EXHIBIT INDEX
|
Exhibit
|
|
|
99.1
99.2
|
Press
release dated July 30, 2008
Supplemental
Information- Audit Report for years ended 12/31/2007 and
12/31/2006
|
Exhibit
99.1
July
30, 2008 - Labwire Management Announces Audited Financial Results for
2007
Houston, TX- July 30, 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 its audit of the financial statements for 2007 and
is pleased to report the following results:
|
1)
|
RECORD ANNUAL SALES
of
$4,799,631 which exceeds the $4,700,000 total previously
announced.
|
|
2)
|
PRE-TAX PROFIT
of $
377,765. The company should have little or no tax liability due to a net
operating loss carry forward benefit from the Company Startup in prior
years. Additionally, Gross Profit was $ 1,705,101 vs. $1,149,056 for 2006.
This represents a $556,045 increase or a 48.39%
improvement.
|
|
3)
|
THE ACQUISITION OF OCCUPATIONAL
TESTING, INC (OTI)
on October 31, 2007 produces substantial current
year and future benefit to Labwire.
|
|
A)
|
Total
Income for Labwire financial statements of $153,766.62 with a Gross Profit
of $106,069.26 and net income of $8,751.01 (after the inclusion of all
acquisition costs) for the two-month period of November 1 thru December
31, 2007.
|
|
B)
|
While
the full year results for OTI were not a part of the Labwire audit,
management has confirmed that Total 2007 Annual Sales for OTI exceeded
$860,000 with a gross profit of $639,000 and net income of $148,000. Total
revenue exceeded the purchase basis of $600,000 by $260,000 or
43%.
|
“2007 was
an excellent year for Labwire” stated Marlin Williford, CFO. “We are pleased
that the audit process confirmed the results previously announced by management.
We expect the 2008 reporting process to proceed more smoothly as we improve our
financial infrastructure and procedures. ”
Dexter
Morris, Labwire Chairman and CEO, provides the following insight into business
activity for this year: “We are 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
various audit processes, we are clearing a final hurdle to up-listing. Our 2007
numbers were very encouraging with record revenue, increasing margins and
profit, and the completion of an exciting acquisition. We will continue to
develop OTI and this acquisition business model as we constantly search the
market for new opportunities.”
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.
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:
mwilliford@capnetrisk.com
Phone:
(832) 487- 7803
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 8-K/A, Amendment No. 1 of Labwire,
Inc., 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
August 6,
2008
2675 S. Jones Blvd. Suite
109, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501
LABWIRE,
INC.
Consolidated
Balance Sheets
|
|
|
12/31/07
|
|
|
12/31/2006
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
Cash
and cash equivalents - interest bearing
|
$
|
206,520
|
|
$
|
108,346
|
|
|
Accounts
receivable, net of allowance for doubtful accounts of $5,600 and $-0- as
of December 31, 2007 and 2006, respectively
|
|
1,102,030
|
|
|
732,544
|
|
|
Prepaid
expenses
|
|
20,696
|
|
|
6,148
|
|
|
Total
Current Assets
|
|
1,329,246
|
|
|
847,038
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT:
|
|
|
|
|
|
|
|
Laboratory
equipment
|
|
53,781
|
|
|
40,371
|
|
|
Vehicles
|
|
7,000
|
|
|
7,000
|
|
|
Office
furniture and equipment
|
|
35,251
|
|
|
26,224
|
|
|
Proprietary
software
|
|
118,550
|
|
|
-
|
|
|
Less: accumulated
depreciation
|
|
(54,207)
|
|
|
(30,627
|
)
|
|
Total
Property and Equipment
|
|
160,375
|
|
|
42,968
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS:
|
|
|
|
|
|
|
|
Goodwill
|
|
455,210
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
1,944,831
|
|
$
|
890,006
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
$
|
866,796
|
|
$
|
817,450
|
|
|
Income
taxes payable
|
|
24,303
|
|
|
6,008
|
|
|
Line
of credit
|
|
241,932
|
|
|
-
|
|
|
Current
portion of long-term debt
|
|
160,000
|
|
|
-
|
|
|
Notes
payable to related parties
|
|
156,985
|
|
|
246,600
|
|
|
Accrued
interest payable
|
|
7,045
|
|
|
-
|
|
|
Accrued
interest payable – related parties
|
|
21,690
|
|
|
19,547
|
|
|
Total
Current Liabilities
|
|
1,478,751
|
|
|
1,089,605
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES:
|
|
|
|
|
|
|
|
Long
term-debt, less current portion above
|
|
320,000
|
|
|
-
|
|
|
Total
Long-term Liabilities
|
|
320,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
1,798,751
|
|
|
1,089,605
|
|
|
|
|
|
|
|
|
|
|
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
|
|
(465,703
|
)
|
|
(811,382
|
)
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity (Deficit)
|
|
146,080
|
|
|
(199,599
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
|
$
|
1,944,831
|
|
$
|
890,006
|
|
The
accompanying notes are an integral part of these financial
statements.
F1
LABWIRE,
INC.
