UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of
Report (Date of Earliest Event Reported): September 8, 2008
|
Labwire,
Inc.
|
|
(Exact
name of registrant as specified in its
charter)
|
|
Nevada
|
000-00000
|
37-1501818
|
|
(State
of Incorporation)
|
(Commission
File No.)
|
(IRS
Employer ID No.)
|
|
Labwire,
Inc.
14133
Memorial Drive, Suite 1
Houston,
Texas 77079
|
|
(Address
of Principal Executive Offices)
|
|
|
|
Registrant’s
Telephone Number, Including Area Code:
(281)
597-1611
|
|
|
|
(Former
name or former address, if changed since last
report)
|
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
|
|
Written
communications pursuant to Rule 425 under the Securities Act (17
CFR.425)
|
|
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Item
2.02. Results of Operations and Financial
Condition
Labwire,
Inc. (the “Company”) is furnishing this information under Item 2.02 of Form
8-K.
The
information in this Current Report, including Exhibit 99.1, is being furnished
and shall not be deemed “filed” for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise
subject to the liabilities of that section. The information in this Current
Report, including Exhibit 99.1, shall not be incorporated by reference into any
registration statement or other document filed pursuant to the Securities Act of
1933, as amended, or the Exchange Act.
Item
9.01. Financial Statements and
Exhibits
|
|
(c)
|
Exhibits
|
|
|
|
|
99.1
|
Press
release dated September 8, 2008.
|
|
|
|
99.2
|
Supplemental
Information – June 30, 2008 Quarterly Financial
Statements
|
|
|
|
|
|
SIGNATURES
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
|
|
|
|
|
Labwire,
Inc.
|
|
|
|
|
Date:
September 8, 2008
|
By:
|
/s/ Dexter
Morris
|
|
|
Dexter
Morris
|
|
|
President
and Chief Executive Officer
|
Exhibit
99.1
September
8, 2008 - Labwire Announces Financial Results for the Second Quarter of
2008
Houston, TX- September
8
,
2008 Labwire, Inc.
(Pink
Sheets: LBWR), a leading provider of employee screening solutions and canine
security and surveillance services, announced that Moore and Associates has
completed it’s review of the financial records and results for the quarter
ending June 30, 2008 and is pleased to report the following
results:
|
1)
|
Total Revenue of $
1,019,324 vs. $ 1,009,310 in 2007. The increase in revenue is
indicative of the first business from the
USIS Alliance
, strong
performance of the OTI unit, and additional revenue from existing Labwire
customers.
|
|
2)
|
Gross Profit
improved to
$ 522,520 vs. $ 445,379 in 2007. This represents a $ 77,141 increase or a
17.32% improvement. Most importantly, gross margin improved to 51% from
44% in 2007. This encouraging trend is indicative of the addition and
growth of the OTI business, a swift and successful conversion of the first
business from the
USIS
Alliance
, and management’s focus on adding high margin business to
its existing contracts and capturing revenue for its technology
services.
|
|
3)
|
Operating
Expense:
Total operating expense was $ 430,694 vs. $
298,988 in 2007
.
Management continues to focus on controlling operating expense.
Most areas were flat or down except Payroll Expense which increased to $
225,888 vs. $ 162,402 in 2007. This is primarily attributable to the
addition of OTI. Management expects this to become less of a factor as the
company is now set up for additional revenue growth in future quarters and
the restructuring of OTI staffing needs have been
addressed.
|
“The 2nd
quarter pre-tax net income of $ 57,235 represents another in a string of
profitable quarters for Labwire” stated Marlin Williford, CFO. “Our numbers were
in line with our previous management release except a slight difference in net
income of about $8,000. This was attributable to some additional
amortization applied by our auditors. We continue to focus on controlling
expense while improving margins and building revenue. We feel we have a good
foundation established as we anticipate additional revenue growth in the second
half of the year.”
Dexter
Morris, Labwire Chairman and CEO, provides the following insight into business
activity for this year: “We have been working very hard to put everything in
place to operate as a fully-reporting public company. This has been very time
consuming as we move thru the various steps in the process. With the completion
of the audit process thru June, we have cleared an important hurdle to
up-listing. We will be aggressively pursuing this agenda in the near term and
will keep our shareholders advised of our progress. The 2nd quarter numbers were
very encouraging with $1MM+ revenue, increasing margins and profit, and the
further growth and development of our OTI acquisition. We are also pleased to
see the impact of our first revenue under the
USIS
Alliance
(see press release May 15,
2008)
. We see great potential in this relationship. We thank our
shareholders for their support and we are excited about the future business
prospects for Labwire.”
