**UNITED
      STATES**





**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**





x
            **QUARTERLY
                REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
                EXCHANGE****ACT
                OF 1934 for the quarterly period ended September 30,
                2006****OR**o
            **TRANSITION
                REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
                EXCHANGE****ACT
                OF 1934 for the Transition Period from to****Commission
                file number: 001-16781**





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





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





**19500
                SW 90****th****Court Tualatin, Oregon**
            
            **97062**(Address
                of Principal Executive
            
            (Zip
                Code)Offices)





(Issuer's
      Telephone Number, Including Area Code): 503-692-5333





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports and (2) has been subject
      to such filing requirements for the past 90 days.


Yes x No o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes o No x





As
      of
      November 14, 2006, there were 14,485,082 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-QSB**


**Quarter
      Ended September 30, 2006**





**TABLE
      OF CONTENTS**





**Page****PART
                I — FINANCIAL INFORMATION**
            
            3**ITEM
                1. CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED**
            
            3Consolidated
                balance sheet as of September 30, 2006
            
            3Consolidated
                statements of operations for the three and nine months ended September
                30,
                2006 and 2005
            
            4Consolidated
                statements of cash flows for the nine months ended September 30,
                2006 and
                2005
            
            5Notes
                to consolidated financial statements
            
            6**ITEM
                2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION**
            
            12**ITEM
                3. CONTROLS AND PROCEDURES**
            
            15**PART
                II — OTHER INFORMATION**
            
            15**ITEM
                6. EXHIBITS**
            
            17**SIGNATURE**
            
            18**CERTIFICATION****EXHIBIT
                31****EXHIBIT
                32**





2


**PART
      I — FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS — UNAUDITED**





**MICROHELIX,
      INC.**





**CONSOLIDATED
      BALANCE SHEET**


**(UNAUDITED)**


**SEPTEMBER
      30, 2006**




**Assets**Current
                Assets:Cash
            
            $
            8,399Accounts
                receivable, net of allowance of $17,050
            
            
            1,713,160Inventories,
                net
            
            
            1,872,200Prepaid
                expenses and other current assets
            
            
            31,642Total
                current assets
            
            
            3,625,401Property
                and equipment, net
            
            
            1,012,751Deposits
                and other assets
            
            
            28,731Intangible
                assets
            
            
            403,839Goodwill
            
            
            1,620,218Total
                assets
            
            $
            6,690,940**Liabilities
                and Shareholders' Equity**Current
                Liabilities:Accounts
                payable
            
            $
            2,161,231Accounts
                payable-related parties
            
            
            8,831Accrued
                liabilities
            
            
            537,469Line
                of credit
            
            
            1,390,874Current
                portion of obligations under capital leases
            
            
            10,758Current
                portion of notes payable to shareholders
            
            
            376,786Notes
                payable to vendor/customer
            
            
            404,865Total
                current liabilities
            
            
            4,890,814Long-Term
                Liabilities:Obligations
                under capital lease
            
            
            11,714Deferred
                tax liability
            
            
            344,014Notes
                payable to shareholders
            
            
            742,568Note
                payable -Vencore
            
            
            151,144Total
                long-term liabilities
            
            
            1,249,440Total
                liabilities
            
            
            6,140,254Shareholders'
                Equity:Preferred
                Stock, no par value, 750,000 shares authorized, none outstandingCommon
                stock, no par value, 25,000,000 shares authorized,14,485,082
                issued and outstanding
            
            
            17,558,764Additional
                paid-in capital
            
            
            6,009,505Accumulated
                deficit
            
            
            (23,017,583
            )Total
                shareholders' equity
            
            
            550,686Total
                liabilities and shareholders' equity
            
            $
            6,690,940




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


3


**MICROHELIX,
      INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(UNAUDITED)**




**Three
                    Months Ended**
                **September
                  30**
            
            **Nine
                Months Ended**
              **September
                30****2006**
            
            **2005**
            
            **2006**
            
            **2005**Sales
            
            $
            3,944,057
            
            $
            2,853,555
            
            $
            11,671,356
            
            $
            5,715,834Cost
                of sales
            
            
            3,249,806
            
            
            2,294,342
            
            
            9,963,074
            
            
            4,952,618Gross
                profit
            
            
            694,251
            
            
            559,213
            
            
            1,708,282
            
            
            763,216Operating
                Expenses:Sales
                and marketing
            
            
            127,604
            
            
            163,083
            
            
            438,961
            
            
            305,959General
                and administrative
            
            
            446,719
            
            
            398,123
            
            
            1,547,477
            
            
            1,420,359Total
                operating expenses
            
            
            556,323
            
            
            561,206
            
            
            1,968,438
            
            
            1,726,318Income
                (loss) from operations
            
            
            119,928
            
            
            (1,993
            )
            
            (278,156
            )
            
            (963,102
            )Other
                income (expense):Other
                income (expense)
            
            
            85
            
            
            —
            
            
            534
            
            
            450Interest
                expense
            
            
            (131,796
            )
            
            (69,351
            )
            
            (288,195
            )
            
            (134,563
            )Other
                income (expense) - net
            
            
            (131,711
            )
            
            (69,351
            )
            
            (287,661
            )
            
            (134,113
            )Net
                (loss) before provision for income taxes
            
            
            (11,783
            )
            
            (71,344
            )
            
            (568,817
            )
            
            (1,097,215
            )Provision
                (Benefit) for income taxes
            
            
            (45,869
            )
            
            (81,074
            )
            
            (137,607
            )
            
            (81,074
            )Net
                income (loss)
            
            
            34,086
            
            
            9,730
            
            
            (428,210
            )
            
            (1,016,141
            )Preferred
                dividends
            
            
            (54,247
            )
            
            (84,375
            )
            
            (260,496
            )
            
            (168,750
            )Net
                (loss) available to common shareholders
            
            $
            (20,161
            )
            $
            (74,645
            )
            $
            (688,706
            )
            $
            (1,184,891
            )Net
                income (loss) per share available to common shareholders
            
            $
            (.00
            )
            
            (.04
            )
            $
            (.15
            )
            
            (.58
            )Basic
                and dilutedWeighted
                average number of shares OutstandingBasic
                and diluted
            
            
            8,367,706
            
            
            2,091,121
            
            
            4,634,728
            
            
            2,036,896




*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
                30****Cash
                Flows Provided By (Used For) Operating
                Activities:**
            
