**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 June 30,
                2005****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





As
      August
      31, 2005, there were 2,082,746 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 June 30, 2005**





**TABLE
      OF CONTENTS**





**Page****PART
                I — FINANCIAL INFORMATION**
            3**ITEM
                1. FINANCIAL STATEMENTS — UNAUDITED**Consolidated
                balance sheet as of June 30, 2005
            3Consolidated
                statements of operations for the three and six months ended June
                30, 2005
                and 2004
            4Consolidated
                statements of cash flows for the six months ended June 30, 2005 and
                2004
            5Notes
                to consolidated financial statements
            6**ITEM
                2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION**
            10**ITEM
                3. CONTROLS AND PROCEDURES**
            12**PART
                II — OTHER INFORMATION****ITEM
                6. EXHIBITS**
            13**SIGNATURE**
            14**CERTIFICATION****EXHIBIT
                31.1**
            15**EXHIBIT
                31.2**
            16








2





**PART
      I — FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS — UNAUDITED**





The
      accompanying unaudited consolidated financial statements of microHelix, Inc.
      (the “Company”) include all adjustments (consisting only of normal recurring
      accruals and adjustments) that management considers necessary for fair
      presentation of financial position as of June 30, 2005 and operating results
      for
      the three and six months ended June 30, 2005 and 2004 and cash flows for the
      six
      months ended June 30, 2005.


.


**MICROHELIX,
      INC.**





**CONSOLIDATED
      BALANCE SHEET**


**(UNAUDITED)**


**JUNE
      30, 2005**





**Assets**Current
                Assets:Cash
            
            
            163,272Accounts
                receivable, net of allowance of $27,849
            
            
            685,804Inventories,
                net of reserves
            
            
            1,059,451Prepaid
                expenses and other current assets
            
            
            34,366Total
                current assets
            
            
            1,942,893Property
                and equipment - net
            
            
            937,098Intangible
                assets - net
            
            
            708,668Goodwill
            
            
            1,581,974Other
                Assets
            
            
            107,144Total
                assets
            
            $
            5,277,777**Liabilities
                and Shareholders’ Equity**Current
                Liabilities:Accounts
                payable
            
            $
            833,058Accrued
                liabilities
            
            
            778,156Accrued
                Dividends
            
            
            84,375Line
                of credit
            
            
            512,782Obligations
                under capital lease
            
            
            9,864Notes
                payable to shareholders
            
            
            372,369Customer
                deposits
            
            
            159,439Total
                current liabilities
            
            
            2,750,043Long-Term
                Liabilities:Obligations
                under capital lease, less current maturities
            
            
            13,524Deferred
                tax liability
            
            
            615,156Notes
                payable to shareholders, less current maturities
            
            
            977,631Total
                long-term liabilities
            
            
            1,606,305Total
                liabilities
            
            
            4,356,384Shareholders’
                Equity:Preferred
                Stock, no par value, 5,000,000 shares authorized,
            
            
            1,975,7932,250,000
                issued and outstandingCommon
                stock, no par value, 25,000,000 shares authorized,
            
            
            14,495,5492,082,746
                shares issued and outstandingAdditional
                paid-in capital
            
            
            6,403,042Accumulated
                deficit
            
            
            (21,952,955
            )Total
                shareholders’ equity
            
            
            921,429Total
                liability and shareholders’ equity
            
            $
            5,277,777




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





3




**MICROHELIX,
        INC.**




**CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **(UNAUDITED)**


**Three
                    Months Ended**
                
                **Six
                    Months Ended****June
                    30**
                
                **June
                    30****2005**
                
                **2004**
                
                **2005**
                
                **2004**Sales
                
                $
                2,443,595
                
                $
                187,867
                
                $
                2,862,279
                
                $
                469,211Cost
                    of sales
                
                
                2,318,168
                
                
                327,364
                
                
                2,658,276
                
                
                760,690Gross
                    profit (loss)
                
                
                125,427
                
                
                (139,497
                )
                
                204,003
                
                
                (291,479
                )Operating
                    Expenses:Research
                    and development
                
                
                —
                
                
                8,375
                
                
                —
                
                
                62,958Sales
                    and marketing
                
                
                137,930
                
                
                (463
                )
                