About
Labwire
Labwire
Inc., Headquartered in Houston, TX, provides secure and compliant employee drug
screening and background checking services to Fortune 500 corporations via the
Labwire™ Platform. Labwire™ is a proprietary, web-based application that
streamlines the complex regulatory and record management activities associated
with employee screening, delivering accurate timely results while eliminating
service calls and paper trails. This comprehensive solution to managing employee
screening services is the most efficient and cost-effective platform in the
industry.
About
USIS
USIS is a
worldwide provider of total client solutions in human resources background
investigations, pre-employment/drug screenings, insurance information services,
due diligence and risk management assessment, and security and related
professional services to businesses, federal agencies, and institutions.
Formerly the Office of Federal Investigations (a U.S. government agency
privatized in 1996), today USIS remains the largest supplier of security
investigations to the U.S. government and a major global provider of security
support services, training and consulting solutions for government agencies and
commercial clients. Headquartered in Falls Church, Va., USIS has approximately
7,000 employees supporting business operations in all 50 states and overseas.
For more information, please visit
www.usis.com
Safe
Harbor Provisions:
Certain
oral statements made by management from time to time and certain statements
contained in press releases and periodic reports issued by Labwire, Inc., (the
"Company"), as well as those contained herein, that are not historical facts are
"forward-looking statements" within the meaning of Section 21E of the Securities
and Exchange Act of 1934 and, because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Forward-looking statements,
including those in Management's Discussion and Analysis, are statements
regarding the intent, belief or current expectations, estimates or projections
of the Company, its Directors or its Officers about the Company and the industry
in which it operates, and are based on assumptions made by management. Forward
looking statements include without limitation statements regarding: (a) the
Company's strategies regarding growth and business expansion, including future
acquisitions; (b) the Company's financing plans; (c) trends affecting the
Company's financial condition or results of operations; (d) the Company's
ability to continue to control costs and to meet its liquidity and other
financing needs; (e) the declaration and payment of dividends; and (f) the
Company's ability to respond to changes in customer demand and regulations.
Although the Company believes that its expectations are based on reasonable
assumptions, it can give no assurance that the anticipated results will occur.
When issued in this report, the words "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," and similar expressions are generally
intended to identify forward-looking statements.
Important
factors that could cause the actual results to differ materially from those in
the forward-looking statements include, among other items, (i) changes in the
regulatory and general economic environment; (ii) conditions in the capital
markets, including the interest rate environment and the availability of
capital; (iii) changes in the competitive marketplace that could affect the
Company's revenue and/or cost and expenses, such as increased competition, lack
of qualified marketing, management or other personnel, and increased labor and
inventory costs; (iv) changes in technology or customer requirements, which
could render the Company's technologies noncompetitive or obsolete; (v) new
product introductions, product sales mix and the geographic mix of
sales.
The
Company disclaims any intention or obligation to update or revise
forward-looking statements, whether as a result of new information, future
events or otherwise. Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995: The statements which are not historical facts
contained in this advertisement are forward-looking statements that involve
certain risks and uncertainties including but not limited to risks associated
with the uncertainty of future financial results, additional financing
requirements, development of new products, governmental approval processes, the
impact of competitive products or pricing, technological changes, and the effect
of economic conditions.
Investor
and Public Relations Contact:
Marlin R.
Williford Jr.
email:
marlinwilliford@aol.com
Phone:
(832) 277- 4818
Exhibit 99.2
MOORE &
ASSOCIATES, CHARTERED
ACCOUNTANTS AND
ADVISORS
PCAOB
REGISTERED
CONSENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
We
consent to the use, in the statement on Form 10/A, Amendment No. 1 of Labwire,
Inc., of our report dated September 4, 2008 on our review of the financial
statements of Labwire, Inc. as of June 30, 2008
, and the related statements of
operations, stockholders’ equity and cash flows for the three-month and
six-month periods ended June 30, 2008 and 2007
, and of our report dated
July 23, 2008 on our audit of the financial statements of Labwire, Inc. as of
December 31, 2007 and December 31, 2006
, and the related statements of
operations, stockholders’ equity and cash flows for the years then ended
December 31, 2007 and December 31, 2006,
and the reference to us under
the caption “Experts.”
