UNITED
STATES





SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x
            QUARTERLY
      REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
  EXCHANGEACT
      OF 1934 for the quarterly period ended September 30,
  2008ORo
            TRANSITION
      REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
  EXCHANGEACT
      OF 1934 for the Transition Period from toCommission
      file number: 001-16781





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





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





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





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





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


Yes o No x





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


Large accelerated filer o                                                          Accelerated
filer o


Non-accelerated
filer   o                                                          Smaller
reporting company x





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


Yes x No o





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





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





microHelix,
Inc.


Quarterly
Report on Form 10-Q


Quarter
Ended September 30, 2008





TABLE
OF CONTENTS





PagePART
      I — FINANCIAL INFORMATION
                                3ITEM
      1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED
                                3Consolidated
      balance sheets as of September 30, 2008 and December 31,
    2007
                                3Consolidated
      statements of operations for the three and nine months ended September 30,
      2008 and 2007
                                4Consolidated
      statements of cash flows for the three and  nine months ended
      September 30, 2008 and 2007
                                5Notes
      to consolidated financial statements6
                                6ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
                                10ITEM
      3. MANAGEMENT'S DISCUSSIONS CONCERNING MARKET RISK
                                15ITEM
      4. CONTROLS AND PROCEDURES
                                17PART
      II — OTHER INFORMATION
                                17ITEM
      1. LEGAL PROCEEDINGS
                                17ITEM
      6. EXHIBITS
                                17SIGNATURECERTIFICATIONEXHIBIT
      31EXHIBIT
      32





PART
I — FINANCIAL INFORMATION





ITEM 1. FINANCIAL STATEMENTS —
UNAUDITED





MICROHELIX,
INC.





CONDENSED
CONSOLIDATED BALANCE SHEETS


(UNAUDITED)


September
30, 2008 and December 31, 2007





2008
                              
                              
                              2007AssetsCurrent
      Assets:Cash
                              
                              $
                              1,135
                              
                              
                              $
                              5,797Prepaid
      expenses and other current assets
                              
                              
                              30,547
                              
                              
                              
                              22,917Total
      assets
                              
                              $
                              31,682
                              
                              
                              $
                              28,714Liabilities
      and Shareholders’ DeficitCurrent
      Liabilities:Accounts
      payable
                              
                              $
                              733,216
                              
                              
                              $
                              1,068,943Accrued
      liabilities
                              
                              
                              110,253
                              
                              
                              
                              250,886Common
      stock warrant liability
                              
                              
                              —
                              
                              
                              
                              62,822Current
      maturities of notes payable-net of discount at September 30,
      2008
                              
                              
                              358,285
                              
                              
                              
                              198,739Total
      liabilities
                              
                              
                              1,201,754
                              
                              
                              
                              1,581,380Shareholders'
      Deficit:Preferred
      Stock, convertible, no par value, 10,000,000 shares
      authorized,279,070
      Series C Preferred Stock issued and outstanding, liquidation preference
      $600,000
                              
                              
                              533,000
                              
                              
                              
                              533,000Common
      stock, no par value, 75,000,000 shares authorized, 1,972,568 and 966,339
      shares  issued and outstanding at September 30, 2008 and
      December 31, 2007
                              
                              
                              17,477,917
                              
                              
                              
                              17,462,823Additional
      paid-in capital
                              
                              
                              10,248,407
                              
                              
                              
                              5,989,455Accumulated
      deficit
                              
                              
                              (29,429,396
                              )
                              
                              
                              (25,537,944
                              )Total
      shareholders' deficit
                              
                              
                              (1,170,072
                              )
                              
                              
                              (1,552,666
                              )Total
      liabilities and shareholders' deficit
                              
                              $
                              31,682
                              
                              
                              $
                              28,714




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


3


MICROHELIX,
INC.





CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


(UNAUDITED)





Three
      Months Ended
                            September
      30
                          
                          
                          Nine
      Months Ended
                            September
      302008
                          
                          
                          2007
                          
                          
                          2008
                          
                          
                          2007Sales
                          
                          $
                          —
                          
                          
                          $
                          2,673,692
                          
                          
                          $
                          —
                          
                          
                          $
                          7,979,856Cost
      of sales
                          
                          
                          —
                          
                          
                          
                          1,459,901
                          
                          
                          
                          —
                          
                          
                          
                          7,092,458Gross profit
                          
                          
                          —
                          
                          
                          
                          1,213,791
                          
                          
                          
                          —
                          
                          
                          
                          887,398Operating
      Expenses:Sales and
    marketing
                          
                          
                          —
                          
                          
                          
                          4,908
                          
                          
                          
                          —
                          
                          
                          
                          214,884General and
      administrative
                          
                          
                          94,326
                          
                          
                          
                          154,730
                          
                          
                          
                          3,917,132
                          
                          
                          
                          1,040,369Total operating
      expenses
                          
                          
                          94,326
                          
                          
                          
                          159,638
                          
                          
                          
                          3,917,132
                          
                          
                          
                          1,255,253Income
      (loss) from operations
                          
                          
                          (94,326
                          )
                          
                          
                          1,054,153
                          
                          
                          
                          (3,917,132
                          )
                          
                          
                          (367,855
                          )Other
      income (expense):Interest and other
      income
                          
                          
                          27,557
                          
                          
                          
                          —
                          
                          
                          
                          30,971
                          
                          
                          
                          —Impairment
      expense-intangible assets
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          (242,658
                          )Impairment
      expense-goodwill
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          (732,365
                          )Loan
      restructuring expense
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          (989,079
                          )Warrant
      valuation gain
                          
                          
                          —
                          
                          
                          
                          —
                          
                          
                          
                          62,822
                          
                          
                          
                          1,478,580Debt
      forgiveness
                          
                          
                          5,185
                          
                          
                          
                          109,471
                          
                          
                          
                          341,066
                          
                          
                          
                          109,471Loss
      on disposal of equipment
                          
                          
                          —
                          
                          
                          
                          (545,721
                          )
                          
                          
                          —
                          
                          
                          
                          (545,721
                          )Interest expense
                          
                          
                          (365,100
                          )
                          
                          
                          (509,560
                          )
                          
                          
                          (409,179
                          )
                          
                          
                          (1,016,890
                          )Other income (expense) –
      net
                          
                          
                          (332,358
                          )
                          
                          
                          (945,810
                          )
                          
                          
                          25,680
                          
                          
                          
                          (1,938,662
                          )Net
      income (loss) before benefit from income taxes
                          
                          
                          (426,684
                          )
                          
                          
                          108,343
                          
                          
                          
                          (3,891,452
                          )
                          
                          
                          (2,306,517
                          )Benefit
      from income taxes
                          
                          
                          —
                          
                          
                          
                          (206,408
                          )
                          
                          
                          —
                          
                          
                          
                          (298,145
                          )Net
      income (loss)
                          
                          $
                          (426,684
                          )
                          
                          $
                          314,751
                          
                          
                          $
                          (3,891,452
                          )
                          
                          $
                          (2,008,372
                          )Net
      income (loss) per shareBasic
                          
                          $
                          (.22
                          )
                          
                          $
                          .33
                          
                          
                          $
                          (1.97
                          )
                          
                          $
                          (2.08
                          )Diluted
                          
                          $
                          (.22
                          )
                          
                          $
                          .15
                          
                          
                          $
                          (1.97
                          )
                          
                          $
                          (2.08
                          )Weighted average number of
      shares outstanding –Basic
                          
                          
                          1,972,568
                          
                          
                          
                          966,339
                          
                          
                          
                          1,775,913
                          
                          
                          
                          966,319Diluted
                          
                          
                          1,972,568
                          
                          
                          
                          2,157,695
                          
                          
                          
                          1,775,913
                          
                          
                          
                          966,319





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


4


MICROHELIX,
INC.





