UNITED
STATES
 
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
      EXCHANGEACT
      OF 1934 for the quarterly period ended September 30,
  2009ORo
              TRANSITION
      REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
  EXCHANGEACT
      OF 1934 for the Transition Period from toCommission
      file number: 001-16781
 
 MICROHELIX,
      INC.(Exact
      Name of Registrant as Specified in its
Charter)
 
 Oregon
              
              91-1758621(State
      or Other Jurisdiction of
              
              (I.R.S.
      Employer Identification No.)Incorporation
      or Organization)
 
 5300
      Meadows Rd, Suite 400, Lake Oswego, Oregon
              
              97035(Address
      of Principal Executive
              
              (Zip
      Code)Offices)
 
 (Registrant’s
Telephone Number, Including Area Code): 503-419-3564
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
 Yes o No x
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).
 Yes o No x
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
 Large accelerated filer o                                                                            Accelerated
filer o
 Non-accelerated
filer   o                                                                            Smaller
reporting company x
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 Yes x No o
 
 As of
November 16, 2009, there were 1,974,088 shares of the issuer’s common stock
outstanding.
 
 At a
special meeting of the shareholders on March 19, 2008, the Company’s Amended and
Restated Articles of Incorporation, as amended, were amended to effect a reverse
split of the Company’s Common Stock in which every 15 shares of Common Stock
held by a shareholder were reduced to one share of Common Stock.  The
consolidated financial statements, notes, and other references to share and per
share data contained in this Report have been retroactively restated to reflect
such reverse stock split for all periods presented.
 
  
  microHelix,
Inc.
 Quarterly
Report on Form 10-Q
 Quarter
Ended September 30, 2009
 
 TABLE
OF CONTENTS
 
 PagePART
      I — FINANCIAL INFORMATION
                    3ITEM
      1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
                    3Consolidated
      balance sheets as of September 30, 2009 and December 31,
    2008
                    3Consolidated
      statements of operations for the three and nine months ended September 30,
      2009 and 2008
                    4Consolidated
      statements of cash flows for the nine months ended September 30, 2009 and
      2008
                    5Notes
      to consolidated financial statements
                    6ITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
                    10ITEM
      4T. CONTROLS AND PROCEDURES
                    12PART
      II — OTHER INFORMATION
                    13ITEM
      6. EXHIBITS
                    13SIGNATURE
                    14
  
  PART
I — FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS —
UNAUDITED
  MICROHELIX,
INC.
 
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
 September
30, 2009 and December 31, 2008
 
 2009
                                                    
                                                    
                                                    2008AssetsCurrent
      Assets:Cash
                                                    
                                                    $
                                                    971
                                                    
                                                    
                                                    $
                                                    98,433Prepaid
      expenses
                                                    
                                                    
                                                    4,166
                                                    
                                                    
                                                    
                                                    —Total
      assets
                                                    
                                                    $
                                                    5,137
                                                    
                                                    
                                                    $
                                                    98,433Liabilities
      and Shareholders' DeficitCurrent
      Liabilities:Accounts
      payable
                                                    
                                                    $
                                                    744,542
                                                    
                                                    
                                                    $
                                                    744,542Accrued
      liabilities
                                                    
                                                    
                                                    295,155
                                                    
                                                    
                                                    
                                                    257,515Current
      maturities of notes payable, net of debt discount
                                                    
                                                    
                                                    1,081,501
                                                    
                                                    
                                                    
                                                    694,161Total
      liabilities
                                                    
                                                    
                                                    2,121,198
                                                    
                                                    
                                                    
                                                    1,696,218Shareholders'
      Deficit:Preferred
      stock, convertible, no par value, 10,000,000 shares
      authorized,279,070
      Series C Preferred Stock issued and outstanding, convertible, liquidation
      preference $600,000
                                                    
                                                    
                                                    533,000
                                                    
                                                    
                                                    
                                                    533,000Common
      stock, no par value 75,000,000 shares authorized, 1,974,088 and 1,973,421
      issued and outstanding at September 30, 2009 and December 31, 2008,
      respectively
                                                    
                                                    
                                                    17,477,917
                                                    
                                                    
                                                    
                                                    17,477,917Additional
      paid-in capital
                                                    
                                                    
                                                    10,437,636
                                                    
                                                    
                                                    
                                                    10,342,521Accumulated
      deficit
                                                    
                                                    
                                                    (30,564,614
                                                    )
                                                    
                                                    
                                                    (29,951,223
                                                    )Total
      shareholders' deficit
                                                    
                                                    
                                                    (2,116,061
                                                    )
                                                    
                                                    
                                                    (1,597,785
                                                    )Total
      liabilities and shareholders' deficit
                                                    
                                                    $
                                                    5,137
                                                    
                                                    
                                                    $
                                                    98,433
 
 The
accompanying notes are an integral part of these condensed consolidated
financial statements.
 
