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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

|    |  |                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------
|[X] |  | QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended March 31, 2002

OR

|      |  |                                                                                                                                    
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the Transition Period from________to________

Commission file number: 001-16781

MICROHELIX, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)

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

|                                                                              |  |                 
|----------------------------------------------------------------------------- |  | ----------------
|16125 SW 72ND Ave.; Portland, Oregon
(Address of Principal Executive Offices) |  | 97224
(Zip Code)

(Issuers Telephone Number, Including Area Code): 503/968-1600

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [X]; No [   ]

The number of shares outstanding of each of the issuers classes of common
equity, as of March 31, 2002 was 4,659,886 shares of Common Stock, 3,136,498
Class A Warrants, and 3,136,498 Class B Warrants.

Transitional Small Business Disclosure Format (Check One): Yes [   ]; No[X]





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TABLE OF CONTENTS



|                               |                                                                                                |                                            |  |  |  |  |  | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                  
|                               |                                                                                                | CONSOLIDATED BALANCE SHEET                
|                               |                                                                                                | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                               |                                                                                                | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                               |                                                                                                | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|PART II  OTHER INFORMATION   
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                      
|SIGNATURES                    



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TABLE OF CONTENTS

|                               |                                                                                               |                                                                                          |    |      |   | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | -- | ---- | - | 
|                               |                                                                                               |                                                                                          |    | Page
|                               |                                                                                               |                                                                                          |    |     
|PART I  FINANCIAL INFORMATION |                                                                                               |                                                                                          | 1  |     
|                               | ITEM 1. FINANCIAL STATEMENTS  UNAUDITED                                                      |                                                                                          |    |      |  
|                               |                                                                                               | Consolidated balance sheet as of March 31, 2002                                          |    |      | 2 | 
|                               |                                                                                               | Consolidated statements of operations for the three months ended March 31, 2002 and 2001 |    |      | 3 | 
|                               |                                                                                               | Consolidated statements of cash flows for the three months ended March 31, 2002 and 2001 |    |      | 4 | 
|                               |                                                                                               | Notes to consolidated financial statements                                               |    |      | 5 | 
|                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS |                                                                                          |    | 8    |  
|PART II  OTHER INFORMATION    |                                                                                               |                                                                                          | 11 |     
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                      |                                                                                          |    |      |  
|SIGNATURES                     |                                                                                               |                                                                                          | 12 |     





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PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements of microHelix,
Inc. (the Company) include all adjustments (consisting only of normal
recurring accruals) which management considers necessary for fair presentation
of operating results, financial position and cash flows as of March 31, 2002
and for the three month periods ended March 31, 2002 and March 31, 2001.

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MICROHELIX, INC.

CONSOLIDATED BALANCE SHEET
March 31, 2002
(UNAUDITED)

