UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
|
FOR
THE QUARTERLY PERIOD ENDED MARCH 31, 2009
Or
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Commission
File #333-74638
LABWIRE,
INC.
(Exact
name of registrant as specified in its charter)
NEVADA
|
|
37-1501818
|
(State
or other jurisdiction of incorporation)
|
|
(IRS
Employer Identification
Number)
|
1514
North FM 359 Brookshire, Texas
|
|
77423
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(281) 934 –
3158
(Registrant's
telephone no., including area code)
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
x
No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes
¨
No
x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act).
Large
accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
|
|
|
|
Non-accelerated
filer
|
¨
|
Smaller
reporting company
|
x
|
(Do
not check if smaller reporting company
|
|
|
|
Indicate
by a check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act: Yes
o
No
x
State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date:
At May 8,
2009, there were 144,452,334 shares of common stock
outstanding.
TABLE
OF CONTENTS
PART
I FINANCIAL INFORMATION
|
|
|
Page
No.
|
|
|
|
|
Item
1.
|
|
Financial
Statements
|
3
|
|
|
Consolidated
Balance Sheets – March 31, 2009 (Unaudited) and March 31,
2008
|
3
|
|
|
Unaudited
Consolidated Statements of Operations-Three Months Ended March 31, 2009
and 2008
|
4
|
|
|
Unaudited
Consolidated Statement of Changes in Stockholders’ Equity (Deficit) –
Three Months Ended March 31, 2009
|
5
|
|
|
Unaudited
Consolidated Statements of Cash Flows-Three Months Ended March 31, 2009
and 2008
|
6
|
|
|
Notes
to Unaudited Consolidated Financial Statements
|
7
|
|
|
|
|
Item
2.
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
16
|
Item
3.
|
|
Quantitative
and Qualitative Disclosures About Market Risks
|
16
|
Item
4T.
|
|
Controls
and Procedures
|
17
|
|
|
PART
II OTHER INFORMATION
|
|
|
Item
1.
|
|
Legal
Proceedings
|
17
|
Item
2.
|
|
U
Unregistered Sales of Equity Securities and Use of
Proceeds
|
17
|
Item
3.
|
|
D
Defaults Upon Senior Securities
|
17
|
Item
4.
|
|
Submission
of Matters to a Vote of Security Holders
|
17
|
Item
5.
|
|
Other
Information
|
17
|
Item
6.
|
|
Exhibits
|
17
|
|
|
|
|
Signatures
|
18
|
ITEM
1. FINANCIAL STATEMENTS
LABWIRE,
INC.
Consolidated
Balance Sheets
|
|
3/31/2009
|
|
|
12/31/2008
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
64,007
|
|
|
$
|
186,144
|
|
Accounts
Receivable , net
|
|
|
754,191
|
|
|
|
480,295
|
|
Prepaid
Expenses
|
|
|
205,064
|
|
|
|
-
|
|
Employee
Advances
|
|
|
30,405
|
|
|
|
26,405
|
|
Total
Current Assets
|
|
|
1,053,667
|
|
|
|
692,844
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT:
|
|
|
|
|
|
|
|
|
Laboratory
equipment
|
|
|
55,020
|
|
|
|
53,781
|
|
Vehicles
|
|
|
7,000
|
|
|
|
7,000
|
|
Office
furniture and equipment
|
|
|
56,116
|
|
|
|
56,116
|
|
Proprietary
software
|
|
|
293,294
|
|
|
|
267,617
|
|
Less:
Accumulated Depreciation
|
|
|
(133,105
|
)
|
|
|
(113,609
|
)
|
Net
Property and Equipment
|
|
|
278,325
|
|
|
|
270,905
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
455,210
|
|
|
|
455,210
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
1,787,202
|
|
|
$
|
1,418,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
771,801
|
|
|
|
316,688
|
|
Income
taxes payable
|
|
|
34,521
|
|
|
|
21,140
|
|
Line
of credit
|
|
|
300,000
|
|
|
|
300,000
|
|
Notes
Payable - Bridge Loan
|
|
|
260,000
|
|
|
|
280,000
|
|
Current
portion on long-term debt
|
|
|
197,175
|
|
|
|
198,290
|
|
Notes
payable to related parties
|
|
|
-
|
|
|
|
-
|
|
Accrued
Interest
|
|
|
2,229
|
|
|
|
43,297
|
|
Accrued
Interest payable - related parties
|
|
|
-
|
|
|
|
-
|
|
Total
Current Liabilities
|
|
|
1,565,726
|
|
|
|
1,159,415
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES
|
|
|
|
|
|
|
|
|
Long-term
debt, less current portion above
|
|
|
266,666
|
|
|
|
283,574
|
|
Total
Long-term Liabilities
|
|
|
266,666
|
|
|
|
283,574
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
1,832,392
|
|
|
|
1,476,776
|
(1)
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Common
stock; $0.01 par value; 150,000,000 shares authorized, 142,699,001
and 142,699,001 shares outstanding, respectively
|
|
|
142,699
|
|
|
|
142,499
|
|
Additional
paid-in capital
|
|
|
670,674
|
|
|
|
670,674
|
|
Accumulated
deficit
|
|
|
(858,563
|
)
|
|
|
(837,403
|
)
|
Total
Stockholders' Equity (Deficit)
|
|
|
(45,190
|
)
|
|
|
(24,030
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
|
|
$
|
1,787,202
|
|
|
$
|
1,418,959
|
|
LABWIRE,
INC.