            **2006**
            
            **2005**Net
                loss
            
            $
            (428,210
            )
            $
            (1,016,141
            )Adjustments
                  to reconcile net loss to cash provided by (used in) operating
                  activities:Depreciation -capital
                assets
            
            
            325,540
            
            
            155,441Amortization
                - intangible assets
            
            
            161,187
            
            
            105,741Provision
                for doubtful accounts
            
            
            (2,414
            )
            
            26,060Provision
                for inventory reserves
            
            
            112,054
            
            
            (34,327
            )Common
                stock issued for services
            
            
            64,017
            
            
            31,855Benefit
                for deferred income taxes
            
            
            (137,607
            )
            
            —Warrants
                used for services
            
            
            28,731
            
            
            —Change
                in assets and liabilities:(Increase)
                Decrease in assets:Accounts
                receivable
            
            
            (124,722
            )
            
            (233,354
            )Inventories
            
            
            (862,747
            )
            
            115,051Prepaid
                expenses and other current assets
            
            
            17,972
            
            
            (202,979
            )Intangibles,
                other assets and deposits
            
            
            (28,731
            )
            
            —Increase
                (Decrease) in liabilities:Accounts
                payable
            
            
            596,365
            
            
            660,067Accrued
                liabilities
            
            
            66,073
            
            
            (38,142
            )Customer
                Deposit
            
            
            (163,456
            )
            
            —Net
                cash used in operating activities
            
            
            (375,948
            )
            
            (430,728
            )**Cash
                Flows from Investing Activities:**Cash
                for stock of Moore Electronics
            
            
            —
            
            
            (1,500,000
            )Cash
                used to pay off loan of Moore Electronics
            
            
            —
            
            
            (412,683
            )Capital
                Expenditures
            
            
            (245,527
            )
            
            (22,922
            )Net
                cash used in investing activities
            
            
            (245,527
            )
            
            (1,935,605
            )**Cash
                Flows from Financing Activities:**Proceeds
                from preferred stock offering, net of expenses
            
            
            —
            
            
            1,725,793Proceeds
                from line of credit
            
            
            13,284,252
            
            
            4,830,321Payments
                on line of credit
            
            
            (13,140,480
            )
            
            (4,198,971
            )Proceeds
                from loan
            
            
            286,650
            
            
            —Payments
                on capital lease obligation
            
            
            (16,844
            )
            
            —Proceeds
                from issue of notes payable
            
            
            306,471
            
            
            —Payments
                on notes payable
            
            
            (44,081
            )
            
            —Payments
                on notes payable to shareholders
            
            
            (104,406
            )
            
            —Proceeds
                from issue of notes payable to shareholders
            
            
            —
            
            
            100,000Net
                cash provided by financing activities
            
            
            571,562
            
            
            2,457,143Change
                in cash
            
            
            (49,913
            )
            
            90,810Cash,
                beginning of period
            
            
            58,312
            
            
            30,471Cash,
                end of period
            
            $
            8,399
            
            $
            121,282**Supplemental
                Cash Flow Information:**Interest
                paid
            
            $
            283,503
            
            $
            99,302Income
                taxes paid
            
            $
            —
            
            $
            —**Supplemental
                Disclosure of Non-cash Investing Activities:**Purchase
                price acquisition of Moore Electronic details:Fair
                value of assets acquired
            
            
            —
            
            
            4,558,702Liabilities
                assumed
            
            
            —
            
            
            (1,146,019
            )Note
                payable to former shareholders of Moore as part of the acquisition
                price
            
            
            —
            
            
            (1,250,000
            )Preferred
                stock issued to former shareholder of Moore as part of the acquisition
                price
            
            
            —
            
            
            (250,000
            )Cash
                paid
            
            
            —
            
            
            1,912,683Preferred
                Dividends
            
            $
            (260,496
            )
            $
            (168,750
            )**Supplemental
                Disclosure of Non-cash Financing Activities:**Warrants
                issued to lender
            
            $
            31,923
            
            $
            —Common
                stock issued for services
            
            $
            64,017
            
            $
            31,855





*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, 2006 and 2005**





**1.
      Summary of Significant Accounting Policies and Basis of
      Presentation**





*Nature
      of Operations* —
      microHelix, Inc. (the "Company" or "microHelix") is a manufacturer and
      distributor of custom cable assemblies and mechanical assemblies for the medical
      and commercial original equipment manufacturer markets.





*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





*Principles
      of Consolidation* —
These
      consolidated financial statements include the accounts of the Company and its
      wholly owned subsidiary, Moore Electronics, Inc. ("Moore" or “Moore
      Electronics”), that was acquired on April 8, 2005. All material inter-company
      accounts have been eliminated in consolidation.





*Reclassifications* —
Certain
      amounts from the nine months ended September 30, 2005 have been reclassified
      to
      correspond to the nine months ended September 30, 2006.





*Going
      Concern* —
These
      consolidated financial statements have been prepared on a going concern basis
      that contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. The Company has incurred recurring net losses
      and had negative cash flows from operations during each of the past two years
      and at September 30, 2006 had an accumulated deficit of $23,017,583. These
      conditions raise substantial doubt about its ability to continue as a going
      concern for a reasonable period of time. These consolidated financial statements
      do not include any adjustments relating to the recoverability and classification
      of recorded asset amounts or the amounts and classification of liabilities
      that
      may be necessary should the Company be unable to continue as a going
      concern.





As
      a part
      of the Company's plan to return to profitability, the Company initiated a
      strategy in mid 2004 that combined a focus on revenue growth from its existing
      business with the acquisition of a similar business with a history of revenue
      growth and profitability. On April 8, 2005, the Company completed the
      acquisition of 100% of the stock of privately held Moore. Moore is operated
      as a
      wholly owned subsidiary of the Company and had revenues of $9,979,991 for the
      nine months ended September 30, 2006. Moore manufactures cable assemblies for
      a
      broad mix of customers, serving major medical device manufacturers with
      components for external defibrillators and serving commercial equipment
      manufacturers in diverse markets including test and measurement,
      instrumentation, semi-conductors and robotics. Combining the Company's existing
      operations with Moore's have had a material impact on combined revenues, created
      new customer opportunities and expanded the capabilities that the Company can
      offer customers. Although the Company will need to continue to build its
      business to achieve consistently profitable operations, the combination of
      the
      Moore acquisition and growth in the Company's existing business have had a
      favorable impact on the business as the Company reported a profit in the quarter
      ended September 30, 2006.





