UNITED
STATES





SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x
            QUARTERLY
      REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
  EXCHANGEACT
      OF 1934 for the quarterly period ended June 30, 2007ORo
            TRANSITION
      REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
  EXCHANGEACT
      OF 1934 for the Transition Period from toCommission
      file number: 001-16781





MICROHELIX,
      INC.(Exact
      Name of Registrant as Specified in its
Charter)





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





5300
      Meadows Road, Suite 400, Lake Oswego, Oregon
            
            97035(Address
      of Principal Executive
            
            (Zip
      Code)Offices)





(Issuer's
Telephone Number, Including Area Code): 503-419-3564





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports and (2) has been subject to such filing requirements for
the past 90 days.


Yes o No x





Indicate
by a check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a non-accelerated filer, or a
smaller reporting company.


Large accelerated filer o
            
            Accelerated filer oNon-accelerated filer o
            
            Smaller reporting company x





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


Yes x No o





As of
March 16, 2009, there were 1,972,568 shares of the issuer's common stock
outstanding.





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





microHelix,
Inc.


Quarterly
Report on Form 10-Q


Quarter
Ended June 30, 2007





TABLE
OF CONTENTS





PagePART
      I — FINANCIAL INFORMATION
                        3ITEM
      1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
                        3Consolidated
      balance sheets as of June 30, 2007 and December 31, 2006
                        3Consolidated
      statements of operations for the three and six months ended June 30, 2007
      and 2006
                        4Consolidated
      statements of cash flows for the three and six months ended June 30, 2007
      and 2006
                        5Notes
      to consolidated financial statements
                        6ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
                        11ITEM
      3. MANAGEMENT'S DISCUSSIONS CONCERNING MARKET RISK
                        15ITEM
      4. CONTROLS AND PROCEDURES
                        17PART
      II — OTHER INFORMATION
                        18ITEM
      3. LEGAL PROCEEDINGS
                        18ITEM
      6. EXHIBITS
                        18SIGNATURE
                        18





PART
I — FINANCIAL INFORMATION





ITEM 1. FINANCIAL STATEMENTS —
UNAUDITED





MICROHELIX,
INC.





CONDENSED
CONSOLIDATED BALANCE SHEETS


(UNAUDITED)


June
30, 2007 and December 31, 2006





2007
                            
                            
                            2006AssetsCurrent
      Assets:Cash
                            
                            $
                            23,177
                            
                            
                            $
                            40,680Accounts
      receivable, net of allowance of $84,087 and $3,206 at June 30, 2007
      and  December 31, 2006 respectively
                            
                            
                            675,543
                            
                            
                            
                            1,905,660Inventories,
      net
                            
                            
                            444,146
                            
                            
                            
                            1,600,403Prepaid
      expenses and other current assets
                            
                            
                            21.101
                            
                            
                            
                            43,692Total
      current assets
                            
                            
                            1,163,967
                            
                            
                            
                            3,590,435Property
      and equipment, net
                            
                            
                            714,872
                            
                            
                            
                            904,231Intangible
      assets
                            
                            
                            —
                            
                            
                            
                            350,112Goodwill
                            
                            
                            —
                            
                            
                            
                            732,365Total
      assets
                            
                            $
                            1,878,839
                            
                            
                            $
                            5,577,143Liabilities
      and Shareholders' DeficitCurrent
      Liabilities:Checks
      issued in excess of bank balances
                            
                            $
                            32,635
                            
                            
                            $
                            129,397Accounts
      payable
                            
                            
                            2,030,589
                            
                            
                            
                            1,633,288Accounts
      payable-related parties
                            
                            
                            
                            
                            
                            
                            8,232Accrued
      liabilities
                            
                            
                            316,693
                            
                            
                            
                            609,599Line
      of credit
                            
                            
                            379,277
                            
                            
                            
                            1,897,432Current
      maturities of notes payable, net of debt discount of $530,198 at June 30,
      2007
                            
                            
                            1,498,285
                            
                            
                            
                            347,938Note
      payable to shareholder
                            
                            
                            —
                            
                            
                            
                            150,000Common
      stock warrant liability
                            
                            
                            339,620
                            
                            
                            
                            —Total
      current liabilities
                            
                            
                            4,597,099
                            
                            
                            
                            4,775,886Long-Term
      Liabilities:Notes
      payable, less current maturities, net of debt discounts
                            
                            
                            —
                            
                            
                            