                142,876
                
                
                30,396General
                    and administrative
                
                
                770,660
                
                
                181,196
                
                
                966,456
                
                
                502,475Amortization
                    of intangibles
                
                
                55,780
                
                
                —
                
                
                55,780
                
                
                —Total
                    operating expenses
                
                
                964,370
                
                
                189,108
                
                
                1,165,112
                
                
                595,829Loss
                    from operations
                
                
                (838,943
                )
                
                (328,605
                )
                
                (961,109
                )
                
                (887,308
                )Other
                    income (expense):Interest
                    and other income
                
                
                450
                
                
                29,053
                
                
                450
                
                
                29,421Interest
                    expense
                
                
                (57,245
                )
                
                (11,403
                )
                
                (65,212
                )
                
                (15,410
                )Total
                    other income (expense):
                
                
                (56,795
                )
                
                17,650
                
                
                (64,762
                )
                
                14,011Net
                    loss from continuing operations
                
                
                (895,738
                )
                
                (310,955
                )
                
                (1,025,871
                )
                
                (873,297
                )Discontinued
                    operations:Income
                    (loss) from operations of wire and cable division
                
                
                —
                
                
                6,337
                
                
                —
                
                
                (122,877
                )
 Loss
                      on sale of wire and cable division
                  
                  
                  —
                  
                  
                  (129,816
                  )
                  
                  —
                  
                  
                  (129,816
                  )Net
                      loss
                  
                  
                  (895,738
                  )
                  
                  (434,434
                  )
                  
                  (1,025,871
                  )
                  
                  (1,125,990
                  )Preferred
                      Dividends
                  
                  
                  (
                      84,375
                  )
                  
                  —
                  
                  
                  (
                      84,375
                  )
                  
                  —Net
                      loss available to common shareholders
                  
                  $
                  (980,113
                  )
                  $
                  (434,434
                  )
                  $
                  (1,110,246
                  )
                  $
                  (1,125,990
                  )
  Loss
                        per share available to common stockholders - basic and
                        dilutedNet
                        loss from continuing operations
                    
                    $
                    (.48
                    )
                    $
                    (0.18
                    )
                    $
                    (.55
                    )
                    $
                    (0.51
                    )
 Net
                          loss from discontinued operations
                      
                      
                      —
                      
                      
                      (0.08
                      )
                      
                      —
                      
                      
                      (0.16
                      )
 Net
                            loss
                        
                        $
                        (.48
                        )
                        $
                        (0.26
                        )
                        $
                        (.55
                        )
                        $
                        (0.67
                        )
  Weighted
                            average number of shares outstanding -Basic
                            and diluted
                        
                        
                        2,051,996
                        
                        
                        1,681,806
                        
                        
                        2,012,460
                        
                        
                        1,681,806




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








4





**MICROHELIX,
      INC.**





**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**








Six
                months ended
            
            Six
                months ended**Cash
                Flows Provided By (Used For) Operating
                Activities:**
            
            June
                30, 2005
            
            June
                30, 2004Net
                loss from continuing operations
            
            $
            (1,025,871
            )
            $
            (873,297
            )Adjustments
                to reconcile net loss from continuing operations to cash provided
                by(used
                in) operating activities:Depreciation -capital
                assets
            
            
            77,428
            
            
            39,805Amortization
                - intangible assets
            
            
            55,780
            
            
            —Provision
                for doubtful accounts
            
            
            (20,642
            )
            
            —Provision
                for inventory reserves
            
            
            (1,653
            )
            
            73,518Common
                stock issued for services
            
            
            22,140
            
            
            10,774Loss
                from operations of wire and cable division
            
            
            —
            
            
            (122,877
            )Loss
                from sale of wire and cable division
            
            
            —
            
            
            (129,816
            )Change
                in assets and liabilities:(Increase)
                Decrease in assets:Accounts
                receivable
            
            
            166,356
            
            
            309,521Inventories
            
            
            279,028
            
            
            (49,959
            )Prepaid
                expenses and other current assets
            
            
            (16,983
            )
            
            5,421Increase
                (Decrease) in liabilities:Accounts
                payable
            
            
            164,668
            
            
            (363,462
            )Accrued
                liabilities
            
            
            142,458
            
            
            (154,844
            )Net
                cash used in operating activities
            
            
            (157,291
            )
            
            (1,255,216
            )**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
            )
            
