**UNITED
        STATES**
 
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-QSB**
 
 x
              **QUARTERLY
                  REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
                  EXCHANGE****ACT
                  OF 1934 for the quarterly period ended September 30,
                  2005****OR**o
              **TRANSITION
                  REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
                  EXCHANGE****ACT
                  OF 1934 for the Transition Period from to****Commission
                  file number: 001-16781**
 
 **MICROHELIX,
                  INC.****(Exact
                  Name of Small Business Issuer as Specified in its
                  Charter)**
 
 **Oregon**
              
              **91-1758621**(State
                  or Other Jurisdiction of
              
              (I.R.S.
                  Employer Identification No.)Incorporation
                  or Organization)
 
 **19500
                  SW 90****th****Court Tualatin, Oregon**
              
              **97062**(Address
                  of Principal Executive
              
              (Zip
                  Code)Offices)
 
 (Issuer's
        Telephone Number, Including Area Code): 503-692-5333
 
 Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports and (2) has been subject
        to such filing requirements for the past 90 days.
 Yes x No o
 
 As
        of
        November 18, 2005, there were 2,116,246 shares of the issuer's common stock
        outstanding.
 
 Transitional
        Small Business Disclosure Format (Check One): **** Yes o No x
 
  
  
 **microHelix,
        Inc.**
 **Quarterly
        Report on Form 10-QSB**
 **Quarter
        Ended September 30, 2005**
 
 **TABLE
        OF CONTENTS**
 **Page****PART
                  I — FINANCIAL INFORMATION**
              3**ITEM
                  1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS —
                  UNAUDITED**
              3Consolidated
                  balance sheet as of September 30, 2005
              3Consolidated
                  statements of operations for the three and nine months ended September
                  30,
                  2005 and 2004
              4Consolidated
                  statements of cash flows for the nine months ended September 30,
                  2005 and
                  2004
              5Notes
                  to consolidated financial statements**ITEM
                  2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
                  OPERATION**
              15**ITEM
                  3. CONTROLS AND PROCEDURES**
              17**PART
                  II — OTHER INFORMATION**
              18**ITEM
                  6. EXHIBITS**
              18**SIGNATURE****EXHIBIT
                  10.1****CERTIFICATION****EXHIBIT
                  31.1****EXHIBIT
                  31.2**
 
  2
 **PART
        I — FINANCIAL INFORMATION**
 
 **ITEM
        1. FINANCIAL STATEMENTS — UNAUDITED**
  **MICROHELIX,
        INC.**
 
 **CONDENSED
        CONSOLIDATED BALANCE SHEET**
 **(UNAUDITED)**
 **SEPTEMBER
        30, 2005**
 **Assets**Current
                  Assets:Cash
              
              $
              121,282Accounts
                  receivable, net of allowance of $74,551
              
              
              1,038,812Inventories,
                  net of reserves
              
              
              1,256,103Prepaid
                  expenses and other current assets
              
              
              74,503Total
                  current assets
              
              
              2,490,700Property
                  and equipment - net
              
              
              973,148Intangible
                  assets - net
              
              
              620,733Goodwill
              
              
              1,620,218Total
                  assets
              
              $
              5,704,799**Liabilities
                  and Shareholders' Equity**Current
                  Liabilities:Accounts
                  payable
              
              $
              1,264,510Accounts
                  payable-related parties
              
              
              63,947Accrued
                  liabilities
              
              
              528,027Accrued
                  dividends
              
              
              168,750Line
                  of credit
              
              
              760,982Obligations
                  under capital leases
              
              
              10,193Notes
                  payable to shareholders
              
              
              479,261Customer
                  deposits
              
              
              156,969Total
                  current liabilities
              
              
              3,432,639Long-Term
                  Liabilities:Obligations
                  under capital lease, less current maturities
              
              
              10,821Deferred
                  tax liability
              
              
              534,104Notes
                  payable to shareholders, less current maturities
              
              
              870,739Total
                  long-term liabilities
              
              
              1,415,664Total
                  liabilities
              
              
              4,848,303Shareholders'
                  Equity:Preferred
                  Stock, no par value, 5,000,000 shares authorized,
                2,250,000
                  issued and outstanding
              
              
              1,975,793Common
                  stock, no par value, 25,000,000 shares authorized,
                2,116,246
                  issued and outstanding
              
              
              14,505,264Additional
                  paid-in capital
              
              
              6,318,667Accumulated
                  deficit
              
              
              (21,943,228
              )Total
                  shareholders' equity
              
              
              856,496Total
                  liabilities and shareholders' equity
              
              $
              5,704,799
 *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
                    30****2005**
              
              **2004**
              
              **2005**
              
              **2004**(restated)
              
              
              
              (restated)Sales
              
              $
              2,853,555
              
              $
              414,627
              
              $
              5,715,834
              
              $
              883,839Cost
                  of sales
              
              
              2,294,342
              
              
              337,028
              
              
              4,952,618
              
              
              1,097,716Gross
                  profit (loss)
              
              
              559,213
              
              
              77,599
              
              
              763,216
              
              
              (213,877
              )Operating
                  Expenses:Research
                  and development
              
              
              —
              
              
              671
              
              
              —
              
              
              63,618Sales
                  and marketing
              
              
              163,083
              
              
              (4,410
              )
              
              305,959
              
              
              25,987General
                  and administrative
              
              
              347,354
              
              
              179,497
              
              
              1,313,810
              
              
              681,973Amortization
                  of intangibles
              
              
              50,769
              
              
              —
              
              
              106,549
              
              
              —Total
                  operating expenses
              
              
              561,206
              
              
              175,758
              
              
              1,726,318
              
              
              771,578Loss
                  from operations
              
              
              (1,993
              )
              
              (98,159
              )
              
              (963,102
              )
              
              (985,455
              )Other
                  income (expense):Interest
                  and other income
              
              
              —
              
              
              7,927
              
              
              450
              
              
              37,348Interest
                  expense
              
              
              (69,351
              )
              
              (4,073
              )
              
              (134,563
              )
              