                            801,262Deferred
      tax liability
                            
                            
                            206,408
                            
                            
                            
                            298,145Total
      long-term liabilities
                            
                            
                            206,408
                            
                            
                            
                            1,099,407Total
      liabilities
                            
                            
                            4,803,507
                            
                            
                            
                            5,875,293Shareholders'
      Deficit:Preferred
      stock, convertible, no par value, 750,000 shares
    authorized,279,070
      Series C Preferred Stock issued and outstanding, liquidation preference
      $600,000
                            
                            
                            533,000
                            
                            
                            
                            533,000Common
      stock, no par value, 25,000,000 shares authorized,966,339
      and 965,672 shares issued and outstanding at June 30, 2007 and December
      31, 2006, respectively
                            
                            
                            17,462,823
                            
                            
                            
                            17,462,823Additional
      paid-in capital
                            
                            
                            5,989,455
                            
                            
                            
                            6,292,850Accumulated
      deficit
                            
                            
                            (26,909,946
                            )
                            
                            
                            (24,586,823
                            )Total
      shareholders' deficit
                            
                            
                            (2,924,668
                            )
                            
                            
                            (298,150
                            )Total
      liabilities and shareholders' deficit
                            
                            $
                            1,878,839
                            
                            
                            $
                            5,577,143




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


3


MICROHELIX,
INC.





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)





Three Months Ended
                          June 30
                        
                        
                        Six Months Ended
                          June 302007
                        
                        
                        2006
                        
                        
                        2007
                        
                        
                        2006Sales
                        
                        $
                        2,501,021
                        
                        
                        $
                        3,949,315
                        
                        
                        $
                        5,306,164
                        
                        
                        $
                        7,727,299Cost
      of sales
                        
                        
                        2,819,625
                        
                        
                        
                        3,145,307
                        
                        
                        
                        5,632,557
                        
                        
                        
                        6,713,268Gross profit
    (loss)
                        
                        
                        (318,604
                        )
                        
                        
                        804,008
                        
                        
                        
                        (326,393
                        )
                        
                        
                        1,014,031Operating
      Expenses:Sales and
    marketing
                        
                        
                        82,016
                        
                        
                        
                        126,312
                        
                        
                        
                        209,976
                        
                        
                        
                        311,357General and
      administrative
                        
                        
                        421,916
                        
                        
                        
                        634,171
                        
                        
                        
                        885,639
                        
                        
                        
                        1,100,758Total operating
      expenses
                        
                        
                        503,932
                        
                        
                        
                        760,483
                        
                        
                        
                        1,095,615
                        
                        
                        
                        1,412,115Loss
      from operations
                        
                        
                        (822,536
                        )
                        
                        
                        43,525
                        
                        
                        
                        (1,422,008
                        )
                        
                        
                        (398,084
                        )Other
      income (expense):Interest and other
      income
                        
                        
                        —
                        
                        
                        
                        71
                        
                        
                        
                        —
                        
                        
                        
                        449Impairment
      expense-intangible assets
                        
                        
                        (242,658
                        )
                        
                        
                        —
                        
                        
                        
                        (242,658
                        )
                        
                        
                        —Impairment
      expense-goodwill
                        
                        
                        (732,365
                        )
                        
                        
                        —
                        
                        
                        
                        (732,365
                        )
                        
                        
                        —Loan
      restructuring expense
                        
                        
                        3,191
                        
                        
                        
                        —
                        
                        
                        
                        (989,079
                        )
                        
                        
                        —Warrant
      valuation gain
                        
                        
                        2,174,383
                        
                        
                        
                        —
                        
                        
                        
                        1,478,580
                        
                        
                        
                        —Interest expense
                        
                        
                        (255,905
                        )
                        
                        
                        (88,996
                        )
                        
                        
                        (507,330
                        )
                        
                        
                        (156,399
                        )Other income (expense) –
      net
                        
                        
                        946,646
                        
                        
                        
                        (88,925
                        )
                        
                        
                        (992,852
                        )
                        
                        
                        (155,950
                        )Net
      income (loss) before benefit from income taxes
                        
                        
                        124,110
                        
                        
                        
                        (45,400
                        )
                        
                        
                        (2,414,860
                        )
                        
                        
                        (554,034
                        )Benefit
      from income taxes
                        
                        
                        (45,868
                        )
                        
                        
                        (45,869
                        )
                        
                        
                        (91,737
                        )
                        
                        
                        (91,738
                        )Net
      income (loss)
                        
                        
                        169,978
                        
                        
                        