 Page
3
  MICROHELIX,
INC.
 
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 Three
      Months Ended
                                            September
      30
                                          
                                          
                                          Nine
      Months Ended
                                            September
      302009
                                          
                                          
                                          2008
                                          
                                          
                                          2009
                                          
                                          
                                          2008Operating
      Expenses:General and
      administrative
                                          
                                          
                                          64,224
                                          
                                          
                                          
                                          94,326
                                          
                                          
                                          
                                          304,252
                                          
                                          
                                          
                                          3,917,132Loss
      from operations
                                          
                                          
                                          (64,224
                                          )
                                          
                                          
                                          (94,326
                                          )
                                          
                                          
                                          (304,252
                                          )
                                          
                                          
                                          (3,917,132
                                          )Other
      income (expense):Interest and other
      income
                                          
                                          
                                          —
                                          
                                          
                                          
                                          27,557
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          30,971Warrant valuation gain
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          62,822Debt forgiveness
                                          
                                          
                                          —
                                          
                                          
                                          
                                          5,185
                                          
                                          
                                          
                                          —
                                          
                                          
                                          
                                          341,066Interest expense
                                          
                                          
                                          (113,156
                                          )
                                          
                                          
                                          (365,100
                                          )
                                          
                                          
                                          (309,139
                                          )
                                          
                                          
                                          (409,179
                                          )Other income (expense) –
      net
                                          
                                          
                                          (113,156
                                          )
                                          
                                          
                                          (332,358
                                          )
                                          
                                          
                                          (309,139
                                          )
                                          
                                          
                                          25,680Net
      loss
                                          
                                          $
                                          (177,380
                                          )
                                          
                                          $
                                          (426,684
                                          )
                                          
                                          $
                                          (613,391
                                          )
                                          
                                          $
                                          (3,891,452
                                          )Net
      loss  per shareBasic
      and diluted
                                          
                                          $
                                          (.09
                                          )
                                          
                                          $
                                          (.22
                                          )
                                          
                                          $
                                          (.31
                                          )
                                          
                                          $
                                          (1.97
                                          )Weighted
      average number of shares outstanding –
                                            Basic
      and diluted
                                          
                                          
                                          1,974,088
                                          
                                          
                                          
                                          1,972,568
                                          
                                          
                                          
                                          1,973,791
                                          
                                          
                                          
                                          1,775,913
  The
accompanying notes are an integral part of these condensed consolidated
financial statements.
 Page
4
  MICROHELIX,
INC.
 
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (UNAUDITED)
 
 
 Nine
      Months Ended
                                            September
      30Cash
      Flows Used In Operating Activities:
                                          
                                          2009
                                          
                                          
                                          2008Net
      loss
                                          
                                          $
                                          (613,391
                                          )
                                          
                                          $
                                          (3,891,452
                                          )Adjustments
      to reconcile net loss to cash used in operating
activities:Interest
      expense - amortization
                                          
                                          
                                          —
                                          
                                          
                                          
                                          329,991Warrants
      issued for advisory services
                                          
                                          
                                          1,001
                                          
                                          
                                          
                                          3,598,971Warrant
      valuation gain
                                          
                                          
                                          —
                                          
                                          
                                          
                                          (62,822
                                          )Debt
      forgiveness
                                          
                                          
                                          —
                                          
                                          
                                          
                                          (341,066
                                          )Amortization
      of debt discount
                                          
                                          
                                          136,465
                                          
                                          
                                          
                                          —Change
      in assets and liabilities:(Increase)
      Decrease in assets:Prepaid
      expenses
                                          
                                          
                                          (4,166
                                          )
                                          
                                          
                                          (7,630
                                          )Increase
      (Decrease) in liabilities:Accounts
      payable
                                          
                                          
                                          —
                                          
                                          
                                          
                                          (57,788
                                          )Accrued
      liabilities
                                          
                                          
                                          282,629
                                          
                                          
                                          
                                          142,591Net
      cash used in operating activities
                                          
                                          
                                          (197,462
                                          )
                                          
                                          
                                          (289,205
                                          )Cash
      Flows Provided By Financing Activities:Proceeds
      from exercise of warrants
                                          
                                          
                                          —
                                          
                                          
                                          
                                          15,094Proceeds
      from issue of notes payable to shareholders
                                          
                                          
                                          100,000
                                          
                                          
                                          
                                          269,449Net
      cash provided by financing activities
                                          
                                          
                                          100,000
                                          
                                          
                                          
                                          284,543Change
      in cash
                                          
                                          
                                          (97,462
                                          )
                                          
                                          
                                          (4,662
                                          )Cash,
      beginning of period
                                          
                                          
                                          98,433
                                          
                                          
                                          
