UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
  (Mark
One)
 x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the
quarterly period ended: December 31, 2008
  or
   ̈
              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:0-53570
  VOLU-SOL
REAGENTS CORPORATION
  (Exact
name of registrant as specified in its charter)
 
 Utah
                
                87-0578125(State
      or other jurisdiction of incorporationor
      organization)
                
                (I.R.S.
      Employer Identification No.)5095
      West 2100 South
                  West Valley City,
      Utah
                
                84120(Address
      of principal executive offices)
                
                (Zip
      Code)
 
 (801)
974-9474
 (Registrant's
telephone number)
 
 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  ̈  No x
 
 Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer or a smaller reporting company.  See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
 
 Large
      accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈
              Smaller
      reporting company x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.)
 Yes   ̈   No  x
 
 As of
February 10, 2009, the issuer’s had 8,982,639 shares of common stock
outstanding.
   1
  VOLU-SOL REAGENTS CORPORATION
 
 Table
of Contents
 
 PagePART
      I – FINANCIAL INFORMATION
                                                            3Item
      1. Financial Statements
                                                            4Balance
      Sheets (unaudited)
                                                            4Statements
      of Operations (unaudited)
                                                            5Statements
      of Cash Flows (unaudited)
                                                            6Notes
      to Financial Statements (unaudited)
                                                            7Item
      2. Management's Discussion and Analysis of Financial Condition and Results
      of  Operations
                                                            14Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk
                                                            22Item
      4.  Controls and Procedures
                                                            22PART
      II – OTHER INFORMATION
                                                            23Item
      1. Legal Proceedings
                                                            23Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds
                                                            23Item
      3. Defaults Upon Senior Securities
                                                            23Item
      4. Submission of Matters to a Vote of Security Holders
                                                            23Item
      5. Other Information.
                                                            24Item
      6. Exhibits
                                                            24SIGNATURES
                                                            25
   2
  PART I – FINANCIAL INFORMATION
 
 Forward-Looking
Information
  Unless
otherwise indicated, the terms “Volu-Sol,” the “Company,” “we,” “us,” and “our”
refer to Volu-Sol Reagents Corporation. In this Quarterly Report on Form 10-Q,
we may make certain forward-looking statements, including statements regarding
our plans, strategies, objectives, expectations, intentions and resources that
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. We do not undertake to update, revise or correct
any of the forward-looking information. The following discussion should also be
read in conjunction with the audited financial statements and the notes
thereto.
 
 The
statements contained in this Quarterly Report on Form 10-Q that are not
historical fact are forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995), within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The forward-looking statements contained
herein are based on current expectations that involve a number of risks and
uncertainties. These statements can be identified by the use of forward-looking
terminology such as “believes,” “expects,” “may,” “will,” “should,” “intend,”
“plan,” “could,” “is likely,” or “anticipates,” or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. The Company wishes to caution the reader that
these forward-looking statements that are not historical facts are only
predictions. No assurances can be given that the future results indicated,
whether expressed or implied, will be achieved. While sometimes presented with
numerical specificity, these projections and other forward-looking statements
are based upon a variety of assumptions relating to the business of the Company,
which, although considered reasonable by the Company, may not be realized.
Because of the number and range of assumptions underlying the Company’s
projections and forward-looking statements, many of which are subject to
significant uncertainties and contingencies that are beyond the reasonable
control of the Company, some of the assumptions inevitably will not materialize,
and unanticipated events and circumstances may occur subsequent to the date of
this report. These forward-looking statements are based on current expectations
and the Company assumes no obligation to update this information. Therefore, the
actual experience of the Company and the results achieved during the period
covered by any particular projections or forward-looking statements may differ
substantially from those projected. Consequently, the inclusion of projections
and other forward-looking statements should not be regarded as a representation
by the Company or any other person that these estimates and projections will be
realized, and actual results may vary materially. There can be no assurance that
any of these expectations will be realized or that any of the forward-looking
statements contained herein will prove to be accurate.
  Return
to Table of Contents
 3
 
 Item 1.  Financial Statements.
 
 Volu-Sol Reagents Corporation
 Balance
Sheets
 (unaudited)
 
 December
      31, 2008
                                                
                                                
                                                September
      30, 2008AssetsCurrent
      assets:Cash
                                                
                                                $
                                                330,559
                                                
                                                
                                                $
                                                474,146Accounts
      receivable, net of allowance for doubtful accounts of $2,000 and $2,500,
      respectively
                                                
                                                
                                                84,696
                                                
                                                
                                                
                                                91,667Inventories,
      net of reserve of $38,811 and $39,141, respectively
                                                
                                                
                                                55,897
                                                
                                                
                                                
                                                51,183Prepaid
      expenses and other assets
                                                
                                                
                                                14,442
                                                
                                                
                                                
                                                7,250Total
      current assets
                                                
                                                
                                                485,594
                                                
                                                
                                                
                                                624,246Property
      and equipment, net of accumulated depreciation of $399,621 and $396,787,
      respectively (note 2)
                                                
                                                
                                                53,976
                                                
                                                
                                                
                                                52,375Related
      party note receivable (note 3)
                                                
                                                
                                                519,791
                                                
                                                
                                                
                                                598,793Total
      assets
                                                
                                                $
                                                1,059,361
                                                
                                                
                                                $
                                                1,275,414Liabilities and
      Stockholders’ EquityCurrent
      liabilities:Accounts
      payable
                                                
                                                $
                                                160,779
                                                
                                                
                                                $
                                                72,159Accrued
      expenses
                                                
                                                
                                                187,529
                                                
                                                
                                                
                                                145,293Total
      current liabilities
                                                
                                                
                                                348,308
                                                
                                                
                                                
                                                217,452Total
      liabilities
                                                
                                                
                                                348,308
                                                
                                                
                                                
                                                217,452Stockholders’
      equity:Preferred
      stock; no par value, 10,000,000 shares authorized; 0 and 0 shares issued
      and outstanding, respectively
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Common
      stock, no par value, 50,000,000 shares authorized; 8,982,639 and 8,982,639
      shares issued and outstanding, respectively
                                                
                                                
                                                3,698,750
                                                
                                                
                                                
                                                3,698,750Accumulated
      deficit
                                                
                                                
                                                (2,987,697
                                                )
                                                
                                                
                                                (2,640,788
                                                )Total
      stockholders’ equity
                                                
                                                
                                                711,053
                                                
                                                
                                                
                                                1,057,962Total
      liabilities and stockholders’ equity
                                                
                                                $
                                                1,059,361
                                                
                                                
                                                $
                                                1,275,414
   
 See
accompanying notes to financial statements.
  Return
to Table of Contents
 4
  Volu-Sol Reagents Corporation
 Statements
of Operations
 (unaudited)
 Three
      Months EndedDecember
      31,2008
                                                                          
                                                                          
                                                                          
                                                                          2007Sales,
      net
                                                                          
                                                                          $
                                                                          104,307
                                                                          
                                                                          
                                                                          $
                                                                          169,592Cost
      of goods sold
                                                                          
                                                                          
                                                                          103,071
                                                                          
                                                                          
                                                                          
                                                                          114,221Gross
      profit
                                                                          
                                                                          
                                                                          1,236
                                                                          
                                                                          
                                                                          
                                                                          55,371Operating
      expenses:Research
      and development
                                                                          
                                                                          
                                                                          105,938
                                                                          
                                                                          
                                                                          
                                                                          175,103Selling,
      general and administrative
                                                                          
                                                                          
                                                                          249,005
                                                                          
                                                                          
                                                                          
                                                                          164,514Loss
      from operations
                                                                          
                                                                          
                                                                          (353,707
                                                                          )
                                                                          
                                                                          
                                                                          (284,246
                                                                          )Other
      income (expense):Interest
      income
                                                                          
                                                                          
                                                                          7,623
                                                                          
                                                                          
                                                                          
                                                                          2,672Other
      income (expenses)
                                                                          
                                                                          
                                                                          (825
                                                                          )
                                                                          
                                                                          
                                                                          1,342Net
      loss
                                                                          
                                                                          $
                                                                          (346,909
                                                                          )
                                                                          
                                                                          $
                                                                          (280,232
                                                                          )Net
      loss per common share – basic and diluted
                                                                          
                                                                          $
                                                                          (0.04
                                                                          )
                                                                          
                                                                          $
                                                                          (0.03
                                                                          )Weighted
      average shares – basic and diluted
                                                                          
                                                                          
                                                                          8,983,000
                                                                          
                                                                          
                                                                          
                                                                          8,983,000
 
 
 
 See
accompanying notes to financial statements.
  Return
to Table of Contents
 5
 
 Volu-Sol Reagents Corporation
 Statements
of Cash Flows
 (unaudited)
  Three
      Months EndedDecember
      31,2008
                                                                                  
                                                                                  
                                                                                  2007Cash
      flows from operating activities:Net
      loss
                                                                                  
                                                                                  $
                                                                                  (346,909
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  (280,232
                                                                                  )Adjustments
      to reconcile net loss to net cash usedIn
      operating activities:Depreciation
      and amortization
                                                                                  