              (19,496
              )Loss
                  on sale of assets
              
              
              —
              
              
              (3,688
              )
              
              —
              
              
              (3,688
              )Other
                  income (expense) - net
              
              
              (69,351
              )
              
              166
              
              
              (134,113
              )
              
              14,164Loss
                  from continuing operations
              
              
              (71,344
              )
              
              (97,993
              )
              
              (1,097,215
              )
              
              (971,291
              )Discontinued
                  operations:Income
                  (loss) from operations of wire and cable division
              
              
              
              
              
              —
              
              
              —
              
              
              (122,877
              )Loss
                  on sale of wire and cable division
              
              
              —
              
              
              —
              
              
              —
              
              
              (129,816
              )Provision
                  (Benefit) for Income Taxes
              
              
              (81,074
              )
              
              —
              
              
              (81,074
              )
              
              —Net
                  Profit (loss)
              
              
              9,730
              
              
              (97,993
              )
              
              (1,016,141
              )
              
              (1,223,984
              )Preferred
                  Dividends
              
              
              (84,375
              )
              
              —
              
              
              (168,750
              )
              
              —Net
                  loss available to common shareholders
              
              $
              (74,645
              )
              $
              (97,993
              )
              $
              (1,184,891
              )
              $
              (1,223,984
              )Net
                  loss per share available to common
                shareholders
                  - basic and diluted:
  Net
                  loss per share from continuing operations
              
              $
              (.03
              )
              $
              (.06
              )
              $
              (.54
              )
              $
              (.57
              )Net
                  loss per share from discontinued operations
              
              
              —
              
              
              —
              
              
              —
              
              
              (.16
              )
 
 Net
                  profit ( loss)
              
              $
              .00
              
              $
              (.06
              )
              $
              (.50
              )
              $
              (.73
              )
  Weighted
                  average number of shares outstanding -
                Basic
                  and Diluted
              
              
              2,091,121
              
              
              1,774,442
              
              
              2,036,896
              
              
              1,712,685
 *The
        accompanying notes are an integral part of these condensed consolidated
        financial statements.*
  4
 **MICROHELIX,
        INC.**
 
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(UNAUDITED)**
 **Cash
                  Flows Provided By (Used For) Operating
                  Activities:**
              
              **Nine
                  months**
                **ended**
                **September
                  30,**
                **2005**
              
              **Nine
                  months**
                **ended**
                **September
                  30,**
                **2004**(restated)Net
                  loss from continuing operations
              
              $
              (1,097,215
              )
              $
              (971,291
              )Adjustments
                  to reconcile net loss from continuing operations to cash
                provided
                  by (used in) operating activities:Depreciation -capital
                  assets
              
              
              155,441
              
              
              60,651Amortization
                  - intangible assets
              
              
              105,741
              
              
              —Provision
                  for doubtful accounts
              
              
              26,060
              
              
              —Provision
                  for inventory reserves
              
              
              (34,327
              )
              
              73,518Common
                  stock issued for services
              
              
              31,855
              
              
              16,162Benefit
                  for deferred income taxes
              
              
              81,074
              
              
              —Loss
                  from operations of wire and cable division
              
              
              —
              
              
              (122,877
              )Loss
                  from sale of wire and cable division
              
              
              —
              
              
              (129,816
              )Change
                  in assets and liabilities:(Increase)
                  Decrease in assets:Accounts
                  receivable
              
              
              (233,354
              )
              
              194,317Inventories
              
              
              115,051
              
              
              (91,230
              )Prepaid
                  expenses and other current assets
              
              
              (202,979
              )
              
              55,806Intangibles,
                  other assets and deposits
              
              
              —
              
              
              8,874Increase
                  (Decrease) in liabilities:Accounts
                  payable
              
              
              660,067
              
              
              (289,919
              )Accrued
                  liabilities
              
              
              (38,142
              )
              
              (165,127
              )Net
                  cash used in operating activities
              
              
              (430,728
              )
              
              (1,355,932
              )**Cash
                  Flows from Investing Activities:**Cash
                  for stock of Moore Electronics
              
              
              (1,500,000
              )
              
              —Cash
                  used to pay-off loan of Moore Electronics
              
              
              (412,683
              )
              
              —Capital
                  Expenditures
              
              
              (22,922
              )
              
              (1,885
              )Net
                  book value of wire and cable division sold
              
              
              —
              
              
              1,624,369Net
                  cash provided by /(used in) investing activities
              
              
              (1,935,605
              )
              
              1,622,484**Cash
                  Flows from Financing Activities:**Proceeds
                  from line of credit
              
              
              4,830,321
              
              
              1,002,786Payments
                  on line of credit
              
              
              (4,198,971
              )
              
              (1,252,079
              )Proceeds
                  from issuance of notes payable to shareholders
              
              
              100,000
              
              
              —Net
                  cash provided by /(used in) financing activities
              
              
              2,457,143
              
              
              (249,293
              )Change
                  in cash
              
              
              90,810
              
              
              17,259Cash,
                  beginning of period
              
              
              30,472
              
              
              48,767Cash,
                  end of period
              
              $
              121,282
              
              $
              66,026**Supplemental
                  Cash Flow Information:**Interest
                  paid
              
              $
              99,302
              
              $
              37,035Income
                  taxes paid
              
              $
              —
              
              $
              —**Supplemental
                  Disclosure of Non-cash Investing Activities:**Purchase
                  price acquisition of Moore Electronic details:Fair
                  value of assets acquired
              
              $
              4,558,702
              
              
              —Liabilities
                  assumed
              
              
              (1,146,019
              )
              
              —Note
                  payable to former shareholders of Moore as part of the acquisition
                  price
              
              
              (1,250,000
              )
              
              —Preferred
                  stock issued to former shareholder of Moore as part of the acquisition
                  price
              
              
              (250,000
              )
              
              —Cash
                  paid
              
              
              1,912,683
              
              
              —Preferred
                  dividends
              
              $
              (168,750
              )
              
              —**Supplemental
                disclosure of non-cash
                Financing Activities:**Common
                stock issued for services
              
              $
              31,855
              
              $
              16,162
 *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, 2005 and 2004**
 
 **1.**  **Summary
        of Significant Accounting Policies and Basis of
        Presentation**
 
 *Nature
        of Operations* —
        microHelix, Inc. (the "Company"), is primarily engaged in the design,
        manufacture, sale and distribution of cable assemblies for use in medical
        and
        commercial devices and systems.
 
