UNITED
STATES





SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x
            QUARTERLY
      REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
  EXCHANGEACT
      OF 1934 for the quarterly period ended September 30,
  2007ORo
            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)





(Issuer'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 a check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a non-accelerated filer, or a
smaller reporting company.


Large accelerated filer o
            
            Accelerated filer oNon-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
March 16, 2009, there were 1,972,568 shares of the issuer's common stock
outstanding.





Transitional
Small Business Disclosure Format (Check One):Yes o No x





microHelix,
Inc.


Quarterly
Report on Form 10-Q


Quarter
Ended September 30, 2007





TABLE
OF CONTENTS





PagePART
      I — FINANCIAL INFORMATION
                    3ITEM
      1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
                    3Consolidated
      balance sheets as of September 30, 2007 and December 31,
    2006
                    3Consolidated
      statements of operations for the three and nine months ended September 30,
      2007 and 2006
                    4Consolidated
      statements of cash flows for the three and nine months ended September 30,
      2007 and 2006
                    5Notes
      to consolidated financial statements
                    6ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
                    10ITEM
      3. MANAGEMENT'S DISCUSSION CONCERNING MARKET RISK
                    15ITEM
      4. CONTROLS AND PROCEDURES
                    17PART
      II — OTHER INFORMATION
                    17ITEM
      1. LEGAL PROCEEDINGS
                    17ITEM
      6. EXHIBITS
                    17SIGNATURE
                    18


2


PART
I — FINANCIAL INFORMATION





ITEM 1. FINANCIAL STATEMENTS —
UNAUDITED





MICROHELIX,
INC.





CONDENSED
CONSOLIDATED BALANCE SHEETS


(UNAUDITED)


September
30, 2007 and December 31, 2006





2007
                          
                          
                          2006AssetsCurrent
      Assets:Cash
                          
                          $
                          5,996
                          
                          
                          $
                          40,680Accounts
      receivable, net of allowance of $84,064 and $3,206 at September 30, 2007
      and December 31, 2006 respectively
                          
                          
                          184,113
                          
                          
                          
                          1,905,660Inventories,
      net
                          
                          
                          —
                          
                          
                          
                          1,600,403Prepaid
      expenses and other current assets
                          
                          
                          5,086
                          
                          
                          
                          43,692Total
      current assets
                          
                          
                          195,195
                          
                          
                          
                          3,590,435Property
      and equipment, net
                          
                          
                          —
                          
                          
                          
                          904,231Intangible
      assets
                          
                          
                          —
                          
                          
                          
                          350,112Goodwill
                          
                          
                          —
                          
                          
                          
                          732,365Total
      assets
                          
                          $
                          195,195
                          
                          
                          $
                          5,577,143Liabilities
      and Shareholders’ DeficitCurrent
      Liabilities:Checks
      issued in excess of bank balances
                          
                          $
                          37,476
                          
                          
                          $
                          129,397Accounts
      payable
                          
                          
                          1,787,838
                          
                          
                          
                          1,633,288Accounts
      payable-related parties
                          
                          
                          —
                          
                          
                          
                          8,232Accrued
      liabilities
                          
                          
                          294,376
                          
                          
                          
                          609,599Line
      of credit
                          
                          
                          —
                          
                          
                          
                          1,897,432Note
      payable to shareholder
                          
                          
                          —
                          
                          
                          
                          150,000Current
      maturities of notes payable, net of debt discount of $44,232 at September
      30, 2007
                          
                          
                          345,802
                          
                          
                          
                          347,938Common
      stock warrant liability
                          
                          
                          339,620
                          
                          
                          
                          —Total
      current liabilities
                          
                          
                          2,805,112
                          
                          
                          
                          4,775,886Long-Term
      LiabilitiesNotes
      payable, less current maturities, net of debt discounts
                          
                          
                          —
                          
                          
                          
                          801,262Deferred
      tax liability
                          
                          
                          —
                          
                          
                          
                          298,145Total
      long-term liabilities
                          
                          
                          —
                          
                          
                          
                          1,099,407Total
      liabilities
                          
                          
                          2,805,112
                          
                          
                          
                          5,875,293Shareholders'
      Deficit:Preferred
      Stock, convertible, no par value, 750,000 shares
    authorized,279,070
      Series C Preferred Stock issued and outstanding, liquidation preference
      $600,000
                          
                          
                          533,000
                          
                          
                          
                          533,000Common
      stock, no par value, 25,000,000 shares authorized,966,339
      and 965,672 shares issued and outstanding at September 30, 2007 and
      December 31, 2006, respectively
                          
                          
                          17,462,823
                          
                          
                          
                          17,462,823Additional
      paid-in capital
                          
                          
                          5,989,455
                          
                          
                          
                          6,292,850Accumulated
      deficit
                          
                          
                          (26,595,195
                          )
                          
                          
                          (24,586,823
                          )Total
      shareholders' deficit
                          
                          
                          (2,609,917
                          )
                          
                          
                          (298,150
                          )Total
      liabilities and shareholders' deficit
                          
                          $
                          195,195
                          
                          
                          $
                          5,577,143




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


3


MICROHELIX,
INC.





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)





Three Months Ended
                      September 30
                    
                    
                    Nine Months Ended
                      September 302007
                    
                    
                    2006
                    
                    
                    2007
                    
                    
                    2006Sales
                    
                    $
                    2,673,692
                    
                    
                    $
                    3,944,057
                    
                    
                    $
                    7,979,856
                    
                    
                    $
                    11,671,356Cost
      of sales
                    
                    
                    1,459,901
                    
                    
                    
                    3,249,806
                    
                    
                    
                    7,092,458
                    
                    
                    
                    9,963,074Gross profit
                    
                    
                    1,213,791
                    
                    
                    
                    694,251
                    
                    
                    
                    887,398
                    
                    
                    
                    1,708,282Operating
      Expenses:Sales and
    marketing
                    
                    
                    4,908
                    
                    
                    
                    127,604
                    
                    
                    
                    214,884
                    
                    
                    
                    438,961General and
      administrative
                    
                    
                    154,730
                    
                    
                    
                    446,719
                    
                    
                    
                    1,040,369
                    
                    
                    
                    1,547,477Total operating
      expenses
                    
                    
                    159,638
                    
                    
                    
                    556,323
                    
                    
                    
                    1,255,253
                    
                    
                    
                    1,968,438Income
      (loss) from operations
                    
                    
                    1,054,153
                    
                    
                    
                    119,928
                    
                    
                    
                    (367,855
                    )
                    
                    
                    (278,156
                    )Other
      income (expense):Interest and other
      income
                    
                    
                    —
                    
                    
                    
                    85
                    
                    
                    
                    —
                    
                    
                    