                                                                                  
                                                                                  2,835
                                                                                  
                                                                                  
                                                                                  
                                                                                  2,294Changes
      in operating assets and liabilities:Accounts
      receivable
                                                                                  
                                                                                  
                                                                                  6,971
                                                                                  
                                                                                  
                                                                                  
                                                                                  2,752Interest
      receivable
                                                                                  
                                                                                  
                                                                                  (7,152
                                                                                  )
                                                                                  
                                                                                  
                                                                                  -Inventories
                                                                                  
                                                                                  
                                                                                  (4,714
                                                                                  )
                                                                                  
                                                                                  
                                                                                  4,300Prepaid
      expenses and other assets
                                                                                  
                                                                                  
                                                                                  (39
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (7,971
                                                                                  )Accounts
      payable
                                                                                  
                                                                                  
                                                                                  88,620
                                                                                  
                                                                                  
                                                                                  
                                                                                  22,390Accrued
      liabilities
                                                                                  
                                                                                  
                                                                                  42,236
                                                                                  
                                                                                  
                                                                                  
                                                                                  (9,685
                                                                                  )Net
      cash used in operating activities
                                                                                  
                                                                                  
                                                                                  (218,152
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (266,152
                                                                                  )Cash
      flows from investing activities:Payments
      for property and equipment
                                                                                  
                                                                                  
                                                                                  (4,436
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (1,574
                                                                                  )Net
      cash used in investing activities
                                                                                  
                                                                                  
                                                                                  (4,436
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (1,574
                                                                                  )Cash
      flows from financing activities:Proceeds
      from  related-party note
                                                                                  
                                                                                  
                                                                                  79,001
                                                                                  
                                                                                  
                                                                                  
                                                                                  203,022Proceeds
      from the sale of common stock
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,575,000Net
      cash provided by financing activities
                                                                                  
                                                                                  
                                                                                  79,001
                                                                                  
                                                                                  
                                                                                  
                                                                                  1,778,022Net
      increase (decrease) in cash
                                                                                  
                                                                                  
                                                                                  (143,587
                                                                                  )
                                                                                  
                                                                                  
                                                                                  1,510,296Cash,
      beginning of year
                                                                                  
                                                                                  
                                                                                  474,146
                                                                                  
                                                                                  
                                                                                  
                                                                                  752,404Cash,
      end of year
                                                                                  
                                                                                  $
                                                                                  330,559
                                                                                  
                                                                                  
                                                                                  $
                                                                                  2,262,700Supplemental
      Cash Flow Information:Cash
      paid for income taxes
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -Cash
      paid for interest
                                                                                  
                                                                                  
                                                                                  -
                                                                                  
                                                                                  
                                                                                  
                                                                                  -
 
 
 
 See
accompanying notes to financial statements.
  Return
to Table of Contents
 6
  Volu-Sol Reagents Corporation
 Notes to
Financial Statements
 (unaudited)
  1.         Organization
and Nature of Operations
 
 Volu-Sol
      Reagents Corporation (the “Company” or “Volu-Sol”) was formed March 5,
      1998, as a wholly owned subsidiary of RemoteMDx, Inc. (formerly Volu-Sol,
      Inc.), a Utah corporation (“RemoteMDx”).  RemoteMDx was
      originally a wholly owned subsidiary of Biomune Systems, Inc. (“Biomune”)
      and was spun off from Biomune in 1997 to engage in the business of
      manufacturing and marketing medical diagnostic substances.  This
      business was initially conducted as an unincorporated division of Biomune,
      called the Volu-Sol Medical Division.  Biomune purchased the
      business in 1991 from Logos Scientific,
Inc.
 
 The
      Company sells medical diagnostic substances and equipment to laboratories
      throughout the United States.
 
 Going Concern
 The
Company has recurring net losses, negative cash flows from operating activities,
and an accumulated deficit. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.  In order for the Company to achieve successful
operations, the Company must generate positive cash flows from operating
activities and obtain the necessary funding to meet its projected capital
investment requirements.
 
 In
      order for the Company to remove substantial doubt about its ability to
      continue as a going concern, the Company must generate positive cash flows
      from operations and obtain the necessary funding to meet its projected
      capital investment requirements.  Management’s plans with
      respect to this uncertainty include raising additional capital from the
      sale of the Company’s common stock.  There can be no assurance
      that revenues will increase rapidly enough to offset operating losses and
      repay debts.  If the Company is unable to increase revenues or
      obtain additional financing, it will be unable to continue the development
      of its products and may have to cease
  operations.
 
 2.         Summary
of Significant Accounting Policies
 
 Use of Estimates in the Preparation of
Financial Statements
 The
      preparation of financial statements in conformity with U.S. generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the 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 these
      estimates.
 
 Fair Value of Financial
Instruments
 The
      carrying amounts reported in the accompanying financial statements for
      cash, accounts receivable, accounts payable, accrued liabilities, and
      other debt obligations approximate fair values because of the immediate or
      short-term maturities of these financial
  instruments.
 
 Concentration of Credit
Risk
 The
      Company has cash in bank accounts that, at times, may exceed federally
      insured limits.  The Company has not experienced any losses in
      such accounts.
 
 In
      the normal course of business, the Company provides credit terms to its
      customers. Accordingly, the Company performs ongoing credit evaluations of
      its customers' financial condition and requires no collateral from its
      customers.  The Company maintains an allowance for uncollectable
      accounts receivable based upon the expected collectability of all accounts
      receivable.
 
 During
      three months ended December 31, 2008 and 2007, the Company had sales to
      entities which represented more than 10% of its
      revenues.  Thermo Fisher Scientific, Inc. accounted for
      approximately 20% ($21,040) and Richard-Allan Scientific Co. 13% ($13,970)
      for the thre months ending December 31, 2008.  The Company had
      the following sales to entities which represented more than 10% of its
      revenues during the three months ended December 31,
      2007:  Thermo Fischer Scientific, Inc accounted for 25%
      ($42,015), Cardinal Health Medical accounted for 14% ($23,762) and Esbe
      Scientific accounted for 11% ($19,217).  No other customer
      accounted for more than 10% of the Company’s revenues for the three months
      ended December 31, 2008 and
2007.
  Return
to Table of Contents
 7
 
 Cash and Cash Equivalents
 Cash
      and cash equivalents consist of cash and investments with original
      maturities to the Company of three months or
  less.
 
 Accounts Receivable
 Accounts
      receivable are carried at original invoice amount less an estimate made
      for doubtful receivables based on a review of all outstanding amounts on a
      monthly basis.  Specific reserves are estimated by management
      based on certain assumptions and variables, including the customer’s
      financial condition, age of the customer’s receivables and changes in
      payment histories.  Trade receivables are written off when
      deemed uncollectible.  Recoveries of trade receivables
      previously written off are recorded when received.  A trade
      receivable is considered to be past due if any portion of the receivable
      balance has not been received by the contractual pay
      date.  Interest is not charged on trade receivables that are
      past due.
 
 Inventories
 Inventories
      are recorded at the lower of cost or market, cost being determined on a
      first-in, first-out ("FIFO") method. Inventories consisted of raw
      materials, work-in-process, and finished goods.  Inventories as
      of December 31, 2008 and September 30, 2008 were as
    follows:
  December
      31,
                      
                      
                      September
      30,2008
                      
                      
                      2008Raw
      materials
                      
                      $
                      42,355
                      
                      
                      $
                      39,829Work
      in process
                      
                      
                      8,124
                      
                      
                      
                      6,604Finished
      goods
                      
                      
                      44,229
                      
                      
                      
                      43,891Reserve
      for inventory obsolescence
                      
                      
                      (38,811
                      )
                      
                      
                      (39,141
                      )Total
      inventory
                      
                      $
                      55,897
                      
                      
                      $
                      51,183
 
 Provisions,
      when required, are made to reduce excess and obsolete inventories to their
      estimated net realizable values. Due to competitive pressures and
      technological innovation, it is possible that estimates of the net
      realizable value could change in the near
term.
 
 Property and Equipment
 Property
      and equipment are stated at cost, less accumulated depreciation and
      amortization.  Depreciation and amortization are determined
      using the straight-line method over the estimated useful lives of the
      assets, typically three to seven years.  Leasehold improvements
      are amortized over the shorter of the estimated useful lives of the asset
      or the term of the lease.  Expenditures for maintenance and
      repairs are expensed while renewals and improvements over $500 are
      capitalized.  When property and equipment are disposed, any
      gains or losses are included in the results of
  operations.
 
