**UNITED
      STATES**





**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**





x
            **QUARTERLY
                REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
                EXCHANGE****ACT
                OF 1934 for the quarterly period ended March 31,
                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 May
      15, 2006, there were 2,129,097 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 March 31, 2006**





**TABLE
      OF CONTENTS**





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





2


**PART
      I — FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS — UNAUDITED**





**MICROHELIX,
      INC.**





**CONDENSED
      CONSOLIDATED BALANCE SHEET**


**(UNAUDITED)**


**MARCH
      31, 2006**





**Assets**Current
                Assets:Cash
            
            $66,473Accounts
                receivable, net of allowance of $27,021
            
            
            1,930,262Inventories,
                net
            
            
            1,361,048Prepaid
                expenses and other current assets
            
            
            50,840Total
                current assets
            
            
            3,408,623Property
                and equipment, net
            
            
            1,110,718Intangible
                assets
            
            
            511,293Goodwill
            
            
            1,620,218Total
                assets
            
            $
            6,650,852**Liabilities
                and Shareholders' Equity**Current
                Liabilities:Accounts
                payable
            
            $
            2,119,659Accounts
                payable-related parties
            
            
            18,786Accrued
                liabilities
            
            
            805,314Accrued
                dividends
            
            
            356,250Line
                of credit
            
            
            1,470,085Current
                maturities of obligations under capital leases
            
            
            14,190Current
                maturities of notes payable to shareholders
            
            
            335,072Customer
                deposits
            
            
            163,456Total
                current liabilities
            
            
            5,282,812Long-Term
                Liabilities:Obligations
                under capital lease, less current maturities
            
            
            11,074Deferred
                tax liability
            
            
            435,751Notes
                payable to shareholders, less current maturities
            
            
            857,273Total
                long-term liabilities
            
            
            1,304,098Total
                liabilities
            
            
            6,586,910Shareholders'
                Equity:Preferred
                Stock, no par value, 3,500,000 shares authorized,
            
            
            2,475,7932,750,000
                Series B Preferred Stock issued and outstandingCommon
                stock, no par value, 25,000,000 shares authorized,
            
            
            14,473,4092,129,097
                issued and outstandingAdditional
                paid-in capital
            
            
            6,166,877Accumulated
                deficit
            
            
            (23,052,137
            )Total
                shareholders' equity
            
            
            63,942Total
                liabilities and shareholders' equity
            
            $
            6,650,852




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




3


**MICROHELIX,
      INC.**





**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(UNAUDITED)**




**Three
                  Months Ended****March
                  31****2006**
              
              
              **2005**Sales
              
              $
              3,777,984
              
              $
              418,684Cost
                  of sales
              
              
              3,567,961
              
              
              340,108Gross
                  profit
              
              
              210,023
              
              
              78,576Operating
                  Expenses:Sales
                  and marketing
              
              
              185,045
              
              
              4,946General
                  and administrative
              
              
              466,587
              
              
              196,299Total
                  operating expenses
              
              
              651,632
              
              
              201,245Loss
                  from operations
              
              
              (441,609
              )
              
              (122,669
              )Other
                  income (expense):Other
                  income
              
              
              378
              
              
              —Interest
                  expense
              
              
              (67,403
              )
              
              (7,966
              )Gain
                  on sale of assets
              
              
              —
              
              
              500Other
                  income (expense) - net
              
              
              (67,025
              )
              
              (7,466
              )Net
                  loss before provision for income taxes
              
              
              (508,634
              )
              
              (130,135
              )Provision
                  (Benefit) for income taxes
              
              
              (45,869
              )
              
              —Net
                  loss
              
              
              (462,765
              )
              
              (130,135
              )Preferred
                  dividends
              
              
              (103,125
              )
              
              —Net
                  loss available to common shareholders
              
              $
              (565,890
              )
              $
              (130,135
              )


Net
                loss per share available to common shareholders - basic and
                diluted:Net
                loss per share
            
            $
            (.27
            )
            $
            (.07
            )Weighted
                average number of shares outstanding -Basic
                and Diluted
            
            
            2,129,097
            
            
            1,959,713




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




4


**MICROHELIX,
      INC.**





**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(UNAUDITED)**




**Three
                Months Ended March 31****Cash
                Flows Provided By (Used For) Operating
                Activities:**
            
            **2006**
            
            **2005**Net
                loss
            
            $
            (462,765
            )
            $
            (130,135
            )Adjustments
                to reconcile net loss to cash provided by(used
                in) operating activities:Depreciation -capital
                assets
            