Consolidated
Statements of Operations
|
|
|
For
the Year Ended 12/31/2007
|
|
|
For
the Year Ended 12/31/2006
|
|
|
REVENUES
|
$
|
4,799,631
|
|
$
|
3,701,742
|
|
|
COST
OF SALES
|
|
3,094,530
|
|
|
2,552,686
|
|
|
GROSS
PROFIT
|
|
1,705,101
|
|
|
1,149,056
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
General
and administrative expenses
|
|
604,545
|
|
|
1,010,325
|
|
|
Bad
debt expense
|
|
6,405
|
|
|
453
|
|
|
Advertising
and marketing expense
|
|
10,240
|
|
|
9,780
|
|
|
Payroll
expenses
|
|
663,721
|
|
|
597,379
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
1,284,911
|
|
|
1,617,937
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME (LOSS)
|
|
420,190
|
|
|
(468,881
|
)
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
Interest
expense
|
|
(42,634
|
)
|
|
(26,078
|
)
|
|
Interest
income
|
|
209
|
|
|
-
|
|
|
Total
Other Income (Expenses)
|
|
(42,425
|
)
|
|
(26,078
|
)
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS) BEFORE TAXES
|
|
377,765
|
|
|
(494,959
|
)
|
|
|
|
|
|
|
|
|
|
INCOME
TAX EXPENSE
|
|
32,086
|
|
|
6,022
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
$
|
345,679
|
|
$
|
(500,981
|
)
|
|
|
|
|
|
|
|
|
|
BASIC
EARNINGS (LOSS) PER SHARE
|
$
|
0.0025
|
|
$
|
(0.0036
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
140,399,001
|
|
|
138,315,665
|
|
The
accompanying notes are an integral part of these financial
statements.
F2
LABWIRE,
INC.
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
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
F3
LABWIRE,
INC.
Consolidated
Statements of Cash Flows
|
|
|
For
the Year Ended
|
|
|
For
the year ended
|
|
|
|
|
12/31/2007
|
|
|
12/31/2006
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
Net
income (loss)
|
$
|
345,679
|
|
$
|
(500,981
|
)
|
|
Adjustments
to reconcile net income (loss) to net cash provided (used) by operating
activities:
|
|
|
|
|
|
|
|
Depreciation
|
|
23,580
|
|
|
16,022
|
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
(Increase)
decrease in accounts receivable
|
|
(369,486
|
)
|
|
184,511
|
|
|
(Increase)
decrease in prepaid expenses
|
|
(14,548
|
)
|
|
(6,148
|
)
|
|
Increase
(decrease) in accounts payable and accrued expenses
|
|
49,346
|
|
|
113,757
|
|
|
Increase
(decrease) in accrued interest payable
|
|
9,188
|
|
|
-
|
|
|
|
|
18,295
|
|
|
-
|
|
|
Net
Cash Provided by (Used) in Operating Activities
|
|
62,054
|
|
|
(192,839
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
(22,437
|
)
|
|
(16,474
|
)
|
|
Development
of Software
|
|
(118,550
|
)
|
|
-
|
|
|
Acquisition
goodwill
|
|
(455,210
|
)
|
|
-
|
|
|
Net
Cash Used in Investing Activities
|
|
(596,197
|
)
|
|
(16,474
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Repayment
of notes payable
|
|
(59,890
|
)
|
|
(65,000
|
)
|
|
Increase
in bank line of credit
|
|
241,932
|
|
|
-
|
|
|
Increase
in notes payable
|
|
450,275
|
|
|
|
|
|
Sale
of common stock for cash
|
|
-
|
|
|
307,205
|
|
|
Net
Cash Provided by Financing Activities
|
|
632,317
|
|
|
242,205
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH
|
|
98,174
|
|
|
32,892
|
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF YEAR
|
|
108,346
|
|
|
75,454
|
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF YEAR
|
$
|
206,520
|
|
$
|
108,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
PAID FOR:
|
|
|
|
|
|
|
|
Interest
|
$
|
31,305
|
|
$
|
19,378
|
|
|
Income
Taxes
|
$
|
-
|
|
$
|
4,840
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial
statements.
F4
Labwire,
Inc.
Notes to
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. 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 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 and $-0- at December 31, 2007 and December 2006,
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
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’s revenues are derived principally from the sale of medical testing
services to companies and individuals. Revenue is recognized after
the test 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.
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 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.
F6
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
1.
Summary of Significant Accounting Policies - Continued
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 years ended
December 31, 2007 and 2006 there were no dilutive securities. The
computation of earnings (loss) per share is as follows:
|
|
Year
Ended
December
31, 2007
|
Year
Ended
December
31, 2006
|
|
|
|
|
|
Net
Income (Loss)
|
$345,679
|
$ (500,981)
|
|
Weighted
average shares outstanding
|
140,399,001
|
138,315,665
|
|
Basic
Earnings (Loss) per share
|
$ 0.0025
|
$ (0.0036)
|
Recent Accounting
Pronouncements
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.
F7
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
Recent Accounting
Pronouncements (Continued)
In
February 2007, the FASB issued SFAS NO. 159, The Fair Value Option for Financial
Assets and Financial Liabilities-Including an amendment of FASB Statement No.