Consolidated
Statements of Operations
|
|
For
the Three
|
|
|
For
the Three
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
March
31, 2009
|
|
|
March
31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
1,233,003
|
|
|
$
|
864,997
|
|
COST
OF SALES
|
|
|
708,352
|
|
|
|
462,708
|
|
GROSS
PROFIT
|
|
|
524,651
|
|
|
|
402,289
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
|
239,480
|
|
|
|
163,827
|
|
Bad
debt expense
|
|
|
17,514
|
|
|
|
520
|
|
Advertising
and marketing expenses
|
|
|
8,047
|
|
|
|
4,244
|
|
Payroll
expenses
|
|
|
206,139
|
|
|
|
239,393
|
|
Total
Operating Expenses
|
|
|
471,180
|
|
|
|
407,984
|
|
|
|
|
|
|
|
|
|
|
INCOME
FROM OPERATIONS
|
|
|
53,471
|
|
|
|
(5,695
|
)
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(27,466
|
)
|
|
|
(18,385
|
)
|
Interest
income
|
|
|
4
|
|
|
|
78
|
|
Total
Other Income (Expense)
|
|
|
(27,462
|
)
|
|
|
(18,307
|
)
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) BEFORE TAXES
|
|
|
26,009
|
|
|
|
(24,002
|
)
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
13,381
|
|
|
|
(16,299
|
)
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
|
$
|
12,628
|
|
|
$
|
(7,703
|
)
|
|
|
|
|
|
|
|
|
|
BASIC
EARNINGS (LOSS) PER SHARE
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
142,699,001
|
|
|
|
140,399,001
|
|
LABWIRE,
INC.
Consolidated
Statements of Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common
|
|
|
Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006
|
|
|
140,399,001
|
|
|
$
|
140,399
|
|
|
$
|
471,384
|
|
|
$
|
(811,382
|
)
|
|
$
|
(199,599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
received for prior issued common shares
|
|
|
-
|
|
|
|
-
|
|
|
|
5,439
|
|
|
|
-
|
|
|
|
5,439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income for year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2007 (restated)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
168,585
|
|
|
|
168,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007 (restated)
|
|
|
140,399,001
|
|
|
|
140,399
|
|
|
|
476,823
|
|
|
|
(642,797
|
)
|
|
|
(25,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued for cash
|
|
|
100,000
|
|
|
|
100
|
|
|
|
14,900
|
|
|
|
-
|
|
|
|
15,000
|
|
Common
stock issued for debt
|
|
|
2,200,000
|
|
|
|
2,200
|
|
|
|
178,951
|
|
|
|
-
|
|
|
|
181,151
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2008
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(194,606
|
)
|
|
|
(194,606
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2008
|
|
|
142,699,001
|
|
|
$
|
142,699
|
|
|
$
|
670,674
|
|
|
$
|
(837,403
|
)
|
|
$
|
(24,030
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued for cash
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common
stock issued for debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Top
side entry for Cost of Goods Sold accrual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,788
|
)
|
|
|
(
33,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income for the three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2009
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,628
|
|
|
|
12,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142,699,001
|
|
|
$
|
142,699
|
|
|
$
|
670,674
|
|
|
$
|
(858,563
|
)
|
|
$
|
(45,190
|
)
|
LABWIRE,
INC.
Consolidated
Statements of Cash Flows
|
|
For
the Three
|
|
|
For
the Three
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
March
31, 2009
|
|
|
March
31, 2008
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
12,628
|
|
|
$
|
(7,703
|
)
|
Adjustments
to reconcile net income (loss) to net cash provided (used) by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
19,497
|
|
|
|
11,640
|
|
Changes
in operating activities
|
|
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
|
|
(273,896
|
)
|
|
|
502,390
|
|
(Increase)
decrease in employee advances
|
|
|
(4,000
|
)
|
|
|
(12,500
|
)
|
(Increase)
decrease in prepaid expenses
|
|
|
(199,715
|
)
|
|
|
(191,741
|
)
|
Increase
(decrease) in accounts payable and
accrued
expenses
|
|
|
415,977
|
|
|
|
(368,964
|
)
|
Increase
(decrease) in accrued interest payable
|
|
|
7,065
|
|
|
|
11,275
|
|
Increase
(decrease) in income taxes payable
|
|
|
13,381
|
|
|
|
(24,303
|
)
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Operating Activities
|
|
|
(9,063
|
)
|
|
|
(79,906
|
)
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(1,240
|
)
|
|
|
(1,479
|
)
|
Capitalized
software costs
|
|
|
(25,678
|
)
|
|
|
(35,500
|
)
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Investing Activities
|
|
|
(26,918
|
)
|
|
|
(36,979
|
)
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
Repayment
of notes payable
|
|
|
(86,156
|
)
|
|
|
(
45,645
|
)
|
Proceeds
from line of credit
|
|
|
-
|
|
|
|
100,000
|
|
Sale
of common stock for cash
|
|
|
-
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
(86,156
|
)
|
|
|
69,355
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH
|
|
|
(122,137
|
)
|
|
|
(47,530
|
)
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF YEAR
|
|
|
186,144
|
|
|
|
200,208
|
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF YEAR
|
|
$
|
64,007
|
|
|
$
|
152,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
PAID FOR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
27,466
|
|
|
$
|
31,305
|
|
Income
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON
CASH FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Common
stock issued for debt
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying condensed notes are an integral part of these consolidated
financial statements.
1.
Summary of Significant Accounting Policies
Nature of
Operations
- The Company was incorporated in Nevada on October 8, 2004 as
Labwire, Inc. (referred to herein as "the Company"). The Company was established
as a an employee screening company specializing in drug testing
and background investigations with a client base of large US and European
corporations which provides compliance services for Department Of Transportation
(49cfr part 40) and Security and Exchange Commission (Fair Credit
Reporting Act) governed programs.