            
            79,889
            
            
            10,092Amortization
                - intangible assets
            
            
            53,733
            
            
            —Provision
                for doubtful accounts
            
            
            7,557
            
            
            —Provision
                for inventory reserves
            
            
            24,000
            
            
            10,000Common
                stock issued for services
            
            
            —
            
            
            —Benefit
                for deferred income taxes
            
            
            (45,869
            )
            
            —Change
                in assets and liabilities:(Increase)
                Decrease in assets:Accounts
                receivable
            
            
            (351,794
            )
            
            (98,477
            )Inventories
            
            
            (263,541
            )
            
            (53,383
            )Prepaid
                expenses and other current assets
            
            
            (1,226
            )
            
            5,937Intangibles,
                other assets and deposits
            
            
            —
            
            
            (71,884
            )Increase
                (Decrease) in liabilities:Accounts
                payable
            
            
            648,177
            
            
            200,768Accrued
                liabilities
            
            
            333,918
            
            
            61,439Net
                cash provided by/(used in) operating activities
            
            
            22,079
            
            
            (65,643
            )**Cash
                Flows from Investing Activities:**Capital
                Expenditures
            
            
            (115,265
            )
            
            (10,728
            )Net
                Cash (used in) investing activities
            
            
            (115,265
            )
            
            (10,728
            )**Cash
                Flows from Financing Activities:**Proceeds
                from line of credit
            
            
            3,828,532
            
            
            462,554Payments
                on line of credit
            
            
            (3,684,131
            )
            
            (408,934
            )Proceeds
                from/(Payments on) notes payable to shareholders
            
            
            (31,415
            )
            
            10,047Payments
                on capital lease obligations
            
            
            (11,619
            )
            
            —Net
                cash provided by /(used in) financing activities
            
            
            101,367
            
            
            63,667Change
                in cash
            
            
            8,161
            
            
            (12,704
            )Cash,
                beginning of period
            
            
            58,312
            
            
            30,472Cash,
                end of period
            
            $
            66,473
            
            $
            17,768**Supplemental
                Cash Flow Information:**Interest
                paid
            
            $
            67,403
            
            $
            3,755Income
                taxes paid
            
            $
            —
            
            $
            —





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




5


**MICROHELIX,
      INC.**





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


**Three
      Months Ended March 31, 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 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"), that was acquired
      on
      April 8, 2005. All material inter-company accounts have been eliminated in
      consolidation.





*Reclassifications* —
Certain
      amounts from the three months ended March 31, 2005 have been reclassified to
      correspond to the three months ended March 31, 2006.





*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 net losses
      and had negative cash flows from operations during each of the past two years
      and at March 31, 2006 had an accumulated deficit of $23,052,137. 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 $3,382,489 for the
      three months ended March 31, 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, aerospace 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.





*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 grants
      to the employees and directors will be in the form of grants of shares of Common
      Stock. Such grants may be restricted or unrestricted.





No
      options were granted in the three months ended March 31, 2006 or during the
      fiscal year 2005. 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
      proforma amounts indicated below for the three months ended March 31,
      2005.




6


**For
                  the Three Months Ended****March
                  31, 2005**Net
                  loss available to common shareholders
              
              $
              (130,135
              )Deduct:
                  Total stock-based employee compensation expense determined
                  underSFAS
                  123 method
              
              
              (27,188
              )Pro
                  forma net loss available to common shareholders
              
              
              (157,323
              )Basic
                  and diluted net loss available to common shareholders per common
                  share:As
                  reported
              
              
              (0.07
              )Pro
                  forma
              
              $
              (0.08
              )





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 March 31, 2006, the outstanding number of potentially dilutive
      common shares totalled 12,621,289 shares of Common Stock, consisting of Series
      B
      Preferred Stock convertible into 11,000,000 shares of Common Stock, Class B
      warrants to purchase 926,833 shares of Common Stock, and other warrants to
      purchase 694,456 shares of Common Stock. At March 31, 2005, the outstanding
      number of potentially dilutive common shares totalled 1,255,095 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, and other warrants to
      purchase 210,395 shares of Common Stock. In periods when the Company has net
      losses, their effect is anti-dilutive and have not been included in the diluted
      weighted average earnings per share as shown on our Consolidated Statements
      of
      Operations.





**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 123R-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) 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.





**3.
      Customer Concentration**





For
      the
      three months ended March 31, 2006 and 2005, $2,237,025 and $157,000,
      respectively, in sales were made to **t** hree
      customers and the accounts receivable balance for these customers as of March
      31, 2006 and 2005 totaled $1,101,219 and $0, respectively.





7





**4.
      Business Combination**





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.