                                          5,797Cash,
      end of period
                                          
                                          $
                                          971
                                          
                                          
                                          $
                                          1,135Supplemental
      Disclosure of Non-cash Financing Activities:Warrants
      issued to lenders-recorded as debt discount
                                          
                                          $
                                          94,114
                                          
                                          
                                          $
                                          659,981Refinance
      of accrued interest to note payable
                                          
                                          $
                                          —
                                          
                                          
                                          $
                                          283,224Refinance
      of accrued liability to note payable
                                          
                                          $
                                          244,989
                                          
                                          
                                          $
                                          —Reclassification
      of note payable to accounts payable
                                          
                                          $
                                          —
                                          
                                          
                                          $
                                          63,137
 
 The accompanying notes are an
integral part of these condensed consolidated financial
statements.
  Page
5
  MICROHELIX, INC.
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 Three
and Nine Months Ended September 30, 2009 and 2008
 
 1.   Summary
of Significant Accounting Policies and Basis of Presentation
 
 Nature of Operations— Until
September 28, 2007, when microHelix, Inc. (“we,” “us,” “ the Company,” or
“microHelix”) suspended manufacturing operations and concluded the disposition
of its assets to its secured creditors, the Company was a manufacturer of custom
cable assemblies and mechanical assemblies for the medical and commercial
original equipment manufacturer (OEM) markets.  On May 31, 2007,
the Company surrendered substantially all its assets to its secured creditors
and concluded the disposition of all the Company's assets on September 28,
2007, after which microHelix became a shell company (see "Going Concern") that
will seek out suitable business combinations.  Management believes
that presentation of discontinued operations would not be appropriate since
substantially all of the Company’s operations have been
discontinued.
 
 On June
27, 2008, the Company entered into an Advisory Services Agreement with Aequitas
Capital Management, Inc. (“Aequitas”) under which Aequitas began to provide
strategy development, strategic planning, marketing, corporate development and
other services that the Company reasonably requests from time to time, under
direction of the Company’s Board of Directors for a monthly fee of $10,000 and
reimbursement of expenses.  In connection with the Advisory Services
Agreement, the Company issued a warrant for 1,066,667 shares of common stock
with an exercise price of $0.001 per share to Aequitas in 2008 (see Note
3).  Under a separate agreement, the Company has an obligation to pay
Aequitas $5,000 per month for certain services related to occupancy of Aequitas
facilities and information technology support.  In addition to
advising and servicing the Company, Aequitas is also manager of MH Financial
Associates, LLC (“MH Financial”) and Aequitas Catalyst Fund, LLC, which are two
of the Company’s largest shareholders.
 
 Basis of Presentation— The
unaudited consolidated financial statements have been prepared by the Company,
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC").  The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments), which are, in the
opinion of management, necessary to fairly represent the operating results for
the respective periods.
 
 Use of Estimates— The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period.  Actual results
could differ from those estimates.
 
 Principles of Consolidation—
These consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary, Moore Electronics, Inc. ("Moore”).  All
material inter-company accounts have been eliminated in
consolidation.
 
 Going Concern—These consolidated financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business.  The Company has incurred recurring losses from
operations, had an accumulated deficit of $30,564,614 at September 30, 2009, and
has no current business operations.  These conditions raise
substantial doubt about the Company’s ability to continue as a going concern for
a reasonable period of time.  These consolidated financial statements
do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities that
may be necessary should the Company be unable to continue as a going
concern.
 
 Financial Instruments—The fair value of the
Company’s liabilities approximates cost due to the short-term nature of the
obligations.
 
 Subsequent Events— Subsequent events have
been considered through November 16, 2009, the date these financial statements
were issued.
  Page
6
  Net Income/(Loss) per Share—
The Company uses Accounting Standards Codification (“ASC”) Topic 260,
"Earnings per Share" for calculating the basic and diluted income/(loss) per
share.  Basic income/(loss) per share is computed by dividing net
income/(loss) attributable to common stockholders by the weighted average number
of common shares outstanding.  Since there was a loss for the three
and nine months ended September 30, 2009 and 2008, the issuance of shares from
the conversion of preferred stock or warrants would be
anti-dilutive.  The Company computes dilutive shares using the
treasury method.
  For the
three and nine months ended September 30, 2009, the outstanding number of
potentially dilutive common shares totaled 10,910,178 shares of Common Stock,
consisting of Series C Preferred Stock convertible to 186,047 shares of Common
Stock and warrants to purchase 10,724,131 shares of Common Stock.  For
the three and nine months ended September 30, 2008, the outstanding number of
potentially dilutive common shares totaled 8,776,843 shares of Common Stock,
consisting of Series C Preferred Stock convertible to 186,047 shares of Common
Stock and warrants to purchase 8,590,796 shares of Common Stock.
  On
January 2, 2008, MH Financial exercised warrants to purchase 133,333 shares of
Common Stock for $2,000.
 