 Property
      and equipment consisted of the following as of December 31, 2008 and
      September 30, 2008:
 
 2008
                            
                            
                            2007Equipment
                            
                            $
                            158,153
                            
                            
                            $
                            153,718Software
                            
                            
                            6,580
                            
                            
                            
                            6,580Leasehold
      improvements
                            
                            
                            268,366
                            
                            
                            
                            268,366Furniture
      and fixtures
                            
                            
                            20,498
                            
                            
                            
                            20,498453,597
                            
                            
                            
                            449,162Accumulated
      depreciation
                            
                            
                            (399,621
                            )
                            
                            
                            (396,787
                            )Property
      and equipment, net of accumulated depreciation
                            
                            $
                            53,976
                            
                            
                            $
                            52,375
 
 Depreciation
      expense for the three months ended December 31, 2008 and 2007 was $2,835
      and $2,294, respectively.
  Return
to Table of Contents
 8
 
 Revenue Recognition
  The
Company’s revenue has historically been from two sources: (i) diagnostic
equipment product sales; and (ii) sales of medical diagnostic
stains.
  Diagnostic Equipment Product
Sales
  Although
not the focus of the Company’s business model, the Company sells its diagnostic
equipment devices in certain situations. The Company recognizes product sales
revenue when persuasive evidence of an arrangement with the customer exists,
title passes to the customer and the customer cannot return the devices, prices
are fixed or determinable  and collection is reasonably
assured.
  Medical Diagnostic Stain
Sales
  The
Company recognizes medical diagnostic stains revenue when persuasive evidence of
an arrangement with the customer exists, title passes to the customer, prices
and fixed or determinable and collection is reasonably assured.
  Shipping
and handling fees are included as part of net sales. The related freight costs
and supplies directly associated with shipping products to customers are
included as a component of cost of goods sold. Neither the sale of diagnostic
equipment nor the sale of medical diagnostic stains contains multiple
deliverables.
 
 Customers
order either of the Company’s product lines by purchase order.  The
Company does not enter into long-term contracts.  Its diagnostic
equipment sales were $12,474 for the three months ended December 31, 2008 and
its medical diagnostic stain sales were $91,833 for the three months ended
December 31, 2008.  All of the Company’s sales are made with net
30-day payment terms.
 
 In
connection with SFAS No. 48 criteria to qualify for the recognition of revenue
at the time of sale, the Company notes the following:
 
 ·
              Volu-Sol’s
      price to the buyer is fixed or determinable at the date of
      sale.
 ·
              The
      buyer has paid Volu-Sol, or the buyer is obligated to pay Volu-Sol within
      30 days, and the obligation is not contingent on resale of the
      product.
 ·
              The
      buyer's obligation to Volu-Sol would not be changed in the event of theft
      or physical destruction or damage of the
  product.
 ·
              The
      buyer acquiring the product for resale has economic substance apart from
      that provided by Volu-Sol.
 ·
              Volu-Sol
      does not have significant obligations for future performance to directly
      bring about resale of the product by the
buyer.
 ·
              The
      amount of future returns can be reasonably estimated and they are
      negligible.
 ·
              Customers
      may return diagnostic equipment within 30 days of the purchase date.
      Customers may return the medical diagnostic stains within 30 days of the
      purchase date provided that the stain’s remaining life is at least 8
      months. Customers must obtain prior authorization for a product
      return.
  The
Company’s products have not been modified significantly for several
years.  There is significant history on which to base the Company’s
estimates of sales returns.  These sales returns have been
negligible.
 
 The
Company has 70 types of products based on the number of individual SKUs in its
inventory.  Most of these 70 SKUs are for medical diagnostic stain
inventory.  For example, certain medical diagnostic stains are
packaged in different sizes, and each packaged size (i.e. 16 oz., 32 oz., 48
oz.) has a unique SKU in inventory.  Paragraph 37 of SFAS No. 131
states that, “an enterprise shall report revenues from external customers for
each product and service or each group of similar products and services unless
it is impractical to do so.”  The vast majority of the Company’s sales
are of medical diagnostic stains, with a minimal portion of sales being
diagnostic equipment.   Because diagnostic equipment sales are
not material to the financial statements, the Company discloses sales as one
line item.
  Return
to Table of Contents
 9
  The
Company’s revenue recognition policy for sales to distributors is the same as
the policy for sales to end-users.
 
 A
customer qualifies as a distributor by completing a distributor application and
proving its sales tax status.  Upon qualifying as a distributor, a
customer receives a 35% discount from retail prices, and the distributor
receives an additional 5% discount when product is purchased in case
quantities.  The Company’s distributors are not required to maintain
specified amounts of product on hand, and distributors are not required to make
minimum purchases to maintain distributor status.  Distributors have
no stock rotation rights or additional rights of return.  Sales to
distributors are recorded net of discounts.
 
 Sales
returns have been negligible, and any and all discounts are known at the time of
sale.  Sales are recorded net of sales returns and sales
discounts.  There are no significant judgments or estimates associated
with the recording of revenues.
 
 Research
and Development Costs
 All
expenditures for research and development are charged to expense as incurred.
These expenditures in both the three months ended December 31, 2008 and 2007
were for the development of a medical home monitoring device and associated
services. For the three months ended December 31, 2008 and 2007, research and
development expenses were $105,938 and $175,103, respectively.
 
 Advertising
Costs
 The
Company expenses advertising costs as incurred.  Advertising expenses
for the three months ended December 31, 2008 and 2007 were approximately $102
and $55, respectively.
 
 Income
Taxes
 The
Company recognizes deferred income tax assets or liabilities for the expected
future tax consequences of events that have been recognized in the financial
statements or income tax returns. Deferred income tax assets or liabilities are
determined based upon the difference between the financial statement and tax
bases of assets and liabilities using enacted tax rates expected to apply when
the differences are expected to be settled or realized.  Deferred
income tax assets are reviewed periodically for recoverability and valuation
allowances are provided as necessary.  Interest and penalties related
to income tax liabilities, when incurred, are classified in interest expense and
income tax provisions, respectively.
 
 Net
Loss Per Common Share
 Basic net
loss per common share ("Basic EPS") is computed by dividing net loss available
to common stockholders by the weighted average number of common shares
outstanding during the period.
 
 Diluted
net loss per common share ("Diluted EPS") is computed by dividing net loss by
the sum of the weighted average number of common shares outstanding and the
weighted-average dilutive common share equivalents then
outstanding.  The computation of Diluted EPS does not assume exercise
or conversion of securities that would have an anti-dilutive
effect.
 
 Recent
Accounting Pronouncements
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities.SFAS No. 159 permits companies to
choose to measure many financial instruments and certain other items at fair
value.  SFAS No. 159 is effective for financial statements issued for
fiscal years beginning after November 15, 2007.  The Company does not
expect the adoption of SFAS No. 159 to have a material impact on our financial
statements.
 
 In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations,and
SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements.  SFAS No.
141(R) requires an acquirer to measure the identifiable assets acquired, the
liabilities assumed and any non-controlling interest in the acquiree at their
fair values on the acquisition date, with goodwill being the excess value over
the net identifiable assets acquired.  SFAS No. 160 clarifies that a
non-controlling interest in a subsidiary should be reported as equity in the
financial statements, net income shall be adjusted to include the net income
attributed to the non-controlling interest and comprehensive income shall be
adjusted to include the comprehensive income attributed to the non-controlling
interest.  The calculation of earnings per share will continue to be
based on income amounts attributable to the parent.  SFAS No. 141(R)
and SFAS No. 160 are effective for financial statements issued for fiscal years
beginning after December 15, 2008.  Early adoption is
prohibited.  The Company has not yet determined the effect on our
financial statements, if any, upon adoption of SFAS No. 141(R) or SFAS No.
160.
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 10
 
 In
December 2007, the FASB ratified Emerging Issues Task Force (EITF)
Issue No. 07-1, Accounting for Collaborative
Arrangements(EITF 07-1). EITF 07-1 defines collaborative
arrangements and establishes reporting requirements for transactions between
participants in a collaborative arrangement and between participants in the
arrangement and third parties. EITF 07-1 also establishes the appropriate income
statement presentation and classification for joint operating activities and
payments between participants, as well as the sufficiency of the disclosures
related to these arrangements. EITF 07-1 is effective for fiscal years
beginning after December 15, 2008. The Company has not yet determined the
effect on its financial statements, if any, that will occur upon adoption of
EITF 07-1.
 
 In
February 2008, the FASB issued FASB Staff Position (FSP) FAS No. 140-3, Accounting for Transfers of
Financial Assets and Repurchase Financing Transactions (FSP FAS 140-3).
FSP FAS 140-3 requires an initial transfer of a financial asset and a repurchase
financing that was entered into contemporaneously or in contemplation of the
initial transfer to be evaluated as a linked transaction under SFAS No. 140
unless certain criteria are met, including that the transferred asset must be
readily obtainable in the marketplace. FSP FAS 140-3 is effective for fiscal
years beginning after November 15, 2008, and will be applied to new transactions
entered into after the date of adoption. Early adoption is prohibited. The
Company has not yet determined the effect on its financial statements, if any,
that will occur upon adoption of FSP FAS 140-3.
 