|                                                  |                                                                                           |                             |           |                |            | 
|------------------------------------------------- | ----------------------------------------------------------------------------------------- | --------------------------- | --------- | -------------- | ---------- | 
|                                                  |                                                                                           |                             |           | March 31, 2002
|                                                  |                                                                                           |                             |           |               
|Assets                                            |                                                                                           |                             |           |               
|Current Assets:                                   |                                                                                           |                             |           |               
|                                                  | Cash                                                                                      |                             | $         | 5,451,698      |           
|                                                  | Accounts receivable, net of allowance of $24,155                                          |                             |           | 893,164        |           
|                                                  | Inventories (Note 2)                                                                      |                             |           | 867,893        |           
|                                                  | Prepaid expenses                                                                          |                             |           | 212,510        |           
|                                                  |                                                                                           |                             |           |               
|                                                  |                                                                                           | Total current assets        |           |                | 7,425,265  | 
|Property and equipment  net                      |                                                                                           |                             | 1,843,694 |               
|Intangible and other assets  net                 |                                                                                           |                             | 4,929,289 |               
|                                                  |                                                                                           |                             |           |               
|                                                  |                                                                                           | Total                       |           | $              | 14,198,248 | 
|                                                  |                                                                                           |                             |           |               
|Liabilities and Shareholders Equity              |                                                                                           |                             |           |               
|Current Liabilities:                              |                                                                                           |                             |           |               
|                                                  | Accounts payable                                                                          |                             | $         | 477,480        |           
|                                                  | Accrued liabilities                                                                       |                             |           | 365,749        |           
|                                                  | Line of credit                                                                            |                             |           | 711,000        |           
|                                                  | Current portion of notes payable                                                          |                             |           | 250,000        |           
|                                                  | Current portion of notes payable to shareholder                                           |                             |           | 535,000        |           
|                                                  |                                                                                           |                             |           |               
|                                                  |                                                                                           | Total current liabilities   |           |                | 2,339,229  | 
|                                                  |                                                                                           |                             |           |               
|Long-Term Liabilities:                            |                                                                                           |                             |           |               
|Long-term portion of notes payable                |                                                                                           |                             | 441,396   |               
|Long-term portion of notes payable to shareholder |                                                                                           |                             | 600,000   |               
|                                                  |                                                                                           |                             |           |               
|                                                  |                                                                                           | Total long-term liabilities |           |                | 1,041,396  | 
|                                                  |                                                                                           |                             |           |               
|                                                  |                                                                                           | Total liabilities           |           |                | 3,380,625  | 
|                                                  |                                                                                           |                             |           |               
|Shareholders Equity:                             |                                                                                           |                             |           |               
|                                                  | Common stock, no par value, 5,519,495 shares authorized, 4,659,886 issued and
outstanding |                             |           | 14,179,467     |           
|                                                  | Additional paid-in capital                                                                |                             |           | 6,485,313      |           
|                                                  | Notes receivable from shareholders for common stock                                       |                             |           | (57,940        | )         
|                                                  | Deferred compensation expense                                                             |                             |           | (75,681        | )         
|                                                  | Accumulated deficit                                                                       |                             |           | (9,713,536     | )         
|                                                  |                                                                                           |                             |           |               
|                                                  |                                                                                           | Total shareholders equity  |           |                | 10,817,623 | 
|                                                  |                                                                                           |                             |           |               
|                                                  |                                                                                           | Total                       |           | $              | 14,198,248 | 
|                                                  |                                                                                           |                             |           |               

See notes to consolidated financial statements.

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MICROHELIX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2001 and 2002
(UNAUDITED)

