UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 
 þ           Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 For the
quarterly period ended: September 30, 2008
 
 o           Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 For the
transition period from _______ to _________
 
 Commission
file number: 000-1426567
  LABWIRE,
INC.
 (Exact
name of registrant as specified in its charter)
 
 Nevada
                  
                  37-1501818(State
      or other jurisdiction of incorporation or organization)
                  
                  (I.R.S.
      Employer Identification
No.)
 
 
 1514
      FM 359 N., Brookshire, Texas
                
                77423(Address
      of principal executive offices)
                
                (Zip
      Code)
  281-934-3153
 (Registrant’s
telephone number, 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 þ  No
o


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 o                                           Accelerated
filer o
 Non-accelerated
filer   o                                           Smaller
Reporting Company  þ
 (Do not
check if a smaller reporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).    Yes
o No þ
  The
number of shares of common stock, $.001 par value, outstanding as of November
28, 2008: 142,699,001shares
 
  Page
1
  LABWIRE,
INC.
 PERIOD
ENDED SEPTEMBER 30, 2008
 
 INDEX
 
 PagePART
      I.  FINANCIAL INFORMATIONITEM
      1.
                                    FINANCIAL
      STATEMENTSFinancial
      statements of Labwire, Inc. (unaudited):Consolidated
      balance sheets as of September 30, 2008 (unaudited) and December 31,
      2007
                                    3Consolidated
      statements of operations for the three and nine months ended September 30,
      2008 and 2007 (unaudited)
                                    4Consolidated
      statement of stockholders' deficiency for the period from December 31,
      2005 through September 30, 2008 (unaudited)
                                    5Consolidated
      statements of cash flows for the nine months ended September 30, 2008 and
      2007 (unaudited)
                                    6Notes
      to consolidated financial statements (unaudited)
                                    7ITEM
      2.
                                    MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                                    17ITEM
      4T.
                                    CONTROLS
      AND PROCEDURES
                                    24PART
      II.   OTHER INFORMATIONITEM
      1.
                                    LEGAL
      PROCEEDINGS
                                    25ITEM
      6.
                                    EXHIBITS
                                    25SIGNATURES
                                    25
   Page
2
  PART
I.   FINANCIAL INFORMATION
 ITEM
1.   FINANCIAL STATEMENTS
 
 LABWIRE,
INC.
 Condensed
Consolidated Balance Sheets
 
 September
      30, 2008
                      
                      December
      31, 2007ASSETS
                      (Unaudited)
                      
                      (Restated)CURRENT
      ASSETS:Cash
      and cash equivalents - interest bearing
                      $    77,485
                      
                      $    206,520Accounts
      receivable, net of allowance for doubtful accounts of $5,600 as
      ofSeptember
      30, 2008 and December 31, 2007, respectively
                      991,945
                      
                      860,098Advances
      to employees
                      26,405
                      
                      -Prepaid
      expenses
                      29,259
                      
                      20,696Total
      Current Assets
                      1,125,094
                      
                      1,087,314PROPERTY
      AND EQUIPMENT:Laboratory
      equipment
                      53,781
                      
                      53,781Vehicles
                      7,000
                      
                      7,000Office
      furniture and equipment
                      51,115
                      
                      35,251Proprietary
      software
                      237,703
                      
                      118,550349,599
                      
                      214,582Less:  accumulated
      depreciation
                      (95,866)
                      
                      (54,207)Total
      Property and Equipment
                      253,733
                      
                      160,375OTHER
      ASSETS:Goodwill
                      455,210
                      
                      455,210TOTAL
      ASSETS
                      $    1,834,037
                      
                      $    1,702,899LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)CURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                      $    387,992
                      
                      $    866,796Income
      taxes payable
                      17,939
                      
                      24,303Current
      portion of long-term debt
                      520,326
                      
                      401,932Notes
      payable to related parties
                      -
                      
                      156,985Accrued
      interest payable
                      35,231
                      
                      7,045Accrued
      interest payable – related parties
                      -
                      
                      21,690Total
      Current Liabilities
                      961,488
                      
                      1,478,751LONG-TERM
      LIABILITIES:Long
      term-debt, less current portion above
                      626,883
                      
                      320,000Total
      Long-term Liabilities
                      626,883
                      
                      320,000TOTAL
      LIABILITIES
                      1,588,371
                      
                      1,798,751STOCKHOLDERS’
      EQUITY (DEFICIT):Common
      stock; $0.001par value; 200,000,000 shares authorized;142,699,001
      shares issuedand
      outstanding at September 30, 2008 and140,399,001
      shares at December 31, 2007
                      142,699
                      
                      140,399Additional
      paid-in capital
                      665,235
                      
                      471,384Accumulated
      deficit
                      (562,268)
                      
                      (707,635)Total
      Stockholders’ Equity (Deficit)
                      245,666
                      
                      (95,852)TOTAL
      LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
                      1,834,037
                      
                      1,702,899
  The accompanying notes are an integral part of these
financial statements.
  Page
3
  