                    534Impairment
      expense-intangible assets
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (242,658
                    )
                    
                    
                    —Impairment
      expense-goodwill
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (732,365
                    )
                    
                    
                    —Loan
      restructuring expense
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    (989,079
                    )
                    
                    
                    —Warrant
      valuation gain
                    
                    
                    —
                    
                    
                    
                    —
                    
                    
                    
                    1,478,580
                    
                    
                    
                    —Debt
      forgiveness
                    
                    
                    109,471
                    
                    
                    
                    —
                    
                    
                    
                    109,471
                    
                    
                    
                    —Loss
      on disposal of equipment
                    
                    
                    (545,721
                    )
                    
                    
                    —
                    
                    
                    
                    (545,721
                    )
                    
                    
                    —Interest expense
                    
                    
                    (509,560
                    )
                    
                    
                    (131,796
                    )
                    
                    
                    (1,016,890
                    )
                    
                    
                    (288,195
                    )Other income (expense) –
      net
                    
                    
                    (945,810
                    )
                    
                    
                    (131,711
                    )
                    
                    
                    (1,938,662
                    )
                    
                    
                    (287,661
                    )Net
      income (loss) before benefit from income taxes
                    
                    
                    108,343
                    
                    
                    
                    (11,783
                    )
                    
                    
                    (2,306,517
                    )
                    
                    
                    (568,817
                    )Benefit
      from income taxes
                    
                    
                    (206,408
                    )
                    
                    
                    (45,869
                    )
                    
                    
                    (298,145
                    )
                    
                    
                    (137,607
                    )Net
      income (loss)
                    
                    
                    314,751
                    
                    
                    
                    34,086
                    
                    
                    
                    (2,008,372
                    )
                    
                    
                    (428,210
                    )Preferred
      dividends
                    
                    
                    —
                    
                    
                    
                    (54,247
                    )
                    
                    
                    —
                    
                    
                    
                    (260,496
                    )Net
      income (loss) attributable to common shareholders
                    
                    $
                    314,751
                    
                    
                    $
                    (20,161
                    )
                    
                    $
                    (2,008,372
                    )
                    
                    $
                    (668,706
                    )Net
      income (loss) per share attributable to common shareholders –Basic
                    
                    $
                    .33
                    
                    
                    $
                    (.04
                    )
                    
                    $
                    (2.08
                    )
                    
                    $
                    (2.16
                    )Diluted
                    
                    $
                    .15
                    
                    
                    $
                    (.04
                    )
                    
                    $
                    (2.08
                    )
                    
                    $
                    (2.16
                    )Weighted average number of
      shares outstanding –Basic
                    
                    
                    966,339
                    
                    
                    
                    557,847
                    
                    
                    
                    966,319
                    
                    
                    
                    308,982Diluted
                    
                    
                    2,157,695
                    
                    
                    
                    557,847
                    
                    
                    
                    966,319
                    
                    
                    
                    308,982





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


4


MICROHELIX,
INC.





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)





Nine Months Ended
                                          September 302007
                                        
                                        
                                        2006Cash Flows
      Provided By (Used In) Operating Activities:Net
      loss
                                        
                                        $
                                        (2,008,372
                                        )
                                        
                                        $
                                        (428,210
                                        )Adjustments
      to reconcile net loss to cash provided by(used
      in) operating activities:Depreciation -capital
      assets
                                        
                                        
                                        266,510
                                        
                                        
                                        
                                        325,540Goodwill
      impairment
                                        
                                        
                                        732,365
                                        
                                        
                                        
                                        —Amortization
      – intangible assets
                                        
                                        
                                        107,454
                                        
                                        
                                        
                                        161,187Intangible
      asset impairment
                                        
                                        
                                        242,658
                                        
                                        
                                        
                                        —Provision
      for doubtful accounts
                                        
                                        
                                        80,858
                                        
                                        
                                        
                                        (2,414
                                        )Provision
      for inventory reserves
                                        
                                        
                                        (404,476
                                        )
                                        
                                        
                                        112,054Common
      stock issued for services
                                        
                                        
                                        2,500
                                        
                                        
                                        
                                        64,017Interest
      expense-amortization
                                        
                                        
                                        662,090
                                        
                                        
                                        
                                        —Loan
      restructuring costs
                                        
                                        
                                        992,270
                                        
                                        
                                        
                                        —Warrant
      valuation gain
                                        
                                        
                                        (1,478,580
                                        )
                                        
                                        
                                        —Debt
      forgiveness
                                        
                                        
                                        (109,471
                                        )
                                        
                                        
                                        —Loss
      on disposal of equipment
                                        
                                        
                                        545,721Benefit
      for deferred income taxes
                                        
                                        
                                        (298,145
                                        )
                                        
                                        
                                        (137,607
                                        )Warrants
      used for services
                                        
                                        
                                        —
                                        
                                        
                                        
                                        28,731Change
      in assets and liabilities:(Increase)
      Decrease in assets:Accounts
      receivable
                                        
                                        
                                        1,640,689
                                        
                                        
                                        
                                        (124,722
                                        )Inventories
                                        
                                        
                                        2,004,879
                                        
                                        
                                        
                                        (862,747
                                        )Prepaid
      expenses and other current assets
                                        
                                        
                                        38,606
                                        
                                        
                                        
                                        17,972Intangibles,
      other assets and deposits
                                        
                                        
                                        —
                                        
                                        
                                        
                                        (28,731
                                        )Increase
      (Decrease) in liabilities:Accounts
      payable and checks issued in excess of cash balances
                                        
                                        
                                        163,868
                                        
                                        
                                        
                                        596,365Accrued
      liabilities
                                        
                                        
                                        (315,223
                                        )
                                        
                                        
                                        66,073Customer
      deposit
                                        
                                        
                                        —
                                        
                                        
                                        
                                        (163,456
                                        )Net
      cash provided by (used in) operating activities
                                        
                                        
                                        2,866,201
                                        
                                        
                                        
                                        (375,948
                                        )Cash
      Flows Provided By (Used In) Investing Activities:Capital
      expenditures
                                        
                                        
                                        —
                                        
                                        
                                        
                                        (245,527
                                        )Proceeds
      from sale of equipment
                                        
                                        
                                        92,000Net
      cash provided by (used in) investing activities
                                        
                                        
                                        92,000
                                        
                                        
                                        
                                        (245,527
                                        )Cash
      Flows Provided By (Used In) Financing Activities:Payments
      on line of credit
                                        
                                        
                                        (9,656,474
                                        )
                                        
                                        
                                        (13,140,480
                                        )Proceeds
      from line of credit
                                        
                                        
                                        7,759,042
                                        
                                        
                                        