 In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities.  SFAS No. 161 is intended
to improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity's financial position, financial
performance, and cash flows. SFAS No. 161 is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged.  The Company does not expect that
the adoption of SFAS No. 161 will have a material impact on its financial
statements.
 
 In April
2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of
Intangible Assets(FSB FAS 142-3). FSP FAS 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under SFAS
No. 142, Goodwill and Other
Intangible Assets. The intent of this FSP is to improve the consistency
between the useful life of a recognized intangible asset under FAS FAS 142 and
the period of expected cash flows used to measure the fair value of the asset
under SFAS No. 141(R) and other generally accepted accounting principles. FSP
FAS 142-3 is effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2008. The Company has not yet determined the
effect on its financial statements, if any, that will occur upon adoption of FSP
FAS 142-3.
 
 In May
2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted
Accounting Principles.  SFAS No. 162 identifies the sources of
accounting principles and provides entities with a framework for selecting the
principles used in preparation of financial statements that are presented in
conformity with GAAP.  The current GAAP hierarchy has been criticized
because it is directed to the auditor rather than the entity, it is complex, and
it ranks FASB Statements of Financial Accounting Concepts, which are subject to
the same level of due process as FASB Statements of Financial Accounting
Standards, below industry practices that are widely recognized as generally
accepted but that are not subject to due process.  The Board believes
the GAAP hierarchy should be directed to entities because it is the entity (not
its auditors) that is responsible for selecting accounting principles for
financial statements that are presented in conformity with GAAP.  The
adoption of FASB 162 is not expected to have a material impact on the Company’s
financial statements.
 
 In May
20008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement).  FSB APB 14-1 clarifies that convertible debt
instruments that may be settled in cash upon conversion (including partial cash
settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants,and specifies that issuers of
such instruments should separately account for the liability and equity
components in a manner that will reflect the entity's nonconvertible debt
borrowing rate when interest cost is recognized in subsequent periods. FSP APB
14-1 is effective for financial statements issued for fiscal years beginning
after December 15, 2008 and interim periods within those fiscal years. The
Company does not expect that the adoption of FSP APB 14-1 will have a material
impact on its financial statements.
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 11
  In June
2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own Stock (EITF 07-5).
EITF 07-5 provides that an entity should use a two step approach to evaluate
whether an equity-linked financial instrument (or embedded feature) is indexed
to its own stock, including evaluating the instrument's contingent exercise and
settlement provisions. It also clarifies on the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning
after December 15, 2008. The Company does not expect that the adoption of EITF
07-5 will have a material impact on its financial statement.
 
 In June
2008, the FASB ratified EITF Issue No. 08-3, Accounting for Lessees for
Maintenance Deposits Under Lease Arrangements (EITF 08-3). EITF 08-3
provides guidance for accounting for nonrefundable maintenance deposits. It also
provides revenue recognition accounting guidance for the lessor. EITF 08-3 is
effective for fiscal years beginning after December 15, 2008. The Company has
not yet determined the effect on its financial statements, if any, that will
occur upon adoption of EITF 08-3.
 
 In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities
(FSP EITF 03-6-1). FSP EITF 03-6-1 clarified that all outstanding unvested
share-based payment awards that contain rights to nonforfeitable dividends
participate in undistributed earnings with common shareholders. Awards of this
nature are considered participating securities and the two-class method of
computing basic and diluted earnings per share must be applied. FSP EITF 03-6-1
is effective for fiscal years beginning after December 15, 2008. The Company has
not yet determined the effect on its financial statements, if any, that will
occur upon adoption of FSP EITF 03-6-1.
 
 In
September 2008, the FASB ratified EITF Issue No. 08-5, Issuer’s Accounting for Liabilities
Measured at Fair Value With a Third-Party Credit Enhancement (EITF 08-5).
EITF 08-5 provides guidance for measuring liabilities issued with an attached
third-party credit enhancement (such as a guarantee). It clarifies that the
issuer of a liability with a third-party credit enhancement (such as a
guarantee) should not include the effect of the credit enhancement in the fair
value measurement of the liability. EITF 08-5 is effective for the first
reporting period beginning after December 15, 2008. The Company has not yet
determined the effect on its financial statements, if any, that will occur upon
adoption of EITF 08-5.
 
 In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard Number 157, Fair Value Measurements,
(SFAS 57) which defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosures about
fair value measurements. The provisions of SFAS No. 157 related to
financial assets and financial liabilities were effective during
2008.  With respect to certain nonfinancial assets and nonfinancial
liabilities, SFAS No. 157 is effective for fiscal years beginning after
November 15, 2008, and interim periods within those fiscal
years.  The Company does not expect that the adoption of SFAS
No. 157 with respect to nonfinancial assets and nonfinancial liabilities
will have a material impact on its financial statements.
 
 In
September 2008, the FASB issued FSP FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives
and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45; and Clarification of the Effective Date of FASB Statement
No. 161 (FSP FAS 133-1 and FIN 45-4). FSP FAS 133-1 and FIN 45-4 amends
and enhances disclosure requirements for sellers of credit derivatives and
financial guarantees. It also clarifies that the disclosure requirements of SFAS
No. 161 are effective for quarterly periods beginning after November 15, 2008,
and fiscal years that include those periods. FSP FAS 133-1 and FIN 45-4 is
effective for fiscal years ending after November 15, 2008. The Company has not
yet determined the effect on its financial statements, if any, that will occur
upon adoption of FSP FAS 133-1 and FIN 45-4.
 
 In
October 2008, the FASB issued FSP FAS 157-3 Determining Fair Value of a
Financial Asset in a Market That Is Not Active (FSP FAS 157-3). FSP FAS
157-3 clarified the application of SFAS No. 157 in an inactive market. It
demonstrated how the fair value of a financial asset is determined when the
market for that financial asset is inactive. FSP FAS 157-3 was effective upon
issuance, including prior periods for which financial statements had not been
issued. The effect of adopting FSP FAS 157-3 did not have a material effect on
the Company’s financial statements.
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 12
  In
November 2008, the FASB ratified EITF Issue No. 08-6, Equity Method Investment Accounting
Considerations(EITF 08-6). EITF 08-6 clarifies the accounting for
certain transactions and impairment considerations involving equity method
investments. EITF 08-6 is effective for fiscal years beginning after December
15, 2008, with early adoption prohibited. The Company has not yet determined the
effect on its financial statements, if any, that will occur upon adoption of
EITF 08-6.
 
 In
November 2008, the FASB ratified EITF Issue No. 08-7, Accounting for Defensive Intangible
Assets. EITF 08-7 clarifies the accounting for certain separately
identifiable intangible assets which an acquirer does not intend to actively use
but intends to hold to prevent its competitors from obtaining access to them.
EITF 08-7 requires an acquirer in a business combination to account for a
defensive intangible asset as a separate unit of accounting which should be
amortized to expense over the period the asset diminishes in value. EITF 08-7 is
effective for fiscal years beginning after December 15, 2008, with early
adoption prohibited. The Company does not expect the pending adoption of EITF
08-7 to have a material impact on its financial statements.
 
 In
December 2008, the FASB issued FASB Staff Position FAS 140-4 and FIN 46(R)-8,
Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities ("FSP FAS 140-4 and FIN 46(R)-8"). FSP FAS 140-4 and
FIN 46(R)-8 amends SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities and FIN
46(R), FASB Interpretation No.
46 (R), Consolidation of Variable Interest Entities, an interpretation of
Accounting Research Bulletin No. 51, to require public entities to
provide additional disclosures about transfers of financial assets and their
involvement with variable interest entities. FSP FAS 140-4 and FIN 46(R)-8 is
effective for the first interim or annual reporting period ending after December
15, 2008. The Company has not yet determined the effect on its financial
statements, if any, that will occur upon adoption of FSP FAS 140 and FIN
46(R)-8.
 
 On June
27, 2007, the FASB ratified EITF 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services to Be Used in Future Research and Development
Activities, which calls for nonrefundable advance payments for goods or
services to be used in future research and development activities to be deferred
and capitalized until such time as the related goods are delivered or related
services are performed, at which point the amounts are to be recognized as an
expense.  EITF 07-3 is effective for fiscal periods beginning after
December 15, 2007.  The Company has evaluated its research and development
contracts in regard to this new pronouncement and has determined that the effect
of this consensus will not have a material impact on its financial
statements.
 
 3.
                Related-Party
      Note Receivable
  In
October 2004, the Company entered into a Loan Agreement with
RemoteMDx.  Under the terms of the Loan Agreement, RemoteMDx borrowed
from the Company under a note which was repayable, together with interest at an
annual rate of 5%.  As of December 31, 2008 and September 30, 2008,
RemoteMDx owed the Company $519,791 and $598,793, respectively.  The
note is due and payable on December 31, 2009.
 