 *Basis
        of Presentation* —
        The
        unaudited consolidated financial statements have been prepared by the Company,
        pursuant to the rules and regulations of the Securities and Exchange Commission
        ("SEC"). The information furnished herein reflects all adjustments (consisting
        of normal recurring accruals and adjustments), which are, in the opinion
        of
        management, necessary to fairly represent the operating results for the
        respective periods
 
 *Principles
        of Consolidation* —
        These
        consolidated financial statements include the accounts of the Company and
        its
        wholly owned subsidiary, Moore Electronics, Inc. ("Moore"), that was acquired
        on
        April 8, 2005. All material inter-company accounts have been eliminated in
        consolidation.
 
 *Reclassifications* —
        Certain
        reclassifications have been made to the nine months ended September 30, 2004
        consolidated financial statements to conform to the presentation of the nine
        months ended September 30, 2005 consolidated financial statements.
 
 *Going
        Concern* —
        These
        consolidated financial statements have been prepared on a going concern basis
        which contemplates the realization of assets and the satisfaction of liabilities
        in the normal course of business. The Company has incurred recurring losses
        and
        had negative cash flows from operations during each of the past two years.
        The
        Company had a working capital deficit of $941,939 and an accumulated deficit
        of
        $21,943,228 at September 30, 2005. This indicates that the Company may be
        unable
        to continue as a going concern for a reasonable period of time. These
        consolidated financial statements do not include any adjustments relating
        to the
        recoverability and classification of recorded asset amounts or the amounts
        and
        classification of liabilities that may be necessary should the Company be
        unable
        to continue as a going concern.
  Our
        ability to increase sales and gross margins and manage our operating expenses
        is
        critical to our ability to continue as a going concern. On April 8, 2005
        the
        Company acquired Moore who serves many of the major medical equipment
        manufacturers and leading manufacturers in the commercial test and measurement
        market. The Company anticipates that the acquisition of the Moore workforce
        and
        customer contacts will allow the Company to offer a broader product line
        to
        their common customers. The acquisition of the Moore manufacturing process
        technology combined with the Company’s manufacturing capability in Mexico should
        enable the Company to compete more cost effectively in the complex cable
        assembly market.
 
 We
        may
        remain dependent upon additional financing transactions in order to continue
        operations, and such additional financing may not be available at all or
        on
        terms which would be acceptable to us. We recently sold additional shares
        of our
        Series B Preferred Stock as described below in Section 9—Subsequent
        Event.
 
 *Stock-Based
        Compensation* —SFAS
        No.
        123, "Accounting for Stock-Based Compensation," establishes and encourages
        the
        use of the fair value based method of accounting for stock-based compensation
        arrangements under which compensation cost is determined using the fair value
        of
        stock-based compensation determined as of the date of grant and is recognized
        over the periods in which the related services are rendered. The statement
        also
        permits companies to elect to continue using the current intrinsic value
        accounting method specified in Accounting Principles Board ("APB") Opinion
        No.
        25, "Accounting for Stock Issued to Employees," to account for stock-based
        compensation. The Company has elected to use the intrinsic value based method
        and has disclosed the pro forma effect of using the fair value based method
        to
        account for its stock-based compensation. The Company uses the fair value
        method
        for options granted to non-employees. If the Company had elected to recognize
        compensation expense based upon the fair value at the grant date for awards
        under the Stock Option Plan consistent with the methodology prescribed by
        SFAS
        No. 123, the Company' net loss and loss per share would be increased to the
        pro
        forma amounts indicated below for the three and nine months ended September
        30,
        2005 and 2004, respectively.
 
 6
  **Three
                  Months**
                **Ended**
                **September
                  30,**
              
              **Three
                  Months**
                **Ended**
                **September
                  30,**
              
              **Nine
                  Months**
                **Ended**
                **September
                  30,**
              
              **Nine
                  Months**
                **Ended**
                **September
                  30,****2005**
              
              **2004**
              
              **2005**
              
              **2004**Net
                  loss available to common shareholders, as reported
              
              $
              (74,645
              )
              $
              (97,993
              )
              $
              (1,184,891
              )
              $
              (1,223,984
              )Deduct:
                  Total stock-based employee
                compensation
                  expense determined
                under
                  SFAS 123 method.
              
              
              (21,777
              )
              
              (40,198
              )
              
              (72,363
              )
              
              (135,461
              )Pro
                  forma net loss
              
              $
              (96,422
              )
              $
              (138,191
              )
              $
              (1,257,254
              )
              $
              (1,359,445
              )Basic
                  and diluted net loss per common share:As
                  reported
              
              $
              (.04
              )
              $
              (.06
              )
              $
              (.58
              )
              $
              (.73
              )Pro
                  forma
              
              $
              (.05
              )
              $
              (.08
              )
              $
              (.62
              )
              $
              (.82
              )
 
 The
        pro
        forma amounts may not be indicative of the effects on reported net income
        for
        future years due to the effect of options vesting over a period of years
        and the
        granting of stock compensation awards in future years.
  The
        fair
        value of each option grant was estimated on the date of grant using the
        Black-Scholes option pricing model with the following weighted-average
        assumptions used for the grants:
 
 **Nine
                  Months Ended**
                **September
                  30****2005**
              
              **2004**Dividend
                  yield
              
              
              None
              
              
              NoneRisk-free
                  interest rate
              
              
              4.0%
              
              
              4.0%Expected
                  volatility
              
              
              99%
              
              
              99%Expected
                  option lives
              
              
              4.0
                  years
              
              
              4.0
                  years
 
 There
        were no options exercised or granted during the three and nine months ended
        September 30, 2005 and 2004.
 