            —Net
                book value of wire and cable division sold
            
            
            —
            
            
            1,625,909Net
                cash provided by /(used in) investing activities
            
            
            (1,912,683
            )
            
            1,625,909**Cash
                Flows from Financing Activities:**Proceeds
                from preferred stock offering, net of expenses
            
            
            1,725,793
            
            
            —Proceeds
                from line of credit net
            
            
            2,531,161
            
            
            1,002,786Payments
                on line of credit
            
            
            (2,148,011
            )
            
            (1,252,079
            )Proceeds
                from issuance of notes payable to shareholders
            
            
            100,000
            
            
            —Net
                cash provided by /(used in) financing activities
            
            
            2,208,943
            
            
            (249,293
            )Change
                in cash
            
            
            138,969
            
            
            121,400Cash,
                beginning of period
            
            
            24,303
            
            
            48,767Cash,
                end of period
            
            $
            163,272
            
            $
            170,167**Supplemental
                Cash Flow Information:**Interest
                paid
            
            $
            47,268
            
            $
            18,093Income
                taxes paid
            
            $
            —
            
            $
            —**Supplemental
              Disclosure of Non-cash Investing Activities:**Purchase
                price acquisition of Moore Electronic details:Fair
                value of assets acquired
            
            
            4,558,702
            
            
            —Liabilities
                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
            
            
            1,912,683
            
            
            —Preferred
                dividends
            
            
            (84,375
            )
            
            —




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




5




**MICROHELIX,
      INC.**





**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**Three
      and Six Months Ended June 30, 2005 and 2004**





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





*Nature
      of Operations* —
      microHelix, Inc. (the “Company”), is primarily engaged in the design,
      manufacture, sale and distribution of cable assemblies for use in medical and
      commercial devices and systems.





*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”), that was acquired on
      April 8, 2005. All
      material inter-company accounts have been eliminated in
      consolidation.





*Reclassifications* —
      Certain
      reclassifications have been made to the six months ended June 30, 2004
      consolidated financial statements to conform to the presentation of the six
      months ended June 30, 2005 consolidated financial statements.





*Going
      Concern* —
      These
      consolidated financial statements have been prepared on a going concern basis
      which contemplates the realization of assets and the satisfaction of liabilities
      in the normal course of business. The Company has incurred recurring losses
      and
      had negative cash flows from operations during each of the past two years and
      at
      June 30, 2005 had an accumulated deficit of $21,952,955. This indicates that
      the
      Company may be unable 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.




*Stock-Based
      Compensation* — SFAS
      No.
      123, “Accounting for Stock-Based Compensation,” establishes and encourages the
      use of the fair value based method of accounting for stock-based compensation
      arrangements under which compensation cost is determined using the fair value
      of
      stock-based compensation determined as of the date of grant and is recognized
      over the periods in which the related services are rendered. The statement
      also
      permits companies to elect to continue using the current intrinsic value
      accounting method specified in Accounting Principles Board (“APB”) Opinion No.
      25, “Accounting for Stock Issued to Employees,” to account for stock-based
      compensation. The Company has elected to use the intrinsic value based method
      and has disclosed the pro forma effect of using the fair value based method
      to
      account for its stock-based compensation. The Company uses the fair value method
      for options granted to non-employees. 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’ net loss and loss per share would be increased to the pro
      forma amounts indicated below for the three and six months ended June 30, 2005
      and 2004, respectively.





**Three
                Months Ended June 30,******
            
            **Three
                Months Ended June 30,******
            
            **Six
                Months**
              **Ended
                June 30,**
            
            **Six
                Months**
              **Ended
                June 30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
                loss available to common shareholders, as reported
            
            $
            (980,113
            )
            $
            (434,434
            )
            $
            (1,110,246
            )
            $
            (1,125,990
            )Deduct:
                Total stock-based employee compensation expense determined under
                SFAS 123
                method.
            
            
            (23,398
            )
            
            (60,782
            )
            
            (50,586
            )
            
            (60,782
            )Pro
                forma net loss
            
            $
            (1,003,511
            )
            $
            (495,216
            )
            $
            (1,160,832
            )
            $
            (1,186,772
            )Basic
                and diluted net loss per common share:As
                reported
            
            
            (.49
            )
            
            (.26
            )
            
            (.58
            )
            
            (.67
            )Pro
                forma
            
            
            (.49
            )
            
            (.29
            )
            
            (.58
            )
            
            (.74
            )





The
      pro
      forma amounts may not be indicative of the effects on reported net income for
      future years due to the effect of options vesting over a period of years and
      the
      granting of stock compensation awards in future years.