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(UNAUDITED)




Nine
      Months Ended
                        September
      302008
                      
                      
                      2007Cash
      Flows Provided By (Used In) Operating Activities:Net
      loss
                      
                      $
                      (3,891,452
                      )
                      
                      $
                      (2,008,372
                      )Adjustments
      to reconcile net income (loss) to cash provided by(used
      in) operating activities:Depreciation -capital
      assets
                      
                      
                      —
                      
                      
                      
                      266,510Goodwill
      impairment
                      
                      
                      —
                      
                      
                      
                      732,365Amortization
      – intangible assets
                      
                      
                      —
                      
                      
                      
                      107,454Intangible
      asset impairment
                      
                      
                      —
                      
                      
                      
                      242,658Provision
      for doubtful accounts
                      
                      
                      —
                      
                      
                      
                      80,858Provision
      for inventory reserves
                      
                      
                      —
                      
                      
                      
                      (404,476
                      )Common
      stock issued for services
                      
                      
                      —
                      
                      
                      
                      2,500Interest
      expense-amortization
                      
                      
                      329,991
                      
                      
                      
                      662,090Loan
      restructuring costs
                      
                      
                      —
                      
                      
                      
                      992,270Warrants
      issued for advisory services
                      
                      
                      3,598,971
                      
                      
                      
                      —Warrant
      valuation gain
                      
                      
                      (62,822
                      )
                      
                      
                      (1,478,580
                      )Debt
      forgiveness
                      
                      
                      (341,066
                      )
                      
                      
                      (109,471
                      )Loss
      on disposal of equipment
                      
                      
                      —
                      
                      
                      
                      545,721Benefit
      for deferred income taxes
                      
                      
                      —
                      
                      
                      
                      (298,145
                      )Change
      in assets and liabilities:(Increase)
      Decrease in assets:Accounts
      receivable
                      
                      
                      —
                      
                      
                      
                      1,640,689Inventories
                      
                      
                      —
                      
                      
                      
                      2,004,879Prepaid
      expenses and other current assets
                      
                      
                      (7,630
                      )
                      
                      
                      38,606Increase
      (Decrease) in liabilities:Accounts
      payable
                      
                      
                      (57,788
                      )
                      
                      
                      163,868Accrued
      liabilities
                      
                      
                      142,591
                      
                      
                      
                      (315,223
                      )Payable-settlements
                      
                      
                      —
                      
                      
                      
                      —Net
      cash provided by (used in) operating activities
                      
                      
                      (289,205
                      )
                      
                      
                      2,866,201Cash
      Flows Provided by Investing Activities:Proceeds
      from sale of equipment
                      
                      
                      —
                      
                      
                      
                      92,000Net
      cash provided by investing activities
                      
                      
                      —
                      
                      
                      
                      92,000Cash
      Flows Provided By (Used In) Financing Activities:Payments
      on line of credit
                      
                      
                      —
                      
                      
                      
                      (9,656,474
                      )Proceeds
      from line of credit
                      
                      
                      —
                      
                      
                      
                      7,759,042Payments
      on notes payable
                      
                      
                      —
                      
                      
                      
                      (1,695,453
                      )Proceeds
      from exercise of warrants
                      
                      
                      15,094
                      
                      
                      
                      —Payments
      on notes payable to shareholders
                      
                      
                      —
                      
                      
                      
                      (150,000
                      )Proceeds
      from issue of notes payable to shareholders
                      
                      
                      269,449
                      
                      
                      
                      750,000Net
      cash provided by  (used in) financing activities
                      
                      
                      284,543
                      
                      
                      
                      (2,992,885
                      )Change
      in cash
                      
                      
                      (4,662
                      )
                      
                      
                      (34,684
                      )Cash,
      beginning of period
                      
                      
                      5,797
                      
                      
                      
                      40,680Cash,
      end of period
                      
                      $
                      1,135
                      
                      
                      $
                      5,996Supplemental
      Disclosure of Non-cash Financing Activities:Warrants
      issued to lenders-recorded as debt discount
                      
                      $
                      659,981
                      
                      
                      $
                      551,970Common
      stock warranty liability
                      
                      $
                      —
                      
                      
                      $
                      1,818,200Reclassification
      of note payable to accounts payable
                      
                      $
                      63,137
                      
                      
                      $
                      —Refinance
      of accrued interest to note payable
                      
                      $
                      283,224
                      
                      
                      $
                      —





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


5


MICROHELIX,
INC.





