights.

If we cannot effectively increase and enhance our sales and marketing capabilities, we may not be able to increase our revenues.

We need to further develop our sales and marketing capabilities to support our commercialization efforts. If we fail to increase and enhance our marketing and sales force, we may not be able to enter new or existing markets. Failure to recruit, train and retain new sales personnel, or the inability of our new sales personnel to effectively market and sell our systems, could impair our ability to gain market acceptance of our systems.

If we encounter unforeseen problems with our current technology offering, it may inhibit our sales and early adoption of our product.

We continue to improve on the products performance capabilities, but any unforeseen problems relating to the units operating effectively in the field could have a negative impact on adoption, future shipments and our operating results.

We are to establish and maintain required disclosure controls and procedures and internal controls over financial reporting and to meet the public reporting and the financial requirements for our business.

Our management has a legal and fiduciary duty to establish and maintain disclosure controls and control procedures in compliance with the securities laws, including the requirements mandated by the Sarbanes-Oxley Act of 2002. The standards that must be met for management to assess the internal control over financial reporting as effective are new and complex, and require significant documentation, testing and possible remediation to meet the detailed standards. Because we have limited resources, we may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting, and disclosure controls and procedures. In addition, the attestation process by our independent registered public accounting firm is new and we may encounter problems or delays in completing the implementation of any requested improvements and receiving an attestation of our assessment by our independent registered public accounting firm. If we cannot assess our internal control over financial reporting as effective or provide adequate disclosure controls or implement sufficient control procedures, or our independent registered public accounting firm is unable to provide an unqualified attestation report on such assessment, investor confidence and share value may be negatively impacted.

Risks Related to Common Stock

There is a significant risk of our common shareholders being diluted as a result of our outstanding convertible securities.

We have 1,750,000,000 shares of common stock issued and outstanding as of the date of this report, which is all of the shares which are authorized under our charter documents. We also have outstanding a gross aggregate principal balance of $4,288,831 of Convertible Notes as of March 31, 2011 which may be converted into shares of common stock at the conversion rate as provided in the convertible notes. Because the conversion rate under the Convertible Notes is at a discounted price from the trading price of the Company’s common stock, and the low trading price of the Company’s common stock, any additional conversions of these Convertible Notes would result in the issuance of a significant amount of additional shares of common stock which will dilute the ownership interest of our shareholders. The conversion of these Convertible Notes, exercise of warrants and new stock issued during the year resulted in an increase in the number of the Company’s issued and outstanding shares of common stock from 1,021,482,054 as of December 31, 2010 to 1,750,000,000 shares issued and outstanding as of March 31, 2011. In addition, we recently completed financings described in this report with St. George Investments, LLC pursuant to which we issued a convertible note and warrants which, if exercised, would result in a significant amount of additional shares of common stock outstanding. Further, we anticipate the need to raise additional capital which would also result in the issuance of additional shares of common stock and/or securities convertible into our common stock. We also have outstanding warrants to purchase common stock the exercise of which could potentially result in the Company issuing a significant number of additional shares of common stock. The Company may seek shareholder approval to amend its articles of incorporation to increase the number of authorized shares of common stock, and if amended, continue to issue a significant number of additional shares of common stock. Accordingly, a common shareholder has a significant risk of having its interest in our Company being significantly diluted.

The large number of shares eligible for immediate and future sales may depress the price of our stock.

Our Articles of Incorporation authorize the issuance of 1,750,000,000 shares of common stock, $0.0001 par value per share and 5,000,000 shares of preferred stock, $0.0001 par value per share. As discussed above, we had 1,750,000,000 shares of common stock outstanding as of the date of this report, and the Company has contractual obligations to issue a significant amount of additional shares issuable upon exercise and conversion of our outstanding warrants, stock options and convertible notes.

Because we have exhausted all of our authorized shares of common stock, we may amend our articles of incorporation to authorize the issuance of additional shares for a variety of reasons which would have a dilutive effect on our shareholders and on your investment, resulting in reduced ownership in our company and decreased voting power, or may result in a change of control.