Basis of
Consolidation
- The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, Occupational Testing,
Inc. All intercompany balances and transactions have been eliminated
in consolidation.
Basis of
Presentation
– The accompanying financial statements have been prepared
on the accrual basis of accounting in accordance with accounting principles
generally accepted in the United States. Significant accounting principles
followed by the Company and the methods of applying those principles, which
materially affect the determination of financial position and cash flows are
summarized below.
Cash and
Cash Equivalents
- For purposes of the statement of cash flows, the
Company considers all highly liquid instruments with original maturities of
ninety days or less, to be cash equivalents.
Allowance
for Doubtful Accounts Receivables
- The allowance for doubtful
accounts is based on a combination of historical data, cash payment trends,
specific customer issues, write-off trends, general economic conditions and
other factors. These factors are continuously monitored by management to arrive
at an estimate for the amount of accounts receivable that may ultimately be
uncollectible. In circumstances where the Company is aware of a specific
customer’s inability to meet its financial obligations, the Company records a
specific allowance for bad debts against amounts due to reduce the net
recognized receivable to the amount it reasonably believes will be collected.
This analysis requires making significant estimates, and changes in facts and
circumstances could result in material changes in the allowance for
uncollectible receivables. The Company’s allowance for doubtful
accounts receivables was $187,070 and $192,111 at March 31, 2009 and December
31, 2008, respectively.
Fair
Value of Financial Instruments
- The Company's financial instruments
includes accounts receivable, accounts payable, notes payable and long-term
debt. The fair market value of accounts receivable and accounts payable
approximate their carrying values because their maturities are generally less
than one year. Long-term notes receivable and debt obligations are estimated to
approximate their carrying values based upon their stated interest
rates.
Long-Lived
Assets
-
The Company reviews
long-lived assets, such as property and equipment, and purchased intangibles
subject to amortization, for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable, in accordance with Statement of financial Accounting Standards
(“SFAS”) No. 144, Accounting for the Impairment for Disposal of Long-Lived
Assets. Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is recognized by
the amount of the asset exceeds the fair value of the asset.
Basis of
Presentation
-
In the opinion of
management, the accompanying balance sheets and related interim statements of
income, cash flows, and stockholders' equity include all adjustments, consisting
only of normal recurring items, necessary for their fair presentation in
conformity with accounting principles generally accepted in the United States of
America ("U.S. GAAP"). Preparing financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. Actual results and outcomes may differ from
management's estimates and assumptions.
Interim
results are not necessarily indicative of results for a full year. The
information included in this Form 10-Q should be read in conjunction with
information included in the Form 10-K.
Property
and equipment
- Property and equipment are stated at cost, net of
accumulated depreciation. Depreciation is provided primarily by the
straight-line method over the estimated useful lives of the related assets
generally of five to seven years.
Computer
equipment is being depreciated over three (3) years, equipment and furniture
& fixtures over five (5) years using the straight-line method, vehicles over
five (5) years using the straight-line method, and software over five (5) years
using the straight-line method.
Following
is a description of the Company’s depreciated property:
Asset
Description
|
|
Historical
Cost
|
|
|
Accum
Depreciation
|
|
|
Net
Book Value
|
|
Office
Furniture & Equipment
|
|
$
|
56,116
|
|
|
$
|
34,543
|
|
|
$
|
21,573
|
|
Equipment
|
|
|
55,020
|
|
|
|
37,266
|
|
|
|
17,754
|
|
Vehicles
|
|
|
7,000
|
|
|
|
5,444
|
|
|
|
1,556
|
|
Software
Development
|
|
|
293,294
|
|
|
|
55,852
|
|
|
|
237,442
|
|
Net
Property and Equipment
|
|
|
|
$
|
278,325
|
|
Income
Taxes
- The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", which requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax basis
of assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce the deferred tax assets to
the amount expected to be realized. The Company has established a 100% valuation
allowance for any temporary timing issues resulting in a deferred tax
asset. Income tax expense is payable or refundable for the period
plus or minus the change during the period in deferred tax assets and
liabilities.
Use of
Estimates
-
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Revenue
Recognition
- The Company's revenues are derived principally from the
sale of medical testing services to companies and individuals. Revenue is
recognized after the test as services have been provided and there are no longer
any material commitments to the customer.
Software
Development Costs
- The Company follows the guidance set forth in
Statement of Position 98-1,
Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use
(SOP 98-1), in
accounting for costs incurred in the development of its on-demand application
suite. SOP 98-1 requires companies to capitalize qualifying computer
software costs that are incurred during the application development stage and
amortize them over the software’s estimated useful life.
1.
Summary of Significant Accounting Policies - Continued
Software Development Costs -
continued
The
Company capitalizes costs associated with developing software for internal use,
which costs primarily include salaries of developers. Direct costs
incurred in the development of software are capitalized once the preliminary
project stage is completed, management has committed to funding the project and
completion and use of the software for its intended purpose are
probable. The Company ceases capitalization of development costs once
the software has been substantially completed at the date of conversion and is
ready for its intended use. The estimation of useful lives requires a
significant amount of judgment related to matters, specifically, future changes
in technology. The Company believes there have not been any events or
circumstances that warrant revised estimates of useful lives.
Purchase
Accounting
- The Company completed acquisitions in 2004 and in the fourth
quarter of 2007. The purchase method of accounting requires companies to assign
values to assets and liabilities acquired based upon their fair values. In most
instances, there is not a readily defined or listed market price for individual
assets and liabilities acquired in connection with a business, including
intangible assets. The determination of fair value for assets and liabilities in
many instances requires a high degree of estimation. The valuation of
intangibles assets, in particular, is very subjective. The Company
generally uses internal cash flow models and, in certain instances, third party
valuations in estimating fair values. The use of different valuation techniques
and assumptions can change the amounts and useful lives assigned to the assets
and liabilities acquired, including goodwill and other intangible assets and
related amortization expense.