 *Net
        Loss per Share* —The
        Company uses SFAS No. 128, "Earnings Per Share" for calculating the basic
        and
        diluted loss per share. Basic loss per share is computed by dividing net
        loss
        attributable to common stockholders by the weighted average number of common
        shares outstanding. Diluted loss per share is computed similar to basic loss
        per
        share except that the denominator is increased to include the number of
        additional common shares that would have been outstanding if the potential
        common shares had been issued and if the additional common shares were dilutive.
        At September 30, 2005, the outstanding number of potentially dilutive common
        shares totaled 10,739,156 shares of common stock, consisting of options to
        purchase 117,867 shares of common stock, Class B warrants to purchase 926,833
        shares of common stock, other warrants to purchase 694,456 shares of common
        stock, and Series B Preferred Stock convertible into 9,000,000 shares of
        common
        stock. At September 30, 2004, the outstanding number of potentially dilutive
        common shares totaled 1,255,095 shares, consisting of options to purchase
        117,867 shares of common stock, Class B warrants to purchase 926,833 shares
        of
        common stock, and other warrants to purchase 210,395 shares of common stock.
        As
        the Company has net losses, their effect is anti-dilutive for all periods
        presented and has not been included in the diluted weighted average earnings
        per
        share as shown on the Consolidated Statements of Operations
 
 7
 **2.
        Summary of Recent Accounting Pronouncements**
 
 In
        March
        2005, the SEC released Staff Accounting Bulletin No. 107. “Share-Based
        Payment”(“SAB 107”), which provides interpretive guidance related to the
        interaction between SFAS 123(R) and certain SEC rules and regulations. It
        also
        provides the SEC staff’s views regarding valuation of share-based payment
        arrangements. In April 2005, the SEC amended the compliance dates for SFAS
        123(R), to allow companies to implement the standard at the beginning of
        their
        next fiscal year, instead of the next reporting period beginning after June
        15,
        2005. Management is currently evaluating the impact SAB 107 will have on
        our
        consolidated financial statements.
 
 In
        March
        2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional
        Asset Retirement Obligations” (“FIN 47”). FIN47 provides guidance relating to
        the identification of and financial reporting for legal obligations to perform
        an asset retirement activity. The Interpretation requires recognition of
        a
        liability for the fair value of a conditional asset retirement obligation
        when
        incurred if the liability’s fair value can be reasonably estimated. FIN 47 also
        defines when an entity would have sufficient information to reasonably estimate
        the fair value of an asset retirement obligation. The provision is effective
        no
        later than the end of fiscal years ending after December 15, 2005. We do
        not
        believe the adoption will have a material impact on our financial position
        or
        results of operations or cash flows.
 
 In
        May
        2005, the Financial Accounting Standards Board (FASB) issued Statement of
        Financial Accounting Standard (SFAS) No. 154, Accounting Changes and Error
        Corrections-a replacement of APB Opinion No. 20 and FASB Statement No. 3.
        SFAS
        No. 154 requires retrospective application to prior periods’ financial
        statements of changes in accounting principle, unless it is impracticable
        to
        determine either the period-specific effects or the cumulative effect of
        the
        change. SFAS No. 154 also requires that retrospective application of a change
        in
        accounting principle be limited to the direct effects of the change. Indirect
        effects of a change in accounting principle, such as a change in
        nondiscretionary profit-sharing payments resulting from an accounting change,
        should be recognized in the period of the accounting change. SFAS No. 154
        also
        requires that a change in depreciation, amortization or depletion method
        for
        long-lived, non-financial assets be accounted for as a change in accounting
        estimate effected by a change in accounting principle. SFAS No. 154 is effective
        for accounting changes and corrections of errors made in fiscal years beginning
        after the date this Statement is issued. We do not expect the implementation
        of
        this new standard will have a material impact on our financial position,
        results
        of operations and cash flows.
  In
        June
        2005, the Emerging Issues Task Force, or EITF, reached a consensus on Issue
        05-6, Determining the Amortization Period for Leasehold Improvements, which
        requires that leasehold improvements acquired in a business combination or
        purchased subsequent to the inception of a lease be amortized over the lesser
        of
        the useful life of the asset or a term that includes renewals that are
        reasonably assured at the date of the business combination or purchase. EITF
        05-6 is effective for periods beginning after July 2, 2005. We do not expect
        the
        provisions of this consensus to have a material impact on our Company’s
        financial position, results of operations or cash flows.
  8
 **3.
        Customer Concentration**
 
 For
        the
        three months ended September 30, 2005 and 2004, $1,917,779 and $414,627 in
        sales
        were made to **t** hree
        customers and the accounts receivable balance for these customers as of
        September 30, 2005 totaled $291,154. For the nine months ended September
        30,
        2005 and 2004, $5,886,552 and $883,839 in sales were made to three
        customers.
 
 **4.
        Business Combination**
 
 On
        April
        8, 2005, the Company entered into a merger agreement and acquired 100% of
        the
        outstanding stock of Moore Electronics, Inc. ("Moore") from two shareholders.
        Moore, headquartered in Tualatin, Oregon, was founded in 1978 and is a
        manufacturer of customized cable assemblies, sub-assemblies, wire harnesses
        and
        electro-mechanical assemblies. Moore serves many of the major medical equipment
        manufacturers and many of the leading commercial equipment manufacturers
        in the
        test and measurement and semi-conductor industries. Moore is operated as
        a
        wholly owned subsidiary. The Company anticipates that the acquisition of
        the
        Moore workforce and customer contacts will allow the Company to offer a broader
        product line to their common customers. The acquisition of the Moore
        manufacturing process technology combined with the Company's manufacturing
        capability in Mexico should enable the Company to compete more cost effectively
        in the complex cable assembly market.
  The
        Company paid $3,000,000 for 100% of the 2,000 shares of common stock of Moore,
        which consisted of $1,500,000 in cash, $1,250,000 in the form of a promissory
        note and 250,000 shares of microHelix Series B Preferred Stock valued at
        $250,000. In addition, the Company refinanced $413,000 of bank debt owed
        by
        Moore. The total purchase price for Moore totaled approximately $3,413,000.
        In
        order to finance the acquisition of Moore, the Company sold 2.0 million shares
        of Series B Preferred Stock at $1.00 per share in a private placement. Each
        share of Series B Preferred Stock is convertible into four shares of Common
        Stock. Each share of Series B Preferred Stock is eligible for a cumulative
        dividend of $0.15 per share per annum, payable in either cash or stock quarterly
        when, as and if declared by the Board of Directors of the Company. The Board
        of
        Directors has not declared any dividends on the Series B Preferred
        Stock.
  The
        fair
        value of assets acquired and liabilities assumed was recorded in the Company's
        balance sheet as of April 8, 2005, the effective date of the acquisition,
        and
        the results of operations of Moore have been included in the Company's
        consolidated results of operations for the period from April 8, 2005
        through September 30, 2005.
 