 4.
                Preferred
      Stock
 
 The
Company is authorized to issue 10,000,000 shares of undesignated preferred
stock, no par value per share.  Pursuant to the Company's Articles of
Incorporation, the Company's board of directors has the authority to amend the
Company's Articles of Incorporation, without further shareholder approval, to
designate and determine, in whole or in part, the preferences, limitations and
relative rights of the preferred stock before any issuance of the preferred
stock and to create one or more series of preferred stock and fix the number of
shares of each such series and determine the preferences, limitations and
relative rights of each series of preferred stock, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, and liquidation preferences.
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 13
  Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
 
 The
following discussion and analysis should be read in conjunction with our
financial statements and related notes included elsewhere in this filing. This
discussion may contain forward-looking statements based upon current
expectations that involve risks and uncertainties, including those set forth
elsewhere in this filing. Our actual results and the timing of selected events
discussed below could differ materially from those expressed in, or implied by,
these forward-looking statements.
  Overview
 
 Our
current core business is the manufacture, distribution and sale of medical
diagnostic stains and solutions.  We continue to define our business
plan and marketing strategy.  We are currently developing and we plan to
market a new product line for monitoring and providing assistance to mobile and
homebound seniors and the chronically ill, including those who may require a
personal assistant to check up on them during the day to ensure their safety and
well being and know where they are at all times.
  Under our
developing business model, we expect that the majority of our customers will be
seniors who are mobile and want "peace of mind" knowing that their location is
known at all times and that they can request assistance at
anytime.  Our business plan is to sell or give customers a device
and require payment of a monthly subscription for
services.  Different     services range
from requesting emergency services to receiving calls throughout the
day from the monitoring center to remind them of specific
events and ensuring their health and state of mind.  When an
elderly person falls or is in need of help, the longer the patient waits for
emergency help, the higher the hospitalization costs and the higher the
mortality rate. By subscribing to our services, a subscriber will have
access to a monitoring center advisor who can immediately contact emergency
services and provide turn by turn directions on how to reach the subscriber in
the event of an emergency.
  In the
future, we plan to monitor vital signs of the elderly and alert the patient and
appropriate family members and emergency personnel when abnormal vitals are
identified at the monitoring center.   We plan to integrate third
party bio-medical sensors to capture specific vital signs such as glucose, blood
pressure, and SPO2 and transmit the measurements to the monitoring
center.
  With U.S.
healthcare costs spiraling upward, we believe that cost containment is a
primary issue facing the industry.  This pressure will only intensify
during the 21st century as the baby-boom generation is aging.  As of 2005,
35 million Americans were 65 years of age or older according to the US Census
Bureau, and this number is projected to increase to 54 million by the year 2020,
according to a study by the Economic Research Service of the U.S. Department of
Agriculture (on file with the Company). By that year, 1 in 6 Americans will be
over the age of 65 and by the middle of the century, the number of elderly could
reach more than 86 million people, more than double its present size.  With
an aging population, and because approximately 80% of healthcare costs occur in
the last two years of life, according to an article published in the National
Review Online (on file with the Company), viable cost saving options are
needed.
  In
addition to the aging, approximately one in every four Americans suffers from a
chronic illness, according to a 2004 presentation to the American Telemedicine
Association (on file with the Company) which typically becomes more severe and
prominent with age.  The demographics of chronic illnesses include over 15
million people with diabetes and close to 14 million with coronary heart disease
(according to reports published by the American Heart Association), and over 10
million with osteoporosis (according to a study by the University of Maryland
Medical Center).  Various industry studies, including a study published in
the IBM Systems Journal in 2007 (on file with the Company) and a study conducted
by heart specialists from Columbia Presbyterian Medical Center Cardiac
Transplant Service (on file with the Company), have been conducted showing the
cost savings that are attributed to the daily monitoring of the chronically
ill.
  We believe
through the technologies that we have and plan to work on, that we can enhance
the life of the elderly and enable them to live a more "normal" life style
by being mobile and providing peace of mind knowing that their vital signs
are being monitored and their location is known at all times.  We can
immediately communicate with the patient and emergency personnel in times of
need and communicate the patient’s location and medical
history.
  The
monitoring center will be staffed around the clock with advisors that will
receive calls originating from the product.  There will be two ways in
which the advisor at the monitoring center will be engaged.
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 14
 
 PERS
  We are
developing a line of personal emergency response systems, or PERS, known as home
devices that connect the user to a 24-hour call center with the push of a
button. The transmitter is typically worn on a neck pendant or wristband, and it
sends a signal to a receiver that is connected to the home telephone line. When
the patient pushes the button, the staff at the call center evaluates the
situation, deciding whether to call an ambulance or a designated friend or
family member. With most PERS setups, the patient can talk with the call center
staff from anywhere in the house.  Typical problems are that the
patient is too far away from the home communication device and the monitoring
center personnel cannot hear the patient with advanced dementia who may not know
to push the button in an emergency.  The system is also of no value
when the patient is away from the home.
  GPS
Location Services / Cellular Services
  There are
many products that provide GPS tracking integrated with cellular
services.  These products and services can be found in the
transportation industry for vehicle and asset tracking and in the sports
industry.
  We are
working to integrate the PERS and GPS location/Cellular services together and
provide a comprehensive solution for the senior market.  We intend to
work with strategic partners to design, develop and deliver a water resistant
watch that interfaces with a GPS/Cellular communications device and transmits
GPS location and a voice call to our monitoring center.  We have not
made a final selection on the GPS/Communications device as of
yet.  This decision will be made after evaluating the results of the
prototype phase.  Additional strategic partners will develop the
prototypes.
  Currently,
there are separate products on the market that provide service to the Personal
Emergency Response (PERS) industry and products that provide geographical
locations, and clinical health parameters.  However, we believe that
no product on the market today has successfully integrated both products
together to provide a service.  We feel that it is imperative to bring
such a solution to the market.
  We plan
to develop end user products and a monitoring center application and
infrastructure to interface with the patient and the monitoring center
advisors.
  During
the three months ended December 31, 2008, we spent $105,938 on research and
development.  Research and development has taken place on a
GPS/Cellular communications device and on a water resistant watch that will
detect falls, and consist of a speaker and microphone.  The watch will
be universal for women and men with an adjustable strap.
  The
monitoring center and the related products will be developed by our
team.  We have identified and are negotiating with several potential
vendors for services that will further our objectives.  Our goal is to
develop a wrist-watch sized PERS device, and we anticipate that we may work with
one or more vendors to develop such a product.
  Competition
in Personal Emergency Response System (PERS) Markets
  We have
identified the following entities that appear to compete directly in one or more
of our markets.  Note that all these entities target the senior that
is confined to the home, as opposed to our intended customer who is typically
more mobile:
  ·
              ADT
      – specializing in home security, they offer a pendent device/home
      communications station.·
              Alertone
      – offers a wristband and pendent device / home communications
      device.·
              American
      Medical Alarms – offers a pendent device/home communications
      device.·
              Life
      Alert – offers a pendent device/home communications
  device.·
              Lifeline
      – owned by Philips is the largest provider in the industry with over
      500,000 subscribers.  Offers a pendent device/home
      communications station.  They also send out pages to family
      members or caregivers when the monitoring center receives an
      alarm.·
              Life
      Station – offers a wristband, belt clip, pendent devices / home
      communications station.·
              Rescue
      Alert – offers a pendent device/home communications
      station.  Claims to have the best panic button range of 600 feet
      to the home communication device.   Monitoring center that
      is staffed with certified EMT
advisors.
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 15
  Recent
Developments
 
 Subsequent
to the three months ended December 31, 2008, the Company received a $200,000
payment from RemoteMDx, Inc., the Company’s former parent.
 
 Critical
Accounting Policies
 
 Use
of Estimates in the Preparation of Financial Statements
  The
preparation of financial statements requires management to make significant
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses during the reporting period.  By their nature,
these estimates and judgments are subject to an inherent degree of
uncertainty.  On an on-going basis, we evaluate our estimates,
including those related to bad debts, inventories, intangible assets, warranty
obligations, product liability, revenue recognition, and income
taxes.  We base our estimates on historical experience and other facts
and circumstances that are believed to be reasonable and the results provide a
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources.  Actual results may
differ from these estimates under different assumptions or conditions, and these
differences may be material.
  With
respect to concentration of credit risk, allowances for doubtful accounts
receivable, inventories, impairment of assets, revenue recognition, and research
and development, those material accounting policies that we believe are critical
to an understanding of our financial results and condition are as
follows:
  Concentration
of Credit Risk
  The
Company has cash in bank accounts that, at times, may exceed federally insured
limits.  The Company has not experienced any losses in such
accounts.
  In the
normal course of business, the Company provides credit terms to its customers.
Accordingly, the Company performs ongoing credit evaluations of its customers'
financial condition and requires no collateral from its
customers.  The Company maintains an allowance for uncollectable
accounts receivable based upon the expected collectability of all accounts
receivable.
  Accounts
Receivable
  Accounts
receivable are carried at original invoice amount less an estimate made for
doubtful receivables based on a review of all outstanding amounts on a monthly
basis.  Specific reserves are estimated by management based on certain
assumptions and variables, including the customer’s financial condition, age of
the customer’s receivables and changes in payment histories.  Trade
receivables are written off when deemed uncollectible.  Recoveries of
trade receivables previously written off are recorded when
received.  A trade receivable is considered to be past due if any
portion of the receivable balance has not been received by the contractual pay
date.  Interest is not charged on trade receivables that are past
due.
  Inventories
  Inventories
are recorded at the lower of cost or market, cost being determined on a
first-in, first-out ("FIFO") method. Inventories consist of raw materials,
work-in-process, and finished goods.  Provisions, when required, are
made to reduce excess and obsolete inventories to their estimated net realizable
values. Due to competitive pressures and technological innovation, it is
possible that estimates of the net realizable value could change in the near
term.
 