*Stock-Based
      Compensation* —
As
      of
      December 31, 2005, the Company terminated all of its equity compensation plans.
      In October 2005 the Company agreed to repurchase from the existing option
      holders options exercisable for up to a total of 14,262 shares of the Company's
      Common Stock in exchange for the issuance of a total of 12,851 shares of Common
      Stock and payment of a total of $423 in cash. Such transactions were completed
      by February 28, 2006. No additional expense was recognized as the fair value
      at
      the date on cancellation and repurchase was not in excess of the original
      compensation recognized.





The
      Company expects that for the foreseeable future any equity compensation granted
      to the employees and directors will be in the form of grants of shares of Common
      Stock rather than in the form of stock options. Such grants may be restricted
      or
      unrestricted. No options were granted in the nine months ended September 30,
      2006 or 2005.




6




On
      April
      27, 2006 the Company granted to three outside board members a total of 107,690
      shares of common stock for services performed in the years 2004 and 2005 in
      lieu
      of cash payments that were due to these board members. The stock was valued
      at
      $.42 per share which represented the average trading price for the 10 business
      days preceding the date of the award.





On
      August
      17, 2006 the Company granted four outside board members a total of 40,000 shares
      of common stock for services performed in 2006 in lieu of cash payments to
      these
      board members for future services through June 30, 2007. The stock was valued
      as
      $.45 per share which represented the trading price at the date of the
      award.





The
      Company’s policy covering equity compensation grants to either employees or
      directors is to recognize the expense as described in FAS 123 (R) in the period
      the grant is issued. If the Company had elected to recognize compensation
      expense based upon the fair value at the grant date for awards under the Stock
      Option Plan consistent with the methodology prescribed by SFAS No. 123, the
      Company’s net loss and loss per share would be reduced to the pro forma amounts
      indicated below for the three months ended September 30, 2005 and the nine
      months ended September 30, 2005, respectively.





**For
                the Three Months Ended September 30, 2005**
            
            **For
                the Nine Months Ended September 30, 2005**Net
                loss available to common shareholders
            
            $
            (74,645
            )
            $
            (1,184,891
            )Deduct:
                Total stock based employee compensation expense determined under
                SFAS 123
                method
            
            
            (21,777
            )
            
            (72,303
            )Pro
                forma net loss available to common shareholders
            
            
            (96,422
            )
            
            (1,257,154
            )Basic
                and diluted net loss available to common shareholders per common
                share:As
                reported
            
            
            (.04
            )
            
            (.58
            )Pro
                forma
            
            
            (.05
            )
            
            (.62
            )





*Net
      Loss per Share* For
      the
      nine month period ended September 30, 2006 the Company
      used SFAS No. 128, "Earnings per Share" for calculating the basic and diluted
      loss per share. Basic loss per share is computed by dividing net loss
      attributable to common stockholders by the weighted average number of common
      shares outstanding. Diluted loss per share is computed similar to basic loss
      per
      share except that the denominator is increased to include the number of
      additional common shares that would have been outstanding if the potential
      common shares had been issued and if the additional common shares were dilutive.
      At September 30, 2006, the outstanding number of potentially dilutive
      common shares totaled 1,794,206 shares of Common Stock, consisting of Class
      B
      warrants to purchase 926,833 shares of Common Stock, and other warrants to
      purchase 867,373 shares of Common Stock. At September 30, 2005, the
      outstanding number of potentially dilutive common shares totaled 10,255,095 shares
      of
      Common Stock, consisting of 9,000,000 shares of Common Stock issuable upon
      conversion of Series B Preferred Stock, options to purchase 117,867 shares
      of
      Common Stock, Class B warrants to purchase 926,833 shares of Common Stock,
      and
      other warrants to purchase 210,395 shares of Common Stock. In the periods when
      the Company has net losses available to common shareholders, their effect is
      anti-dilutive and have not been included in the diluted weighted average
      earnings per share as shown on the Consolidated Statements of Operations. Our
      Class B Warrants are scheduled to expire on November 16, 2006. We do not expect
      that any of them will be exercised prior to expiration because their exercise
      price substantially exceeds the current price of our Common Stock.





*Declaration
      of Dividend on and Conversion of Series B Preferred Stock* **** —
On
      August 17, 2006, our Board of Directors declared and paid, in 1,188,086 shares
      of the Company's Common Stock, the dividends accrued on the shares of Series
      B
      Preferred Stock. The holders of the Series B Preferred Stock were entitled
      to an
      annual dividend of $0.15 per share, payable in arrears either in cash or Common
      Stock when, as and if declared by the Board of Directors. The dividend had
      been
      accrued and was paid in shares of our Common Stock depending on the number
      of
      days each share of Series B Preferred Stock had been outstanding. For purposes
      of determining the amount of the dividend in shares of the Common Stock, the
      Amended and Restated Articles of Incorporation (the "Articles") provided that
      the value of a share of Common Stock would be equal to the average closing
      price
      of the Company's Common Stock as reported by Nasdaq for the ten trading days
      immediately prior to August 17, 2006. That value was $0.435 per
      share.




7




Immediately
      after the declared dividend on the Series B Preferred Stock, the holders of
      the
      Series B Preferred Stock, voting as a separate class at our 2006 Annual Meeting
      of shareholders, voted to authorize conversion of their shares of Series B
      Preferred Stock into shares of our Common Stock. The Articles provided that
      holders of two-thirds of the outstanding shares of Series B Preferred Stock
      could authorize the conversion of all the outstanding shares of Series B
      Preferred Stock into Common Stock at any time after the issuance of the Series
      B
      Preferred Stock. Of 2,750,000 shares of Series B outstanding, 2,100,500 voted
      in
      favor of the conversion, and no votes were cast against or withheld from the
      conversion. Upon approval, the Articles further provided that each share of
      Series B Preferred Stock would be automatically converted into shares of Common
      Stock at the conversion rate in effect on the date approved by the Series B
      Preferred Stock holders. The conversion rate in effect on August 17, 2006
      provided that each share of Series B Preferred Stock would be converted into
      four shares of Common Stock, and 11,000,000 shares of Common Stock were thus
      issued under the conversion.