                        469
                        
                        
                        
                        (2,323,123
                        )
                        
                        
                        (462,296
                        )Preferred
      dividends
                        
                        
                        —
                        
                        
                        
                        (103,125
                        )
                        
                        
                        —
                        
                        
                        
                        (206,250
                        )Net
      income (loss) attributable to common shareholders
                        
                        $
                        169,978
                        
                        
                        $
                        (102,656
                        )
                        
                        $
                        (2,323,123
                        )
                        
                        $
                        (668,546
                        )Net
      income (loss) per share attributable to common shareholders –
                          Basic
                        
                        $
                        .18
                        
                        
                        $
                        (.70
                        )
                        
                        $
                        (2.40
                        )
                        
                        $
                        (4.63
                        )Diluted
                        
                        $
                        .08
                        
                        
                        $
                        (.70
                        )
                        
                        $
                        (2.40
                        )
                        
                        $
                        (4.63
                        )Weighted
      average number of shares outstanding –
                          Basic
                        
                        
                        966,339
                        
                        
                        
                        145,759
                        
                        
                        
                        966,309
                        
                        
                        
                        144,486Diluted
                        
                        
                        2,171,948
                        
                        
                        
                        145,759
                        
                        
                        
                        966,309
                        
                        
                        
                        144,486





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


4


MICROHELIX,
INC.





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)





Six Months Ended
                            June 302007
                          
                          
                          2006Cash
      Flows Provided By (Used In) Operating Activities:Net
      loss
                          
                          $
                          (2,323,123
                          )
                          
                          $
                          (462,296
                          )Adjustments
      to reconcile net loss to cash provided by(used
      in) operating activities:Depreciation –capital
      assets
                          
                          
                          189,359
                          
                          
                          
                          202,604Goodwill
      impairment
                          
                          
                          732,365
                          
                          
                          
                          —Amortization
      – intangible assets
                          
                          
                          107,454
                          
                          
                          
                          107,460Intangible
      assets impairment
                          
                          
                          242,658
                          
                          
                          
                          —Provision
      for doubtful accounts
                          
                          
                          80,881
                          
                          
                          
                          7,987Provision
      for inventory reserves
                          
                          
                          338,424
                          
                          
                          
                          97,250Common
      stock issued for services
                          
                          
                          2,500
                          
                          
                          
                          46,017Loan
      restructuring costs
                          
                          
                          992,270
                          
                          
                          
                          —Warrant
      valuation gain
                          
                          
                          (1,478,580
                          )
                          
                          
                          —Interest
      expense-amortization
                          
                          
                          176,124
                          
                          
                          
                          —Benefit
      for deferred income taxes
                          
                          
                          (91,737
                          )
                          
                          
                          (91,738
                          )Warrants
      used for services
                          
                          
                          —
                          
                          
                          
                          31,923Change
      in assets and liabilities:(Increase)
      Decrease in assets:Accounts
      receivable
                          
                          
                          1,149,236
                          
                          
                          
                          (116,609
                          )Inventories
                          
                          
                          817,833
                          
                          
                          
                          (674,326
                          )Prepaid
      expenses and other current assets
                          
                          
                          22,591
                          
                          
                          
                          8,508Intangibles,
      other assets and deposits
                          
                          
                          —
                          
                          
                          
                          (31,923
                          )Increase
      (Decrease) in liabilities:Accounts
      payable and checks issued in excess of cash balances
                          
                          
                          292,307
                          
                          
                          
                          859,337Accrued
      liabilities
                          
                          
                          (292,906
                          )
                          
                          
                          70,369Customer
      deposit
                          
                          
                          —
                          
                          
                          
                          (163,456
                          )Net
      cash provided by (used in) operating activities
                          
                          
                          957,656
                          
                          
                          
                          (108,893
                          )Cash
      Flows Provided by (Used In) Investing Activity:Capital
      Expenditures
                          
                          
                          —
                          
                          
                          
                          (225,529
                          )Net
      cash used in investing activity
                          
                          
                          —
                          
                          
                          
                          (225,259
                          )Cash
      Flows Provided by (Used In) Financing Activities:Payments
      on line of credit
                          
                          
                          (9,277,197
                          )
                          
                          
                          (9,156,470
                          )Proceeds
      from line of credit
                          
                          
                          7,759,042
                          
                          
                          
                          9,260,951Proceeds
      from notes payable
                          
                          
                          —
                          
                          
                          