 During
        the three month period ending September 30, 2005 the intangible assets were
        adjusted as per FASB 141. Any final adjustments to the value of the intangible
        assets will be made in the prescribed time.
 
 The
        following table summarizes the total purchase consideration as of the date
        of
        acquisition by major asset and liability classification:
 
 Category
              
              ValueNet
                  tangible assets
              
              $
              907,984Property
                  and Equipment fair value adjustment
              
              
              773,427Customer
                  lists and contacts
              
              
              522,466Manufacturing
                  process technology
              
              
              203,738Goodwill
                  (net of tax benefit)
              
              
              1,005,068Total
                  purchase consideration
              
              $
              3,412,683
  The
        following unaudited pro forma financial information presents the combined
        results of operations of the Company and Moore as if the acquisition had
        occurred at the beginning of the periods presented in the table below. The
        unaudited pro forma financial information is not intended to represent or
        be
        indicative of the consolidated results of operations or the financial position
        of the Company that would have been reported had the acquisition been effective
        as of the beginning of the periods presented and should not be interpreted
        as
        indicative of the future consolidated results of operations or to be
        representative of the future financial condition of the Company. For the
        three
        and nine months ended September 30, 2004, the Company recorded a net loss
        from
        operations of its discontinued wire and cable division combined with a loss
        on
        the eventual sale of this same division.
  9
  **Three
                  Months**
                **Ended**
                **September
                  30,**
                **2004**
              
              **Nine
                  Months**
                **Ended**
                **September
                  30,**
                **2005**
              
              **Nine
                  Months**
                **Ended**
                **September
                  30,**
                **2004**Sales
              
              $
              3,170,443
              
              $
              8,652,718
              
              $
              9,670,863Net
                  loss from continuing operations
              
              $
              (44,981
              )
              $
              (1,097,215
              )
              $
              (558,732
              )Net
                  profit ( loss)
              
              $
              (44,981
              )
              $
              (1,016,141
              )
              $
              (811,425
              )Net
                  profit ( loss) per share from continuing operations-basic
              
              $
              (.03
              )
              $
              (.54
              )
              $
              (.32
              )Net
                  profit (loss) per share-basic
              
              $
              (.03
              )
              $
              (.50
              )
              $
              (.47
              )
 
 The
        preliminary pro forma financial statements that were filed on August 8, 2005
        as
        a part of the Company’s Report 8-K/A in connection with its acquisition of MEI
        failed to eliminate the MEI retained earnings account as required by general
        accepted accounting principles. When the Company filed its results for the
        period ended June 30, 2005 on Form 10-QSB the actual retained earnings for
        MEI,
        as of the acquisition date of April 8, 2005, were properly eliminated in
        consolidation.
  **5.
        Inventories**
  Inventories
        at September 30, 2005 are as follows:
  Finished
                  goods
              
              $
              213,894Work-in
                  process
              
              
              256,434Raw
                  materials
              
              
              962,496Total
                  inventory
              
              
              1,432,824Less:
                  reserves
              
              
              (176,721
              )Net
                  inventory
              
              $
              1,256,103
 
  **6.
        Goodwill and Other Intangible Assets**
 
 Goodwill
        represents the excess of the purchase price over the estimated fair value
        of the
        net identified tangible and intangible assets of the acquired business. Goodwill
        must be tested for impairment at least on an annual basis, or if an event
        occurs
        or circumstances change prior to the annual test of impairment, then the
        carrying value of goodwill must be tested on an interim basis. Considering
        that
        the goodwill carrying value was recently established with the Moore acquisition
        on April 8, 2005 there is not a need, as of this reporting period, to test
        for
        impairment. The annual review to determine if the carrying value of goodwill
        is
        impaired will be performed in the three month period ended March 31,
        2006.
 
 As
        a
        result of the Moore purchase, the Company acquired identifiable defined life
        intangible assets such as customer contacts and lists and manufacturing process
        technology. The customer lists and contacts are amortized on a straight-line
        basis over a 3 year period and the manufacturing process technology is amortized
        over a 5 year period on a straight-line basis. The Company will continue
        to
        amortize these identifiable intangible assets over these lives unless an
        event
        occurs or circumstances change that indicate that the carrying value of these
        assets may not be recoverable. The following table reflects the cost of other
        identifiable intangible assets and the accumulated amortization related to
        these
        respective assets as of September 30, 2005:
 
 10
 
 Gross
                Carrying
                Value
              
              Accumulated
                  Amortization
              
              Net
                Carrying
                ValueCustomer
                  lists and contacts
              
              $
              522,466
              
              $
              82,126
              
              $
              440,340Manufacturing
                  process technology
              
              
              203,738
              
              
              23,345
              
              
              180,393Total
                  other intangible assets
              
              $
              726,204
              
              $
              105,471
              
              $
              620,733
 
 The
        Company expects to record annual amortization expense of approximately $162,000
        in 2005, $215,000 in 2006, $215,000 in 2007, $84,000 in 2008, $41,000 in
        2009
        and $10,000 in 2010 related to the other identifiable intangible assets
        purchased in the Moore acquisition.
 