6


The
      fair
      value of each option grant was estimated on the date of grant using the
      Black-Scholes option pricing model with the following weighted-average
      assumptions used for the grants:





**Three
                Months Ended June 30,****2005**
            
            **2004**Dividend
                yield
            
            
            None
            
            
            NoneRisk-free
                interest rate
            
            
            4.0%
            
            
            4.0%Expected
                volatility
            
            
            99%
            
            
            99%Expected
                option lives
            
            
            4.0
                years
            
            
            4.0
                years





There
      were no options exercised or granted during the three and six months ended
      June
      30, 2005 and 2004.





*Net
      Loss per Share* — The
      Company uses 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 June 30, 2005, the outstanding number of potentially dilutive common shares
      totaled 10,739,156 shares of common stock, consisting of options to purchase
      117,867 shares of common stock, Class B warrants to purchase 926,833 shares
      of
      common stock, other warrants to purchase 694,456 shares of common stock, and
      Series B Preferred Stock convertible into 9,000,000 shares of common stock.
      At
      June 30, 2004 , the outstanding number of potentially dilutive common shares
      totaled 1,255,095 shares, consisting of 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. However, as the
      Company has net losses, their effect is anti-dilutive and has not been included
      in the diluted weighted average earnings per share as shown on the Consolidated
      Statements of Operations.





*Recent
      Accounting Pronouncements* - In May
      2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections"
      ("SFAS 154") which replaces Accounting Principles Board Opinions No. 20
      "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim
      Financial Statements-An Amendment of APB Opinion No. 28." SFAS 154 provides
      guidance on the accounting for and reporting of accounting changes and error
      corrections. It establishes retrospective application, or the latest practicable
      date, as the required method for reporting a change in accounting principle
      and
      the reporting of a correction of an error. SFAS 154 is effective for accounting
      changes and corrections of errors made in fiscal years beginning after December
      15, 2005 and is required to be adopted by the Company in the first quarter
      of
      2006. The Company is currently evaluating the effect that the adoption of SFAS
      154 will have on its consolidated results of operations and financial condition
      but does not expect it to have a material impact.





**2.
      Customer Concentration**





For
      the
      three months ended June 30, 2005 and 2004, approximately $1,828,000 and
      $2,302,000 in sales were made to three customers and the accounts receivable
      balance for these customers as of June 30, 2005 totaled approximately $210,000.
      For the six months ended June 30, 2005 and 2004, appoximately $3,969,000 and
      $4,679,000 in sales were made to three customers.





**3.
      Business Combination**





On
      April
      8, 2005, the Company entered into a merger agreement and acquired 100% of the
      outstanding stock of Moore Electronics, Inc. (“Moore”) from two shareholders.
      Moore, headquartered in Tualatin, Oregon, was founded in 1978 and is a
      manufacturer of customized cable assemblies, sub-assemblies, wire harnesses
      and
      electro-mechanical assemblies. Moore serves many of the major medical equipment
      manufacturers and many of the leading commercial equipment manufacturers in
      the
      test and measurement and semi-conductor industries. Moore is operated as a
      wholly owned subsidiary. The Company anticipates that the acquisition of the
      Moore workforce and customer contacts will allow the Company to offer a broader
      product line to their common customers. The acquisition of the Moore
      manufacturing process technology combined with the Company’s manufacturing
      capability in Mexico should enable the Company to compete more cost effectively
      in the complex cable assembly market.





7
 
 
 The
        Company paid $3,000,000 for 100% of the 2,000 shares of common stock of Moore,
        which consisted of $1,500,000 in cash, $1,250,000 in the form of a promissory
        note and 250,000 shares of microHelix Series B Preferred Stock valued at
        $250,000. In addition, the Company refinanced $413,000 of bank debt owed
        by
        Moore. The total purchase price for Moore totaled $3,413,000. In order to
        finance the acquisition of Moore, the Company sold 2.0 million shares of
        Series
        B Preferred Stock at $1.00 per share in a private placement. Each share of
        Series B Preferred Stock is convertible into four shares of Common Stock.
        Each
        share of Series B Preferred Stock is eligible for a cumulative dividend of
        $0.15
        per share per annum, payable in either cash or stock quarterly when, as and
        if
        declared by the Board of Directors of the Company.