                          286,650Payments
      on notes payable
                          
                          
                          (57,004
                          )
                          
                          
                          (12,476
                          )Payments
      on notes payable to shareholders
                          
                          
                          (150,000
                          )
                          
                          
                          (78,276
                          )Proceeds
      from issue of notes payable to shareholders
                          
                          
                          750,000
                          
                          
                          
                          —Net
      cash provided by (used in) financing activities
                          
                          
                          (975,159
                          )
                          
                          
                          300,379Change
      in cash
                          
                          
                          (17,503
                          )
                          
                          
                          (34,043
                          )Cash,
      beginning of period
                          
                          
                          40,680
                          
                          
                          
                          58,312Cash,
      end of period
                          
                          $
                          23,177
                          
                          
                          $
                          24,269Supplemental
      Cash Flow Information:Interest
      paid
                          
                          $
                          —
                          
                          
                          $
                          151,707Income
      taxes paid
                          
                          $
                          —
                          
                          
                          $
                          —Preferred
      Dividends
                          
                          $
                          —
                          
                          
                          $
                          (206,250
                          )Supplemental
      Disclosure of Non-cash Financing Activities:Warrants
      issued to lenders-recorded as debt discount
                          
                          $
                          551,970
                          
                          
                          $
                          31,923Common
      stock warrant liability
                          
                          $
                          1,818,200
                          
                          
                          $
                          —





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


5


MICROHELIX,
INC.





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Three
and Six Months Ended June 30, 2007 and 2006





1.   Summary
of Significant Accounting Policies and Basis of Presentation





Nature of Operations— For the
period covered by this report, the three and six months ending June 30, 2007,
microHelix, Inc. ("we," "us," the "Company" or "microHelix") was a manufacturer
of custom cable assemblies and mechanical assemblies for the medical and
commercial original equipment manufacturer markets.   On May 31,
2007, the Company surrendered substantially all its assets to its secured
creditors.  On September 28, 2007, the Company suspended manufacturing
operations and concluded the disposition of all its assets to its secured
creditors.  The Company thereafter became a shell
company.  See “Going Concern” and Note 10 – Subsequent
Events.





Basis of Presentation— The
unaudited consolidated financial statements have been prepared by the Company,
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC").  The information furnished herein reflects all adjustments
(consisting of normal recurring accruals and adjustments), which are, in the
opinion of management, necessary to fairly represent the operating results for
the respective periods.





Use of Estimates— The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period.  Actual results
could differ from those estimates.





Principles of Consolidation—
These consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Moore Electronics, Inc. ("Moore").  All
material inter-company accounts have been eliminated in
consolidation.





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





These
financial statements reflect the shutdown (discontinuance) of the MicroCoax
Assembly Solutions division on May 23, 2007.  The division’s assets
were sold to an unrelated third party for $17,000 during July
2007.  Moore continued to operate for the benefit of the secured
creditors through September 28, 2007 after which its assets were sold to an
unrelated third party for $75,000.  See Note 2 – Terms of Troubled
Debt Modification, Note 6 – Fixed Assets, Note 7 – Goodwill and Other Intangible
Assets and Note 10—Subsequent Events.





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





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


6




Weighted
      average basic shares outstanding
                  
                  
                  966,339Warrants
                  
                  
                  1,019,562Convertible
      preferred stock
                  
                  
                  186,047Weighted
      average diluted shares outstanding
                  
                  
                  2,171,948




For the
six months ended June 30, 2007, the outstanding number of potentially dilutive
common shares totaled 1,250,985 shares of Common Stock, consisting of Series C
Preferred Stock convertible into 186,047 shares of Common Stock, and warrants to
purchase 1,064,938 shares of Common Stock.  For the three months ended
June 30, 2007, warrants to purchase 45,376 shares of Common Stock were not
included in the dilutive earnings per share computation as the effects would
have been anti-dilutive.  At June 30, 2006, the outstanding number of
potentially dilutive common shares totaled 846,280 shares of Common Stock,
consisting of Series B Preferred Stock convertible into 733,333 shares of Common
Stock, Class B warrants to purchase 61,789 shares of Common Stock, and other
warrants to purchase 51,158 shares of Common Stock.