                                        13,284,252Proceeds
      from notes payable
                                        
                                        
                                        —
                                        
                                        
                                        
                                        593,121Payments
      on notes payable
                                        
                                        
                                        (1,695,453
                                        )
                                        
                                        
                                        (16,844
                                        )Payments
      on notes payable to shareholders
                                        
                                        
                                        (150,000
                                        )
                                        
                                        
                                        (44,081
                                        )Proceeds
      from issue of notes payable to shareholders
                                        
                                        
                                        750,000
                                        
                                        
                                        
                                        (104,406
                                        )Net
      cash provided by (used in) financing activities
                                        
                                        
                                        (2,992,885
                                        )
                                        
                                        
                                        571,562Change
      in cash
                                        
                                        
                                        (34,684
                                        )
                                        
                                        
                                        (49,913
                                        )Cash,
      beginning of period
                                        
                                        
                                        40,680
                                        
                                        
                                        
                                        58,312Cash,
      end of period
                                        
                                        $
                                        5,996
                                        
                                        
                                        $
                                        8,399Supplemental
      Cash Flow Information:Interest
      paid
                                        
                                        $
                                        —
                                        
                                        
                                        $
                                        283,503Preferred
      Dividends
                                        
                                        $
                                        —
                                        
                                        
                                        $
                                        (260,496
                                        )Supplemental
      Disclosure of Non-cash Financing Activities:Warrants
      issued to lenders-recorded as debt discount
                                        
                                        $
                                        551,970
                                        
                                        
                                        $
                                        31,923Common
      stock warrant liability
                                        
                                        $
                                        1,818,200
                                        
                                        
                                        $
                                        —





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


5


MICROHELIX,
INC.





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Three
and Nine Months Ended September 30, 2007 and 2006





1.   Summary
of Significant Accounting Policies and Basis of Presentation





Nature of Operations— For the
period covered by this report, the three and the nine months ending September
30, 2007, microHelix, Inc. ("we," "us," the "Company" or "microHelix") was a
manufacturer of custom cable assemblies and mechanical assemblies for the
medical and commercial original equipment manufacturer
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 September 28, 2007, after which microHelix became a shell
company.   See “Going Concern” and Note 8 – Subsequent
Events.





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— Despite the
Company’s efforts to restructure its debts, continuing deterioration of the
Company’s financial condition during April and May 2007 caused the Board of
Directors to approve a voluntary surrender of the Company's assets to its
secured creditors and began winding up its affairs.  In connection
with the windup, the Company stopped paying its unsecured creditors for goods
and services provided prior to May 21, 2007.  To ensure an orderly
transition, the Company’s customers agreed to substantial price increases,
provided raw materials and subsidized certain expenses which allowed Moore to
fill its backlog, collect its receivables and cure outstanding deficiencies in
rent payments and benefits plans.  The Company applied the proceeds
from filling these orders to the outstanding balances due to its secured
creditors.





These
financial statements reflect the shutdown (discontinuance) of the MicroCoax
Assembly Solutions division which occurred May 23, 2007.  The
division’s assets were sold to an unrelated third party for $17,000
during  July 2007.  Moore continued to operate for the
benefit of the secured creditors through September 28, 2007 after which its
assets were sold to an unrelated third party for $75,000.  These sales
resulted in a loss on disposal of equipment of $545,721. See Note 2 – Terms
of Troubled Debt Modification, Note 5 – Fixed Assets, Note 7 – Goodwill and
Other Intangible Assets and Note 8—Subsequent Events.





Stock-Based Compensation— No
options were granted or stock grants made in the nine months ending September
30, 2007 or 2006.  The Company's policy covering equity compensation
grants to either employees or directors is to recognize the expense as described
in FAS 123 (R).





Net Income/(Loss) per Share—
The Company uses SFAS No. 128, "Earnings per Share" for calculating the basic
and diluted income/(loss) per share. Basic income/(loss) per share is computed
by dividing the net income/(loss) attributable to common stockholders by the
weighted average number of common shares outstanding. Because the Company
recorded a loss for the nine months ending September 30, 2007 and the three and
nine months ending September 30, 2006; the issuance of shares from the
conversion of preferred stock, options or warrants would be
anti-dilutive.  Thus, basic and diluted losses per common share were
identical for these periods.  The Company computes dilutive shares
using the treasury method.  For the three months ending September 30,
2007 the following reconciles the denominator of the basic and diluted earnings
per share computation:


6




Weighted
      average basic shares outstanding
                  
                  
                  966,339Warrants
                  
                  
                  1,005,309Convertible
      preferred stock
                  
                  
                  186,047Weighted
      average diluted shares outstanding
                  
                  
                  2,157,695




For the
nine months ended September 30, 2007, the outstanding number of potentially
dilutive common shares totaled 1,250,985 shares of Common Stock, consisting of
Series C Preferred Stock convertible into 186,047 shares of Common Stock, and
warrants to purchase 1,064,938 shares of Common Stock.  For the three
months ended September 30, 2007, warrants to purchase 45,376 shares of Common
Stock were not included in the dilutive earnings per share computation as the
effects would have been anti-dilutive.  At September 30, 2006, the
outstanding number of potentially dilutive common shares totaled 119,614 shares
of Common Stock, consisting of Class B warrants to purchase 61,789 shares of
Common Stock and other warrants to purchase 46,297 shares of Common
Stock.




2.
Terms of Troubled Debt Modification





At
December 31, 2006, the Company had outstanding a promissory note payable to MH
Financial Associates, LLC, an Oregon limited liability company ("MH Financial"),
with an outstanding principal balance of $1,006,086 (the "Original
Note").  The Original Note was due in July 2007.  Effective
March 12, 2007 the Company and MH Financial modified the terms of the Original
Note as follows:





(a)
            MH
      Financial loaned the Company an additional
  $750,000;





(b)
            The
      due date of the Original Note was extended to June 30,
    2008;





(c)
            MH
      Financial's right to convert the Original Note into shares of Company
      Common Stock was deleted;





(d)
            The
      Company issued MH Financial and a related party a warrant to purchase
      666,667 shares of the Common Stock with an exercise price of $0.015 per
      share;





(e)
            The
      exercise price on warrants to purchase 153,102 shares of Common Stock
      previously issued to MH Financial was reduced from $4.50 to $0.015 per
      share; and





(f)
            The
      Company issued MH Financial a warrant to purchase 193,333 shares of the
      Company’s Common Stock with an exercise price of $0.015 per share, as
      consideration for MH Financial's forbearance of certain defaults under the
      Original Note.