**Three
                  Months Ended****March
                  31, 2005**Sales
              
              $
              2,983,749Net
                  loss from continuing operations
              
              $
              (92,806
              )Net
                  profit ( loss)
              
              $
              (92,806
              )Net
                  profit ( loss) per share from continuing operations-basic and
                  diluted
              
              $
              (.05
              )Net
                  profit (loss) per share-basic and diluted
              
              $
              (.05
              )Pro
                forma per share-basic and diluted
              
              $
              (.08
              )




**5.
      Inventories**





Inventories
      at March 31, 2006 were as follows:




Finished
                goods
            
            $
            213,664Work-in
                process
            
            
            164,883Raw
                materials
            
            
            1,265,132Total
                inventory
            
            
            1,643,679Less:
                reserves
            
            
            (282,631
            )Net
                inventory
            
            $
            1,361,048




**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. The Company
      has
      performed the impairment analysis as required by FAS 142 and determined that
      there is no required impairment of goodwill.





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 March 31, 2006:





8




Gross
              
              
              
              
              
              NetCarrying
              
              
              Accumulated
              
              
              CarryingValue
              
              
              Amortization
              
              
              ValueCustomer
                  lists and contacts
              
              $
              522,466
              
              $
              174,162
              
              $
              348,304Manufacturing
                  process technology
              
              
              203,738
              
              
              40,749
              
              
              162,989Total
                  other intangible assets
              
              $
              726,204
              
              $
              214,911
              
              $
              511,293




For
      the
      three months ending March 31, 2006 and 2005, the Company recorded $53,733 and
      $0
      as amortization expense, respectively. 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.





**7.
      Subsequent Events**





MicroHelix,
      on April 5, 2006, amended and restated the existing loan and security agreement
      with BFI Business Finance. Effective April 17, 2006 the maximum account advance
      of the line of credit for working capital was increased from $1,700,000 to
      $2,000,000.





MicroHelix,
      on April 17, 2006, completed and signed a secured promissory note with BFI
      Business Finance. BFI agreed to advance working capital funds to microHelix
      based on purchase orders received from one customer. The maturity of the secured
      promissory note is June 15, 2006 and the entire principal balance and accrued
      interest, loan fees, monthly administrative fees, and attorneys’ fees shall be
      paid in full.





**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.





9




*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 therefore do not establish reserves for
      returns.





**RESULTS
      OF OPERATIONS**





***Overview***





microHelix
      is a manufacturer of custom cable assemblies for the medical and commercial
      Original Equipment Manufacturer ("OEM") markets. We serve a segment of the
      quick
      turn, high mix, and 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, was founded in 1978 and is a manufacturer
      of
      custom 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 sale 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 well-suited for transfer to offshore operations for three
      principal reasons: (1) low unit volume; (2) rapid turn (i.e. accelerated
      delivery schedule) and (3) frequent engineering changes. We operate Moore as
      a
      wholly owned subsidiary.





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.





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, 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.





In
      April
      2004 we sold the assets of our wire and cable division to ANS, 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.





10




We
      have
      incurred significant losses since inception and those losses have continued.
      In
      our business we have had to rely on a relatively small number of OEMs for the
      majority of our sales. Short term changes in the OEM's demand schedule have
      made
      our expenses and cash requirements uncertain. We have not been successful in
      achieving profitability due to in part the unpredictability of our OEM
      requirements. During the past two years we have tried to broaden the OEM
      customer base, in part through our acquisition of Moore.





**THREE
      MONTHS ENDED** **MARCH
      31, 2006** **AND 2005**





One
      principal event affected our financial results in the first quarter of 2006
      compared to the first quarter of 2005. On April 8, 2005 we acquired 100% of
      the
      outstanding stock of Moore Electronics, Inc., a manufacturer of custom cable
      assemblies, sub-assemblies, wire harnesses and electro-mechanical
      assemblies.





Total
      sales in the first quarter of 2006 were $3,777,984, compared to $418,684 in
      the
      first quarter of 2005, an increase of 802%. This increase is primarily due
      to
      the acquisition of Moore in April 2005. Total sales for the MicroCoax division
      in the first quarter of 2006 were $395,495compared to $418,684 in 2005, a
      decrease of 5.5%. The decline in MicroCoax division sales resulted from reduced
      demand from our medical and commercial ultrasound OEM customers. We believe
      this
      decline is temporary and represents short term inventory re-balancing on the
      part of our customers.




Gross
      profit in the first quarter of 2006 was $210,023 compared to a gross profit
      of
      $78,576 in the first quarter of 2005, an increase of 167%. The improvement
      in
      gross profit resulted primarily from our acquisition of Moore. The MicroCoax
      division had negative gross profit of $143,550 in the first quarter of 2006
      compared to a positive gross profit margin of $78,576 in 2005.