|                                                         |                                 |                          |           |                              |           |      |           |           |           |  
|-------------------------------------------------------- | ------------------------------- | ------------------------ | --------- | ---------------------------- | --------- | ---- | --------- | --------- | --------- | -
|                                                         |                                 |                          |           | Three Months Ended March 31,
|                                                         |                                 |                          |           |                             
|                                                         |                                 |                          |           | 2001                         |           | 2002
|                                                         |                                 |                          |           |                              |           |     
|Sales:                                                   |                                 |                          |           |                              |           |      |           |          
|                                                         | Wire and cable                  |                          | $         | 1,355,561                    |           |      | $         | 1,229,564 |          
|                                                         | Government contracts            |                          |           | 244,275                      |           |      |           | 62,403    |          
|                                                         |                                 |                          |           |                              |           |      |           |          
|                                                         |                                 | Total sales              |           |                              | 1,599,836 |      |           |           | 1,291,967 |  
|Cost of Sales:                                           |                                 |                          |           |                              |           |      |           |          
|                                                         | Wire and cable                  |                          |           | 932,058                      |           |      |           | 1,041,551 |          
|                                                         | Government contracts            |                          |           | 128,439                      |           |      |           | 60,427    |          
|                                                         |                                 |                          |           |                              |           |      |           |          
|                                                         |                                 | Total cost of sales      |           |                              | 1,060,497 |      |           |           | 1,101,978 |  
|                                                         |                                 |                          |           |                              |           |      |           |          
|                                                         |                                 | Gross profit             |           |                              | 539,339   |      |           |           | 189,989   |  
|                                                         |                                 |                          |           |                              |           |      |           |          
|Operating Expenses:                                      |                                 |                          |           |                              |           |      |           |          
|                                                         | Research and development        |                          |           | 44,310                       |           |      |           | 129,639   |          
|                                                         | Sales and marketing             |                          |           | 96,911                       |           |      |           | 193,963   |          
|                                                         | General and administrative      |                          |           | 303,809                      |           |      |           | 548,178   |          
|                                                         |                                 |                          |           |                              |           |      |           |          
|                                                         |                                 | Total operating expenses |           |                              | 445,030   |      |           |           | 871,780   |  
|                                                         |                                 |                          |           |                              |           |      |           |          
|Income (loss) from operations                            |                                 |                          | 94,309    |                              |           |      | (681,791  | )        
|                                                         |                                 |                          |           |                              |           |      |           |          
|Other Income (Expense):                                  |                                 |                          |           |                              |           |      |           |          
|                                                         | Interest income                 |                          |           |                             |           |      |           | 26,539    |          
|                                                         | Interest expense                |                          |           | (98,169                      | )         |      |           | (17,784   | )        
|                                                         | Interest expense to shareholder |                          |           | (40,968                      | )         |      |           | (28,146   | )        
|                                                         |                                 |                          |           |                              |           |      |           |          
|                                                         |                                 | Other expense  net      |           |                              | (139,137  | )    |           |           | (19,391   | )
|                                                         |                                 |                          |           |                              |           |      |           |          
|Net loss                                                 |                                 | $                        | (44,828   | )                            |           | $    | (701,182  | )        
|                                                         |                                 |                          |           |                              |           |      |           |          
|Net loss per common share  basic and diluted            |                                 | $                        | (.03      | )                            |           | $    | (.15      | )        
|                                                         |                                 |                          |           |                              |           |      |           |          
|Shares used in per share calculation  basic and diluted |                                 |                          | 1,331,854 |                              |           |      | 4,659,886 |          
|                                                         |                                 |                          |           |                              |           |      |           |          

See notes to consolidated financial statements.

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MICROHELIX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2001 and 2002
(UNAUDITED)