 On
February 17, 2008, a related party to MH Financial exercised warrants to
purchase 73,915 shares of Common Stock for $1,109.
 
 On March
3, 2008, MH Financial exercised warrants to purchase 798,981 shares of Common
Stock for $11,985.
 
 On March
19, 2008 at a special meeting of the shareholders, the Company’s Articles of
Incorporation were amended to effect a 15-for-1 reverse split of the Company’s
Common Stock.  The accompanying condensed consolidated financial
statements, notes, and other references to share and per share data have been
retroactively restated to reflect the reverse stock split for all periods
presented.
 
 On
February 9, 2009, the Company issued 667 shares of Common Stock with a value of
$1,001 to a former member of the Company’s Board of Directors.
 
 2.
Summary of Recent Accounting Pronouncements
 
 In
December 2007, the FASB issued guidance on accounting for business combinations
and related disclosures.  This guidance is now part of  ASC
Topic 805, “Business
Combinations” which establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any non-controlling interest in the
acquiree and the goodwill acquired.  The Statement also establishes
disclosure requirements which will enable users to evaluate the nature and
financial effects of the business combination.  ASC Topic 805 is
effective for fiscal years beginning after December 15, 2008.  The
adoption of ASC Topic 805 will have an impact on accounting for business
combinations but the effect is dependent upon the acquisitions at that
time.
 
 In
December 2007, the FASB issued guidance which is now part of the ASC Topic
810-10-65-1, (“Noncontrolling Interests in Consolidated Financial
Statements”),  an amendment to ARB No. 51, which establishes
accounting and reporting standards for ownership interests in subsidiaries held
by parties other than the parent, the amount of consolidated net income
attributable to the parent and to the non-controlling interest, changes in a
parent’s ownership interest and the valuation of retained non-controlling equity
investments when a subsidiary is deconsolidated.  The Statement also
establishes reporting requirements that provide sufficient disclosures that
clearly identify and distinguish between the interest of the parent and the
interests of the non-controlling owners.  ASC Topic 810 is effective
for fiscal years beginning after December 15, 2008.  The adoption of
ASC Topic 810 did not have an effect on the Company’s consolidated financial
statements.
 
 In April
2009, the FASB issued new guidance, which is now part of the ASC,
which  was effective for interim and annual periods ending after
September 15, 2009.
 
 After
considering the current non-operating nature of the company and the nature of
its assets and liabilities, the Company expects no material impact on the
adoption of these standards on its financial position and results of
operations.
 
 Page
7
  3.
Notes Payable and Warrants
 
 A summary
of the Company’s notes payable outstanding as of September 30, 2009 and December
31, 2008 is as follows:
  2009
                                      
                                      
                                      2008MH
      Financial Associates, LLC
                                      
                                      $
                                      877,743
                                      
                                      
                                      $
                                      777,743Aequitas
      Capital Management, Inc.
                                      
                                      
                                      244,989
                                      
                                      
                                      
                                      —Other
                                      
                                      
                                      10,532
                                      
                                      
                                      
                                      10,532Total
      notes payable
                                      
                                      $
                                      1,133,264
                                      
                                      
                                      $
                                      788,275Note
      discount
                                      
                                      
                                      (51,763
                                      )
                                      
                                      
                                      (94,114
                                      )Total
      notes payable-net of discount
                                      
                                      $
                                      1,081,501
                                      
                                      
                                      $
                                      694,161
 
 On June 27, 2008, the
Company obtained a loan from MH Financial in the amount of
$977,743.  The loan amount includes $477,743 that was owed to MH
Financial as of June 27, 2008 and an additional loan of up to
$500,000.  The Company was advanced $200,000 on June 27, 2008,
$100,000 on December 31, 2008, $100,000 on February 25, 2009,and on
November 6, 2009 received an additional advance of $100,000 against the $500,000
loan amount.  As a result of the November 6, 2009 advance, microHelix
has borrowed the full $977,743 principal amount available under the
loan.  All amounts outstanding under the loan are due on the earliest
of:  (a) December 27, 2009, (b) the closing of a loan or other
financing by microHelix in an amount sufficient to pay off the loan, or
(c) the closing of a private investment in public equity and/or any other
financing event with gross proceeds to microHelix in excess of
$1,000,000.  The loan is secured by a lien against substantially all
of the assets of microHelix and its wholly-owned subsidiary, Moore Electronics,
Inc., including all of the outstanding common stock of Moore Electronics,
Inc.  In the event of default by microHelix, MH Financial may
accelerate the entire amount owed under the loan.
  Effective
as of the date of this loan, interest will accrue on the outstanding principal
balance of the loan at a rate of 20% per annum.  The original due date
of the loan was December 27, 2008 and, as a condition of the December 31, 2008
advance, the due date was extended to December 27, 2009.  As a
condition of the initial disbursement on June 27, 2008, the Company also issued
warrants to purchase 7,466,666 shares of Common Stock at $0.001 per
share.  The warrants expire June 27, 2013. The warrants have a fair
value relative to the fair value of the associated debt of $659,981 calculated
using the Black-Scholes option pricing model with the following
assumptions:
 