/s/ Moore & Associates,
Chartered
Moore
& Associates Chartered
Las
Vegas, Nevada
September
5, 2008
LABWIRE,
INC.
Condensed
Consolidated Balance Sheets
|
ASSETS
|
|
6/30/2008
(Unaudited)
|
|
|
12/31/2007
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
Cash
and cash equivalents - interest bearing
|
$
|
257,279
|
|
$
|
206,520
|
|
Accounts
receivable, net of allowance for doubtful accounts of $5,600 as of June
30, 2008
and
December 31, 2007, respectively
|
|
705,073
|
|
|
1,102,030
|
|
|
Advances
to employees
|
|
12,500
|
|
|
-
|
|
|
Prepaid
expenses
|
|
135,751
|
|
|
20,696
|
|
|
Total
Current Assets
|
|
1,110,603
|
|
|
1,329,246
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT:
|
|
|
|
|
|
|
|
Laboratory
equipment
|
|
53,781
|
|
|
53,781
|
|
|
Vehicles
|
|
7,000
|
|
|
7,000
|
|
|
Office
furniture and equipment
|
|
51,115
|
|
|
35,251
|
|
|
Proprietary
software
|
|
185,025
|
|
|
118,550
|
|
|
|
|
296,921
|
|
|
214,582
|
|
|
Less: accumulated
depreciation
|
|
(79,242)
|
|
|
(54,207)
|
|
|
Total
Property and Equipment
|
|
217,679
|
|
|
160,375
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS:
|
|
|
|
|
|
|
|
Goodwill
|
|
455,210
|
|
|
455,210
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
1,783,492
|
|
$
|
1,944,831
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
$
|
323,420
|
|
$
|
866,796
|
|
|
Income
taxes payable
|
|
13,890
|
|
|
24,303
|
|
|
Current
portion of long-term debt
|
|
493,989
|
|
|
401,932
|
|
|
Unearned
income
|
|
61,147
|
|
|
-
|
|
|
Notes
payable to related parties
|
|
-
|
|
|
156,985
|
|
|
Accrued
interest payable
|
|
26,338
|
|
|
7,045
|
|
|
Accrued
interest payable – related parties
|
|
-
|
|
|
21,690
|
|
|
Total
Current Liabilities
|
|
918,784
|
|
|
1,478,751
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
|
|
|
|
Long
term-debt, less current portion above
|
|
667,988
|
|
|
320,000
|
|
|
Total
Long-term Liabilities
|
|
667,988
|
|
|
320,000
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
1,586,772
|
|
|
1,798,751
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY (DEFICIT):
|
|
|
|
|
|
|
Common
stock; $0.001par value; 150,000,000 shares authorized; 140,399,001 shares
issued
and
outstanding at
December 31, 2007 and 2006,
respectively
|
|
140,399
|
|
|
140,399
|
|
|
Additional
paid-in capital
|
|
471,384
|
|
|
471,384
|
|
|
Accumulated
deficit
|
|
(415,063
|
)
|
|
(465,703
|
)
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity (Deficit)
|
|
196,720
|
|
|
146,080
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
|
$
|
1,783,492
|
|
$
|
1,944,831
|
|
The
accompanying notes are an integral part of these financial
statements.
F1
LABWIRE,
INC.