Total
      operating expenses in the first quarter of 2006 were $651,632 compared to
      $201,245 for the same period one year ago, an increase of 224%. The increase
      is
      due to the acquisition of Moore, including $53,733 of additional amortization
      expense related to intangible assets acquired as a result of the Moore
      acquisition.





Sales
      and
      marketing expenses for the first quarter of 2006 were $185,045compared to $4,946
      in the first quarter of 2005, an increase of 3,641%. This increase was primarily
      a result of the Moore acquisition. The sales and marketing expense for the
      first
      quarter of 2006 for the Moore division was $145,990.





General
      and administrative expenses for the first quarter of 2006 were $466,587 compared
      to $196,299 in the first quarter of 2005, an increase of 138%. The increase
      resulted principally from the Moore acquisition, including additional legal
      and
      audit costs. General administrative expenses for the first quarter of 2006
      for
      the Moore division were $232,412.





Net
      other
      expense for the first quarter of 2006 was $67,025 compared to net other expense
      of $7,466 for the first quarter of 2005. The difference was the increase
      interest expense on the line of credit due to increased borrowings and higher
      interest rates.





We
      recorded a net loss of $462,765 in the first quarter of 2006 compared to a
      net
      loss of $130,135 in the first quarter of 2005. Dividends accrued on our Series
      B
      Preferred Stock were $103,125 in the first quarter of 2006 and $0 in the first
      quarter of 2005. Net loss available to common shareholders was $565,890 in
      the
      first quarter of 2006 and $130,135 in the first quarter of 2005. We have to
      date
      accrued $356,250 of dividends for our Series B Preferred Stock; however, no
      dividends have been declared or paid on our Series B Preferred
      Stock.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of
      March 31, 2006, we had $66,473 of cash and cash equivalents. Cash provided
      by
      operating activities in the first quarter of 2006 was $22,079 compared to
      $65,643 used in the first quarter of 2005. The net cash provided by operations
      of $22,079 included an increase in accounts payable of $648,177, an
      increase in accrued liabilities of $333,918, and $133,622 in depreciation and
      amortization and was partially offset by an increase in accounts receivable
      of
      $351,794, and an increase in inventories of $263,541. The increase of $8,161
      in
      the cash balance during this reporting period represents the net cash provided
      by operations of $22,079 and $101,367 from financing activities which was offset
      by $115,265 used in investing activities.




11




As
      of
      March 31, 2006, we had a $1,700,000 line of credit for working capital, secured
      by accounts receivable and inventory. As of March 31, 2006, there was $1,470,085
      outstanding on the line of credit and our availability on the line of credit
      was
      $229,915. Our line of credit expires on April 7, 2007.





As
      of
      March 31, 2006, there were no purchase orders outstanding for capital equipment.





On
      April
      8, 2005, we issued a promissory note in the amount of $1,250,000 to Marti D.
      Lundy, one of our directors and Vice President of our Moore division, as part
      of
      the Moore acquisition. The note bears an annual interest rate of 10%. A monthly
      payment of principal plus accrued interest totaling $43,483.16 is due until
      April 8, 2008 at which time all remaining principal outstanding plus accrued
      and
      unpaid interest are due and payable. The note is secured by a lien on
      substantially all of our assets.





Each
      share of our Series B Preferred Stock is convertible into four shares of Common
      Stock (subject to adjustment for stock splits, stock dividends,
      reclassifications and the like). We can redeem the shares of Series B Preferred
      Stock at any time after April 8, 2006 for $1.50 per share (as adjusted for
      stock
      splits, stock dividends, reclassification and the like) into common shares.
      We
      have granted demand and piggy-back registration rights to the holders of Series
      B Preferred Stock with respect to the underlying shares of Common Stock
      obtainable upon conversion.





**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 March 31, 2006. Based on that evaluation, the Company's
      Chief Executive Officer/Chief Financial Officer concluded that 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
      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 March 31, 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
      March 31, 2006 microHelix was not involved in any legal
      proceedings.





**ITEM
      6. EXHIBITS**





(a)  Exhibits:





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 Finance31(3)
            
            Certification
                of Principal Executive Officer and Principal Financial Officer pursuant
                to
                18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
                Sarbanes-Oxley Act of 200232(3)
            
            Certification
                of Principal Executive Officer and Principal Financial Officer pursuant
                to
                18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002




12







(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)
            Filed
                herewith.




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**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
            
            May
                22, 2006Tyram
                H. Pettit
            
            and
                Chief Financial Officer




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