 Expected
      life (in years)
                    1Expected
      volatility
                    202.46%Risk-free
      interest rate
                    1.15%Expected
      dividend
                    —
 
 The
Company also issued warrants on June 27, 2008 that grant Aequitas Capital
Management the right to purchase 1,066,667 shares of Common Stock with an
exercise price of $0.001 per share as consideration for financial advisory
services.  The warrants expire on June 27, 2013.  The
warrants have a fair value of $3,598,971 (recorded as general and administrative
expense) calculated using the Black-Scholes option pricing model with the
following assumptions:
 
 Expected
      life (in years)
                    1Expected
      volatility
                    202.46%Risk-free
      interest rate
                    1.15%Expected
      dividend
                    —
 
 On
December 31, 2008 the Company received a $100,000 advance against the loan the
Company obtained from MH Financial on June 27, 2008.  As additional
consideration for this $100,000 disbursement, the Company also issued warrants
to purchase 1,066,667 shares of Common Stock at $0.001 per share to
Aequitas Catalyst Fund, LLC.  The warrants expire December 31,
2013.  The warrants have a fair value relative to the fair value of
the associated debt of $94,114 calculated using the Black-Scholes option pricing
model with the following assumptions:
 
 Expected
      life (in years)
                    1Expected
      volatility
                    285.29%Risk-free
      interest rate
                    0.37%Expected
      dividend
                    —
 
 Page
8
 On
December 31, 2008 the Company issued a new note payable to Aequitas Capital
Management in the amount of $101,834.  The loan has a due date of
December 31, 2009 and interest will accrue on the outstanding principal balance
of the loan at a rate of 20% per annum.  The loan amount included
$90,000 owed to Aequitas Capital Management for rent and advisory services and
$11,834 for travel and legal services paid for by Aequitas Capital Management on
behalf of the Company.  The $90,000 had been accrued (in accrued
liabilities) for during 2008 and the $11,834 was recorded as general and
administrative expenses during the three month period ending March 31,
2009.  During the nine months ended September 30, 2009 Aequitas
Capital Management paid an additional $135,000 for rent and advisory services
and $8,155 for travel and legal services on behalf of the Company.
 
 On
February 25, 2009 the Company received a $100,000 advance against the loan the
Company obtained from MH Financial on June 27, 2008.  As additional
consideration for this $100,000 disbursement, the Company also issued warrants
to purchase 1,066,667 shares of Common Stock at $0.001 per share to Aequitas
Catalyst Fund, LLC.  The warrants expire February 25,
2014.  The warrants have a fair value relative to the fair value of
the associated debt of $94,114 calculated using the Black-Scholes option pricing
model with the following assumptions:
 
 Expected
      life (in years)
                      1Expected
      volatility
                      278.42%Risk-free
      interest rate
                      0.75%Expected
      dividend
                      —
  In
connection with and as a condition of the  November 6, 2009 advance
under the Note described above, on November 6, 2009, the Company issued a
warrant to purchase up to 1,066,667 shares of microHelix Common
Stock  at an exercise price of $0.001 per share to Aequitas
Catalyst Fund, LLC.  The warrant expires on November 6,
2014.
  4.
Liability for Potentially Dilutive Securities in Excess of Authorized Number of
Common Shares
 
 In
accordance with ASC, the Company accounts for potential shares that can be
converted to Common Stock that are in excess of authorized shares, as a
liability that is recorded at fair value.  Total potential outstanding
Common Stock exceeded the Company’s authorized shares on March 12, 2007 when the
Company restructured its debt with MH Financial.  In this process the
Company issued 860,000 warrants.  At that time outstanding warrants
allowed the holders the right to purchase approximately 579,867 shares over the
current authorized amount. The fair value of the warrants in excess of the
authorized shares at March 12, 2007 was $1,818,200 and was recognized as a
liability on March 12, 2007.  This liability was required to be
evaluated at each reporting date with any change in value included in other
income/ (expense) until such time as enough shares were authorized to cover all
potentially convertible instruments.  As of December 31, 2007 the
Company had recorded $1,755,378 in income related to the change in the fair
value of its potential liability.  In January 2008 the Company’s
shareholders voted to amend the Company’s Amended and Restated Articles of
Incorporation, as amended, to increase the number of authorized shares of
Preferred Stock to 10 million and Common Stock to 75 million.  As a
result of this action the potentially dilutive securities no longer exceeded the
authorized number of common shares.  As such the Company reversed the
remaining $62,822 liability to income during the three month period ending March
31, 2008.
 