 LABWIRE,
INC.
 Condensed
Consolidated Statements of Operations
 
 For
      the Three Months Ended
                    September
      30,
                  
                  For
      theNine Months Ended
                    September
      30,2008
                  
                  2007
                  
                  2008
                  
                  2007REVENUES
                  $    1,292,472
                  
                  $    1,352,671
                  
                  $    3,168,726
                  
                  $    3,529,956COST
      OF SALES
                  747,665
                  
                  927,084
                  
                  1,707,178
                  
                  2,285,302GROSS
      PROFIT
                  544,807
                  
                  425,587
                  
                  1,461,548
                  
                  1,244,654OPERATING EXPENSES:General
      and administrative expenses
                  167,173
                  
                  96,952
                  
                  529,194
                  
                  402,066Bad
      debt expense
                  365
                  
                  -
                  
                  2,366
                  
                  490Advertising
      and marketing expense
                  6,520
                  
                  1,750
                  
                  15,896
                  
                  2,938Payroll
      expenses
                  208,879
                  
                  154,278
                  
                  674,160
                  
                  443,752Total
      Operating Expenses
                  382,937
                  
                  252,980
                  
                  1,221,616
                  
                  849,246OPERATING INCOME
                  161,870
                  
                  172,607
                  
                  239,932
                  
                  395,408OTHER INCOME
    (EXPENSES)Interest expense
                  (40,026)
                  
                  (12,645)
                  
                  (93,002)
                  
                  (25,197)Interest
      income
                  -
                  
                  -
                  
                  78
                  
                  -Total
      Other Income (Expenses)
                  (40,026)
                  
                  (12,645)
                  
                  (92,925)
                  
                  (25,197)NET INCOME BEFORE TAXES
                  121,844
                  
                  159,962
                  
                  147,007
                  
                  370,211INCOME
      TAX EXPENSE (BENEFIT)
                  4,049
                  
                  -
                  
                  1,640
                  
                  32,086NET INCOME
                  $    117,795
                  
                  $    159,962
                  
                  $    145,367
                  
                  $    338,125BASIC EARNINGS PER SHARE
                  $    0.00
                  
                  $    0.00
                  
                  $    0.00
                  
                  $    0.00WEIGHTED
      AVERAGE NUMBER OFSHARES OUTSTANDING
                  140,654,557
                  
                  140,399,001
                  
                  140,654,557
                  
                  140,399,001
  
 The
accompanying notes are an integral part of these financial
statements.
  Page
4
  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
                    -
                    307,205Net
      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 (Restated)
                    -
                    -
                    -
                    103,747
                    103,747Balance,
      December 31, 2007 (Restated)
                    140,399,001
                    140,399
                    471,384
                    (707,635)
                    (95,852)Common
      stock issued for cash
                    100,000
                    100
                    14,900
                    
                    15,000Issuance
      of common stock to retire debt
                    2,200,000
                    2,200
                    178,951
                    
                    181,151Net
      income for the nine months ended September 30, 2008
                    -
                    -
                    -
                    145,367
                    145,367Balance,
      September 30, 2008
                    142,699,001
                    $    142,699
                    $    665,235
                    $    
      (562,268)
                    $    245,666
     The
accompanying notes are an integral part of these financial
statements.
  Page
5
  
 LABWIRE,
INC.
 Condensed
Consolidated Statements of Cash Flows
 
 For
      the Nine Months Ended
                            September
      302008
                          
                          2007OPERATING
      ACTIVITIESNet
      income
                          $    145,367
                          
                          $    338,125Adjustments
      to reconcile net income (loss) to net cash provided (used) by operating
      activities:Depreciation
                          41,659
                          
                          14,071Changes
      in operating assets and liabilities(Increase) decrease in accounts receivable
                          (158,252)
                          
                          (296,281)(Increase)
      decrease in prepaid expenses
                          (8,563)
                          
                          1,382Increase
      (decrease) in accounts payable and  accrued
    expenses
                          (478,804)
                          
                          17,109Increase
      (decrease) in accrued interest payable
                          6,496
                          
                          (19,547)Income
      taxes payable
                          (6,364)
                          
                          18,295Net
      Cash Provided by (Used) in Operating Activities
                          (458,461)
                          
                          73,154CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property and equipment
                          (15,864)
                          
                          (61,496)Development
      of Software
                          (119,153)
                          
                          -Net
      Cash Used in Investing Activities
                          (135,017)
                          
                          (61,496)CASH
      FLOWS FROM FINANCING ACTIVITIESRepayment
      of notes payable
                          (150,557)
                          
                          (66,165)Increase
      in bank line of credit
                          300,000
                          
                          121,933Sale
      of common stock
                          15,000Increase
      in notes payable
                          300,000
                          
                          76,588Net
      Cash Provided by Financing Activities
                          464,443
                          
                          132,356NET
      INCREASE (DECREASE) IN CASH
                          (129,035)
                          
                          144,014CASH
      AT BEGINNING OF YEAR
                          206,520
                          
                          108,346CASH
      AT END OF PERIOD
                          $    77,485
                          
                          $    252,360CASH
      PAID FOR:Interest
                          $    57,770
                          
                          $    3,666Income
      Taxes
                          $    -
                          
                          $    6,022
  The
accompanying notes are an integral part of these financial
statements.
 