**2.
      Summary of Recent Accounting Pronouncements**





In
      February of 2006, the FASB issued SFAS No. 155 "Accounting for Certain Hybrid
      Financial Instruments", which is intended to simplify the accounting and improve
      the financial reporting of certain hybrid financial instruments (i.e.,
      derivatives embedded in other financial instruments). The statement amends
      SFAS
      No. 133, "Accounting for Derivative Instruments and hedging Activities", and
      SFAS No. 140, "Accounting for Transfers and Servicing of Financial assets and
      Extinguishments of Liabilities-a replacement for FASB Statement No. 125." SFAS
      155 is effective for all financial instruments issued or acquired after the
      beginning of an entity's first fiscal year that begins after September 15,
      2006.
      Management is currently evaluating the impact SFAS No. 155 will have on our
      consolidated financial statements, if any.





In
      February 2006, the FASB issued FSP FAS 123(R)-4, “Classification of Options
      and Similar Instruments Issued as Employee Compensation That Allow for Cash
      Settlement upon the Occurrence of a Contingent Event” (“FSP 123R -4”). FSP
      123(R)-4 addresses the classification of options and similar instruments issued
      as employee compensation that allow for cash settlement upon the occurrence
      of a
      contingent event. A cash settlement feature that can be exercised only upon
      the
      occurrence of a contingent event that is outside the employee’s control does not
      meet the conditions in paragraphs 32 and A229 of Statement 123(R) -4 until
      it
      becomes probable that the event will occur. The guidance in FSP 123(R)-4 was
      effective on February 3, 2006 and is to be applied in the first reporting
      period beginning after the February 3, 2006. The Company does not expect its
      financial statements to be significantly impacted by this
      statement.





In
      July
      of 2006, the FASB issued FIN 48 “Accounting for Uncertainty in Income Taxes”,
      which is intended to clarify the accounting for income taxes by prescribing
      the
      minimum recognition threshold a tax position must meet before being recognized
      in the financial statements. FIN 48 also provides guidance on derecognition,
      measurement, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. In addition, FIN 48 clearly scopes out
      income taxes from Financial Accounting Standards Board Statement No. 5,
      Accounting for Contingencies. FIN 48 applies to all tax positions related to
      income taxes subject to Financial Accounting Standards Board Statement No.
      109,
      Accounting for Income Taxes, (FAS 109). This includes tax positions considered
      to be "routine" as well as those with a high degree of uncertainty. The guidance
      contained in FIN 48 also applies to pass-through entities, nontaxable entities,
      and entities whose tax liability is subject to 100% credit for dividends paid
      (i.e., real estate investment companies and registered investment companies).
      FIN 48 requires expanded disclosure requirements and disclosures are required
      at
      each annual reporting period unless significant change occurs in an interim
      period. FIN 48 is effective for fiscal years beginning after 15 December 2006
      (i.e., effective 1 January 2007 for calendar year-end companies). Management
      is
      currently evaluating the impact FIN 48 will have on our consolidated financial
      statements, if any.




8




In
      March
      2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
      Assets an amendment of FASB Statement No. 140”. Companies are required to apply
      SFAS No. 156 as of the first annual reporting period that begins after September
      15, 2006. The Company does not believe adoption of SFAS No. 156 will have a
      material effect on its unaudited condensed consolidated financial position,
      results of operations or cash flow.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, Fair Value ** Measurements ** (“FAS
      157”). FAS 157 defines fair value, establishes a framework for measuring fair
      value and expands disclosures about fair value measurements but does not require
      any new fair value measurements. FAS 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007, and interim periods
      within those fiscal years. The Company has not yet determined the impact of
      applying FAS 157.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      158, Employers’ Accounting ** for
      Defined Benefit Pension and Other Postretirement Plans, (“FAS 158”). FAS 158
      requires an employer to recognize the over funded or under funded status of
      a
      defined benefit postretirement plan (other than a multiemployer plan) as an
      asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the changes occur through
      comprehensive income. FAS 158 is effective for financial statements as of
      December 31, 2006. The Company does not believe adoption of SFAS No. 158 will
      have a material effect on its unaudited condensed consolidated financial
      position, results of operations or cash flow.





**3.
      Customer Concentration**





For
      the
      three months ended September 30, 2006 approximately $1,941,495 in sales were
      made to four customers. For the nine months ended September 30, 2006
      approximately $7,560,623 in sales were made to these same four customers whose
      combined accounts receivable balance totaled approximately $689,153 as of
      September 30, 2006. For the three months ended September 30, 2005 approximately
      $1,917,779 in sales were made to three customers. For the nine months ended
      September 30, 2005 approximately $5,886,5520 in sales were made to these same
      three customers whose combined accounts receivable balance totaled approximately
      $ 291,154 as of September 30, 2005.





**4.
      Inventories**





Inventories
      at September 30, 2006 were as follows:




Finished
                goods
            
            $
            380,739Work-in
                process
            
            
            243,185Raw
                materials
            
            
            1,618,960Total
                inventory
            
            $
            2,242,884Less:
                reserves
            
            
            (370,684
            )Net
                inventory
            
            $
            1,872,200








**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. Goodwill
      must be tested for impairment at least on an annual basis, or if an event occurs
      or circumstances change prior to the annual test of impairment, then the
      carrying value of goodwill must be tested on an interim basis. The Company
      performed their annual impairment analysis, as required by FAS 142 during the
      first quarter, and determined that the goodwill recorded as a result of the
      acquisition of Moore was not impaired as of March 31, 2006.




9




As
      a
      result of the Moore purchase, the Company acquired identifiable defined life
      intangible assets such as customer contacts and lists and manufacturing process
      technology. The customer lists and contacts are amortized on a straight-line
      basis over a 3-year period and the manufacturing process technology is amortized
      over a 5-year period on a straight-line basis. The Company will continue to
      amortize these identifiable intangible assets over these lives unless an event
      occurs or circumstances change that indicate that the carrying value of these
      assets may not be recoverable. The following table reflects the cost of other
      identifiable intangible assets and the accumulated amortization related to
      these
      respective assets as of September 30, 2006:


Gross
                  Carrying Value
              
              Accumulated
                  Amortization
              
              Net
                  Carrying ValueCustomer
                  lists and contacts
              
              $
              522,466
              
              $
              261,240
              
              $
              261,226Manufacturing
                  process technology
              
              
              203,738
              
              
              61,125
              
              
              142,613Total
                  other intangible assets
              
              $
              726,204
              
              $
              322,365
              
              $
              403,839




For
      the
      nine months ending September 30, 2006 and 2005, the Company recorded $161,187
      and $105,741 as amortization expense. The Company expects to record annual
      amortization expense of approximately $215,000 in 2006, $215,000 in 2007,
      $84,000 in 2008, $41,000 in 2009 and $10,000 in 2010 related to the other
      identifiable intangible assets purchased in the Moore acquisition.