 **7.
        Equity**
 
 On
        April
        8, 2005, the Company issued 2.25 million shares of Series B Preferred Stock
        at
        $1.00 per share in a private placement. Each share of Series B Preferred
        Stock
        is currently convertible into four shares of Common Stock (as adjusted for
        stock
        splits, stock dividends, reclassifications and the like). Each share of Series
        B
        Preferred Stock is eligible for a cumulative annual dividend of $0.15 per
        share,
        when, as and if declared by the Board of Directors. Declared dividends are
        payable either in cash or in shares of the Company’s Common Stock at the
        election of the Company’s Board of Directors. The Company may call the Series B
        Preferred Stock for redemption at any time after March 31, 2006 for $1.50
        per
        share (as adjusted for stock splits, stock dividends, reclassifications and
        the
        like). Shares of Series B Preferred Stock have the same voting rights as
        the
        shares of Common Stock into which they are convertible. Currently each share
        of
        Series B Preferred Stock is entitled to four votes on all matters submitted
        to
        the Shareholders of the Company. The holders of at least 25% of the outstanding
        shares of Series B Preferred Stock may require the Company to register for
        resale under federal securities laws the shares of Common Stock issuable
        upon
        conversion of the Series B Preferred Stock. This demand registration right
        may
        be exercised only once. Certain “piggyback” registration rights also apply to
        the shares of Common Stock issuable upon conversion of the Series B Preferred
        Stock.
  The
        Company issued warrants on April 8, 2005 to its financial advisor and its
        affiliates to purchase a total of 478,000 shares of Common Stock for services
        rendered in connection with the Series B Preferred Stock offering. Such warrants
        can be exercised through April 7, 2015 for a price of $0.25 per share. The
        Company also issued on April 8, 2005 a total of 123,000 shares of Common
        Stock
        to six of its employees and directors. These grants were unrestricted and
        were
        made for services related to the successful completion of the
        merger.
  On
        September 19, 2005, the Company authorized and issued a total of 33,500 shares
        of Common Stock to 16 employees and one director totaling $9,715 which
        represented the fair market value of the shares on the date of issuance.
        These
        grants were unrestricted.
 
 **8.
        Subsequent Event**
 
 MicroHelix
        on October 28, 2005 sold 310,000 shares of its Series B Preferred Stock.
        The
        total offering price for the Series B Preferred Stock was $1.00 per share.
        MicroHelix received total cash proceeds of $210,000. Additionally, a shareholder
        has converted $100,000 of loan outstanding into 100,000 shares of the Series
        B
        Preferred Stock. The shares of Series B Preferred Stock were issued in reliance
        on Regulation D promulgated under the Securities Act of 1933, as
        amended.
  Except
        as
        expressly provided by the Amended and Restated Articles of Incorporation,
        as
        amended, of MicroHelix (the “Articles”) or as provided by law, the holders of
        Series B Preferred Stock have the same voting rights as the holders of Common
        Stock and are entitled to notice of any shareholders meeting in accordance
        with
        the Bylaws of MicroHelix, and the holders of Common Stock and the Series
        B
        preferred Stock vote together as a single class on all matters. Each holder
        of
        Series B Preferred Stock is entitled to the number of votes equal to the
        number
        of shares of Common Stock into which such shares of Series B Preferred Stock
        could at the time of such vote by converted.
  As
        of the
        date of the filing of this Form 10-QSB, there are 2,116,246 shares of Common
        Stock outstanding which were entitled to vote and holders of Series B Preferred
        Stock have the right to 10,240,000 votes on an as-converted basis.
 
 11
 **ITEM
        2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
        OPERATION**
 
 The
        following discussion provides information that management believes is relevant
        to an assessment and understanding of the Company's operations and financial
        condition. This discussion should be read in conjunction with the unaudited
        consolidated financial statements and accompanying notes.
 
 **Forward-Looking
        Statements**
 
 Statements
        in this filing which are not historical facts are "forward-looking" statements
        under the provisions of the Private Securities Litigation Reform Act of 1995.
        Such statements reflect management's current views and estimates of future
        economic and market circumstances, industry conditions, company performance
        and
        financial results. Words such as "may,"  "should,"  "expects," 
        "plans,"  "anticipates,"  "believes,"  "estimates," 
        "predicts,"  "intends,"  "potential,"  "continue," and
        variations
        of such words and similar expressions are intended to identify such forward
        looking statements. These statements are subject to risks and uncertainties
        that
        could cause the Company's actual future results to differ materially from
        the
        results discussed herein. Factors that could adversely affect future events,
        transactions or results include, but are not limited to: our ability to compete
        successfully in the medical ultrasound business; our ability to execute our
        business plan; the delay in the sale of commercial quantities of our products
        caused by regulatory review of our customer's products into which they are
        incorporated; the concentrated nature of our customer base which causes
        fluctuations in our revenue and earnings and adds unpredictability of our
        quarterly sales and earnings; the uncertain market acceptance of our new
        ultrasound products; and competition from larger competitors with more financial
        resources; and other risks and factors as are described from time to time
        in the
        Company's Securities and Exchange Commission filings, including but not limited
        to, the risks detailed in the "Risk Factors" section of the Company's Annual
        Report on Form 10-KSB for the year ended December 31, 2004. The forward-looking
        statements contained in this Form 10-QSB speak only as of the date on which
        they
        are made, and the Company undertakes no obligation and does not intend to
        update
        or revise these forward-looking statements to reflect events or circumstances
        that occur after the date of this filing. If the Company does update or correct
        one or more forward-looking statements, investors and others should not conclude
        that the Company will make additional updates or corrections with respect
        thereto or with respect to other forward-looking statements.
 