2.
Terms of Troubled Debt Modification





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





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





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





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





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





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





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





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




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





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


7





3.
Summary of Recent Accounting Pronouncements





In
December 2007, the FASB issued SFAS no. 141(R), “Business Combinations” (“SFAS
141(R)”), which replaces SFAS No. 141. SFAS No. 141(R) establishes principles
and requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
non-controlling interest in the acquiree and the goodwill
acquired.  The Statement also establishes disclosure requirements
which will enable users to evaluate the nature and financial effects of the
business combination.  SFAS 141 (R) is effective for fiscal years
beginning after December 15, 2008.  The adoption of SFAS 141(R) will
have an impact on accounting for business combinations once adopted, but the
effect is dependent upon acquisitions occurring after that time.





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





In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements-an amendment of Accounting Research Bulletin
No. 51” (“SFAS No.160”), which establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to
the non-controlling interest, changes in a parent’s ownership interest and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated.  SFAS No. 160 also establishes reporting requirements
that provide sufficient disclosures that clearly identify and distinguish
between the interest of the parent and the interests of the non-controlling
owners.  SFAS No. 160 is effective for fiscal years beginning after
December 15, 2008.  The Company is evaluating the potential impact
SFAS No. 160  on its consolidated financial statements.





4.   Customer
Concentration





During
the three months ended June 30, 2007 and 2006 approximately $1,185,827 and
$2,698,000 in sales were made to four customers.  For the six months
ended June 30, 2007 and 2006, $2,137,853 and $5,619,000 respectivelyof the Company’s sales were made to these same four customers and the
accounts receivable balance for these four customers as of June 30, 2007 totaled
$353,983.




5.   Inventories





Inventories
at June 30, 2007 are as follows:




Finished
      goods
                      
                      $
                      78,368Work-in
      process
                      
                      
                      —Raw
      materials
                      
                      
                      816,328Total
      inventory
                      
                      
                      894,696Less:
      reserves
                      
                      
                      (450,550)Net
      inventory
                      
                      $
                      444,146





6.   Fixed
Assets





Fixed
Assets, as required by FAS 144, must be tested for impairment whenever an event
occurs or circumstances change that would significantly change the carry value
of the fixed assets.  Due to the impending sale of the Company’s
assets the Company performed an impairment analysis, as required by FAS 144
during the second quarter, and determined that the Fixed Assets were not
impaired as of June 30, 2007.  The analysis included an estimate of
future undiscounted cash flows until the sale takes place.


8




7.   Goodwill
and Other Intangible Assets





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





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





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





For the
six months ending June 30, 2007 and 2006, the Company recorded $107,454 and
$107,460, respectively, as amortization expense.





8.
Notes Payable and Warrants





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




VenCore
      Solutions, LLC
                
                $
                215,732MH
      Financial Associates, LLC
                
                
                1,739,081EPICOR
      Software Corporation
                
                
                63,137Other
                
                
                10,533Total
      notes payable
                
                $
                2,028,483Debt
      discountsWarrants
      issued with VenCore note
                
                $
                (19,154)Warrants
      issued with MH Financial note
                
                
                (511,044)Notes
      payable, net
                
                $
                1,498,285





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





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


9





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





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





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





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





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





9.
Liability for Potentially Dilutive Securities in Excess of Authorized Number of
Common Shares





In
accordance with EITF 00-19, the Company accounts for potential shares that
can be converted to Common Stock that is in excess of authorized shares, as a
liability that is recorded at fair value. Effective with the March 12, 2007
modification of its debt with MH Financial, total potential outstanding Common
Stock exceeded the Company’s authorized shares of Common Stock.  At
that time, outstanding warrants granted their holders the right to purchase
approximately 579,867 more shares of Common Stock (post-split) than were
authorized in the Company’s Amended and Restated Articles of Incorporation, as
amended. The fair value of the warrants in excess of the authorized shares at
March 12, 2007 was $1,818,200 and was recognized as a liability on that date.
This liability is required to be evaluated at each reporting date with any
change in value included in other income/ (expense) until such time as enough
shares are authorized to cover all potentially convertible
instruments.  At June 30, 2007 the Company had recorded $695,803 in
loss related to the change the fair value of its potential
liability.  During the second quarter of 2007 the fair value decreased
by $2,174,383 and the Company recorded the amount as other
income.





The
Company’s shareholders in January 2008 voted to amend the Company’s Amended and
Restated Articles of Incorporation, as amended, to increase the number of
authorized shares of Common Stock such that a sufficient number of authorized
shares existed to permit the exercise of all outstanding warrants (See Note
10-Sebsequent Events).