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Three
and Nine Months Ended September 30, 2008 and 2007





1.   Summary
of Significant Accounting Policies and Basis of Presentation





Nature of Operations— Until
September 28, 2007, when microHelix, Inc. (“we,” “us,” “the Company,” or
“microHelix”) suspended manufacturing operations and concluded the disposition
of its assets to its secured creditors, the Company was a manufacturer of custom
cable assemblies and mechanical assemblies for the medical and commercial
original equipment manufacturer (OEM) markets.  On May 31, 2007,
the Company surrendered substantially all its assets to its secured creditors
and concluded the disposition of all the Company's assets September 28,
2007, after which microHelix became a shell company (see "Going Concern") that
will seek out suitable business combinations.





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 to
conclude that the Company’s creditors and shareholders would be best served by
allowing the secured creditors to foreclose on the Company’s
assets.  The Company agreed to voluntarily surrender its assets on May
31, 2007 and began winding up its affairs.  In connection with the
windup, the company stopped paying its unsecured creditors for goods and
services provided prior to May 21, 2007.  To ensure an orderly
transition, the Company’s customers agreed to substantial price increases,
provided raw materials and subsidized certain expenses which allowed the Moore
Electronics subsidiary 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
consolidated financial statements reflect the shutdown (discontinuance) of the
MicroCoax Assembly Solutions division which occurred May 23,
2007.  The division’s assets were sold to an unrelated third party for
$17,000 during July 2007.  The Company’s Moore Electronics subsidiary
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 during September 2007.  These sales resulted in a loss on
disposal of equipment of $545,721.





These
consolidated financial statements have been prepared on a going concern basis
which contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business.  The Company has incurred recurring
losses from operations, had an accumulated deficit of $25,537,944 at December
31, 2007, and has no current business operations.  These conditions
raise substantial doubt about the Company’s 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.


6





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 net income/(loss) attributable to common stockholders by
the weighted average number of common shares outstanding.  Since there
was a loss for the three and nine months ended September 30, 2008 and the nine
months ended September 30, 2007, the issuance of shares from the conversion of
preferred stock or warrants would be anti-dilutive.  The Company
computes dilutive shares using the treasury method.




For the
three months ended September 30, 2008, the following reconciles the denominator
of the basic and diluted earnings per share computation:




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




For
the three months ended September 30, 2008, 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. For the three and nine months ended
September 30, 2008, the outstanding number of potentially dilutive common shares
totaled 758,767 shares of Common Stock, consisting of Series C Preferred Stock
convertible into 186,047 shares of Common Stock and warrants to purchase 572,720
shares of Common Stock. For the nine months ended September 30, 2007, the
outstanding number of potentially dilutive common shares totaled 1,250,985
shares of Common Stock, consisting of Series C Preferred Stock convertible into
186,047 shares of Common Stock and warrants to purchase 1,064,938 shares of
Common Stock.




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





On
February 17, 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 Articles of
Incorporation 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.




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


7





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




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





3.
Summary of Recent Accounting Pronouncements





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





In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements-an amendment of Accounting Research Bulletin
No. 51” (“SFAS 160”), which establishes accounting and reporting
standards for ownership interests in subsidiaries held by parties other than the
parent, the amount of consolidated net income attributable to the parent and to
the non-controlling interest, changes in a parent’s ownership interest and the
valuation of retained non-controlling equity investments when a subsidiary is
deconsolidated.  The Statement also establishes reporting requirements
that provide sufficient disclosures that clearly identify and distinguish
between the interest of the parent and the interests of the non-controlling
owners.  SFAS 160 is effective for fiscal years beginning after
December 15, 2008.  The Company has not determined the effect that the
application of SFAS 160 will have on its consolidated financial
statements.





4.   Customer
Concentration





The Company did not have revenues from
customers during the three or nine months ended September 30,
2008.  During the three months ended September 30, 2007 approximately
$1,899,832 in sales were made to four customers.  For the nine months ended September 30,
2007, $3,842,960 of the Company’s sales were made to four customers and the
accounts receivable balance for these four customers as of September 30, 2007
totaled $152,384.




5.   Goodwill
and Other Intangible Assets





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


8





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





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





For the
nine months ending September 30, 2008 and 2007, the Company recorded $0 and
$107,454 as amortization expense.