  Page
6
  
 
 Labwire,
Inc.
 Notes to
Consolidated Financial Statements
 References
to September 30, 2008 are Unaudited
 
 
 1.
Summary of Significant Accounting Policies
 Nature of
Operations-Labwire, Inc. (referred to herein as “the Company”) was incorporated in
Nevada on October 8, 2004. The Company was established as an employee screening
company specializing in drug testing, background investigations, employee
training, on-line certification and security with a client base of large US and
European corporations. It provides compliance services for Department of
Transportation (49CFR Part 40) and Federal Trade Commission (Fair Credit
Reporting Act) governed programs.
 
 Basis of
Consolidation – The consolidated financial statements include the
accounts of the Company and its two wholly-owned subsidiaries.  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 of America (“U.S. GAAP”). 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 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, in order 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 September 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– In accordance with
Statement of financial Accounting Standards (“SFAS”) No. 144, Accounting for the
Impairment for Disposal 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,.
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.
 
 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 GAAP 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–   We
have three main sources of revenue: drug testing and related services, training
and online certification, and security services provided by an allied
company.  Drug testing: we fulfill orders for drug testing services,
wherein we are responsible for the performance and data maintenance related to
employee drug testing for its clients.  We do not perform the drug
tests, but we fulfill the order through our 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.  We have low bad debt levels because our policy is to deal
with large well-positioned firms that pay monthly. Because we track these
company’s activities daily, we are constantly aware of our position and
therefore can demand and receive timely payments as we provide on-going
compliance services. Pursuant to EITF 99-19, we are responsible for fulfilling a
customer’s order, including whether the service is acceptable and therefore
bears the risks and rewards of principal.  As such, we have elected to
record the gross amounts of the contracts.  Our service agreements
rarely include multiple parts that would have a material impact on the
recognition of revenue.  As such, we have created our 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 the client is automatically tagged for billing, which coincides with
performance of services.
 
 Security
services provided by the Company through its allied company: 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 projects 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 no events or circumstances warrant revised
estimates of useful lives of the software.
 
 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 nine months ended
September 30, 2008 and the year ended December 31, 2007 were $15,896and $10,240,
respectively.
 
 Stock
Based Compensation–The Company 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), Share-Based Payments, and Staff
Accounting Bulletin No. 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, 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 nine months ended September 30, 2008 and 2007 there were
no dilutive securities.  The computation of earnings (loss) per share
is as follows:
 
 Nine
      Months Ended
                      September
      30,2008
                    2007Net
      Income
                    
                    $      145,367
                    $      338,125Weighted
      average shares outstanding
                    
                    140,654,557
                    140,399,001Basic
      Earnings per share
                    
                    $    0.00
                    $    0.00
 
 
 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.
 
 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 accordance with 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 accordance with
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.  Restatement
 In
preparing the financial statements for the quarter ended March 31, 2008, the
Company determined that it had recorded excess revenue during the year ended
December 31, 2007.   As the result of this error, we are
restating our financial statements (“The Restatement”) and associated
disclosures to reduce revenues.  The error resulted in the over
statement of and a corresponding understatement of net loss by $241,932, for the
year ending December 31, 2007. The restatement impacted certain line items
within cash flows from operations, but had no effect on total cash flows from
operations and did not impact cash flows from financing or investing
activities.
 
 The
restatement also affected Note 7.
 
 The
effect of the restatement on specific items in the balance sheet is as
follows:
 
 December
      31, 2007As
      Previously
                    Reported
                  
                  Adjustments
                  
                  As
      RestatedSTOCKHOLDERS’
      EQUITY:Retained
      earnings (deficit)
                  $    
      (465,703)
                  
                  $    
      (241,932)
                  
                  $    
      (707,635)Total
      Stockholders’ Equity
                  $       146,080
                  
                  $    
      (241,932)
                  
                  $    
      (95,852)
 
 The
effect of the restatement on specific items in the statements of operations is
as follows:
 
 Year
      ended December 31, 2007As
      Previously
                          Reported
                        
                        Adjustments
                        
                        As
      RestatedREVENUES:
                        $
          4,799,631
                        
                        $    
      (241,932)
                        
                        $    4,557,699GROSS
      PROFIT
                        1,705,101
                        
                        (241,932)
                        
                        1,463,169OPERATING
      INCOME
                        420,190
                        
                        (241,932)
                        
                        178,258NET
      INCOME
                        345,679
                        
                        (241,932)
                        
                        103,747
  The
effect of the restatement on specific items in the statements of cash flows is
as follows:
 
 Year
      ended December 31, 2007As
      Previously
                      Reported
                    
                    Adjustments
                    
                    As
      RestatedOPERATING
      ACTIVITIES:Net
      Income
                    $  345,679
                    
                    $    
      (241,932)
                    
                    $    103,747Changes
      in operating assets and liabilities:Increase
      in accounts receivable
                    (369,486)
                    
                    241,932
                    
                    (127,554)Net
      cash used in operating activities
                    62,054
                    
                    -
                    
                    62,054
 
 
 3.  Goodwill
 The
Company acquired 100% of Occupational Testing, Inc. (OTI) on October 31, 2007
for $120,000 cash and a $480,000 note payable 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.
 