10.   Subsequent
Events





On July
10, 2007 the assets and inventory of MicroCoax Assembly Solutions division of
the Company was sold to an unrelated third party.   VenCore
Solutions, LLC, as a secured creditor received $5,000 from its security interest
in the equipment.  MH Financial, as a secured creditor, received
$10,000 from the sale of  inventory and $2,000 from the sale
intangible assets.





On
September 28, 2007 the assets and inventory of Moore were sold to an unrelated
third party.  VenCore Solutions, LLC, as a secured creditor received
$75,000 from the sale of equipment.  MH Financial, as a secured party,
received 90% of the cost of any inventory used in the assembly or manufacturing
of products through March 31, 2008.  The purchaser was also to pay MH
Financial three percent (3%) of all revenue for products and services provided
to certain Moore customers through December 31, 2008.





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


10





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





On
February 27, 2008 a related party to MH Financial exercised warrants to purchase
73,915 shares of Common Stock for $1,109.





On March
3, 2008 MH Financial exercised warrants to purchase 798,981 shares of Common
Stock for $11,985.





On March
19, 2008 at a special meeting of the shareholders the Company’s Amended and
Restated Articles of Incorporation, as amended, were amended to effect a
15-for-1  reverse split of the Company’s Common Stock.  The
accompanying condensed consolidated financial statements, notes, and other
references to share and per share data have been retroactively restated to
reflect the reverse stock split for all periods presented.  At that
same meeting, Thomas Sidley and Donald Megrath were elected to the Company’s
Board of Directors.  Each of Messrs. Sidley and Megrath is an employee
of Aequitas Capital Management, Inc., an affiliate of MH Financial.





On June
27, 2008 the Company obtained a loan from MH Financial in the amount of
$977,743.  The loan amount includes $477,743 that was owed to MH
Financial as of June 27, 2008 and an additional loan of up to
$500,000.  The Company was advanced $200,000 on June 27, 2008,
$100,000 on December 31, 2008, $100,000 on February 25, 2009, and has received
no additional advances against the $500,000 loan amount.  Effective as
of the date of this loan, interest will accrue on the outstanding principal
balance of the loan at a rate of 20% per annum.  As a condition of the
initial disbursement of June 27, 2008, the Company also issued warrants to
purchase 7,466,666 shares of Common Stock at $0.001 per share.  As a
condition of the December 31, 2008 advance the Company also issued warrants to
purchase 1,066,667 shares of Common Stock at $0.001 per share.  As a
condition of the February 25, 2009 advance the Company also issued warrants to
purchase 1,066,667 shares of Common Stock at $0.001 per share.  In
addition the Company signed a financial advisory agreement with MH Financial
which included the provision that the Company would issue warrants to purchase
1,066,667 shares of Common Stock at $0.001 per share.  The original
due date of the loan was December 27, 2008 and, as a condition of the December
31, 2008 advance, the due date was extended to December 27, 2009.





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





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-Q contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
reflect management's current view and estimates of future economic and market
circumstances, industry conditions, Company performance and financial results.
Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and variations of such words and similar expressions are intended to
identify such forward-looking statements.  These statements are
subject to risks and uncertainties that could cause our future results to differ
materially from the results discussed herein.  Factors that might
cause such a difference include, but are not limited to, those discussed
elsewhere in this Quarterly Report on Form 10-Q.  The Company does not
intend, and undertakes no obligation, to update any such forward-looking
statements to reflect events or circumstances that occur after the date of this
filing.





11




Critical
Accounting Policies and Estimates


The
discussion and analysis of the Company’s financial condition and results of
operations is based upon the Company’s consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States.  The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities.  Because Moore continued to operate
during the windup period, management continued to evaluate its estimates for
Moore on a going concern basis that assumed continued operations, including
those related to product returns, bad debts, inventories, prepaid expenses,
intangible assets, income taxes, warranty obligations, and other
contingencies.  The Company bases its 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
those estimated.  The Company’s MicroCoax Assembly Division was
evaluated as a discontinued operation and the value of its remaining assets was
adjusted to $17,000, which is the value the Company received from the sale of
these assets to an unrelated third party on July 12, 2007. The Company believes
the following critical accounting policies and related judgments and estimates
affect the preparation of our consolidated financial statements.





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





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





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





RESULTS
OF OPERATIONS





Overview





For the
period covered by this Report, microHelix manufactured custom cable assemblies
for the medical and commercial original equipment manufacturer ("OEM")
markets.  Typical cable assemblies included cable, connectors,
contacts, flex reliefs and housings; sub-components of medical devices and
commercial electronic systems.  The Company operated the business in a
single operating segment through two units: the Moore subsidiary and the
MicroCoax Assembly Solutions division.