The
foregoing modifications to the Original Note resulted in an effective interest
rate of 54.7% to be applied prospectively to the carrying amount of the debt.
Interest expense through the revised maturity date of June 30, 2008 will be
increased accordingly.  For accounting and financial reporting
purposes, this modification is characterized as troubled debt
restructuring.  Accordingly, the costs associated with this
modification have been expensed in the period of the
restructuring.  There was no gain implicit in this restructuring
because total principal and interest payments under the modified debt terms
exceed the net carrying value of the original debt.




As
additional consideration to, and as a requirement of, MH Financial extending
additional credit to microHelix and modifying the Original Note, the Company’s
Board of Directors approved the sale (the "Sale") to MH Financial or its assigns
of all of microHelix's MicroCoax Assembly Solutions division's assets, which
comprised substantially all of the Company's operating assets, and all issued
and outstanding shares of Moore.  The closing date for the Sale was to
be not later than September 30, 2007, and would be subject to certain terms and
conditions, including approval by microHelix's
shareholders.  Shareholder approval for the Sale was not requested and
the Sale did not occur.




James M.
Williams, Chairman of the Board and a director of microHelix during the period
covered by this report, is an investor in MH Financial.  MH Financial
is an affiliate of Aequitas Capital Management, Inc., which served as
microHelix's exclusive financial advisor during the period covered by this
report.




7





3.
Summary of Recent Accounting Pronouncements





In
December 2007, the FASB issued SFAS no. 141(R), “Business Combinations” (“SFAS
141(R)”), which replaces SFAS No. 141. SFAS No. 141(R) 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.  SFAS 141 (R) is effective for fiscal years
beginning after December 15, 2008.  The adoption of SFAS 141(R) will
have an impact on accounting for business combinations once adopted, but the
effect is dependent upon the acquisitions at that time.





In
February 2007, the FASB issued SFAS No. 159, “Fair Value Option for Financial Assets and Financial
Liabilities.”  SFAS
No. 159 permits entities to choose to measure many financial instruments and
certain other items at fair value.  SFAS 159 is expected to expand the
use of fair value measurement and to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused
by measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions.  The Company is required to adopt
SFAS No. 159 effective at the beginning of fiscal year 2008.  The
Company will evaluate the impact of SFAS No. 159 on its consolidated financial
statements, if any, in connection with preparing its 2007 Annual Report on Form
10-K.





In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements-an amendment of Accounting Research Bulletin
No. 51” (“SFAS No. 160”), 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.  SFAS No. 160 is effective for fiscal years beginning after
December 15, 2008.  The Company is evaluating the potential impact of
SFAS No. 160 will have on its consolidated financial statements.





4.   Customer
Concentration





During the three months ended September
30, 2007 and 2006 approximately $1,899,832 and $1,941,495 in sales,
respectively, were made to four customers.  For the nine months ended September 30,
2007 and 2006, $3,842,960 and $7,560,623 of the Company’s sales were made to
four customers and the accounts receivable balance for these four customers as
of September 30, 2007 totaled $152,384.




5.   Goodwill
and Other Intangible Assets





Goodwill
represents the excess of the purchase price over the estimated fair value of the
net identified tangible and intangible assets of the acquired
business.  The Company evaluates the recorded value of Goodwill on at
least an annual basis, or more frequently when a significant event occurs or
circumstances change.





During
April and May 2007, the Company’s financial condition deteriorated significantly
from the loss of a major customer (due to regulatory actions taken against that
customer), loss of personnel, and continuing operating deficits.  On
May 31, 2007 the Company surrendered its assets to its secured creditors and
began winding up its affairs.  In connection with the windup, the
Company determined that its Goodwill was impaired and recorded a charge of
$732,365 as of June 30, 2007, writing down the value of its Goodwill to
$0.





As a
result of the Company's purchase of Moore in April 2005, the Company acquired
identifiable defined life intangible assets such as customer contacts and lists
and manufacturing process technology.  The customer lists and contacts
were amortized on a straight-line basis over a 3-year period and the
manufacturing process technology was amortized over a 5-year period on a
straight-line basis.  The Company continued to amortize these
identifiable intangible assets over these lives until the quarter ending June
30, 2007 when the Company, for the reasons listed in the previous paragraph,
recorded a charge of $242,658 reducing the value of its intangible assets to
$0.  The impairment was calculated using the discounted cash flows
expected to be derived from the remaining use of the assets in
2007.





For the
nine months ending September 30, 2007 and 2006, the Company recorded $107,454
and $161,187, respectively, as amortization expense.





8




6.    Notes
Payable and Warrants





A summary
of the Company’s notes payable outstanding as of September 30, 2007 is as
follows:





VenCore
      Solutions, LLC
                  
                  $
                  135,732MH
      Financial Associates, LLC
                  
                  
                  180,633EPICOR
      Software Corporation
                  
                  
                  63,137Other
                  
                  
                  10,532Total
      notes payable
                  
                  $
                  390,034Debt
      discountsWarrants
      issued with VenCore note
                  
                  $
                  (15,962
                  )Warrants
      issues with MH Financial notes
                  
                  
                  (28,270
                  )Notes
      payable, net
                  
                  $
                  345,802





On March
12, 2007 the Company modified its note payable owed to MH
Financial.  See Note 2—Terms of Troubled Debt
Modification.  In connection with such modification, the Company
issued warrants that grant MH Financial the right to purchase 666,667 shares of
Common Stock of the Company at an exercise price of $0.015 per
share.  The warrants expire on March 11, 2010.  The warrants
have a fair value relative to the fair value of the associated debt of $551,970
calculated using the Black-Scholes option pricing model with the following
assumptions:





Expected
      life (in years)
                  
                  
                  1Expected
      volatility
                  
                  
                  75.94
                  %Risk-free
      interest rate
                  
                  
                  4.96
                  %Expected
      dividend
                  
                  
                  —





The
Company also issued warrants that grant MH Financial the right to purchase
193,333 shares of Common Stock with an exercise price of $0.015 per share as
consideration for a forebearance agreement.  The warrants expire on
March 11, 2010.  The warrants have a fair value of $606,239 (recorded
as loan restructure expense) calculated using the Black-Scholes option pricing
model with the following assumptions:





Expected
      life (in years)
                  
                  
                  1Expected
      volatility
                  
                  
                  75.94
                  %Risk-free
      interest rate
                  
                  
                  4.96
                  %Expected
      dividend
                  
                  
                  —





The
Company also agreed to reduce the exercise price from $4.50 to $0.015 on
warrants previously granted to MH Financial giving it the right to purchase
153,102 shares of Common Stock.  The change in the fair value of the
warrants of $354,096 (recorded as loan restructure expense) has been calculated
using the Black-Scholes option pricing model with the following
assumptions:





Expected
      life (in years)
                  
                  
                  1Expected
      volatility
                  
                  
                  75.94
                  %Risk-free
      interest rate
                  
                  
                  4.96
                  %Expected
      dividend
                  
                  
                  —





As of
September 30, 2007, the Company was in default on the note payable to EPICOR
Software Corporation, an unsecured creditor, and in default on the notes
payable to VenCore and MH Financial, both secured creditors.