**6.
      Note Payable and Warrants**





On
      June
      22, 2006 the Company entered into a loan and security agreement and a
      corresponding promissory note with VenCore Solutions LLC (“VenCore”) wherein
      VenCore agreed to make loans to the Company in aggregate principal amount not
      to
      exceed $350,000. The Company plans to use the proceeds from the loan to satisfy
      ongoing working capital requirements. The note requires the Company to pay
      VenCore $14,175 per month, payable in 30 consecutive installments beginning
      on
      July 15, 2006 with subsequent payments due on the 15 th of each
      month thereafter. A final payment of $35,000 is due on January 15, 2009. As
      part
      of the agreement the Company issued warrants that grant VenCore the right to
      purchase 72,917 shares of common stock of the Company at an exercise price
      of
      $.48 per share. The warrants expire on June 22, 2016. The warrant has a fair
      value of $31,923 calculated using the Black-Scholes option pricing model with
      the following assumptions:





Expected
                life (in years)
            
            
            10Expected
                volatility
            
            
            100
            %Risk-free
                interest rate
            
            
            5.0
            %Expected
                dividend
            
            
            —





The
      warrants are subject to piggyback registration rights.





**7.
      Subsequent Events**





**A.
      Restructure of Shareholder Note and Initial Issuance of Class C Preferred
      Stock**





Effective
      October 19, 2006, microHelix entered
      into several agreements under which it issued shares of its newly authorized
      Series C Preferred Stock, no par value ("Series C Preferred Stock"), issued
      warrants to purchase shares of its Common Stock, amended
      and restated a promissory note owed to one of its executive officers and amended
      the employment agreement of the executive officer. The agreements entered into
      were:




(a)
            Series
                C Preferred Stock Purchase Agreement under which MH Financial Associates,
                LLC, an Oregon limited liability company ("MH Financial"), purchased
                139,535 shares of Series C Preferred Stock for $2.15 per share, or
                a total
                of $300,000. Each share of Series C Preferred Stock is initially
                convertible into 10 shares of Common Stock. If the Series C Preferred
                Stock were converted at the initial conversion ratio, microHelix
                would
                issue 1,395,350 shares of Common Stock. James M. Williams, Chairman
                of the
                Board and a director of microHelix, is an investor in MH Financial.
                MH
                Financial is an affiliate of Aequitas Capital Management, Inc., which
                serves as microHelix's financial
                advisor.




10




(b)
            Warrant
                (the "InitialSeries
                C Warrant") issued to MH Financial to purchase 1,046,513 shares of
                Common
                Stock at an initial exercise price of $0.30 per share. The Series
                C
                Warrant expires on October 18,
                2011.




(c)
            Registration
                Rights Agreement under which microHelix granted MH Financial certain
                registration rights with respect to the shares of Common Stock issuable
                upon conversion of the Series C Preferred Stock, upon conversion
                of the
                Restated Note (defined below) and upon exercise of the warrants issued
                and
                issuable to MH Financial in connection with the transactions described
                herein.




(d)
            Agreement
                Regarding Amendment of Promissory Note under which microHelix and
                MH
                Financial agreed to amend and restate the promissory note dated April
                8,
                2005, as amended (the "Prior Note"), that was originally issued to
                Marti
                D. Lundy. On October 19, 2006, Ms. Lundy assigned the promissory
                note and
                its underlying security agreement to MH Financial in exchange for
                a cash
                payment. Ms. Lundy is an executive officerand
                shareholderof
                microHelix.




(e)
            Amended
                and Restated Promissory Note (the "Restated Note") in favor of MH
                Financial. The Restated Note replaces and supersedes the Prior Note.
                The
                initial principal amount of the Restated Note is $1,028,982, which
                bears
                interest at the rate of 10% per annum through July 31, 2007 and 14%
                per
                annum from August 1, 2007 through the maturity date of August 19,
                2008.
                Payments of principal and interest of $20,000 are due monthly under
                the
                Restated Note, with the first payment due on November 19, 2006. The
                Restated Note is convertible into Common Stock at any time by MH
                Financial. The conversion rate is the lower of (i) $0.30 per share;
                (ii)
                the weighted average closing bid price for Common Stock for the 20
                trading
                days immediately prior to conversion; or (iii) the closing price
                of Common
                Stock sold in any new offering resulting in proceeds to microHelix
                of more
                than $1,000,000. The Restated Note continues to be secured by a lien
                against substantially all of the assets of microHelix andMoore.
                MH Financial may accelerate all amounts due under the Restated Note
                in the
                event of payment default or certain other defaults defined in the
                Restated
                Note. A total of $77,309 of outstanding principal of the Prior Note
                was
                forgiven in connection with its amendment and
                restatement.




(f)
            Warrant
                (the "Note Warrant") issued to MH Financial to purchase 102,898 shares
                of
                Common Stock at an initial exercise price of $0.30 per share. The
                Note
                Warrant expires on October 18, 2011. microHelix also agreed to issue
                warrants in identical form to MH Financial to purchase that number
                of
                shares of Common Stock, calculated on a quarterly basis, equal to
                10% of
                the then outstanding principal balance of the Restated Note on the
                first
                day of each calendar quarter that the Restated Note is outstanding and
                unpaid.





(g)
            Amendment
                No. 1 to Employment Agreement between Moore Electronics, Inc. and
                Marti D.
                Lundy, an executive officer of microHelix, under which Ms. Lundy's
                employment was converted to "at will" status and her compensation
                and
                benefits were changed.




**B.**  **Subsequent Issuance of Series C Preferred Stock and
      Warrant**





Effective
      November 2, 2006, microHelix entered into two agreements under which it issued
      shares of its Series C Preferred Stock and issued a warrant to purchase shares
      of its Common Stock. The agreements entered into were:




(a)
            Series
                C Preferred Stock Purchase Agreement under which MH Financial purchased
                139,535 shares of Series C Preferred Stock for $2.15 per share, or
                a total
                of $300,000. Each share of Series C Preferred Stock is initially
                convertible into 10 shares of Common Stock. If the Series C Preferred
                Stock were converted at the initial conversion ratio, microHelix
                would
                issue 1,395,350 shares of Common
                Stock.