|                                                                          |                                                                         |                                            |                                 |                                                 |         |                              |            |          |         |          |            |  
|------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------ | ------------------------------- | ----------------------------------------------- | ------- | ---------------------------- | ---------- | -------- | ------- | -------- | ---------- | -
|                                                                          |                                                                         |                                            |                                 |                                                 |         | Three Months Ended March 31,
|                                                                          |                                                                         |                                            |                                 |                                                 |         |                             
|                                                                          |                                                                         |                                            |                                 |                                                 |         | 2001                         |            | 2002    
|                                                                          |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|Cash Flows from Operating Activities:                                     |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|                                                                          | Net loss                                                                |                                            | $                               | (44,828                                         | )       |                              | $          | (701,182 | )      
|                                                                          | Adjustments to reconcile net loss to cash used in operating
activities: |                                            |                                 |                                                 |         |                              |            |          |        
|                                                                          |                                                                         | Depreciation and amortization              |                                 |                                                 | 107,737 |                              |            |          | 132,272 |         
|                                                                          |                                                                         | Stock compensation expense                 |                                 |                                                 | 13,218  |                              |            |          | 9,141   |         
|                                                                          |                                                                         | Amortization of deferred inventory charges |                                 |                                                 |        |                              |            |          | 1,540   |         
|                                                                          |                                                                         | Change in:                                 |                                 |                                                 |         |                              |            |          |         |         
|                                                                          |                                                                         |                                            | Accounts receivable, net        |                                                 |         | (210,142                     | )          |          |         | 155,469  |           
|                                                                          |                                                                         |                                            | Inventories                     |                                                 |         | (402,148                     | )          |          |         | 10,844   |           
|                                                                          |                                                                         |                                            | Due from affiliates             |                                                 |         | (14,874                      | )          |          |         |         |           
|                                                                          |                                                                         |                                            | Prepaid expenses                |                                                 |         | (23,954                      | )          |          |         | (41,943  | )         
|                                                                          |                                                                         |                                            | Intangible and other assets     |                                                 |         | (40,288                      | )          |          |         | (9,145   | )         
|                                                                          |                                                                         |                                            | Accounts payable                |                                                 |         | 353,233                      |            |          |         | (364,291 | )         
|                                                                          |                                                                         |                                            | Accrued interest                |                                                 |         | (33,206                      | )          |          |         |         |           
|                                                                          |                                                                         |                                            | Accrued interest to shareholder |                                                 |         | 42,259                       |            |          |         | (530,546 | )         
|                                                                          |                                                                         |                                            | Accrued liabilities             |                                                 |         | 61,976                       |            |          |         | (212,099 | )         
|                                                                          |                                                                         |                                            | Due to affiliates               |                                                 |         | 46,744                       |            |          |         |         |           
|                                                                          |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|                                                                          |                                                                         |                                            |                                 | Cash used in operating activities               |         |                              | (144,273   | )        |         |          | (1,549,940 | )
|                                                                          |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|Cash Flows from Investing Activities:                                     |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|                                                                          | Capital expenditures                                                    |                                            |                                 | (15,638                                         | )       |                              |            | (102,244 | )      
|                                                                          |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|                                                                          |                                                                         |                                            |                                 | Cash used in investing activities               |         |                              | (15,638    | )        |         |          | (102,244   | )
|                                                                          |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|Cash Flows from Financing Activities:                                     |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|                                                                          | Proceeds from borrowings against notes payable and line of
credit       |                                            |                                 | 966,716                                         |         |                              |            |         |        
|                                                                          | Principal payments on notes payable and lines of credit                 |                                            |                                 | (807,500                                        | )       |                              |            | (249,434 | )      
|                                                                          |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|                                                                          |                                                                         |                                            |                                 | Cash provided by (used in) financing activities |         |                              | 159,216    |          |         |          | (249,434   | )
|                                                                          |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|Change in cash                                                            |                                                                         |                                            | (695                            | )                                               |         |                              | (1,901,618 | )       
|Cash, beginning of period                                                 |                                                                         |                                            | 3,554                           |                                                 |         |                              | 7,353,316  |         
|                                                                          |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|Cash, end of period                                                       |                                                                         | $                                          | 2,859                           |                                                 |         | $                            | 5,451,698  |         
|                                                                          |                                                                         |                                            |                                 |                                                 |         |                              |            |         
|Supplemental disclosure of cash flow information  Cash paid
for interest |                                                                         | $                                          | 130,084                         |                                                 |         | $                            | 576,476    |         
|                                                                          |                                                                         |                                            |                                 |                                                 |         |                              |            |         

See notes to consolidated financial statements.

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MICROHELIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 2002 and
for the three month periods ended March 31, 2001 and 2002
(UNAUDITED)

1. General

The accompanying quarterly consolidated financial statements of
microHelix, Inc. and its wholly owned subsidiary, BioElectric Corporation
(collectively, the Company) are unaudited and include all adjustments
(consisting only of normal recurring accruals) considered necessary by
management to present a fair statement of the results of operations, financial
position and cash flows. They have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB of Regulation S-B. Accordingly, they do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements.

The results of operations for the three-month period ended March 31, 2002
are not necessarily indicative of the results to be expected for the full year.
For further information, refer to the financial statements and footnotes
thereto included in the Companys Form 10-KSB for the fiscal year ended
December 31, 2001.

Use of Estimates The preparation of 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 amounts
reported in the consolidated financial statements and accompanying notes. This
includes, among other things, evaluation of the remaining life and
recoverability of long-lived assets. Actual results could differ from those
estimates.

Recent Accounting Pronouncements In June 1998, June 1999, and June 2000,
the Financial Accounting Standards Board (FASB) issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities,SFAS No. 137,
Deferral of the Effective Date of FASB Statement No. 133, and SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging
Activities,
respectively (collectively the Statements). The Statements establish
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities. They require that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. The Statements are effective for fiscal years
beginning after June 15, 2000. The Company adopted the Statements on January 1,
2001. The adoption of the Statements did not have a material impact on the
Companys consolidated financial statements.