 **Critical
        Accounting Policies and Estimates**
 
 The
        discussion and analysis of our financial condition and results of operations
        is
        based upon our consolidated financial statements, which have been prepared
        in
        accordance with accounting principles generally accepted in the United States.
        The preparation of these financial statements requires us to make estimates
        and
        judgments that affect the reported amounts of assets, liabilities, revenues
        and
        expenses, and related disclosure of contingent assets and liabilities. We
        evaluate our estimates on an on-going basis, including those related to product
        returns, bad debts, inventories, prepaid expenses, intangible assets, income
        taxes, warranty obligations, and other contingencies. We base our estimates
        on
        historical experience and on various other assumptions that are believed
        to be
        reasonable under the circumstances, the results of which form the basis for
        making judgments about the carrying value of assets and liabilities that
        are not
        readily apparent from other sources. Actual results may differ from these
        estimates under different assumptions or conditions. We believe the following
        critical accounting policies and related judgments and estimates affect the
        preparation of our consolidated financial statements.
  *Revenue
        Recognition* —
        The
        Company recognizes revenue from commercial sales of micro cables, connectors,
        customized cable, assemblies, wire harnesses and electro-mechanical assemblies
        when title passes, which is upon shipment. Commercial sales are made F.O.B.
        point of shipment. The products must be physically shipped from the factory.
        In
        some cases, tooling that has been paid for by a customer may remain at the
        Company or at a vendor. Returns are limited to nonconforming products and
        the
        volume of returns to the Company has been insignificant. The Company does
        not
        establish reserves for returns because they are minimal.
 
 12
 **RESULTS
        OF OPERATIONS**
 
 **THREE
        AND NINE MONTHS ENDED** **SEPTEMBER** **30, 2005 AND 2004**
 
 On
        April
        8, 2005, the Company entered into a merger agreement and acquired 100% of
        the
        outstanding stock of Moore from two shareholders. Moore, headquartered in
        Tualatin, Oregon, was founded in 1978 and is a manufacturer of customized
        cable
        assemblies, sub-assemblies, wire harnesses and electro-mechanical assemblies.
        Moore serves many of the major medical equipment manufacturers and many of
        the
        leading commercial equipment manufacturers in the test and measurement and
        semi-conductor industries. Moore is operated as a wholly owned subsidiary.
        As a
        result of this acquisition the financial results of the Moore subsidiary
        are
        included in both the three and nine month periods from April 8, 2005 through
        September 30, 2005.
  Total
        sales for the three month period ended September 30, 2005 were $2,853,555
        compared to sales of $414,627, an increase of $2,438,928 over the same three
        month period a year ago. The significant increase is due to the acquisition
        of
        Moore and the inclusion of its results in the quarter. Sales for the ultrasound
        division of microHelix for the three month period ended September 30, 2005
        were
        $512,369, an increase of $97,742 over sales of $414,627 recorded in the same
        period a year ago. For the nine month period ended September 30, 2005, total
        sales were $5,715,834 compared with sales of $883,839 recorded in the first
        nine
        months of 2004. For the nine month period ended September 30, 2005, sales
        of the
        ultrasound division were $1,355,347 compared with sales of $883,839 in the
        nine
        month period ended September 30, 2004. This represents a $471,508 increase
        in
        sales when comparing the nine month period ending September 30, 2005 to
        September 30, 2004.
  Gross
        profit for the three month period ended September 30, 2005 was $559,213 compared
        to a gross profit of $77,599, an increase of $481,614 over the same three
        month
        period a year ago. The gross profit improvement is primarily related to the
        acquisition of Moore. On a year to date basis, the gross profit was $763,216
        compared to a negative gross profit of $213,877 recorded by the ultrasound
        division during the first nine months of 2004. Although the gross profit
        has
        improved in the ultrasound division during the first nine months of 2005
        compared to this same period in 2004, the gross profit remains negative for
        the
        division and the Company believes that anticipated higher shipment levels,
        although these are not guaranteed by any means, should enable the division
        to
        record a positive gross profit during the last three months of
        2005.
  Total
        operating expenses for the three month period ended September 30, 2005 were
        $561,206 compared to $175,758 for the same period a year ago. This increase
        in
        expenses can be identified by two factors: first, the inclusion of the Moore
        expenses in the period; second, the inclusion of $49,458 of additional
        amortization expense related to intangible assets acquired in the acquisition
        of
        Moore. For the nine month period ended September 30, 2005, total operating
        expenses were $1,726,318 compared to the same period a year ago expenses
        of
        $771,578. The
        reasons for the increase in expenses in this period are directly related
        to the
        inclusion of the Moore operating expenses, additional
        legal fees and the
        indirect expenses associated with the required audit of Moore.
  The
        loss
        from continuing operations was $71,344 for the three month period ended
        September 30, 2005 compared to a loss from continuing operations of $97,993
        during the same period a year ago. For the nine months ended September 30,
        2005,
        the net loss from continuing operations was $1,097,215 compared to a net
        loss
        from continuing operations for this same period a year ago of $971,291. Losses
        related to discontinued operations were $252,693 for the nine month period
        ending September 30, 2004.
 
 13
 For
        the
        three month period ended September 30, 2005 the Company recorded a net profit
        of
        $9,730 resulting from an income tax benefit of $81,074 offset by a loss from
        continuing operations of $71,344. On a year-to-date basis the Company recorded
        a
        net loss of $1,016,141 compared to a net loss of $1,223,984 for the same
        period
        a year ago.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 The
        Company acquired Moore on April 8, 2005. The accompanying statement of cash
        flows includes the results of Moore from April 8, 2005 through September
        30,
        2005 combined with the results of microHelix from January 1, 2005 through
        September 30, 2005. As of September 30, 2005, the Company had a cash balance
        of
        $121,282  compared
        to a cash balance as of December 31, 2004 of $30,472, an increase of
        $90,810.
  The
        Company financed the acquisition of Moore by raising $1,725,793 in net proceeds
        from a preferred stock offering, by issuing $1,350,000 in notes payable to
        shareholders, by issuing $250,000 of preferred stock to a selling
        shareholder and by borrowing the balance against the Company's
        line of
        credit. The Company paid $3,412,683 for Moore.
  During
        the nine month period ended September 30, 2005, the Company used net cash
        of
        $430,728 in operating activities. The net cash used in operations of $430,728
        included an increase in accounts receivable of $233,354 and an increase in
        prepaid expenses and other current assets of $202,979 and was partially offset
        by $261,182 in depreciation and amortization and an increase of $660,067
        in
        accounts payable. The increase of $90,810 in the cash balance during this
        reporting period represents the net cash used in operations of $430,728 plus
        $1,935,605 used in investing activities, offset by $2,457,143 of cash provided
        from financing activities.
 