Condensed
Consolidated Statements of Operations
|
|
|
For
the Three Months Ended
|
|
|
For
the Three Months Ended
|
|
|
For
the Six Months Ended
|
|
|
For
the Six Months Ended
|
|
|
|
6/30/2008
|
|
|
6/30/2007
|
|
|
6/30/2008
|
|
|
6/30/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
$
|
1,019,324
|
|
$
|
1,009,310
|
|
$
|
1,899,321
|
|
|
2,177,285
|
|
COST
OF SALES
|
|
496,804
|
|
|
563,931
|
|
|
959,513
|
|
|
1,358,218
|
|
GROSS
PROFIT
|
|
522,520
|
|
|
445,379
|
|
|
939,808
|
|
|
819,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
198,194
|
|
|
135,816
|
|
|
362,021
|
|
|
305,114
|
|
Bad
debt expense
|
|
1,481
|
|
|
490
|
|
|
2,001
|
|
|
490
|
|
Advertising
and marketing expense
|
|
5,131
|
|
|
280
|
|
|
9,376
|
|
|
1,188
|
|
Payroll
expenses
|
|
225,888
|
|
|
162,402
|
|
|
465,281
|
|
|
289,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
430,694
|
|
|
298,988
|
|
|
838,679
|
|
|
596,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME (LOSS)
|
|
91,826
|
|
|
146,391
|
|
|
101,129
|
|
|
222,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
34,591
|
|
|
(6,483)
|
|
|
(52,976)
|
|
|
(12,551)
|
|
Interest
income
|
|
-
|
|
|
-
|
|
|
78
|
|
|
-
|
|
Total
Other Income (Expenses)
|
|
34,591
|
|
|
(6,483)
|
|
|
(52,898)
|
|
|
(12,551)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) BEFORE TAXES
|
|
57,235
|
|
|
139,908
|
|
|
48,231
|
|
|
210,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAX EXPENSE (BENEFIT)
|
|
13,890
|
|
|
32,086
|
|
|
2,409
|
|
|
32,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
$
|
43,345
|
|
$
|
107,822
|
|
$
|
50,640
|
|
|
178,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
EARNINGS (LOSS) PER SHARE
|
$
|
0.00
|
|
$
|
0.00
|
|
$
|
0.00
|
|
$
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
140,399,001
|
|
|
140,399,001
|
|
|
140,399,001
|
|
|
138,315,665
|
The
accompanying notes are an integral part of these financial
statements.
F2
LABWIRE,
INC.
Condensed
Consolidated Statement of Stockholders’ Equity (Deficit)
|
DESCRIPTION
|
Common
Shares
|
Stock
Amount
|
Additional
Paid-In Capital
|
Accumulated
Deficit
|
Total
Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2005
|
136,232,330
|
$
136,232
|
$
168,346
|
$
(310,401)
|
$
(5,823)
|
|
|
|
|
|
|
|
|
Common
shares issued for cash
|
4,166,671
|
4,167
|
303,038
|
-
|
307,205
|
|
|
|
|
|
|
|
|
Net
loss for the year ended December 31, 2006
|
-
|
-
|
-
|
(500,981)
|
(500,981)
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2006
|
140,399,001
|
140,399
|
471,384
|
(811,382)
|
(199,599)
|
|
|
|
|
|
|
|
|
Net
income for the year ended December 31, 2007
|
-
|
-
|
-
|
345,679
|
345,679
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
140,399,001
|
140,399
|
471,384
|
(465,703)
|
146,080
|
|
|
|
|
|
|
|
|
Net
income for the six months ended June 30, 2008
|
-
|
-
|
-
|
50,640
|
50,640
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2008
|
140,399,001
|
$
140,399
|
$
471,384
|
$
(415,063)
|
$
196,720
|
The
accompanying notes are an integral part of these financial
statements.
F3
LABWIRE,
INC.
Condensed
Consolidated Statements of Cash Flows
|
|
|
For
the Six Months Ended June 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
Net
income (loss)
|
$
|
50,640
|
|
$
|
178,164
|
|
|
Adjustments to reconcile net income (loss) to net cash provided (used) by
operating activities:
|
|
|
|
|
|
|
|
Depreciation
|
|
25,034
|
|
|
9,316
|
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
|
384,457
|
|
|
(81,471
|
)
|
|
(Increase)
decrease in prepaid expenses
|
|
(115,055
|
)
|
|
1,382
|
|
|
Increase (decrease) in accounts payable and accrued
expenses
|
|
(543,375
|
)
|
|
(284,112
|
)
|
|
Increase (decrease) in unearned income
|
|
61,147
|
|
|
-
|
|
|
Increase (decrease) in accrued interest payable
|
|
(2,397)
|
|
|
-
|
|
|
Income taxes payable
|
|
(10,413
|
)
|
|
18,294
|
|
|
Net
Cash Provided by (Used) in Operating Activities
|
|
(149,962
|
)
|
|
(158,427
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
(15,864
|
)
|
|
-
|
|
|
Development
of Software
|
|
(65,475
|
)
|
|
-
|
|
|
Net
Cash Used in Investing Activities
|
|
(82,339
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Repayment
of notes payable
|
|
(266,940
|
)
|
|
(80,965
|
)
|
|
Increase
in bank line of credit
|
|
250,000
|
|
|
121,000
|
|
|
Increase
in note payable
|
|
300,000
|
|
|
-
|
|
|
Sale
of common stock for cash
|
|
-
|
|
|
-
|
|
|
Net
Cash Provided by Financing Activities
|
|
283,060
|
|
|
40,035
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
50,759
|
|
|
(118,392
|
)
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF YEAR
|
|
206,520
|
|
|
108,346
|
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF PERIOD
|
$
|
257,279
|
|
$
|
(10,046
|
)
|
|
|
|
|
|
|
|
|
|
CASH
PAID FOR:
|
|
|
|
|
|
|
|
Interest
|
$
|
48,328
|
|
$
|
12,551
|
|
|
Income
Taxes
|
$
|
-
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial
statements.