The
      purchase price allocation included in these financial statements is based on
      preliminary information received from the valuation firm. Accordingly, the
      final
      purchase accounting adjustments may be materially different from those included
      in these financial statements. The Company expects, but cannot guarantee, to
      receive the final valuation report in time to include the final purchase
      price adjustments in the financial statements for the period ended September
      30,
      2005.


The
      fair
      value of assets acquired and liabilities assumed was recorded in the Company’s
      balance sheet as of April 8, 2005, the effective date of the acquisition, and
      the results of operations of Moore have been included in the Company’s
      consolidated results of operations for the period from April 8, 2005
      through June 30, 2005.





The
      following table summarizes the total purchase consideration as of the date
      of
      acquisition by major asset and liability classification:





Category
            
            ValueNet
                tangible assets
            
            $
            907,984Property
                and Equipment fair value adjustment
            
            
            773,427Customer
                lists and contacts
            
            
            526,732Manufacturing
                process technology
            
            
            237,716Goodwill
                (net of tax benefit)
            
            
            966,824Total
                purchase consideration
            
            $
            3,412,683




The
      following unaudited pro forma financial information presents the combined
      results of operations of the Company and Moore as if the acquisition had
      occurred at the beginning of the periods presented in the table below. The
      unaudited pro forma financial information is not intended to represent or be
      indicative of the consolidated results of operations or the financial position
      of the Company that would have been reported had the acquisition been effective
      as of the beginning of the periods presented and should not be interpreted
      as
      indicative of the future consolidated results of operations or to be
      representative of the future financial condition of the Company. For the three
      and six months ended June 30, 2004, the Company recorded a net loss from
      operations of its discontinued wire and cable division combined with a loss
      on
      the eventual sale of this same division.





**Three
                Months Ended June 30, 2005**
            
            **Three
                Months Ended June 30, 2004**
            
            **Six
                Months Ended June 30, 2005**
            
            **Six
                Months Ended June 30, 2004**Sales
            
            $
            2,989,588
            
            $
            3,208,822
            
            $
            5,799,163
            
            $
            6,500,420Net
                loss from continuing operations
            
            $
            (947,778
            )
            $
            (168,438
            )
            $
            (1,040,583
            )
            $
            (513,751
            )Net
                loss
            
            $
            (947,778
            )
            $
            (291,917
            )
            $
            (1,040,583
            )
            $
            (766,444
            )Net
                loss per share from continuing operations
            
            $
            (.46
            )
            $
            (.10
            )
            $
            (.52
            )
            $
            (.31
            )Net
                loss per share
            
            $
            (.46
            )
            $
            (.17
            )
            $
            (.52
            )
            $
            (.46
            )




**4.
      Inventories**




Inventories
      at June 30, 2005 are as follows:




Finished
                goods
            
            $
            229,315Work-in
                process
            
            
            263,633Raw
                materials
            
            
            760,899Total
                inventory
            
            
            1,253,847Less:
                reserves
            
            
            (194,396
            )Net
                inventory
            
            $
            1,059,451





**5.
      Loss Per Share**




Basic
      net
      loss per share has been computed by dividing net loss by the weighted average
      number of shares outstanding during each period. Diluted loss per share would
      be
      computed by dividing net loss by the weighted average common stock and common
      stock equivalent shares outstanding during each period using the treasury stock
      method for employee stock option plans and warrants, if the common stock
      equivalent shares were not anti-dilutive. Common stock equivalents were
      anti-dilutive for all periods presented, so diluted and basic earnings per
      share
      are the same.




8




6.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. Considering
      that
      the goodwill carrying value was recently established with the Moore acquisition
      on April 8, 2005 there is not a need, as of this reporting period, to test
      for
      impairment. The annual review to determine if the carrying value of goodwill
      is
      impaired will be performed in the three month period ended March 31, 2006,
      providing that the assumptions relating to the carrying value of goodwill remain
      the same.