In July 2001, the FASB issued SFAS No. 141, Business Combinations.The
statement discontinues the use of the pooling of interests method of accounting
for business combinations. The statement is effective for all business
combinations after June 30, 2001. The effects of this statement did not have a
material impact on the Companys consolidated financial statements.

In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible
Assets.The statement will require discontinuing the amortization of goodwill
and other intangible assets with indefinite useful lives. Instead, these assets
will be tested periodically for impairment and written down to their fair
market values as necessary. This statement is effective for fiscal years
beginning after December 15, 2001. The Company adopted this statement on
January 1, 2002 and such adoption did not have a material impact on the
Companys consolidated financial statements.

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. SFAS No.144 addresses accounting
and reporting of long-lived assets, except goodwill, that are either held and
used or disposed of through sale or other means. The Company adopted this statement on January 1, 2002 and such adoption did not have a
material impact on the Companys consolidated financial statements.

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2. Inventories

Inventories are as follows:

|                  |       |   |           |         | 
|----------------- | ----- | - | --------- | ------- | 
|                  |       |   | March 31,
|                  |       |   | 2002     
|                  |       |   |          
|Raw materials     |       | $ | 1,275,620 |        
|Work-in-process   |       |   | 23,033    |        
|Inventory reserve |       |   | (430,760  | )      
|                  |       |   |           |        
|                  | Total |   | $         | 867,893 | 
|                  |       |   |           |        

3. Line of Credit and Notes Payable

In December 2001, the Company entered into a revolving line of credit and
equipment loan agreement with a bank. The line of credit bears interest at the
prime rate plus 1% (5.75% at March 31, 2002) and allows the Company to borrow
up to $2,000,000. At March 31, 2002, $711,000 was outstanding on the line of
credit.

As of March 31, 2002, the Company was in compliance with the financial
covenants established in the line of credit and borrowing agreement.

Notes payable consisted of the following:

|                                                                                                                                                                               |                                    |   |           |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------- | - | --------- | --------- | 
|                                                                                                                                                                               |                                    |   | March 31,
|                                                                                                                                                                               |                                    |   | 2002     
|                                                                                                                                                                               |                                    |   |          
|Note payable, interest at prime plus 1.25%, 6% at March 31, 2002, principal and interest
payable monthly, due in full on December 30, 2004, secured by inventory and equipment |                                    | $ | 691,396   |          
|Note payable to shareholder, interest at 7.5% at March 31, 2002, interest payable monthly
and principal payments due March 2003 and December 2004, secured by certain assets   |                                    |   | 456,115   |          
|Note payable to shareholder, interest at 7.5% at March 31, 2002, interest payable monthly
and principal payments due March 2003 and December 2004, secured by certain assets   |                                    |   | 383,885   |          
|Note payable to shareholder, interest at 7.5% at March 31, 2002, interest payable monthly
and principal payment due December 2002, secured by certain assets                   |                                    |   | 135,000   |          
|Note payable to shareholder, interest at 7.5% at March 31, 2002, interest payable monthly
and principal payments due March 2003 and December 2004, secured by certain assets   |                                    |   | 160,000   |          
|                                                                                                                                                                               |                                    |   |           |          
|                                                                                                                                                                               | Total notes payable                |   |           | 1,826,396 | 
|Less current portion                                                                                                                                                           |                                    |   | (785,000  | )        
|                                                                                                                                                                               |                                    |   |           |          
|                                                                                                                                                                               | Long-term portion of notes payable |   | $         | 1,041,396 | 
|                                                                                                                                                                               |                                    |   |           |          

Long-term notes payable consist of a $441,396 note payable to a bank and
$600,000 of notes payable to shareholder.

In February 2002, the Companys President and Chief Executive Officer (the
shareholder), along with the Board of Directors, agreed to reduce the
interest rates on notes payable to shareholder from 12% to 7.5% and extend the
terms for $400,000 of the balance from December 31, 2002 to March 31, 2003 and
the remaining $600,000 of the balance will be due December 31, 2004. The
shareholder, who also serves as trustee of the Sass Living Trust, along with
the Board of Directors, also agreed to reduce the interest rate on the note
payable to the Sass Living Trust from 15% to 7.5%. In connection with the
revisions, the Company repaid $90,830 of principal in 2002 in order to reduce
the outstanding principal to $1,000,000. Additionally, in 2002 the Company
paid accrued interest in full for both the notes payable to the shareholder and
to the Sass Living Trust in the amounts of approximately $460,000 and $72,000,
respectively.