Advertising
Costs
- Advertising costs are reported in selling, general and
administrative expenses and include advertising, marketing and promotional
programs. As of March 31, 2009 and December 31, 2008, all of these costs were
charged to expenses in the period or year in which incurred. Advertising costs
for the quarters ended March 31, 2009 and December 31, 2008 were $8,047 and
$19,648, respectively.
Stock
Options
- The Company accounts for stock options issued to employees in
accordance with APB No.25.
The
Company has elected to adopt the disclosure requirements of SFAS No.123
"Accounting for Stock-based Compensation". This statement requires that the
Company provide proforma information regarding net income (loss) and
income (loss) per share as if compensation cost for the Company's stock
options granted had been determined in accordance with the fair value based
method prescribed in SFAS No. 123. Additionally, SFAS No. 123 generally requires
that the Company record options issued to non-employees, based on the fair value
of the options.
Stock
Based Compensation
– Labwire accounts for stock-based employee
compensation arrangements using the fair value method in accordance with the
provisions of Statement of Financial Accounting Standards no.123(R) or SFAS No.
123(R), Share-Based Payments, and Staff Accounting Bulletin No. 107, or SAB 107,
Share-Based Payments. The company accounts for the stock options issued to
non-employees in accordance with the provisions of Statement of Financial
Accounting Standards No. 123, or SFAS No. 123, Accounting for Stock-Based
Compensation, and Emerging Issues Task Force No. 96-18, Accounting for Equity
Instruments with Variable Terms That Are Issued for Consideration other Than
Employee Services Under FASB Statement No. 123. The fair value of stock options
and warrants granted to employees and non-employees is determined using the
Black-Scholes option pricing model.
Net
Earnings (Loss) per Share
- Basic and diluted net loss per share
information is presented under the requirements of SFAS No. 128, Earnings per
Share. Basic net loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding for the period, less shares
subject to repurchase. Diluted net loss per share reflects the potential
dilution of securities by adding other common stock equivalents, including stock
options, shares subject to repurchase, warrants and convertible notes in the
weighted-average number of common shares outstanding for a period, if dilutive.
During the three months ended March 31, 2009 and the year ended December 31,
2008 there were no dilutive securities. The computation of earnings
(loss) per share is as follows:
|
|
Quarter
Ended
|
|
|
Quarter
Ended
|
|
|
|
Mar 31, 2009,
|
|
|
Dec 31, 2008
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
12,628
|
|
|
$
|
( 194,606
|
)
|
Weighted
average shares outstanding
|
|
|
142,699,001
|
|
|
|
141,586,433
|
|
Basic
Earnings (Loss) per share
|
|
$
|
( 0.00
|
)
|
|
$
|
0.00
|
|
Recent Accounting
Pronouncements
In
June 2008, the FASB issued FASB Staff Position EITF 03-6-1,
Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
(“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting,
and therefore need
1.
Summary of Significant Accounting Policies - Continued
to be
included in the computation of earnings per share under the two-class method as
described in FASB Statement of Financial Accounting Standards No. 128,
“Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements
issued for fiscal years beginning on or after December 15, 2008 and earlier
adoption is prohibited. We are not required to adopt FSP EITF 03-6-1; neither do
we believe that FSP EITF 03-6-1 would have material effect on our consolidated
financial position
and results of
operations if adopted.
In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163,
“
Accounting for Financial
Guarantee Insurance Contracts-an interpretation of FASB Statement No.
60
”.
SFAS
No. 163 clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement of premium
revenue and claims liabilities. This statement also requires expanded
disclosures about financial guarantee insurance contracts. SFAS No. 163 is
effective for fiscal years beginning on or after December 15, 2008, and interim
periods within those years. SFAS No. 163 has no effect on the Company’s
financial position, statements of operations, or cash flows at
this time.
In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 162,
“
The Hierarchy of Generally
Accepted Accounting Principles
”.
SFAS No. 162 sets forth
the level of authority to a given accounting pronouncement or document by
category. Where there might be conflicting guidance between two categories, the
more authoritative category will prevail. SFAS No. 162 will become effective 60
days after the SEC approves the PCAOB’s amendments to AU Section 411 of the
AICPA Professional Standards. SFAS No. 162 has no effect on the Company’s
financial position, statements of operations, or cash flows at
this time.
In March
2008, the Financial Accounting Standards Board, or FASB, issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133.
This standard requires companies to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company has not yet adopted the
provisions of SFAS No. 161, but does not expect it to have a material impact on
its financial position, results of operations or cash flows.
In
December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110 regarding
the use of a "simplified" method, as discussed in SAB No. 107 (SAB 107), in
developing an estimate of expected term of "plain vanilla" share options in
accordance with SFAS No. 123 (R),
Share-Based
Payment
. In particular, the staff indicated in SAB 107 that it
will accept a company's election to use the simplified method, regardless of
whether the company has sufficient information to make more refined estimates of
expected term. At the time SAB 107 was issued, the staff believed that more
detailed external information about employee exercise behavior (e.g., employee
exercise patterns by industry and/or other categories of companies) would, over
time, become readily available to companies. Therefore, the staff stated in SAB
107 that it would not expect a company to use the simplified method for share
option grants after December 31, 2007. The staff understands that such detailed
information about employee exercise behavior may not be widely available by
December 31, 2007. Accordingly, the staff will continue to accept, under certain
circumstances, the use of the simplified method beyond December 31, 2007. The
Company currently uses the simplified method for “plain vanilla” share options
and warrants, and will assess the impact of SAB 110 for fiscal year 2009. It is
not believed that this will have an impact on the Company’s financial position,
results of operations or cash flows.