 Property
and Equipment
 
 Property
and equipment are stated at cost, less accumulated depreciation and
amortization.  Depreciation and amortization are determined using the
straight-line method over the estimated useful lives of the assets, typically
three to seven years.  Leasehold improvements are amortized over the
shorter of the estimated useful lives of the asset or the term of the
lease.  Expenditures for maintenance and repairs are expensed while
renewals and improvements over $500 are capitalized.  When property
and equipment are disposed, any gains or losses are included in the results of
operations.
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 16
 
 Revenue
Recognition
  The
Company’s revenue has historically been from two sources: (i) diagnostic
equipment product sales; and (ii) sales of medical diagnostic
stains.
  Diagnostic Equipment Product
Sales
  Although
not the focus of the Company’s business model, the Company sells its diagnostic
equipment devices in certain situations. The Company recognizes product sales
revenue when persuasive evidence of an arrangement with the customer exists,
title passes to the customer, prices are fixed or determinable, and collection
is reasonably assured.
  Medical Diagnostic Stain
Sales
  The
Company recognizes medical diagnostic stains revenue when persuasive evidence of
an arrangement with the customer exists, title passes to the customer, prices
are fixed or determinable, and collection is reasonably assured.
  Shipping
and handling fees are included as part of net sales. The related freight costs
and supplies directly associated with shipping products to customers are
included as a component of cost of goods sold.
 
 We have
no sales that contain multiple deliverables.  All of our revenues
consist of sales of products, either (1) diagnostic equipment or (2) medical
diagnostic stains.  The diagnostic equipment does not require
installation or customization.
 
 Historically
and consistently all of our sales are made with net 30-day payment
terms.  We have not changed our payment terms in the recent past (at
least for five years).  We have no plans to change our payment terms
in the future.
 
 Our
products have not been modified significantly for several
years.  There is significant history on which to base our estimates of
sales returns.  These sales returns have been
negligible.  Customers may return diagnostic equipment within 30 days
of the purchase date.  Customers may return the medical diagnostic
stains within 30 days of the purchase date provided that the stain’s remaining
life is at least 8 months.  Customers must obtain prior authorization
for a product return.
 
 In
connection with SFAS No. 48 criteria to qualify for the recognition of revenue
at the time of sale, we note the following:
 
 ·
              Volu-Sol’s
      price to the buyer is fixed or determinable at the date of
      sale.·
              The
      buyer has paid Volu-Sol, or the buyer is obligated to pay Volu-Sol within
      30 days, and the obligation is not contingent on resale of the
      product.·
              The
      buyer's obligation to Volu-Sol would not be changed in the event of theft
      or physical destruction or damage of the product.·
              The
      buyer acquiring the product for resale has economic substance apart from
      that provided by Volu-Sol.·
              Volu-Sol
      does not have significant obligations for future performance to directly
      bring about resale of the product by the buyer.·
              The
      amount of future returns can be reasonably estimated and they are
      negligible.
 
 We have
70 types of products based on the number of individual SKUs in our
inventory.  Most of these 70 SKUs are for medical diagnostic stain
inventory.  For example, certain medical diagnostic stains are
packaged in different sizes, and each packaged size (i.e. 16 oz., 32 oz., 48
oz.) has a unique SKU in inventory.  Paragraph 37 of SFAS No. 131
states that, “an enterprise shall report revenues from external customers for
each product and service or each group of similar products and services unless
it is impractical to do so.”  The vast majority of our sales are of
medical diagnostic stains, with a minimal portion of sales being diagnostic
equipment.   Because diagnostic equipment sales are not material
to the financial statements, we disclose sales as one line
item.
  Return
to Table of Contents
 17
 
 Our
revenue recognition policy for sales to distributors is the same as the policy
for sales to end-users.
 
 A
customer qualifies as a distributor by completing a distributor application and
proving its sales tax status.  Upon qualifying as a distributor, a
customer receives a 35% discount from retail prices, and the distributor
receives an additional 5% discount when product is purchased in case
quantities.  Our distributors are not required to maintain specified
amounts of product on hand, and distributors are not required to make minimum
purchases to maintain distributor status.  Distributors have no stock
rotation rights or additional rights of return.  Sales to distributors
are recorded net of discounts.
 
 Sales
returns have been negligible, and any and all discounts are known at the time of
sale.  Sales are recorded net of sales returns and sales
discounts.  There are no significant judgments or estimates associated
with the recording of revenues.
 
 Results
of Operations
 
 Three
Months Ended December 31, 2008 and 2007
 
 Net
Sales
 
 The
Company’s fiscal year ends on September 30.  During the fiscal quarter
ended December 31, 2008, we had net sales of $104,307 compared to $169,592 in
the fiscal quarter ended December 31, 2007.  The change from 2007 to
2008 was due to a reduction in orders of Wright-Giemsa stain.  During
the 2008 fiscal year, prive management of the Company changed the formula for
Wright-Giemsa stain and customers did not respond well to the changed
formula.  The Company has reintroduced the old formula and is
attempting to get customers to once again order its products.
 
 Cost
of Goods Sold
  Cost of
goods sold totaled $103,071 in the first fiscal quarter ended December 31, 2008,
compared to $114,221 for the quarter ended December 31, 2007.  The
decrease of approximately $11,000 relates to a reduction in revenues described
above.
 
 Research
and Development Expenses
 
 During
the quarter ended December 31, 2008, the Company incurred research and
development expenses of $105,938 compared to $175,103 in research and
development expense incurred during the fiscal quarter ended December 31, 2007.
The research and development expenses in the quarter ended December 31, 2008 has
decreased do to decreased billings from our research and development
partners.
 
 Selling,
General and Administrative Expenses
 
 During
the three months ended December 31, 2008, the Company’s selling, general and
administrative expenses totaled $249,005, compared to the same period one year
ago, which totaled $164,515.  The increase in 2008 is the result of
the following:
 
 ·
              Legal
      and accounting fees associated with the spin-off of the Company from
      RemoteMDx, Inc.
 ·
              Board
      of Director fees
 
 Other
Income and Expense
 
 During
the quarter ended December 31, 2008, interest income was $7,623, compared to
$2,672 in the quarter ended December 31, 2007.  The increase in
interest income was due to the Company having more cash on
hand.
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 18
  Net
Loss
 
 The
Company had a net loss for the three months ended December 31, 2008 totaling
$346,909, compared to a net loss of $280,232 for the same period one year
ago.  This increase in net loss is due primarily to an increase in
direct labor costs, research and development, and selling, general, and
administrative expense in the most recent fiscal year as described
above.
 
 Liquidity
and Capital Resources
 
 Three
Months ended December 31, 2008
 
 The
Company has not historically financed operations entirely from cash flows from
operating activities.  During the year ended September 30, 2008, the
Company supplemented cash flows with funding from the sale of equity
securities.
 
 At
December 31, 2008, the Company had unrestricted cash of $330,559, compared to
cash of $474,146 at September 30, 2008. At September 30, 2008, the Company had
working capital of $406,794, compared to working capital of $137,286 at December
31, 2008.
 
 During
the quarter ended December 31, 2008, the Company’s operating activities used
cash of $218,152.
 
 Investing
activities for the quarter ended December 31, 2008 used cash of
$4,436.
 
 Financing
activities for the quarter ended December 31, 2008, provided $79,001 of net
cash.
 
 During
quarter ended December 31, 2008, the Company incurred a net loss of $346,909 and
had negative cash flows from operating activities totaling $218,152, compared to
a net loss of $2,278,731 and negative cash flows from operating activities of
$1,247,092 for the year ended September 30, 2008.  As of September 30,
2008, the Company’s working capital was $406,794 compared to working capital of
$137,286 at December 31, 2008.  As of December 31, 2008; the Company
had an accumulated deficit of $2,987,697 compared to $2,640,788 at September 30,
2008, and total stockholders’ equity at December 31, 2008 was $711,053 compared
to $1,057,962 at September 30, 2008.
  Recent
Accounting Pronouncements
  In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities.SFAS No. 159 permits companies to
choose to measure many financial instruments and certain other items at fair
value.  SFAS No. 159 is effective for financial statements issued for
fiscal years beginning after November 15, 2007.  The Company does not
expect the adoption of SFAS No. 159 to have a material impact on our financial
statements.
 