 4.  Notes
payable
 As of
September 30, 2008 and December 31, 2007, the Company had outstanding notes
payable as follows:
 
 September
      30, 2008
                  December
      31, 2007A
      .  Murphy, due in quarterly installments of $40,000 beginning
      January 31, 2008 andbears
      interest at 1% over New York floating prime
                  $    343,066
                  $    480,000Bank
      installment loan, payable in monthly installments of $7,482.43 at interest
      rate of 1% over prime interest
                  204,143
                  241,932Note
      payable December 31, 2008 at 4% interest per annum
                  300,000Bank
      line of credit due February 13, 2010 and bears interest at per
      annuminterest
      rate of 1% over prime interest
                  300,000
                  -1,147,209
                  721,932Less:  current
      portion
                  520,327
                  401,932Long
      term portion
                  $    
      626,883
                  $    320,000Related
      Party Notes Payable:Shareholders,
      due on demand, bearing interest at1.71% per annum
                  $            
        -
                  $ 
      100,985Workplace
      Health, due on demand, bearing interest at 4.5% per annum
                  -
                  56,000Total
      Related Party Notes Payable
                  -
                  156,985Less:  current
      portion
                  -
                  156,985Long
      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 the Company’s accounts receivable 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
                  $    
        479,2212009
                  257,9882010
                  410,000$    1,147,209
 
 
 
 5.
Stockholders’ Equity
 On
September 19, 2008, the Company filed amended articles of incorporation with the
Nevada Secretary of State to increase its authorized shares from 150,000,000 to
200,000,000 shares of common stock with a par value of $0.001.  The
Company had 142,699,001 shares issued and outstanding at September 30, 2008 and
140,399,001 issued and outstanding at December 31, 2007.
 
 During
the second quarter of 2008, we issued an aggregate of 2,200,000 shares of our
common stock to our two directors and other shareholders in exchange for the
cancellation of promissory notes that we executed in favor of them in the
aggregate principal and accrued interest amount of approximately
$181,151.  Because the recipients’ status as directors of ours, the
issuance of these shares is claimed to be exempt pursuant to Section 4(2) of the
Securities Act of 1933 (the “Act”).
 
 During
the first quarter of 2008, we sold 100,000 shares of our common stock to a
single accredited investor at a per share price of $.15.  This sale of
common stock is claimed to be exempt pursuant to Rule 506 of Regulation D under
the Act.  No advertising or general solicitation was employed in
offering these securities.  The offering and sale were made only to an
accredited investor, and subsequent transfers were restricted in accordance with
the requirements of the Act.
 
 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.  This sale of
common stock is claimed to be exempt pursuant to Rule 506 of Regulation D under
the Act.  No advertising or general solicitation was employed in
offering these securities.  The offering and sale were made only to an
accredited investor, and subsequent transfers were restricted in accordance with
the requirements of the Act.
 
 
 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:
 
 Nine
      Months Ended
                    September
      30, 2008
                  
                  Year
      Ended
                    December
      31, 2007Income
      tax expense at statutory rate
                  $      (54,330)
                  
                  $     (134,806)Valuation
      allowance
                  54,330
                  
                  134,806Income
      tax expense per books
                  $                   -
                  
                  $                   -
 
 
 Net
deferred tax assets consist of the following components as of:
 Nine
      Months Ended
                    September
      30, 2008
                  
                  Year
      Ended
                    December
      31, 2007NOL
      carryover
                  $      54,330
                  
                  $     181,740Valuation
      allowance
                  (54,330)
                  
                  (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 volatility in the Company’s effective tax rate in future
periods when new information about particular tax positions may cause management
to change its estimates. If the Company establishes 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
 At
December 31,  2007,  loans and  advances from the
Company’s two directors bore interest at 1.71% and were
unsecured,  aggregated $156,985,  plus accrued and unpaid
interest of $21,690, 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.
 
 Labwire
(dba Labwire Security, Inc.) contracts with American K-9 Bomb Search, Inc.,
which is one-half owned by Labwire’s Chairman and Chief Executive Officer, to
perform security services.  Labwire Security, Inc. is fully licensed
with the State of Texas.   Labwire is paid a 5% commission for the K-9
security services that it refers to Labwire Security, Inc.  The
commissions received by the Company have been less than 1% of the Company’s
gross revenues.
 