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


12





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





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





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





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





THREE AND
SIX MONTHS ENDED JUNE 30, 2007 AND 2006





Total
sales in the second quarter of 2007 were $2,501,021, compared to $3,949,315 in
the second quarter of 2006, a decrease of $1,448,294 or 36.7%.  For
the six months ended June 30, 2007 total sales were $5,306,164 compared to
$7,727,299, or a decrease of $2,421,135 on a year to date basis, a decrease of
31.3%.  The decrease for the three month and six months is due to the
loss of a key customer: the Redmond, Washington facility of Physio-Control,
Inc., a subsidiary of Medtronic, Inc., due to regulatory actions taken by the
United States FDA against Physio-Control, Inc. that were unrelated to the
Company.





Gross
loss in the second quarter of 2007 was $(318,604) compared to a gross profit of
$804,008 in the second quarter of 2006, a decrease of $1,122,612.  For
the six months ended June 30, 2008 the total gross loss was ($326,393) compared
to a gross profit of $1,014,031 recorded in the first six months of
2006.  The degradation in the gross profit resulted primarily from the
suspension of shipments to Physio-Control and higher than anticipated
manufacturing expenses and material costs.





Total
operating expenses in the second quarter of 2007 were $503,932, compared to
$760,483 for the same period one year ago, a decrease of $256,551 or
33.8%.  For the six month period ending June 30, 2007 the total
operating expenses were $1,095,615 compared to $1,412,115 for the first six
months of 2006, or a $316,500 decrease.  The decrease is due to head
count reductions that reduced salary and related benefits expenses, and reduced
consultant expenses.





Sales and
marketing expenses for the second quarter of 2007 were $82,016, compared to
$126,312 in the second quarter of 2006, a decrease of $44,296 or
35.1%.  For the six month period ending June 30, 2007 the sales and
marketing expenses were $209,976 compared to $311,357 for the first six months
of 2006, or a $101,381 decrease.   This decrease was primarily a
result of head count reductions that reduced salary and related benefits
expense.





General
and administrative expenses for the second quarter of 2007 were $421,916
compared to $634,171 in the second quarter of 2006, a decrease of $212,255 or
33.5%.  For the six month period ending June 30, 2007 the general and
administrative expenses were $885,639 compared to $1,100,758 for the first six
months of 2006, or a $215,119 decrease.   The decrease resulted
principally from head count reductions that reduced salary and related benefit
expenses.





Net other
income for the second quarter of 2007 was $946,646 compared to net other expense
of ($88,925) for the second quarter of 2006.  For the six month period
ending June 30, 2007 net other (expense) was ($992,852) as compared to
($155,950) for the first six months of 2006.  The difference are
attributable to the income and expense associated with the change in the warrant
valuation offset by the amortization of note discount, loan restructuring
expenses, higher interest rates, the impairment of the intangible assets, and
the additional impairment of the goodwill.


13





The
Company recorded net income of $169,978 in the second quarter of 2007 compared
to a net income of $469 in the second quarter of 2006.  No dividends
were accrued in the second quarter of 2007. Dividends accrued on the Company’s
Series B Preferred Stock were $103,125 in the second quarter of 2006 and were
paid in shares of the Company’s Common Stock during 2006.  Net income
(loss) attributable to common shareholders was $169,978 in the second quarter of
2007 and $(102,656) in the second quarter of 2006.  For the six months
ended June 30, 2007 the Company recorded a loss of $(2,323,123) compared to a
loss of $(462,296) recorded during the first six months of 2006.





LIQUIDITY
AND CAPITAL RESOURCES





Asof June 30, 2007, the
Company had $23,177 of cash and cash equivalents.  Cash provided by
operating activities during the six-month period ended June 30, 2007 was
$957,656 compared to $108,893 used in the same period a year ago, an improvement
of $1,066,549. The cash provided by operations during the first six months of
the year primarily related to a decrease in accounts receivable of $1,149,236, a
decrease in inventories of $817,833, and an increase in accounts payable of
$292,307 that was offset by a decrease in accrued payables by
$292,906.





For the
six months ending June 30, 2007 the Company used $975,159 for financing
activities as compared to $300,379 of cash provided by financing activities
during the first six months of 2006.  The primary use of the cash
during 2007 was to pay down the debt owed to the Company’s secured
creditors.