6.    Notes
Payable and Warrants





A summary
is as follows:




MH
      Financial Associates, LLC
                            
                            $
                            677,744Other
                            
                            
                            10,532Total
      notes payable
                            
                            $
                            688,276Note
      discount-MH Financial
                            
                            
                            (329,991)Total
      notes payable-net of discount
                            
                            $
                            358,285





The
Company was in default on a promissory note to EPICOR Software
Corporation.  The remaining balance of $63,137 was settled during the
first quarter of 2008 and reclassified to accounts payable. EPICOR
forgave a portion of the promissory note.The Company is in default under
the terms of its settlement with EPICOR Software Corporation.





On
March 12, 2007 the Company modified the Original Note owed to MH Financial
by executing the Amended Note.  See Note 2 - Terms of Troubled Debt
Modification.





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 on the outstanding principal
balance.  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.  As a condition of the initial disbursement on June
30, 2008, the Company also issued warrants to purchase 7,466,666 shares of
Common Stock at $0.001 per share.  The warrants expire June 27,
2013.  The warrants have a fair value relative to the fair value of
the associated debt of $659,981 calculated using the Black-Scholes option
pricing model with the following assumptions:





Expected
      life (in years)
                    
                    
                    1Expected
      volatility
                    
                    
                    202.46
                    %Risk-free
      interest rate
                    
                    
                    1.15
                    %Expected
      dividend
                    
                    
                    —





The
Company also issued warrants on June 27, 2008 that grant MH Financial the right
to purchase 1,066,667 shares of Common Stock with an exercise price of $0.001
per share as consideration for financial advisory services.  The
warrants expire on June 27, 2013.  The warrants have a fair value of
$3,598,971 (recorded as general and administrative expense) calculated using the
Black-Scholes option pricing model with the following
assumptions:





9





Expected
      life (in years)
                    
                    
                    1Expected
      volatility
                    
                    
                    202.46
                    %Risk-free
      interest rate
                    
                    
                    1.15
                    %Expected
      dividend
                    
                    
                    —




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





In
accordance with EITF 00-19, the Company accounts for potential shares that
can be converted to Common Stock that are in excess of authorized shares, as a
liability that is recorded at fair value.  Total potential outstanding
Common Stock exceeded the Company’s authorized shares on March 12, 2007 when the
Company restructured its debt with MH Financial. At that time outstanding
warrants allowed the holders the right to purchase approximately 579,867 shares
over the current authorized amount. 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 March 12, 2007. This liability was required to be evaluated at each
reporting date with any change in value included in other income/ (expense)
until such time as enough shares were authorized to cover all potentially
convertible instruments.  For the three and nine months ended
September 30, 2008 and September 30, 2007 the Company recorded zero and
$1,478,580 in gain related to the change in fair value of its potential
liability.  During the first quarter of 2008 the remaining fair value
of $62,822 was reported as a gain since the Company increased its authorized
shares (see below).





In
January 2008 the Company’s shareholders voted to amend the Company’s Amended and
Restated Articles of Incorporation, as amended, to increase the number of
authorized shares of Preferred Stock to 10 million and Common Stock to 75
million.





8.  Subsequent
Events





On
December 31, 2008 the Company received a $100,000 advance against the loan the
Company obtained from MH Financial on June 27, 2008. As a condition of this
$100,000 disbursement, the Company also issued warrants to purchase 1,066,667
shares of Common Stock at $0.001 per share.





On
February 25, 2009 the Company received a $100,000 advance against the loan the
Company obtained from MH Financial on June 27, 2008. As a condition of this
$100,000 disbursement, the Company also issued warrants to purchase 1,066,667
shares of Common Stock at $0.001 per share.





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.  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.


10





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 the Moore Electronics
subsidiary continue to operate during the windup period; management continued to
evaluate its estimates for the Moore Electronics subsidiary on a going concern
basis that assumed continued operations, including those related to product
returns, bad debts, inventories, prepaid expenses, intangible assets, income
taxes, warranty obligations, and other contingencies.  The Company
based the estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
formed the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources.  Actual
results may differ from those estimated.   The Company believes
the following critical accounting policies and related judgments and estimates
affect the preparation of the Company’s consolidated financial
statements.





Revenue Recognition — The
Company recognized revenues from commercial sales of cable assemblies and
related supplies when title passed (which was upon shipment); persuasive
evidence of an agreement existed, the price was fixed or determinable, and
collectability was probable.  Commercial sales were made F.O.B. point
of shipment.  Returns were limited to nonconforming
products.  The Company expensed shipping and handling costs as
incurred, which were included in operating expense.  Shipping costs
recovered from customers, if any, were included in net sales.