 
 ITEM
2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 
 Company
Overview
 
 Labwire,
Inc. was incorporated in 2004 as a Nevada corporation and is headquartered in
Brookshire, Texas, close to metropolitan Houston.   We are a leading
provider of certain third party administrator (“TPA”) services.  As a
provider of TPA services, we administer certain programs for our clients,
allowing them to outsource matters that they would prefer not to undertake
in-house on their own.  We act as a TPA with respect to the following
three types of services:
 
 1.
                Drug
      testing and other employee screening – In connection with the provision of
      these services, we supervise specimen collection and test processing by
      federally certified labs.  We also provide a medical review
      officer, who interprets the results of the testing.  Moreover,
      unrelated to drug testing, we supervise background screening and on-site
      testing, which includes audio and vision testing, general employee
      physicals, and metal testing of employees engaged in operations such as
      mining.
 
 2.
                Employee
      training and online certification – In connection with the provision of
      these services, we have developed training and education programs to
      enable clients to comply with certain government
      regulations.  Currently, some of these programs deal with
      Department of Transportation regulations, while others deal with Federal
      Trade Commission regulations.  We plan to broaden our offering
      of these programs in the future, as we are
able.
 
 3.
                Security –
      In connection with the provision of these services, we provide K-9 dog
      teams that search for bombs or drugs, supervise on-site physical security
      teams, and undertake some surveillance
work.
 
 We
operate through two wholly-owned subsidiaries, Workplace Screening Services,
Inc. and Occupational Testing, Inc.  We have developed the LabwireTM
Platform, an innovative, proprietary Web-based application that (a) streamlines
the complex regulatory and record management activities associated with our drug
testing, and (b) offers our employee training and online certification
programs.  This application figures prominently into our business
strategy.  Moreover, our management team has extensive experience in
our business and industry.
 
 We became
a reporting company with the U.S. Securities and Exchange Commission (the
“Commission”) when our General Form for Registration of Securities on Form 10
became effective on or about April 14, 2008.
 
 There can
be no assurance that we will be successful in our business.  Our
business involves numerous risks, the principal ones of which are described in
the section captioned “Risk Factors” inour General Form for
Registration of Securities on Form 10.
 
 Listed
below are key company events that occurred in the third quarter of
2008:
 
 *
                We
      signed an alliance agreement with Global Services to provide compliance
      management and specimen collections on an international
    basis.
 
 *
                We
      completed the billing interface with USIS and are now in position to
      increase business through our alliance with that
  company.
 
 *
                We
      again successfully participated in the hurricane security taskforce for
      Norco, Louisiana and Port Arthur, Texas refining
    facilities.
 
 The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this Report. In addition to
historical information, the discussion in this Report contains forward-looking
statements that involve risks and uncertainties. Actual results could differ
materially from those anticipated by these forward-looking statements due to
factors including, but not limited to, those factors set forth elsewhere in this
Report and in the section captioned “RISK FACTORS” in our General Form for
Registration of Securities on Form 10.
 
 Results
of Operations
 
 Quarter Ended September 30,
2008 Compared to the Quarter Ended September 30, 2007
 
 The
following table sets forth certain operating information (unaudited) regarding
the Company for the three-month periods ended September 30, 2008 and
2007:
  Three
      Months Ended
                    September
      302008
                  2007(unaudited)
                  (unaudited)Revenues
                  $    1,292,472
                  $    1,352,671Cost
      of operations
                  $    
        747,665
                  $   
         927,084Gross
      Profit
                  $      
      544,807
                  $  
          425,587Operating
      expenses
                  $     
       382,937
                  $    
        252,980Net
      income
                  $      
      117,796
                  $    
        159,962Net
      income  per share
                  $    0.00
                  $    0.00
 
 
 Revenues
 Revenues
for the three-month periods ended September 30, 2008 and 2007 were $1,292,472
and $1,352,671, respectively.  The decrease in revenues is principally
due to the inclusion in third quarter 2007 revenues of approximately $208,000 in
collections on accounts previously written off.  Adjusted for this
$208,000 in revenues, third quarter 2008 revenues increased over third quarter
2007 revenues, primarily because of revenues from our Wyoming operations
acquired during the fourth quarter of 2007.  This increase is despite
the expiration of a particular client’s account agreement amounting to
approximately $400,000 per quarter.  We are currently in negotiations
to resume services to this client, and we anticipate that revenues from this
client may resume in some amount in the first quarter of 2009.
 
 
 Operating
Expenses
 Operating
expenses for the three-month periods ended September 30, 2008 and 2007 were
$382,937 and $252,980, respectively.  The $129,957 increase was
primarily due to a $54,601 increase in our payroll expense, $18,548 in computer
expenses relative to the development of our proprietary software, $10,568 in
amortization of capitalized software development costs, and a $14,495 increase
in professional fees and the continued development of its infrastructure to
prepare for increased business.
 
 
 Operating
Income
 Our
operating income for the three-month period ended September 30, 2008 was
$161,870 compared to an operating income of $172,607 for the three-month period
ended September 30, 2007.  Our operating income changed little between
the two periods, with decreased revenues that were more than offset by a
decrease in cost of sales but with an increase in operating
expenses.
 