1.
Summary of Significant Accounting Policies - Continued
Recent Accounting
Pronouncements – continued
In
December 2007, the FASB issued SFAS No. 160,
Noncontrolling Interests in
Consolidated Financial Statements
—an amendment of ARB No.
51. This statement amends ARB 51 to establish accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in
a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. Before this
statement was issued, limited guidance existed for reporting noncontrolling
interests. As a result, considerable diversity in practice existed. So-called
minority interests were reported in the consolidated statement of financial
position as liabilities or in the mezzanine section between liabilities and
equity. This statement improves comparability by eliminating that diversity.
This statement is effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009,
for entities with calendar year-ends). Earlier adoption is prohibited. The
effective date of this statement is the same as that of the related Statement
141 (revised 2007). The Company will adopt this Statement beginning March 1,
2009. It is not believed that this will have an impact on the Company’s
financial position, results of operations or cash flows.
In
December 2007, the FASB, issued FAS No. 141 (revised 2007),
Business Combinations.
’This
Statement replaces FASB Statement No. 141,
Business Combinations
, but
retains the fundamental requirements in Statement 141. This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. An entity may not apply it before that date. The
effective date of this statement is the same as that of the related FASB
Statement No. 160,
Noncontrolling Interests in
Consolidated Financial Statements
. The Company will adopt this
statement beginning March 1, 2009. It is not believed that this will have an
impact on the Company’s financial position, results of operations or cash
flows.
In
February 2007, the FASB, issued SFAS No. 159,
The Fair Value Option for Financial
Assets and Liabilities
—Including an Amendment of FASB Statement No.
115. This standard permits an entity to choose to measure many
financial instruments and certain other items at fair value. This option is
available to all entities. Most of the provisions in FAS 159 are elective;
however, an amendment to FAS 115
Accounting for Certain Investments
in Debt and Equity Securities
applies to all entities with available for
sale or trading securities. Some requirements apply differently to entities that
do not report net income. SFAS No. 159 is effective as of the beginning of an
entities first fiscal year that begins after November 15, 2007. Early adoption
is permitted as of the beginning of the previous fiscal year provided that the
entity makes that choice in the first 120 days of that fiscal year and also
elects to apply the provisions of SFAS No. 157
Fair Value
Measurements
. The Company adopted SFAS No. 159 beginning March
1, 2008. The adoption of this pronouncement did not have an impact on the
Company’s financial position, results of operations or cash flows.
In
September 2006, the FASB issued SFAS No. 157,
Fair Value
Measurements
This statement defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. This statement
applies under other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this statement does not require any new fair value measurements.
However, for some entities, the application of this statement will change
current practice. This statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. Earlier application is encouraged, provided that the
reporting entity has not yet issued financial statements for that fiscal year,
including financial statements for an interim period within that fiscal year.
The Company adopted this statement March 1, 2008. The adoption of this
pronouncement did not have an impact on the Company’s financial position,
results of operations or cash flows.
2. Goodwill
The
Company acquired 100% of Occupational Testing, Inc. (OTI) on October 31, 2007
for $120,000 cash and a $480,000 note bearing interest at 1% over New York
floating prime. The note is payable in quarterly installments of
$40,000 plus accrued interest beginning January 31, 2008. The
purchase of OTI resulted in $455,210 in goodwill as an asset on the Company’s
financial statements. At March 31, 2009, the Company determined that
the fair value of the reporting entity unit exceeds its carrying amount and
hence the goodwill is not impaired. In 2006, the Company wrote off
$476,933 in goodwill deemed impaired from the Workplace Screening, Inc.
acquisition of Labwire, Inc.
3. Line
of Credit
On March
4, 2008, the Company transferred the $241,933 balance on the revolving Line of
Credit to an installment loan at 4.25% with Frost Bank maturing on March 4,
2011. Monthly installment payments of $6,761.31 plus interest are due
on the 4
th
of each
month.
On March
4, 2008, the Company established another $300,000 revolving line of credit with
Frost Bank that matures on March 4, 2009. The interest rate on the
outstanding balance of the revolving line of credit is a floating prime plus 1%
and is due on the 13
th
of each
month.
The
principal balance owing by the Company at March 31, 2009 was $300,000 and
accrued interest payable was $-0-. The Company had no available funds on the
revolving line of credit at March 31, 2009. This line of credit is
secured by a UCC Financing statement signed by the Company in favor of the
lender and by the personal guarantee of the Company’s Chief Executive
Officer.
4.