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 creditors and began
winding up its affairs; a circumstance that indicated a need for an impairment
review.  In connection with the windup, the Company determined that
the liquidation value of its tangible assets was insufficient to repay its
secured and unsecured creditors, and therefore, the carrying value of Goodwill
required adjustment.  The Company recorded a charge of $732,365 as of
June 30, 2007, writing the value of its Goodwill to $0; and a charge of
$296,385, writing the value of its intangibles to $0.





RESULTS
OF OPERATIONS





Overview





Until
September 2007, microHelix manufactured of 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.


11





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





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





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





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





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





THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007





Total
sales in the third quarter of 2008 were $0, compared to $2,673,692 in the third
quarter of 2007, a decrease of $2,673,692.  For the nine months ended
September 30, 2008 total sales were $0 compared to $7,979,856, a decrease of
$7,979,856.  The decrease in sales is due to the sale of the MicroCoax
division and the assets of the Moore Electronics, Inc.
subsidiary.





Gross
profit in the third quarter of 2008 was $0 compared to a gross profit of
$1,213,791 in the third quarter of 2007, a decrease of
$1,213,791.  For the nine months ended September 30, 2008 the total
gross profit was $0 compared to a gross profit of $887,398 recorded in the first
nine months of 2007, a decrease of $887,398.  The decrease in the
gross profit is due to the sale of the MicroCoax
division and the assets of the Moore Electronics, Inc.
subsidiary.





Total
operating expenses in the third quarter of 2008 were $94,326, compared to
$159,638 for the same period one year ago, a decrease of $65,312.  For
the nine month period ending September 30, 2008 the total operating expenses
were $3,917,132 compared to $1,255,253 for the first nine months of 2007, an
increase of $2,661,879.  The increase is due to the $3,598,971 of
professional services expense in the second quarter of 2008 related to the
warrants issued in conjunction with the advisory services agreement and was
partially offset by the wind down and sale of the MicroCoax
division and the assets of the Moore Electronics, Inc.
subsidiary.





Sales and
marketing expenses for the third quarter of 2000 were $0, compared to $4,908 in
the third quarter of 2007, a decrease of $4,908.  For the nine month
period ending September 30, 2008 the sales and marketing expenses were $0
compared to $214,884 for the first nine months of 2007, or a $214,884
decrease.   The decrease is due to the wind down and sale of the
MicroCoax
division and the assets of the Moore Electronics, Inc.
subsidiary.




12





General
and administrative expenses for the third quarter of 2008 were $94,326 compared
to $154,730 in the third quarter of 2007, a decrease of $60,404.  For
the nine month period ending September 30, 2008 the general and administrative
expenses were $3,917,132 compared to $1,040,369 for the first nine months of
2007, an increase of $2,876,763.  The increase is due to the
$3,598,971 of professional services expense in the second quarter of 2008
related to the warrants issued in conjunction with the advisory services
agreement and was partially offset by the wind down and sale of theMicroCoax
division and the assets of the Moore Electronics, Inc.
subsidiary.





Net other
(expense) for the third quarter of 2008 was $(332,358) compared to net other
(expense) of $(945,810) for the third quarter of 2007.  For the nine
month period ending September 30, 2008 the net other income was $25,680 as
compared to net other (expense) of ($1,938,662) for the first nine months of
2007.  The difference was the income associated with the change in the
warrant valuation in 2007 offset by the amortization of note discount, loan
restructuring expenses, higher interest rates, loss on disposal of equipment,
and impairment of the intangible assets.





The
Company recorded a net (loss) of $(426,684) in the third quarter of 2008
compared to a net income of $314,751 in the third quarter of 2007.  On
a year to date basis for the nine months ended September 30, 2008 the company
recorded a net (loss) of ($3,891,452) compared to a net (loss) of $(2,008,372)
recorded during the first nine months of 2007.