 **ITEM
        3. CONTROLS AND PROCEDURES**
  The
        Company's Chief Executive Officer/Chief Financial Officer evaluated the
        effectiveness of the design and operation of the Company's disclosure controls
        and procedures as of September 30, 2005. Based on that evaluation, the Company's
        Chief Executive Officer/Chief Financial Officer concluded that as of the
        evaluation date the Company’s disclosure controls and procedures are designed to
        and are effective to give reasonable assurance that the information the Company
        must disclose in reports filed with the Securities and Exchange Commission
        are
        properly recorded, processed, summarized, and reported as required. The
        Company’s Chief Executive Officer/Chief Financial Officer also concluded that,
        notwithstanding the material weaknesses discussed in the following paragraph,
        the Company’s disclosure controls and procedures are effective to ensure that
        the information required to be disclosed in reports filed or submitted by
        the
        Company under the Securities Exchange Act of 1934, as amended, is accumulated
        and communicated to the Company’s management, including its principal executive
        and principal financial officers, as appropriate to allow timely decisions
        regarding required disclosure. There were no changes in the Company’s internal
        control over financial reporting during the quarter ended September 30, 2005
        that materially affected, or were reasonably likely to materially affect,
        the
        Company’s internal control over financial reporting.
  As
        noted
        in the Company’s 10-KSB filing for the year ended December 31, 2004, in January
        2005, our management and our newly appointed independent registered public
        accountants reviewed our 10-QSB filings for the periods ended March 31, 2004,
        June 30, 2004, and September 30, 2004. As a result of these reviews, the
        newly
        appointed independent registered accountants reported to our Audit Committee
        two
        adjustments with regard to the interim financial statements prepared for
        the
        periods ending March 31, 2004 and June 30, 2004 that needed to be made.
        Management acknowledged that these recommended adjustments to the interim
        financial statements reflected a material weakness under standards established
        by the Public Company Accounting Oversight Board ("PCAOB"). The Company restated
        its 10-QSB reports for each quarter in 2004 due to a correction of an error
        for
        inventory reserves during the three months ended March 31, 2004, and a
        reclassification of a one-time entry that recorded a sale of assets that
        occurred during the three months ended June 30, 2004. Additional inventory
        reserves were provided for the three months ended December 31, 2004. These
        material weakness issues have been discussed in detail among management,
        our
        Audit Committee, and our independent registered public accountants. The Company
        will continue to evaluate its internal controls and procedures to identify
        any
        required improvements. In reaching the conclusion that the Company’s disclosure
        controls and procedures were effective as of September 30, 2005, notwithstanding
        such material weaknesses in 2004, the Company’s Chief Executive Officer/Chief
        Financial officer relied on his review of the processes used by the Company
        in
        preparing its financial statements, which indicated that such weaknesses
        were
        confined to isolated instances and did not reflect systemic weaknesses in
        the
        Company’s disclosure controls and procedures. The Company has changed its
        methodology for recording inventory reserves to better reflect actual and
        planned usages of inventory. The Company also hired in the three months ended
        June 30, 2005 a Corporate Controller to enhance its ability to record entries
        associated with dispositions of assets. The Corporate Controller is also
        expected to continue to improve the Company’s internal controls, financial
        systems and reporting procedures. The Company’s Chief Executive officer/Chief
        Financial Officer also consulted with the Company’s independent registered
        public accountants, with the Company’s Audit Committee and with Company
        personnel with financial reporting responsibilities.
  14
 **PART
        II. OTHER INFORMATION**
 
 **ITEM
        1. LEGAL PROCEEDINGS**
 
 As
        of
        September 30, 2005 microHelix is not involved in any legal
        proceedings.
 
 **ITEM
        2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
        PROCEEDS**
 
 microHelix
        on October 28, 2005 sold 310,000 shares of its Series B Preferred Stock.
        The
        total offering price for the Series B Preferred Stock was $1.00 per share.
        microHelix received total gross cash proceeds of $210,000. The remaining
        $100,000 of the purchase price for the Series B Preferred Stock was paid
        by
        conversion of the outstanding principal on a promissory note owed by microHelix
        to James M. Williams, one of its directors. The shares of Series B Preferred
        Stock were issued in reliance on Regulation D promulgated under the Securities
        Act of 1933, as amended. Each share of Series B Preferred Stock is eligible
        for
        a cumulative dividend of $0.15 per share (as adjusted for stock splits, stock
        dividends, reclassification and the like) per annum, payable quarterly when,
        as
        and if declared by the Board of Directors of microHelix. The Board of Directors
        of microHelix may elect to pay such dividend in cash or shares of microHelix
        Common Stock. Each share of Series B Preferred Stock is convertible into
        four
        shares of microHelix Common Stock. MicroHelix has the option after March
        31,
        2006 to redeem outstanding shares of Series B Preferred Stock for $1.50 per
        share (adjusted for stock splits, stock dividends, reclassification and the
        like).
 
 **ITEM
        6. EXHIBITS**
 
 (a)  Exhibits:
  Exhibit
                  10.1
              
              Addendum
                  to Promissory Note dated November 18, 2004 between microHelix,
                  Inc. and
                  Marti D. Lundy
 
 Exhibit
                  31.1
              
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  302 Of
                  The Sarbanes-Oxley Act of 2002Exhibit
                  31.2
              
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 Of
                  The Sarbanes-Oxley Act of 2002
 
  15
 **SIGNATURE**
 
 In
        accordance with the requirements of the Securities Exchange Act of 1934,
        the
        registrant has caused this report to be signed on its behalf by the undersigned,
        thereunto duly authorized.
 **Signature**
              
              **Title**
              
              **Date**/s/
                  Tyram H. Pettit
              
              President,
                  Chief Executive Officer
              
              November
                  18, 2005Tyram
                  H. Pettit
              
              and
                  Chief Financial Officer
  16