(b)
            Warrant
                (the "Second Series C Warrant") issued to MH Financial to purchase
                1,046,512 shares of Common Stock at an initial exercise price of
                $0.30 per
                share. The Series C Warrant expires on November 1, 2011.





11





**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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.





**Forward-Looking
      Statements**





This
      Quarterly Report on Form 10-QSB 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. We do not intend, and undertake no obligation, to update
      any such forward-looking statements to reflect events or circumstances that
      occur after the date of this filing.





**Critical
      Accounting Policies and Estimates**





The
      discussion and analysis of our financial condition and results of operations
      is
      based upon our 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 us to make estimates
      and
      judgments that affect the reported amounts of assets, liabilities, revenues
      and
      expenses, and related disclosure of contingent assets and liabilities. We
      evaluate our estimates on an on-going basis, including those related to product
      returns, bad debts, inventories, prepaid expenses, intangible assets, income
      taxes, warranty obligations, and other contingencies. We base our estimates
      on
      historical experience and on various other assumptions that are believed to
      be
      reasonable under the circumstances, the results of which form 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 these
      estimates under different assumptions or conditions. We believe the following
      critical accounting policies and related judgments and estimates affect the
      preparation of our consolidated financial statements.





*Revenue
      Recognition* —We
      recognize 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. The
      products must be physically shipped from the factory. In some cases, tooling
      that has been paid for by a customer may remain at our facility or at a vendor's
      facility. Returns are limited to nonconforming products and the volume of
      returns has been insignificant. We do not establish reserves for returns because
      they have been minimal.





**RESULTS
      OF OPERATIONS**





***Overview***





microHelix
      is a manufacturer and distributor of custom cable assemblies for the medical
      and
      commercial Original Equipment Manufacturer ("OEM") markets. We serve a segment
      of the quick turn, high mix, low volume cable assembly market generally referred
      to as the custom cable assembly market. Typical cable assemblies include cable,
      connectors, contacts, flex reliefs, housings and printed circuit boards ("PCBs")
      and are critical sub-components of medical devices and commercial electronic
      systems. We operate our business in a single operating segment through two
      divisions: our Moore division and our MicroCoax division. We sold our wire
      and
      cable division in April 2004.





On
      April
      8, 2005, we acquired 100% of the outstanding stock of Moore. Moore,
      headquartered in Tualatin, Oregon a Portland suburb, was founded in 1978 and
      is
      a manufacturer of customized cable assemblies, sub-assemblies, wire harnesses
      and electro-mechanical assemblies. Moore serves the cable assembly requirements
      of major medical equipment manufacturers and commercial equipment manufacturers.
      Moore also does complex mechanical assemblies (“box builds”) for commercial and
      aerospace customers. Many major OEMs outsource their cable assembly work so
      they
      can focus on final assembly and testing of their products. Moore’s growth has
      been driven by its ability to partner with its customers, support complex
      projects with strong in-house engineering resources, provide low-cost assembly
      services and offer turn-key solutions for custom cable assembly projects. Custom
      cable assembly work is generally not easily transferred to offshore operations
      for three reasons: (1) low unit volume; (2) rapid turn (i.e. accelerated
      delivery and schedule) and (3) frequent engineering changes. We operate Moore
      as
      a wholly owned subsidiary.




12




Our
      MicroCoax division designs and manufactures cable assemblies for OEM customers
      that are used in applications such as medical ultrasound probes, laparoscopes,
      catheters and flaw detection ultrasound systems.





microHelix
      began in 1991 in Portland, Oregon as a grant and private equity funded research
      company, formed to develop leading edge manufacturing techniques for medical
      device interconnect systems. In the years that followed we established a
      foundation of proprietary processes and intellectual property in the areas
      of
      ultra-thin wall pinhole free wire, micro-interconnect technology, advanced
      laser
      micro-machining, specialty connectors and flex circuits. We began manufacturing
      operations in 1998, designing and building cable assemblies and micro-electric
      interconnects for use in the medical device and commercial industries.





In
      April
      1999, we acquired Key-Tech, a privately held Portland-based designer and
      manufacturer of interconnect systems for the medical and commercial markets.
      In
      addition to acquiring a customer base, we significantly enhanced our
      manufacturing and engineering capabilities.





In
      December 1999, we acquired the assets of the medical ultrasound division of
      Alcatel NA Cable Systems, Inc , the United States subsidiary of one of the
      largest wire and cable manufacturers in the world headquartered in Paris, which
      designs and manufactures cable assemblies for use in non-invasive ultrasound
      probes and systems. In connection with this acquisition, we acquired facilities
      and employees in Tucson, Arizona and Nogales, Mexico.





We
      completed our initial public offering in November 2001. Our Common Stock and
      Class B Warrants currently trade on the NASDAQ OTC Bulletin Board under the
      symbols MHLX.OB and MHLXZ.OB, respectively. Our Class B Warrants are scheduled
      to expire on November 16, 2006. We do not expect that any of them will be
      exercised prior to expiration because their exercise price substantially exceeds
      the current price of our Common Stock.





In
      April
      2004 we sold the assets of our wire and cable division to Advanced
      Neuromodulation Systems, and in April 2005 we acquired all of the stock of
      Moore, a manufacturer of customized cable assemblies, sub-assemblies, wire
      harnesses and electro-mechanical assemblies. Moore is operated as a wholly
      owned
      subsidiary.





We
      have
      incurred significant losses since inception and those losses have continued
      following our initial public offering. In our business we have had to rely
      on a
      relatively small number of OEM customers for the majority of our sales. Rapid
      changes in demand by our OEM customers in the short term make our production
      scheduling uncertain and, as such, have made our expenses more difficult to
      control and consequently make our cash requirements difficult to predict. We
      have not been successful in achieving profitability due to in part the
      unpredictability of the OEM requirements. During the past two years we have
      tried to broaden the OEM customer base, in part through our acquisition of
      Moore.





**THREE
      AND NINE MONTHS ENDED SEPTEMBER 30** **,
      2006** **AND 2005**





On
      April
      8, 2005 the Company acquired 100% of the outstanding stock of Moore and as
      result of this acquisition date the third quarter, ended September 30, 2006,
      can
      effectively be compared with the same quarter in 2005. The results for the
      nine
      months ended September 30, 2006 will differ, as the Moore acquisition did not
      occur until early April 2005.