LIQUIDITY
AND CAPITAL RESOURCES





As of
September 30, 2008, the Company had $1,135 of cash.  Cash used by
operating activities during the nine-month period ended September 30, 2008 was
$289,205 compared to cash provided by operating activities of $2,866,201 in the
same period a year ago. The use of funds included a net loss of $3,891,452, a
net decrease in accounts payable of $57,788, debt forgiveness of $341,066,
offset by an increase in accrued liabilities of $142,591, warrants issued for
advisory services of $3,598,971, and amortization of debt discount of
$329,991.





For the
nine months ending September 30, 2008 the company provided $284,543 from
financing activities as compared to $2,992,885 of cash used in financing
activities during the first nine months of 2007.  The primary source
of cash from financing activities for the nine month period ending September 30,
2008 was advances on notes payable from the Company’s secured
creditor.





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 lenders sold the assets
of the MicroCoax Assembly division during July 2007 and the assets of Moore to
an unrelated third party in September 2007.  Proceeds from these sales
and the liquidation of accounts receivable and other assets were used to
partially repay the amounts due under various secured lending
agreements.  At the conclusion of business operations in September
2007, the Company still owed its secured lenders approximately
$365,536.   In connection with the asset surrender, the Company
stopped paying its unsecured creditors for goods and services provided prior to
May 21, 2007.  To ensure an orderly transition, the Company’s
customers agreed to a substantial price increase, provided raw materials and
subsidized certain expenses which allowed Moore to fill its backlog, collect its
accounts receivable and cure certain outstanding deficiencies in rent payments
and benefits plans.  On September 28, 2007, Moore and the Company
discontinued all manufacturing operations and sold their remaining assets to an
unrelated third party.




The
following description of the Company's principal debt at September 30, 2008
should be read in the context of the foregoing paragraph.  See also
Note 6 of Notes to Consolidated Financial Statements.


13





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





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





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





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 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.




The
Company also agreed to use commercially reasonable efforts to obtain shareholder
approval at the 2007 annual meeting for the Sale and for an increase of the
authorized capital stock to 75,000,000 shares of Common Stock and 10,000,000
shares of Preferred Stock.  Such approval was obtained at a special
meeting of shareholders on January 15, 2008.




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, we 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.  After giving effect to the
additional warrants issued in connection with the Amended Note and the
Forbearance Agreement, MH Financial is the beneficial holder of approximately
55% of the voting capital stock.




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




On
February 17, 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.


14





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.





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
loan 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.




In all of
the above cases, shares of Series B Preferred Stock and Series C Preferred Stock
and warrants to purchase Common Stock were issued in reliance on Regulation D
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
and we obtained representations from the investors as to their status as
"accredited investors" as that term is defined in
Regulation D.





ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Risk
Factors





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





Minimal
assets





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





Adequate
financing may not be available when needed





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





Speculative
nature of the Company's proposed operations





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


15





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 officers anticipate 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 officers and directors participate in other business ventures which
may compete directly with the Company.





Reporting
requirements may delay or preclude acquisitions





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





Lack
of diversification





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





Regulation
under Investment Company Act





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


16





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
our disclosure controls and procedures pursuant to Rule 13a-15 under the
Securities Exchange Act of 1934 as of September 30, 2008.  Based on
that evaluation, our 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 the Company’s President and Chief Financial Officer,
to allow timely decisions regarding required disclosure.





The
Company’s disclosure controls and procedures are subject to material weaknesses
resulting from the Company’s loss of key personnel and the Company’s surrender
of all of its assets to its creditors.  Because of the limited number
of personnel available for accounting duties, there is an inadequate segregation
of duties related to accounting controls.  The accounting department
consists only of the Company’s Chief Financial Officer.  Due to the
Company’s current lack of financial resources it has not been reasonable or cost
beneficial for the Company to hire extra accounting personnel who would have no
other purpose, duties, or workload than to provide formal segregation of duties
under internal control principles.





PART
II.   OTHER INFORMATION





ITEM
1.  LEGAL PROCEEDINGS




As of
September 30, 2008, the Company was not a party to any litigation
proceedings.




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
Finance


17





10.3(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, LLC and to be issued to Dr. Steven G.
Ashton10.6(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
      200231.2(4)
              
              Certification
      of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232.1(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
      200232.2(4)
              
              Certification
      of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002





(1)
              Incorporated
      by reference to the Company's Form 8-K filed on 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


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