 In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard Number 157, Fair Value Measurements,
(SFAS 57) which defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosures about
fair value measurements. The provisions of SFAS No. 157 related to
financial assets and financial liabilities were effective during
2008.  With respect to certain nonfinancial assets and nonfinancial
liabilities, SFAS No. 157 is effective for fiscal years beginning after
November 15, 2008, and interim periods within those fiscal
years.  The Company does not expect that the adoption of SFAS
No. 157 with respect to nonfinancial assets and nonfinancial liabilities
will have a material impact on its financial statements.
 
 In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations,and
SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements.  SFAS No.
141(R) requires an acquirer to measure the identifiable assets acquired, the
liabilities assumed and any non-controlling interest in the acquiree at their
fair values on the acquisition date, with goodwill being the excess value over
the net identifiable assets acquired.  SFAS No. 160 clarifies that a
non-controlling interest in a subsidiary should be reported as equity in the
financial statements, net income shall be adjusted to include the net income
attributed to the non-controlling interest and comprehensive income shall be
adjusted to include the comprehensive income attributed to the non-controlling
interest.  The calculation of earnings per share will continue to be
based on income amounts attributable to the parent.  SFAS No. 141(R)
and SFAS No. 160 are effective for financial statements issued for fiscal years
beginning after December 15, 2008.  Early adoption is
prohibited.  The Company has not yet determined the effect on our
financial statements, if any, upon adoption of SFAS No. 141(R) or SFAS No.
160.
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 19
 
 In
December 2007, the FASB ratified Emerging Issues Task Force (EITF)
Issue No. 07-1, Accounting for Collaborative
Arrangements(EITF 07-1). EITF 07-1 defines collaborative
arrangements and establishes reporting requirements for transactions between
participants in a collaborative arrangement and between participants in the
arrangement and third parties. EITF 07-1 also establishes the appropriate income
statement presentation and classification for joint operating activities and
payments between participants, as well as the sufficiency of the disclosures
related to these arrangements. EITF 07-1 is effective for fiscal years
beginning after December 15, 2008. The Company has not yet determined the
effect on its financial statements, if any, that will occur upon adoption of
EITF 07-1.
 
 In
February 2008, the FASB issued FASB Staff Position (FSP) FAS No. 140-3, Accounting for Transfers of
Financial Assets and Repurchase Financing Transactions (FSP FAS 140-3).
FSP FAS 140-3 requires an initial transfer of a financial asset and a repurchase
financing that was entered into contemporaneously or in contemplation of the
initial transfer to be evaluated as a linked transaction under SFAS No. 140
unless certain criteria are met, including that the transferred asset must be
readily obtainable in the marketplace. FSP FAS 140-3 is effective for fiscal
years beginning after November 15, 2008, and will be applied to new transactions
entered into after the date of adoption. Early adoption is prohibited. The
Company has not yet determined the effect on its financial statements, if any,
that will occur upon adoption of FSP FAS 140-3.
 
 In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities.  SFAS No. 161 is intended
to improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity's financial position, financial
performance, and cash flows. SFAS No. 161 is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged.  The Company does not expect that
the adoption of SFAS No. 161 will have a material impact on its financial
statements.
 
 In April
2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of
Intangible Assets(FSB FAS 142-3). FSP FAS 142-3 amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under SFAS
No. 142, Goodwill and Other
Intangible Assets. The intent of this FSP is to improve the consistency
between the useful life of a recognized intangible asset under FAS FAS 142 and
the period of expected cash flows used to measure the fair value of the asset
under SFAS No. 141(R) and other generally accepted accounting principles. FSP
FAS 142-3 is effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2008. The Company has not yet determined the
effect on its financial statements, if any, that will occur upon adoption of FSP
FAS 142-3.
 
 In May
2008, the FASB issued SFAS 162, The Hierarchy of Generally Accepted
Accounting Principles.  SFAS No. 162 identifies the sources of
accounting principles and provides entities with a framework for selecting the
principles used in preparation of financial statements that are presented in
conformity with GAAP.  The current GAAP hierarchy has been criticized
because it is directed to the auditor rather than the entity, it is complex, and
it ranks FASB Statements of Financial Accounting Concepts, which are subject to
the same level of due process as FASB Statements of Financial Accounting
Standards, below industry practices that are widely recognized as generally
accepted but that are not subject to due process.  The Board believes
the GAAP hierarchy should be directed to entities because it is the entity (not
its auditors) that is responsible for selecting accounting principles for
financial statements that are presented in conformity with GAAP.  The
adoption of FASB 162 is not expected to have a material impact on the Company’s
financial statements.
 
 In May
2008, the FASB issued FSP APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement).  FSB APB 14-1 clarifies that convertible debt
instruments that may be settled in cash upon conversion (including partial cash
settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and
Debt Issued with Stock Purchase Warrants,and specifies that issuers of
such instruments should separately account for the liability and equity
components in a manner that will reflect the entity's nonconvertible debt
borrowing rate when interest cost is recognized in subsequent periods. FSP APB
14-1 is effective for financial statements issued for fiscal years beginning
after December 15, 2008 and interim periods within those fiscal years. The
Company does not expect that the adoption of FSP APB 14-1 will have a material
impact on its financial statements.
 
 In June
2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own Stock (EITF 07-5).
EITF 07-5 provides that an entity should use a two step approach to evaluate
whether an equity-linked financial instrument (or embedded feature) is indexed
to its own stock, including evaluating the instrument's contingent exercise and
settlement provisions. It also clarifies on the impact of foreign currency
denominated strike prices and market-based employee stock option valuation
instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning
after December 15, 2008. The Company does not expect that the adoption of EITF
07-5 will have a material impact on its financial statements.
  Return
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 20
 
 In June
2008, the FASB ratified EITF Issue No. 08-3, Accounting for Lessees for
Maintenance Deposits Under Lease Arrangements (EITF 08-3). EITF 08-3
provides guidance for accounting for nonrefundable maintenance deposits. It also
provides revenue recognition accounting guidance for the lessor. EITF 08-3 is
effective for fiscal years beginning after December 15, 2008. The Company has
not yet determined the effect on its financial statements, if any, that will
occur upon adoption of EITF 08-3.
 
 In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities
(FSP EITF 03-6-1). FSP EITF 03-6-1 clarified that all outstanding unvested
share-based payment awards that contain rights to nonforfeitable dividends
participate in undistributed earnings with common shareholders. Awards of this
nature are considered participating securities and the two-class method of
computing basic and diluted earnings per share must be applied. FSP EITF 03-6-1
is effective for fiscal years beginning after December 15, 2008. The Company has
not yet determined the effect on its financial statements, if any, that will
occur upon adoption of FSP EITF 03-6-1.
 
 In
September 2008, the FASB ratified EITF Issue No. 08-5, Issuer’s Accounting for Liabilities
Measured at Fair Value With a Third-Party Credit Enhancement (EITF 08-5).
EITF 08-5 provides guidance for measuring liabilities issued with an attached
third-party credit enhancement (such as a guarantee). It clarifies that the
issuer of a liability with a third-party credit enhancement (such as a
guarantee) should not include the effect of the credit enhancement in the fair
value measurement of the liability. EITF 08-5 is effective for the first
reporting period beginning after December 15, 2008. The Company has not yet
determined the effect on its financial statements, if any, that will occur upon
adoption of EITF 08-5.
 
 In
September 2008, the FASB issued FSP FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives
and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45; and Clarification of the Effective Date of FASB Statement
No. 161 (FSP FAS 133-1 and FIN 45-4). FSP FAS 133-1 and FIN 45-4 amends
and enhances disclosure requirements for sellers of credit derivatives and
financial guarantees. It also clarifies that the disclosure requirements of SFAS
No. 161 are effective for quarterly periods beginning after November 15, 2008,
and fiscal years that include those periods. FSP FAS 133-1 and FIN 45-4 is
effective for fiscal years ending after November 15, 2008. The Company has not
yet determined the effect on its financial statements, if any, that will occur
upon adoption of FSP FAS 133-1 and FIN 45-4.
 
 In
October 2008, the FASB issued FSP FAS 157-3 Determining Fair Value of a
Financial Asset in a Market That Is Not Active (FSP FAS 157-3). FSP FAS
157-3 clarified the application of SFAS No. 157 in an inactive market. It
demonstrated how the fair value of a financial asset is determined when the
market for that financial asset is inactive. FSP FAS 157-3 was effective upon
issuance, including prior periods for which financial statements had not been
issued. The effect of adopting FSP FAS 157-3 did not have a material effect on
the Company’s financial statements.
 
 In
November 2008, the FASB ratified EITF Issue No. 08-6, Equity Method Investment Accounting
Considerations(EITF 08-6). EITF 08-6 clarifies the accounting for
certain transactions and impairment considerations involving equity method
investments. EITF 08-6 is effective for fiscal years beginning after December
15, 2008, with early adoption prohibited. The Company has not yet determined the
effect on its financial statements, if any, that will occur upon adoption of
EITF 08-6.
 