Long-term notes payable
As of
March 31, 2009 and December 31, 2008, the Company had notes payable as
follows:
|
|
2009
|
|
|
2008
|
|
Note
to A. Murphy, due in quarterly installments of $40,000 beginning January
31, 2008 and bears interest at 1% over New York floating
prime
|
|
$
|
302,138
|
|
|
$
|
340,718
|
|
|
|
|
|
|
|
|
|
|
Less: current
portion
|
|
|
160,000
|
|
|
|
160,000
|
|
|
|
$
|
142,138
|
|
|
$
|
180,718
|
|
|
|
2009
|
|
|
2008
|
|
Installment
Loan to Frost Bank, due in monthly installments of $6,761.31 Beginning
April 4, 2008 and bears interest at 4.25%
|
|
$
|
163,933
|
|
|
$
|
184,444
|
|
|
|
|
|
|
|
|
|
|
Less: current
portion
|
|
|
81,136
|
|
|
|
81,136
|
|
|
|
$
|
82,797
|
|
|
$
|
103,308
|
|
|
|
|
|
|
|
|
|
|
Bridge
loan from Northamerican Energy Group, Inc., due on April 1, 2009 and bears
interest at 1% per fifteen (15) day period or 24.33% per
annum
|
|
$
|
260,000
|
|
|
$
|
280,000
|
|
|
|
|
|
|
|
|
|
|
Less: current
portion
|
|
|
260,000
|
|
|
|
280,000
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Related
Party Notes Payable:
|
|
|
|
|
|
|
|
|
Shareholders,
due on demand, bearing interest at 1.71% per annum
|
|
$
|
-
|
|
|
$
|
100,985
|
|
|
|
|
|
|
|
|
|
|
Workplace
Health, due on demand, bearing interest at 4.5% per annum
|
|
|
-
|
|
|
|
56,000
|
|
|
|
|
-
|
|
|
|
156,985
|
|
Less: current
portion
|
|
|
-
|
|
|
|
156,985
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
The A.
Murphy note payable is secured by all of the outstanding stock and all of the
assets of Occupational Testing, Inc. The related party notes payable
are unsecured.
4.
Long-term notes payable – continued
The
bridge loan from Northamerican Energy Group, Inc. is secured by 1,753,333 shares
of Labwire, Inc (LBWR) common stock which is held by a mutually agreed upon
third party. Principal payments made on the loan will reduce the
required collateralized stock in the amount of $.15 per
share. Seizure of the collateral by Northamerican Energy Group, Inc.
will constitute payment in full of the entire principal amount of the
note.
Accrued
interest on the Northamerican Energy Group, Inc. note has been paid through
March 31, 2009.
Maturities
of notes payable and long-term debt for each of the years succeeding December
31, 2008 are as follows:
Year
ending December 31,
|
|
|
|
2009
|
|
$
|
501,136
|
|
2010
|
|
|
241,136
|
|
2011
|
|
|
42,890
|
|
|
|
$
|
785,162
|
|
As of
April 1, 2009, the Northamerican Energy Group, Inc. note remained outstanding
and the lender exercised its right to seize the collateralized stock, thereby
satisfying the loan in full.
Maturities
of notes payable and long-term debt for each of the years succeeding December
31, 2008 based upon retirement of the Northamerican Energy Group, Inc. loan are
as follows:
Year
ending December 31,
|
|
|
|
2009
|
|
$
|
241,136
|
|
2010
|
|
|
241,136
|
|
2011
|
|
|
42,890
|
|
|
|
$
|
525,162
|
|
5. Stockholders’
Equity
The
Company is authorized to issue 200,000,000 shares of common stock with a par
value of $.001 per share. The Company had 142,699,000 and 140,399,000
shares issued and outstanding at December 31, 2008 and December 31, 2007,
respectively.
In the
year ended December 31, 2008, the Company sold 100,000 shares in private
placements to accredited investors for $15,000 in cash.
In June
2008, the Company issued 2,200,000 shares in retirement of the following related
party debt:
J
Maring Note (1.71% APR)
|
|
$
|
61,541
|
|
D
Morris Note (1.71% APR)
|
|
|
50,889
|
|
Workplace
Health Note (4.5% APR)
|
|
|
68,721
|
|
|
|
|
|
|
Total
|
|
$
|
181,151
|
|
6.
Income Taxes
The
Company provides for income taxes under Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and liability approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse. The Company’s predecessor
operated as entity exempt from Federal and State income taxes.
SFAS No.
109 requires the reduction of deferred tax assets by a valuation allowance if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized.
6.
Income Taxes – Continued
The
Company has a timing difference between book and tax income since the Company
has goodwill on the books from the purchase of Occupational Testing Inc. in the
amount of $455,210 and goodwill written off the books for financial purposes
from the Labwire, Inc. purchase of $476,933 which creates a timing difference
for tax purposes. The temporary and permanent timing differences
between tax and financial reporting is as follows:
The
provision for income taxes differs from the amounts which would be provided by
applying the statutory federal income tax rate of 39% to the net loss before
provision for income taxes for the following reasons:
|
|
Three
Months Ended
|
|
|
Year
Ended
|
|
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
Income
tax expense at statutory rates
|
|
$
|
13,381
|
|
|
$
|
(69,288
|
)
|
Valuation
Allowance
|
|
|
-
|
|
|
|
69,288
|
|
Income
tax expense per books
|
|
$
|
13,381
|
|
|
$
|
-
|
|
Net
deferred tax assets consist of the following components as of:
|
|
Three
Month Ended
|
|
|
Year
Ended
|
|
|
|
March
31, 2009
|
|
|
December
31, 2008
|
|
NOL
Carryover
|
|
$
|
43,279
|
|
|
$
|
69,288
|
|
Valuation
Allowance
|
|
|
(43,279
|
)
|
|
|
(69,288
|
)
|
Net
deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
At March
31, 2009, the Company had total net operating losses carried forward of
approximately $325,891 that may be offset against future taxable income through
2027. Due to the change in ownership provisions of the Tax Reform Act
of 1986, net operating loss carry forwards are subject to annual
limitations. Should a change in ownership occur net operating
loss carry forwards may be limited as to use in future years. No tax
benefit has been reported in the March 31, 2009 financial statements since the
potential tax benefit is offset by a valuation allowance of the same
amount.