The weighted-average interest rate on short-term borrowings outstanding at
March 31, 2002 was 5.75%.

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4. Related-Party Transactions

Significant transactions and balances with shareholders are summarized
below:

|                                                    |  |           |           | 
|--------------------------------------------------- |  | --------- | --------- | 
|                                                    |  | March 31,
|                                                    |  | 2002     
|                                                    |  |          
|Notes receivable from shareholders for common stock |  | $         | 57,940    | 
|                                                    |  |           |           | 
|Notes payable to shareholder                        |  | $         | 1,135,000 | 
|                                                    |  |           |           | 

|                                |  |                          |        |      |  |   |        | 
|------------------------------- |  | ------------------------ | ------ | ---- |  | - | ------ | 
|                                |  | Three Month Period Ended
|                                |  | March 31,               
|                                |  |                         
|                                |  | 2001                     |        | 2002
|                                |  |                          |        |     
|Interest expense to shareholder |  | $                        | 40,968 |      |  | $ | 28,146 | 
|                                |  |                          |        |      |  |   |        | 

During 1999, the shareholder agreed to defer his annual compensation of
$200,000 to future periods in order to improve the Companys cash flow. In
February 2002, the Company agreed to pay $125,000 of the deferred compensation
and the shareholder agreed to forgive the remaining $75,000.

5. Segments

The Company operates in two segments. The wire and cable segment designs
and manufactures micro cables, connectors, and assemblies for use in medical
devices. The government contracts segment performs research funded by
governmental institutions, primarily the National Institutes of Health, for
development of custom electronic interconnect systems for the human body.

The following is a summary of various financial amounts for each of the
Companys business segments. There were no intersegment sales during any of
the periods presented.

|              |                      |       |   |                              |           |      |   |           |           | 
|------------- | -------------------- | ----- | - | ---------------------------- | --------- | ---- | - | --------- | --------- | 
|              |                      |       |   | Three Months Ended March 31,
|              |                      |       |   |                             
|              |                      |       |   | 2001                         |           | 2002
|              |                      |       |   |                              |           |     
|Sales:        |                      |       |   |                              |           |      |   |          
|              | Wire and cable       |       | $ | 1,355,561                    |           |      | $ | 1,229,564 |          
|              | Government contracts |       |   | 244,275                      |           |      |   | 62,403    |          
|              |                      |       |   |                              |           |      |   |          
|              |                      | Total |   | $                            | 1,599,836 |      |   | $         | 1,291,967 | 
|              |                      |       |   |                              |           |      |   |          
|Gross profit: |                      |       |   |                              |           |      |   |          
|              | Wire and cable       |       | $ | 423,503                      |           |      | $ | 188,013   |          
|              | Government contracts |       |   | 115,836                      |           |      |   | 1,976     |          
|              |                      |       |   |                              |           |      |   |          
|              |                      | Total |   | $                            | 539,339   |      |   | $         | 189,989   | 
|              |                      |       |   |                              |           |      |   |          

6. Loss Per Share

Basic net loss per share has been computed by dividing net loss by the
weighted average number of shares outstanding during each period. Diluted loss
per share has been computed by dividing net loss adjusted for interest on
convertible notes payable by the weighted average common stock and common stock
equivalent shares outstanding during each period using the treasury stock
method for employee stock option plans and warrants, and the if-converted
method for redeemable preferred stock and convertible notes payable, if the
common equivalent shares were not anti-dilutive. Common stock equivalents were
anti-dilutive for all periods presented.