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 June 30, 2005:








Gross
                CarryingValue
            
            AccumulatedAmortization
            
            Net
                CarryingValueCustomer
                lists and contacts
            
            $
            526,732
            
            $
            43,894
            
            $
            482,838Manufacturing
                process technology
            
            
            237,716
            
            
            11,886
            
            
            225,830Total
                other intangible assets
            
            $
            764,448
            
            $
            55,780
            
            $
            708,668





The
      Company expects to record annual amortization expense of approximately $167,000
      in 2005, $223,000 in 2006, $223,000 in 2007, $91,000 in 2008, $48,000 in 2009
      and $12,000 in 2010 related to the other identifiable intangible assets
      purchased in the Moore acquisition.




7.
        Equity
 
 On
          April
          8, 2005, the Company issued 2.25 million shares of Series B Preferred Stock
          at
          $1.00 per share in a private placement. Each share of Series B Preferred
          Stock
          is currently convertible into four shares of Common Stock (as adjusted
          for stock
          splits, stock dividends, reclassifications and the like). Each share of
          Series B
          Preferred Stock is eligible for a cumulative annual dividend of $0.15 per
          share,
          when, as and if declared by the Board of Directors. Declared dividends
          are
          payable either in cash or in shares of the Company’s Common Stock at the
          election of the Company’s Board of Directors. The Company may call the Series B
          Preferred Stock for redemption at any time after March 31, 2006 for $1.50
          per
          share (as adjusted for stock splits, stock dividends, reclassifications
          and the
          like). Shares of Series B Preferred Stock has the same voting rights as
          the
          shares of Common Stock into which they are convertible. Currently each
          share of
          Series B Preferred Stock is entitled to four votes on all matters submitted
          to
          the shareholders of the Company. The holders of at least 25% of the outstanding
          shares of Series B Preferred Stock may require the Company to register
          for
          resale under federal securities laws the shares of Common Stock issuable
          upon
          conversion of the Series B Preferred Stock. This demand registration right
          may
          be exercised only once. Certain "piggyback" registration rights also apply
          to
          the shares of Common Stock issuable upon conversion of the Series B Preferred
          Stock.
  The
          Company issued warrants on April 8, 2005 to its
          financial advisor and its affiliates to purchase a total of 478,000 shares
          of
          Common Stock for services rendered in connection with the Series B Preferred
          Stock offering. Such warrants can be exercised through April 7, 2015 for
          a price
          of $0.25 per share. The company also issued on April 8, 2005 a total of
          123,000
          shares of common stock to six of its employees and directors.
          These
          grants were unrestricted and were made for services related to the successful
          completion of the merger.




***
      * * * * ***





9





**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**





Statements
      in this filing which are not historical facts are “forward-looking” statements
      under the provisions of the Private Securities Litigation Reform Act of 1995.
      Such statements reflect management’s current views and estimates of future
      economic and market circumstances, industry conditions, company performance
      and
      financial results. Words such as “may,”  “should,”  “expects,” 
“plans,”  “anticipates,”  “believes,”  “estimates,” 
“predicts,”  “intends,”  “potential,”  “continue,” 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 the Company’s actual future results to differ materially from the
      results discussed herein. Factors that could adversely affect future events,
      transactions or results include, but are not limited to; our ability to compete
      successfully in the medical ultrasound business; our ability to execute our
      business plan; the delay in the sale of commercial quantities of our products
      caused by regulatory review of our customer’s products into which they are
      incorporated; the concentrated nature of our customer base which causes
      fluctuations in our revenue and earnings and adds unpredictability of our
      quarterly sales and earnings; the uncertain market acceptance of our new
      ultrasound products; and competition from larger competitors with more financial
      resources; and other risks and factors as are described from time to time in
      the
      Company’s Securities and Exchange Commission filings, including but not limited
      to, the risks detailed in the “Risk Factors” section of the Company’s Annual
      Report on Form 10-KSB for the year ended December 31, 2004. The forward-looking
      statements contained in this Form 10-QSB speak only as of the date on which
      they
      are made, and the Company undertakes no obligation and does not intend to update
      or revise these forward-looking statements to reflect events or circumstances
      that occur after the date of this filing. If the Company does update or correct
      one or more forward-looking statements, investors and others should not conclude
      that the Company will make additional updates or corrections with respect
      thereto or with respect to other forward-looking statements.





