You realize that Mike will soon suffocate unless you do something, but while it would be fun to merge him with your form, there are more things that you can do with balloons than fill them with air. You think about it, and let your substance transform Mike into water. Living water, like you're living rubber, but water all the same.
Then you get to wrestle as Mike surges against you, standing up and regaining human form, if not substance. He's now a sloshy water elemental held into shape by your balloon substance.
You realize that he's stronger than you and he can now walk around wearing you, but just because he's stronger doesn't mean you can't be weaker. You weaken your substance around his dick, making it more stretchy and watching as his penis distends, since he's nothing but water anyway. Then you open a hole at the end and let the whole of him gush out.