Total
      sales in the third quarter of 2006 were $3,944,057 compared to $2,853,555 in
      the
      third quarter of 2005, an increase of 38%. The sales increases in both the
      Moore
      and MicroCoax divisions were a result of increased demand from existing
      customers while at the same time new customers contributed significantly to
      the
      increased sales levels. For the nine months ended September 30, 2006 total
      sales
      were $11,671,356 compared to $5,715,834, or an increase of $5,955,522 on a
      year
      to year basis. The primary reason for this increase was due to the acquisition
      of Moore and the increase in business during the second and third quarters
      as
      previously discussed.




13




Gross
      profit in the third quarter of 2006 was $694,251 compared to $559,213 in the
      third quarter of 2005, an increase of 24% The $135,038 increase in gross profit
      margin can be attributed to operating our facilities at higher capacity, lower
      manufacturing expenses, and improved inventory management. For the nine months
      ended September 30, 2006 the total gross profit was $1,708,282 compared to
      gross
      profit of $763,216 recorded during the first nine months of 2005. The increase
      in gross profit during this period of $945,066 can be attributed to the
      acquisition of Moore, our facilities operating at higher capacity, lower
      manufacturing expenses, improved inventory management, sales of higher margin
      products, and the improvements in operating efficiency achieved during the
      second and third quarters of 2006.





Total
      operating expenses in the third quarter of 2006 were $556,323 compared to total
      operating expenses of $561,206 incurred during the same quarter a year earlier,
      a decrease of 1%. For the nine months ending September 30, 2006 total operating
      expenses were $1,968,438 compared to $1,726,318, or an increase of $242,120.
      This increase is attributed to an increase in the sales and administrative
      personnel related to the Moore division and the additional expenses incurred
      by
      the Company associated with the acquisition of Moore Electronics in the second
      quarter of 2005.





Interest
      expense for the third quarter of 2006 was $131,796 compared to $69,351 for
      the
      same quarter in 2005. On a nine month basis interest expense for 2006 was
      $288,195 compared to $134,563 in 2005, or an increase of $153,632. The increases
      in interest expense are attributed to interest rates and to increased debt
      levels under our line of credit and a shareholder note used in part to acquire
      Moore Electronics.





Primarily
      as a result of the significant increase in sales and the associated improvements
      in gross profit the Company earned net income before preferred stock dividends
      of $34,086 in the third quarter of this year compared to net income before
      preferred stock dividends of $9,730 recorded in the third quarter of 2005,
      an
      improvement of $24,356. On a year to date basis for the nine months ended
      September 30, 2006 the Company recorded a net loss before preferred stock
      dividends of $428,210 compared to a net loss before preferred stock dividends
      of
      $1,016,141 recorded during the first nine months of 2005, an improvement of
      $587,931 that can primarily be attributed to second and third quarter changes
      previously discussed.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of
      September 30, 2006 the Company had $8,399 of cash and cash equivalents. Cash
      used in operating activities for the nine months ended September 30, 2006 was
      $375,947 compared to $430,728 used in the same period a year ago. The decrease
      in cash used in operations during the first nine months of 2006 primarily
      resulted from an increae in accounts payable of $599,819 which was partially
      offset by an increase in accounts receivable of $124,721, an increase in
      inventories of $862,747, and a decrease in customer deposits of $163,456. The
      decrease in cash of $49,913 since December 31, 2005 reflects $375,947 used
      for
      operating activities plus $245,527 invested in capital expenditures for tooling
      and equipment to support our manufacturing partner in Malaysia, and the
      installation of a new ERP software system. These expenditures were partially
      financed by $571,562 of cash proceeds from a note and through an increase in
      our
      line of credit.





As
      of
      September 30, 2006, the Company had a $2,000,000 line of credit for working
      capital, secured by accounts receivable and inventory. As of September 30,
      2006,
      there was $1,390,874 outstanding on the line of credit and the availability
      on
      the line of credit was $609,126. The line of credit expires on April 7,
      2007.





On
      April
      5, 2006, the Company’s subsidiary, Moore entered into an agreement with a
      customer to provide an advance of $200,000 against future orders. The funds
      were
      used to finance the purchase of high cost components used in the customer’s
      assemblies. Under the current terms of the agreement as amended on October
      25,
      2006, the outstanding balance will be reduced through credits issued against
      current invoices at the rate of $25,000 per month until paid in full.




14




On
      June
      22, 2006, the Company entered into a $350,000 term loan agreement secured by
      equipment. The loan will be repaid in 30 equal installments consisting of
      principal and interest with the final payment due on January 15, 2009.




On
      August
      16, 2006, Moore entered into an agreement with a vendor to amortize an
      outstanding balance due of $106,471 over twelve months. As of September 30,
      2006, the outstanding balance due to the vendor was approximately $89,071 and
      Moore was in compliance with the terms of the agreement





As
      of
      September 30, 2006, there were no outstanding purchase orders for capital
      equipment.





On
      April
      8, 2005, the Company issued a promissory note in the amount of $1,250,000 to
      Marti D. Lundy as part of the Moore acquisition. The note bears an annual
      interest rate of 10%. On August 8, 2006 the payment terms were changed to state
      that a monthly payment of $23,482 is due through September 8, 2006, and a
      monthly payment of $43,482 is due beginning on October 8, 2006 through April
      8,
      2008, at which time all unpaid principal and accrued but unpaid interest is
      due
      and payable. The note is secured by a lien on substantially all of the Company’s
      assets. Subsequent to September 30, 2006, the promissory note was sold to a
      third party and substantially restructured. See “note 7 - Subsequent Events” in
      Item I above and “Other Information” in Item 5 of Part II below.





**ITEM
      3. CONTROLS AND PROCEDURES**





The
      Company's Chief Executive Officer/Chief Financial Officer evaluated the
      effectiveness of the design and operation of the Company's disclosure controls
      and procedures as of June 30, 2006. Based on that evaluation, the Company's
      Chief Executive Officer/Chief Financial Officer concluded that as of the end
      of
      the period covered by this report the Company's disclosure controls and
      procedures are designed to and are 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. The Company's Chief Executive Officer/Chief Financial
      Officer also concluded that the Company's disclosure controls and procedures
      are
      effective to ensure that the information required to be disclosed in reports
      filed or submitted by the Company under the Securities Exchange Act of 1934,
      as
      amended, is accumulated and communicated to the Company's management, including
      its principal executive and principal financial officers, as appropriate to
      allow timely decisions regarding required disclosure. There were no changes
      in
      the Company's internal control over financial reporting during the quarter
      ended
      September 30, 2006 that materially affected, or were reasonably likely to
      materially affect, the Company's internal control over financial
      reporting.