**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 require 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* —
      The
      Company recognizes revenue from commercial sales of micro cables, connectors,
      customized cable, assemblies, wire harnesses and electro-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 the
      Company or at a vendor. Returns are limited to nonconforming products and the
      volume of returns to the Company has been insignificant. The Company does not
      establish reserves for returns because they are minimal.





10





**RESULTS
      OF OPERATIONS**





**THREE
      AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004**





On
      April
      8, 2005, the Company entered into a merger agreement and acquired 100% of the
      outstanding stock of Moore from two shareholders. Moore, headquartered in
      Tualatin, Oregon, was founded in 1978 and is a manufacturer of customized cable
      assemblies, sub-assemblies, wire harnesses and electro-mechanical assemblies.
      Moore serves many of the major medical equipment manufacturers and many of
      the
      leading commercial equipment manufacturers in the test and measurement and
      semi-conductor industries. Moore is operated as a wholly owned subsidiary.
      As a
      result of this acquisition the financial results of the Moore subsidiary are
      included in the both the three and six month periods from April 8, 2005 through
      June 30, 2005.





Total
      sales for the three month period ended June 30, 2005 were $2,443,595 compared
      to
      sales of $187,867 in the same three month period a year ago. The significant
      increase is due to the acquisition of Moore and the inclusion of its results
      in
      the quarter. Sales for the ultrasound division of microHelix for the three
      month
      period ended June 30, 2005 were $341,486, an increase of $153,619 over sales
      of
      $187,867 recorded in the same period a year ago. For the six month period ended
      June 30, 2005, total sales were $2,862,279 compared with sales of $469,211
      recorded in the first six months of 2004. For the six month period ended June
      30, 2005, sales of the ultrasound division were $750,217 compared with sales
      of
      $455,164 in the six month period ended June 30, 2004.





Gross
      profit for the three month period ended June 30, 2005 was $125,427 compared
      a
      negative gross margin of $139,497 during the same three month period a year
      ago.
      The gross margin improvement is primarily related to the acquisition of Moore.
      On a year to date basis, the gross margin was $204,003 compared to a negative
      margin of $291,479 recorded by the ultrasound division during the first six
      months of 2004. Although gross margins have improved in the ultrasound division
      during the first six months of 2005 compared to this same period in 2004 the
      gross margin remains negative for the division and the Company believes that
      anticipated higher shipment levels, although these are not guaranteed by any
      means, should enable the division to record a positive gross margin during
      the
      last six months of 2005.





Total
      operating expenses for the three month period ended June 30, 2005 were $964,370
      compared to $189,108 for the same period a year ago. This increase in expenses
      can be identified by three factors: first, the inclusion of the Moore expenses
      in the period; second, the inclusion of approximately $300,000 of costs such
      as
      legal fees, auditing fees and accounting fees associated with the acquisition
      of
      Moore; third, the inclusion of approximately $106,000 of additional amortization
      expense related to intangible assets acquired in the acquisition of Moore.
      For
      the six month period, total operating expenses were $1,165,112 compared to
      the
      first six months of last year expenses of $595,829. The reasons for the increase
      in this period are primarily due to the same factors that impacted the results
      of the second quarter ended June 30, 2005.





The
      loss
      from continuing operations was $895,738 for the three month period ended June
      30, 2005 compared to a loss from continuing operations of $310,955 during the
      same period a year ago. Although the gross profit improved $264,924 for the
      three month period ended June 30, 2005 compared to the same period a year ago,
      this improvement was more than offset by the one time expenses associated with
      the Moore acquisition, amortization expenses related to the acquired assets
      and
      increased interest expense. For the six months ended June 30, 2005, the net
      loss
      was $1,025,871 compared to a net loss for this same period a year ago of
      $1,125,990 that included losses related to discontinued operations of
      $252,693.





11





**LIQUIDITY
      AND CAPITAL RESOURCES**





The
      Company acquired Moore on April 8, 2005. The accompanying statement of cash
      flows includes the results of Moore from April 8, 2005 through June 30, 2005
      combined with the results of microHelix from January 1, 2005 through June 30,
      2005. As of June 30, 2005, the Company had a cash balance of $163,272 compared
      to a cash balance as of December 31, 2004 of $30,472, an increase of
      $132,800.