The Company recently entered into financing documents with St. George Investments, LLC (see Item 7 below) pursuant to which the Company agreed to seek shareholder approval to amend its articles of incorporation to increase the number of authorized shares of common stock to 5,000,000,000. The amendment of our articles of incorporation to create additional shares of common stock and the issuance of any such shares may result in a reduction of the book value or market price of the outstanding shares of our common stock. If we do issue any such additional shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change of control of the company. The Company believes it will be difficult or impossible to raise additional funding without amending its Articles of Incorporation to increase its authorized shares.

Additional financings may dilute the holdings of our current shareholders.

In order to provide capital for the operation of the business, we may enter into additional financing arrangements. These arrangements may involve the issuance of new shares of common stock, preferred stock that is convertible into common stock, debt securities that are convertible into common stock or warrants for the purchase of common stock. Any of these items could result in a material increase in the number of shares of common stock outstanding, which would in turn result in a dilution of the ownership interests of existing common shareholders. In addition, these new securities could contain provisions, such as priorities on distributions and voting rights, which could affect the value of our existing common stock.

There is currently a limited public market for our common stock. Failure to develop or maintain a trading market could negatively affect its value and make it difficult or impossible for you to sell your shares.

There has been a limited public market for our common stock and an active public market for our common stock may not develop. Failure to develop or maintain an active trading market could make it difficult for you to sell your shares or recover any part of your investment in us. Even if a market for our common stock does develop, the market price of our common stock may be highly volatile. In addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as variations in interim financial results or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative effect on the market price of our common stock.

“Penny Stock” rules may make buying or selling our common stock difficult.

If the market price for our common stock is below $5.00 per share, trading in our common stock may be subject to the “penny stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules would require that any broker-dealer that would recommend our common stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations would require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market price and liquidity of our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

None

Purchases of equity securities by the issuer and affiliated purchasers

None.

Item 3. Defaults Upon Senior Securities.

On February 15, 2011, the Company received a notice from St. George Investments, LLC, a Illinois limited liability company (“St. George”) notifying the Company that a non-payment default had occurred under the convertible secured promissory note, dated March 30, 2010, in the principal amount of $779,500 and a series of four convertible secured promissory notes each with a principal balance of $130,000 made by the Company in favor of St. George (the “March 2010 Note”). Also, on February 15, 2011, the Company received a second notice from St. George Investments, LLC, a Illinois limited liability company (“St. George”) notifying the Company that a non-payment default had occurred under a series of convertible secured promissory notes dated August 10, 2010 (principal balance of $72,500), August 30, 2010, September 15, 2010, and September 30, 2010, each with a principal balance of $65,000, made by the Company in favor of St. George (the “Additional Notes”).

As a result of the defaults, the outstanding amount of the Note and Additional Notes was increased by 25% and St. George was permitted to exercise its other default remedies under the Note and Additional Notes. Reference is made to the Company’s Current Report on Form 8-K that was filed with the SEC on April 6, 2010, and the exhibits of that report, for a complete description of the terms and conditions of the Notes, Additional Notes and related financing. As described in Item 2, above, on March 21, 2011, the Company executed a Forbearance Agreement with St. George pursuant to which, among other things, St. George agreed to refrain and forbear from exercising and enforcing any of its remedies under the March 2010 Note, or under applicable laws, with respect to the defaults, for a period of 90 days from the date of the Forbearance Agreement;

Item 4. (Removed and Reserved)

Item 5. Other Information.

None

Item 6. Exhibits.

Those exhibits marked with an asterisk (*) refer to exhibits filed herewith.

Exhibit No.		Description

31.1*		Certification of Chief Operating Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32.1*		Certification of Chief Operating Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

	HELIX WIND, CORP.

	By:	/s/ Kevin Claudio
		Kevin Claudio
		Chief Financial Officer
		(Principal Financial Officer)

Date: July 27 , 2011

Attached files

Helix Wind, Corp. Reports

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