* * * * * *

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

The following discussion provides information which 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

Statements in this filing, which are not historical facts, are
forward-looking statements under the provisions of the Private Securities
Litigation Reform Act of 1995. All forward-looking statements involve risks
and uncertainties. These statements are based on numerous assumptions about
future conditions that could prove not to be accurate. Actual events,
transactions or results may materially differ from the anticipated events,
transactions or results described in such statements. The Companys ability to
consummate such transactions and achieve such events or results is subject to
certain risks and uncertainties. In addition to those specifically mentioned
above, factors that could adversely affect future events, transactions or
results include, but are not limited to, unfavorable economic conditions,
disruptions or other effects related to terrorism and acts of war, the
existence of demand for, and acceptance of, the Companys products and
services, regulatory approvals and developments, economic conditions, the
impact of competition and pricing, new product offerings by competitors,
successful completion of special engineering projects, successful completion of
long-term production contracts, and other risks and factors as are described
from time to time in the Companys Securities and Exchange Commission filings,
including but not limited to, the risks detailed in the Risk Factors section
of the Companys Annual Report on Form 10-KSB for the year ended December 31,
2001 The forward-looking statements contained in this Form 10-QSB speak only
as of the date on which they are made, and the Company undertakes no obligation
and does not intend to update or revise these forward-looking statements to
reflect events or circumstances that occur after the date of this filing.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001

Total sales for the first quarter of 2002 were $1,292,000, a 19% decrease from
the $1,600,000 recorded for the first quarter of 2001. Wire and cable sales
were $1,230,000 for the first quarter of 2002 compared to $1,356,000 for the
first quarter of 2001, a decrease of 9%. The decline in wire and cable sales
in the first quarter of 2002 was due to a decline in sales to the ultrasound
market, partially offset by increases in sales to the minimally invasive and
fully implantable markets. Sales from government contracts for the first
quarter of 2002 were $62,000 compared to $244,000 for the first quarter of
2001, a decrease of 75%. The Company anticipated this reduction in government
contract sales, and intends to focus on product development rather than to
continue to rely on government research grants.

The gross profit margin for the first quarter of 2002 was 15%, compared to 34%
for the first quarter of 2001. There are two primary reasons for the decline
in gross margin in the first quarter of 2002. First, in the first quarter of
2001 ultrasound sales accounted for 60% of wire and cable sales, compared to
26% of wire and cable sales in the first quarter of 2002. This significant
reduction in sales and the corresponding reduction in production levels
materially impacted the efficiency and productivity of our Mexican plant. We
are currently working to obtain additional production volume for the Mexican
plant during the second half of 2002. If we obtain additional production
volume, and there are no guarantees that we will, then the gross margins on
products shipped from that plant during the second half of 2002 should improve.
The second reason gross margin was lower during the first quarter of 2002
compared to the same quarter a year ago is due to a decrease in government
contract sales, which earn a much higher margin, from 15% of total sales in the
first quarter of 2001 to less than 5% in the first quarter of 2002.

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Research and development expenses were $130,000 in the first quarter of 2002,
compared to $44,000 recorded for the same period a year ago. This increase in
expenses is due to the Company hiring additional engineers to focus on product
development, as well as an improvement in the cost allocation methods between
operating expense and cost of sales. Sales and marketing expenses were
$194,000 in the first quarter of 2002, compared to $97,000 recorded during the
same period a year ago. This increase is primarily due to the staffing of both
an internal and external sales force. General and administrative expenses were
$548,000 in the first quarter of 2002, compared to $304,000 recorded in the
first quarter of 2001. This increase is due to the additional cost of
maintaining the Companys status as a public entity, the cost of putting a
formal contracts administrative process in place and the cost of hiring a Chief
Financial Officer and a human resources manager.

Interest expense was $46,000 in the first quarter of 2002, compared to $139,000
for the same quarter a year ago. This reduction in interest expense is due
primarily to the retirement of approximately $3.2 million of debt with a
portion of the proceeds from the Companys initial public offering completed in
November 2001.

LIQUIDITY AND CAPITAL RESOURCES

THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001

The Company completed its initial public offering on November 16, 2001 and
received net proceeds, after underwriting commissions and financing costs, of
approximately $11.4 million. The Company used approximately $3.2 million of
such net proceeds to reduce debt. The Companys cash position as of March 31,
2002 was approximately $5.5 million.