The
      Company financed the acquisition of Moore by raising $1,725,793 in net proceeds
      from a preferred stock offering, by issuing $1,350,000 in notes payable to
      shareholders, issuing $250,000 of preferred stock and by borrowing the
      balance against the Company’s line of credit. The Company paid $3,412,683
      for Moore..





During
      the six month period ended June 30, 2005, the Company used $157,291 in operating
      activities. The loss from operations was $1,025,871 and this was principally
      reduced by $133,208 in depreciation and amortization, an increase in trade
      accounts payable and accrued liabilities and reductions in inventories and
      accounts receivable. The increase of $138,969 in the cash balance during this
      reporting period represents the net of cash used in operations of $157,291
      plus
      $1,912,683 used, in investing activities offset by $2,208,943 cash provided
      from
      financing activities.





**ITEM
      3. CONTROLS AND PROCEDURES**




The
      Company's Chief Executive Officer/Principal Financial Officer evaluated the
      effectiveness of the design and operation of the Company's disclosure controls
      and procedures as of June 30, 2005. Based on that evaluation, the Company's
      Chief Executive Officer/Principal Financial Officer concluded that,
      notwithstanding the material weakness discussed in the following paragraph,
      as
      of the evaluation date 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 is properly recorded, processed, summarized, and reported as
      required. There were no changes in the Company's internal control over financial
      reporting during the quarter ended June 30, 2005 that materially affected,
      or
      were reasonably likely to materially affect, the Company's internal control
      over
      financial reporting.




As
      noted
      in the Company’s 10-KSB filing for the year ended December 31, 2004, in January
      2005, our management and our newly appointed independent registered public
      accountants reviewed our 10-QSB filings for the periods ended March 31, 2004,
      June 30, 2004, and September 30, 2004. As a result of these reviews, the newly
      appointed independent registered accountants reported to our Audit Committee
      two
      adjustments with regard to the interim financial statements prepared for the
      periods ending March 31, 2004 and June 30, 2004 that needed to be made.
      Management acknowledged that these recommended adjustments to the interim
      financial statements reflected a material weakness under standards established
      by the Public Company Accounting Oversight Board ("PCAOB"). The Company restated
      its 10-QSB reports for each quarter in 2004 due to a correction of an error
      for
      inventory reserves during the three months ended March 31, 2004, and a
      reclassification of a one-time entry that recorded a sale of assets that
      occurred during the three months ended June 30, 2004. Additional inventory
      reserves were provided for the three months ended December 31, 2004 .
      These
      material weakness issues have been discussed in detail among management, our
      Audit Committee, and our independent registered public accountants. The Company
      will continue to evaluate its internal controls and procedures to identify
      any
      required improvements. In reaching the conclusion that the Company’s disclosure
      controls and procedures were effective as of June 30, 2005, notwithstanding
      such
      material weaknesses in 2004, the Company’s Chief Executive Officer/Chief
      Financial officer relied on his reviw of the processes used by the Company
      in
      preparing its financial statements, which indicated that such weaknesses were
      confined to isolated instances and did not reflect systemic weaknesses in the
      Company’s disclosure controls and procedures. The Company has changed its
      methodology for recording inventory reserves to better reflect actual and
      planned usages of inventory. The Company also hired in the three months ended
      June 30, 2005 a Corporate Controller to enhance its ability to record entries
      associated with dispositions of assets. The Corporate Controller is also
      expected to continue to improve the Company’s internal controls, financial
      systems and reporting procedures. The Company’s Chief Executive officer/Chief
      Financial Officer also consulted with the Company’s independent registered
      public accountants, with the Company’s Audit Committee and with Company
      personnel with financial reporting responsibilities.





12





**ITEM
      6. EXHIBITS**





(a) Exhibits:





Exhibit
                31.1
            
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                302 Of
                The Sarbanes-Oxley Act of 2002Exhibit
                32.1
            
            Certification
                Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                906 Of
                The Sarbanes-Oxley Act of 2002





13








**SIGNATURE**





In
      accordance with the requirements of the Securities Exchange Act of 1934, the
      registrant has caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.





**Signature**
            
            **Title**
            
            **Date**/s/
                Tyram H. Pettit
            
            President,
                Chief Executive Officer
            
            September
                19, 2005Tyram
                H. Pettit
            
            and
                Chief Financial Officer





14