In July
2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
No. 48 regarding “Accounting for Uncertainty in Income Taxes,” an interpretation
of FASB No. 109 (“FIN 48”), which defines the
threshold
for recognizing the benefits of tax-return positions in the financial statements
as “more-likely-than-not” to be sustained by the taxing authorities. The Company
has reviewed its tax positions for open tax years 2005 and later and the
adoption of FIN 48 on January 1, 2007 did not result in establishing a
contingent tax liability reserve nor a corresponding charge to retained
earnings. Also, no such uncertainties were identified during 2007. The Company
has substantial tax benefits derived from its operating loss carryforwards but
has provided 100% valuation allowances against them due to uncertainties
associated with the realization of those tax benefits.
The
recognition and measurement of certain tax benefits includes estimates and
judgment by management and inherently includes subjectivity. Changes in
estimates may create volatility in the Company’s effective tax rate in future
periods from obtaining new information about particular tax positions that may
cause management to change its estimates. If the Company would establish a
contingent tax liability reserve, interest and penalties related to uncertain
tax positions would be classified in general and administrative
expenses.
7. Related
Party Transactions
As of
March 31, 2009, these loans and advances, which bear interest at 1.71% and are
unsecured, have been converted to 2,200,000 shares of common
stock.
8. Acquisitions
On
October 31, 2007, the Company acquired Occupational Testing, Inc. The
acquisition cost, funded from our existing cash balances and by the issuance of
a promissory note to the shareholder of Occupational Testing, Inc., are shown by
the following table which summarizes the purchase consideration and fair values
of the assets acquired at the date of acquisition:
Purchase Price
Consideration
|
|
|
|
Cash
paid to the shareholder of Occupational Testing, Inc.
|
|
$
|
120,000
|
|
Promissory
Note to the shareholder of Occupational Testing, Inc.
|
|
|
480,000
|
|
Acquisition
costs
|
|
|
10,960
|
|
Total
consideration paid
|
|
$
|
610,960
|
|
|
|
|
|
|
Net Assets Acquired
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
42,711
|
|
Accounts
receivable
|
|
|
105,063
|
|
Fixed
assets
|
|
|
13,410
|
|
Other
assets
|
|
|
780
|
|
Goodwill
|
|
|
455,210
|
|
Liabilities
assumed
|
|
|
(6,214)
|
|
Total
net assets
|
|
$
|
610,960
|
|
The
Company has included the results of operations for Occupational Testing, Inc. in
its financial statements since October 31, 2007.
9. Restatement
of Financial Statements
The
accompanying financial statements for the year ended December 31, 2008 have
been restated to reflect the under accrual of collection expenses by
$33,787.
Year ended December 31,
2008
|
|
Revised
|
|
|
Original
|
|
Consolidated
Balance Sheet:
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
350,475
|
|
|
$
|
316,688
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
$
|
1,476,776
|
|
|
$
|
1,442,989
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Deficit
|
|
$
|
(
871,190)
|
)
|
|
$
|
(837,403)
|
)
|
Total
Shareholders’ Equity
|
|
$
|
(57,817)
|
|
|
$
|
(24,030)
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statement of Operations:
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
$
|
2,300,261
|
|
|
$
|
2,266,474
|
|
Net
Profit
|
|
$
|
(228,393)
|
)
|
|
$
|
(194,606)
|
)
|
10.
Subsequent Events
The
bridge loan from Northamerican Energy Group, Inc. is secured by 1,753,333 shares
of Labwire, Inc. common stock which is held by a mutually agreed upon third
party. Per the promissory note executed on February 4, 2009 and dated
January 1, 2009, seizure of the collateral by Northamerican Energy Group, Inc.
constitutes payment in full of the entire principle amount of the
note.
Accrued
interest on the Northamerican Energy Group, Inc. note has been paid through
March 31, 2009.
As of
April 1, 2009 the Northamerican Energy Group, Inc. note remained outstanding and
the lender exercised its right to seize the collateralized stock, thereby
satisfying the $263,000 outstanding balance of the loan in
full.
10.
Subsequent Events - continued
As a
result of the retirement of the Northamerican Energy Group, Inc. note on April
1, 2009. Maturities of notes payable and long-term debt for each of the years
succeeding December 31, 2008 are as follows:
Year
ending December 31,
|
|
|
|
2009
|
|
$
|
241,136
|
|
2010
|
|
|
241,136
|
|
2011
|
|
|
42,890
|
|
|
|
$
|
525,162
|
|
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
following discussion should be read in conjunction with our unaudited
consolidated interim financial statements and related notes thereto included in
this quarterly report and in our audited consolidated financial statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") contained in our Form 10-K for the year ended December
31, 2008. Certain statements in the following MD&A are forward looking
statements. Words such as "expects", "anticipates", "estimates" and similar
expressions are intended to identify forward looking statements. Such statements
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected.
MATERIAL
CHANGES IN FINANCIAL CONDITION
As of
March 31, 2009, our cash and cash equivalents were $64,007, compared to $186,144
at December 31, 2008. This decrease was due to the timing of our collections, as
revenue from several accounts was collected in the last quarter of 2008 rather
than the first quarter of 2009.
At
December 31, 2008, our accounts receivable were $480,295. At March 31, 2009,
these accounts were $754,191. Our accounts receivable increased
substantially due to additional accounts coming online. This increase was
expected as we believed that our new accounts (and one returning customer) would
begin to produce revenue for us at the beginning of this year.
Our
working capital deficit at March 31, 2009 was $512,059 compared to $202,976 at
March 31, 2008. The Company believes that the current cash flow and planned
increase in operations are adequate to satisfy the working capital deficit.