F4
Labwire,
Inc.
Notes to
Consolidated Financial Statements
References
to June 30, 2008 are Unaudited
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. 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.
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, revenues, 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 quarterly report should be
read in conjunction with information included in the annual financial
statements.
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 Uncollectible
Receivables -
The allowance for all probable
uncollectible receivables 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 uncollectible
receivables was $5,600 at June 30, 2008 and December 31, 2007,
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.
Impairment of 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.
At
December 31, 2007, the Company determined that the fair value of the reporting
entity unit exceeds its carrying amount and hence the goodwill is not
impaired.
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.
F5
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
References
to June 30, 2008 are Unaudited
1.
Summary of Significant Accounting Policies - Continued
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. 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 has three main sources of revenue: drug testing and related services,
training and online certification, and security services provided by a Company
subsidiary. Drug testing: the company fulfills orders for drug
testing services, wherein the Company is responsible for the performance and
data maintenance related to employee drug testing for its
clients. The Company does not perform the drug tests, but it fulfills
the order through its network of third party labs and other drug testing
facilities. Revenue is recognized when the drug testing has been
completed by the lab and the customer has been invoiced for the
services. The Company has low bad debt levels because it is its
policy that they will not fulfill drug testing orders for clients that are
behind in their payments. In other words, the Company must receive
payment for previous orders before fulfillment of new orders take
place. Pursuant to EITF 99-19, the Company is responsible for
fulfilling a customer’s order, including whether the service is acceptable and
therefore bears the risks and rewards of principal. As such, the
Company has elected to record the gross amounts of the contracts. The
company’s service agreements rarely include multiple parts that would have a
material impact on the recognition of revenue. As such, the Company
has created its revenue recognition policies pursuant to EITF
00-21.
Online
training and certification: the Company has designed online testing for various
certifications which client employees must attain for their
employment. The employee takes the certification examinations online
and pays with a credit card. As such revenue is recorded at the time
of payment, which coincides with performance of services.
Security
services provided by the Company through its subsidiary: the process is handled
in similar fashion to that described above for drug testing.
Software Development
Costs
During
the period, the Company began developing a software platform for certain
exclusively internal purposes. 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.
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.
F6
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
References
to June 30, 2008 are Unaudited
1.
Summary of Significant Accounting Policies - Continued
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 December 31, 2007 and
2006, all of these costs were charged to expenses in the period or year in which
incurred. Advertising costs for the years ended December 31, 2007 and 2006 were
$10,240 and $9,780, 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
-
ASRC 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. The Company has adopted SFAS 123(R) and applied it in the period
presented. The Company had not issued any options to employees in the
prior periods thus; there was no impact of adopting the new
standard.
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, 2008 and 2007 there were no dilutive securities. The
computation of earnings (loss) per share is as follows:
|
|
Six
Months Ended June 30,
|
|
|
2008
|
2007
|
|
Net
Income (Loss)
|
$ 50,640
|
$ 178,164
|
|
Weighted
average shares outstanding
|
140,399,001
|
138,315,665
|
|
Basic
Earnings (Loss) per share
|
$0.00
|
$ (0.00)
|
F7
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
References
to June 30, 2008 are Unaudited
1.
Summary of Significant Accounting Policies - Continued
Recent Accounting
Pronouncements
In May
2008, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 163,
“Accounting for Financial Guarantee Insurance Contracts-and 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 consolidated 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 consolidated financial position, results of
operations or cash flows.
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 consolidated financial position, results of
operations or cash flows.
F8
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
References
to June 30, 2008 are Unaudited
Recent Accounting
Pronouncements (Continued)
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 consolidated 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 will
adopt SFAS No. 159 beginning March 1, 2008 and is currently evaluating the
potential impact the adoption of this pronouncement will have on its
consolidated financial statements.