9


7.   Liability
for Potentially Dilutive Securities in Excess of Authorized Number of Common
Shares




In
accordance with EITF 00-19, the Company accounts for potential shares that
can be converted to Common Stock and that are in excess of authorized shares, as
a liability that is recorded at fair value.  Effective with the March
12, 2007 modification of its debt with MH Financial, total potential outstanding
Common Stock exceeded the Company’s authorized shares of Common
Stock.  At that time, outstanding warrants granted their holders the
right to purchase approximately 579,867 more shares of Common Stock (post-split)
than were authorized in the Company’s Amended and Restated Articles of
Incorporation, as amended. 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 that date. This liability is required to be evaluated at each
reporting date with any change in value included in other income/ (expense)
until such time as enough shares are authorized to cover all potentially
convertible instruments.  At September 30, 2007 the Company has
recorded $695,803 in loss related to the change 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 Common Stock such that authorized shares existed to permit
the exercise of all outstanding warrants. (See Note 8—Subsequent
Events)





8.    Subsequent Events





On
January 2, 2008 MH Financial exercised warrants to purchase 133,333 shares of
Common Stock for $2,000.





On
January 15, 2008 at a special meeting of the shareholders the Company’s Amended
and Restated Articles of Incorporation, as amended, were amended to increase the
number of shares of Common Stock the Company is authorized to issue to 75
million and the number of shares of Preferred Stock the Company is authorized to
issue to 10 million.





On
February 27, 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 Amended and
Restated Articles of Incorporation, as amended, 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.  At that
same meeting, Thomas Sidley and Donald Megrath were elected to the Company’s
Board of Directors.  Each of Messrs. Sidley and Megrath is an employee
of Aequitas Capital Management, Inc., and affiliate of MH
Financial.





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 has received
no additional advances against the $500,000 loan amount.  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.  As a condition of the
initial disbursement of June 27, 2008, the Company also issued warrants to
purchase 7,466,666 shares of Common Stock at $0.001 per share. As a condition of
the December 31, 2008 advance the Company also issued warrants to purchase
1,066,667 shares of Common Stock at $0.001 per share.  As a condition
of the February 25, 2009 advance the Company also issued warrants to purchase
1,066,667 shares of Common Stock at $0.001 per share. In addition the Company
signed a financial advisory agreement with MH Financial which included the
provision that the Company would issue warrants to purchase 1,066,667 shares of
Common Stock at $0.001 per share. 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.





ITEM
2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION





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.





10




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. 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-QSB.  The Company does
not intend, and undertakes 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.  Because Moore continued to operate
during the windup period; management continued to evaluate its estimates for the
Moore on a going concern basis that assumed continued operations, including
those related to product returns, bad debts, inventories, prepaid expenses,
intangible assets, income taxes, warranty obligations, and other
contingencies.  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.   The Company’s MicroCoax Assembly Division was
evaluated as a discontinued operation and the value of its remaining assets was
adjusted to $17,000, which is the value the Company received from the sale of
these assets to an unrelated third party on July 12, 2007. The Company
believes the following critical accounting policies and related judgments and
estimates affect the preparation of the Company’s consolidated financial
statements.





Revenue Recognition —The
Company recognizes  revenue from commercial sales of cables,
connectors, customized cable assemblies, wire harnesses, and mechanical
assemblies when title passes, which is upon shipment.  Commercial
sales are made F.O.B. point of shipment, and the products must be physically
shipped from the factory.  Returns are limited to nonconforming
products and the volume of returns has been insignificant.  The
Company does not establish reserves for returns because they have been
minimal.





Goodwill and Intangible
Assets—The Company follows the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 142, Goodwill and Other Intangible
Assets.  SFAS No. 142 requires an annual impairment test for goodwill
and intangible assets with indefinite lives, unless circumstances indicate a
need for more frequent review.  Under the provisions of SFAS No. 142,
the first step of the impairment test requires that we determine the fair value
of each reporting unit, and compare the fair value to the reporting unit's carry
amount.  To the extent a reporting unit's carrying amount exceeds its
fair value, an indication exists that the reporting unit's goodwill may be
impaired and the Company must perform a second more detailed impairment
assessment.  The second impairment assessment involves allocating the
reporting unit's fair value to all of its recognized and unrecognized assets and
liabilities in order to determine the implied fair value of the reporting unit's
goodwill as of the assessment date.  The implied fair value of the
reporting unit's goodwill is then compared to the carrying amount of goodwill to
quantify an impairment charge as of the assessment date.





During
April and May 2007, the Company’s financial condition deteriorated significantly
from the loss of a major customer (due to regulatory actions taken against that
customer by the United States FDA that were unrelated to the Company), loss of
key personnel, and continuing and accelerating operating deficits.  On
May 31, 2007 the Company surrendered its assets to its secured creditors and
began winding up its affairs; a circumstance that indicated a need for an
impairment review.  In connection with the windup, the Company
determined that the liquidation value of its tangible assets was insufficient to
repay its secured and unsecured creditors, and therefore, the carrying value of
Goodwill required adjustment.  The Company recorded a charge of
$732,365 as of June 30, 2007, writing the value of its Goodwill to $0; and a
charge of $296,385, writing the value of its intangibles to $0.


11


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.





The
Company has incurred significant losses since inception and those losses have
continued.  In the normal course of its business the Company has had
to rely on a relatively small number of OEMs for the majority of its
sales.  Short term changes in the OEM's demand schedule have made
expenses and cash requirements uncertain.  The Company has not been
successful in achieving profitability.  During April and May 2007, the
Company’s financial condition deteriorated significantly.  On May 31,
2007 the Company surrendered its assets to its secured creditors and began
winding up its affairs.  The Company operated for the benefit of its
secured creditors until September 2007, at which time it ceased manufacturing
operations.





microHelix
was formed in 1991 to develop manufacturing techniques for medical device
interconnect systems.  The Company began manufacturing operations in
1998, designing and building cable assemblies and micro-electric interconnects
and subsequently sold this operation to an unrelated third party in
2004.





The
MicroCoax division designed and manufactured cable assemblies for OEM customers
for use in medical ultrasound probes, laparoscopes, catheters and flaw detection
ultrasound.  The division was built around assets acquired in 1999.
The Company sold this operation to an unrelated third party during July 2007 and
used the proceeds of this sale to partially repay debt.