For the
three months ended March 31, 2009, cash used in operating activities was $9,063,
compared to cash used by operating activities of $79,906 for the three months
ended March 31, 2008. This substantial change in cash flow used in operating
activities was mainly due to net income increasing $20,331, and an increase of
$37,684 in income taxes payable.
RESULTS
OF OPERATIONS
Our
revenues in the quarter ended March 31, 2009 ($1,223,003) increased over 41%
from the quarter ended March 31, 2008 ($864,997). This increase in revenue was
due to several new accounts that the Company obtained last year. As expected,
the revenues from these accounts began to show up in the first
quarter.
Our
margins on these revenues declined somewhat year-over-year, however. At March
31, 2008, our operating margin (gross profit divided by revenues) was 46.5%. At
March 31, 2009, our margin had decreased to 42.6%. The reason for this decrease
was greater volume in our security business (K-9), which only has a 5%
margin.
Our
operating expenses increased over 15% from March 31, 2008 to March 31, 2009. The
main contributor to this increase was general and administrative expenses, which
increased from $163,827 at March 31, 2008 to $239,480 at March 31, 2009. Our bad
debt expense also increased substantially from $520 at March 31, 2009 to $17,514
at March 31, 2009. This increase in bad debt expense is due to several accounts
that pay slow; in accordance with the Company’s accounting policies, accounts
receivable more than 90 days old are fully reserved as bad debt
expense.
Despite
the overall increase in expenses, the Company was still able to post an
operating profit of $53,471 this quarter, as opposed to a loss of $5,695 in the
quarter ended March 31, 2008.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a
smaller reporting company, we are not required to provide the information
required by this Item.
ITEM
4T. CONTROLS AND PROCEDURES
Evaluation of disclosure controls
and procedures
. We carried out an evaluation, under the supervision and
with the participation of our management, including our principal executive
officer and principal financial officer, of the effectiveness of our disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)). Based upon that evaluation, our principal executive
officer and principal financial officer concluded that, as of the end of the
period covered in this report, our disclosure controls and procedures were
effective ensuring that information required to be disclosed in reports filed
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the required time periods and is accumulated and communicated to
our management, including our principal executive officer and principal
financial officer, as appropriate to allow timely decisions regarding required
disclosure.
Our
management, including our principal executive officer and principal financial
officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all error or fraud. A control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are
met. Further, the design of a control system must reflect the fact
that there are resource constraints and the benefits of controls must be
considered relative to their costs. Due to the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, have been
detected.
Changes in internal
controls
.
There
have not been any changes in our internal control over financial reporting that
occurred during the last quarter ended March 31, 2009 that has materially affect
or is reasonably likely to materially affect internal control over financial
reporting.
PART
II
ITEM
1. LEGAL PROCEEDINGS
None.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On
February 4, 2009, the Company issued 1,753,333 shares of its common stock as
collateral for a promissory note in the principal amount of $263,000. This
issuance was made in reliance upon the exemption provided by Section 4(2) of the
Securities Act.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM
5. OTHER INFORMATION
None.
ITEM
6. EXHIBITS
3.1*
|
Articles
of Incorporation of Labwire, Inc. (as amended September 19,
2008)
|
3.2*
|
Nevada Secretary of State Certificate
|
3.3*
|
By-Laws of Labwire, Inc.
|
10.1*
|
Agreement and Promissory Note for Purchase of Occupational Testing,
Inc.
|
10.2*
|
Alliance Agreement with USIS Commercial Services, Inc.
|
10.3*
|
Master Service Agreement with Laboratory Corporation of America
Holdings
|
10.5*
|
Agreement with Connex North America, Inc. (now Veolia) for
services
|
10.6*
|
Agreement with ARAMARK Management Services for services
|
10.7*
|
Agreement with Greyhound Lines, Inc. for Services
|
10.8*
|
Agreement with Boeing for Services
|
10.9*
|
Lease Agreement
with FM358 LTD for office space in Brookshire, Texas
|
10.10*
|
Lease Agreement
with Michael and Christina Geis for office space in
Wyoming
|
10.13**
|
Services Agreement with Evergreen International Aviation,
Inc.
|
10.14*
|
Agreement with American K-9 Bomb Search, Inc.
|
10.15*
|
Purchase
Order From Lockheed for Services
|
10.16*
|
Agreement
with Shell Chemical for Services
|
10.17*
|
US
Patent and Trademark Office Notice on
Trademark Registration
|
10.18*
|
Loan
Agreement with Frost Bank for $300,000 due February 13,
2010
|
10.19*
|
Loan
Agreement with Frost Bank for $241,932 due March 4,
2011
|
10.20*
|
Security
Agreement for Frost Bank $300,000 Loan
|
10.21*
|
Security
Agreement for Frost Bank $241,932 Loan
|
14.1*
|
Code
of Ethics
|
21.1*
|
Subsidiaries
of Registrant
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Rule 15d-14(a) of
the Exchange Act
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Rule 15d-14(a) of the Exchange
Act
|
32.1
|
Certification
of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 and 18 U.S.C. Section 1350.
|
32.2
|
Certification
of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 and 18 U.S.C. Section
1350.
|
*
Incorporated by reference from our Form 10-12G/A filed on December 23,
2008.
**
Incorporated by reference from our Form 8-K filed on February 26,
2009.
SIGNATURES
Pursuant
to the requirements of section 13 or 15(d) of the Securities Exchange Act of
1934, the undersigned has duly caused this Form 10-Q to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Brookshire, Texas,
on August 12, 2009.
LABWIRE,
INC.
|
|
|
|
By:
/s/ G. Dexter Morris
|
|
G. Dexter Morris
|
|
Chief
Executive Officer, Chief Financial Officer, and
Director
|
|
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