 
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9
  ITEM
2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 
 The
following discussion provides information that management believes is relevant
to an assessment and understanding of the Company's operations and financial
condition.  This discussion should be read in conjunction with the
unaudited consolidated financial statements and accompanying notes.
 
 Forward-Looking
Statements
 
 This
Quarterly Report on Form 10-Q contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, as amended.
Such statements reflect management's current view and estimates of future
economic and market circumstances, industry conditions, company performance and
financial results. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and variations of such words and similar
expressions are intended to identify such forward-looking
statements.  These statements are subject to risks and uncertainties
that could cause our future results to differ materially from the results
discussed herein.  Factors that might cause such a difference include,
but are not limited to, those discussed elsewhere in this Quarterly Report on
Form 10-Q.  We do not intend, and undertake no obligation, to update
any such forward-looking statements to reflect events or circumstances that
occur after the date of this filing.
 
 Critical
Accounting Policies and Estimates
 
 The
discussion and analysis of the Company’s financial condition and results of
operations is based upon the Company’s consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States.  The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities.  The Company based the estimates on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which formed the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources.  Actual results may differ from
those estimated.
 
 RESULTS
OF OPERATIONS
 
 Overview
 
 Until
September 2007, microHelix manufactured custom cable assemblies for the medical
and commercial Original Equipment Manufacturer ("OEM")
markets.  Typical cable assemblies included cable, connectors,
contacts, flex reliefs and housings; sub-components of medical devices and
commercial electronic systems.  The Company operated the business in a
single operating segment through two units: the Moore subsidiary and the
MicroCoax Assembly Solutions division.
 
 On May
31, 2007 the Company surrendered its assets to its secured creditors and
concluded the disposition of all the Company’s assets on September 28, 2007
after which it became a shell company.
 
 The
Company’s current business objective is to locate appropriate opportunities for
a business combination.  The Company does not currently engage in any
activity that provides cash flow.  The Company anticipates incurring
costs related to the filing of Exchange Act reports, officers’ and directors’
salaries and transaction costs related to a business
combination.  There is no assurance that the Company will be able to
raise sufficient capital to cover those expenses.  Until the Company
consummates a business combination, it does not anticipate any future
expenditures for research and development or the purchase or sale of any
property, plant, or equipment.
 
 Certain
types of business combinations may be completed without having to first submit
the transaction to our shareholders for approval.  If a business
combination transaction is structured such that the approval by the Company’s
shareholders is not required, our shareholders will not be provided with
financial or other information relating to the other party to the business
combination prior to the completion of the transaction.
 
 Because
of the disposition of substantially all of the Company’s assets and the
subsequent winding up of the business, the Company has no ongoing
operations.  The Company’s Board of Directors has determined to
maintain the Company as a public “shell” corporation, which will seek suitable
business combination opportunities.  The Company’s Board of Directors
believes that a business combination with an operating company has the potential
to create value for the Company’s shareholders.
 
 The
Company completed its initial public offering in November 2001.  As of
the date of this report the Company’s Common Stock trades on the Pink Sheets
under the symbol MHLN.PK.  On June 11, 2007 the Company filed a Form
15 with the
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10
  The
following discussion should be read in the context of the above
overview.
 
 THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
 
 Total
operating expenses in the third quarter of 2009 were $64,224, compared to
$94,306 for the same period one year ago.  For the nine month period
ending September 30, 2009 the total operating expenses were $304,252 compared to
$3,917,132 for the first nine months of 2008.  The decrease is due to
the $3,598,971 of professional services expense in the second quarter of 2008
related to the warrants issued in conjunction with the advisory services
agreement and was partially offset by the professional service expenses related
to the preparation of Forms 10-Q and 10-K for 2008 and 2009.
 
 Net other
income (expense) for the third quarter of 2009 was ($113,156) compared to net
other income (expense) of ($332,358) for the third quarter of
2008.  For the nine month period ending September 30, 2009, the net
other income (expense) was ($309,139) as compared to $25,680 for the first nine
months of 2008.  The difference was primarily related to the income
associated with the change in the warrant valuation in the first quarter of 2008
and debt forgiveness recorded in 2008.
 