115. This statement permits entities to choose to measure many financial
instruments and certain items at fair value. The objective is to
improve the financial reporting by providing entities with the opportunity
to mitigate volatility in reported earnings caused by measuring related assets
and liabilities differently without having to apply complex hedge accounting
provisions. This statement is expected to expand the use of fair value
measurement objectives for accounting for financial instruments. This
statement is effective as of the beginning of an entity's first fiscal year that
begins after November 15, 2007.
In December 2007, the
FASB issued SFAS 160, Non-controlling Interest in
Consolidated Financial Statements-an amendment of ARB No. 51.
This statement amends ARB 51 to establish accounting and reporting
standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. It also changes the way the consolidated
income statement is presented for non-controlling interest. This statement
improves comparability by eliminating diversity of methods. This statement
also requires expanded disclosure. The Company does not expect the adoption
of SFAS No. 160 to have a significant effect on its financial position or
results of operation.
In March
2008, the FASB issued SFAS 161, Disclosures about Derivative
Instruments and Hedging Activities--an amendment of FASB Statement No. 133. This
statement is intended to enhance
the disclosure requirements for derivative instruments and
hedging activities as required by SFAS 133. The Company is currently
evaluating the impact, if any, the adoption of SFAS 161 will have on its
disclosure requirements.
In May
2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted Accounting
Principles. This Statement identifies the sources
of accounting principles and the
framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles
(GAAP) in the United States (the GAAP hierarchy). The Company is currently
evaluating the impact, if any, the adoption of SFAS 161 will have on its
disclosure requirements.
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.
3.
Line of credit
On
February 13, 2007, the Company established a $300,000 revolving line of credit
with Frost Bank that matures on February 13, 2008. The interest rate on the
outstanding balance of the revolving line of credit is a floating prime plus 1%
and is due on the 24
th
of each
month. The principal balance owing by the Company at December 31, 2007 was
$241,933 and accrued interest payable was $-0-. The Company had $58,067
available on the revolving line of credit at December 31, 2007. 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.
F8
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
4. Long-term
notes payable
As of
December 31, 2007 and 2006, the Company had notes payable totaling $636,985 as
follows:
|
|
2007
|
2006
|
|
A
. Murphy, due in quarterly installments of $40,000 beginning
January 31, 2008 and bears interest at 1% over New York floating
prime
|
$480,000
|
$ -
|
|
|
|
|
|
Less: current
portion
|
160,000
|
-
|
|
|
$320,000
|
$ -
|
|
|
|
|
|
Related
Party Notes Payable:
|
|
|
|
Shareholders,
due on demand, bearing interest at1.71% per annum
|
$100,985
|
$190,600
|
|
|
|
|
|
Workplace
Health, due on demand, bearing interest at 4.5% per annum
|
56,000
|
56,000
|
|
|
|
|
|
Less: current
portion
|
156,985
|
246,600
|
|
|
$ -
|
$ -
|
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.
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
|
$ 316,985
|
|
|
2009
|
160,000
|
|
|
2010
|
160,000
|
|
|
|
$ 636,985
|
5.
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 140,399,000 shares issued
and outstanding at September 30, 2007, December 31, 2006 and 2005,
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.
F9
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
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.
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:
|
|
December
31, 2007
|
|
December
31, 2006
|
|
Income
tax expense at statutory rate
|
$ (134,806)
|
|
$
(168,286)
|
|
Valuation
allowance
|
134,806
|
|
168,286
|
|
Income
tax expense per books
|
$
-
|
|
$
-
|
Net
deferred tax assets consist of the following components as of:
|
|
December
31, 2007
|
|
December
31, 2006
|
|
NOL
carryover
|
$ 181,740
|
|
$ 168,286
|
|
Valuation
allowance
|
(181,740)
|
|
(168,286)
|
|
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.
F10
Labwire,
Inc.
Notes to
the Consolidated Financial Statements
7. Related
Party Transactions
As of
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,
and are reflected in "Loans and advances from related party" and "Accrued
interest, related party" on the accompanying balance sheet.
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
|
|
We have
included the results of operations for Occupational Testing, Inc. in our
financial statements since October 31, 2007.
9.
Subsequent Events
On
February 13, 2008, the Company renewed its revolving loan agreement as a term
note with a maturity date of March 4, 2011 at an interest rate of 6.25% per
annum.
On March
4, 2008, the Company entered into a revolving loan agreement with a maturity
date of February 13, 2010 at an interest rate of 1% over the rate that the
Lender charges, or would charge, on 90-day unsecured loans to the most
creditworthy corporate customers.
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.
F11
10. Pro
Forma Results (Unaudited)
The
following table reflects unaudited pro forma results of operations assuming that
the Occupational Testing, Inc. acquisition had occurred on January 1,
2006:
|
|
Year
Ended
December
31, 2007
|
Year
Ended
December
31, 2006
|
|
|
|
|
|
Revenue
|
$ 5,506,771
|
$ 4,415,478
|
|
Net
income (loss)
|
$ 485,568
|
$ (
397,234)
|
|
Net
income (loss) per share
|
$ 0.0035
|
$ (0.0029)
|
F12