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 will adopt this statement March 1, 2008, and it is not believed that
this will have an impact on the Company’s consolidated financial position,
results of operations or cash flows.
In
September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 157, “Fair Value Measurements” which defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures about fair value
measurements. Where applicable, SFAS No. 157 simplifies and codifies
related guidance within GAAP and does not require any new fair value
measurements. SFAS No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. Earlier adoption is encouraged. The Company does
not expect the adoption of SFAS No. 157 to have a significant effect on its
financial position or results of operation.
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.
F9
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
References
to June 30, 2008 are Unaudited
3. Notes
payable
As of
June 30, 2008 and December 31, 2007, the Company had outstanding notes payable
as follows:
|
|
June
30, 2008
|
December
31, 2007
|
|
|
|
|
|
A
. Murphy, due in quarterly installments of $40,000 beginning
January 31, 2008and bears interest at 1% over New York floating
prime
|
$ 388,711
|
$ 480,000
|
|
|
|
|
|
Bank
installment loan, payable in monthly installments of $6,296 plus accrued
at rate of 7% interest
|
223,266
|
241,932
|
|
Note
payable August 29, 2008 at 5% interest
|
300,000
|
-
|
|
Bank
line of credit due March 10, 2010 and bears interest at 7%
|
250,000
|
-
|
|
|
1,161,977
|
721,932
|
|
Less: current
portion
|
493,989
|
401,932
|
|
Long
term portion
|
$ 667,988
|
$320,000
|
|
|
|
|
|
|
|
|
|
Related
Party Notes Payable:
|
|
|
|
Shareholders,
due on demand, bearing interest at1.71% per annum
|
$ -
|
$100,985
|
|
Workplace
Health, due on demand, bearing interest at 4.5% per annum
|
-
|
56,000
|
|
Total
Related Party Notes Payable
|
-
|
156,985
|
|
Less: current
portion
|
-
|
156,985
|
|
Long
term portion
|
$
-
|
$ -
|
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.
The bank
loans are 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.
Maturities
of notes payable and long-term debt for each of the years succeeding December
31, 2007 are as follows:
|
|
Year
ending December 31,
|
|
|
|
2008
|
$ 493,989
|
|
|
2009
|
257,988
|
|
|
2010
|
410,000
|
|
|
|
$
1,161,977
|
4.
Stockholders’ Equity
The
Company is authorized to issue 150,000,000 shares of common stock with a par
value of $.001 per share. The Company had 140,399,001 shares issued
and outstanding at June 30, 2008 and December 31, 2007,
respectively.
In the
year ended December 31, 2006, the Company sold 4,177,670 shares in private
placements to accredited investors for $307,205 in cash.
F10
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
References
to June 30, 2008 are Unaudited
5.
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.
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:
|
|
Six
Months Ended
June
30, 2008
|
|
Year
Ended
December
31, 2007
|
|
Income
tax expense at statutory rate
|
$
(19,750)
|
|
$
(134,806)
|
|
Valuation
allowance
|
19,750
|
|
134,806
|
|
Income
tax expense per books
|
$
-
|
|
$
-
|
Net
deferred tax assets consist of the following components as of:
|
|
Six
Months Ended
June
30, 2008
|
|
Year
Ended
December
31, 2007
|
|
NOL
carryover
|
$ 19,750
|
|
$
181,740
|
|
Valuation
allowance
|
(19,750)
|
|
(181,740)
|
|
Net
deferred tax asset
|
$ -
|
|
$
-
|
At
December 31, 2007, the Company had total net operating losses carried forward of
approximately $466,000 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 December 31, 2007 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 volativity 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.
F11
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
References
to June 30, 2008 are Unaudited
6. Related
Party Transactions
At
December 31, 2007, these loans
and advances, which bear interest at 1.71% and are
unsecured, aggregated $156,985, plus accrued and unpaid
interest of $21,690, respectively and are reflected in
"Loans and advances from related party" and
"Accrued interest, related party" on the accompanying balance
sheet. These loans and accrued interest were retired during the
quarter ended June 30, 2008.
7. Subsequent
Events
On May
27, 2008, the Board of Directors and shareholders owning approximately 85% of
the Company’s issued and outstanding common shares voted to increase its
authorized shares of common stock from 150,000,000 to 200,000,000 at par value
of $0.001 per share. The Company has not yet filed the amended
articles of incorporation with the Nevada Secretary of State
F12