 The
Company recorded a net loss of ($177,380) in the third quarter of 2009 compared
to a net loss of ($426,684) in the third quarter of 2008.  On a year
to date basis for the nine months ended September 30, 2009, the Company recorded
a net loss of ($613,391) compared to a net loss of ($3,891,452) recorded during
the first nine months of 2008.  The decrease is due to the $3,598,971
of professional services expense in the second quarter of 2008 related to the
warrants issued in conjunction with the advisory services agreement and was
partially offset by the professional service expenses related to the preparation
of Forms 10-Q and 10-K for 2008 and 2009.
  LIQUIDITY
AND CAPITAL RESOURCES
 
 Asof September 30, 2009, the
Company had $971 of cash.  Cash used in operating activities during
the nine-month period ended September 30, 2009 was $197,462 compared to cash
used in operating activities of $289,205 in the same period a year ago. The use
of funds during the first nine months of 2009 included a net loss of $613,391,
and a net decrease in prepaid expenses of $4,166, offset by an increase in
accrued liabilities of $282,629 and amortization of debt discount of
$136,465.
 
 For the
nine months ending September 30, 2009, financing activities provided the Company
with $100,000 of cash as compared to $284,543 of cash provided by financing
activities during the first nine months of 2008.  The primary source
of the cash from financing activities for the three and nine month period ending
September 30, 2009 and 2008 was advances on notes payable from the Company’s
secured creditor.
 
 The
following description of the Company's principal debt at September 30, 2009
should be read in the context of the overview above and Note 3 of Notes to
Consolidated Financial Statements.
  On June
27, 2008, the Company obtained a loan (the “MH Financial Loan”) from MH
Financial, Inc. (“MH Financial”) in the amount of $977,743.  The MH
Financial Loan is secured by a lien against substantially all of the assets of
microHelix and Moore, including all of the outstanding common stock of
Moore.  MH Financial may accelerate all amounts due under the MH
Financial Loan in the event of default.  In addition, all amounts
outstanding under the MH Financial Loan are due and payable upon theearliest of:  (a) December 27, 2009, (b)
the closing of a loan or other financing bythe Company inan
amount sufficient to pay off the loan, or (c) the closing of a private
investment in public equity and/or any other financing event with gross proceeds
tothe Companyin excess of $1,000,000.The MH Financial Loan replaces the prior
notes payable to MH Financial, and includes $477,743 that was owed to MH
Financial as of June 27, 2008 and an additional loan of up to
$500,000.  The Company was advanced $200,000 on June 27, 2008,
$100,000 on December 31, 2008, $100,000 on February 25, 2009 and $100,000 on
November 6, 2009.  Effective as of the date of this loan, interest
will accrue on the outstanding principal balance of the loan at a rate of 20%
per annum.  The original due date of the loan was December 27, 2008
and, as a condition of the December 31, 2008 advance, the due date was extended
to December 27, 2009.  As additional
consideration of the initial disbursement on June 27, 2008, the Company also
issued warrants to purchase 7,466,666 shares of Common Stock at $0.001 per share
to MH Financial.  MH Financial has assigned these warrants to certain
of its investors as follows: (i) Aequitas Catalyst Fund LLC: warrants to
purchase 1,166,601 shares; (ii) Thurman Holdings 1, Limited Partnership:
warrants to purchase 2,822,867 shares; (iii) Fiserv Trust Company fbo Robert J.
Jesenik: warrants to purchase 59,957 shares and (iv) CTK Capital Corporation, a
corporation controlled by James M. Williams, former Chairman of the Company’s
Board of Directors; warrants to purchase 332,384 shares.  The warrants
expire on June 27, 2013.  The Company was in default under the MH
Financial Loan and entered into a Forbearance Agreement with MH Financial on
March 31, 2009.
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11
  As a
condition of the December 31, 2008 advance under the MH Financial Loan, MH
Financial required the Company to issue warrants to Aequitas Catalyst Fund, LLC
to purchase 1,066,667 shares of Common Stock at $0.001 per
share.  Aequitas Catalyst Fund, LLC participated as a lender in the MH
Financial Loan pursuant to a participation agreement with MH
Financial.
 
 As a
condition of the February 25, 2009 advance under the MH Financial Loan, MH
Financial required the Company to issue warrants to Aequitas Catalyst Fund, LLC
to purchase 1,066,667 shares of Common Stock at $0.001 per share. Aequitas
Catalyst Fund, LLC participated as a lender in the MH Financial loan pursuant to
a participation agreement with MH Financial.
 
 The
Company signed a financial advisory agreement with Aequitas Capital Management
on June 27, 2008.  The Company issued warrants to purchase 1,066,667
shares of Common Stock at $0.001 per share to Aequitas Capital Management in
connection with the financial advisory agreement.
 
 On
December 31, 2008, the Company issued a new note payable to Aequitas Capital
Management in the amount of $101,834.  The loan amount included
$90,000 owed to Aequitas Capital Management for rent and advisory services and
$11,834 for travel and legal services paid for by Aequitas Capital Management on
behalf of the Company.  The $90,000 had been accrued for during 2008
and the $11,834 was recorded as general and administrative expenses during the
three month period ending March 31, 2009.  During the nine months
ended September 30, 2009 the Company was advanced $135,000 for rent and advisory
services and $8,155 for travel and legal services paid by Aequitas Capital
Management on behalf of the Company. The loan has a due date of December 31,
2009 and interest will accrue on the outstanding principal balance of the loan
at a rate of 20% per annum.
 