 In
November 2008, the FASB ratified EITF Issue No. 08-7, Accounting for Defensive Intangible
Assets. EITF 08-7 clarifies the accounting for certain separately
identifiable intangible assets which an acquirer does not intend to actively use
but intends to hold to prevent its competitors from obtaining access to them.
EITF 08-7 requires an acquirer in a business combination to account for a
defensive intangible asset as a separate unit of accounting which should be
amortized to expense over the period the asset diminishes in value. EITF 08-7 is
effective for fiscal years beginning after December 15, 2008, with early
adoption prohibited. The Company does not expect the adoption of EITF 08-7 to
have a material impact on its financial statements.
 
 In
December 2008, the FASB issued FASB Staff Position FAS 140-4 and FIN 46(R)-8,
Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities ("FSP FAS 140-4 and FIN 46(R)-8"). FSP FAS 140-4 and
FIN 46(R)-8 amends SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities and FIN
46(R), FASB Interpretation No.
46 (R), Consolidation of Variable Interest Entities, an interpretation of
Accounting Research Bulletin No. 51, to require public entities to
provide additional disclosures about transfers of financial assets and their
involvement with variable interest entities. FSP FAS 140-4 and FIN 46(R)-8 is
effective for the first interim or annual reporting period ending after December
15, 2008. The Company has not yet determined the effect on its financial
statements, if any, that will occur upon adoption of FSP FAS 140 and FIN
46(R)-8.
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 21
 
 On June
27, 2007, the FASB ratified EITF 07-3, Accounting for Nonrefundable Advance
Payments for Goods or Services to Be Used in Future Research and Development
Activities, which calls for nonrefundable advance payments for goods or
services to be used in future research and development activities to be deferred
and capitalized until such time as the related goods are delivered or related
services are performed, at which point the amounts are to be recognized as an
expense.  EITF 07-3 is effective for fiscal periods beginning after
December 15, 2007.  The Company has evaluated its research and development
contracts in regard to this new pronouncement and has determined that the effect
of this consensus will not have a material impact on its financial
statements.
  Going
Concern
  The
significant accumulated deficits and negative cash flows of the Company raise
substantial doubt about the Company’s ability to continue as a going concern.
The financial statements included in this report do not include any adjustments
that might result from the outcome of this uncertainty.  Our plan with
respect to this uncertainty is to focus on sales of our reagent products and
completing strategic acquisitions and business combinations, and to raise
capital through the offer and sale of our equity securities.  There
can be no assurance that revenues will increase rapidly enough to offset
operating losses and repay debts.  Likewise, there can be no assurance
that the Company will be successful in raising additional capital from the sale
of equity or debt securities.  If the Company is unable to increase
revenues or obtain additional financing, it will be unable to continue the
development of its products and would likely cease operations.
 
 Item 3.  Quantitative and Qualitative Disclosures about
Market Risk
 
 None.
 
 Item 4.  Controls and Procedures.
 
 Under the
supervision and with the participation of our management, including our Chief
Executive Officer and our Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of
1934 (the “Exchange Act”)). Based upon that evaluation, the Chief Executive
Officer and the Chief Financial Officer concluded that, as of the end of the
period covered by this report, our disclosure controls and procedures were not
effective.  We and our auditors identified material weaknesses
discussed below in the Report of management on internal control over financial
reporting.
 
 Report
of Management on Internal Control over Financial Reporting
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) under the
Exchange Act. Our internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles. Our internal control over
financial reporting includes those policies and procedures that:
 
 (i)
              pertain
      to the maintenance of records that, in reasonable detail, accurately and
      fairly reflect the transactions and dispositions of our
      assets;(ii)
              provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with U.S. generally
      accepted accounting principles, and that our receipts and expenditures are
      being made only in accordance with authorizations of our management and
      directors; and(iii)
              provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use or disposition of assets that could have a
      material effect on the financial
statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance
with the policies or procedures may deteriorate.
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 22
 
 Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission.  A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement to the Company's annual or
interim financial statements will not be prevented or detected.
 
 In the
course of the management's assessment, it has identified the following material
weaknesses in internal control over financial reporting:
  Because
of the small size of the Company, in terms of the number of employees, the
Company lacks segregation of duties and that is a material
weakness.  As the Company grows, this weakness will be
mitigated.
 
 We are in
the process of improving our internal control over financial reporting in an
effort to eliminate these material weaknesses through improved supervision and
training of our staff, but additional effort is needed to fully remedy these
deficiencies. Our management, audit committee, and directors will continue to
work with our auditors and outside advisors to ensure that our controls and
procedures are adequate and effective.
 
  PART II – OTHER INFORMATION
 
 Item 1. Legal Proceedings.
 
 The
Company is not involved in any legal proceedings which management believes will
have a material effect upon the financial condition of the Company, nor are any
such material legal proceedings anticipated.
 
 By way of
information, on August 15, 2008, plaintiffs Frederico and Erica Castellanos
filed a lawsuit in the Superior Court of the State of California, Los Angeles
County, Case No. BC396402, entitled "Frederico and Erica Castellanos vs.
Allegheny Ludlum Corporation, et al."  The complaint names twenty-four
Defendants and one hundred unnamed Doe Defendants.  The complaint
asserts claims for negligence, strict liability - failure to warn, strict
liability - design defect, fraudulent concealment, breach of implied warranties,
and loss of consortium based on Mr. Castellanos' alleged exposure to certain
chemicals during the course of his employment.  One of the original
named Defendants was Logos Scientific, Inc.  On September 4, 2008,
Plaintiffs amended their complaint to substitute "Volu-Sol, Inc. as successor in
interest to Logos Scientific, Inc." for the previously unnamed Doe
1.
 
 Volu-Sol,
Inc. was the original name of RemoteMDx, Inc., the prior parent corporation of
the Company.  As such, although the lawsuit names an entity called
“Volu-Sol, Inc.,” as a party, as of the date of this filing, the Company was not
a party to the lawsuit.
 
 We are
not aware of any contemplated legal or regulatory proceeding by a governmental
authority in which we may be involved.
 
 
 Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.
 
 None.
 
 
 Item 3.  Defaults Upon Senior Securities.
 
 None.
 
  Item 4. Submission of Matters to a Vote of Security
Holders.
 
 None.
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 23
  Item 5. Other Information.
 
 None.
  
 Item 6. Exhibits.
 
 Exhibit
Number                                                                Description
  (3)(i)
                Articles
      of Incorporation of Registrant (previously filed as an exhibit to the
      Company’s Registration Statement on Form S-1 and incorporated herein by
      reference).(3)(i)
                Articles
      of Amendment to Articles of Incorporation of Registrant (previously filed
      as an exhibit to the Company’s Registration Statement on Form S-1 and
      incorporated herein by reference).(3)(ii)
                Bylaws
      of Registrant (previously filed as an exhibit to the Company’s
      Registration Statement on Form S-1 and incorporated herein by
      reference).(4)
                Specimen
      of common stock certificate (previously filed as an exhibit to the
      Company’s Registration Statement on Form S-1 and incorporated herein by
      reference).(10)(i)
                Lease
      Agreement between RJF Company Ltd., and Volu-Sol Reagents, Inc., dated as
      of August 1, 2005 (previously filed as an exhibit to the Company’s
      Registration Statement on Form S-1 and incorporated herein by
      reference).(10)(ii)
                Loan
      Agreement between Volu-Sol Reagents Corporation and RemoteMDx (previously
      filed as in exhibit to the Company’s Registration Statement on Form S-1
      and incorporated herein by reference).(10)(iii)
                Promissory
      Note dated as of October 1, 2008 (previously filed as an exhibit to the
      Company’s Registration Statement on Form S-1 and incorporated herein by
      reference).(10)(iv)
                Professional
      Services Contract between Volu-Sol Reagents, Inc., and VPI Engineering,
      dated as of September 27, 2007, together with addenda (previously filed as
      an exhibit to the Company’s Registration Statement on Form S-1 and
      incorporated herein by reference).(10)(v)
                Securities
      Purchase Agreement between Volu-Sol Reagents, Inc., and ADP Management,
      dated as of November 15, 2007 (previously filed as an exhibit to the
      Company’s Registration Statement on Form S-1 and incorporated herein by
      reference).(11)
                Computation
      of Statement of Earnings (included in financial statements filed
      herewith)(31)(i)
                Rule
      13a–14(a)/15d–14(a) Certifications(32)
                Section
      1350 Certifications
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 24
 
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 VOLU-SOL
      REAGENTS CORPORATION/s/  James
      DaltonJames
      Dalton
                    Chairman
      of the Board of Directors
                    and
      Chief Executive Officer (Principal Executive
  Officer)
  Date:
      February 19, 2009
  /s/  Michael
      G. ActonMichael
      G. Acton
                    Chief
      Financial Officer (Principal Financial and Accounting
    Officer)
  Date:
      February 19, 2009
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 25