During the three month period ended March 31, 2002, the Companys cash used in
operations was $1,550,000, compared to $144,000 for the same period in 2001.
This increased cash usage of $1,406,000 is primarily attributable to an
increased loss of $656,000, a decrease in accounts payable of $717,000, and an
increase in interest payments made to shareholders of $573,000, that was
partially offset by a decrease in inventory expenditures of $413,000.

During the three month period ended March 31, 2002 total cash balance decreased
from $7,353,000 to $5,452,000, a reduction of $1,901,000. During this quarter
the Company made one-time payments of $269,000 to vendors who provided services
related to the Companys initial public offering. In addition, during such
quarter the Company made a one-time payment of approximately $862,000 for
accrued interest to a shareholder, as well as a partial payment of loan
principal and deferred compensation to such shareholder. Allowing for these
two one-time payments cash used for all other operating activities in the
quarter totaled $770,000.

As of March 31, 2002, the Company had approximately $5.5 million in cash,
compared with $3,000 in cash as of March 31, 2001. This change was due to the
Companys initial public offering that was completed in November 2001.

In December 2001, the Company entered into a revolving line of credit and
equipment loan agreement with a bank. The line of credit allows the Company to
borrow up to $2.0 million at prime plus 1%. At March 31, 2002, $711,000 was
outstanding on the line of credit. As of March 31, 2002 the Company was in
compliance with all loan covenants contained in the loan agreement. However,
the Company believes it will not meet the tangible net worth covenant as of
April 30, 2002. The Company has been in discussions with the bank who has
expressed a willingness to work with the Company to amend the tangible net
worth covenant before the end of May 2002. The Company expects to be in
compliance with such amended covenant for the balance of fiscal year 2002.

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The following table discloses the Companys contractual cash obligations as of
March 31, 2002:

|                                         |  |                        |           |                  |  |           |         |           |  |   |           |  |  |   |       | 
|---------------------------------------- |  | ---------------------- | --------- | ---------------- |  | --------- | ------- | --------- |  | - | --------- |  |  | - | ----- | 
|                                         |  | Payments Due by Period
|                                         |  |                       
|Contractual Obligations                  |  | Total                  |           | Less than 1 year |  | 1-3 years |         | 4-5 years
|                                         |  |                        |           |                  |  |           |         |          
|Operating leases, net of sublease income |  | $                      | 207,928   |                  |  | $         | 158,733 |           |  | $ | 45,246    |  |  | $ | 3,949 | 
|Line of credit                           |  |                        | 711,000   |                  |  |           |         |           |  |   | 711,000   |  |  |   |       | 
|Long-term debt                           |  |                        | 691,396   |                  |  |           | 250,000 |           |  |   | 441,396   |  |  |   |       | 
|Long-term debt to shareholder            |  |                        | 1,135,000 |                  |  |           | 535,000 |           |  |   | 600,000   |  |  |   |       | 
|                                         |  |                        |           |                  |  |           |         |           |  |   |           |  |  |   |       | 
|Total contractual cash obligations       |  | $                      | 2,745,324 |                  |  | $         | 943,733 |           |  | $ | 1,797,642 |  |  | $ | 3,949 | 
|                                         |  |                        |           |                  |  |           |         |           |  |   |           |  |  |   |       | 

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PART II  OTHER INFORMATION




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits- None

(b)  Reports on Form 8-K  During the quarter ended March 31, 2002, the
Company filed a Current Report on Form 8-K on February 27, 2002, reporting its
financial results for the quarter and fiscal year ended December 31, 2001.
Subsequent to the quarter ended March 31, 2002, the Company filed a Current
Report on Form 8-K on May 1, 2002, reporting its financial results for the
quarter ended March 31, 2002.

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SIGNATURES

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/ RICHARD G. SASS    
|Richard G. Sass         |  | Chairman, President and
Chief Executive Officer |  | May 15, 2002
|                       
|                       
|/s/ TERRENCE A. RIXFORD
|Terrence A. Rixford     |  | Chief Financial Officer and
Director            |  | May 15, 2002

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