In April
2005, the Company acquired 100% of the outstanding stock of Moore Electronics
(“Moore”).  Moore manufactured custom cable assemblies, wire harnesses
and electro-mechanical assemblies for medical and commercial equipment
manufacturers.  The Company sold this operation to an unrelated third
party during September 2007 and used the proceeds of this sale to partially
repay debt.





The
Company completed the initial public offering in November 2001.  The
Common Stock currently trades on the Pink Sheets under the symbol
MHLX.PK.  On June 11, 2007 the Company filed a Form 15 with the
Securities and Exchange Commission terminating its registration under Section
12(g) of the Securities Exchange Act of 1934 and the suspension of its duty to
file reports under Sections 13 and 15(d) of the Securities Exchange Act of
1934.  On March 24, 2009, the Company recommenced filing reports due
under the Securities Exchange Act of 1934.




THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006





Total
sales in the third quarter of 2007 were $2,673,692, compared to $3,944,057 in
the third quarter of 2006, a decrease of $ 1,270,365 or 32.2%.  For
the nine months ended September 30, 2007 total sales were $7,979,856 compared to
$11,671,356, a decrease of $3,691,500 or 31.6% on a year to date
basis.  The decrease for the three months and nine months is due to
the loss of a key customer: the Redmond, Washington facility of Physio-Control,
Inc., a subsidiary of Medtronic, Inc., due to regulatory actions taken by the
United States FDA against Physio-Control, Inc that were unrelated to the
Company, the closure and sale of the MicroCoax Assembly Solutions division, and
the wind down of microHelix, Inc. and the Moore Electronics wholly owned
subsidiary.





Gross
profit in the third quarter of 2007 was $1,213,791 compared to a gross profit of
$694,251 in the third quarter of 2006, an increase of $519,540 or
74.8%.  For the nine months ended September 30, 2008 the total gross
profit was $887,398 compared to a gross profit of $1,708,282 recorded in the
first nine months of 2006, a decrease of $820,884 or 48.1%.  The
degradation in the gross profit resulted primarily from the suspension of
shipments to Physio-Control which was partially offset by the reduction in
manufacturing related overhead costs, substantial price increases, and two
customers providing subsidies for certain operating expenses.





Total
operating expenses in the third quarter of 2007 were $159,638, compared to
$556,323 for the same period one year ago, a decrease of $396,685 or
71.3%.  For the nine month period ending September 30, 2007 the total
operating expenses were $1,255,253 compared to $1,968,438 for the first nine
months of 2006, a decrease of $713,185 or 36.2%.  The decrease is due
to head count reductions that reduced salary and related benefits expenses, and
reduced consultant expenses related
to the sale of the MicroCoax Assembly Solutions division, and the wind down of
microHelix, Inc. and the Moore Electronics wholly owned
subsidiary.


12





Sales and
marketing expenses for the third quarter of 2007 were $4,908, compared to
$127,604 in the third quarter of 2006, a decrease of $122,696 or
96.2%.  For the nine month period ending September 30, 2007 the sales
and marketing expenses were $214,884 compared to $438,961 for the first nine
months of 2006, or a $224,077 decrease.   This decrease is due to
head count reductions that reduced salary and related benefits expense, and
reduced consultant expenses related
to the sale of the MicroCoax Assembly Solutions division, and the wind down of
microHelix, Inc. and the Moore Electronics wholly owned
subsidiary.





General
and administrative expenses for the third quarter of 2007 were $154,730 compared
to $446,719 in the third quarter of 2006, a decrease of $291,989 or
65.4%.  For the nine month period ending September 30, 2007 the
general and administrative expenses were $1,040,369 compared to $1,547,477 for
the first nine months of 2006, a decrease of $507,108 or 32.8%.  The
decrease resulted principally from head count reductions that reduced salary and
related benefit expenses.





Net other
expense for the third quarter of 2007 was $(945,810) compared to net other
expense of $(131,711) for the third quarter of 2006.  For the nine
month period ending September 30, 2007 the net other (expense) was ($1,938,662)
as compared to ($287,661) for the first nine months of 2006.  The
differences are attributable to the income and expense associated with debt
forgiveness and the change in the warrant valuation offset by the amortization
of note discount, loan restructuring expenses, higher interest rates, impairment
of intangible assets, the additional impairment of goodwill, and the loss on
disposal of equipment.





The
Company recorded a net income of $314,751 in the third quarter of 2007 compared
to a net income of $34,086 in the third quarter of 2006.  No dividends
were accrued in the third quarter of 2007.  Dividends accrued on the
Series B Preferred Stock were $54,247 in the third quarter of 2006 and were paid
in shares of the Common Stock during 2006.  Net income (loss)
attributable to common shareholders was $314,751 in the third quarter of 2007
and $(20,161) in the third quarter of 2006.  For the nine months ended
September 30, 2007 the company recorded a loss of $(2,008,372) compared to a
loss of $(668,706) recorded during the first nine months of 2006.





LIQUIDITY
AND CAPITAL RESOURCES





As of
September 30, 2007, the Company had $5,996 of cash and cash
equivalents.  Cash provided by operating activities during the
nine-month period ended September 30, 2007 was $2,866,201 compared to $375,948
used in the same period a year ago, an improvement of $3,242,149. The cash
provided by operations during the first nine months of the year primarily
related to a decrease in accounts receivable of $1,640,689, a decrease in
inventories of $2,004,879, and an increase in accounts payable of $163,868 that
was offset by a decrease in accrued payables by $315,223.





For the
nine months ending September 30, 2007 the Company used $2,992,885 for financing
activities as compared to $571,562 of cash provided by financing activities
during the first six months of 2006.  The primary use of the cash
during 2007 was to pay down the debt owed to the secured creditors.





During
April and May 2007, the Company’s financial condition deteriorated significantly
from the loss of a major customer (due to regulatory actions taken against that
customer by the United States FDA that were unrelated to the Company), loss of
key personnel, and continuing and accelerating operating deficits.  On
May 31, 2007 the Company surrendered its assets to its secured creditors and
began winding up its affairs.  The Company’s secured lenders sold the
assets of the MicroCoax Assembly division during July 2007 and the assets of
Moore to an unrelated third party in September 2007.  Proceeds from
these sales and the liquidation of accounts receivable and other assets were
used to partially repay the amounts due under various secured lending
agreements.  At the conclusion of business operations in September
2007, the Company still owed its secured lenders approximately
$365,536.   In connection with the asset surrender, the Company
stopped paying its unsecured creditors for goods and services provided prior to
May 21, 2007.  To ensure an orderly transition, certain of the
Company’s customers agreed to a substantial price increase, provided raw
materials and subsidized certain expenses which allowed Moore to fill its
backlog, collect its accounts receivable and cure certain outstanding
deficiencies in rent payments and benefits plans.  On September 28,
2007, Moore and the Company discontinued all manufacturing operations and sold
their remaining assets to an unrelated third party.