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





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





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


14


The
Amended Note continues to be secured by a lien against substantially all of the
assets of microHelix and Moore, including all of the outstanding Common Stock of
Moore.   MH Financial may accelerate all amounts due under the
Amended Note in the event of default.  In addition, all amounts
outstanding under the Amended Note are due and payable upon the sale of all or
substantially all of the Company’s assets to anyone other than MH Financial, or
upon the transfer of ownership of more than 50% of the stock.




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




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




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




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




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




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




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




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




ITEM
3.  QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK





Risk
Factors


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





15




Minimal
assets





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





Adequate
financing may not be available when needed





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





Speculative
nature of the Company's proposed operations





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





Scarcity
of and competition for business opportunities and combinations





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





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





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





Continued
management control, limited time availability





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





Conflicts
of interest





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





16




Reporting
requirements may delay or preclude acquisitions


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





Lack
of diversification





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





Regulation
under Investment Company Act





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





Possible
change in control and management





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





Reduction
of percentage share ownership following business combination





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





Taxation





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





ITEM
4.   CONTROLS AND PROCEDURES





The
Company’s President and Chief Financial Officer evaluated the effectiveness of
the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under
the Securities Exchange Act of 1934 as of June 30, 2007.  Based on
that evaluation, the Company’s President and Chief Financial Officer concluded
that the Company’s disclosure controls and procedures are not designed at a
reasonable assurance level nor are they effective to give reasonable assurance
that the information the Company must disclose in reports filed with the
Securities and Exchange Commission are properly recorded, processed, summarized,
and reported as required, and that such information is not accumulated and
communicated to our management, including our President and Chief Financial
Officer, to allow timely decisions regarding required
disclosure.


17





The
Company’s disclosure controls and procedures are subject to material weaknesses
resulting from the Company’s loss of key personnel.  Because of the
limited number of personnel available for accounting duties, there is an
inadequate segregation of duties related to accounting controls.  The
accounting department consists only of the Company’s Chief Financial
Officer.  The Company believes that remediation of the lack of
segregated duties can be accomplished through the hiring of additional
accounting personnel or be adding or modifying certain existing internal control
procedures.  Due to the Company’s current lack of financial resources
it has not been reasonable or cost beneficial for the Company to hire extra
accounting personnel who would have no other purpose, duties, or workload than
to provide formal segregation of duties under internal control
principles.





PART
II.   OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS





During
May, 2007 one unsecured creditor initiated legal action to collect the
outstanding balance of $63,137 owed to them as per an unsecured
note.





ITEM
6.   EXHIBITS





(a) Exhibits:


10.1(1)
              
              Promissory
      Note dated December 28, 2006 issued by microHelix, Inc. to James M.
      Williams10.2(1)
              
              Subordination
      Agreement dated December 28, 2006 among microHelix, Inc., James M.
      Williams and BFI Business Finance10.3(2)
              
              Second
      Agreement Regarding Amendment of Promissory Note dated March 12, 2007
      between microHelix, Inc. and MH Financial Associates,
  LLC10.4(2)
              
              Second
      Amended and Restated Promissory Note dated March 12, 2007 issued by
      microHelix, Inc. to MH Financial Associates, LLC10.5(2)
              
              Form
      of Warrant dated March 12, 2007 issued by microHelix, Inc. to MH Financial
      Associates, LLC10.6(2)
              
              Form
      of Amendment to Warrant dated March 12, 2007 between microHelix, Inc. and
      MH Financial Associates, LLC10.7(2)
              
              Forbearance
      and Waiver Agreement dated March 12, 2007 between microHelix, Inc. and MH
      Financial Associates, LLC10.8(2)
              
              Amendment
      to Registration Rights Agreement dated March 12, 2007 between microHelix,
      Inc. and MH Financial Associates, LLC10.9(3)*
              
              Independent
      Contractor Agreement effective February 12, 2007 between Moore
      Electronics, Inc. and Dr. Steven G. Ashton, as amended31.1(4)
              
              Certification
      of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1(4)
              
              Certification
      of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002





(1)
              Incorporated by reference to the
      Company's Form 8-K filed on January 3,
  2007.


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


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


(4)
              Filed
      herewith.


*
              Management
      contract or compensatory plan or
arrangement.





SIGNATURE





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





Signature
                  
                  Title
                  
                  Date/s/
      James E. Horswill
                  
                  President
      and Chief Financial Officer
                  
                  March 24,
      2009James
      E. Horswill


18