 On
January 2, 2008, MH Financial exercised warrants to purchase 133,333 shares of
Common Stock for $2,000.
 
 On
February 17, 2008, a related party to MH Financial exercised warrants to
purchase 73,915 shares of Common Stock for $1,109.
 
 On March
3, 2008, MH Financial exercised warrants to purchase 798,981 shares of Common
Stock for $11,985.
 
 On March
19, 2008 at a special meeting of the shareholders, the Company’s Articles of
Incorporation were amended to effect a 15-for-1 reverse split of the Company’s
Common Stock.  The accompanying condensed consolidated financial
statements, notes, and other references to share and per share data have been
retroactively restated to reflect the reverse stock split for all periods
presented.
 
 On
February 9, 2009, the Company issued 667 shares of Common Stock with a value of
$1,001 to a former member of the Company’s Board of Directors.
  On
November 6, 2009, as a condition of the  advance under the MH
Financial Loan, the Company  issued a warrant to Aequitas Catalyst
Fund, LLC to purchase 1,066,667 shares of Common Stock at $0.001 per
share.  The warrant expires November 6, 2014.
 
 In all of
the above cases, the warrants to purchase Common Stock and the shares of Common
Stock issued upon exercise of the warrants were issued in reliance on Regulation
D promulgated under the Securities Act of 1933, as amended (the “Securities
Act”), and
the Company obtained representations from the investors as to their status as
“accredited investors” as that term is defined in
Regulation D.
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  ITEM
4T.   CONTROLS AND PROCEDURES
 
 The
Company’s President and Chief Financial Officer evaluated the effectiveness of
our disclosure controls and procedures pursuant to Rule 13a-15 under the
Securities Exchange Act of 1934 as of September 30, 2009.  Based on
that evaluation, our President and Chief Financial Officer concluded that the
Company’s disclosure controls and procedures are not designed at a reasonable
assurance level nor are they effective to give reasonable assurance that the
information the Company must disclose in reports filed with the Securities and
Exchange Commission are properly recorded, processed, summarized, and reported
as required, and that such information is not accumulated and communicated to
our management, including the Company’s President and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
 
 The
Company’s disclosure controls and procedures are subject to material weaknesses
resulting from the Company’s loss of key personnel and the Company’s surrender
of all of its assets to its creditors.  Because of the limited number
of personnel available for accounting duties, there is an inadequate segregation
of duties related to accounting controls.  The accounting department
consists only of limited contracted resources.  Due to the Company’s
current lack of financial resources it has not been reasonable or cost
beneficial for the Company to hire extra accounting personnel who would have no
other purpose, duties, or workload than to provide formal segregation of duties
under internal control principles.
 
 There
have been no changes in the Company’s internal controls over financial reporting
that occurred during the Company’s most recent fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
 
 PART
II.  OTHER INFORMATION
 
 ITEM
6.   EXHIBITS
 
 (a) Exhibits:
 3.1(1)
              
              Amended
      and Restated Articles of Incorporation of microHelix, Inc., as amended
      November 16, 2001, December 5, 2003, April 8, 2008, October 28, 2008,
      October 17, 2006, January 16, 2008, and March 19, 2008.3.2(2)
              
              Bylaws
      of microHelix, Inc.31(3)
              
              Certification
      of Principal Executive Officer and Principal Financial
      Officer  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to Section 302 of the Sarbanes-Oxley Act of 200232(3)
              
              Certification
      of Principal Executive Officer  and Principal Financial
      Officer  pursuant to 18 U.S.C. Section 1350, as adopted pursuant
      to Section 906 of the Sarbanes-Oxley Act of
2002
 
 (1)
              Incorporated
      by reference to the Company's Annual Report on Form 10-KSB for the year
      ended December 31, 2004, filed on April 21, 2005 and to the Company’s Form
      8-K/A filed on April 14, 2005, and the Company’s Forms 8-K filed on
      October 31, 2005, October 20, 2006 and the Company’s Annual Report on Form
      10-K for the year ended on December 31, 2008 filed on April 16,
      2009.(2)
              Incorporated
      by reference to the Company's Form SB-2 filed on July 26,
      2001.(3)
              Filed
      herewith.
 
 
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13
 
 SIGNATURE
 
 In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
 
 Signature
                  
                  Title
                  
                  Date/s/
      James E. Horswill
                  
                  President
      and Chief Financial Officer
                  
                  November
      16, 2009James
      E. Horswill
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