The
following description of the Company's principal debt at September 30, 2007
should be read in the context of the foregoing paragraph.  See also
Note 10 of Notes to Consolidated Financial Statements.


13





On March
12, 2007, the Company obtained an additional loan from MH Financial of
$750,000.  The original note (the "Original Note") evidencing
then-existing debt owed to MH Financial was amended (the "Amended Note") to
reflect a revised principal amount of $1,778,964, which bears interest at a rate
of 12% per annum ("Current Interest").  Additional interest accrues on
the Amended Note at a rate of 8% per annum, which is compounded quarterly and is
payable at maturity ("Deferred Interest").  The Company will make
separate payments with respect to $1,006,086 of the principal under the Original
Note ("Loan 1") and with respect to $750,000 of the principal added in the
Amended Note ("Loan 2").  Beginning April 19, 2007 and on the same day
of each subsequent month, microHelix will pay $20,000 per month to be applied to
Current Interest and principal on Loan 1 and will pay $7,500 per month of
Current Interest on Loan 2.  On September 30, 2007, the Company will
make an additional payment of accrued Current Interest through that date with
regard to Loan 2.  Beginning on October 31, 2007, and on the last day
of each subsequent month through and including May 31, 2008, the Company will
pay $87,555 per month to be applied against the Current Interest and principal
balance of Loan 2.  All amounts outstanding under the Amended Note,
including the Deferred Interest, are due and payable on June 30,
2008.




The
Amended Note continues to be 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
Amended Note in the event of default.  In addition, all amounts
outstanding under the Note are due and payable upon the sale of all or
substantially all of the Company’s assets to anyone other than MH Financial, or
upon the transfer of ownership of more than 50% of the stock.




The
Company used $153,698 of the proceeds from Loan 2 of the Amended Note to pay in
full a promissory note previously issued to James M. Williams, one of the
Company’s directors.  The remaining proceeds were used to make
payments to certain vendors and to fund operating costs.  The Amended
Note replaces and supersedes the Original Note.  In connection with
Loan 2, microHelix issued a warrant (the "Note Warrant") to MH Financial to
purchase 666,667 shares of Common Stock at an initial exercise price of $0.015
per share.  The Note Warrant expires on March 11, 2010.  In
connection with the Amended Note, the right to convert the Original Note into
shares of our Common Stock was deleted.




As
additional consideration to MH Financial for extending additional credit to the
Company in connection with the Amended Note, the Board of Directors approved
(subject to approval by the shareholders) the sale (the "Sale") to MH Financial
or its assigns of all of the MicroCoax division's assets, which comprise
substantially all of the operating assets, and all issued and outstanding shares
of Moore.  The closing date for the Sale would be not later than
September 30, 2007.  The Sale is subject to the following terms and
conditions:




(a)         The
purchase price for the Sale would consist of the release of the Company from
liability under the Amended Note, including all amendments and modifications
thereto, and assumption by the purchaser or by Moore of all of the loans, debts
and payables.




(b)          All
of the outstanding Series C Preferred Stock (which is currently held by MH
Financial) would be converted into shares of the Common Stock before or
concurrently with the closing of the Sale.




(c)          The
Board of Directors retained the right to obtain a better offer for the purchase
of the Company’s and/or the assets (an "Alternative Sale"), provided that no
Event of Default (as defined in the Amended Note) had occurred or was
continuing, and, subject to MH Financial's right to close the Sale as set forth
in (d) below, all principal, interest and other amounts due under the Amended
Note are to be paid in full before the closing of the Sale and contemporaneously
with the closing of the Alternative Sale.




(d)          MH
Financial or its assigns may close the Sale at any time following approval of
the Sale by the shareholders.  Following such approval, MH Financial
may give the Company notice of its intent to close the Sale.  If the
Company has not closed an Alternative Sale within 10 days following MH
Financial's notice, the Company and MH Financial shall proceed to close the Sale
within 20 days following MH Financial's notice or such longer period as is
mutually agreed.




Shareholder
approval for the Sale was not requested and the Sale did not occur.




On March
12, 2007 the Company was in default under the Original Note.  On that
date, the Company and MH Financial entered into a Forbearance and Waiver
Agreement (the "Forbearance Agreement") under which MH Financial agreed to
forbear with respect to such defaults and agreed to waive certain of the
obligations to register shares of Common Stock owned by MH Financial pursuant to
the Registration Rights Agreement dated October 19, 2006 between the Company and
MH Financial.    As consideration for the Forbearance
Agreement, the Company issued a warrant to MH Financial (the "Forbearance
Warrant") to purchase 193,333 shares of Common Stock at an exercise price of
$0.015 per share. The Forbearance Warrant expires on March 11,
2010.  As additional consideration for the Forbearance Agreement, the
Company also agreed to reduce the exercise price to $0.015 per share for
warrants issued to MH Financial pursuant to the Original Note for a total of
153,102 shares of the Common Stock.  The Company also agreed to issue
future warrants under the Amended Note with an exercise price of $0.015 per
share.  After giving effect to the additional warrants issued in
connection with the Amended Note and the Forbearance Agreement, MH Financial,
together with its affiliates is the beneficial holder of approximately 55% of
the Company’s voting capital stock.


14


ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Risk
Factors





We are
subject to various risks that could have a negative effect on the Company and
its financial condition, including the following.





Minimal
assets





The
Company has no significant assets or financial resources. It is likely the
Company will sustain operating expenses without corresponding
revenues until it consummates a business combination with a target
company. There is no assurance that we can identify such a target company and
consummate such a business combination.





Adequate
financing may not be available when needed





Additional
sources of funding would be required for us to continue operations. There is no
assurance that the Company can raise working capital or if any capital would be
available at all. Failure to obtain financing when needed could result in
curtailing operations, acquisitions or mergers and investors could lose some or
all of their investment.





Speculative
nature of the Company's proposed operations





The
success of the Company's proposed plan of operation will depend to a great
extent on the operations, financial condition and management of the identified
target company. While management will prefer business combinations with entities
having established operating histories, there can be no assurance that we will
be successful in locating candidates meeting such criteria. In the event the
Company completes a business combination, of which there can be no assurance,
the success of the Company's operations will be dependent upon management of the
target company and numerous other factors beyond our control.





Scarcity
of and competition for business opportunities and combinations





The
Company is and will continue to be an insignificant participant in the business
of seeking mergers with and acquisitions of business entities. A large number of
established and well-financed entities, including venture capital firms, are
active in mergers and acquisitions of companies which may be merger or
acquisition target candidates for the Company. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than we do.  The Company will therefore be at a competitive
disadvantage in identifying possible business opportunities and successfully
completing a business combination. Moreover, we will also compete with numerous
other small public companies in seeking merger or acquisition
candidates.