 Nine-month Period Ended
September 30, 2008 Compared to the Nine-month Period Ended September 30,
2007
 
 The
following table sets forth certain operating information (unaudited) regarding
the Company for the nine-month periods ended September 30, 2008 and
2007:
 
 Nine
      Months Ended
                    September
      302008
                  2007(unaudited)
                  (unaudited)Revenues
                  $    3,168,726
                  $    3,529,956Cost
      of operations
                  $    1,707,178
                  $    2,285,302Gross
      Profit
                  $    1,461,548
                  $    1,244,654Operating
      expenses
                  $    1,221,616
                  $    
        849,246Net
      income
                  $      
      145,367
                  $     
       338,125Net
      income per share
                  $    0.00
                  $    0.00
 
 
 
 Revenues
 Revenues
for the nine-month periods ended September 30, 2008 and 2007 were $3,168,726 and
$3,529,956, respectively.  The decrease in revenues is principally due
to the inclusion in third quarter 2007 revenues of approximately $208,000 in
collections on accounts previously written off and the expiration of a
particular client’s account agreement amounting to approximately $400,000 per
quarter.  The magnitude of the loss in revenues from this account was
partially offset in the third quarter 2008 by an increase in revenues from our
Wyoming operations acquired during the fourth quarter of 2007.  We are
currently in negotiations to resume services to this client, and we anticipate
that revenues from this client may resume in some amount in the first quarter of
2009.
 
 
 Operating
Expenses
 Operating
expenses for the nine-month periods ended September 30, 2008 and 2007 were
$1,221,616 and $849,246, respectively.  The $372,370 increase was
primarily due an increase of $230,407 in the Company’s payroll expense primarily
as the result of the addition our Wyoming operations, a $24,566 increase in
contract labor, a $18,956 increase in professional fees, a $24,871 increase in
office supplies, a $30,586 increase in the amortization of capitalized software
development and a $18,630 increase in postage and delivery
expenses.
 
 
 Operating
Income
 Our
operating income for the nine-month period ended September 30, 2008 was $239,932
compared to an operating income of $395,408 for the nine-month period ended
September 30, 2007.  The $155,476 decrease in operating income in the
2008 period compared to the 2007 period is attributed primarily to the
approximately $208,000 in collections on accounts previously written off and
collected during the nine-months ended September 30, 2007 and the expiration of
a particular client’s account agreement amounting to approximately $400,000 per
quarter.  Adjusted for this $208,000 in revenues, we would have
experienced an approximately $75,000 increase in 2008, primarily because of
revenues from our Wyoming operations acquired during the fourth quarter of 2007,
despite the expiration of the aforementioned account agreement.  We
are currently in negotiations to resume services to this client, and we
anticipate that revenues from this client may resume in some amount in the first
quarter of 2009.
 
 
 Liquidity
and Capital Resources
 From
inception until the third quarter of 2007, our primary sources of capital were
proceeds from private placements of our common stock, loans from shareholders
and bank lines of credit.  We began to experience positive cash flow
in the third quarter of 2007, which has allowed us to provide our own operating
capital for our operations and reduced the need to access outside capital
sources to support current operations.  We currently require
approximately $130,000 per month to fund our recurring operations. This amount
would likely increase if we expand our sales and marketing efforts and continue
to develop new products and services as are our plans.  Our cash needs
are primarily attributable to funding sales and marketing efforts, strengthening
technical and helpdesk support, expanding our development capabilities, and
building administrative infrastructure, including costs and professional fees
associated with being a public company.  We intend to meet our
immediate capital needs from cash flow provided from operations.  We
believe that we have sufficient funding to cover our cash needs for the next 12
months, although there can be no assurance in this regard.
 
 As of
September 30, 2008, we had cash and cash equivalents of $77,485.  The
largest uses of our funds are funding general and administrative expenses and
salaries and related expenses.  As of September 30, 2008, we had total
current liabilities of $961,488 and total current assets of $1,125,094, with our
current assets exceeding our current liabilities by $163,606.
  Net cash
used by operating activities was $458,461 for the nine months ended September
30, 2008, compared to net cash provided by operating activities of $73,154 for
the nine months ended September 30, 2007.  The increase in cash used
by operating activities in comparing the nine months ended September 30, 2008 to
the nine months ended September 30, 2007 can be attributed primarily to 2008
having a net loss of $96,565 compared to 2007 having a net income of
$338,125.
 
 We have
two outstanding loans with Frost National Bank (“Frost”).  On February
13, 2007, we established a $300,000 revolving line of credit with Frost that was
originally scheduled to mature on February 13, 2008.  However, on or
about March 4, 2008, we converted this revolving line of credit into a term note
with an original principal amount of approximately $241,932.  This
term note is due and payable in 36 level monthly payments.  The
interest rate on the outstanding balance of this term note is a floating rate of
prime plus 1%.  This term note is secured by out accounts
receivable.  The outstanding principal balance on this term note as of
September 30, 2008 was $204,143.
 