PART
      II.
      OTHER INFORMATION





**ITEM
      1. LEGAL PROCEEDINGS**





As
      of
      September 30, 2006 microHelix was not involved in any legal
      proceedings.





**ITEM
      2.** **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**





Our
      2006
      annual meeting of shareholders was held on August 17, 2006 for the purpose
      of
      electing directors and authorizing conversion of our Series B Preferred Stock.
      The following votes were cast for or withheld as to each of the six nominees
      for
      the position of director:




15




**Director
                  Nominee**
              
              **Votes
                  For**
              
              **Votes
                  Withheld**James
                  M. Williams
              
              
              10,432,837
              
              
              0Tyram
                  H. Pettit
              
              
              10,419,770
              
              
              13,067Terrence
                  A. Rixford
              
              
              10,418,236
              
              
              14,601John
                  L. Crary
              
              
              10,432,837
              
              
              0Marti
                  D. Lundy
              
              
              10,395,609
              
              
              37,228James
                  M. Thornton
              
              
              10,432,837
              
              
              0


All
      of
      the nominees for directors were elected by the shareholders. There were no
      abstentions or broker non-votes with regard to this matter.





On
      August
      17, 2006, our Board of Directors declared and paid, in 1,188,086 shares of
      the
      Company's Common Stock, the dividends accrued on the shares of Series B
      Preferred Stock. The holders of the Series B Preferred Stock were entitled
      to an
      annual dividend of $0.15 per share, payable in arrears either in cash or Common
      Stock when, as and if declared by the Board of Directors. The dividend had
      been
      accrued and was paid in shares of our Common Stock depending on the number
      of
      days each share of Series B Preferred Stock had been outstanding. For purposes
      of determining the amount of the dividend in shares of the Common Stock, the
      Amended and Restated Articles of Incorporation (the "Articles") provided that
      the value of a share of Common Stock would be equal to the average closing
      price
      of the Company's Common Stock as reported by Nasdaq for the ten trading days
      immediately prior to August 17, 2006. That value was $0.435 per
      share.





Immediately
      after the declared dividend on the Series B Preferred Stock, the holders of
      the
      Series B Preferred Stock, voting as a separate class at our 2006 Annual Meeting
      of shareholders, voted to authorize conversion of their shares of Series B
      Preferred Stock into shares of our Common Stock. The Articles provided that
      holders of two-thirds of the outstanding shares of Series B Preferred Stock
      could authorize the conversion of all the outstanding shares of Series B
      Preferred Stock into Common Stock at any time after the issuance of the Series
      B
      Preferred Stock. Of 2,750,000 shares of Series B outstanding, 2,100,500 voted
      in
      favor of the conversion, and no votes were cast against or withheld from the
      conversion. Upon approval, the Articles further provided that each share of
      Series B Preferred Stock would be automatically converted into shares of Common
      Stock at the conversion rate in effect on the date approved by the Series B
      Preferred Stock holders. The conversion rate in effect on August 17, 2006
      provided that each share of Series B Preferred Stock would be converted into
      four shares of Common Stock, and 11,000,000 shares of Common Stock were thus
      issued under the conversion.





**ITEM
      3. OTHER INFORMATION**





**Declaration
      of Dividend on and Conversion of Series B Preferred Stock**





See
“Item
      2 - Submission of Matters to a Vote of Security Holders” above for a discussion
      of a declaration of dividends and the vote by the holders of the company’s
      Series B Preferred Stock to convert each share of Series B Preferred Stock
      into
      shares of Common Stock.





**Restructure
      of Note and Issuance of Class C Preferred Stock**





See
“Note
      7 - Subsequent Events” in Item 1 above.




16




**ITEM
      6. EXHIBITS**





(a)  Exhibits:





3.1
            
            Amended and
              Restated
              Articles of Incorporation of microHelix, Inc., as amended November
              16,
              2001, December 5, 2003, April 8, 2005, October 28, 2005, and October
              19,
              2006.10.1(1)
            
            Amended
                and Restated Loan and Security Agreement dated as of April 5, 2005
                among
                microHelix, Inc., Moore Electronics, Inc. and BFI Business Finance
                as
                modified on October 11, 2005, December 22, 2005, January 5, 2006 and
                April 17, 200610.2(2)
            
            Secured
                Promissory Note dated April 17, 2006 among microHelix, Inc., Moore
                Electronics, Inc. and BFI Business Finance10.3(3)
            
            Promissory
                Note dated April 8, 2005 made by microHelix, Inc. in favor of Marti
                D.
                Lundy, as modified on August 5, 2005, November 18, 2005, January
                3, 2006,
                May 18, 2006 and August 8, 2006.10.4(4)
            
            Loan
                and Security Agreement Number 1202, dated June 22, 2006, between
                VenCore
                Solutions LLC and microHelix, Inc. and Moore Electronics,
                Inc.10.5(4)
            
            Promissory
                Note, dated June 22, 2006, executed in favor of VenCore Solutions
                LLC by
                microHelix, Inc. and Moore Electronics, Inc.31.1(5)
            
            Certification
                of Principal Executive Officer and Principal Financial Officer pursuant
                to
                18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200232.1(5)
            
            Certification
                of Principal Executive Officer and Principal Financial Officer pursuant
                to
                18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002







(1)
            Incorporated
                by reference to the Company's Form 8-K filed on April 14, 2005, and
                to the
                Company's Forms 8-K filed on October 31, 2005, January 4, 2006, January
                26, 2006 and April 21, 2006.(2)
            Incorporated
                by referenced to the Company's Form 8-K filed on April 21,
                2006.(3)
            Incorporated
                by reference to the Company's Forms 8-K and 8-K/A filed on April
                14, 2005,
                Form 8-K filed on August 8, 2005, to the Company's Form 10-QSB for
                the
                quarter ended September 30, 2005 and to the Company's Forms 8-K filed
                on
                January 4, 2006, May 23, 2006 and August 11, 2006.(4)
            Incorporated
                by reference to the Company's Form 8-K filed on June 28,
                2006.(5)
            Filed
                herewith.





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/
                Tyram H. Pettit
            
            President,
                Chief Executive Officer
            
            November
                14, 2006Tyram
                H. Pettit
            
            and
                Chief Financial Officer




18