No
agreement for business combination or other transaction – No standards for
business combination





As of
this filing, the Company has not reached any definitive understanding with any
person or entity concerning a merger or acquisition. There can be no assurance
that we will be successful in identifying and evaluating suitable business
opportunities or in concluding a business combination. Management has not
identified any particular industry or specific business within an industry for
evaluation by the Company. There is no assurance that the Company will be able
to negotiate a business combination on terms favorable to the Company. We have
not established a specified level of earnings, assets, net worth or other
criteria that we will require a target company to have achieved, or that would
prevent us from considering a business combination with such business entity.
Accordingly, the Company may enter into a business combination with a business
entity having no significant operating history, losses, limited or no potential
for immediate earnings, limited assets, negative net worth or other negative
characteristics.





Continued
management control, limited time availability





While
seeking a business combination, our remaining officer anticipates devoting only
a limited amount of time per month to our business. Our ability to attract
and retain key personnel is critical to our future success.  There is no
guarantee that we will be able to hire and retain qualified
officers.





15




Conflicts
of interest





The
Company's remaining officer and directors participate in other business ventures
which may compete directly with the Company.





Reporting
requirements may delay or preclude acquisitions





Section
13 of the Securities Exchange Act of 1934 (the "Exchange Act") requires
companies subject thereto to provide certain information about significant
acquisitions including certified financial statements for the company acquired
covering one or two years, depending on the relative size of the acquisition.
The time and additional costs that may be incurred by some target companies to
prepare such financial statements may significantly delay or essentially
preclude consummation of an otherwise desirable acquisition by the Company.
Acquisition prospects that do not have or are unable to obtain the required
audited statements may not be appropriate for acquisition so long as the
reporting requirements of the Exchange Act are applicable.





Lack
of diversification





Our activities
will be limited to the operations engaged in by the business entity with which
we merge or acquire. Our inability to diversify our activities into a
number of areas may subject us to economic fluctuations within a particular
business or industry and therefore increase the risks associated with our
operations.





Regulation
under Investment Company Act





Although
the Company will be subject to regulation under the Exchange Act, management
believes the Company will not be subject to regulation under the Investment
Company Act of 1940 because it will not be engaged in the business of investing
or trading in securities. In the event the Company engages in business
combinations which result in the Company holding passive investment interests in
a number of entities, the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, we would be required to register
as an investment company and could be expected to incur significant registration
and compliance costs. We have not obtained a formal determination from the
Securities and Exchange Commission as to our status under the Investment Company
Act of 1940.  Consequently, any violation of such Act could subject
the Company to material adverse consequences.





Possible
change in control and management





A
business combination involving the issuance of the Company's equity securities
could result in shareholders of a target company obtaining a controlling
interest in the Company. Any such business combination may require our
shareholders to sell or transfer all or a portion of the Company's equity
securities held by them. The resulting change in control will likely result
in removal of the present officers and directors of the Company and a
corresponding reduction in or elimination of their participation in the future
affairs of the Company.





Reduction
of percentage share ownership following business combination





The
Company's primary plan of operation is based upon a business combination with a
business entity which, in all likelihood, will result in our issuing securities
to shareholders of such business entity. The issuance of previously authorized
and unissued equity securities of the Company would result in reduction in
percentage of shares owned by our present shareholders and would most likely
result in a change in control or management of the Company.





Taxation





Federal
and state tax consequences will, in all likelihood, be major considerations in
any business combination we may undertake.  Currently, such
transactions may be structured so as to result in tax-free treatment to both
companies, pursuant to various federal and state tax provisions. We intend to
structure any business combination so as to minimize the federal and state tax
consequences to both the Company and the target company; however, there can be
no assurance that such business combination will meet the statutory requirements
of a tax-free reorganization or that the parties will obtain the intended
tax-free treatment upon a transfer of stock or assets. A non-qualifying
reorganization could result in the imposition of both federal and state taxes
which may have an adverse effect on both parties to the
transaction.


16


ITEM
4.  CONTROLS AND PROCEDURES





The
Company’s President and Chief Financial Officer evaluated the effectiveness of
the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under
the Securities Exchange Act of 1934 as of September 30, 2007.  Based
on that evaluation, the Company’s 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 the Company’s 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 the Company’s Chief Financial Officer.  The Company
believes that remediation of the lack of segregated duties could be accomplished
through the hiring of additional accounting personnel or by adding or modifying
certain existing internal control procedures.  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.





PART
II.   OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS





As of
September 30, 2007 microHelix one unsecured creditor had initiated legal action
against the Company to collect the outstanding balance owed to them as per an
unsecured note.





ITEM
6.   EXHIBITS





(a) Exhibits:


10.1(1)
            
            Promissory
      Note dated December 28, 2006 issued by microHelix, Inc. to James M.
      Williams10.2(1)
            
            Subordination
      Agreement dated December 28, 2006 among microHelix, Inc., James M.
      Williams and BFI Business Finance10.3(2)
            
            Second
      Agreement Regarding Amendment of Promissory Note dated March 12, 2007
      between microHelix, Inc. and MH Financial Associates,
  LLC10.4(2)
            
            Second
      Amended and Restated Promissory Note dated March 12, 2007 issued by
      microHelix, Inc. to MH Financial Associates, LLC10.5(2)
            
            Form
      of Warrant dated March 12, 2007 issued by microHelix, Inc. to MH Financial
      Associates, LLC10.6(2)
            
            Form
      of Amendment to Warrant dated March 12, 2007 between microHelix, Inc. and
      MH Financial Associates, LLC10.7(2)
            
            Forbearance
      and Waiver Agreement dated March 12, 2007 between microHelix, Inc. and MH
      Financial Associates, LLC10.8(2)
            
            Amendment
      to Registration Rights Agreement dated March 12, 2007 between microHelix,
      Inc. and MH Financial Associates, LLC10.9(3)*
            
            Independent
      Contractor Agreement effective February 12, 2007 between Moore
      Electronics, Inc. and Dr. Steven G. Ashton, as amended31.1(4)
            
            Certification
      of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1(4)
            
            Certification
      of Principal Executive 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 Form 8-K filed on January 3,
  2007.


(2)
            Incorporated by referenced to the
      Company's Form 8-K filed on March 16,
  2007.


(3)
            Incorporated
      by reference to the Company's Forms 8-K filed on March 16, 2007 and April
      5, 2007.


(4)
            Filed
      herewith.


*
            Management
      contract or compensatory plan or
arrangement.





17




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
                
                March
      24, 2009James
      E. Horswill





18