 On or
about March 4, 2008, we established a new $300,000 revolving line of credit with
Frost that is scheduled to mature on February 13, 2010, at which time a balloon
payment comprised of all outstanding principal and accrued interest must be
paid.  The interest rate on the outstanding balance of the revolving
line of credit is a floating rate of prime plus 1%, and a payment of all accrued
interest is due monthly throughout the term of the line of
credit.  This revolving line of credit is secured by out accounts
receivable.  The outstanding principal balance on this line of credit
as of September 30, 2008 was $300,000.
 
 As of
September 30, 2008, we also had a $434,355 promissory note outstanding and
payable at a floating rate of interest of prime plus 1%.  The note is
related to the purchase of Occupational Testing, Inc.
 
 As of
September 30, 2008, we also had a $300,000 promissory note outstanding and
payable at an interest rate of 4% per annum and payable on December 31,
2008.
 
 The
long-term success of our operations depends on our ability to (1) increase the
deployment of our LabwireTM Platform, (2) significantly increase our services
revenue through the deployment of the LabwireTM Platform, both through increases
in drug and alcohol testing, and usage of employee training and online
certification programs, and (3) increase our revenues from K-9 security
services.  We intend to raise additional capital through an offering
of our Common Stock or other securities to provide additional working capital to
fund the expansion of operations through acquisitions and the addition of new
clients through marketing efforts and joint ventures with other service
organizations.  We intend to seek up to approximately $2.0 million in
capital in the near future in this connection.  The exact amount of
funds raised, if any, will determine how aggressively we can grow and what
additional projects we will be able to undertake.  Assuming that we
are able to raise the $2.0 million in new capital, we currently anticipate
spending approximately $250,000 in marketing and sales in its efforts to sign
new clients and seek additional alliances.  No assurance can be given
that we will be able to raise additional capital, when needed or at all, or that
such capital, if available, will be on terms acceptable to us.  If
adequate funds are not available on acceptable terms, our business, results of
operations and financial condition could be materially adversely
affected.  In a worst-case scenario, we would have to scale back or
cease operations, and we might not be able to remain a viable
entity.
 
 In
addition common stock may also be issued for conversion or settlement of debt
and/or payables for equity, future obligations which may be satisfied by the
issuance of common shares, and other transactions and agreements which may in
the future result in the issuance of additional common shares. The common shares
that we may issue in the future could significantly increase the number of
shares outstanding and could be extremely dilutive.
 
 
 Contractual
Obligations
 Future
payments due on our contractual obligations as of September 30, 2008 are as
follows:
  Total
                      2008
                      2009-2010
                      2010-2012
                      ThereafterOperating
      lease
                      $    
      22,600
                      $   
      22,600
                      $            
      -
                      $             
      -
                      $             
      -Notes
      payable
                      882,440
                      376,950
                      235,552
                      235,552
                      34,386Line
      of credit
                      300,000
                      -
                      300,000
                      -
                      -Total
                      $
      1,205,040
                      $  
      399,550
                      $
      535,552
                      $ 
      235,552
                      $    
      34,386
 
 
 
 
 Critical
Accounting Policies and Estimates
 Our
discussion of our financial condition and results of operations is based on the
information reported in our financial statements. The preparation of our
financial statements requires us to make assumptions and estimates that affect
the reported amounts of assets, liabilities, revenues and expenses as well as
the disclosure of contingent assets and liabilities as of the date of our
financial statements. We base our assumptions and estimates on historical
experience and other sources that we believe to be reasonable at the time.
Actual results may vary from our estimates due to changes in circumstances,
weather, politics, global economics, mechanical problems, general business
conditions and other factors. Our significant accounting policies are detailed
in Note 1 to our financial statements included in this Quarterly
Report.  We have outlined below certain of these policies that have
particular importance to the reporting of our financial condition and results of
operations and that require the application of significant judgment by our
management.
 
 
 Impairment
of Long-Lived Assets
 We review
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, impairment charge is recognized by the
amount of the asset exceeds the fair value of the asset.
 
 
 Fair
Value of Financial Instruments
 Management
believes that the carrying amounts of our financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable, and accrued
liabilities approximate fair value due to the short-term nature of these
instruments. The carrying amount of our long-term debt also approximates fair
value, based on market quote values (where applicable) or discounted cash flow
analyses.
 
 
 Income
Taxes
 We
account for income taxes under SFAS No. 109, which requires the asset and
liability approach to accounting for income taxes. Under this method, deferred
tax assets and liabilities are measured based on differences between financial
reporting and tax bases of assets and liabilities measured using enacted tax
rates and laws that are expected to be in effect when differences are expected
to reverse. Valuation allowances are established when it is necessary to reduce
deferred income tax assets to the amount, if any, expected to be realized in
future years.
 
 
 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. All potentially dilutive securities have
been excluded from the computation, as their effect is
anti-dilutive.
 
 
 Use
of Estimates
 The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities and disclosures at the date
of the financial statements and the reported amounts of revenue and expenses
during the reporting periods. Actual results could differ from those
estimates.
 
 
 Revenue
recognition
 We have
three main sources of revenue: drug testing and related services, training and
online certification, and security services provided by an allied
company.  Drug testing: we fulfill orders for drug testing services,
wherein we are responsible for the performance and data maintenance related to
employee drug testing for its clients.  We do not perform the drug
tests, but we fulfill the order through our 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.  We have low bad debt levels because our policy is to deal
with large well-positioned firms that pay monthly. Because we track these
company’s activities daily, we are constantly aware of our position and
therefore can demand and receive timely payments as we provide on-going
compliance services. Pursuant to EITF 99-19, we are responsible for fulfilling a
customer’s order, including whether the service is acceptable and therefore
bears the risks and rewards of principal.  As such, we have elected to
record the gross amounts of the contracts.  Our service agreements
rarely include multiple parts that would have a material impact on the
recognition of revenue.  As such, we have created our 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 the client is automatically tagged for billing, which coincides with
performance of services.
 
 Security
services provided by us through an allied company: the process is handled in
similar fashion to that described above for drug testing.
 
 
 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 we are aware of a specific customer’s inability to meet its financial
obligations, we record 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.
 
 
 Software
Development Costs
 During
the period, we began developing a software platform for certain exclusively
internal purposes.  We follow 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.
 
 We
capitalize 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.  We cease 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. We believe no events or circumstances warrant revised estimates of
useful lives of the software.
 
 
 Purchase
Accounting
 We
completed acquisitions in 2004 and 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.  We generally use 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.
 
 
 Intangible
Assets
 Intangible
assets with estimable useful lives are amortized over respective estimated
useful lives, and reviewed for impairment in accordance with FASB Statement No.
142, Goodwill and Other
Intangible Assets.
 
 
 Recent
Accounting Pronouncements
 In
September 2006, the FASB issued FASB Statement 157 “Fair Value Measurements”
(“SFAS No. 157”) that defines and measures fair value and expands
disclosures about fair value measurements. The statement emphasizes that fair
value is a market-based measurement and not an entity-specific measurement. The
provisions of SFAS No. 157 are effective for fiscal years beginning after
November 15, 2007.
 
 In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial
Assets and Financial Liabilities, which permits entities to choose to
measure many financial instruments and certain other items at fair value. 
The objective is to improve 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.  SFAS No. 159 applies to all entities and is
effective for fiscal years beginning after November 15, 2007.
 
 We do not
expect the adoption of any other recently issued accounting pronouncements to
have a significant impact on their consolidated financial position, results of
operations or cash flow.
 
 Off
Balance Sheet Arrangements
 We have
no off balance sheet arrangements.
 
 ITEM 4T.  CONTROLS AND
PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures
 Our Principal Executive Officer and
Principal Financial Officer, after evaluating the effectiveness of our
disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)
under the Exchange Act) as of the end of the period covered by this report, have
concluded that, based on the evaluation of these controls and procedures, that
our disclosure controls and procedures were not effective due to the lack of
segregation of duties in financial reporting, as our accounting functions are
performed by one person with no internal review, as our company does not have an
audit committee. This is due to our lack of working capital to hire additional
staff. To remedy this, we intend to engage another accountant to assist with
financial reporting as soon as our finances will allow.
 
 Change
in Internal Controls Over Financial Reporting
 There have not been any changes in our
predecessors’ internal controls over financial reporting that occurred during
the quarterly period ended September 30, 2008 that has materially affected, or
is reasonably likely to materially affect, our internal controls over financial
reporting.
 
 
 PART
II. OTHER INFORMATION
 
 ITEM
1.  LEGAL PROCEEDINGS
 We are
not now a party to any legal proceeding requiring disclosure in accordance with
the rules of the U.S. Securities and Exchange Commission.  In the
future, we may become involved in various legal proceedings from time to time,
either as a plaintiff or as a defendant, and either in or outside the normal
course of business.  We are not now in a position to determine when
(if ever) such a legal proceeding may arise. If we ever become involved in such
a legal proceeding, our financial condition, operations, or cash flows could be
materially and adversely affected, depending on the facts and circumstances
relating to such proceeding.
 
 
 ITEM
6.  EXHIBITS
 (a)           The
following exhibits are filed with this Quarterly Report or are incorporated
herein by reference:
 
 Exhibit
                  Number
                Description31.1
                Certification
      pursuant to Rule 13a-14(a) of the Securities Exchange Act of
      1934.31.2
                Certification
      pursuant to Rule 13a-14(a) of the Securities Exchange Act of
      1934.32.1
                Certification
      Pursuant to 18 U.S.C. Section 1350, as pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.2
                Certification
      Pursuant to 18 U.S.C. Section 1350, as pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.
 
 SIGNATURES
 
 In
accordance with the requirements of the Exchange Act, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  LABWIRE,
      INC.(Registrant)Date:
      December 23, 2008
                By:
                /s/ G.
      Dexter
      MorrisG.
      Dexter Morris,Chief
      Executive Officer(Principal
      Executive Officer, Principal Financial
Officer)